Good day, everyone, and welcome to the RF Industries' First Quarter Fiscal 2020 Financial Results Conference. [Operator Instructions] As a reminder, this call is being recorded today, Thursday, March 12, 2020..

At this time, I would like to turn the call over to Mr. Todd Kehrli, MKR, Investor Relations. Please go ahead, sir. .

Thank you, operator. Good afternoon, and welcome to RF Industries' First Quarter Fiscal 2020 Financial Results Conference Call. With me on today's call are RF Industries' President and CEO, Rob Dawson; and Chief Financial Officer, Mark Turfler. .

Before I turn the call over to Mark and Rob, I'd like to cover a few quick items. This afternoon, RF Industries issued a press release announcing its first quarter fiscal 2020 financial results. That release is available on the company's website at rfindustries.com.

This call is being broadcast live over the Internet for all interested parties, and the webcast will be archived on the Investor Relations page of the company's website. .

I want to remind everyone that during today's call, management will make forward-looking statements that involve risks and uncertainties. Please note that except for the historical statements, statements on this call today may constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934.

When used, the words anticipate, believe, expect, intend, future and other similar expressions identify forward-looking statements.

These forward-looking statements reflect management's current views with respect to future events and financial performance and are subject to risks and uncertainties, and actual results may differ materially from the outcomes contained in any forward-looking statements..

Factors that could cause these forward-looking statements to differ from actual results include delays in development, marketing or sales of products and other risks and uncertainties discussed in the company's periodic reports on Form 10-K and 10-Q and other filings with the Securities and Exchange Commission.

RF Industries undertakes no obligation to update or revise any forward-looking statements. .

Additionally, throughout this call, we'll be discussing certain non-GAAP financial measures. Today's earnings release and the related current report on Form 8-K describe the differences between our non-GAAP and GAAP reporting and present the reconciliation between the 2 for the periods reported in the release.

I'll now turn the conference over to Rob Dawson, President and Chief Executive Officer.

Rob?.

Thank you, Todd. Good afternoon, everyone, and welcome to our first quarter fiscal 2020 earnings conference call. Overall, our fiscal first quarter included some macro challenges. And while the market headwinds weren't ideal, the team did a great job of staying focused. We grew sales 17% over last year in the same quarter.

We're able to show a profit and slightly exceed analysts' expectations on sales and non-GAAP net income for the quarter. .

As I've noted before, our first quarter is seasonally our most difficult. November through January is typically a difficult time of year in most of our markets.

As I said on our December call, this year was even tougher with a late Thanksgiving and major holidays falling on a Wednesday, resulting in a 5- to 6-week period where the business climate seemed extremely slow. Q1 was also a shorter quarter with only 62 business days as compared to 65 in Q4. .

Our Q1 results also reflect the impact of some meaningful noncash and onetime expenses that hit our operating line in the quarter. Beginning this quarter, we'll be providing some additional financial metrics to give color on our results and make them more understandable.

While we haven't traditionally done this, we recognize that with 2 acquisitions in the last year and the related costs and complexities of our evolving business, it would be helpful to provide more information.

Additionally, we've frequently been asked by many investors to include items like adjusted EBITDA to clarify acquisition-related costs and equity compensation. Mark will provide more detail on that later in the call. .

In addition to the usual seasonal factors, we saw wireless carrier CapEx spend slow dramatically, and in some cases, stopped completely as 2019 was winding down and this continued into 2020. This industry-wide spending adjustment significantly impacted our sales in the quarter as we saw very little wireless carrier project sales materialize. .

Uncertainty around the proposed T-Mobile/Sprint merger and other macro spending decisions clearly affected carrier purchases in the quarter. Despite these headwinds, our team remained focused on managing the elements that we were able to control.

We do expect that the recent decision to allow the merger should take away uncertainty and lead to spending. The upgrade from 4G to 5G is happening, along with increased usage of data, so the need to address capacity hasn't really changed. .

Fortunately, our core distribution-centric run rate business continues to be diverse and healthy. That includes both the coaxial business and C Enterprises. We feel good about that business, and the go-to-market plan we're executing on to grow our distribution is working well.

