CLFD - Earnings call transcript Q3 2019

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Operator

Good afternoon. Welcome to Clearfield’s Fiscal Third Quarter 2019 Earnings Conference Call. My name is Ben 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 the commentary, we will open the call for questions.

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

this a the presentation speaker listener. their through the forward As reminder, you, advance the Please presentation slides speaker rather are by remarks. but presents as by the the controlled not in

With that, over Please Clearfield’s call turn I to Beranek. Cheri would the proceed. CEO, to like

Cheri Beranek

joining us afternoon and thank you everyone Good today. for

year-over-year softer performance build the partially business demand $XX.X the our by moved X% our our record closer Revenue million, by During full XXXX. primarily on toward which in segments driven strong year continued quarter, to in markets. third of of National we up offset to was achieving track was our growth and achieved guidance other Carrier for

our the was markets year and to in National businesses. million of of Revenue all of was in the June prior Carrier International ended period first For up the X-month revenue XXXX, the with growth XXXX. $XX.X XX% months than strongest X period our compared higher XX,

million for and $XX We’re previously fiscal our built, $XX we guidance million announced us of revenue encouraged X-month the have backlog overall to to by the result enabling reiterate XXXX.

spend deeper going Age Before our against revenue. softness always, which I’ll is operational and quarter core market, Coming recent dive in a as million part Broadband Community Opportunity moment our into results progress. begins progress our Fund, last The in a $XX.X flat the to the with transition over which in The years roughly due start, market to in our with roughly of I Digital Fund funding XXXX, this like minimum increases federal I’d the Rural market plan, had a annual threshold. for the under in in program to ending Connect XX-year the Digital XXXX. spend Fund, speed programs $X Rural the which America is Opportunity the under X billion and

to fiber technology a ongoing We While being providers have market continue it consistently who it relied speed of position, supplier maintains neutral gain growth we is its to will our to the because decade. of past requirements. believe solutions for over and share choice the positive communications on the

these support distribution and field with fiber the growing their but in also achievement strong at continued solutions’ developing not XX% and increasing carrier adoption of competency FieldShield business Carrier at trust field $X.X to significant growth continued FieldSmart only driven their by revenue. demonstrates date, strongest sales National was This another. its our of to cabinets up one to comfort the carriers recorded This Our scale of large networks. of million are and the quarters one our products

promising date Carriers. the of are this the preview just through we potential been growth progress our level of National can a and in reminder achieve we believe has scratching market, only While surface we to the

XXXX. with our for markets, XX, while $X.X the X-month ended of up MSO some last business at consistent period at X% revenue June was year million Looking other our of

the during business the lens international the year-over-year time through looking Our declined business million period, is our once of revenue slightly up longer of the $X.X X-month at again XX% for benefits quarter a of demonstrating but horizon. to

annual it quarter achieved As for million run-rate an this business, for relates business, we historically anomaly this making to our Build-to-Print have $X us. a legacy

business limited growth we has achieving annual continue shortfall. this to this quarter’s despite this Although opportunities, expect run-rate

quarter CFO, With that, presentation XXXX. financial over to the for turn I’ll now walk the Herzog, our performance us our who will Dan through fiscal third of

Dan Herzog

Cheri. Thank you,

$XX.X the which at Now in XX% same $XX.X million revenue our up National by $X our quarter in increased The fiscal increased in sales X% largely looking quarter financial fiscal for increase third XXXX. more period. to approximately the compared million customers, Carrier was detail, driven year-ago to to our XXXX million of the was results QX from or

in fiscal totaled percentage in experiencing, currently to which Gross are of supply Even XXXX tariff part we from compared XXXX total total of the and fiscal margin is due our down enhance of million profit to quarter XX% due the but basis remain efforts we revenue profit gross mix. in our of of year-over-year third XXXX fiscal the quarter chain however, for forecast to XXX costs, tariffs, of continued achieving XX.X% confident the to or for cost structure. or to to XX.X% up prior our quarter product the $X.X with points XX% fiscal Gross was due $X.X quarter revenue million XXXX. third third for

