CLFD - Earnings call transcript Q3 2024

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Operator

Good afternoon, and welcome to the Clearfield Fiscal Third Quarter 2024 Conference Call. [Operator Instructions]. Please note that this event is being recorded. I would now like to turn the conference over to Greg McNiff, Investor Relations for Clearfield. Please go ahead.

Greg McNiff

you. Thank

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

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

as events Securities company. of that are future subject also Private uncertainties forward-looking that These expressed actual such company of Reform forward-looking cause required statements. for materially this purposes remarks could safe forward-looking remarks during except obligation that financial harbor the statements note differ the from by future to note risks no management will constitute law. in to the and results update Please making undertakes Act. to These performance important the provisions be Litigation the It call, is to regarding and of those statements, the statements

factors in differ section its Clearfield's are Form forward-looking Slide cause in filings on you of company could earnings Form presentation Factors call. most actual consider this the in that those provide and conference to risk the The risks. XX-Q results subsequent statements these description today's press from a release, Risk of on presentation. also Exchange Commission summarized filing Securities They with and recent The on to today's earnings cautions and contained materially X XX-K

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

Cheryl Beranek

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

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

In continue that and service following XXXX we slides, will data as that gradual in the deploy remains end and discuss supports I We continue long-term providers equipment this recovery robust. remain market demand believe user as view latest transition the a a year broadband to to view.

high XXXX above end range. of $XX.X for of net were quarter the guidance sales the third million, fiscal Total our

was Community driven strong in by Utility new our from segment sales customers, our International orders Broadband the out-performance from Customer sales in Our including segment. and higher-than-expected customers

is year. driven by revenue last last Specifically, a Community to from to higher of Connected Homes relative Broadband revenue percentage year, comparable

expect for the continue overhang our the large predominantly year impacted We and patterns remainder be the ordering to of inventory regional to MSO accounts. by in

more Dan our in will for quarter detail discuss the results financial shortly.

encouraged such see expand which transportation interest are including monitoring, for in for this active We applications traffic support base in growing by the an as our our municipalities. cabinets emerging starting as will new adjacent in XXXX. and categories, new opportunity customer We to markets, fiscal Clearfield

provider from As interactive mobile an BILT issue we labor our make XD the feedback to positive service reduce on available tool end, constraints to time, our is installation errors with that to fiber receiving recently be app technical the helping introduced entire one and provider committed app customers field large customers, for them To team. issues. regional continue their are very installation whether evaluating, to

update to a process. the like now would brief BEAD I provide on

quoting in compliant both new our and increase existing activity products a We customers. are for significant seeing BEAD from

week, this have move territories process. XX earlier of As the into states been award approved to and

schedules. Minnesota calendar the initial BEAD from fiscal in in company's late requirements ramp customer to starting their XXXX. BABA activity program more revenue in recognize expect have customers products to continue needed We participation manufacturing anticipated to in deployment and significant enhanced ensure accommodate facilities We to the meet with their and XXXX, recently

our by of the BEAD to of end expect be We the majority this year. current portfolio compliant fiscal

the reduce deed to and the streamline lobby the complexity and Additionally, working with we Association are process. Fiber award Broadband NTIA

enhanced $XX billion Alternative wait currently Connect orders eligible funding to the receiving for are from as this well Model, for funds ramp service private we providers Cost orders, program sources. we the America or the ACAM, While allocated BEAD as in in

Slide overall as on illustrated outlook, to industry Turning the X.

in million forecast homes, forecast compound development which very XX our roughly one than to providers unchanged have are Of believe passed RVA Industry additional We from access to annual X-year with total period X/X indicate also see more million XX.X% will equates that among X is the fiber expands market. a remain homes fiber growth a XX they that introduction of fiber, addressable to healthy provider. next competition rate. and the up to the

the XXXX. through Clearfield's for to to call performance. the now our financial third walk I'd over Dan to our like quarter Turning will pass us CFO, fiscal results who Herzog,

Daniel Herzog

Please Thank you, in afternoon, third to our quarter fiscal at and look good results X detail. more everyone. Cheri, turn Slide to XXXX

the in increase $XX season new quarter from in the million million during $XX.X driven to XXXX period, both an orders sales $XX $XX.X decrease XX% same million, fiscal of year build our a net were ago Net Consolidated above third the in of guidance but existing sales customers. expectations, by exceeded from and our range million.

