via NEWMEDIAWIRE --RF Industries, Ltd, (NASDAQ:
RFIL), a national manufacturer and marketer of interconnect
products and systems, today announced its financial results for the
second quarter of fiscal 2020 ended April 30, 2020.
Second Quarter Fiscal 2020 Highlights and Operating
Results:
- Net sales of $10.4 million
- Net loss was $(184,000), or $(0.02) per diluted share
- Non-GAAP net loss was $(73,000), or $(0.01) per diluted
share
- Adjusted EBITDA was $176,000
- Cash and cash equivalents were $14 million
Robert Dawson, President and CEO of RF Industries,
commented:
“As the second quarter began, we were executing well on our
go-to-market plan and generating good momentum in our business.
However, as we stated on our last earnings call, which occurred
only days prior to the government mandated stay at home orders
related to the pandemic, we were unsure of the full economic impact
of the coronavirus and anticipated that it may present a short-term
speed bump in our growth. In fact, the timing of this unfavorable
economic impact occurred in the middle of our second quarter and
had a significant impact on the results that we’re reporting today.
Although we continued to operate during the stay at home period
because our products were designated as essential to support the
federal critical infrastructure communications sector, our
operations were negatively impacted. We experienced delays in our
project-based business, but are hopeful that this delayed business
will reappear in late 2020 or early 2021. Similarly, our
distribution business was negatively impacted but has since started
to return. We believe that with our current financial position,
we remain well-positioned to successfully navigate this
challenging operating environment and emerge a stronger company as
we continue to execute on our long-term growth plan.”
Second Quarter Fiscal 2020 Results
Net sales in the secondquarter of fiscal 2020 were $10.4
million, a decrease of 23.7%, or $3.2 million, compared to $13.6
million in the second quarter of fiscal 2019. The year-over-year
decrease in net sales reflects a decrease in the Company’s
project-based business resulting from the slowdown in carrier
spending. This decrease was partially offset by additional sales
contributed by the newly acquired Schroff Technologies and C
Enterprises, Inc. subsidiaries (the Company did not own Schrofftech
in the fiscal 2019 quarter, and only owned C Enterprises for six
weeks in the 2019 quarter).
Gross profit for the second quarter was $2.6 million, compared
to $4.1 million in the second quarter last year. Gross margins were
25% of net sales, compared to 30% of net sales in the fiscal 2019
second quarter. The decline in margins was primarily due to lower
sales in the project-based business that resulted in lower coverage
of fixed production costs, product mix at the Custom Cabling
segment and increased sales at the C Enterprises subsidiary, whose
gross margins are lower than the blended margins of the Company’s
other divisions.
Total operating expenses increased $0.1 million to $2.8 million
(27% of net sales), compared to $2.7 million (20% of net sales) in
the second quarter last year primarily due to (i) the operating
expenses of the Schroff Technologies subsidiary and (ii) a full
quarter of operating expenses of the C Enterprises subsidiary. The
costs were partially offset by the $0.3 million decrease in
valuation of Schroff Technologies’ earn-out liability. Excluding
the impact of the two subsidiaries’ additional operating expenses,
second quarter operating expenses declined approximately $0.7
million when compared to the second quarter last
year.
Total operating expenses in the current quarter included
$173,000 of amortization expense, an increase of $104,000 over last
year, as a result of the acquisition of Schroff Technologies and
$97,000 in stock-based compensation expense, an increase of $19,000
over the prior year.
Additionally, the Company incurred approximately $50,000 of
increased production and operating costs for supplies, sanitation
services and other costs to keep its employees safe related to the
COVID-19 pandemic.
Net loss for the second quarter of fiscal 2020 was $(184,000),
or $(0.02) per diluted share, compared to net income of $1.1
million, or $0.11 per diluted share, in the second quarter last
year.
Non-GAAP net loss for the second quarter of fiscal 2020 was
$(73,000), or $(0.01) per diluted share, compared to non-GAAP net
income of $1.2 million, or $0.13 per diluted share in the second
quarter last year. For the second quarter of fiscal 2020, non-GAAP
adjustments excluded $97,000 of stock-based compensation expense,
an increase of $19,000 compared to $78,000 in the second quarter
last year.