We see our daily volumes increasing, and expect we will be able to deliver solid annual sales growth from this run rate business this year. .

While spend from the wireless carriers look extremely light over the last several months, we've started to see signs of improvements and more activity from our Tier 1 carrier customers in the second quarter.

Since the end of our first quarter, our bookings have picked up meaningfully across all divisions, and backlog has increased and currently stands at $6.6 million, up from $5 million at the end of the quarter. .

Looking at the project business that we do in the wireless carrier ecosystem, we continue to focus on providing more of the bill of materials to capitalize on the coming wireless infrastructure spend that we believe will run for quite some time.

Although the timing is still in question as to when that spend will happen in a consistent fashion, we have the products to participate in a meaningful way once it happens. .

As I've noted in the past, the Tier 1 carrier space is generally project-oriented and tied to CapEx spend, with the flow of purchases being somewhat lumpy with peaks and valleys. While the carrier spend remains a big wild card, we continue to work hard to diversify and land more customers and product opportunities to smooth out our results.

And the way we're trying to do that is to grow both distribution business, which as I said is healthy and doing a good job, and grow our project business to tap into more buckets of the wireless CapEx spend..

My general comment here is we either want this carrier business or we don't. If we want it, we have to deal with the wild ebbs and flows and benefit from the large wins that it can provide.

While in short periods of time, this business can wildly swing our relatively small sales numbers due to the magnitude of the spend for both good and bad, in the long term, this business has provided mostly positives for us. .

Our acquisition of telecom supplier Schroff Technologies in November of 2019, expanded our overall offer in the small cell bill of materials so that we can capitalize on the upcoming 5G densification opportunity.

But more importantly, we acquired Schroff Tech to diversify our exposure to the carriers and give us additional buckets of money to tap into within the carrier CapEx spend. Schroff Tech has relationships with all 4 of the major wireless carriers as well as other key players in the wireless ecosystem.

As we continue to aggressively work with the carriers to win business, Schroff Tech gives us more access to those carriers and gets us into the discussion earlier on in the process. .

While major small cell spend didn't show up in the first quarter, as we expected, we began to see Schroff Tech business pick up as we moved into the February time frame. And we believe that by mid-year, we'll see a more normalized level of spend on the small cell side. .

On the macro site side of the carrier CapEx spend, we unfortunately just didn't see it at year-end or at the beginning of the year, and it normally hits one or the other. And we weren't alone. We heard the same thing from other manufacturers in our space as well. As we moved into Q2, we've begun to see signs of life there.

Q2 will not be an easy quarter for some clear macro market reasons, but at least we're seeing some thawing in the larger project spend, and we think that will continue as the year goes on. Having said that, we expect much of the wireless carrier spend to be loaded in the back half of our fiscal year.

More specifically, we're expecting densification efforts to be better in the short term, with both DAS and small cell being key. Macro sites we expect to improve in the second half of the year and into 2021 and beyond. .

Related to this, we did reduce production head count in our custom cable segment during the quarter due to the slower macro site demand. But we believe we need to keep our core intact, which caused a small drag on margins. In our business, it's critical that we keep skilled workers employed on our team even through the ebbs and flows.

Since when the larger projects come in, we need to be able to execute quickly and it's both expensive and time-consuming to train new resources. .

Looking at Q2, it's difficult to provide specific guidance due to the uncertainty regarding the impact of the coronavirus on the supply chain and on our customers.

We've heard significant concerns about its potential impact within the industry from both competitors and suppliers who are saying there may be disruptions and delay in shipments of materials that we need to fulfill our orders. Additionally, we are seeing some customers delay purchasing decisions and projects for both financial and workforce reasons.

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Given the warning signs we're season -- we're seeing, we're being conservative and won't be providing specific revenue expectations for the quarter. We're closely monitoring the situation as it develops and would hope to make up any lost revenue in the back half of the year. I get daily updates on our supply chain.

And in attempts to mitigate the challenges, we've placed larger orders with our suppliers, expedited shipments where possible, and we generally keep more inventory and materials on hand that might be expected for our company of our size.

