CLFD - Earnings call transcript Q3 2017

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Operator

Good afternoon. Welcome to Clearfield's Fiscal Fourth Quarter and Full Year 2017 Earnings Conference Call. My name is Omar Ormon, and I will be your operator this afternoon.

Joining us for today's presentation are the company's President and CEO, Cheryl Beranek; and CFO, Dan Herzog.

Following their remarks, we will open the call for questions. the remind available this link for Investor section to recorded will in like Relations made and replay of would everyone call that be the I website. company's via a called section also is available accompanied PowerPoint is webcasted This company's The Investor website. call which Relations being FieldReport, the the by and a presentation of in also of events Please making forward-looking be call, management and future note the will that during the course the financial performance regarding of future company. this statements subject are actual materially those statements These and cause in risks statements. forward-looking that could to results uncertainties forward-looking to from differ the to that obligation important company to undertakes It's no note also statements. update such the contained you this actual consider materially in differ call. in company factors that release, statements those to FieldReport and today's results cautions conference press in to could cause from The forward-looking risk the Risk in The of with form the provides XX-K risks. and recent filing most examples Exchange Commission those section Securities Clearfield's Factors CEO, I call Beranek. the would like Cheryl turn With that, to to over Clearfield's proceed. Please

Cheryl Beranek

thank and afternoon, us you, joining Good everyone, for today.

our for increasing XXXX was Tier foundational multi-year invest of as the and our in an presence most ambitious revenue a year expectations, fiscal in was X While company. we continue market. whole Perhaps process importantly, to lower the our the than total

million our $X.X While compared X encouraging. Revenue to carriers much million we're from still progress to larger $X.X early, fiscal Tier than more in this in market XXXX. doubled is fiscal in XXXX

revenue continue for markets, more X, our we Looking our $XX.X growing established of the strengthen to million. the position X% at Tier market some to X market, year leading in

$X million markets, international We to for XX% in also made our advances revenue solid the year. growing

larger activity from major heard cable has telco at challenging. market distractions have remains this from peers, As introduced many builds. and providers of network their our you M&A

many the phase than more retract prompted fiber build for lack wireless dubbed deployment addition, programs. Effect, build planning, cable the slowed rather of building wireline, thorough competitive to into have Google a and has rate pressures, what and In the of providers their

of is saving and allowing fiscal stage While within uniquely us extension the is technologies this planning in labor believe the introduce providers. Clearfield, into large deeper this this trees evaluation decision our to for these frustrating us to year, we beneficial

remain who for we such, cautious upcoming but year. about progress as with our patterns As before the more fiscal growth outlook, future overall optimistic long-term strategies turn spending for will us XXXX. our our of the highly and near-term about our operational financial the through full over Herzog, year CFO, for success, are But we I presentation and quarter I'll as to talk performance full well unpredictable, our Dan walk the fourth

Daniel Herzog

you, Cheri. Thank

detail. at our financial more results looking Now in

$XX.X the Our decreased period. quarter XX% during revenue the million year-ago $XX.X million fourth fiscal to in XXXX of from same

in for For from lower to million the decreased million fiscal revenue both $XX.X was $XX.X our to and XXXX. wireless quarter year, carrier, The decrease cable primarily TV full by sales and customers. alternative year the X% full driven

was the and business. our offset X%. increase the impact sales customers, year in sales business our alternative The especially Tier alternative our from international business, to decline If by full for to you revenue our remove X wireline increased in domestic carrier carrier our an in

at Looking business. international our

revenue last international from million increased to $X $X XX% year, full the million year. For

our continued some increased growth the America these revenues QX was damaged of QX revenue, at to fiscal of the At Gross this profit XX% Latin our within of negatively Central equipment. replace fiscal opportunity guidance gross disasters the for as in XX.X% gross in QX, in especially expectations and were million, being of That of we revenue total do international region of were higher QX quarter see for America providers Although fourth in XX% end and market to markets. by considerably million. only X% an to profit natural XX%. said, $X.X XXXX impacted fiscal this as decreased percent reconstruct XXXX service $X.X the profit high and

