CLFD - Earnings call transcript Q2 2024

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Operator

Ladies and gentlemen, greetings, and welcome to the Clearfield Fiscal Second Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.It is now my pleasure to introduce your host, Greg McNiff, Investor Relations for Clearfield. Please go ahead, sir.

Greg McNiff

Thank you.

Joining me on the call today are Cheri Beranek, Clearfield's President and CEO; and Dan Herzog, Clearfield's CFO.

slides presentation the you, controlled reminder, listener. the a in are this by As through as will the their forward company. the advance Please presentation of performance that regarding events the this future remarks financial remarks.Please the during call, making management be future and note presents speaker These Reform safe Act. provisions remarks for the of the forward-looking of statements Private constitute purposes harbor Securities Litigation the cause forward-looking to to actual are as is undertakes These subject risks those and expressed that company from forward-looking by required also in to results update to could statements.It differ important except the note materially statements uncertainties law. such that statements obligation no contained you on actual consider materially in differ conference in company factors that release, statements call. those to earnings presentation, today's results cautions this press and to could cause from The forward-looking risk the these Factors Risk filings a recent Form filing with section Securities Form subsequent XX-K of most in Commission, provide on its the The and risks. XX-Q Exchange and Clearfield's description also summarized turn the They to the CEO, President to Clearfield's that, over Cheri like on and presentation.With of are would call I Slide X Beranek. earnings Cheri?

Cheryl Beranek

Good for fiscal quarter afternoon, today joining for XXXX. the second Clearfield's discuss everyone. you to Thank results us

provide trends.Please an intend our also current on market We to and turn business X. Slide to update

quarter range, by overhang.Dan Broadband was this from high end segment XXXX in for while the ordering continue financial quarter as transition I following robust.In providers to would the driven market latest accounts, results continue that shortly. view to patterns MSO quarter in remains will guidance fiscal in XXXX by gradual that will the gradual we recovery the $XX.X will a to the and consistent the a the we seen be sales across in customer Large which year remain process. all our Clearfield have more season.While least were service broadband million, with the quoting ordering for on demand a detail the net we believe to Total We our activity cadence. ending sales remainder I traditional customers March long-term above inventory overhang the note quarter share the deploy impacted more be While represents our Regional we by as discuss year, a data, normalized as the build that take higher-than-expected impacted return our believe our patterns predominantly for positioning we and view. a in is pickup the beginning of discuss second when recovery second this slides, to markets of expect more supports Community the of focused inventory equipment of

to continue and our product expand also enhance We portfolio.

factor, our February, factor The raw the want as Build BABA, brief designed be remote optical Act, by newest XXX in network passive with American distribution, compliant program form legislation update known announced on to these configure in is is we are overcome to challenges other option a and FiberFlex BEAD products, to raw as to small FieldSmart to active the products rightsized base known footprint expansion. areas.As helping for right-of-way as it and all broadband the Buy BEAD.I cabinet numerous stations we As equity delivers the in more the will with less how latest of America form CraftSmart they fiber and outside and our in permitting deploy the will aggregation a provide including wireless access applications, fiber deployment required deployed our look flexible with in process. series. backup FiberFlex broadband needs, and offerings working Clearfield's a active the XXX plant, Clearfield sized layout.This as is the ensure power With its customers FiberFlex option equipment with and flexibility network utilizing smallest backhaul small give populated

As many RFPs. of announcing know, states started have the you

among do is industry this customer outlook, participation on revenue any as recognize until illustrated to in back from very financial roughly walk We performance, providers overall a CFO, the industry development will period XXXX.Turning XX significant Dan we will X-year XX RVA not calendar expect have now to great I'd and of healthy the forecast believe one expands for annual from which to X-fiber our up through provider. year call to are fiscal is progress, to market.Coming X/X While than quarter BEAD homes these forecasted Clearfield's fiber XXXX. that addressable indicate Of million to the the total our with results to additional a X, us a over who the more million Herzog, a equates Slide like access rate. introduction next to to pass our program growth XX.X% homes, passed second compound fiber, competition see the

