Earnings call transcript Q1 2023

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Operator

Good afternoon and welcome to Clearfield’s Fiscal First Quarter 2023 Earnings Conference Call. My name is Paul, and I will be your operator this afternoon.

I will now pass the call over to Jackie Keshner from Gateway Group.

Jackie Keshner

Thank you. Please note that during this call, management will be making Forward-Looking Statements regarding future events and the future financial performance of the Company. subject to and in differ statements. are cause that the statements results actual materially forward-looking to uncertainties risks could forward-looking These from those

Report, is that by those Statements law. company in Company call. cautions materially that and update It from consider in statements, actual The note contained risk results to press obligation differ factors such required Forward-Looking no release, cause conference in to the as except you to important could the Field undertakes this today’s also to

Risk most The Exchange recent XX-Q filing description filings Factors its on provide and risks. and Securities Form of section in those XX-Q, Form Clearfield’s with Commission subsequent the

through this are speaker slides a the you, the presents the their As remarks. forward controlled presentation presentation reminder, as the in by advance listener. Please

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

Cheri Beranek

afternoon, Good speak an us update It quarter the provide first this to is as business thank well pleasure analysts results and for afternoon a new investor as joining everyone trends. fiscal current on and XXXX market returning Clearfield’s and share to our today. with you our and

Our quarter XXXX our growth broadband. of execution the in reflects and strategic strong as plan, on for fiscal our the well high speed performance ongoing as robust financial demand first sustained

contribution sales for Cables. Nestor from million which million, $X net Total an the first $XX quarter includes were

and community markets. expansion net organic an be sales driven Our broadband, growth leadership continues each our core of by across our end to

scale serve long-term high in nationwide. plan, competitive underserved as strengthen unserved existing for continue to advantages to speed we lead execute the a aim build and we on to runway broadband communities strategic As our demand we our necessary

XXXX. to our revenue components our expected ordering of countervailing year investments and manage customer patterns as for consideration leads headwinds sourcing, ability and our guidance upon on reiterating previously we impact Based could stated plan, the that as strategic develop well progress fiscal of our the are

we income share. guidance of to $X.XX addition, $X.XX introducing In are XXXX net a

detail, of I to are be you Before and I industry. those review our to you performance and and our like we do would dynamics in Clearfield what for we who may briefly greater to new introduce current market who

expanding Clearfield industry. is fiber broadband the in leader a

underlying rapid to and enable the fed craft cost Our friendly fiber proposition provide. the better protection, delivery management value We and effective broadband goal solutions broadband and is fiber enable that lifestyle deployments provider fiber fiber space. service throughout provide

an and community is comprised utilities, wireless co-ops X market municipalities, is broadband, increasing number X Tier incumbent of end primary carriers and carriers. exchange Our Tier predominantly of and which local

service serve service We as national X has the also X operators is providers Pictures MSOs well or on international multiple management. fiber of rules in the consent, cable TV carrier providers. changed Slide as Tier the Clearfield and market, which system some

multiples based This required fiber on is management it integrated utilized wherever is and fibers of in network. XX can and be system whenever the

of protected platform FieldShield Our and needs offers options that network the any deployment. suit fiber pathways

for installation their accelerating the amount reducing needed and the time of to to deployments their necessary Our be and entire was install. thoughtfully faster This friendly revenue. to more product field, skilled customers designed required both to enables craft level efficiently, skilled the of our in complete labor line

before to enhance another the in lead represented which delivery have pandemic. have With competitive and have for underserved our Clearfield worked summarized leadership our these expanded we we area improve of the market broadband. capabilities, industry positioning, product world COVID-XX our Slide we advantages on further leadership X, key To times,

range to lead is within pandemic Across By times our fiber held fueled XX-weeks. the XX-months. eight-weeks of constraints, industry, XX-months Clearfield now lead times to a supply to of range targeting contrast,

times comes process. post-COVID ordering associated lead our This manufacturing which have to work cycles components with customer I’m times improve these within in times lead all our lines power active impacted range at the the with patterns, negatively product as volumes. the but lead conditioning proud achieved used been return for their cabinets, already by sub have to say exception that, to pre-COVID longer we of