Adjusted EBITDA for the second quarter of fiscal 2020 was
$176,000, compared to $1.7 million in the second quarter last year.
For the second quarter of fiscal 2020, adjusted EBITDA excluded
$97,000 stock-based compensation expense and $173,000 amortization
expense, an increase of $104,000 compared to $69,000 in the second
quarter last year primarily due to the impact of acquiring Schroff
Technologies. Adjusted EBITDA excluded a $3,000 tax expense,
compared to a $315,000 tax expense in the second quarter last
year.
First Six Months Results
Net sales for the first six months of fiscal 2020 were $22.8
million, compared to $24.3 million for the same period of fiscal
2019. The year-over-year decrease in net sales reflects a decrease
in the Company’s project-based business resulting from the slowdown
in carrier spending. This decrease was partially offset by
increased sales from newly acquired Schroff Technologies and C
Enterprises.
Gross profit for the first six months was $5.8 million, compared
to $7.2 million, while gross margins were 26% of sales compared to
30% of sales in the same period last year. The decline in margins
was primarily due to lower sales in the project-based business that
resulted in lower coverage of fixed production costs, product mix
at the Custom Cabling segment and increased sales at the C
Enterprises subsidiary, whose gross margins are lower than the
blended margins of the Company’s other divisions.
Total operating expenses increased $0.9 million to $6.0 million
(26% of net sales) compared to $5.1 million (21% of net sales) in
the first half last year primarily due to the absorption of the
additional operating expenses of newly acquired Schroff
Technologies, which the Company did not own in fiscal 2019, and a
full six months of engineering costs at C Enterprises (whose
expenses were only included in 2019 for the six-week period
following the acquisition of this subsidiary on March 15, 2019).
Excluding the impact of their additional operating expenses, second
half operating expenses declined approximately $0.7 million when
compared to the second half last year.
Total operating expenses in the first half of fiscal 2020
included 1) $283,000 in stock-based compensation expense, an
increase of $91,000 over the first half last year, due in part to
new officers hired by the Company, and 2) $346,000 of amortization
expense, an increase of $208,000 over last year, as a result of the
acquisition of Schroff Technologies and 3) acquisition-related
costs of $42,000, also due to the Schroff Technologies
acquisition.
Additionally, the Company incurred approximately $50,000 of
increased production and operating costs for supplies, sanitation
services and other costs to keep its employees safe related to
COVID-19 pandemic.
Net loss for the first half of fiscal 2020 was $(158,000), or
$(0.02) per diluted share, compared to net income of $1.7 million,
or $0.17 per diluted share, in the first half last year.
Non-GAAP net income for the first half of fiscal 2020 was
$167,000, or $0.02 per diluted share, compared to non-GAAP net
income of $2.0 million, or $0.20 per diluted share in the first
half last year. For the first half of fiscal 2020, non-GAAP
adjustments excluded $283,000 of stock-based compensation expense,
an increase of $91,000 compared to $192,000 in the first of half
last year, due in part to a new officer hired by the Company, and
to acquisition-related costs of $42,000, due to the Schroff
Technologies acquisition.
Adjusted EBITDA for the first half of fiscal 2020 was $646,000,
compared to $2.7 million in the first half last year. For the first
half of fiscal 2020, adjusted EBITDA excluded $283,000 stock-based
compensation expense and $346,000 amortization expense, an increase
of $208,000 compared to $138,000 in the first half last year
primarily due to the impact of acquiring Schroff
Technologies. Adjusted EBITDA excluded an $11,000 tax benefit,
compared to a $483,000 tax expense in the first half last year.
Balance Sheet Data
At April 30, 2020, the Company had cash and cash equivalents of
$14.1 million, reported working capital of $23.5 million, had a
current ratio of 5.1-to-1 and no outstanding debt.
