RFIL Filings — Rf Industries Ltd

RFIL Filings — Rf Industries Ltd - FilingSpy

10-Q · Quarter ended Apr 30, 2026 · SEC filing ↗

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Management's Discussion and Analysis

Cautionary Note Regarding Forward-Looking Statements Certain statements in this Quarterly Report on Form 10-Q (this “Quarterly Report”), and other oral and written statements made by RF Industries, Ltd., together with its five wholly-owned subsidiaries (collectively, hereinafter the “Company”, ”we”, “us”, or “our”), from time to time are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including those that discuss strategies, goals, outlook or other non-historical matters, including the potential for expansion of our business or the completion of acquisitions, or projected revenues, income, returns or other financial measures. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms or other comparable terminology. These forward-looking statements are subject to numerous risks and uncertainties that may cause actual results to differ materially from those contained in such statements. Among the most important of these risks and uncertainties are the ability of the Company to meet customer demand through pricing and product offerings and efficient inventory and distribution channel management, to continue to source our raw materials and products from our suppliers and manufacturers, particularly those in Asia, the market demand for our products, which market demand is dependent in large part on the state of the telecommunications industry, the Company’s ability to continue as a going concern, the Company’s ability to remain in compliance with its existing capital loan terms and financial covenants and whether plans to develop 5G networks accelerate as expected, as well as our ability to meet any such demand, our ability to finance the expansion of our business or complete acquisitions, the effect of future business acquisitions and dispositions, the incurrence of impairment charges, and competition. Important factors which may cause actual results to differ materially from the forward-looking statements are described in the Sections entitled “Risk Factors” in this Quarterly Report and in our Annual Report filed on Form 10-K for the fiscal year ended October 31, 2025, and other risks identified from time to time in the Company’s filings with the Securities and Exchange Commission. The Company assumes no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements. The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information appearing elsewhere in this Quarterly Report. Readers are also urged to carefully review and consider the various disclosures made by the Company which attempt to advise interested parties of the factors which affect our business, including without limitation the disclosures made under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the caption “Risk Factors,” and the audited consolidated financial statements and related notes included in our Annual Report filed on Form 10-K for the fiscal year ended October 31, 2025 and our other reports and filings made with the Securities and Exchange Commission (“SEC”). Critical Accounting Estimates This Management’s Discussion and Analysis of Financial Condition and Results of Operations (the “MD&A”) is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these condensed consolidated financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, net revenue and expenses, and the disclosure of contingent liabilities. Management believes that there have been no material changes during the three months ended April 30, 2026 to the items that we disclosed as our critical accounting estimates in the MD&A in our Annual Report on Form 10-K for the fiscal year ended October 31, 2025, except as set forth below with respect to the valuation allowance on our deferred income taxes. The Company continues to evaluate the realizability of its deferred tax assets on a quarterly basis. In prior periods, the Company recorded a valuation allowance due primarily to cumulative losses and other negative evidence. The Company has generated pre-tax income in each of the most recent four consecutive fiscal quarters and has experienced improved operating results over that period. This recent profitability represents positive evidence that the Company is weighing against the historical negative evidence in assessing the realizability of its deferred tax assets. If the Company is able to sustain its current level of profitability and generate sufficient future taxable income, it is reasonably possible that a reduction of a significant portion of the valuation allowance may be appropriate in a future reporting period. Any such reduction could result in a material income tax benefit in the period recognized and could have a significant impact on the Company’s effective tax rate and results of operations. The Company’s assessment remains dependent on the level and sustainability of future earnings and other relevant factors. Overview RF Industries, Ltd. (together with subsidiaries, the “Company,” “we”, “us”, or “our”) is a national manufacturer and marketer of interconnect products and systems. We market a variety of connector products, including connectors and cables, standard and custom cable assemblies, wiring harnesses and fiber optic cable products to numerous industries for use in thousands of applications. We previously aggregated our operating divisions into two reportable segments, the RF Connector and Cable Assembly (“RF Connector”) segment and the Custom Cabling Manufacturing and Assembly (“Custom Cabling”) segment. During the fourth quarter of fiscal 2025, we completed changes to the structure of our organization in connection with broader restructuring initiatives, including consolidation of manufacturing operations, headcount reductions, and the transition of our sales organization to a unified, customer‑centric model. As a result of these changes, our previous RF Connector and Custom Cabling operating segments were combined into a single reportable segment. For the six months ended April 30, 2026, revenues generated from our interconnect products were 35% of the Company’s total sales, revenues from our custom cabling products were 37% of the Company’s total sales and revenues from our integrated systems were 28% of total sales. Our interconnect products are primarily standardized products regularly used by customers and, therefore, have a more stable revenue stream when compared to our other offerings. Our custom cabling products are more customized cabling and wire-related equipment under larger project-based purchase orders. The integrated systems solutions are a blend of standardized offerings where we expect a more stable revenue stream with several more customized solutions that tend to be purchased in large project-based orders. 