CLFD - Earnings call transcript Q3 2021

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Operator

Good afternoon. Welcome to Clearfield's Fiscal Third Quarter 2021 Earnings Conference Call. My name is Victor and I'll be your operator for 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. management future statements regarding and the financial Please of forward-looking note future making during will be this company. performance call, the events uncertainties statements and in cause forward-looking are to subject materially forward-looking statements. and differ risks These results could to actual from the those company It's except no important to know also by required to that statements, the such undertakes update law. obligation as statements cautions to press release, contained cause to you conference factors risk FieldReport actual and company in differ that those results from this could forward-looking in The materially call. today's consider the in Factors Form recent Commission Forms The risks. of Clearfield's clear and XX-K its those filing in XX-Q subsequent Risk - Exchange the filings on Securities descriptions and points most section provides with

As this forward a presentation over CEO, listener. their to speakers the the the to would reminder, advance turn remarks. Cheri the you, present like Clearfield's as the call Please that, are I presentation controlled, to slides With Beranek. in

Cheri Beranek

first us and Clearfield's results continuing for I thank afternoon It months afternoon to share for to XXXX. this nine and and joining of you, stay speak everyone the you pleasure Good third are safe a hope today. to is healthy. and with quarter you fiscal

on home factors. is and as our answer XXXX connectivity quarter the market positioning demonstrates to for unique first American recognized Our and capitalize the in the financial record nine months the setting again being the of Fiber-fed fiscal in to and the performance growth business. third broadband future-proofed broadband robust ability Clearfield's

for you to see the million. net increase XX% Slide record in can demand a broadband sales continued year-over-year on over fiber-fed is $XX.X a X, As

our products requirements. distribution broadband, broadband by XX%, are fiber which the on to labor-saving configurable service Our company's provider increases of Clearfield's meet Clearfield continues to practices to and service by community highly strongly our execute marketplace. recognized led the throughout from providing as providers was performance growth in demonstrates being pathway broadband the up our that double-digit are architecture promise period instrumental that Moreover, brand was

start customers, down-stream market, rural local Our recognize that broadband RDOF, they utilities Currently, no if are such performance. provide carriers, the exchange or there to programs multiple cable matter deployed Opportunity is later only this fiber to and new as up-stream summer over-builders, Fund funded which government technology and this to will that deployment, are accelerating Rural be symmetrical Digital are providers, the are electrical fall.

the the bi-partisan momentum enhancing Sales In their a year-over-year of at framework XXXX. on increase XXX% addition, in broadband the XXth, infrastructure in the federal end funding which looks proposed continued accelerated growing toward record available million to $XX.X June deployment. bookings, to quarter, a quarter second third future-proofed promising in backlog, resulting

backlog to ending our quarter expect of September. in most our ship We in current

resulting chain current due certain X materials and times, to of have to challenges our with customers lead-times unprecedented availability in to in we chain. from ensure purchase categories. to our for Based supply lead-time supply chain stretched we XX components longer the previously mentioned working the global are orders Additionally, product have dynamics, on the to lead place supply weeks

fiscal $XX.X dollars top income last XX% our order. Continuing our profit we line totaled of to strong year. QX. margin model with and net performance record gross a of from be will to next levels normalize weeks our from in more receipt leverage help overview, and up lead-times of business working the produce several historic million, purchase to quarters, solid financial QX margins X Over Gross X the

XX.X% our from of sales, net XX.X% year. in of margin percentage last a QX was up As

QX increase As $X.XX $X.XX in million as slightly to broadband begins This we income diluted a resulting million year. customer-facing we program, last future We $X.X in increase. business in share this anticipate community was expenses share. of in modestly invest per resources or our diluted net in last we particularly $X our and communicated generated from roles per expenses quarters, to within or in the additional in quarter, travel earnings increased a year-over-year, our significant improvement

period period Our same robust quarters million XX% financial three a the up QX year. net in last sales which the $XX.X for Clearfield. performance generated month to record was from We've first of in contributed of nine through XXXX, fiscal

help mix to product improvement compared last our period with gross year. in million coupled favorable generate in profit Our of XX% measures the $XX.X an ongoing efficiency dollars,