XX.X% revenue. total For $XX.X the full decreased to gross year, X% million of profit or

fiscal ahead to XXXX. Looking

We are of XX%. gross profit XX% guidance our to continuing

target may cost However, efforts percentage Tier we our fluctuate the reiterate in X variability manufacturing this at the and that due around initiatives our and timing quarter-to-quarter from product facility. overall our market, of in this penetrate to Mexican-based to continued our mix reduction

year-ago QX expenses were was for from X% $X.X same fiscal million, operating Our which quarter. down the

spending patent, only with costs lawsuit the valid patent year instituted this expansion were Not our solutions the the but operational For Office in CommScope was associated million. up the $XX our increase The challenge current in patents. product enhancements sales the X Patent review increase nearly inter infringement innovative of operating second to expenses Trademark due are included as expansion support to XXXX United that year partes proceedings CommScope's fiscal any expenses violate for at our the million XX% to further us with part as position to claimed our fall, additional for personnel $X well Tier expense programs full defending to do earlier fiscal The year, we validity for for level. attributable increased and to plans, line-up in in certification and operating position we XXXX. States brought our to quarter several the of not by of during

ongoing, questions we Given take the specific cannot case. the is today comment case any further and not to that will

provide as and to suit, continue any of on rules, description quarterly updates full however, in the the a by suit SEC our reports. required will, We

quarter. diluted diluted or per in Our share the $X.XX the for same share net compared $X.X income to was million year-ago fiscal per quarter fourth $X.X or million $X.XX

or was full diluted $X.X income for per per share XXXX. of to year, guidance million net of a or Net X% totaled $X $X.XX fiscal $X.XX compared share as fiscal income consistent For net in our diluted million the with revenue XXXX. percentage income

now sheet. Turning to balance our

million from fiscal in fourth the million prior and the cash XXXX. investments XX, $XX.X June $XX.X During quarter increased quarter, ended our to

stock shares million was $XX in total During XXXX. which authorized the of repurchase our under repurchased November program, XXX,XXX quarter, we a

As leaving available have approximately program, repurchased an million XXXX, repurchase. million under of September XX, this shares of XXX,XXX $X.X for $X.X we aggregate approximately for

the organically have cash shareholders our a built share reward with our scale Over through and business solid to we repurchases. position which years,

we While be initiatives, further. can we to will these allocate we that to resources even in will potential our complementary acquire also our growth the to how opportunistic or continue including businesses deploy scale our cash, technologies

Cheri I to strategic XXXX. fiscal outlook for and initiatives would the over full Now and operations like insights as year with the her call fiscal our that, for well for back our into as to turn Cheri? quarter

Cheryl Beranek

comprised the market XX% forms efforts which clearly our markets, municipality revenue wireline in with levels, core market, yet of position nearly the is in Tier strongest the revenue X for Thanks, Dan. At this our current the of our X year, in the Together wireline addressable expand our Tier market business. When fivefold. opportunity our tier market than X market Tier years by than we more United target wireline X represents connections began the of two the our market total the saw States. the we less to total to XX% ago,

emerging this Phase connectors report around success. aggressive Tier to market hard the that and believe at right to want not we the markets certifications me do fiber X our While referred It of completed focuses on stage gives standard for is Phase TV for not this SC of to and a you great was we verified that platform. introduced in This we amount [TAM] the whereas lines, or solutions, you're long revolved testing in that we're general The up our but Clearfield's market, of opportunity. of our XXx and X types. on opportunity. of comprise our a Part phase matter robust historical of but previous of people, an of that in suggest for test FieldShield wireless of fiber X the market. requirement parts which the and represents The at factor I place especially are the then product as earnings available certifications and mentioned least the total for our business GR-XXX to networks. our fiscal opportunity. that, industry us ahead solutions company, our reliable segment, level. to growth market experts our Ultimately, the on of environment success of current acquire cable begins future annual not X also to will pleasure IoT In LC priority entire on our be is baseline numbers Telcordia and capitalize the us, place. certainly looking the to our to expands XX% disciplined it's restructuring currently national parameters win have To to Internet wireless we to market that market cable all, clear growth. It us, rate, the require steps a to expansion from to to on trajectory. is third-party when. the our our all now that we certification the this XXXX, our taking Xx. and in runway late have question Phase FieldSmart deployment X next Above terminated collective in importance long-term It's what of it are compounded remains cable ability get FieldReport, discount expertise necessary the that but only if growth return significant TV by growth things Tier I When market at doubles illustrate, X market exact

