RF Industries' Q4 2025: Contradictions in Margins, Revenue Diversification, Backlog Trends, and Growth Trajectory

Date of Call: Jan 14, 2026

Financials Results

• Revenue: Q4: $22.7M, up 23% YOY and 15% sequentially. FY2025: $80.6M, up 24% YOY.
• EPS: Q4 GAAP: $0.02 per diluted share (net income). Q4 Non-GAAP: $0.20 per diluted share. FY2025 GAAP: $0.01 per diluted share. FY2025 Non-GAAP: $0.40 per diluted share.
• Gross Margin: Q4: 37%, up from 31% YOY. FY2025: 33%, up from 29% YOY.
• Operating Margin: Q4: Operating income $903,000 vs. $96,000 YOY. FY2025: Operating income $1.8M vs. operating loss $2.8M YOY.

Business Commentary:

Revenue and Profitability Growth:

• RF Industries reported net sales of $22.7 million for Q4, an increase of 23% year-over-year, and $80.6 million for the full fiscal year 2025, an increase of 24% compared to fiscal 2024.
• Gross profit margin reached 37% in Q4, exceeding the target of 30%, and adjusted EBITDA was 11.5% of net sales, above the goal of 10%.
• The growth was driven by strategic transformation, operating leverage, and strong sales growth, particularly in new product lines and solutions.

Diversification of Markets and Customers:

• RF Industries saw a reduction in reliance on the wireless and telecom market, which now constitutes about 50% of sales, with the remaining half coming from transportation, aerospace, defense, industrial, and other OEM markets.
• The company focused on diversifying end markets and customers to mitigate risks associated with customer concentration.
• Initiatives included deepening relationships with existing customers, leveraging successes in traditional markets to penetrate new segments, and expanding value propositions for channel partners.

Operational Excellence and Cost Management:

• Inventory was reduced to $13.7 million, down from $14.7 million the previous year, reflecting operational excellence.
• RF Industries managed its inventory levels with discipline to meet strong customer demand while optimizing supply chain operations.
• Cost reduction initiatives and process improvements strengthened forecast accuracy and operational controls.

Enhanced Financial Position and Capital Allocation:

• RF Industries reduced its net debt by $4.6 million compared to last year, with a total of $5.1 million in cash and cash equivalents as of October 31, 2025.
• The company negotiated more favorable terms for its revolving credit facility, expecting at least $250,000 in interest savings for the next year.
• The priority remains paying down debt, with potential for strategic acquisitions or other shareholder value opportunities in the future.

Sentiment Analysis:

Overall Tone: Positive

• Management described Q4 as a 'breakout year,' highlighted 'strong momentum,' and expressed optimism for fiscal 2026, expecting 'another year of sales growth.' They noted 'strong and diversified pipeline' and 'solid momentum,' with leadership stating 'RF Industries is well-positioned to carry momentum into 2026 and continue creating value.'

Q&A:

• Question from Matthew (B. Riley): How should we think about the growth trajectory for fiscal 2026, especially now that we’re almost through the first quarter? And can you break down the gross margin expansion to 37%?
  Response: Expect another year of growth in FY2026, with a trajectory similar to FY2025, starting from a low Q1 and accelerating. The gross margin expansion was driven by a combination of favorable product/solution mix and the scaling benefit of sales exceeding $20M per quarter.

• Question from Matthew (B. Riley): Is there a new target for EBITDA margin above the 10% achieved in Q4?
  Response: The team exceeded the 10% EBITDA target in Q4 and aims to keep profitability at that level or higher, but does not have a specific new goal beyond maintaining it.

• Question from Matthew (B. Riley): Can you expand on cost increases and how new products can mitigate them?
  Response: Cost increases are nominal and related to labor and benefits. Mitigation comes from a combination of pricing, better product mix, and achieving higher sales volumes to absorb fixed costs.

• Question from Howard Root (Private Investor): Can you explain the $478k income tax and non-cash one-time charges? What is the forward tax rate and interest savings from the new credit facility?
  Response: The tax item relates to a valuation allowance reversal. The forward effective tax rate is expected to be in the mid-20s, with $250k+ in annual interest savings from the reworked credit facility.

• Question from Howard Root (Private Investor): What is the revenue diversification across transportation, aerospace, stadiums, data centers vs. the legacy telecom business?
  Response: Approximately half of sales now come from telecom/wireless, with the other half from transportation, aerospace, defense, industrial/OEM, and public safety markets.

