CLFD - Earnings call transcript Q2 2019

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Operator

Good afternoon. Welcome to Clearfield's Fiscal Second Quarter 2019 Earnings Conference Call. My name is Saveez, and I will be your operator this afternoon.

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

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

not this Please speaker presents CEO, Please As advance call to the the the as a With listener. reminder, presentation speaker are Beranek. forward Clearfield's the in the over turn through presentation their Cheri rather controlled you, the to proceed. slides I by like would that, but remarks. by

Cheri Beranek

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

turn million. cabinets for we Clearfield $XX.X revenue growth and slide with to to the to another active As quarter strong X, XX% traditional our continued of again, once drive product lines up year-over-year

unit faster-growing deployments. our business such on connectivity, the or key as get into we multi-dwelling in growth services each As slide, applications, and MDU class five I'll experienced in markets, particularly next of wireless

quarter our backlog base XXXX. revenue, in progressed, or creating of we an to fiscal picked increase three, strong up backlog bookings with outpacing year-over-year quarter resulting which for a As $XXX,XXX XX%, execute of upon up momentum the building

important we line, architecture acquired to new This is line, we've of this positive active for cabinet launched also year. our enhancements, two this for in the we new for upon density of already required cabinet just our the first received feedback started healthy been first networks. this this new FieldSmart have recognize month. few interest line cabinet we're a the asset fiber but our fiscal addition strong quarter, these products We in demand including which February with includes QX. acquired experiencing revenue in receiving didn't cabinet weeks increased But and from In product next-generation and shipping based orders

one income a operations debt the bankruptcy. down further statement, bad $XXX,XXX income negatively to despite expense Looking charge that of improved after being a customers, see our Windstream, from affected by filed XX you'll Chapter

In basis addition, negatively on costs representing now of who by were XXX our gross margin. points $XXX,XXX, to costs these tariff us. or passing these on impacted profit approximately gross are Suppliers costs tariff previously absorbing X.X% impact extra was

aggressively qualifying and of We elements negate alternative action. to are of supply the consequences reevaluating this our components attempt chain to government

year. working this how one no While maintaining confident our the forecast margin point these are elsewhere knows gross cost in remain mandates and will to we aggressively reduce continue, at for tariff our long

dive Coming recent our the going deeper previously and into plan, our we're of progress. operational along execute already announced market I moment over like Before would steps to a spend I to Age taking

X. Turning to slide

a we up to five key onset, As I million in was experiencing X% Broadband basis. all mentioned terms markets quarter in million same on year fairly year-over-year of with ago from the $XX.X $XX.X on growth had a quarter. Community the balanced growth

be some created late and and distraction impacted bankruptcy the results. account. fiscal what which market Broadband. announced which been don't than any several we bankruptcy Community X% Broadband than shipped being it this QX could our quarter, experiencing slow or less in coming however, included growth not anticipate and slightly in out the this has was experiencing down slightly momentum market capture not was does we're the orders order recently, had represents very fact Recently, a Community that within While That lower within associated we with customer, in in Windstream this order to impact of materially broader this said, Windstream mid-February, the slowdowns

carrier Turning the and to gained our continued this digits active cabinets was of year-over-year double footing national principally million, FieldShield business, lines. up which $X.X adoption through in incremental our we nearly to product market,

which for top FieldSmart During the now new two codes carriers. material ship Tier the quarter, solutions, to approved is fiber granted of were management three to X

how increased alternative all in and us solutions the where this in but of fiber management XG, conviction we're existing designing three carriers ourselves that disrupting solutions solutions and not more next of of leading players are in these this to market, a a significant have as shipping we opportunity connectivity. only the this I for to generation establish will incumbent is appetite one Later, compared describe cost-effective solutions. We there giving heightened FieldShield already for market to

particularly than more doubling not least, as million. experienced Cable Turning year-over-year XX% to Build-to-Print or strongest of with Mexico. legacy quarters business And our continue Latin some to experienced revenue a up our year-over-year, our $X rebound demand American one now to to TV of healthy solutions, which we grew relates for business business, it our last as million especially strong $X.X in to services. was class XX% see markets, we but MSO Internationally, we

by resumed a As after customers, of their primarily driven their purchasing historical a reminder, which growth business activity due own our their to lag this in constraints. has X-year one was internal

walk for our in market XXXX. Herzog, the foresee not will who the through our such, I'll financial presentation With to turn now this us CFO, a for over performance revenue of quarter As Dan pickup forward. fiscal going that, we second material do