While the economic impact of the virus may present a short-term speed bump in our growth, we continue to maintain a strong cash position and are executing on our long-term growth plan. .

As I said to our team, we will approach the business in a calm and compassionate way. The safety of our team is our top priority as we work through this situation together. We have policies and processes in place designed to keep people healthy and productive.

The hardest part is keeping everyone positive and focused, while it's very noisy in the world. Finally, as always, we'll continue to communicate as much as possible with our stakeholders, including the investment community. .

Now back on our growth plan. As part of the plan, we continue to actively look for potential M&A to diversify our customer set and get into new product types and new market segments that will help us diversify our business and smooth out our results even further.

We expect to see some good growth this year from the 2 acquisitions we did last year, C Enterprises and Schroff Tech. And with the significant resources that our balance sheet provides, we're looking to do a larger acquisition in the $15 million to $30 million range when it makes sense..

We continue to pursue a robust pipeline of acquisition candidates, including those with products that complement our existing offer and target end markets. We believe there's an opportunity to drive further consolidation in our space, including both large and small companies, and we'd like to help lead this charge. I think the market needs it.

And we're hearing that from some customers also. .

In closing, we're building a platform upon which we can grow sales organically and through acquisition and do so profitably while generating solid cash flow. We have a strong balance sheet with no debt and lots of cash, which gives us flexibility to manage the business as well as weather any crazy storms like the one we're dealing with at the moment.

We've made investments in our business over the last few years that allow us to increase sales without much additional spend. Looking ahead, we remain confident in the long-term prospects of our business, and we're focused on executing on our growth plan. We're optimistic about the things we can control in our current quarter.

We're keeping a positive attitude, and we're holding a strong cash position. .

With that, I'll now turn the call over to Mark for a detailed review and discussion of the financial results for the quarter.

Mark?.

Thank you, Rob, and good afternoon, everyone. Our net sales in the first quarter were $12.4 million, an increase of 17% or $1.8 million compared to the first quarter a year ago. The year-over-year increase in net sales reflects sales contribution from our acquisition of Schroff Technologies and C Enterprises. .

Bookings during the quarter were $10.2 million, leading us to the backlog of $5 million at the end of Q1 compared to $6.1 million at the end of our fourth quarter. As Rob noted, since the end of the first quarter, our bookings have picked up meaningfully across all divisions and currently stands at $6.6 million.

Gross profit for the first quarter was $3.3 million compared to $3.1 million in the first quarter of fiscal 2019. .

Gross margins were 26.2% of net sales compared to 29.5% of net sales in the first quarter a year ago. The decline in margins was primarily due to product mix in our Custom Cabling segment, driven by lower margin at the C Enterprises subsidiary.

Total operating expenses increased $900,000 to $3.3 million or 26% of sales compared to $2.4 million or 22% of net sales in the first quarter of last year. The increase was primarily due to the absorption of the additional selling and general expenses of newly acquired Schroff Technologies and C Enterprises..

First, $187,000 in stock-based compensation expense, an increase of $73,000 over the first quarter last year, due in part to onetime compensation costs related to the company's recently hired Chief Revenue Officer; secondly, $173,000 of amortization expense, an increase of $104,000 over last year as a result of the acquisition of Schroff Tech; and lastly, acquisition-related costs of $28,000, also due to the Schroff Tech acquisition, an increase of $24,000 over last year.

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Net income for the first quarter was $26,000 or $0.00 per diluted share compared to $640,000 or $0.07 per diluted share in the first quarter of fiscal 2019. Starting this quarter, we are also providing some non-GAAP financial measures, including non-GAAP net income, non-GAAP earnings per share and adjusted EBITDA.

Our earnings press release includes a reconciliation between the GAAP and non-GAAP reported. We believe these non-GAAP financial measures provide useful information to investors with which to analyze our operating trends and performance. .

Non-GAAP net income for the first quarter was $241,000 or $0.02 per diluted share, compared to $758,000 or $0.08 per diluted share in the first quarter last year.

Non-GAAP net income for the first quarter of fiscal 2020 excluded (sic) [ included ] $187,000 in stock-based compensation expense and $28,000 in acquisition-related costs and expenses associated with the acquisition of Schroff Tech.