per fiscal fees expense generated well operations fiscal $XXX,XXX growth of $X.XX or ago sales net of share $X.X million Income $X.X quarters. resulting to X fiscal the the due diluted and million third by for in from tax the result head $X.X million were increase $XXX,XXX The the external of our and which increase Income quarter. consistent a an third XXXX. as year additions third was QX for compensation the in sales quarter million, while from compared totaled commission of fiscal expenses to quarter in the operating last an increase as XXXX. was in manufacturing up as $X.X support reps same was to from in agents. XXXX quarter ago Our income $X.X million The same company’s quarter in the with expense in were count year

the to now changes sheet, the equivalents our as decreased million result slightly in working capital quarter XXXX, million our of investments during to third a cash, $XX.X ended Turning the mainly and cash prior March from balance $XX.X in quarter, XX, in quarter.

to continue generate evaluate our the We capital returns shareholders. to our to ways deploy for highest

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

Cheri Beranek

with now I’ll respect over moment our Age Dan. our Thanks, to a progress plan. of Coming spend going

mentioned continue As share in we business. take market I core earlier, Broadband to Community our

This needs customers their their empower support active developing in our how fiber of to products that and includes for new future with tomorrow. on growth. We are networks them dialogue and management connectivity

As which and with FieldShield recently expanded savings. – is an our an a our of pre-connectorized markets. ideal deliver example significant and drop assembly, cost one-pass D-ROP FieldShield fiber, of is and which MTU portfolio for development D-ROP MDU in solution protect The ideal is to launch the deployment growing this, we time rapidly the offering

enhancing through our are competitive manufacturing position capabilities. We our

the we short lab and production to create dedicated and our leading During times. lead our increased space to industry a quarter, deliveries enhance on-time R&D test

our ongoing in product comprehensive as cost supply challenge tariffs a of capacity facility. the last for strategy our an have we expansion of place in reductions, chain same Mexico quarter, which includes the remain While

convergence create will addressing term. particularly well and points opportunities small as XG. are these wireless to product in is efficiencies In for the the of changes reduce today’s meet-me these network. as growth both of robust we in and operational demarcation margins, also efforts, long work network requirements of wireline requirements related Clearfield the expect We Much XG with densification lockstep and the improve leverage tariff more impact for the market positioning of new or cell the

market end enter this of for You as to the look these Clearfield products toward some can of announce year. they the

with of have generated months we the the of reiterating fiscal strong between $XX $XX XXXX, XXXX and million. guidance closing, In are million first performance for revenue X our for we that

gross of expect a total our XX% profit to We of end be XX%. the revenue near to as range of top forecasted percentage

discover are more in we investing development testing product to we achieve additional opportunities, them. personnel, As and

of near forecasted the top end range result, revenue. a XX% XX% our our expenses of of we to operating to total As expect be

a X%. X% We are net percentage reiterating revenue guidance be income and as between of our for to

markets the position have Overall, set began toward well this financial I’m achieving targets made when the strong encouraged year. in as as we we progress we the our developed have we out with for ourselves

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

Operator

Street. The Instructions] Lake [Operator first question from Schmidt Please Jaeson of go sir. comes ahead

Jaeson Schmidt

months are if and the Hey guys. just talk the your just past current my taking spending know – you your to the overall impacted I guys reiterating macro you but guidance, curious start X backdrop could – for has environment over about here. Thanks if I visibility want questions.

Cheri Beranek

in to me what Jaeson, little a macro regard the to give referring backdrop? insight you’re to as can you

Jaeson Schmidt

visibility tensions, or with has curious Just visibility if that trade how your your far extends. kind etcetera, of impacted