• Question from Howard Root (Private Investor): Can you explain the seasonal drop in backlog and bookings from Q3 to Q4?
  Response: The drop is partly due to seasonality, with a normal booking slowdown in Q4 and a planned reduction in outstanding backlog to a healthier level, expected to rebound as projects resettle post-holiday season.

• Question from Steve Kohl (Mangrove): How is the improved balance sheet (lower net debt) changing capital allocation priorities?
  Response: Priority remains paying down debt first. Acquisitions, share buybacks, and dividends are considered but are secondary to further debt reduction unless a strategic acquisition opportunity arises.

• Question from Steve Kohl (Mangrove): How much of the margin improvement comes from bookings/mix versus volume?
  Response: Both better product/solution mix and higher sales volume contribute, but achieving higher sales (above $18-20M per quarter) has a significant scaling impact on profitability.

• Question from Steve Kohl (Mangrove): How is the public safety/indoor coverage market evolving?
  Response: The market remains fragmented and locally driven, making it challenging to enforce mandates. RFI sees opportunity through its RF passive and active offerings, but the addressable market is still difficult to pin down.

Contradiction Point 1

Gross Margin Drivers and Future Expectations

Conflicting statements on the primary drivers of margin expansion and future margin sustainability.

How should we think about the fiscal 2026 growth trajectory and the breakdown of Q4 gross margin expansion between mix and operating leverage/pricing? - Matthew (on behalf of Josh Nichols, B. Riley)

2025Q4: Q4 gross margin expansion to 37% was driven by a combination of product/solution mix and higher sales volume, which significantly improves profitability by absorbing fixed costs. - Rob Dawson(CEO)

How much of the 34% gross margin improvement is driven by DAC systems and small cells versus mix? - Matthew Maus (B. Riley Securities, Inc.)

2025Q3: The improvement is driven by a mix of higher-value products... Additionally, operating leverage from increased sales volume helps spread fixed costs, contributing to profitability. - Robert Dawson(CEO)

Contradiction Point 2

Revenue Diversification

Inconsistent data presented regarding the company's current revenue mix across markets.

What is the revenue distribution across transportation, aerospace, stadiums, data centers, and telecom markets? - Howard Root (Private Investor)

2025Q4: Revenue diversification has shifted from ~70% telecom/telecom in prior years to about half from telecom/wireless, with the other half from transportation, aerospace, defense, industrial OEMs, and public safety. - Rob Dawson(CEO)

How are the strong bookings split between traditional wireless business and newer markets like aerospace, transportation, and data centers? - Matthew Maus (B. Riley Securities, Inc.)

2025Q3: Bookings are coming from a diverse set of customers and markets, not just one area. The company's core business remains steady, while growth in newer, higher-value product lines is broad-based across multiple customers... - Robert Dawson(CEO)

Contradiction Point 3

Backlog Trends and Seasonality

Backlog drop attributed to normal seasonality, yet a year-ago reference implies non-seasonal factors.

What is the revenue diversification by market, and how should we interpret the seasonal drop in backlog/bookings? - Howard Root (Private Investor)

2025Q4: The backlog drop from Q3 to Q4 is normal due to seasonality (strong Q4 bookings, Q1 fulfillment) and efforts to move older backlog to finished goods. - Rob Dawson(CEO)

What factors contributed to the backlog growth, and how much is expected to be recognized in the next year? - Matthew Maus (B. Riley)

2025Q2: Backlog growth is broad-based across several product areas and not concentrated in one large order... The backlog stood at $18.4 million as of the call date. - Robert Dawson(CEO)

Contradiction Point 4

Growth Trajectory Description

Inconsistent characterization of growth drivers and sales patterns.

What is the growth trajectory for fiscal 2026, especially with the first quarter nearly complete? - Matthew (on behalf of Josh Nichols, B. Riley)

2025Q4: For 2026, another year of growth is expected, with a trajectory similar to 2025, starting from a lower Q1 (due to seasonality) and accelerating. - Rob Dawson(CEO)

What drove the sequential sales growth in the seasonally slow quarter, and what portion is attributed to carrier OpEx? - Matthew Moss (B. Riley)

2025Q1: The increase was largely driven by new product lines (DAC, small cells) contributing more significantly... The primary factors were the addition of new product offerings and improved contributions from both OpEx and CapEx segments. - Rob Dawson(CEO)