Adjusted EBITDA for the first quarter of fiscal 2020 was $471,000 compared to $1 million in the first quarter last year. For the first quarter, adjusted EBITDA excluded (sic) [ included ] $187,000 of stock-based compensation expense and $28,000 in acquisition-related costs and expenses as described above. .

Adjusted EBITDA for the first quarter of 2020, also excluded (sic) [ included ] $173,000 of amortization expense, an increase of $104,000 compared to $69,000 in the first quarter last year, primarily due to the impact of acquiring Schroff Tech. .

During the first quarter, the company provided our shareholders with a return on an investment in the form of a $0.02 per share cash dividend. In addition, at our March 5, 2020 meeting, our board declared a quarterly cash dividend of $0.02 per share, payable on April 15. .

Our balance sheet remained strong with no debt and total cash and cash equivalents of $14.4 million at the end of the first quarter, up from $12.5 million at the end of the preceding fourth quarter.

Additionally, during the first quarter, the company generated cash of $5.6 million from operations, well in excess of the $3.9 million cash paid for the purchase of Schroff Tech. .

Lastly, on the Investor Relations front, this Monday, March 16, Rob and I will be conducting virtual one-on-one meetings with investors as part of the 32nd Annual Roth Conference. Although we will not be giving a live presentation, we have made our current investor presentation available to everyone on our website for your convenience. .

With that, I would like to open up the floor to questions. Operator, we're ready to take our first question. .

[Operator Instructions] And our first question today comes from Aman Gulani of B. Riley FBR. .

Are you able to break out the revenue contribution from Schroff and then also C Enterprises for the quarter?.

Yes. So in total, I think if you were to look at the 3 businesses that we would have had last year, at this time, declined a little bit related to the carrier spend. So we were, I don't know, $9.5 million, call it that. And we got the other -- the remaining dollars of $3 million roughly, or a little more than that from those 2 overall.

So that's kind of the general breakout with -- Schroff had a soft quarter. We weren't surprised by that, but they came in around $1.2 million, I think, in total. So profitable at that level, which is helpful. But we expected their first quarter to be the kind of the slowest either.

So you saw, call it, $9.5 million from the existing businesses and roughly $3 million in acquired business. .

Got it. Okay.

And then what were your booking and backlog numbers for the quarter?.

Yes. So the backlog ended up just over $5 million. So subsequent to that, I think it's important to note, as we've talked about a little bit, is that backlog now stands at $6.6 million. So -- well, during our first quarter, it was a little slower than what we might like overall from a bookings perspective. It has picked up.

It has come up from $5 million at the end of the quarter to $6.6 million total.

Mark, what were the total bookings in Q1?.

It was $10.2 million for the first quarter. .

Got it. Okay.

And then can you talk about some of the cross-selling opportunities that you might be seeing with Schroff specifically? And where are you seeing the opportunities, that selling to Schroff's existing customer base or from Schroff to RFIL legacy customers?.

Yes. So it's interesting. It's -- we're actually -- we're attempting to go both directions on that, and we're seeing some success. We're building a nice pipeline. We've only had them on board, call it, 4 months at this point. And so we've done both.

We've gotten out in front of Schroff's existing customer base where possible, and they've been helping us -- Schroff's team has been helping us pull-through some of the other products in our portfolio as part of their broader solutions. So we're certainly seeing some successes there. .

I think, even better, and our opinion is we're getting our distribution channels trained on the Schroff offering, there's a subset of their offer that makes sense for distribution or at least identifying opportunities there. The other thing is we have sort of separate contacts.

The Schroff team has -- most of their contacts are in the small cell side or kind of related within the various carriers and/or neutral host folks and tower companies. And our traditional relationships have been with a different group of folks, because we've been selling different product areas.

So it allows us to sort of go up a level, let's say, at a higher level decision-maker, or I think even better, we have a real solution to talk about it. I think that's the direction that we're trying to go as a company is going in from solving a problem for an entire solution versus 1 or 2 product categories. We want to have more of that to offer.

So I think we're seeing opportunities from a pipeline perspective in both. .

