CLFD - Earnings call transcript Q4 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon. Welcome to Clearfield’s Fiscal Fourth Quarter and Full Year 2019 Earnings Conference Call. My name is Steve, and I’ll 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

future call, call forward-looking note called FieldReport, and Investor that the course presentation earnings Relations during also a in the statements of this also the webcasted accompanied the which and company. This financial by management is future company’s making PowerPoint performance section available regarding is will be the being the website. of Please of

forward-looking and the differ cause those in the These the The Securities statements the today that with are most those and ís provides descriptions from of Clearfield release, risks subject forward-looking to call. Form uncertainties in results press Factors contained XX-K conference filing in to and ís Risk actual section in risks. recent Commission statements could Exchange materially FieldReport this

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

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

Cheri Beranek

a of from dwelling business deployments. this of connectivity, applications, joining as last National or came of and and up from everyone afternoon as you $XX faster-growing which quarter for much strong market, at to in million, our today. services revenue multi- QX we was quarterly growth X% saw such period for thank fourth The was results, Similar class achieved particularly where Good in MDU, the level strong Clearfield us highest demand company’s year. history QX our Carrier our units, we wireless

each both Tier in one saw quarter wireless we fiscal increase telcos, carriers, revenue includes fact, In XXXX. as well smaller as which customers, from

traction two but only we’re the capitalize also demonstrates investments Tier last years opportunity, increasing market This the we’ve it this growing important made the and momentum not one strategic to market. achieving the in over validates on

guidance for performance quarter Our the fiscal fourth in full the achieve our year. financial helped us

Looking at our million, XX% one. which of we year, markets, by generated across growth especially revenue numbers up headline the from the Tier some revenue XXXX broad-based at key record – driven $XX was for

also in plan gross maintained margins profit line expenses held We well respectively. of our as our net and as with and X.X%, solid XX.X% income

over deeper usual, into progress our market operational and to our before our and recent like against I’d dive progress. going I coming-of-age some results As spend a plan, of moment

that is the at million of $XX.X Looking $XX.X X% Community at pleased revenue we was consistent all Starting with million. the for up up and first our QX exceptionally five in key Broadband breakout at are markets. year-over-year core of revenue, market. revenue year our

$X due the over or CAF, is QX billion. As starting under expected, $XX.X to the the experienced will softness to Digital Digital be annual the Opportunity customer program QX federal with market in Rural from expected is Rural this which programs Connect Opportunity ending XXXX the approximately the the that into transition which a calendar in XX-year funding in XXXX. carried we begins spend Fund, It American Fund, Fund in billion

gain Given Clearfield with integrated market, in Broadband years positioned in an our of market well suite enhanced the record track is product success and the to Community ahead. share

QX million. achieved for revenue market, business Carrier business QX, our fiscal total and of XX% total National In XX% comprising of another Our record XXXX. our our revenue of second-largest $X is in quarter, Carrier our yet revenue with National

and FieldShield continued primarily of driven generated by adoption a carriers million, are year, to our up results the our the products scale from million $X.X along trust XX% to we year. support field record in These our with these competency record with $XX.X at the or performance growing the fiscal networks. the demonstrates two their For prior were continued larger carriers. Clearfield Overall, solutions’ developing

briefly markets. other at our Looking

to up up and in business was XX% MSO QX X% $X.X to for Our million $X.X the million. year

with to of deeper temporary operators be carry TV networks cost the benefit year. and push market their of in alleviated increases this we’re upgrade to Cable some we look the edge, the increasing after effectively the the we term, TV closer to from initiatives. these Clearfield out fiber Cable believe to achieved, spend While encouraged first the and will stands and desire quickly growth As Longer

which, XX% Caribbean year and the in Our last Print business in $X.X Mexico, quarter year. quarter up of fiscal sales the in the most up was million. for you the into International and fourth XX% XX% for know, to fiscal is our Revenue year fourth legacy the to was and as to million market, markets consistent predominantly Canada $X.X full Build-to-

our to continue a the full presentation at now for CFO, walk XXXX. who for financial Herzog, rate run With business fiscal foreseeable I’ll our us We million annual expect quarter to to turn the operate this of Dan approximately performance the through and fourth $X will year that, over future.