Dan Herzog

Thank you, Cheri.

for financial sales by line Now continued quarter our XX% traditional increase our the million driven strong The looking of well revenue quarter product as active more of at increased in $XX.X X, the the cabinet $XX.X detail. as our fiscal in year XXXX same categories. sales our ago slide of period. million On in largely was to second from results the

the increased fiscal fiscal or as XXXX Gross revenue. XXXX of slide second to the fiscal the profit Turning XX.X% lower to total adoption million quarter XXXX of to down cabinet of continued margins. -- for X% active overall acquired carry due Gross X. $X to strong quarter of quarter percentage market compared solutions, profit generally the second second the was of year-over-year cabinet for which

of minimize to potential Cheri any margin tariff-related supply structure cost enhance tariff That chain mentioned, negatively the being In our gross gross that continuing said, addition, actual by costs affected approximately to impact. as profit are and or by our reduced we absorption was further to attempt $XXX,XXX.

X. slide to Turning

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

the $X.X a not to court noting its this of Windstream filed closely of after a Cheri and battle there bankruptcy expenses, solvency a to took charge This debt It's the future. is with that With increase offset payment in this respect lawsuit, with incurred to that decrease the expenses and necessarily much as the million the As $X.X reduction in settled is of for one the which Regardless, defense fiscal earlier, bankruptcy. by possibility any to an we we result by was in alluded company's a protection result patent compensation a losing of of Windstream expense because XX a continue headcount million included worth XXX,XXX expense be XXXX. bad operating legal explained related QX recovered may infringement bondholders or additions expense Windstream's to partially growth. impending in of in work support in was as in issues. in year-over-year onetime it can be Chapter liquidity the settlement amount portion

fiscal second from in in a quarter. Turning the loss to of year to of slide from improved XXXX quarter XX. Income same operations ago $XXX,XXX the $XXX,XXX

onetime of of of diluted tax second was resulting $XXX,XXX of $X.XX included settlement improvement the operations quarter I second As net of Income $XXX,XXX income for The per fiscal from $XXX,XXX of or loss quarter benefit the year a loss QX $XX,XXX in a XXXX. of or XXXX share mentioned XXXX. earlier, from in last fee was $X.XX to second expense compared the share $XXX,XXX. fiscal fiscal in loss the of a an of per the diluted quarter net fiscal

now sheet slide XX. our Turning on to balance

investments December XX, ended second the cash $XX.X to cash our our XXXX in quarter quarter, cash, and million flow equivalents increased due strong operations. from During prior to $XX.X the million from

or of has approximately enhance in shareholders, further we remain our we the our for revenue with as whether did opportunistic our second how to opportunities. million returns XXXX, highest part to not business million total During of remaining share to We reminder, or cost that's generate the $XX as a quarter the our structure reduce program, out continuing any capital repurchase invest of authorized. $X.X our shares through share repurchases our which repurchase deploy

to to call the with Now back would like that, turn over Cheri. I Cheri?

Cheri Beranek

Dan. Thanks,

XX to progress the initiatives. Turning a I'll quarter over Age the slide Coming plan, our now these during three of going each spend on moment of and second

therefore a make Customers them earlier, transforming and into to rely infrastructure, infrastructure core key market. to mentioned help manage on continuing I that fiber Broadband As we're our advantage. in headway their competitive us cost Community deploy effectively

been bandwidth For still reduce longer-term growth. a and and these future has more helping network decade, short-term carriers supporting while expenses than Clearfield their