Additionally, that had benefiting Nestor strong a push. international in our seasonal from we market, a are pleased Cables quarter

navigate headwinds, and the across dedicated While company. continues remain to margins the we enhancing inventory industry costs to reducing

this to manufacturing introduction plug-and-play of continues more investments higher-margin Europe, and connectivity involve In efficient strategic equipment in the products.

margins utilization manufacturing improve labor optimizing our on focused are all productivity locations. gross to at we Additionally, and

$XX.X XXXX. from from to cash operations. XX, flow we to XX% backlog reduce March June are million on actively $XX.X our to working decreased inventory on XX, enhance million Finally, also Order levels XXXX,

operations planning. transition anticipated the the service build and schedules, reduction purchase season, As to outstanding broadband we realigned their backlog in year-end for deployment providers of as current orders we out preparing winter

as align these last ordering our calendar which to help cancellations This customers will schedules, inventory in are resulted realign reduce indicated excess in the quarter. open deployment to not better actively to our working consider their year do effort with XXXX normalized we return and business patterns. customers has this lost current requirements. We asking their some us orders are with order As their we quarter, customers

agreements mutual visibility multiyear better provide that forward. these to key going are working other customers We with in will and put place supply

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

continue times lead across X to product weeks Our most lines. average

Slide to X% quarter. comprised net market, by XX% sales Sales I Turning our in now fiscal the our markets. prior Broadband, X. key Community $XX.X primary QX, from we of net year quarter of sales net sales in Community million XXXX. our to Broadband, third In review will third the of up generated

sectors, Community of quarter momentum. As in Net customers driven our strong sequential we are seeing market as well a in normal as utility an experienced new our seasonality increase million Cheri our XX%, mentioned, to by this orders from comprised versus related Broadband uptick third where decreased in the $X.X the MSO were in year XX% business quarter XX% and sales prior the of third year the in third which net approximately quarter. fiscal of by sales

third quarter inventory Net million, still in quarter. provider year approximately total our from regional levels large this of and versus were sales are which service declined X% quarter the the comprising the by our of for customers deploying. hold market they substantial These in prior third XX% fiscal third $X.X net sales year

and expect potential to strategies. lumpy to mix be deployment and changes in their due future continue to We concentrations this segment product schedules quarters in

Carrier quarter. and versus long-term third closely fiscal of million, third on in our net sales effectively XX% year procurement our these them Net for year for National focus $X.X to quarter sales and market the previously, customers inventory collaborating strategies. were third the prior total with were of manage help quarter remains accounting the mentioned levels As their up X% in this

in Finally, the the sales were in net million in XX% quarter international quarter. this quarter. net third Net sales versus the comprised third our year by market third XX% and increased total prior XXXX market fiscal sales approximately $XX.X of of in

quarter markets' for year sequentially as quarter. our down market decline On the season from We XX% the will season the our due a up during international uptick wind market our basis, a that seasonal strong to fiscal performance anticipate represent international Consequently, expect our international to to the Europe. in build sequential quarter. revenue peak build in was revenue we during this fourth fourth begins