Dan Herzog

Cheri. you, Thank

and at more detail. results in full our looking quarter Now financial

the increased to Our to our $X.X customers, from in by to which million million of compared marked record compared quarterly XX.X% XXXX. $XX approximately fiscal in quarter profit $X.X the increased $XX.X Carrier largely million to quarter fiscal revenue XXXX. XX.X% the a sales in our in fourth fourth same of the total Gross company, revenue year-ago National The for million XXXX or million million of X% percentage fiscal for revenue total revenue up fiscal or XXXX was $X.X period. quarter $XX driven XX% of fourth of or totaled QX

quarter that was quarter. percentage and quarter the absorption XXXX year-ago quarter, to slightly, due enhancements the fourth impact overhead the both prior up and of supply profit fiscal from some chain for tariff the during Gross reduced

Income an costs as additional well primarily expenses and the of $X.X operating from the with million expenses share compared the the fiscal to increase The same The engineering were commission were in year. totaled last in operating QX Our quarter fourth million year-ago external income quarter personnel due $X.X the Income fourth was fourth operations for of in for $X.X resulting quarter. compensation as in or same fiscal sales from million which compared per $X.XX XXXX in in of was quarter. tax diluted sales $XXX,XXX fees. $X.X million up $XXX,XXX million, of net of expense $XXX,XXX to the year-ago increase was $X.X to associated XXXX quarter XXXX.

or compares of income diluted million $X.XX in share XXXX. quarter the of to fiscal This per fourth net $X.X

XXXX. our results Now for fiscal financial to year September XX, ended shifting the

increased to revenue XX% fiscal million million from XXXX $XX $XX.X fiscal XXXX. Our for in

came the of growth by across our from from markets, key midpoint guidance X.X our results line top National the Carrier was at year. driven million which our Our prior to XX% in compared approximately up especially customers,

profit Gross of from or the XX.X% revenue $XX.X total fiscal we of improvement totaled million On million XXXX total revenue. dollar a in $XX.X X% a fiscal for XX.X% basis, XXXX. reported was or this

Our gross in year. to fiscal guidance chain the our XX% XX% our and for by efforts tariff margin profit enhance than cost XXXX to supply range costs structure driven exceeded continued $X million our throughout more of despite

$XX.X for fiscal XXXX. X% million, expenses in $XX.X Our XXXX up operating which million was fiscal were from

in guidance were a of result As of The expense in XX%. expenses XX.X%, well to agents. growth due million fiscal expense the support strategic as in fees higher increase improvement increase additions $X.X of manufacturing dollars XXXX for and and was a compensation for XX% near XXXX percentage an of from $X.X our operating which sales our in fiscal sales continued paid in headcount an to from revenue, fiscal operations commission operating to as XXXX, midpoint fiscal totaled as was to external reps Income million XXXX.

Income million, which tax expense up $X.X in from XXXX. $X.X was fiscal was million

XXXX million million $X.XX share, the or our which sheet. was diluted improvement together, from to year. finally, per Taken $X.XX turning was net an for balance resulting income $X.X last reported now or And $X.X fiscal

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

As whether evaluate capital share expand that’s continuing deploy and management highest and to our in the how invest cost reduce revenue or through the further returns continue opportunities. our generate structure allocation market repurchases for business strategy, will Board it our to to shareholders, our our we relates our to to capital and/or