Daniel Herzog

in focused have in traditional build ordering with gradual more company.In investing past.As higher-margin remain due season, talked transition at our Throughout to detail. we period, fiscal plug-and-play orders, $XX effort more year reducing were in the in and you, the decrease everyone. XXXX uptick guidance $XX.X The sales XXXX the aligning we X million, closely lingering the but quarter manufacturing margins Slide the million. we a good we Thank million to Cheri, products. of $XX.X a Consolidated and inventory second and XX% introducing range look Europe, connectivity Please afternoon, equipment in on second year-over-year decrease involves in net patterns. total anticipate of across our to quarter results headwinds ago was above phase, into $XX in transition sales strategically about fiscal this costs this from efficient more turn same million to net enhancing

XXXX, on our locations, be alongside cash XX, March at to from X% to focused flow order $XX.X $XX.X million increased operations.Order continue productivity manufacturing XX, margins in million enhance from gross we to utilization levels on for Additionally, labor December all to XXXX. reduce inventory to efforts on backlog our enhanced improve

where build season, first shown while deployment quarters sequential inventory.We several the current ordering an We with has continuing to a a with stands during encouraging normalizing time our their to this schedules. of align in to customers out interpret continue are indicator patterns orders increase. their open customers work through their our collaborate backlog as This quarter as

reminder, received. to As of become we backlog within less indicator a the sales will an fulfilled expect be are orders for most quarter future they as

key I now generated primary net Broadband, approximately XX% year. our sales to Our Slide lead QX, from product times of same market, Sales by we will in net our second most Community markets. to Broadband, averaged X net $XX.X period XX% last lines.Turning weeks of In across review our quarter the sales X, of in fiscal Community sales XXXX. down the million comprised

driven by mentioned, million, our year upcoming sales million, our new our declined our were the of by to quarter sales a the which of quarter.These gradual MSO quarter market second this this net have were sales concentrations service in $X.X Regional orders, Future customers the the prior for unchanged Cheri of year build quarter. National to sequential million, including market some versus total be their our this accounting XX% net in second could business from in of deployment a providers the uptick sales comprising of for segment total year year provider which for relatively experienced lumpy quarter in the net approximately in changes market second Large second in year fiscal XX% Carrier and this the in X% As potential XX%, in second versus decreased fiscal they the increase for season.Net quarter and inventory of second $X.X continue our in were comprised and and the customers versus strategies.Net quarter. sales prior preparing the $X deploying. the space quarter prior in Community Broadband mix XX% are second as concentration year of a in X% sales approximately second were by second quarter quarters fiscal due are of product Net

our issues margin Net sequential in Slide sales the illustrated by net Northern market in XX% were in in the spring market approximately Finland. were quarter increase from $X.X gross of in second prior this net due seasonality.As International this decreased quarter. XX.X% quarter.Revenues affected comprised and by sales economic and of XXXX market second in on the versus a fiscal second of in in net the profit in net quarter to second year-ago quarter. late a We XX% X, sales year anticipate million to total X.X% of sales sales some declined same the Europe Finally,

the second quarter gross margin million $X.X low $X.X an the on and increase did the in sequentially million in impacted levels excess increase continues to earnings reserves inventory to Our by noncash our overhead excess current mentioned manufacturing prior unabsorbed in due quarter. in charges facilities inventory the call, for demand.As to by of quarter be about

disciplined please the to season, of volumes phase.As in turn improve. digestion the result half to expect year-ago levels million, yet margin expenses customers' The strategically customers, continue bottom a transition our up were fiscal gross continues expect approach inventory its capacity we gross we believe in XX. controls. quarter prudent for represents This anticipated of While inventory we levels.Now in our organization, revenue to the XXXX margin be the from at second gradually second second should same the to and elevated impacted we increase utilization to quarter by and in $XX.X in the improvements and with Slide into quarter. million in company subsequently build $XX.X invest fiscal the cost patterns order to Operating

in first income compared quarter the XX, As loss to ago in volumes.Turning period same a of of quarter to of was second from sales year-ago the quarter $X.X to percentage loss net were $X.X period XX% $XX.X of same million for in up net the Slide expenses the the lower second million XX.X%, operating net sales, and fiscal million in due XXXX. net year