And it's a real-time activity. We're getting out with our existing sales team and the Schroff team and then sort of cross-pollinating or cross-selling between the different contacts. And people are excited about the conversation.

I can tell you it causes a different beginning reaction to the conversation because it is a -- can be a more custom offering, but it's also -- you're solving a very clear problem if you can resolve some of the -- either thermal cooling challenges that people may have or small cell designs. So we're seeing it both ways. .

Got it. I guess one more question for me.

What are you seeing in terms of 5G spend, specifically to small cell deployment? Do you think your visibility in general has improved now that most of the major wireless carriers now -- they reported their 5G CapEx for 2020?.

Yes, I think we have a better sense of it. One of the things that I mentioned in my comments is we expect the small cell and kind of the densification effort to be happening earlier in the year than the traditional macro tower sites. And that's sort of what we've had to play out so far.

We've seen more opportunities or bookings increase on not only the small cell side, but when I think densification, we're also talking about DAS deployments. There's a lot of stadiums and other venues that are being built out right now.

We're playing in several of those, mostly through our distribution channel on the DAS side, but we're having some successes there. So we feel good about DAS -- densification business increasing first.

I think the part that we're hopeful for and looking to see pick up in the CapEx numbers -- and including Verizon's CEO, just this afternoon, was talking about increasing their spend on 5G deployment, that's great. We're hopeful for that.

I think we've been expecting that in the second half of the year and into 2021, where we really start to see the bigger tower sites and rooftop sites being deployed kind of in a traditional format for each of the carriers. And getting the Sprint/T-Mobile merger completed.

I've said for months, look, one way or the other, we need a resolution there, so we can execute kind of on the next phase of a plan in the market overall. That caused some of the slowdown in spending, I think, in total. But we're hopeful.

And our expectation is that you get to the second half of this calendar year, we should start to see the CapEx pick up on the macro side. .

Our next question comes from Josh Nichols of B. Riley FBR. .

I just want to jump in and ask real quick. Obviously, a lot of uncertainty on the market, but you guys continue to execute pretty well in a tough operating environment.

But I did want to ask, one, the current environment side and some of the uncertainty, is this an opportunity for you potentially to find an attractive acquisition in these types of uncertain times?.

And two, given that this is a very fragmented industry, do you think that there's some opportunity for RF to really take some share since you're able to -- you have a better balance sheet, able to have more inventory and maybe get some new customers that you didn't have previously?.

Yes. Thanks, Josh. I appreciate both those questions. So on the first one, from an M&A perspective, I do think there's an opportunity here. I'm a -- as I've said for several quarters, I'm a big believer in bringing together some of these companies, both small and large for some consolidation.

I think we're hearing more from customers that they love it if people had more bill of materials available. So we're working towards that. And I think there's going to be some opportunities. Not everyone has a balance sheet like ours. So there's going to be some need out there.

Unfortunately, the current environment is probably going to make that even -- that much more obvious. But we do view this as a potential opportunity. Though we want to make good acquisitions, like I think we've done with the last 2, we'd be smart about it and pragmatic about our approach. .

On the second piece, the fragmented kind of overall marketplace, we think we've been taking share.

I think our growth, overall, in the last couple of years in our kind of core run rate business, as we've branched out into more distributors, I feel like we're displacing maybe some incumbents or filling in gaps that people had that were even more fragmented maybe than they realized.

Where they didn't have an incumbent and we've made that easier for them and try to fill in some of those gaps with distributors in particular. No question on the carrier side that the business that we've won, and it's been inconsistent at times and has its [ range ] of challenges based on timing.

But I think we've proven that we can jump in and be a player and take some share from others, or at least position ourselves to benefit from it. So the -- with the market conditions the way they are, we -- as I mentioned, we've purposely taken our inventory position up in things that have short lead times. We're hopeful we can maintain that.

The supply chain is a question mark for everyone going forward. But assuming we can maintain that, we think we've positioned ourselves with the right distributors and the right opportunities and relationships to take some of that share. .

And then last question for me. I think one of the things about this company is its ability to flex up and down with the variable cost structure, as you've mentioned before.