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

Cheri Beranek

Age for fourth disruptive Clearfield It’s we since the year Thanks, progress a position designed a introduced fiscal now during opportunities. is the this of which year. to and I’ll been plan, Coming growth spend on Dan. core quarter and over business plan our our going strengthen moment

business. is our expanding plan Broadband Community core of first The tenet the

We continue throughout gains realize to in the business year. this market share

OSP-rated business flexibility other and on with to Clearfield’s a balance business housing configures new continued craft-friendly, effectively unlike termination meet manage can of fiber Terminal our An to designer has model, cable points any the our and outside any plant that is flexible that help to and the into the Designed designing giving our any conversations touch success Multi-Purpose a systems, goals effectively. customers cost market, deepen our and integral infrastructure. MPT with increase capital terminal their distribution YOURx fiber Consistent to ability is distribution network. drop fits deploy been YOURx around Clearfield how network for and them the an expense fiber labor cost commitment part

Community like and market Broadband Tier leverage providers, penetrate into further Clearfield traditional municipalities intends this this utilities, three service solutions As alongside the cooperatives the to market. enter to

relates healthy improve plan enhancing effectiveness. working meet our tenet to in our product second to The structure Age to XXXX, margin customers, suite competitive profiles. evolving In of our position continued fiscal and operational our of we needs to of invest cost and while our Coming the

remain. new deliveries product test our lead to to leading addition product dedicated lab created tariffs a The on-time short of times. challenge enhance industry- In launches, we and R&D

chain supply capacity our We are strategy with Mexico manufacturing ahead reduce expanding facility. in forging including to our costs,

changes term, additional reduce tariff will create margins, operational impact and the we efficiencies. expect requirements Longer these of the improve

made markets capitalizing the our XG opportunities wireless of the We tremendous of all surface. during XXXX Carriers tenant we scratching we third National markets The and within within are markets. plan and just wireline on these involves believe strides our

billion next U.S. to investments the to five to an seven over to $XXX in support According years. billion require Deloitte, fiber the will technologies XG estimated $XXX

product most of or As on the demarcation of Clearfield’s prior calls, meet-me work and I’ve the well the addressed this convergence densification as wireless in network. cell in of market for network points talked requirements about at wireline small point new as is XG

the and of a spend respond beachhead accelerates year, carriers the been foothold XG to cross-functional design those ability our XXXX our with Clearfield customers We of selection several as to designs. listen Over ahead. believe of the these to with rapid-to-market a committees requirements to needs in requirements us responding for solve will give innovation years of has efforts the the the these and

in growth our Clearfield Altogether, fiscal markets XXXX inflection serve Age of that our represented believe opportunities while point a in major as positioning key growth in experience the our we Coming true continued step towards business. we the plan closer will as to

marked performance the horizon a and finish Clearfield. our for for with in quarter momentum, balance a fiscal opportunities to fiscal XXXX solid year on financial Our strategic financial fourth a growth operating XXXX We guidance sheet. significant the achieved and rock-solid entered

in we trajectory million strategically is XXXX, in that representing for fiscal XXXX, ahead, million, the growth near growth the XX% the ranging the wireline $XX in anticipate business at With term. and midpoint. we half continued year our second and and revenue reason our of and wireless that market consistent anticipate both of with profitability we in the FY between are in in Looking this growth double-digit background year. revenue solid The Carriers, continue investing to of $XX long especially support success to the National mind, for

to is what will our historically. guidance revenue our year we’ve that similar build throughout in Embedded seen the

some of other and anticipate margins Looking range between for XXXX fiscal metrics. our at financial XX% gross to We XX%.

believe outlook exists our later opportunity our margin products follow-on additional cassettes comprising time. for to we environments significant where and optical sales components aggressively strategy gross sales Our price a in at revenue reflects

a operating XXXX of flat our or expect between as to We of XX% revenue revenue. XX% and percentage relatively compared fiscal expenses total to be

the and early revenue to As profitably single bottom digits income it percentage of to between net X% a raising to will near in X% be our Net continue we income the underscoring remain single - commitment digits our for high as to responsibly. the year, to expect relates year, in line, and mid year-end. the percentage growing low