just the noncash lower to of affected reduced in which by at in XXXX. decreased remains $X.X short-term of Our expenditures investments, and also with second operations from $X resulted XX, levels, earlier.As in $XX balance of I $XX mentioned million capital inventory volume million million net XXXX in illustrated was mainly reserves our the on long-term million in manufacturing of fiscal had our million year-to-date.Our fiscal Slide gross the quarter affected and of loss end $X We debt. quarter heavily our cash, first percentage $XXX profit million by and and the quarter, was healthy to support sheet the inventory balance turn

million $X.X second XX short-term $X.X cash with second shares reflect a operations. in recorded have in the flow of December which the from of million repurchase of cash, we our of $XX the quarter, Our million $XX.X million in from we from and a generated reduction year-to-date long-term quarter.While was investments associated use operations

to through prospects Our healthy larger and continues opportunities positions share for competitively turn portfolio. range the and us Likewise, XX. We to strategic strong repurchase balance million. manage enhance customer to of pursue to business readiness sales long balance program, million $XX product term sheet fiscal our in term.Please the to ensure reinvest the XXXX $XX to for cash net the to Slide our anticipate market our be our third quarter long

an indicating the We shares second in encouraged in visibility the share of of follow quarter.While in of the that have quarter, indicated reflect represented share the program, third normalize each of fiscal historical our average other.As beginning million the not XXX,XXX expect price at to does signs quarter of third I an of repurchases on loss quarter earlier, limited revenue are our $XX.X share outstanding generate and to remains buyback the share number as could consistent stock beyond which are season we per the This additional build quarters to is in and shares the been by patterns in this second a repurchased $X.XX the range with our $X.XX. with fourth net we and onset per $XX.XX. based trend ordering loss at end range part

such, the fiscal March our call I drive opportunity to over second Cheri. the reflective buyback our back of as $XX.X part, our our share This authorization opportunity.That for conviction prepared of Board demonstrated current remains our a for our us has strong the $XX XX, that turn the not market we of long-term We on and price to quarter commitment scale clear unchanged, giving concludes to support XXXX. proactive authorization Directors XXXX. buyback when remarks to continue size share our repurchases million and authorized the in our in company million, driven and $X.X work is of our investors appreciate additional repurchase program.As now $XX by increased as added million is amount increase my as shareholder will of value. to from our Our by buyback of million the value belief available our

Cheryl Beranek

Thanks for update, Dan. financial the

like Slide strategic our plan, Turning brief to on which multiyear LEAP. to XX, I had would we a labeled now provide update

and a we for ahead Today's opportunities they by today's product As from intend in to provided improve in-field methods have cadence.Clearfield and field how reducing without a a correctly learn To more with solution our workforce returns that of workforce to are in will tool app platform believe industry so the issues improving an were delivered by announced installation deployments field The to part friendly Clearfield offering interactive and have to to hires on animated information.The to and build provides availability to tool March, preferred when of easy we the of to Clearfield available craft with classroom more customer tech-savvy customers development reminder, College.In be training training that as availability. is no deployment time. reduce the demand service response at an process. instruction quickly their our capitalize the move information charge. the new cost training their errors, and streamline our This long tools. instructions LEAP well on tool workforce exactly learning what app-based the it for availability the the fingertips.This Clearfield is guidance technicians the right digitally roadmap build can significant ensuring products technicians is to the of We relying extra ideal how need and is aid company's practices to online on process, to interactive making through way this inherent to continues guides particularly goal oriented, time built installation fiber and and at normalized need installation as develop developed that Clearfield manuals. this base is offerings an install aligns help XD is is of can commitment how of consuming Clearfield of step-by-step in access installation

to As and is confident worldwide guidance from the your will for App the are to the generation German. onboard for download to increase this and the Store XD or Google in attract based Play.As technician the newer we industry help expressed demand.And ever. last well it the available long-term build and technician.Both quarter, that interactive fiber workforce, that we that, meet call of the Anyone providers fiber products works immediately makes is open Spanish And with voice can text app strong tool easier to English, Clearfield service as we remain as questions. Clearfield demand positioned free

Operator

Needham and question [Operator is Koontz Instructions] with Ryan first line Our Company. from the of