past years, our ordered three levels their plan of reached schedules in fiscal challenges, in These chain any ahead early deployment of backlog, XXXX. stay the record led as to Over customers year end growth the by products our they fiber bills. their supply which orders to advanced

begun XXXX their yards We have try schedules. as to their schedules. customers according driven less lead Our their to match will normalized, continue ordering to this their our readjust staging now in product customers ordering more order improved planning to and moved in and deployment to deployment believe equipment have seasonally trend times, timing

return we the and XX% of six-months delivery believe second patterns, of of the revenue traditional year with half. ordering expected our and remains exceptionally approximately fiscal anticipate XX% strong. demand the We this in first Consistent in long-term our

in in year. are number connecting homes the and our they to all are increase an the comparison Nearly of passing customers of previous indicating

In serve addition, the number of in service increase we exciting. providers the is

seeing I welcome some market insights like growth significant Chief Marketing to our runway Officer, the would long-term on what and we to for the the For call. in additional Kevin are Kevin. Morgan, fiber deployments,

Kevin Morgan

has segments. you This communications afternoon. letting high-speed no market shows Thank for It been joining fiber you, is all broadband into up. and corner deployments and to of drive The Cheri. great to be never across of greater society deeper of every this continues sign all appetite

mentioned, our our world progress, work near-term class enhances to As for plan further maintain elite strategic times lead environment. robust our believe and the opposition Cheri we demand

average for fiber decade. broadband its published in next provider fiber Association a survey, new homes, million for association’s included the annual representing XXXX also In million Broadband December, annual deployment. On In providers the Fiber estimated record run additional passed a power XX-year Slide fiber X, we strong forecast XXXX fiber of XX.X alone, X.X have over deployments rate the deployments.

gives powerful the This us years a momentum for and XXXX foundation ahead.

position or yet accompanying within chart, the cycle an in peak. see accelerating reach will that has its investment you As to

of disbursement BEAD gradual the of and market industry the view and funds tailwinds our distribution RDOF as expand upcoming to ARPA further opportunity. funding but gradual meaningful continue We

will XX.X fiber next XX-years. assumes an new having that come of data housing are of the units on this connections. homes expected two additional million with more or availability, over slide available XX% The fiber Further XX% homes online have to indicated

As fiber past continues providers for this deepen vital service to connected expand, market a revenue to we craft in our will believe continue homes products homes they our in as their deployments. play translating friendly role numbers

the quarter to XXXX. quarter now financial of first our to Turning fiscal will walk back Clearfield over Dan who fiscal for the Herzog, through call I like performance. CFO, pass to us our would first results

Daniel Herzog

everyone. be to first you with Good about afternoon, you, is It today quarter Thank results. pleasure a Kevin. XXXX speaking fiscal our

looking XXXX So at in more results quarter fiscal detail. our first

quarter in of fiscal XXXX XX% from our first million, $XX the quarter in sales XX% increase net from were in fourth the million $XX down a and of $XX XXXX. period, million same Consolidated year-ago

This figure full an organic business contributions quarter includes XXXX. $XX representing of from on Nestor’s acquired Clearfield July million since contribution $X XX, the first and million we from Nestor Cables,

markets The system sales community increase higher broadband, sales throughout markets, fiscal XXXX. in in national net year and end performance was due multiple particularly with our consistent carrier core across operator to our our

$XXX increase was XXXX. XX, on year-over-year million XX, in on $XXX recorded December from $XXX December up a down million XXXX, XX% million our September XXXX on order Order XX, We from backlog. sales backlog and

progress our measure performance on of time metric remain believe our we forward. will meaningful going backlog operational in reporting will this future quarters. Accordingly, lead a lieu on of We focus more in

of we comprised year. our In I XX% sales market XX% Sales QX, review of markets. our in net quarter sales broadband, first net XXXX. last the generated from to net will community approximately primary of not million by period community broadband key $XX sales in same our up the fiscal

on for net approximately sales from period year. which community trailing ended XX-months comparable totaled was XX, up December XXXX, our broadband last the the In $XXX XX% million, addition market

XX% year-over-year for comprise fiscal net quarter XXX% continues of growing up our the trailing and XXX% to with Momentum Our the strong, first XX-month XXXX. MSO net of sales sales market the in MSO in be period. business

trailing our year-over-year. first basis, On the a in national from increased net XXX% for sales up carrier Net XX% fiscal national market sales of our was year-ago quarter the carrier market in XX-month XXXX period.