Just how much flex do you have on that if you were to, one, get a larger order for like a macro or small cell site in the second half of this year? Or if there's going to be a little bit of additional softness in 2Q? Or how are you able to manage that so that you could continue to kind of remain fairly profitable all throughout the year?.

Yes. So I think on the downside. So if things were to continue being down, and we have some pressure in the second quarter, which we're feeling some of, we're trying to manage through it. I think we try to do a good job of keeping a breakeven number at all locations.

So we know, even as we reduce head count, we got to keep key people in seats so that when these orders hit -- and we know they will. It's just the timing of it. We can't afford to not have people ready to do production. So I think our ability to flex down, you got a good example of that in the quarter that we just presented.

I wouldn't call that a massive sales quarter for us, and we managed to make money and still come through looking good. .

On the upside, if things were to greatly increase, we've invested in the company in the last few years to increase production at all locations where needed. And our ability to flex up is significant.

I was asked by an investor, "Hey, if you were to do $20 million a quarter and smooth it out at $80 million a year, how much investment would be required?" And I said, "Listen, if we can smooth it out at $20 million a quarter, we're good.

We don't need to do any investment other than the variability of people." That -- so I think we've got great ability to flex up. But the real challenge or the topic around that comes down to how consistent those results flow in, and we're seeing it. We're doing a great job of throwing off cash in our distribution-centric business.

Its run rate, it's become somewhat of an annuity. The booking numbers daily look great and are way up from where they've been historically. The harder part is on the project side. When that spend hits, we're ready to consume it. We think we'll be able to flex up very, very easily around that.

That kind of -- that movement or that variability in the numbers is the one part of it that's hard to predict quarter-to-quarter. But we feel good about our ability to flex either way. .

Great. Well, thanks for that. And good to see the company kicking off over $5.5 million of operating cash flow in the quarter. I look forward to speaking with you guys next quarter. Rob and Mark, have a good one. .

Thanks so much, Josh, you too. .

Thank you, Josh. .

[Operator Instructions] Our next question comes from Hal Granger of GreatQuarter Research. .

I liked your quarter, so congratulations on that.

I wanted to ask you, organic sales, now that you have C Enterprises and Schroff Tech and understanding that there's a lot of lumpiness when it comes to macro, what do you view your organic sales to -- going forward? And also understanding this quarter is going to be kind of a mess because of coronavirus, what's your long-term organic sales rate -- growth rate, do you think?.

Yes. So I think it's -- setting aside the coronavirus impact, I think what we've seen in -- in what we're now talking about our kind of core run rate or distribution-centric business, that's been really steady in 10%, 15% and even in 20% kinds of growth, depending on the time frame that we're looking.

And that really impacts our traditional coax business, the RF coax and connector business and C Enterprises, which we've -- as I mentioned on the last quarterly call, we combined those sales teams and the customer set and kind of our regional and national approach to those accounts. Again, those are mostly distributors, if not all distributors.

That's become an annuity, and it's producing exactly what we expect, double-digit kind of growth numbers, and it's healthy and good and the margins are improving because we can manage the workload and the related expense of the people, of the variable production folks within that. So that business is growing double digits as we expect. .

Schroff Tech, we think, as kind of a stand-alone entity, we're expecting it to be steady. They had, through the first 9 months of last year, they were at $5.8 million, I think, in sales. So we look at them at the $7 million to $8 million a year kind of business. Their margins are solid.

We think that will start to print through in the coming couple of quarters as we get more impact from them. They have some seasonality around CapEx spend, and we -- they were impacted by the overall CapEx pullback at the end of the year and beginning year as well. But we're expecting that business to kind of grow off of that.

Again, I think there's low double-digit growth in that business. .

The rest of the Custom Cabling segment is heavily influenced by carrier CapEx and major projects. That's the one that -- when I try to give projections or put together models or any investor says like, "Dropping this into my model is difficult," that's the one that's difficult for us.

When it goes, it's hugely successful and throws off a ton of cash and puts a lot of cash on our balance sheet and gives us a lot of help, which has happened in the last few years. When it pulls back, it's always a short-term difficult comparison. I think long term, if you look at the comparison -- and it kind of makes sense.