This our new alongside map the near a configurations will it us service the gives leverage line, newer only to municipalities also with and FieldSmart X this adoption term, cabinet active to in to utilities, expand for initiative, along not road encouraged market. and longer acquired are As our Clearfield revenues cabinet but second reception of build core Community into with we an to the strong term, future Broadband active the our us cabinets. early to into and our market, allows line. moving opportunity active line, the solutions cooperatives line In that enhance enter traditional providers, Tier see

this the not the gaining earlier into these new systems product product are dialog and ourselves XG only developing revenue We sales visibility with requirements, from are in positioning but integrators that these capitalizing building future additions us adding this to disruptive disruptive opportunities on over markets. for the Ultimately, which long-term. cycle. will the believe to more allow mid- within X growth growth Tier is we initiative, And third the brings

fiber to While meaningful carriers XG are to shipping earlier us. eyes X opportunity FieldSmart the the major were company requisite certifications, step two these now carriers. starting about off strengthen given be taking Through years on of the our our successfully already the our made and are as ago, for of X the seen acquire of enhance orders, have initial This pilots Tier the group. management presents is FieldShield opportunities forward products a connectivity we supplier investments two to talked being in we needs meaningfully Tier our that I tremendous the and not that and a reliable ship discussion. in customer increasingly enhance to of complete front all revenues, track just immediate trusted we and fact to we for force, just this are part three we a supplier sales to

long everyone that are steady I while takes While an need in cycles or don't and we I'm market. sales in truly making market remind the that and that displace that challenge it to fact progress growth incumbent, encouraged this there this is the by are to visible a

Turning slide to XX.

through to course, growth be before, front looking the the us. in opportunities our mid- is mentioned XG ways will term, that of as longer revenues to we one Of of over enhance the

of wanted still as terms to early days we I an developments but it's that that industry. recent involvement of illustrate rollout in with couple schedule in expected, As share where a our are XG,

current XG first we of Minneapolis couple of made launch official XG-based national launch areas from its of a a world. such arms Clearfield value that AT&T as services ultimately must of major the and is the there Chicago. the was suite recently which are technologies select ago, the government of and and declaring as product announced a working their to entire believe own has launch This administration Just available it toward benefit race proposition. race rollout and US of the to throughout XG support this Sprint, the will lot the applications is race including Verizon quickly that and Other carriers, been weeks in XG, our XG, win. service, for In closer brings news, other America

XG key that the of is why Coming to but new more stage a when, the it's of of out the we're some successfully and specifically position deploying been to outdated to XG spectrum level to XG up the of modernize more In is dialogue plan, strategy growth ahead push component today, of FAST dubbed to not the matter actually XG are of a building networks, access doorstep of necessary infrastructure wireless past opportunity. associated disruptive illustrate superiority this transition pursuing XG we XG with networks. currently and to look has at into plan, the America's get if, is is developments with working small growth as "facilitate enter we small impediments that are that fact, which this but all to to which designed our networks Clearfield's reduce which infrastructure in regulations, update opportunity period the marketing first These rings beginning a now FCC not policy our are to This cells, marketplace, and build-out Clearfield Ultimately, technology" or supporting support wire comprehensive the build meant are to of XG the of fiber wave of cells. the Age for next-generation moving and growth. carriers,

Cabinet become XXXX our the serve that we that new step contributing reflect quickly slide XX. can business. Active in growth for positioning started experience With Clearfield strong backlog, angles, of our our another such to acquired with Turning have we Fiscal that our active is line, to From our we future all as note, performance wanted markets international our our acquisition year. with of to opportunities have it. plan forming while a our today, FieldSmart in cabinets on proliferation Coming we cabinet expected and the in the XXXX Clearfield represented anniversary growth of closer the and the financial the continued consistent Age only support the I exceeded growth point but even towards not as QX markets, half instances, key active the as met some first XG. true blueprint when solid cabinets shaping X-year expectations to actually for year what in because On it's robust is active up inflection the in to will

are XX% revenue we net the of to margins, call as XX% and our questions. And percentage guidance factors, with reiterating revenue, million XX% year $XX that, these we're your in Operator? operating to to X% of X% as of income Given expenses revenue. for open gross full for a million XX% a $XX percentage to ready to

Operator

Savageaux Northland question [Operator with comes Our Instructions] first from Tim Capital Markets.