quarter year-over-year same XX-month included and basis XXX% Cables, last first which due market period year trailing a of XXX% the to are in on international to Net up year-over-year the increased the the sales international are Nestor we in sales. compared acquisition

same profit of or year-ago XX.X% in $XX the first or quarter. fiscal net $XX Gross quarter the XXXX XX% million, from increased of in XX.X% sales of sales to million net

by coming and quarters gross our in growth was capacity the affected profit investments additional for increase Our years. to

the continued late company’s quarter include in of to investments new facility these the second outfit addition the costs the on that XXXX Minnesota associated with fiscal and of came These board the and Mexico facilities facilities. expansion increased

conjunction in our its which gross investment manufacturing cable fiscal operational in its manufacturing cable in full by is lower profit quarter acquisition, continues with Cables business. the Nestor at Company a facility in was be expected realized Nestor profit of Cables to Mexico our also Gross affected quarter. second

first were these with $XX increase improving quarter year. XXXX revenue same expects the million fiscal $XX levels quarters company levels Operating at margins to from quarter. of the year-ago for operate several The percentage up which profit gross as were million, expenses later for calendar in this

fees. travel increased In Cables the of quarter general, in first addition compensation full and higher professional the and Nestor stock costs from compensation increase entertainment, expenses to operating reflects areas

of year-ago in As expenses same a of down sales, XXXX the fiscal XX% net operating quarter period. percentage XX% first the for from was

OpEx less strong operating sales at Our leverage. continued our of current reflects than XX%

fiscal XXXX in XXXX. year-ago same million the was quarter the Net fiscal $XX.X first $XX XX% in of million from quarter fourth income to period, the from $XX.X in of and increased million down

XX% sales, and in fiscal first XX% fiscal down fourth from year-ago quarter period, As XX% XXXX. down in income XXXX was a the of percentage the net of from for quarter the same of net

inventory first in sheet, in we In million billion our $X.X build outs, had expenditures, balance continued quarter. facility of and with balance support expanding million our our $XX from terms to to and capacity the mainly $XX increased capital

at expect in as XXXX increase in fiscal during fiscal it do year, inventory the ahead. year we this do did While same to cash levels in to we flow to improved resulting continue expect not free so the year

XXXX, As of leaving on of to quarter balance and of fund XXXX a July of line first the credit million reminder, the fiscal in draw Nestor our the use line. that zero off a amount in we did $XX.X acquisition approximately

liquidity In XXXX. $XXX stock through the Under share. $XXX XX, addition, we further per sold on closing of we a offering, the X.X of of shares price our offering at our terms million common upsized public an position December enhanced public million

offering. total the closing at The as stock additional after Including for option additional sold the expenses up flexibility opportunities longer exercise million opportunistic pursue purchase further in a term XXXXXX us of proceeds of grants we growth net X.XX arise. to shares $XXX.X our common be greater capital objectives underwriter’s shares the connection to full of paid million with of and growth

inventory, at opportunities. We the can infrastructure have existing compete new continue necessary CapEx, other customer the our of continue scale for strategic larger We to we a as ensure and strategic shareholders, position in larger that to advance areas well our capital our as as progress. and effectively working appreciate support investing we

I That XXXX. now Cheri. fiscal concludes my prepared over Cheri. to back the remarks for turn call our quarter first will

Cheri Beranek

the for Dan. update, Thanks financial

was to to mentioned new with plan Now have how a plan. continued seize I will the in progress LEAP Age expect greater of plan order to successor our we is previous achieve, higher, earlier force. built LEAP roadmap to how farther jump in is strategic on Clearfield which As and multiyear to scale we call, the the we opportunity The at to make our company our

deep founding market customers. market our our on decade four plans, our with customer’s that of each and market operators, would this on of said, The each our for is long I we our since excellence be focused partner alongside Community a letter. that tenants, an and LEAP have Broadband, agile like our leverage regional which our Through base understanding grow L in progress broader to in proven With and to to one the review we have XXXX. evolve can

terminals. month, our this of light U.S. reached million have XX the shipping networks fiber majority milestone throughout broadband these announced Earlier of The been we reports to craft friendly, of and ports of customers. of we vast cassettes, family Clearfield community deployed our field that five labor have assemblies