XX.X% to build decreased on our the facilities due higher with inventory the and up Slide quarter. due season uptick in better quarter. gross as prior sequential in utilization quarter to increased in in year in X, ago well XX.X% the same quarter higher inventory gross illustrated production lower capacity by million from $X.X sequentially sales, charges revenue net quarter, the noncash in profit to excess net in the as down was margin million from third about associated manufacturing X.X% from The in third quarter of As the was from the revenue $X.X which, margin of sales utilization

from organization $XX.X quarter maintaining prudent lower in We to approach our Slide to the expenses remain cost third were same quarter $XX down costs. turn while year please due for disciplined XX. Now investing million, and to strategically the controls. Operating to in the variable committed a ago million

ago expenses operating up percentage and in third due volumes. As from from same net XX.X% of a net sales, quarter sequential of the was quarter The to increased in were in sales second XX.X%, a XX.X% sales for decrease period. the percentage down the expenses operating year as

to Turning Slide XX.

quarter compared in driven net decline in loss net million quarter of $X.X inventory I third reserves sequential increased by million revenue, income loss same in mentioned was and in lower Net that primarily The to XXXX. the levels, of year-ago $XXX,XXX productivity net noncash second period the the was third quarter $X.X earlier. and had loss the of fiscal higher in

on $X.X investments $XXX $X.X the debt. just Slide million in and long-term remains sheet short-term million support million manufacturing We our to illustrated and of operations mainly XX, in with expenditures healthy capital year-to-date. As $X.X cash, had quarter, our and balance million of

decreased million million of second the the balance to fiscal inventory quarter in the of at fiscal Our XXXX. XXXX quarter $XX $XX end from third of

million of cash investments mainly reduction long-term quarter. third a million inventory March $X net million and just $X.X was shares year-to-date. reflect $X.X of short-term the which million have cash, with associated generated and year-to-date, in XX, repurchase approximately $X.X approximately positive due a to from the third quarter $XX Our operations, quarter the and in in million reduction We of $X we flow million the of recorded operations in of from from

our healthy competitively well position We prospects large portfolio opportunities balance and sheet. supported product to pursue by customer our to enhance market strategic and positioned are

Our term, and ensuring to balance reinvestment also enables long growth. to repurchase us including manage our for business ability through strong the cash sustainable shares, the

XXXX Slide the Please We fiscal quarter sales turn anticipate in be XX. $XX million. million to to of fourth $XX to net range

the in a outstanding quarter on $X.XX end of the the quarter. third could share to reflect to number loss fourth net does at the $X.XX. per the is shares share loss range This repurchases per not that expect in occur generate share range We based of of and

last fiscal As we revenue third our fourth North each other. quarters and to in American expect mentioned with on our call, consistent we be

remaining Our as visibility limited is through remains industry beyond quarter the challenges. related inventory this working

an I which indicated average quarter $X.X of of price earlier, in shares as the repurchased As additional stock our we million represented at $XX.XX. an third XXX,XXX share buyback program, part in

This of leaves future $XX.X million remaining as XXXX. XX, June for repurchases

underscore for prepared remarks market ongoing company third confidence value the in our That XXXX. repurchases opportunity Our share our my quarter and our ahead. fiscal the of concludes

support appreciate We work as to drive our value. we the shareholder to investors of continue

now over to will the I turn back call Cheri.

Cheryl Beranek

financial the for update, Dan. Thanks

supporting the businesses would our to focus new core to the of update addition now brief qualities. to on by the skilled of I provide We these providing communities. like market XX. Slide brings decades-long of lowering and reflects to recently and aspect required. a the level to our small which to is rural Clearfield reduce We which A commitment in cost solutions, our value portfolio town are homes strategy. announced scalable, the deployment on products, a of labor Turning

the the TAP features between resulted the well baseline for home, deploy method the a flexibility CraftSmart amount recent utilizing from cable the Reel exact as for inside enables remainder craft-friendly future all-in-one The of outside Clearfield deploy an deployment method use surveyed and time work installations in over and with the the into Box curve savings storage that which efficiently. safely XXX versus as Reel XX% to XX% technician the benefits Fast These and study, performed. in documented Pass customer on quickly

Second.