17 Our corporate headquarters are located at 16868 Via Del Campo Court, Suite 200, San Diego, CA 92127. Our phone number is (858) 549-6340. Liquidity and Capital Resources Historically, we have been able to fund our liquidity and other capital requirements from funds we generated from operations. We generated operating income during the six months ended April 30, 2026. The cost-cutting measures that were implemented to reduce our operating expenses and to help drive positive operating cash flow and increase liquidity continue to be realized. These cost-cutting efforts included consolidating facilities and recognizing the related operating efficiencies and synergies in our production operations. We intend to continue to pursue additional continuous improvement and cost reduction measures, as well as organic growth in revenue and profitability. As of April 30, 2026, we had a total of $3.4 million of cash and cash equivalents compared to a total of $5.1 million of cash and cash equivalents as of October 31, 2025. As of April 30, 2026, we had working capital of $16.5 million and a current ratio of approximately 1.9:1 with current assets of $35.0 million and current liabilities of $18.6 million. We believe that the amount of cash remaining, plus the amount available to us under the EBC Revolving Loan Facility, will be sufficient to fund our anticipated liquidity needs for at least the next 12 months from the date of filing of this Quarterly Report. As of April 30, 2026, we had $20.0 million of backlog, compared to $15.5 million as of October 31, 2025. The increase in backlog relates primarily to shipments made against orders in our custom cabling and integrated systems product offerings. Our backlog may fluctuate from period to period based on customer demand, general business conditions, and particularly the timing of project-based orders from large customers, which impacts our integrated systems offer. Since purchase orders are submitted by customers based on the timing of their requirements, our ability to predict orders in future periods or trends in future periods is limited. Furthermore, purchase orders may be subject to cancellation from customers, although we have not historically experienced material cancellations of purchase orders. In the six months ended April 30, 2026, we used $47,000 of cash from our operating activities. This net outflow of cash is primarily related to the change in accounts payable of $1.3 million, $1.2 million from depreciation and amortization, net income of $0.8 million, $0.5 million from stock-based compensation expense, the change in other current assets of $0.4 million, $47,000 from amortization of debt issuance costs and deferred income taxes of $25,000. The cash usage was primarily due to the change in accrued expenses of $1.6 million, income tax receivable of $0.8 million, an increase in inventories of $0.7 million, the change in accounts receivable of $0.7 million, right-of-use assets of $0.2 million, $0.1 million of tax payments on cancelled shares of restricted stock and bad debt expense of $24,000. During the six months ended April 30, 2026, we also spent $0.3 million on capital expenditures, repaid $1.7 million on the revolving credit facility with EBC, paid $0.1 million in debt issuance cost, and received $0.4 million in proceeds from the exercise of stock options. Our goal to expand and grow our business both organically and through acquisitions may require material additional capital equipment. In the past, we have purchased all additional equipment or financed some of our equipment and furnishings requirements through capital leases. At this time, we have not identified any additional capital equipment purchases that would require significant additional leasing or capital expenditures during the next 12 months. We also believe that based on our current financial condition, our current backlog of unfulfilled orders, and our anticipated future operations, we would be able to finance our expansion, if necessary. However, there can be no assurance that our cash resources will fund our operating plan, including any organic expansion or acquisitions, for the period anticipated by us, especially if there is a material adverse impact on our business from unforeseen events. From time to time, we may undertake acquisitions of other companies or product lines in order to diversify our product and solutions offerings and customer base. Conversely, we may undertake the disposition of a division or product line due to changes in our business strategy or market conditions. Acquisitions may require the outlay of cash, which may reduce our liquidity and capital resources while dispositions may increase our cash position, liquidity and capital resources. Since our goal is to continue to expand our operations and accelerate our growth through future acquisitions, we may use some of our current capital resources to fund acquisitions we may undertake in the future. Results of Operations Three Months Ended April 30, 2026 vs. Three Months Ended April 30, 2025 Net sales for the three months ended April 30, 2026 (the “fiscal 2026 quarter”) increased by 9.4%, or $1.8 million, to $20.7 million compared to $18.9 million in the three months ended April 30, 2025 (the “fiscal 2025 quarter”). The increase in net sales was primarily attributable to net sales of the custom cabling product offering, which increased by $1.9 million, or 29.8%, to $8.4 million in the fiscal 2026 quarter compared to $6.5 million in the fiscal 2025 quarter, primarily driven by increased market penetration in the aerospace and industrial industries. Net sales of the interconnect product offering also increased by $0.9 million, or 15.9%, to $6.9 million in fiscal 2026 quarter compared to $6.0 million in the fiscal 2025 quarter, primarily driven by higher customer demand for fiber applications and wireless infrastructure deployments. Net sales of the integrated systems product offering decreased by $1.1 million, or 17.2%, to $5.3 million in the fiscal 2026 quarter compared to $6.4 million in the fiscal 2025 quarter, primarily driven by a decrease in sales of small cell solutions to our wireless carrier customers due to the timing of orders and shipments based on budget cycles. 