broadband can our the broadband Reaching in providing about it when networks they our as this further fiber success to fiber much improving innovation. underscores take milestone as they are products market our go. deepening execution, as far the customers is and we the is support commitment need they to their as To it scale, need

these Our market work and ongoing our opportunity. augment market capacity in chain we progress on E developing advance is to continue execute to capacity strategic making of supply leadership. growth, will upon for growth partnerships our the previous our Building maintain enhancements

and manufacturing Having the brought we footprint year, Cables. our our by expanded in-house in cable leveraging are manufacturing Mexico Nestor both acquisition Minnesota capabilities last of

another are Nestor’s to This adding a generate additional revenue manufacturing improve our enhance recently, more us run we current our capacities line - margins Finland Most allow will at in and from will new line efficient level. and facility. higher and to to

The tenant in as grow our manage our our expanding represents accelerate continue LEAP organizational to A infrastructure in we and capacity. This plan infrastructure, is investment our the underlying to investment. business

as supply adding well the focus and have investing significant the quality overall process. systems. support To two-years, in earlier growth personnel, in we we quality in quality teams and placing as includes over the our engineers This chain last generated

past, our quality fast will grow As said in I allow. as the as we systems can

in our we investments meaningful additional help a role growth Our progress. expansion, area top-line facilitate them expect have played to this in and

More our broadly, add to we to sales, teams product as work we and manufacturing improve may times. lead management, personnel

as Clearfield to training expand to online infield of shortage train navigates support the will labor in ongoing provide industry College market. our also We the continue and

our designs, products. in P innovation the build the the of we proposition. friendly cadence value To innovation the for forefront Finally, aim product our in LEAP of upon position stands pilot increasing our emphasizing craft nature and expansions at to our of

believe to coming further that our come add in on that innovation. the new weeks We product on promise we will to soon enhances front. More enough be additional

their fiber our of streamlined broadband customers align with program and the breadth management funding We fiber fiber they intend and additional depth federal installations the will as These and in solutions introduce facilitate to connectivity that and state extend access requirements. swift for networks. help

on strong amid As fed we progress make broadband. results have demand quarter our strategic our indicate, financial robust first continued fiber plan a to and environment

runway flexible be agility markets. market allows we address operational demand and which us from high broadband Our speed for have to strong our evolving built a to in across long-term an foundation the

We expertise work address investments, federal our our accelerate deep both design tailwinds to and continued for in us prepare product prioritize broadband, believe demand our enhance the existing infrastructure innovative capacity, our funding. community of enables longer leverage term and and to state

to million guidance of are revenue previous reiterating visibility staff representing our current to XX% fiscal current year into million, XX% pipeline, $XXX over our With we estimated our growth line of between XXXX. rate $XXX a

guidance introducing to addition, In we $X.XX of are fiscal share. year XXXX net income a $X.XX

our in revenues We follow year-over-year year. expect the patterns, year-over-year continue seasonal first half fiscal of this to strong to expected resulting in growth

and product underway improved as with reduced remain We order our lead further times we capacity improving backlog.

planned see customers year, levels of While monitor second closely the we their to of higher build in of still activity the expect with that will we our to proceed availability the network labor half bills. need

your And we open ready with the that, to call are to questions.

Operator

you. Thank

[Operator Instructions] question-and-answer conducting be a session. We will now

Thank you.

is and Please Cowen with question proceed from first Our Company. Paul your question. with Silverstein

Paul Silverstein

what what all or you eight contribution with quarter? in Nestor, March it expect, do than that? something December the from in consistent are different and Is you expecting meaningfully is the it is million, Cheri Dan, that

Cheri Beranek

more it so is important remember Yes, are. mean, and than seasonal much our the Nestor business next in nature go probably to the quarter. it by up is affected going even that of is very I we to

up the gross numbers by it you XX, about be margins will X months, And and be probably growing see as that by million the quarter going so that. significantly much to and XX to double the probably second their summer going know, are are you quarter, to to affected summer, as in their XX, this

So about up summer XX%. to averaging we now see about the XX%, by in margins of are XX%, the kind at months, we XX% will gross teens, be going in middle high that