Subsequent to quarter end, the Company received in the
aggregate a $2.8 million of loans under the Paycheck Protection
Program ('PPP') within the Coronavirus Aid Relief and Economic
Security Act. The loan bears interest at a fixed rate of 1% and
will be forgiven if the Company meets certain conditions, which it
expects to do at this time. The PPP loans provide the Company with
financial protection and enabled it to continue employing all of
its team members through this period of significant
uncertainty.
As the Company has disclosed to its investors in the past, cash
dividends depend on a number of factors, including general business
conditions and other factors considered relevant by its Board of
Directors. In light of the uncertainty and significant economic
impact that the pandemic has had on the Company’s business, at this
time the Board of Directors has suspended the dividend and will
reconsider the payment of the dividend next quarter.
Conference Call and Webcast
RF Industries will host a conference call and live webcast today
at 1:30 p.m. Pacific Time (4:30 p.m. ET) to discuss its second
quarter 2020 financial results. To access the conference call,
dial 888-394-8218 (US and Canada)
or 323-794-2588(International). The conference ID
is 7782659. In addition, a live and archived webcast of the
conference call will be accessible on the investor
relationssection of the Company’s website
at www.rfindustries.com. A phone replay of the conference call
will also be available beginning approximately two hours after
conclusion of the call and will remain available for two weeks. To
access the phone replay, dial 844-512-2921(US and Canada)
or 412-317-6671(International). The replay conference ID
is 7782659.
About RF Industries
RF Industries designs and manufactures a broad range of
interconnect products across diversified, growing markets including
wireless/wireline telecom, data communications and industrial. The
Company's products include RF connectors, coaxial
cables, data cables, wire harnesses, fiber optic
cables, custom cabling, energy-efficient cooling
systemsand integrated small cell enclosures. The Company is
headquartered in San Diego, California with additional operations
in Long Island, New York, Vista, California, Milford, Connecticut
and North Kingstown, Rhode Island. Please visit the RF Industries
website at www.rfindustries.com.
Forward-Looking Statements
This press release contains forward-looking statements with
respect to future events, including the return of delayed
project-based business and the Company’s long-term growth, which
are subject to a number of factors that could cause actual results
to differ materially. Factors that could cause or contribute
to such differences include, but are not limited to: the duration
and continuing impact of the coronavirus pandemic on the U.S.
economy and the Company’s customers, changes in the
telecommunications industry; the Company's reliance on certain
distributors and customers for a significant portion of
anticipated revenues; the impact of existing and additional future
tariffs imposed by U.S and foreign nations; the Company's ability
to execute on its new go-to-market strategies and channel models;
its ability to expand its OEM relationships; its ability to
continue to deliver newly designed and custom fiber optic and
cabling products to principal customers; its ability to maintain
strong margins and diversify its customer base; and its
ability to address the changing needs of the market. Further
discussion of these and other potential risk factors may be found
in the Company's public filings with the Securities and Exchange
Commission (www.sec.gov) including its Annual Report on Form 10-K
and its Quarterly Reports on Form 10-Q. All
forward-looking statements are based upon information available to
the Company on the date they are published and the Company
undertakes no obligation to publicly update or revise any
forward-looking statements to reflect events or new information
after the date of this release.
Note Regarding Use of Non-GAAP Financial Measures
To supplement our condensed financial statements presented in
accordance with U.S. generally accepted accounting principles
(GAAP), this earnings release and the accompanying tables and the
related earnings conference call contain certain non-GAAP financial
measures, including adjusted earnings before interest, taxes,
depreciation, amortization (Adjusted EBITDA), non-GAAP net income
and non-GAAP earnings per diluted share (non-GAAP EPS). We believe
these financial measures provide useful information to investors
with which to analyze our operating trends and
performance.
In computing Adjusted EBITDA, non-GAAP net income, and non-GAAP
EPS, we exclude stock-based compensation expense, which represents
non-cash charges for the fair value of stock options and other
non-cash awards granted to employees, and acquisition related costs
and expenses. For Adjusted EBITDA we also exclude depreciation,
amortization, and provision for income taxes. Because of varying
available valuation methodologies, subjective assumptions, and the
variety of equity instruments that can impact a company's non-cash
operating expenses, we believe that providing non-GAAP financial
measures that exclude non-cash expense and non-recurring costs and
expenses allows for meaningful comparisons between our core
business operating results and those of other companies, as well as
providing us with an important tool for financial and operational
decision-making and for evaluating our own core business operating
results over different periods of time.