18 Gross profit increased by $1.3 million to $7.3 million in the fiscal 2026 quarter compared to $6.0 million in the fiscal 2025 quarter, and gross margin increased to 35.1% of sales in the fiscal 2026 quarter compared to 31.5% of sales in the fiscal 2025 quarter. The increase in gross profit and gross margin were primarily related to the overall product mix and improved operational efficiencies across the organization. Engineering expenses increased by $0.2 million to $0.9 million in the fiscal 2026 quarter compared to $0.7 million in the fiscal 2025 quarter. The increase was the result of resource allocation associated with new product development. Engineering expenses represent costs incurred relating to the ongoing research and development of current and new products. Selling and general expenses increased by $0.1 million to $5.3 million (25.4% of sales) in the fiscal 2026 quarter compared to $5.2 million (27.3% of sales) in the fiscal 2025 quarter primarily due to an increase in variable compensation related to commissions and bonuses as a result of higher sales and investment in additional resources. For the fiscal 2026 and 2025 quarters, we recorded income tax provision of $60,000 and $135,000, respectively. The effective tax rate was 6.4% for the fiscal 2026 quarter, compared to (122.7%) for the fiscal 2025 quarter. The change in the effective tax rate from the fiscal 2026 quarter to fiscal 2025 quarter was primarily driven by the change in valuation allowance, research and development credits, unrecognized tax benefits, state income taxes, and other expected permanent differences. For the fiscal 2026 quarter, net income was $0.9 million and fully diluted income per share was $0.08, compared to a net loss of $0.2 million and fully diluted loss per share of $0.02 for the fiscal 2025 quarter. For the fiscal 2026 quarter, the diluted weighted average shares outstanding were 11,424,572 as compared to 10,669,608 for the fiscal 2025 quarter. Six Months Ended April 30, 2026 vs. Six Months Ended April 30, 2025 Net sales for the six months ended April 30, 2026 (the “fiscal 2026 six-month period”) increased by 4.1%, or $1.6 million, to $39.7 million compared to $38.1 million in the six months ended April 30, 2025 (the “fiscal 2025 six-month period”). The increase in net sales was primarily attributable to net sales of the custom cabling product offering, which increased by $3.6 million, or 32.2%, to $14.8 million in the fiscal 2026 six-month period compared to $11.2 million in the fiscal 2025 six-month period, primarily driven by increased aerospace demand and organic growth within our existing customer base and product portfolio. Net sales of the interconnect product offering also increased by $2.4 million, or 21.2% to $13.8 million in the fiscal 2026 six-month period compared to $11.4 million in the fiscal 2025 six-month period, primarily driven by higher customer demand for fiber optic and general connectivity solutions. Net sales of the integrated systems product offering decreased by $4.5 million, or 28.9%, to $11.0 million in the fiscal 2026 six-month period compared to $15.5 million in fiscal 2025 six-month period, primarily driven by the timing of orders and shipments to our wireless carrier customers based on longer system design approval and budget cycles. Gross profit increased by $1.7 million to $13.4 million for the fiscal 2026 six-month period compared to $11.7 million in the fiscal 2025 six-month period, and gross margin increased to 33.8% of sales in the fiscal 2026 six-month period compared to 30.6% of sales in the fiscal 2025 six-month period. The increases in gross profit and gross margin were primarily related to the overall increase in sales, product mix and continued operational efficiencies. Engineering expenses increased by $0.4 million to $1.8 million in the fiscal 2026 six-month period compared to $1.4 million in the fiscal 2025 six-month period. The increase was the result of resource allocation associated with new product development. Engineering expenses represent costs incurred relating to the ongoing research and development of new products. Selling and general expenses increased by $0.2 million to $10.3 million (26.1% of sales) in the fiscal 2026 six-month period compared to $10.1 million (26.6% of sales) in the fiscal 2025 six-month period primarily due to an increase in stock-based compensation expense and public company fees. For the fiscal 2026 and 2025 six-month periods, we recorded income tax provision of $94,000 and $171,000, respectively. The effective tax rate was 10.2% for the fiscal 2026 six-month period, compared to (53.6%) for the fiscal 2025 six-month period. The change in effective tax rate for the fiscal 2026 and 2025 six-month periods was primarily driven by the effects of the change in valuation allowance, research and development credits, state income taxes, and other expected permanent differences. For the fiscal 2026 six-month period, net income was $0.8 million and fully diluted income per share was $0.07 per share as compared to a net loss of $0.5 million and fully diluted loss per share of ($0.05) per share for the fiscal 2025 six-month period. For the fiscal 2026 six-month period, the diluted weighted average shares outstanding were 11,221,542 as compared to 10,614,364 for the fiscal 2025 six-month period.