We would margin so dollar the that percentage company, based gross said, would business, a contribution we when gross they commodity the But acquired the accretive. are down. go be margin

that that the the nests still wasn’t throughout but down continue the of accretive expect the because winter months, we This the nature year. of quarter, to case,

Paul Silverstein

question. get Let the real me to

million somewhere And million right? do to I XX would organic, Based XX math million, split if reiteration XX/XX XXX, March, what you did which I take that the neighborhood, but upon correctly, organic, So the imply the million, first the to XXX. imply your in XX XX% that turn XX if quarter XX% your for decline math translate in sequentially? would XX to did million would decline to

to larger the down XX% did the appreciate I of imply deceleration if growth as basis, Nestor, pattern. I would the year-over-year, a XX% And quarter. return X% would a December business for and right, much that if more numbers, over be company. On hit year-over-year math, you from those That as in or the seasonal

but trying back sustainable. dramatic appreciate guess But I the way. we order going let to that and drive the respond. I’m linearity, see soften I’m such if to more number as me to business collapse forward backlog And XX-days at you can what continuing Let of the including was of a patterns, decline normal But growth, in or a the numbers very very, in to the stabilization? understand would time, the - is suggests in well, current a you it everyone’s understand quarter, we I a backlog the in dramatic look a through compressed significant trying go to go more is

Cheri Beranek

you, Paul. Thank

end him doing of things for going patterns. that. and in to were coming fiscal were bookings years, a time pre-COVID I that less than of XX-days was result think in see the the in and the to of back world a We way be shipments we going world call two your ordering talked that of about I alignment would to at year ago, first the

start We are to into that going process.

positions product at conditions, align to the regard and their their or the our an of point in positions even forecasts bit as are, seeing a alongside market. bubble customers swell inventory perhaps in are we people As this inventory labor a

And what not think is actually is that market so a It it demand of and available we alignment is a high. very is it is very - with of softening much the labor. an

Paul Silverstein

Alright. the I out. I And after me can math, help the call, but guess, do

for margin it much look to hit XX.X gross of the gross overall to If we margin, We Nestor. up the was? at XX% whatever said a was set have XX% number How

Cheri Beranek

I mean, X.X% It quarter. is this that. affect Yes. probably they would about

that is really it and of because fourth complete comparable didn’t up when capacity. the So last at year, new quarter a any number facilities not we at important is look the to we have we of were

year. Over March the in the year, And probably since we our the course of to we a last the a of building of and of force been now is capacity have considerable investments of that last year adding increase last one have made XX% about continual themselves adding biggest building summer labor enhancements. level in

And ensure labor though conscious was we a seasonal, so going in people made more that, knew even cross winter capacity availability. we of to training resources and investment the be to

might we first be where plan, the to into while the and a at are is next as are it capacities we to on so quarter, for year can gross absolutely for unsettling prepare And it that necessary. be so margin to standpoint, little this going from a that summer

Paul Silverstein

responses. appreciate I Alright. the

Again, responses. assuming stop pass times on, I submit, as But, to your you days better disclosing you the pass appreciate continue you are of providing respect just making would are I urge think your mistake, respectfully me I on. it the even time with to Before I backlog, let maintain. that. I would business

Cheri Beranek

Very good. Thanks.

Operator

you. Thank

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

Jason Schmidt

for Hey, questions. taking guys. Thanks my

second or And call inventory up this the what to you come question. snapback and whatever following is confidence correction a issue. just of quarter that Just just will issue of half it, digestion, want gives or that sort one you that on line

Cheri Beranek

connecting are passing they resources. they community of seeing customer with to is labor the resources working and and continued we to an that the aggressively number that and absolute increase and additional from find What train homes additional the to contractor community are demand every want

process, the enhance labor to in the out involved training to we tools that them which there. knowledge is and are actively by gain helping and that availability So the

kind you versus would to the have. I calendar think review back are is of there call in out and end the is what I household conditions really, there almost it, like you you year your of of working of at see this come and what looking through when a you

I so think, all just that And our customers, kind making refresh. are of of

continue buyer continual think is part there first growth that in to I it every commitment it our board across demand all was be the of to still and they push that that out the the marketplace. want

when I said that, XX% for this thing is we into reiterate, identified we the want other the walked out XX% extremely to first make year. I The growth strong we fact come sure year, as in quarter. think We would the to rate

first de at rate the course XX% over growth year up In that over escalate would growth last and quarter rate year. the of