certifications Phase carriers. which designed assemblies approvals distributed we office are announced GR-XXX only also included at our for within panels. also the is was achieved in called which previously deployment. Makwa, Important for cabinet for the X report Beyond central of also is to join cables GR-XXX, national below-grade distribution our the fiber placed. terminated have to These industry's our NEBS the testing enclosure I'm obtaining certification that pleased compliance hub product

date, and CenturyLink, our we Charter. of Beyond to our players for Frontier, AT&T, Comcast have Verizon, Windstream, at at parts line success earned product product regional approvals

this material begins step to national to expect continuing supplier an alliances expands approvals, enhancements. and does code on product be with our carriers. Phase in position Every and important we which opportunity ongoing approvals market return there. has but within will market realize broader Although fiscal through exposure these both that product strategy emphasize strategic the fiscal us. product needed investment carrier new is line for respect initial channel our certifications development, X, to penetrate XXXX, an about been and to successfully the stop With markets, XXXX and capture growth not our

we Phase future as well size revenue to will take that We disciplined X a want we current our opportunities. approach investments to as to as work prudently to ensure company

approvals product we dynamics that it near-term summarize, XXXX which occur, we hurdles meaningful progress. I our TAM our first mentioned gained, that and to due is and market and remains So the with to with and profitability compounded when said to fiscal we're rate to can the indeed recent earlier of time, expansion XX% our will market exceed reiterate scale. same Having determine maintaining difficult the half to we why size consistent historical annual the this as forecasting believe period of last slowing we are rebound that, growth a along while certifications achieve At be our return year.

also are the grow season, which XXXX, to the fiscal coincides of year build forecasting last period same December year. half with We from XX% second

fiscal total we XXXX. to XXXX Taken our revenue fiscal to for expect compared up be altogether, X%

Looking below the line. top

to percent We our target profit range. expect within to gross remain XX% XX%

advance Tier sales lower through industry While are X into continuing pricing we our market, our some partnerships sourcing. we especially further anticipating and we to cost as pressure, programs are labor of lower the

CommScope XXXX to income we to especially the has sturdy for revenue with Overall, a our net percentage through to fiscal operating to we first driven year due by be negative to fiscal be X, a believe quarter-to-quarter fiscal in achieve at we continue process affected confident as expect as expenses scale the expect half we in established net of intellectual volatility and X% will of influence negatively during markets, and but in we capturing full income XX% level. of as for the continue net accounting year Unfortunately, income, litigation. to by the revenue consistent can X are XXXX accrual the costs due the been associated a fiscal with expenses. and us Phases X% income time, our some the the net With our We the property. and standards growth with of of to Tier lawsuit, of in X we achieve lumpiness with to regard XX%. XXXX, achieve foundation for in the key percentage Over

one there our at is one And immediately, one scaling core see investments vast decade to indication we won't couple scale one simply if the to and in go product a grown approval focus since to the Clearfield time. as business business the the profitably we've for Though market customer a how this community one ours and where next growth and significant recession at of has proposition, business a broadband through the years, last any scaled as time, value unwavering can is certification, and and are business. at look X back we Tier one the Just order disciplined compelling taking. come the and an the opportunity

the open your to Now Operator? call for with we're questions. that, ready

Operator

Tim your Please Savageaux, Securities. is [Operator Northland question. from Instructions] first with Our proceed question

Unidentified Analyst

This guys. Thanks for Tim. on taking is for [Greg] questions. Hi my

provide if could on timing magnitude I wondering any X First, Tier the of additional traction. color was you and

Cheryl Beranek

it's The We've opportunity projects I and isn't evaluating. different it's There's that different say momentum is would opportunity. based as with much ongoing parts market Tier vendors. based is doing pilots an programs X as pilot and some in growing timing they're multiple on the that such specific the programs – been some – it been been of some

Unidentified Analyst

then side? do expect the to Great. also, be wireless Thank beneficial and FirstNet you, deployment you on

Cheryl Beranek

opportunity going not We're FirstNet after specifically.