Coming earnings expenditures of providing as of our in long-term in in Age of half will that our guidance that as Coming year Age operational off anticipate margin increase to we at the time, improvement our single-digit not this continue We’re part in initiative enabling plan fiscal high of revenue to this XXXX, continue XXXX. to mid- latter with acceleration level matures

we achieved XXXX fiscal conclusion, traction to in for financial meaningful So year the revenue market. in and where one double-digit gained banner our Tier guidance was growth, returned Clearfield, a

industry-leading a XXXX, we open capitalize with ahead model a the are opportunities to fiscal solutions, As questions.Operator? the proven for competitive to ready look for to industry. business And disruptive strong that, optics positioned we within call well on your the growth position and fiber we’re

Operator

[Operator Lake comes Street. Instructions] Jaeson The question Schmidt first with from

Jaeson Schmidt

a so feeling success steam just there. But bullish why you’re that bit gain and about to accounts. always talk Tier was you’re so take a been at one accounts, want just I to size know the given break in your why seeing start in you you’re while the these it’s and on little where, seeing traction a XXXX? can market I to it situation just of always going with much currently

Cheri Beranek

momentum, those What success separate and we’re in was being way architecture. carriers we’ve patent got the of recognizing in both I a FieldShield It’s material, each different able really that in as to – do carriers seeing being each a within it’s growing two of independently a to used that And Clearfield so things. fiber-to-the-home outlined fiber-to-the-business regard FieldShield and of there’s to that shows design, really to unique in and FieldShield other. date difference has

a needed proven to it’s – was that it out. technology So be

FieldShield of help drop behind grow line to is with as proven enclosures. the associated And all connects that it’s to now product cable it Fieldshield different them as with I well the And that market. our it out, that and momentum think that’s the that line product will deployment us brings

allows for what new to but not be us So FieldShield that it about us more to the with designs excited only we’re done has XG-based. technology build will date, disruptive that

Jaeson Schmidt

earmarked then primarily is year, additional helpful. the certifications? is looking some for That’s or investment that at that planned to for Okay. headcount And going this of

Cheri Beranek

one The that, make- specifically order in that lot work certification in you targeted You it had for that to certification got them revenue both. the previously – is was absolutely a rather do did be – headcount to work the Tier so and that. It’s requirements, we considered. of ready

an termination LC capability. GR testing SC as was the it for or example, So

tests Now like the specific that certifications we’re the for doing XXXX are enclosures. are unique requirements

throughout counts, orders. engineers, the the And so we’ve accept we the then – for then managers the certifications for the the are once did complete, supply not headcounts an the that enclosure us to product to And got but salespeople that’s planners last year, managers, that managers, those it’s what that capacity because year. are and effectively capacity open the people order chain the runway product in deliver

first see So in – you’re half why that’s of to a buildup heavier year. a the going the

a to what very planned Age. take program very that Coming about to started it that sure of And be capacity management, was we be then of is the point out in the initiation later thoughtful this advantage They is be the and to think able year. I that’s of are a we’ll – with this wanted going that to I and

And these the of effectiveness about operational our really Tier Age Coming so program. two with are associated

Jaeson Schmidt

into me, Okay. jump I’ll And then for queue. lastly and back

Just want revenue one XXXX. on throughout your a clarification building comments about of fiscal

you You to currently correct? could – in of, sort still you the March? have what growth that expect given sequential see, in quarter, see the seasonality actually March Or pipeline

Cheri Beranek

enough anything seeing I other not point, There’s nothing that. than this nothing wouldn’t be At to seasonalness. more – Yes. specific the anticipate

a fourth – then after that. the continue, and yes, would quarter So the we revenue and second and first would quarter for seasonalness see take higher being third would

Jaeson Schmidt

a perfect. Thanks Okay lot guys.