So and end over that for the at a continue year of XX% XX% last position. to increase the then us to year at working

important is to complete this through call think industry for sort going lifetime it community we is us identify one that the as that situation pandemic. weird to the of I a a readjustment So

isn’t or to even really a statement. there trend so, by which spine to model from compare really the And it judge a didn’t

Jason Schmidt

I and helpful of a there. there out is dynamics lot is that Okay, understand

initial Just what be? split thinking mean, I going XXXX you guidance, expectations? now think curious, when what XX/XX, had were original you you it did fiscal here, the been you be the to provide is but would that

Cheri Beranek

XX/XX, end at be little that a that more little thinking the readjustment, second pushing answer just a was I out tail a would of year. and bit quarter closer the to the so of we seeing

XX% XX%, year, again is amazing over about So again, quarter, looking on increase, at XX%. an is which important from it growing, to last marketplace of level organization look an is are a that XX% probably next increase at we to

together. trying our put everything patterns are we just So, and to normalize

Jason Schmidt

for going obviously Okay, quarters. at the and gross then looking just next of last for to one, remain margin, levels several kind these me, at just

quarter and could start mean you shouldn’t improvement up or in expect that September? December a we an to that see step tells timeframe So does

Cheri Beranek

anticipating we where think beyond similar I are back and that quarter, for their in last people the were was levels, to clicking, in we up taking September inventory improvement and everything positions an fourth as winter. get and year

where quarter fourth absolutely yes, should be So we is shining.

Jason Schmidt

a guys. lot Okay. Thanks

Cheri Beranek

Your are welcome.

Operator

Thank you.

Company. Our question. proceed question & Ryan your from with Needham Please next is Koontz with

Ryan Koontz

your and the Hi general booking was ask to backlog pattern there? a I the be peak to up helpful be assumptions expect customer you what March, but out or your a during want kind going this order would still soften March into are questions. your season quarter about your bit thanks for and give there. in feel plan construction then I behavior. don’t What kind the and like any pick can you March of assumptions is insights new Thanks. mindset do to period of where backlog you know

Cheri Beranek

hit planned Of course, think for over we very million under anticipated backlog the that that and million down talked high point. I the and was had we we the XX XXX are for at XXX a this And went about as little about last course million a of XX-days. just

much that were the to will quarter was a one aiming get times or are at our backlog to as which of in which get as in are product to this product we period I in little we bit backlog well and the ordering we down with customers they consistent ordering deploying. revenue are cadence more that for said that go about point a so

that post time. is reduction Well I world, But I a normalized backlog you it COVID world in of this normal that bad this see this bubble during know, a returned necessity this, believe really in that is of to period is a kind in walks through thing.

Ryan Koontz

the a from your the is us the cable real helpful. maybe or the quarter on color if from look is into cabinets strike? DAA on you reflect Got active home you, fiber that coming was the customers in the could segment strong more And and it like strength that your give

Cheri Beranek

the it well cable both the best national both as their areas. customers. Yes, different coming philosophies they can there of broadband companies. how is different high The And provide have from as and types was speed regional, that to

And based based and the is architecture deployment, have involved actively terminal, non-pawn we to in we are active that support forward. high of pawn versus allows similar product all us a X excited cabinets or And that both whether gross our it opportunity your of are profit the margins. a line about moving both deployment

in our see I space, that the bubbles of and of exciting probably will is quarters, community some the with next else but really see over everything cable think play. we come demand course Like to couple the and absolute the

Ryan Koontz

Alright of the home between passings bookings, your there quarter mix any and shifts terrific lines? terms and connected in latest in and product

Cheri Beranek

turn passing for higher that We are end connecting looking revenue starting the are them. revenue investment to at connecting, they at the that people producing the of increase see customer that a made a that more of a homes, in is can and and into initial of rate in samples the their they now by the homes,

the our success to increasing is seeing those take - and it is seeing connecting place. deployments of passing higher the exciting still percentage of a homes revenue, but of home definitely is So still it see

Ryan Koontz

commentary new gaining and any ARPA still are where it do you feel and around to one, to relative your recent contributions And the one Is you business? of kind like those last we RDOF programs Got contributing? momentum?

