RF Industries : RFIL 2020 Annual Report

2020

Annual Report

Interconnect Solutions for a Connected World™

July 27, 2021

Fellow Shareholders:

As I sat down to prepare to write this annual President's Letter, I couldn't help but reflect on my comments in last year's letter and the huge difference a year makes. I ended last year's message with commentary on the challenging operating environment and ongoing uncertainty that we were facing during our Fiscal Year 2020 due to the global health pandemic and how we intended to power through it the best that we could.

Specifically, I wrote, "We continue to focus first and foremost on the health and safety of our employees and are thankful for their fortitude, innovation and positive spirit throughout this difficult time. The Board and leadership team are confident that with our solid financial standing, we remain well positioned to successfully navigate through this challenging operating environment and emerge a stronger company."

My favorite part of that message was celebrating our employees and knowing that they would be the reason we could come out stronger in the long run. More on that later.

Fiscal Year 2020 obviously had its challenges, as many projects were paused and overall softness in our key markets led to a decline in our sales from the prior year. But despite the disruptions of the pandemic, we remained focused on our long-term plan to build a sustainable engine for growth and didn't stand still. Instead, we used our strong financial position to weather the storm and keep our team safe and intact while also smartly investing in resources to strengthen our capabilities and return to growth. Let me recap what we accomplished this past fiscal year.

First, we strengthened our go-to-market capabilities by adding significant new talent and direction to our sales team. These higher-level sales resources have more direct experience and additional sales acumen that set us up for future growth. This team allows us to further leverage our expanded product offerings and extended footprint in the markets we serve while targeting opportunities in new market segments. We haven't yet seen the full impact of this team, but we believe the relationships they've been building and fostering position us for longer-term growth both this fiscal year and beyond.

Related to that, we also significantly broadened our relationships in the carrier ecosystem this past year, moving from just one big customer to having solid relationships with all major wireless carriers in North America, as well as neutral host and tower companies and several key OEMs and integrators. With the increased number of carriers that we now work with, we believe that our carrier-based business prospects are stronger than they've ever been. Our relationships are solid, and we are doing business with a much longer list than ever before. In fact, we are now shipping our products or integrated solutions into every North American carrier's network through various channels. This new diversity in our relationships positions us to gain a more significant portion of the carrier CapEx spend, which is a big part of our story going forward.

Additionally, our increased distribution focus was a key reason why we made it through Fiscal 2020 as well as we did. In 2017, we decided to focus on our distribution relationships in a more meaningful way, and that commitment has allowed us to grow our distribution sales even during a major market downturn. Three years ago, we essentially had one very large distributor that was generating 20-25% of our sales. With the addition of five meaningful distributors as well as our direct relationships with all the carriers and new segments, our future growth should be more diversified and less dependent on one big customer. Today, we are more about executing on our go-to-market plans and having a relevant offer in the markets that we serve. With the additional top-tier distributors and carrier relationships we have added, we are more effectively positioned to capture a larger portion of the spend as it returns.

To that point, this past fiscal year, we significantly expanded our product offering, taking us further down the path of becoming a product company as opposed to a custom project company. We see a huge opportunity in small cell and densification, and we have invested in the right product lines to increase our market share. As a result of our Schrofftech and C-Enterprises acquisitions, we have a more diverse product set, creating more carrier influence and relationships as a product company with a full solution set.

Going forward, we remain squarely focused on delivering shareholder value and, as we have consistently said, consolidation makes sense in our industry. Like any responsible company, we are always looking at value-enhancing acquisition opportunities and we believe that we can help drive some key consolidation in our markets.

So to conclude, while the pandemic impacted our fiscal 2020 revenue, we weathered the storm and remained focused on successfully executing our long-term growth plan. Our actions this past year have more effectively positioned us to drive demand creation and expand our participation in the different markets where we play. As a result, we are confident in our long-term prospects. Our sales pipeline continues to build in nearly all areas, giving us confidence that things are getting better, and our balance sheet remains strong and continues to provide us with significant operating flexibility.

Now back to my earlier comment about our awesome employees. I am incredibly proud of our team and would again like to thank them for their flexibility, positive attitudes and resilience during these challenging times. I had said that I was confident that our team and the trust from our customers would make us stronger in the long run. Maybe I should have said short run since, as I write this today, we have a sales backlog

of over $32 million, which is by far the largest in Company history. We expect to return to growth in Fiscal Year 2021 and are quickly bouncing back from a tough year. I feel like this is only the beginning of the "long run."

We have made tremendous progress in the last few years, and while we're not done with our transformation, we are energized by the opportunities we see ahead. We appreciate the partnerships with our customers, distributors and suppliers, the hard work of our employees, and the support of our shareholders.

Sincerely,

Robert Dawson, President and CEO

Abridged and Edited Copy of Annual Report

Form 10-K

Annual Report Under Section 13 or 15(d) of

The Securities Exchange Act of 1934

For the fiscal year ended October 31, 2020

Commission File Number 0-13301

RF INDUSTRIES, LTD.

7610 Miramar Road, Bldg. 6000, San Diego, California 92126-4202

[phone]

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business day of the registrant's most recently completed second fiscal quarter was approximately $49.4 million.

On December 28, 2020, the Registrant had 9,848,246 outstanding shares of Common Stock, $.01 par value.

Forward-Looking Statements:

Certain statements in this Annual Report on Form 10-K, and other oral and written statements made by the Company 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, 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," "except," "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 continue to source its raw materials and products from its suppliers and manufacturers, particularly those in Asia, the market demand for its products, which market demand is dependent to a large part on the state of the telecommunications industry, 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 Section entitled "Risk Factors" in this Form 10-K, 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.

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