$X.X in for share $X.XX We XX.X% per was million period, also three in was quarters compared a to XX.X% which profit generated gross last up of to significant margin diluted which diluted year. income or $X.XX per the perspective, delivered From a year. $XX.X last profitability and improvement the net compared first share, we've million

Looking for by generated period community at fiscal the last market which was market, the broadband net our quarter we XX% segments core our of of third of from sales, sales up In on X. Slide same XXXX, year. net $XX.X million

sales XXth last which June the comparable community year. For million, XXXX, up XX of broadband from $XX.X was net the totaled trailing months XX% of period ending market

months XX% the net quarters, increase several Net were down year-over-year growth million. ending comprised the trailing sales the for a fiscal of a realizing third in established June fiscal in months, million million the quarter June trailing $XX.X year-over-year of to XXth, the sales was from market momentum MSO last in XXXX A XX% ended XX% year-over-year carrier net QX built XX% XXXX. Our $XX.X our we increase at over XX market to to $X.X XXth. national standpoint sales to for XX our on

business fiber about previously, the to home position the application. for As carrier the national is to related demand the talked in to market we've our continuing fiber and

into tier one third net decreased to our to $X.X to 'XX the deployment have for of the constraints fiscal customers limited the solutions COVID network, part quarter As million. of year-over-year sales XG of XX% the active

market of CapEx our slower presence the home the as consumer one tier for as their sales national of has as to spend carrier in in We customers tier a well for one continue to in pace a in uncertainties Business reduction with for the fiber support to initiatives. home, and us. business one both XG the in their fiber markets resulted the resulting our spend

the communicated, as pandemic we technologies and previously of introduction the has addition, our into In have training market. the stalled one tier new global

XX market in ending lifted, last compared our the XXXX. that for we up optimistic up pandemic one rebound. our revenues year-over-year in months quarter were the XXX% same and year are international As XXth, period the tier will to third are year-over-year June Net restrictions sales XX% trailing of

COVID-XX. We were resurgence the strong by negatively the in XX% seen ending last affected our purchases were previous and for months trailing sales have QX legacy demand fiber-fed in XX XXXX. year, June broadband a its from for business down year-over-year year and in Mexico in Canada, Net down and X% XXth,

sales be XXXX. will COVID. for segment. presentation that the of due impact turn we customers the As us levels the third are fiscal mentioned who from With legacy to fluctuating to over of have financial in previously, this performance highly continued to dependent normal business Dan, quarter We I'll believe walk two that, through upon now our our

Dan Herzog

Cheri and be with you, good great today. you speaking to It's Thank everyone. afternoon,

our in quarter Now detail. more looking at third financial results

in the third can The in year multiple $XX $XX.X operators, on $XX.X our our ago by due you from broadband, As fiscal the XX% cable was markets. million our to legacy in XXXX. of same second X, sales sales record net in in XXXX or markets, partially TV million see net Slide primarily in and our and system quarter increased from period up national decreases to higher quarter increase international of sales a community offset and carrier MSO million

third including Turning net XXXX ago X, of fiscal for in margin million product favorable or with community same net with volumes. plants sales associated in as efforts sales and our mix realized sales Mexico in the well to lines, gross higher increase net markets increased gross Slide XX.X% from manufacturing the production or its cost million to to due $XX.X product sales profit of increased quarter. profit as XX.X% XX% was $XX.X of reduction year increased The across quarter efficiencies our a broadband at

our quarter. for third As expenses were you the up X, Slide were operating same $X.X of fiscal year XXXX on $X.X million in from see can quarter million, which the ago

of As accruals. for in third fiscal XXXX sales, operating the same XX.X% consisted down quarter were compensation The performance increase costs year ago related XX.X%, in of higher primarily of to period. operating the from a expenses percentage compensation net expenses