Cheri Beranek

but This entirely is gaining privately still Still almost very funded. momentum early.

we comfortable that that the and are. capacity we enhancements is So why making are

get One is things fund can you the market. an the how to very long of through government as is that right, the programs money it for takes into industry, frustrating

we XXXX. and were, wait regard and time all in seen times of money those XXXX, the to two had mean, it again years. we to have We time about I then were excited

it of seen So lot haven’t We it we know a is just coming. yet.

Ryan Koontz

Thanks Okay, great. I much. will on. pass so it

Cheri Beranek

Ryan. Thanks

Operator

Thank you.

Savageaux your Our with Capital question. Northland proceed Markets. next Tim Please question is from with

Tim Savageaux

so obviously Actually is for do planned have good was that place capacity additional but increases. now, pick on kind been you my question it on up. quarters of of couple addition a a And some capacity, this to made we have

what I from wonder here from revenue be it, you capacity you quarter, some to you you think point. you are where of kind fiscal end? of can quarterly where if fiscal from a for that what in it expect year, So to want take give by, Currently, we but a capacity a expect sense capacity half the utilization second the in reported the where or And you of quarters stand looking call year record you if I do are current just standpoint? stand

Cheri Beranek

the Right. make I so an from we end what that do want metrics way. investments to we by along each and incremental the to can is say, set to operational as be we where would try standpoint of quarter,

think I are run probably $XXX the end, maybe million of a today. rate we the puts us $XXX of closer so $XXX $XXX million, to by about the And which by at end about quarterly, to be And expect year. we million at year million

Tim Savageaux

in how adding terms set if of that from And the getting standpoint, kind is as are at of I bit not all? more mean, you you people, there, continue you year, a well throughout address a expecting facility Great. kind the pretty facility, of

Cheri Beranek

continue facility optical it, but in and facilities higher inside facilities of to bringing the example, for bringing power in capabilities. cable the The ability surrounding means, we need are to the augment place, produce to in Right. infrastructure the

we extruder. we to of got are can and as the are it water lines and cooling the bring comes for that the You flushing in of necessary new that in out produce so the cable out floor, bringing the lines actually the cable

costs think what place are you but that perhaps in incremental are about, are So those we the now. right that those some don’t

and is it around also teams as based standpoint the systems that, around and of the are and procurement at of to is in systematic is affecting the infrastructure it, you software process a just ensure this looking of do capacity, wouldn’t We think process it development but we it it, this the kind way.

this. have growing we over the how two-years been step say, And sustainable have, to we a rate course are the very we how that successful take going look of and last back can this and the we make we scale have to and but at

infrastructure that And needs is is designed standpoint look I standpoint gross be a this profit important at scale, within it. but was there a an to think to of in us element put still is, for to from company that

to is foundation it that quality. so And ensure strong

systems, software so we so will grow And long-term. be is will that people, be can be there And there it. some within will there that

bit of year-ago. done we So perhaps got have a what to do from little catch-up a should have we

wherewithal how going the quickly of that to have were back. take didn’t step Just we because

Tim Savageaux

Okay.

In at where seasonal I much the that you - kind more something be higher your there to you we back of was that on basis, somewhere up guess, terms context seem maybe this the going had, now back, of years several guess, just like revenue traditional seasonality, that quarter obviously. in to a going in XX% level, a should sequential, at look a XX%, way I is

Cheri Beranek

where as Exactly, been to pre-COVID that that trying seasonality always yes. last it business at hidden conditions mean, is post-COVID I is to describe think being how And I’m I was just the levels. is there two-years. it

the to year post-COVID world, the in the And half back how is doing is is to so so the caveat I to pattern? Jason that pattern think, that that this normalized statement back and XX-years, thing go in really the it a through that that a asked quickly follow and I I confidence will of traditional that to the How back want get you. do we is going have normalized to only last that

Tim Savageaux

Got thanks very it, much.

Cheri Beranek

You are welcome.