That business will be down 1 quarter, flat 1 quarter and then we could have a huge up or a huge down within that. But we're not looking for the lion's share of our growth to come from that, we just can't. We're having to diversify in a way where we're getting away from just being reliant upon the macro site carrier CapEx spend.

That's the one that's really hard for me to answer around that question, which is the reason why when I try to give goals for the year -- we built some tough goals into that business and expect some things from that sales team. It really comes down to carrier CapEx and whether that's going to come through or not.

I'm thankful we've positioned ourselves to benefit from that CapEx. But find any business that is reliant upon that CapEx in particular and you'll see, quarter-to-quarter, year-to-year, some pretty wild fluctuations. .

I think just last thing on that, Hal, is the thing for me to underscore is, I'm trying to talk more each quarter, including the last couple of quarters about our run rate distribution-centric business that is continuing to grow. And it -- unfortunately, it gets overshadowed by the wild moves on the other side of our business.

We're -- part of our M&A approach is to try to get more CapEx opportunities tapping into different buckets of that money, both in the wireless space and data centers and traditional telco. Those are all areas that we're focused on trying to get into, which we hope some of the seasonality will start to kind of smooth out as we diversify. .

Okay. Great. Let me ask you 2 questions as one. When you mentioned the core run rate, 10%, 15%, 20%, I imagine that you are -- that represents a growth in your business relative to competitors or relative to the industry. And the related part of that, the macro, you mentioned -- I think you said no signs of life in the first quarter.

And can you provide some color on why macro -- I understand it's lumpy, but was there any particular reason why macro was slow in the first quarter and why you expect it to pick up in the second half of this year and also fiscal '21?.

Sure. Yes, thanks. So the -- yes, as far as the kind of run rate business, we think we're taking share there. There is growth. The one area that seems to be growing is DAS and public safety, whether that's public safety DAS or otherwise, those are areas where there's additional build-outs happening. So it's incremental dollars that are available.

But I think if you go back a couple of years, we weren't positioned to get that spend kind of broadly about the different end-user customer sets or distributors. We've -- each distributor has some strength areas, and we love that. So the distribution is a space that I understand reasonably well from my time that I spent there.

And you have to recognize that not every distributor is going after the same-sized opportunities or the same submarkets or segments within those markets. And so we -- I think we've done a good job of positioning ourselves with the right distributors. We're growing with all of them.

And that kind of points to the idea that we have to be taking some share. I can't imagine that every market that every distributor plays in is growing. We're just seeing more opportunities. And I think we've aligned our team in a better way there. .

On your second question related to the kind of slow macro site spend. As the year wound down, one of the big stories, which we think has resolved itself here in coming weeks, T-Mobile and Sprint getting that merger completed finally. And it has approval and we're hearing early April.

I think that's what everyone has heard from a -- when that thing will close. With them not spending -- and when I say not spending, it wasn't even light in some cases, there was no spending happening in some cases, we weren't alone in that.

That's something that you could have easily read about in a whole bunch of different places from different suppliers or even from the companies themselves. I think the impetus for any other carrier that wants to spend, 5G is going to be a tough build. We know that. The policy a little different. The radio set and the hardware is a little bit different.

And it's meant to future-proof us for a long time. But this is a big upgrade, and it's going to be very expensive and have a longtail view. This is not a 1 or 2 quarter hit and then it goes away.

We're going to see these kind of blips happen, then it's going to start, I think, in a heavier way in the second half of this year, simply because we've been talking about it a long time. And densification is not going to go away, but we know that. We got to have coverage everywhere.

But in order to supplement that street-level coverage, you have to have macro sites and tower sites. Whether they're 4G or 5G, the process has already kicked off. And data consumption is only getting that much stronger, the over-the-top play of people cutting the cord and going all wireless.

And that's the Holy Grail for wireless companies, you have to have those kinds of bandwidths available to make that happen. So I think our expectation is, it was somewhat validated by Verizon this afternoon where they said, "Look, we're -- we have to keep spending on 5G.