Our Adjusted EBITDA, non-GAAP net income, and non-GAAP EPS
measures may not provide information that is directly comparable to
that provided by other companies in our industry, as other
companies in our industry may calculate non-GAAP financial results
differently, particularly related to non-recurring, unusual items.
Our Adjusted EBITDA, non-GAAP Net income, and non-GAAP EPS are not
measurements of financial performance under GAAP, and should not be
considered as an alternative to operating or net income or as an
indication of operating performance or any other measure of
performance derived in accordance with GAAP. We do not consider
these non-GAAP measures to be a substitute for, or superior to, the
information provided by GAAP financial results. A reconciliation of
specific adjustments to GAAP results is provided in the last two
tables at the end of this press release.
RF INDUSTRIES, LTD. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
(UNAUDITED) (In thousands, except share and per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six
Months Ended |
April 30, |
|
April 30, |
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
Net sales |
$ 10,390 |
|
$ 13,626 |
|
$ 22,804 |
|
$ 24,273 |
Cost of sales |
7,804 |
|
9,532 |
|
16,965 |
|
17,033 |
|
|
|
|
|
|
|
|
Gross profit |
2,586 |
|
4,094 |
|
5,839 |
|
7,240 |
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
Engineering |
528 |
|
332 |
|
1,124 |
|
652 |
Selling and general |
2,246 |
|
2,400 |
|
4,902 |
|
4,439 |
Total operating expenses |
2,774 |
|
2,732 |
|
6,026 |
|
5,091 |
|
|
|
|
|
|
|
|
Operating (loss) income |
(188) |
|
1,362 |
|
(187) |
|
2,149 |
|
|
|
|
|
|
|
|
Other income |
7 |
|
14 |
|
18 |
|
35 |
|
|
|
|
|
|
|
|
(Loss) income before provision
(benefit) for income taxes |
(181) |
|
1,376 |
|
(169) |
|
2,184 |
Provision (benefit)
for income taxes |
3 |
|
315 |
|
(11) |
|
483 |
|
|
|
|
|
|
|
|
Net (loss) income |
$ (184) |
|
$ 1,061 |
|
$ (158) |
|
$ 1,701 |
|
|
|
|
|
|
|
|
Net
(loss) income per share - Basic |
$ (0.02) |
|
$ 0.11 |
|
$ (0.02) |
|
$ 0.18 |
Net (loss) income
per share - Diluted |
$ (0.02) |
|
$ 0.11 |
|
$ (0.02) |
|
$ 0.17 |
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
Basic |
9,704,880 |
|
9,356,660 |
|
9,633,935 |
|
9,332,665 |
Diluted |
9,704,880 |
|
9,837,964 |
|
9,633,935 |
|
9,837,718 |
RF INDUSTRIES, LTD. AND
SUBSIDIARIES |
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS |
|
|
(in thousands, except share and per share amounts) |
|
|
|
|
|
Apr.30, |
|
Oct. 31, |
|
|
2020 |
|
2019 |
|
ASSETS |
(unaudited) |
|
(audited) |
|
CURRENT ASSETS |
|
|
|
|
Cash and cash equivalents |
$14,076 |
|
$ 12,540 |
|
Trade accounts receivable, net |
4,950 |
|
12,190 |
|
Inventories, net |
9,100 |
|
8,245 |
|
Other current assets |
1,121 |
|
685 |
|
TOTAL CURRENT ASSETS |
29,247 |
|
33,660 |
|
|
|
|
|
|
Property and equipment, net |
797 |
|
839 |
|
Right of use asset, net |
1,901 |
|
- |
|
Goodwill |
2,697 |
|
1,340 |
|
Amortizable intangible assets, net |
3,527 |
|
1,092 |
|