Operator

proceed next from Partners. question. Our with Instructions] your Please is Searle [Operator with Scott Capital question Roth

Scott Searle

the for thanks taking question. afternoon, Good

get that at facilities you the of capacity year? labor fiscal beyond think get way up into dive results. this again. kind it half the to in It we until to the margins the issue Is that Just second like on here about a the weighing the sounds is of content near-term that of on there the mix is until most gross issue,

Cheri Beranek

Absolutely.

in the of of are people those making advance meeting them. addition We

when and we utilization So allow which on is are you board. efficiencies did so you the that everyone those move brought does not it us trained at line, on are to targethem. what that a on they But people are around, do floor is is to level what the we not single

we have success. we doesn’t do Last our that so made flexibility we on people in line. process fiber you you year scale, long-term in the need And these to what that lead people all really train and the could one functions, optimize line. crucial they second the is you sure put all to in and to one But those different on that is to allow order are quarter process, the need termination hired them to to it ensure steps times

were our the right upon than weeks And so that to pre-COVID, force summer. lead this think But times have week is future. in still goal. it we is whole is eight which that us working are based allow to to investment we a will And That is not three we on doing were in eight people investments far and lead the our is that we the now. will training what four weeks. to that don’t six those more be to hit That should making that times by do necessary. I labor six

Scott Searle

guess earlier a comments. just couple follow catalogs in the And a up, I of

kind like for You to March. to sequentially the down you in second XX% are growth which implies of XX% fiscal seasonality looking quarter, is normal said December

into of you the of XX% Is we towards that a half skewed recovery expecting that loss second Before see being the split, half which years. back the correct? are

Cheri Beranek

Completely Absolutely. safe.

Scott Searle

and year? Okay, your What is and a requesting process in from are in backlog or the of either comfort level back but was curious engagement it the shipments terms on up really you it fits there. like a kind half I to asked expectations. standpoint sound the second fiscal where dig in I’m ramp seeing customer doesn’t of just earlier, thought into into RDOF those of around of the the half. to built know, then the that

Cheri Beranek

it projections, to never money variability my on just in I too of accountability a government meeting count and because have it is is much date. lack Right.

is definitely And numbers. not so in that been those is that still

is, other active our backlog, these time of rectifiers. down thing and regard coming lead numbers of And affecting cabinets that one sourcing the our that mentioned exception is with availability in is I of the our of things to the

be that has power conditioning would components and You they frustrating and for long like extremely see but the being company, them. positions products for chipset customers Clearfield is affected our a to of those to able time models, lead our don’t think been are get not for in to as revenue in the are it rectifiers

other coming as so business And available. back the is that chipsets, active on for readily revenue rectifiers more will the total significant our one the much year of cabinet be more That reasons half become of our part plan. board the the a is, is of back of the amount

Scott Searle

higher as margin Cheri, And a that cabinets active just well? gross on the follow-up carry

Cheri Beranek

rest best the the the cabinet of pretty are to They similar, of line.

I higher, will you in are no, call wouldn’t be them XX% So close. to same, but they know, They XX% pretty the margin.

Scott Searle

the and Got revenue guidance back XXX into to are that starting range. that you, XXX extrapolating terms million in into get you the but to million back half, of

Okay.

Cheri Beranek

is expect. to be quarter that this would fourth it to some allow it going cabinets because sure I at standpoint think the what look of that Look, just I’m would that in those is rectifiers going you of to where than step the a Yes. not I amount the powered it from for and make, definitely the in are fourth be a materials, it number quarter have of availability higher backlog significant normally come we going seeing up those to of

Scott Searle

get thanks. back I great Okay, in the queue. will

Operator

session. this time, question-and-answer the this At Company’s concludes

question was taken, may not you Clearfield team at clfd@gatewayir.com. If your Relations Investor contact

want to call for now Beranek to Ms. closing remarks. the would I over turn

Cheri Beranek

analyst you Thank able a you to being year of year all from questions for the opportunity into a patterns. the community. back to speak these for come normalized our and transition of and Definitely with

And invite our gateway to shareholders IR our so or I firm. contact

front broadband, the and opportunity by the I the until you, to speed become excited to us speak welcome player We more in high about with opportunity could be because quarter. significant revenue which plan in of not a next

Operator

for us XXXX Clearfield’s conference joining for call. quarter first fiscal you today Thank

You may now disconnect.

Clearfield (CLFD) 2 Feb 232023 Q1 Earnings call transcript