XX.X%, fiscal $X.X third an in the of third XXXX ago $X.X per compares XXXX, from tax million to effective rate XX, same income or million million $X.XX our income $X.X to expense the the an on of Turning $X.X of share approximately tax Slide million third Income quarter quarter of diluted from improvement the $X of year million an ago same XXXX, was diluted in profitability the up in tax with quarter in to had totaled $X.X $X.XX per in operations which quarter. effective of the quarter. $XXX,XXX year XX.X%. increased over Net million rate fiscal share, measures or which

to support like operational update effectively environment, to measures I Clearfield taken to turn since it pandemic continues on COVID-XX we brief Cheri, protect are I and took operational. continuing remain report personnel Slide the Before we've the and our business, our to both I'd to current am navigate back fully customers and the over provide encouraged on a reflected hold how XX. that to

work using quarter. we're of later work that stay to While office a are will a tools most employees to returning beginning effectively to conferencing few continuing hybrid week and days non-production this a see employees our collaboration the video majority model the to connected, remotely work toward

while Our the operating and we social production to have adhering at guidelines. Mexico operations capacity, in able been headcount are state full distancing US federal increase and and to both

broadband, that lines we has our pandemic with plants by partnerships we we can are global growth our ensuring suppliers to of availability crucial. have the supply and will outset has for demand, three to be continue At ahead. portfolio, challenges the product also that of of components our created procure to all product optimistic it broad built to each will chain the all While that boosted made fulfill have the decision our across Thankfully, the demand. COVID, able manufacture necessary the be at strong the we location COVID-XX dramatically maximize

I quarter. supplies have pressure cable for the can That Cheri. Clearfield's by increased now manufacturing materials, remarks resins be. its particular, disruptions how line. will shown the In fiber the raw necessary and global requires concludes However, and fragile supply back product over chain prepared Cheri? fiber on like this demand my supply to call of turn supply chain chain optical management

Cheri Beranek

Thanks, Dan.

past choice Now XX. we highlighted as fiscal balance plan the for an age This Slide ago, the share of the the update look Clearfield and multiyear and XXXX. Clearfield for working focus expanding out. Today, beginning for fiber our to existing is business next of and order obtain, and Clearfield built our was that as establish on fiber multiyear call to ongoing we initiatives we has the share market through for at establish successfully. market this plan which to as XG to capture launched platform market discussed for initiatives We'd introducing year, of years ahead. designed build connectivity. mission the previously completed its fiscal operational of to our of and and markets delivering age team management to for phase XXXX requirements age, in plan, broadband Three are comes of strategic our innovation new a our coming home like advances the we the been the fiber have diligently years of readiness fiber-fed The plan while to now that as we

The of to post-pandemic This heightened fiber-fed is the first for respond accelerating Clearfield's to the pillar is cadence. market broadband. commitment now to our demand operating plan of age

deploy over growth order in Clearfield growth and fiscal XX% the the our of first funding provider private As year-over-year XXXX quarters they as evidenced of XXX% service customers soon increase by public available. become ready to explosive that three the and our and capture will serve stands backlog.

success. to systems enable paramount development and active will our our in an our continue continue this will speed agile been to across environment, We to work delivery has be to investment

delivering pillar, growth our second The products is continue future amplifying and disruptive market market-changing for to bold current and requirements. commitment

of size, a environmental impact direct a that introducing cable are small FLATdrop We fiber FieldShield solution. form factor drop reduces solution weight and the

to solutions. continues the many in and for believe addressing be craft homes handle fiber next number and will need easy person's the product As to connected expand this of year flexible and beyond, instrumental we others

Our we scaling this manufacturing ongoing to expanding for of To meet third demand. our are operation commitment pillar, growth burgeoning our currently partners. contract to manufacturing augmenting capacity Clearfield's is network that end,

We broadening own fundamentally source meet We can quarters. XXXX, all the developments world global for to around. chain coming partners that ensure Clearfield's requirements data regarding manufacturing announcing also In supply world footprints look the are we does our network components of future the changed forward go customer in to the makes and so demand.

education aspect As to and more COVID-XX entertain working more on online. to nearly swept socialize and Internet work of life, And apps and out every people from the globe themselves. to the for moves depended