Operator

Markets. question Northland next from with Capital [Operator Tim The Instruction] comes Savageaux

Tim Savageaux

gives do there. project-based you a few got Tier of in half on your the also second in of that from stronger one commentary And second that a any that one growth Is – in visibility you side XXXX. follow-ups about about a the in acceleration first, well, XG had specific couple a have the of confidence or Tier your I maybe function seasonality fiscal on otherwise half? I’ve questions or

Cheri Beranek

Right.

visibility So backlog time, that that into don’t underway fits projects have the in supports where our to at the it. we half and a product initiatives line point do well, I while second are have this

the part about Carriers. I collection cross-functional we the As from the across groups materials, table talked in National in of have the been

their aware where in requirements excited and are are, and be used hopeful the what We to holes regard are for of opportunity are product needs their there. to about our products

Tim Savageaux

in Community both that Okay. And kind range. and I National question, saw starting just guess, and assumptions, asked Carrier sort about this in the of market growth in then rates terms fiscal brand community of relative overall of, to you the XXXX, the I’d maybe Broadband, X% your

the of, Given National to plan. sort to material. be, in that’s in built of, there. likewise, again, your fair process be kind the the coming I to growth your regard seen in, wonder you gross your XX% relative would seem rate. of seem on to assume acceleration breaking side, new are some Carrier it to program guidance right having sort assumptions into if of, with that there, growth What out And

Cheri Beranek

we visibility in just The their much beyond one, schedules current, to yet. additional some of, of both Tier in that beyond the Yes, really, kind Right. the point individual activity, our able not pick I Community Broadband providing rate to I so success Xs mean, at categories, each regard time their but – kind The the Tier we’re we’re opportunities don’t market. certainly, first. specific and and in for in anything to to Broadband would momentum guess, looking both accelerate of, growth. demonstrated Tier continue has – up XX% guidance our – there’s in be for the be run where that X%, in Community spend the this But have I’m is to one uncertainty not still

Tim Savageaux

Great.

And mentioned cost on you in that’s situation? that. million about movements regard side, assume on the kind your Is with a you margin guys? the assumptions, gross planning impact tariff overall I tariff of, kind state steady or year. in, costs the any for we wonder do Sorry see $X potential and should a the trade you to of that benefit

Cheri Beranek

in that impact, of Yes. We’ve fourth quarter of year in the that to as did quarter course impact third in was order to year. marketplace the were less I the past And some marketplace with of in million over of of that the The quality costs within significantly about really successes willing talked on-time $X.X than or decrease the tariffs XX% anyone else in work we of work. on-time faster million in we to time. and was as in you to our have in XX% delivery the good – with absorb and this and associated one started about ensure deliver we core the the $X our – delivery

we that as position through that working took we suppliers quality an of each availability continue as we ensure So it inventory ensure our took to products time had our that meet for needed. to to the the well

the will of up. percentage kind income equation. have be ate of some we it of think – see business. world I suppliers market. be take that $X that will might our the dollar percentage. that We’ve they so mean, of but means added we’re million it’s tariffs of million $X – we’ve our I – But we’re raw Chinese effectively, million I a $X similar, it as the I out And number more than our additional net I don’t which tariffs, mean, of a it in were can they you So don’t operation, take outside also Mexican think don’t expanded in

Tim Savageaux

could I follow-up. if actually And it. Got

Cheri Beranek

Go ahead, sorry. Tim. I’m

Operator

there? live. you is line your Tim, are Tim,

Tim Savageaux

am. I

Operator

Okay.

This question-and-answer Sorry, concludes go session. ahead. our

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

Cheri Beranek

conferences forward Thank regarding the much. a at course, different attending. that investor we’re you you talking all to time look with of very future of We, in

opportunity look talking one-on-one forward anyone you on to get to more addition, who answered, we questions have In their did the basis. not to a

into You’re I to us through or contact website, certainly our to we you months forward welcome our talking look directly and get as in fiscal year few through a to XXXX. IR firm

Operator

today Earnings Year Thank XXXX us you Conference Clearfield’s Quarter joining Call. Full for for Fourth Fiscal and

You may disconnect. now

Clearfield (CLFD) 9 Nov 192019 Q4 Earnings call transcript