RF Industries, Ltd. (NASDAQ:RFIL) Q2 2023 Earnings Call Transcript

Rob Dawson: Yes. I think you’ll see some onetime charges around some of these initiatives that we talked through to ultimately reduce our expenses. We’ll be able to give some – I think, some better specifics at the end of Q3 around what that means going forward, but we certainly would expect our go-forward OpEx SG&A to come down in a meaningful way. We think it’s going to be a real impact here. it’s going to be confusing based on the onetime charges here for the next couple of quarters, but we’ll give them a clearer sense of what that looks like as we get into our Q3 results.

Josh Nichols: Great. And then I think you mentioned two things to hit on, like, one, just like the cash flow. Is it fair to assume that your inventory was down here, you expect that to come down further? Is there any idea for what a normalized inventory level would look like or how long that may take? I’m just trying to think about the cash flow impact from the working capital side from just the operating improvements that you guys have already made?

Rob Dawson: Yes, that’s fair. So I think we do believe there’s room for inventory to come down more. Through the consolidation, it becomes really clear where we have duplicate inventory that maybe we didn’t recognize before. So that’s one focus area. The other is we’re finally starting to see a little more normalized supply chain. So for us, sometimes it comes down to timing. There are some items that we ordered several weeks ago that had a 20- or 24-week lead time on them that are going to come in here shortly to address some projects that we have later in the year and early next year. So again, our number is small, so an order of a couple of hundred grand can move our inventory percentage point. But we believe that as we get through the year, you should our inventory start to come down, whether it happens exactly in Q3 or Q4 is hard to nail on timing there, but we’re very focused on getting our liquidity up through rationalizing that inventory.

Josh Nichols: And then last question for me. You’ve talked about the backlog before. It was obviously very elevated with some of these large onetime orders that kind of had been delayed you’re starting to see the beginning of a normalization. It looks like this quarter. Any visibility you have into like how much of the current backlog you expect to ship in like the back half of this year? I’m guessing you would expect the backlog to be materially lower from where it is today to more normalized levels unless you got some more large orders from some of the carriers.

Rob Dawson: Yes. And that last point is a big one that one or two meaningful orders of a few million bucks that are going to be drawn against over time, will artificially elevate that backlog, which we’ve been seeing. I’ve said in the past that backlog in the mid-teens is still a spectacular level for us and a huge amount of our day-to-day business really never hits the backlog. It comes in and goes out in a matter of sometimes hours, but certainly a matter of a few days. So it’s really a snapshot of time. We do expect it to continue trending down some. I think that’s good. We need to work through some of this 15-month-old kind of stuff that’s been on the – from a bookings perspective that came in. It’s good to work through that.