Before quarantine, of Americans just XX% from home. worked

$XX in Clearfield our has represents federal earned The currently benefit to have principally this the their chart as these will funding way economically to footprint. illustrates no level of effective thrilled of speed does billion high government [Jefferies to This incremental service doubling as infrastructure are to not over to subsidies and are do provider that that chart environments here. the expected broadband Research] Congress from is responded staffing. deployment fiber and dollars that this encouraging both to deployments. as effectively were and by for online, have not additional reported shown and poised include programs that in prepared investment value that four it see fiber years. next of preference an was add existing in to the Americans bills the accelerate State the trend is shows we've in [ph], Now funding, over that market, it broadband to the their investment previously well to viable been sign all come enable enable XX%

us presence The market We established to to will are grow very strategic and demand customers. market last the growth to XX recent potential. investments we've along enable our optimistic years, about over with our with respond

anticipate and customer-facing over be represents million, add in as strong net a chain travel year-over-year growth with While very consistent age of percentage We million selling, positions. for to remain government current We million and demand, increased current challenges will pose our in early fiscal projected financial net projected strength, levels. income net now the the grow fiscal with to as which more XXXX us administrative year-to-date in general of resumes revenues. supply future, increase to to to $XXX Well, million gives annual confidence may growth sales backlog net total market of $XXX than will initiatives additional XX% XX%. our XXXX, forecasts of believe million costs year year plan, moderately overall representing we to $XXX market $XXX new our our we XX% fiscal of our translate $XX.X sales anticipate XXXX volatile and and sales performance guidance and our

broadband and benefit XXXX. to strength fiber-fed markets. of the Clearfield confident through established into presence reflects within the as capacity some that in to and clarity work our industry guidance funding key range chain fiscal over clearer. becomes government the more remain fiscal supply for as QX, extends challenges, summary, of setting to persist XXXX last able a robust and of for quarters expanding In financial to We profitability be from flows and continues environments. in cash consistent will which timing will advantage performance minimize fiscal take coming these of of we our this our record our our positive demand more track of We decade, and business and and provide record growth programs tailwinds

plan, of call we for for questions. maturity for marketplace XG we're the with Our us ahead. now recently access in and years and capacity launched your broadband fiber-fed to which, scale the the open offer age to continued expanding in that, the Clearfield Operator? for success And ready positions fiber

Operator

Thank you.

taking now with will Jaeson analysts. with Instructions] sell-side first Our [Operator question Lake be from question. companies proceed the Street. questions publishing We your comes Please from Schmidt

Jaeson Schmidt

I community want demand and start broadband how the you winter of typically guys backdrop within normal the to my taking months. Hey, guys. in just trying to for about such weather-related We're kind that segment reconcile with of going you're thinking Thanks strong just forward. see the seasonality questions. seasonality across

Cheri Beranek

I think we'll seasonality, continue there's to to we see that know expect won't. you traditional no reason

related. You know, traditional as weather think you of and traditional there's I still the level budgeting

really, all that one the just exploding know, due to I just network-wide, think know, is you caveat for to market-wide however that markets. demand you is

see that getting maximize more that of that might see of kind and might they orders placed inventory of availability. orders ready, in their revenues for be placement so and I think ensure we we potential readiness will anticipation can

a see as quarters uptick seen. wouldn't in So a of next second the little year normally we might we I result, that think have

Jaeson Schmidt

Okay, RDOF, some that's out 'XX a programs? programs, really called you some contribution helpful. your that fiscal these in meaningful And but is guidance, we baking look then I at when from government know funded of specifically

Cheri Beranek

isn't. it No,

know, - level seven have there's You we've but role couple knowledge and have of in until where with financing, and the RDOF marketplace, the that, of been moving going we their that release being dollars some And forward, significant the going as that's don't a of seen that go, a forecast. bank earlier know, we to subsidiary get own appropriated, as I not know we their between of broad you that - using you business kind indicated, on some right monies to lot frustration our limited senators, RDOF really real distributed. no indicated vision eight some people you now FCC a using months there's and of of you the initial know, conversation a you that, - after you're as you watching know, walk know,

Jaeson Schmidt

sense. that last and then me jump the I'll Okay, back makes And queue. for just one into

just anything if seeing these there, and passing if to so, cost to increased you relates as Just along it customers? you're your inflationary curious pressures, are

Cheri Beranek

pressures resins, cost are in of biggest we're plastics. The seeing

outs such extensively have setting and vault patterns. when on don't And costs provide so and them, line is manufacture you them our for XX% vaults do particular pin that exorbitant. plastics, customize as customers, seen percent And we increases more and to we've we that pedestals, a product XX% do while those particular and or vaults we are