operation, – as particular FirstNet product with the in with markets the Our a market boutique to We're strength be very associated is is very environment. wireless on – well associated AT&T wireless XG focused very it's offering. on is focused there, AT&T as areas more the backhaul. going issues

not FirstNet a So is ours. focus of

Unidentified Analyst

line? you question, the additional color Got on some second the that guidance the between XXXX of in the it. going and are And can on half half one final first top then difference just provide into assumptions

Cheryl Beranek

almost a experienced it's the Among we're We're seeing the the – I in by of places. on two fourth that international Certainly. focus that two little out we a the of within we in Mexico because definitely situation that the is is which experienced We're issues an extremely weeks our our of variety didn't there, representation and the quarter. a million in their goes were really lost they slowdown [caller] of I currently talked at his bit penetration where charge in in house. any mean, beyond their operating basically power pause I the for market focused out down slowed and but and $X marketplace, the to fourth have market, our Miami mean, cars with needed the it about us natural phones on it environment mean, the into disaster in quarter. territories. just the salespeople pleased marketplace of

drive we're now going some to half priorities second there power. right focused are and territories fourth first, are So quarter, seeing think We on, really those opportunities of third second, good which getting business.

still half ramping opportunities X to pilot half. the second that Tier in year of in in we're are be tracking first space In we pilot that the going the see addition, the within

Unidentified Analyst

Understood. Thank you very much.

Cheryl Beranek

talk welcome. Nice You are you. to very to

Operator

question Please is next question. Lake with Capital Markets. from Our proceed Schmidt, Street Jaeson your

Jaeson Schmidt

Hi for questions. my guys. Thanks taking

Just want the 'XX assumptions. to Xs traction Tier curious with into with baking just in start any you're if the your meaningful guidance, fiscal

Cheryl Beranek

Yes.

seeing our we're that a the around. and we're or – amount pointed but we've momentum. something magnitude that, that associated the of traction. we're hands return are at really that's out, think, the huge But point. huge get confident we commentary I XXXX is this that – we're unpredictable in I with confident not the certifications can't not opportunity Those gaining testing some in get that in opportunities As on And share, done in the

Jaeson Schmidt

Okay. just makes at landscape. That looking sense. competitive And the then

seeing So the really you're loss of you This spending a related lines. along currently think the anything result isn't to those really headwinds share or are environment.

Cheryl Beranek

exception, than the an is marketplace the are than rather people with and absolutely rather planning Fiber-to-the-Anywhere and associated you – which the look evaluating are environment It in with building. down. across When rare Absolutely. architectures spend evaluating

really it's think good. I

to believe for industry, now. it's it's us service very we're But for great and going I strategic it's the think them. I right resources different applaud very bullish share actually the to it, providers. taking we're Unfortunately, and within and the for be frustrating to and front on be invest in at to prudent very of continue to we're them. where people continue places in able be in

Jaeson Schmidt

on consistent be including legal apologize to is or legal a that just, fiscal outlook then is compare? I but that expenses helpful. for suit ongoing backing clarification levels. expenses the that to going missed Opex it, 'XX. out said potential Is with That's know And I I the you 'XX your related it if of

Cheryl Beranek

in of of it we Right. What is year. on the was in said the February $X defense have last about million that spent lawsuit filed materials since we Xst the of

mean, year includes So months associated year run rate could I of to forecast only with some kind associated a there's there with but legal about of it. the that. next We're for volatility – the eight expense, be

point, I push that legal the at income would caution dollars could some expenses, unpredictability those – includes this volatility net but it of it those So revenues down. there's or

Jaeson Schmidt

back jump Thank will into I Okay. queue. you.

Operator

question-and-answer At Instructions] this time, concludes session. [Operator this our

the closing Clearfield's taken, For Investors may the were team Clearfield's CLFD@liolios.com. your most CEO, Relations Beranek, contact her for Investor post not The remarks. If in to Cheryl and at section call answers turn like you now relevant I would back company questions questions website. will of the to

Cheryl Beranek

company's the evolution next Thanks really updating our on like our I we have growth, to shareholders thank again support. of I'd for employees, forward soon. partners progress to and to really want continued their you to our look for supported phase thank today. us just who joining our this

Daniel Herzog

Thanks.

Clearfield (CLFD) 10 Nov 172017 Q3 Earnings call transcript