Legal Proceedings

From time to time, the Company is a party to various claims and legal proceedings that arise in the ordinary course of business. The outcome of any such claims or proceedings, regardless of the merits, is inherently uncertain and we cannot assure you that their ultimate disposition will not have a material adverse effect on our business, financial condition, cash flows, or results of operations. Except as discussed below, the Company is not currently a party to any pending or threatened litigation, the outcome of which would be expected to have a material adverse effect on its financial condition, results of operations, or cash flows. The Company discloses contingent liabilities even if the liability is not probable or estimable, or both, if there is a reasonable possibility that a material loss may have been incurred. Employee Class Action On July 24, 2024, a former employee (“Plaintiff”) filed a class action lawsuit against the Company and its subsidiary C Enterprises, Inc., in San Diego County Superior Court. The case is before the Honorable Gregory W. Pollack, and asserts allegations of California state law violations pertaining to: (1) straight time wages; (2) overtime wages; (3) meal periods; (4) rest periods; (5) business expense reimbursement; (6) timely payment of wages at termination; (7) provision of accurate itemized wage statements; and (8) California’s unfair competition law. This action seeks damages on behalf of a putative class of non-exempt employees who worked for the Company in California at any time from July 24, 2020, through the present. On July 23, 2024, Plaintiff provided notice of the alleged violations of law above to California’s Labor and Workforce Development Agency (“LWDA”) under the Private Attorneys General Act of 2004 (“PAGA”). On or about October 18, 2024, Plaintiff filed her First Amended Complaint (“FAC”), which amended her class complaint to include a cause of action under PAGA, whereby Plaintiff seeks penalties on behalf of the State of California and other similarly situated employees for the period of August 14, 2023, through the present. On October 30, 2025, we executed a memorandum of understanding, pursuant to which the Company agrees to pay, on an all-in and non-reversionary basis, a total settlement amount of $855,000, which has been accrued as of October 31, 2025. As of June 15, 2026, no class certification deadline or trial date has been set. The parties attended private mediation on August 7, 2025. The parties thereafter reached a settlement agreement, which will be subject to Court approval. The Motion for Preliminary Approval of the Settlement is scheduled to be heard in Court on August 7, 2026. 20

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Risk Factors

Our business, financial condition and operating results are affected by a number of factors, whether currently known or unknown, including risks specific to us or our industry, as well as risks that affect businesses in general. In addition to the information and risk factors set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended October 31, 2025, filed with the SEC on January 14, 2026 (the “Annual Report”). The risks disclosed in such Annual Report and in this Quarterly Report could materially adversely affect our business, financial condition, cash flows, or results of operations and thus our stock price. We believe there have been no material changes in our risk factors from those disclosed in the Annual Report. However, additional risks and uncertainties not currently known or which we currently deem to be immaterial may also materially adversely affect our business, financial condition, or results of operations. These risk factors may be important to understanding other statements in this Quarterly Report and should be read in conjunction with the unaudited condensed consolidated financial statements and related notes in Part I, Item 1, “Financial Statements” and Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report. Because of such risk factors, as well as other factors affecting the Company’s financial condition and operating results, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.