Non-amortizable intangible assets |
1,174 |
|
657 |
|
Other assets |
69 |
|
112 |
|
TOTAL ASSETS |
$39,412 |
|
$ 37,700 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
Accounts payable |
$ 1,454 |
|
$ 2,406 |
|
Accrued expenses |
3,305 |
|
3,653 |
|
Income Taxes Payable |
- |
|
21 |
|
Other current
liabilities |
977 |
|
- |
|
TOTAL CURRENT LIABILITIES |
5,736 |
|
6,080 |
|
|
|
|
|
|
Deferred tax liabilities |
91 |
|
- |
|
Operating lease liabilities |
1,023 |
|
- |
|
Other
long-term liabilities |
869 |
|
87 |
|
TOTAL LIABILITIES |
7,719 |
|
6,167 |
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
STOCKHOLDERS' EQUITY |
|
|
|
|
Common stock, authorized 20,000,000 shares of
$0.01 par value; |
|
|
|
|
9,758,062 and 9,462,267 shares
issued and outstanding at |
|
|
|
|
April 30, 2020 and October 31,
2019, respectively |
98 |
|
95 |
|
Additional paid-in capital |
22,652 |
|
21,949 |
|
Retained earnings |
8,943 |
|
9,489 |
|
TOTAL STOCKHOLDERS' EQUITY |
31,693 |
|
31,533 |
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$39,412 |
|
$ 37,700 |
|
RF INDUSTRIES, LTD. AND
SUBSIDIARIES |
|
Unaudited Reconciliation of GAAP to non-GAAP Net (Loss) Income |
|
(In thousands, except share and per share amounts) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
April 30, |
|
April 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
Net (loss)
income |
$ (184) |
|
$ 1,061 |
|
$ (158) |
|
$ 1,701 |
|
Stock-based compensation expense |
97 |
|
78 |
|
283 |
|
192 |
|
Acquisition-related costs |
14 |
|
100 |
|
42 |
|
103 |
|
Non-GAAP net
(loss) income |
$ (73) |
|
$ 1,239 |
|
$ 167 |
|
$ 1,996 |
|
|
|
|
|
|
|
|
|
|
Non-GAAP net
(loss) income per share: |
|
|
|
|
|
|
|
|
Basic |
$ (0.01) |
|
$ 0.13 |
|
$ 0.02 |
|
$ 0.21 |
|
Diluted |
$ (0.01) |
|
$ 0.13 |
|
$ 0.02 |
|
$ 0.20 |
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding |
|
|
|
|
|
|
|
|
Basic |
9,704,880 |
|
9,356,660 |
|
9,633,935 |
|
9,332,665 |
|
Diluted |
9,704,880 |
|
9,837,964 |
|
9,881,320 |
|
9,837,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RF INDUSTRIES, LTD. AND SUBSIDIARIES |
|
Unaudited Reconciliation of Net (Loss) Income to Adjusted
EBITDA |
|
(In thousands, except share and per share amounts) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
April 30, |
|
April 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Net (loss)
income |
$ (184) |
|
$ 1,061 |
|
$ (158) |
|
$ 1,701 |
|
Stock-based compensation expense |
97 |
|
78 |
|
283 |
|
192 |
|
Acquisition-related costs |
14 |
|
100 |
|
42 |
|
103 |
|
Amortization expense |
173 |
|
69 |
|
346 |
|
138 |
|
Depreciation expense |
80 |
|
72 |
|
162 |
|
140 |
|
Other
income |
(7) |
|
(14) |
|
(18) |
|
(35) |
|
Provision (benefit) for income taxes |
3 |
|
315 |
|
(11) |
|
483 |
|
Adjusted
EBITDA |
$ 176 |
|
$ 1,681 |
|
$ 646 |
|
$ 2,722 |
|
RF Industries Ltd.Mark Turfler SVP/CFO (858)
549-6340 rfi@rfindustries.com
MKR Investor RelationsTodd Kehrli Analyst/Investor
Contact (323) 468-2300 rfil@mkr-group.com
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