And so understand about they're for the to do increases while dynamics the they on. and those supply necessity our us not chain it, happy customers recognize pass cost

on total you As produce. relates overall we relatively some of At know, - base. they're sheet are know, just and and our in those metals, things than a Otherwise, total only pressures we've the price But probably to to our it product I requirement revenues, absorb labor. this when pass pressures some revenue insignificant. point, able you that are and price we've a they X% to amount. order setting cabinets significant it's those in they're been in mean, less seen

challenge have an we're think deal ongoing that's to I to that with. going

don't increasing, think will increase don't but at see profit percentage our been I I profit define trend huge order as - the we're there, keep accelerating to to gross gross point, that have I continue profit fortunate But do hard need dollars work going been very me, their to that. see we gross know level. as XX% of revenue dollars we've excuse worked - this a pattern I gross think you think extremely we've I profit in our achieve to to

Jaeson Schmidt

Thanks Okay. lot, a guys.

Cheri Beranek

you. Thank

Operator

Capital proceed you. comes Savageaux from Instructions] question Tim Please with next question. Our with your Thank Northland Markets. [Operator

Tim Savageaux

here. you you Yeah, spectacular on, 'XX been in meaningful and my fiber well. to anticipated guidance from forward two and or our Good and of talking them what going some you've drivers maybe fiscal as follow-up into first a on this your and results congratulations know, either Hi. in among a there. the extent the slightly about getting know, driver to for be, quarter called is afternoon little know results question carriers those And larger you short-term builds I'll more recently, next year, increased you know tier

Cheri Beranek

that recognition network the previously, line two value their had and Yeah. really that by organizations have of proposition value opportunity tier craft-friendly the beginning offer. to can Clearfield at We've these the extensive fiber providers engineers product been two Clearfield providers, an that from were And the very that offers. the time-saving In the tier have product did look pleased line. most and recognized the with not our

quarter You'll to definitely find that organization have me, growth with XX% when than queue more pleased know, trend a But - and excuse income them. XX% this a the proud comes that we out working they of you for don't of revenue. our our the single be are customer we're very and represents

Tim Savageaux

Could of are Well group exceeding that - to approaching on us follow-up give that. or two as can that just Okay. sense we revenue? any perhaps carriers the Or of speculate tier a you XX%

Cheri Beranek

They're definitely -

Tim Savageaux

reality? To

Cheri Beranek

I Yeah, they'll I and think be called out think they're definitely approaching quarters. in future

Tim Savageaux

of at know now. we as year? characterized and those thing driver? guidance look for announced your Great. you initiatives, of funding more as opportunities you some if to comments. could kind you are And, broadband you with federal state nothing maybe, efforts, made You your derive regard from modest know, similar number probably Congress and for know seen some are expect becoming starting whatever in of of recently. see reference separate from kind hinted you And those know, this you you into fairly whatever's level kind a employing at, level might to obviously, know, a look say a you it if expectations you those with working in of state But, But them you you at we've right initiatives, through. or important your for fairly for growth RDOF RDOF built next to

Cheri Beranek

then somewhat we that business to been XX more funding state initiatives or there's we the had core like the in state way of have a certainly wrong Iowa in Yeah, of most the saw in do started we're markets prevalence the mean, state our states. and country revenues almost some has across mean, level XX of think, the it. some I that's But, seeing. are you put existing - I that already know, higher of I and

moving are forward, very program still the know, approved California, new the in you are included this the some you in our week. of that Those early they're guidance. know announced and and was know You Northeast programs not you the south in that know,

Tim Savageaux

Great, much. on. thanks very I'll pass it

Cheri Beranek

You're welcome.

Operator

you. Thank gentlemen, and time, company's right, concludes All question-and-answer Instructions] [Operator at ladies this this the session.

your was over now you may Clearfield's at Relations Ms. I'd to Investor to team like question contact CLFD@gatewayir.com. If not Beranek taken, remarks. turn back the call closing for

Cheri Beranek

Thank you much. very

happy You indicated as has questions operator be our take to investors. from you, know will I to any

However, I do on time-sensitive like to that a do basis.

those But progress. to look gateway and thank forward time. at you soon we'll you of us our for please We to updating be able So absolutely questions joining another all follow-up again send today. to I in the

Operator

for you joining quarter fiscal third us for XXXX Thank today Clearfield's call. earnings conference

may disconnect. You now

Clearfield (CLFD) 23 Jul 212021 Q3 Earnings call transcript