Tim Savageaux

kind congrats strong and guess, the least, I I the of bit Hey, down if. to perspective. your end good results. little from you of XG. drill afternoon on comments to there a when towards wanted on I when, on sort try focus And the more and around not want at Clearfield's mentioned a it's

sort wondered XG And this would perspective? new associate follow with something So that with I up specificity to maybe fiscal from anything contribution in if whether expect talk any opportunity, revenue a as could we of we assess do I need And terms you What degree will what there. scenarios in for product about from might 'XX? you represent if of greater deployment Clearfield? opportunities of you could

Cheri Beranek

groups contractors was and Okay. and New about there and event AT&T executives All right. some were were it's at the X this the XXX faster at Comcast Tim. the XX Thanks, that a and it Spectrum, and were XX then in were and there other laughing planners York actually people to about interesting, take. to two XXX and to to X was expect was an dialog about it a were to and was real there there going years, there I years. there that Tim, Verizon, from and disagreement saying from across contractors And weeks interesting us all as how were there because of engineers, is were there there were what XG long ago executive

Clearfield start certainly is the there I where most late the consensus. think deployment opportunity look small – cells. Clearfield I is, of was as to earlier think, it connection at we'll deployment from fiber from if and the of see the So perhaps of XXXX, quarter ring no on our But fourth we in immediate very the go revenues first to or of to quarter fiber into you

as unit. is about distributed the it the Our of not world as to connectivity fiber fiber the the actual much and distribution is then that deployment fiber of of end

FieldShield in earlier FieldSmart of as the are I And for the are deployed, of heads solutions and put able is is conversation. the antennas so the which ability those to the are some our assemblies, not, of radios that part they're provide being poles, or panels, to mentioned our those solutions as some types -- or provide different solutions that, the of radio which onto whether hardened cabinetry connectivity

-- which the as presentation. are product the getting stage is part code, to what first we So about material is talked of we that

stage small going into those put organizations the second The alongside to is be as cells are place.

for success-based to be cabinet other less away going to about within more able wireless it's As issues an of in we of first issues right some permitting challenges level be to not to and the are high-density but ensure going that they're be dense going density, currently are kind products solution connectivity, that of are which wireless upon and to our associated to going to product architecture technologies and networks that, product it's cassettes; be be scalable look that about looking to of anticipation we guaranteed fiber-to-the-home about at is taking associated for of be to Clearfield have going new success-based are the upon commitment deployment is to cabinets a in it and based not deployment, the new the a about providing going having the new -- with really they're and going that behind being with be based our it issue. about deployment good

have of to developments to marketplace sure currently things, we we do make you we doing and best will we the that and see in that. of revenue the underway XXXX, can So those part having both are are

Tim Savageaux

Great. could there, Tier XG Tier -- names activity activities your to kind space? sort driving the of intersect and maybe about the what you If XG. you be around current big X could include as I And degree currently? follow-up, of in pretty X with universe. I those events of anecdote are as most of of of and XG the some the with one planning regard I wonder that what you I opportunities gather see used we be And but sort foundation into anymore Tier same, shouldn't imagine, color a X thinking the to move business And kind your as

Cheri Beranek

are the differentiate There as multi-tenant different. a well been and a we've solutions labor scalable class of to especially going that's really three to business reduce services be in We've FieldSmart that all where three ourselves. in top working in serving that organizations space and which that the need the it solutions, some only FieldShield those in were Right. and types handle deployment initiatives, our been environment period are have and class do to as kind solutions of class thing in and of scrap Tier have density the And associated some different carriers, ability incumbent XG that X able better floor but not differently, of for time, the carriers management of solutions, large those space. services the to business be our going both to going where each their to wireless is

associated service QX going So our Xs. more the seeing current to principally That's was revenue that in and the be Tier class XX% with function. business you're to MDU today of revenue

that can turn application, out opportunities, able established not that one new the which we opportunity incumbent pointed connectivity to only talks the we growing immediate is our bring and on some both XG part of But of network that fiber as I we're those are why at because being trunk be as serving of We'll to our of do be looking to were opportunities two different deployed as the really wireline efforts. to about years really those about that a and is one creative As in network least wireless in in forward. that of ago, perspective take those That not are markets. seeing of are of marketplace more us particular backs no differently. XG wireless forward, bring XX it at and things get is about FieldReport and how that's a week our because supplier as where two collaborative market reasons And going partner the or able which those how elephant able it's some to the converged, organizations, is the at many to the move and expertise being wireless about that we wireline customers doing wireline the markets. well, even in three we're top-tier how we They're have deployments causes the importantly, before that today. take is one where can It's think event it helping for be was become and last more there really those things recognition. looking be consultative, received being we'll

my have we we recognize Revenue giving Officer, of have. XG thought wouldn't Marketing didn't You'll Operating Officer members Chief if in competency the And be that and they across Chief Officer, -- Chief industry event. see my all our my the invited XG us at this my leadership that expertise team, that's spoken