We expect to start cranking up that focus even more." I love hearing that and I think that's the right approach. We've kind of reached that inflection point where if we're going to do it, we can't just get away with street-level networks that have small pockets of coverage.

We have to make it a more broad-based footprint or consumers aren't going to be that interested in a device or any kind of connectivity in 5G. You need coverage in more places to do that. .

Okay. Great. I like hearing Verizon's CEO, Hans Vestberg, talking about the -- increasing their spend, as you mentioned earlier in the call. .

Yes. That was encouraging. .

Can you talk about the supply chains? And you import from Asia, I guess, coaxial connectors and some cable. Can you talk about -- and that's been -- has been a big problem in certain areas in Asia, but things seem to be improving dramatically.

Can you talk about your experience with sourcing stuff from Asia and what your outlook is for that?.

Sure. Yes, I think the supply chain coming out of Asia is one that we have broadly a lot of exposure to, and we're monitoring it closely. If I go back several weeks, our coax business, in particular, we bring in a lot of items from Asia, mostly Taiwan and other places. We do have exposure to Mainland China on coaxial cable.

That's an area, in particular, where one of the largest incumbents in coax cable and U.S. networks is in China. That's where their factory is. We've been in touch with them consistently. I get daily updates from our team on production levels, are those facilities back online. I think we've heard similar to what others have.

But when people at home for Chinese New Year, there was a shutdown, and it was difficult to get people back because of quarantines or otherwise. We feel like we positioned ourselves pretty well with a larger inventory position in the States. We feel comfortable with that.

We're being told that the dates we expected, our next orders, which we increased the magnitude of on purpose. We've been told those are going to be in line with what we expected. You don't really know until it gets through customs and shows up, unfortunately.

But I think we're encouraged, at least, by the improvements that we've heard about in the last couple of weeks, as those companies get back up online and get running. .

The one wildcard in this is even other places in Asia or domestic suppliers that we buy from -- we buy a lot of materials in the States. When we ask them where they buy, their raw materials or otherwise, invariably, China is a pretty common answer. So the fear, if there is one, is that we're all drawing on the same resources coming out of China.

And we think those facilities are back up online and running and okay. There can be one item that just material-wise is required, whether that's a small piece of rubber or plastic or copper that can hold up an entire shipment or an entire order. So we need those raw materials to flow through and show up for us.

We're monitoring copper very closely in some of the more rubberized boots and other things, weather-proofing wise, but we do bring out of Asia. We're keeping a close eye on and hopeful that the impact will be small, but planning as though it could be a significant one in the short term and trying to mitigate that as much as we can. .

Yes. Okay. You did a great job -- I guess for Mark, you did a great job bringing down the accounts receivable dramatically from year-end.

Can you talk about what went into that? What was going on there?.

Sure. We knew we were going to have some large receivables at year-end, primarily because of our agreements with some of our customers. Since then, we were able to negotiate some factory agreements which was able to kind of break the long chain. And we've got some receivables coming in on a more timely basis.

So we anticipate that the receivables now to get high for that region and improve our cash flow going forward. .

Yes. I think just one other thing on that, Hal. We're in a lucky position where we don't have a lot of challenges collecting. And so when our receivables did increase at the end of last quarter, we don't view receivables or cash really any differently from that perspective.

Because we don't have collection challenges, which has been a nice thing for us over many years. In that case, our finance team did a great job of just making sure that we can get it flowing a little more readily, and there was a little bit of a log down there at the end of the fiscal year that cleared itself up.

And we expected that, but it was still nice to see, and obviously, increased cash always helps. .

Right. Yes. And that's one of the super appealing aspects of your company. You've got a lot of cash and you have no debt and an undrawn credit line if you need it. So that's really great. .

Ladies and gentlemen, that concludes the question-and-answer session. I would now like to turn the call back to your host for any additional or closing remarks. .

Thank you, and thanks, everyone, for your interest and support for RF Industries. Mark and I look forward to reporting our fiscal 2020 second quarter results in June, and hopefully seeing some of you at our investor conference presentations before that. Thanks again for joining our call. Please stay safe, and have a great day. .

Ladies and gentlemen, that concludes today's conference call. Thank you for participating. You may now disconnect..