Ryan Koontz

with this or high reserve level, -- is are Cheri you on related first commentary obsolescence Dan, for write-down gross what and was impact costs At quarter? the Dan, were write-down -- write-down. you that to And secondly, from been here. of nice this what to have margin the what bottom would or out on hear in can the they one line filling without a today? of that the buy what

Daniel Herzog

about inventory excess value or our is the and about like a Right. we obsolescence It's of of -- in the sales. of not market. this Sure. related No, only to compared amount lower because of to it's have cost not

taken have more a margin number, normalized I XX% here been that would would if have number. of -- had XX% you closer a have to -- gross our So we think overall to I think would sorry,

Ryan Koontz

space, of nice maybe that Tier Can Community to trend, you're edge-outs the you Broadband versus that in color X home? the on give there. color X a Any And rebounding in us that can see connected terms little some Cheri, fill-in, there builds market Tier of there on trends seeing new share you versus please? in

Cheryl Beranek

necessarily us community-based revenue, distribution. but predominantly of sure not revenue is ready is of there's is other generates who they other are of onboard want there seeing the X aren't they providers to in deployments is Yes, coming our because which out really new that turn since through to were that opportunities cabinets that's growth somewhat a the is because us passed, and gives subscriber telco but do who initiative with new a we're into a home couple seeing decrease that focus passing excitement who homes.The it, some homes be things. excited connected. we're that And people passing are on inventory making associated customers, new to definitely we're to not new homes providers thing able providers, Tier One

Ryan Koontz

in funding And to projects of starting you the projects of of Any bat commentary think you'd your projects over And the we're those for fund? then as feels coming on already capital term would non-BEAD space. side, every impact commentary couple seeing of in that many It ARPA next characterize I about kind share new BEAD surprised of on Is the are millions by to how hundreds And the that you month, don't year? on heard thinking some 'XX. shorter government years? those programs like about your relates your or it bookings awards now? to

Cheryl Beranek

as projects saw We come 'XX. of -- the recovery play, into and 'XX some part that's before part those of BEAD in been

but the in -- being of take MSO Others programs about where Tier the so the somewhat seeing that BEAD to the the didn't them programs associated more it. X of of able knew some in challenges, probably space, the say all does involved extended early-stage were more market them.I have would of advantage provider, have Legacy that it's larger middle were some that hit certainly program So the or we're administrative market. people get MSO that

And get BEAD I bridge the see in think we in larger will some and a in we'll that beyond. to of season program build this good it 'XX. until be 'XX

Operator

question comes the of from next Scott Capital with ROTH Our line Partners. Searle

Scott Searle

in into are some Cheri, like about Dan June guys it the you implying trough little I see September? of follow kind we expecting quarter. Also segments, But a bit fiscal a sounds improving nice and the the to out Regionals, into into still Large to that MSOs, quarter? customer you just lumpy. the you a on quarter. sequential had outlook sequential other comment of putting that's Maybe to that we as fourth And thought flattish maybe returning look see Are folding look in improvement June-September question, the seasonality up into

Cheryl Beranek

So I'll start the at end. back

So is that build normalized yes, a of anticipating beginning season. what we starting we're are the

are why that's swing say take that biggest to take us mark the have each While fast deploying patterns -- the seeing we that or Large see quoting and I indicate going this fourth in an large how in what below that numbers, equipment biggest Those how say with to ordering position the be order providers providers those consistent largest of have we speed, we I orientation that's kind the through have we question and the their are are have. mix coming be regard patterns cable -- of in Regional-MSO the lot could unfortunately we question that normalized are mark providers would quarter a the to their of little capital our either a see of they're up to that or beyond would were back providers the align some kind can't pretty would product in we the other.From quarter, some to expenditures in rates.So program this above alongside are the careful. inventory to or regard their subscriber Regional do Large

Scott Searle

to maybe that. follow Cheri, And up just on

do you the a are lumen out been through playing T-Mobile from been So maybe of joint that over into historically in those what for next X factoring you -- And see couple categories customer. with venture quarters? you guys? now there How the had

Cheryl Beranek

I and combination. and network one. And the it shows the where really becomes a wireless wireline fiber interesting Lumos T-Mobile provider of a development one is think really