Tim Savageaux

me. Okay. from And last question

margin the year, gross at for guidance look we XX%. to the XX% As

for 'XX? impact and mentioned, in headwind QX XXX margins But Or it to we the fiscal in tailwind year, represent we maintaining a say that tariff at later of that XXX it guidance. that to points XX% fair should would that is to that's year? XX%, as mitigated basis basis or in XXX see of I of the inclusive, You think a kind point look in gross

Cheri Beranek

Right.

tariffs ludicrous We're the you we But mix. it quarter, with out. -- the along earlier, where quarter, really, being felt little When was based I should So If that a have the able quarter, and light think pass points themselves, the tariff to materiality that. XXX conservative. not better of product you XX% of to ways first assume consistent can, than to continue they thought that already XX%, assume different be for come I it we're guidance going was gross our didn't first. tariff conversation margins We're anybody I different we're at year. the term, working everybody and in countries, and XX%, call much are as believe -- as which planning it's gave -- basis that we to we necessary. qualified our will we and working less of cheaper a effect, reverse as -- on that to is. Long XX% we're at want last to cost. and in just to as by different we But And that think, had the looking our be cost was that of work the than so this working it forecasted we the it it to we're that to marketplace it that we able goods work due on up the believing in without effect always own environment they're as to tariff we I are, going with is different have negate environment the inclusive through suppliers suppliers, to us to

Operator

[Operator Instructions]

Cheri Beranek

questions group. all a online. to did I or of were pausing, accelerate bring to the particular customers They include, limited bookings were they quarter couple did market a posted we're As that want for in up

it were in backlog bookings spread think, question have I across the groups. all of The is customer all that in five quarter, before. might markets the and our asked this been up shows those on which of slide

of of grow are audiences. the all after that and we provide to solutions sure connectivity plan as we the proud for part initiative strongly continue is is able our really Coming those Tier So this of Age customers. that make to our X fact of be core to our protect But to

have course connectivity it's nearly I new of put of carriers, marketplace. last while the that we the years million to think are important the ports we XX XX recognize to large the relatively over into

I it The really associated or to of and decision. and as numbers via also are tested opportunity very important FieldShield as are much be much working I the incumbency tried it's the during Tier And what I that We about, where with So it. the codes question and it. product try year-to-date, indicators And the that as success transparent our represent marketplace are and acceptance, that. with revenue we early an to important is both. that and material issues of about decision points, success protect that additional contracts working is that actual procurement an decision and our and where we're established possible purchase can demonstrate own, codes we the complex. are actual outside are that we the acceptance think and it’s Tier through we making There that established it's are and early talked sales demonstrated shows part having was product we the we to of think our are qualify report is moved X more longer, beyond product within shareholders about product as And to cycle success what much other purchase that just engineering revenue. FieldSmart think, those the product quarter material into X

questions? to that we any points contact are technically is their system-by-system we financially, were as So solution, additional throughout those of organizations, have well working as and there a really quarter-by-quarter, customer it throughout ensure bases. Operator,

Operator

at questions question-and-answer no concludes There This time. this are more our session.

investor Cheri Beranek, relations you now questions not website. for will company most the relevant the answers remarks. may back call Clearfield's contact to post I'd turn Please section If The taken, CEO, question the your closing Investors was at Clearfield's ahead. of For team her in to and like clfd@liolios.com. go

Cheri Beranek

you quarter. We Thank look soon all program, with forward to today an for you for speaking discuss opportunity this again to next joining us Clearfield.

Operator

you updating joining Thank you, on today. for look to again soon. again, forward us our progress We

Clearfield (CLFD) 27 Apr 192019 Q2 Earnings call transcript