Cheri Beranek

We’ve too look. always out to more year the in in following forecasting and might been – this pretty where we far than think being to cautious regard regard

of mix, of and of year and high our issues in we worked product – standpoint mitigate this associated not our those expansion, our working a the type calendar as not on end and hard volume but product Brooklyn bear fiscal customers. play Minnesota-based cost costing opportunities kind XG we’ve of are product We manufacturing lines the rare from is utilization XG and lines that us an willing is anticipating to some look kind any labor and That’s for count the are structure exception, maintaining year and increases. out cost tensions, then market organization, customers next complexity manufacturing into to some in regard higher year for And insight the of The ‘XX requirements. prices near increasing operational ‘XX any haven’t our with what that might for efficiency, provided labor to year that of higher fiscal with why program. will the really Park, our lower to macro to our that Mexican of we we’re of one for start any for

Jaeson Schmidt

And as that X.X%. still you well? that last Okay. past was That’s I consistent very impact quarter think tariff indicated quarter helpful. this about in the Is

Cheri Beranek

are costs about the $XXX,XXX. They’re The over little same. a

actual – to So I think percentage the that like closer or X.X% is X.X%.

little of programs it but and to an to also have the bit. we’re expanding use our to that a a doing maintaining So for materials it. were of alternative of of diverting behind we’re to, that facility work our be – run That Mexican able going struggle Chinese lot by the ongoing of fiscal and ‘XX of we in to some to the the us a offset markets us hard some some markets bake said, just year standpoint starting rate I guess, into for it’s

Jaeson Schmidt

Okay, thanks lot. a

Cheri Beranek

appreciate I Jaeson. it

Operator

comes Markets. question next The of from Capital Northland Savageaux Tim

Tim Savageaux

of couple Tier a afternoon And first, in good have focus the questions. Hi, congrats results. on the on the good to X the want I growth. and strength and guess, I I quarter

I of distributed mentioned but carrier you material X this of increasingly think sort some business a can how applications, total universe. revenue. it a is it’s couple of And Tier your customers you I’d if sense us different of love give as getting that percent major and across

continue the to do You’ve potential if extent which to kind FieldShield to from you’re application. and is, the sense, of least going opportunity of I’d Tier gain the X then terms at you’re think among equally moment, better – distributed like traction XG up to Should how big follow being at which here, what FieldSmart the opportunity. those in and is the that, the a magnitude the of in mentioned the say, my X facing scratching a the to or get be you question. of you’ve we is separate mentioned what just surface – surface carriers? to couple next to on possible, And of able look a

Cheri Beranek

we product I and wired X FieldSmart carriers. have use the the out line line, and FieldShield business Tim, in we carriers, different called in both wireless but predominantly that do fact Okay. both

because is it fiber for when you’re when business connecting, kind opportunity. opportunity you for So as a typically physically delivery for it’s it fiber aspect than opportunity are aspect fiber revenue as of FieldShield and broader the just us both FieldSmart out I’ve delivery management the the well connecting called antenna, then home have of X. And you big then me, higher And when $XX excuse to about have be we maybe $XX $XXX of broader it to would passing. $XXX of a or worth the worth – equivalent of physically we of of revenue opportunity.

Broadband both for So be major services, FieldShield where the carriers passing much opportunity the to concentration both it’s business that front today’s work revenue business a for National end deployments for are the range because of and business Carriers fiber-to-the-home at in the FieldSmart for Community urban through. important are our a physical and is doing with in well today at heading as opportunity higher Most class for those services than fiber-to-the-business of us business remains we’re new class ongoing as the are connection. to The of for carriers really in which revenue associated more higher environments.

we XG class business we’re that which types have services little the the be that required the inside for what for the As forward. try required certifications carriers, the as as to this now in we capacity to and types, of connector bit, move well and by associated the enclosures is able and provides with business termination means a service moving build those as both space, the is technology organization visibility an of certifications to the credibility we groups to doing the requirements gaining anticipate the

have Tim, XG? did on you more something

Operator

Tim I’m cleared. – This been concludes question-and-answer sorry, has his line session. the

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

Cheri Beranek

Thank to fiscal at our the on forward us for updating again you We our joining you of progress year. end look again today.

Operator

And fiscal joining call. Thank you thank earnings quarter you joining again XXXX us for for conference today. Clearfield’s

now may You disconnect.

Clearfield (CLFD) 26 Jul 192019 Q3 Earnings call transcript