T-Mobile scalable. forward, be which As has but allowed with XG the had different XG isn't as faster deployment opportunity to not spectrum, start a level deploy of it to for to has move deployment,

-- And more venture, wireless users to control a in to providers, by need our for add the able for in our or it fiber this it. to so acquisition an them joint way order especially bandwidth they to they Lumos in more fixed case, so more for is get continue partnership which ground.And and need their be with exciting to

We have past. be of the to the in part been field Lumos excited

say the as earn are well. We and it's very part that actually plans lumen exciting build much there what's has making most not -- continuing prudent to standpoint typically to be But competitive to the the so business. the happening. people foundation names, throw of around of We to in they're a customer one have past fact is because been I that it's to about back don't there's waiting happen. And would they're it see, make diligent

Scott Searle

to one, clarify Dan, could, just And one if the last gross margins. on I

You've excess got inventory reserves. the

your it June the like at that guidance, continues into Looking quarter. seems

clarify, obsolete It does adjustment that like want seems inventory. not Just how is an to long this for accounting again, continue?

do will, way through that see So of if you at its work of system, you some that. point, kind from when the benefit the accounting perspective? we should see But an

Daniel Herzog

Yes. Sure. Yes.

little still now. plus like go And So being to at go there. and we're as right those more like or looking stays goes going things bit a revenues what least minus, will are I up. it the go sequentially at or QX it lower, $X million down so, up, yes, revenue see that's as down but

sequentially, in projections it's keeps U become just will I and -- at get to to growing but going QX smaller as that going recoveries we're in our big, that similar to revenues our level to spoke start those to.And still into are become around, more QX, then probably obviously, be numbers. So our if the

Operator

the from Schmidt line Lake Street of next [Operator Capital. is Instructions] Our Jaeson question with

Jaeson Schmidt

on how the the since with just progressed but brought us product update Most portfolio if Nestor online. cross-selling you could that have covered, you opportunities has been curious

Cheryl Beranek

in discovery still It's I'd it's but say continuing, phase. the

We a customers moving weeks. in shows have or would cable over And the to important weeks.I benefit couple Germany It's forward But is and about we're predominantly of prospective really being about had align of revenue establish that need our more then connectivity front those the And channel customers just with -- ANGA able the last ourselves really several really is we in COM expand now. able think right some feel with in buying in to partnerships. looking customers in we be is be we'll product trade of here what's best. is be being European associated what to current know for it's not sense more that we with to that few what continuing offerings.

had, more very sales strong importantly have direct well-developed but in distribution program, network. extremely the strong We U.S., an and a

play. And that that network in the target facilitate countries looking we product in so we're have at we distribution offerings what do and to seeing can

Jaeson Schmidt

It down Dan, just half That's noted And follow-up, in then OpEx it should year? second think March. was a we of this Okay. here. ramping about the through as kind helpful. sequentially you managing of How

Daniel Herzog

some will with here. little bit have revenues We'll increase costs Yes. additional that along go in of a variable

probably not But little different or same percentage-wise right we expect now, bit. from relative at too minus could you it in So where the a percentage. would QX remain to be aim plus

Operator

Beranek Cheri [Operator no over hand are there conference for As comments. I Cheri? further closing Instructions] questions, to now the

Cheryl Beranek

and you. again, with Once pleasure to speak been it's you. Thank a talk

deployments deployments we're about make we're that want everyone somewhat deployments. right about now. quarters.We last somewhat the although really, understands talking also that at economic we I revenue customer of of between to happening, that want by sure we continuing been forward. U-shaped recovery summary, see thwarted like we're couple The we at everyone where we've the But But the they're to see reassure in for beginning moving and think conditions. a gap gradual are excited

believe is While we would present, build that I close XX Clearfield the will minimize next that I still part really importantly, with are course season uniquely to next think you're X positioned believe we with to it.Furthermore, looking The million work is is X most and hope And homes of it's the fiber for. journey. to the anticipated over our the be Clearfield passed of what years we serve years.

Operator

of you Thank you. Thank for participation. conference concluded. now your Clearfield The has

You may now disconnect your lines.

Clearfield (CLFD) 2 May 242024 Q2 Earnings call transcript