MPO high-speed our continue and the will our the in expand invest facility that Finland. the to pushable market. operations, investments assembly for including We within our line including set in Estonia skill operations, manufacturing cost These to lower introducing FieldShield fiber European

growth the market we future the to have and our as our BEAD require margin we optimal expanded rationalize footprint, to ensure an will and to utilization product U.S. expansion. portfolio Finally, mix of product drive manufacturing streamline continue

demand. well As as is and demand is we long-term remain meet that positioned expressed last confident service that ever, strong providers to Clearfield help quarter, fiber the we as for

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

Operator

& first comes Ryan Instructions] [Operator Company. question Our of Needham from Koontz

Ryan Koontz

BEAD. Louisiana and early on start guys a there, push with to mid-'XX. like process. expectations? not Few the kind is of out out more But given the in Or with it optimism pace with align of in 'XX surprising little late super prepared It timing beginning is some about about through still specific of projects moving Does of the the like there commentary your your sounds there remarks? the some industry something that your sounds

Cheryl Beranek

it's Ryan, being I just realistic. think

late that to one deliverables not It's to, to really for is I But what year think we we in summer. we're it as in will through for succeed. for if since happen that closed everybody that fiscal September, within everyone our quite is hoping in likely the to in And talk next more to again for has of see than we our charter look fiscal be difficult year. that year, year. challenges at looking revenue the fact, us order

not. So but realistically, hopeful we're probably

Ryan Koontz

any international Nestor from call on products specific there? as And the it. you front, strength or might Got out geographies

Cheryl Beranek

to to in success in copper future alternative home more actual of the process investing there to ability certainly the is German there success a microduct that always is base. -- They're in build. the is Finland, make-ready And opportunity course, which to build they look were an is solution. And quarters space. with Germany carriers. maximize forward our also originally their Early the and late into years our how high-quality now and our leverage build-out strongly process. of but moving to which Well, a able is provide and that core because with as solution and for underway that market, infrastructure, their are then But the

Ryan Koontz

comments you bounce give Great. mix, And nicely. Connected. back on can your around think about heard this a the Community little I that Broadband, I Homes see more you that Do -- product next us shift should in then magnitude level? And an at mix we of forward think about the idea several of going kind the mix how a quarters? that of high year-over-year the

Cheryl Beranek

Right.

the for been a customers. pretty a of concentration Homes there's of due homes of -- our a think mean, I bit in Connected sway I passed concentrated toward it's that all overall to

kind sales -- mix, business closer our I you're is And you'd Community whereas years. homes where like series our next it a is cabinet definitely Broadband so the itself, exactly I would line over and say see, along pass is has more Within up. which that probably That's X to down, then you're connect definitely business going connected to healthy. to of really going been because home of it's X to to XX-XX the a think

Ryan Koontz

really share connected? That's great. more call is of this it gains point Or And in would just any you seeing out spend you're still at about terms there?

Cheryl Beranek

Right.

quantify homes, those worked careful want also kind gain who had to especially you Connected their a wouldn't didn't through at share information standpoint as of to able standpoint the we a Home, would we I the we were to accurately because I to buy a previously, customers of we of it's of monitoring see that share that to distribution provide from so customers go -- a us get we yet. connecting being We're most book -- think I market. share but of be gain they for not since point. say share process these were can that first pocket assumed gain look it's so this far those

Ryan Koontz

a the lower improvement write-off a Did that clarification hear Great. here. gross Did I maybe in in was there expected sequentially. -- E&O little I than the And just margin nice quarter?

Daniel Herzog

it Yes, Yes. definitely was.

close I something to like towards had were X.X%. up think million, $X forecasted we about and we

better much That's have demand. utilization. higher we what when So happens

happy we're so And that. about

Ryan Koontz

And couple a of it. Got then quick product questions. maybe

an rate, I'm AI earlier clusters. these Is opportunity you centers? Are seeing attach and the much results are gains you're front, share sure seeing the week data Corning new the in evaluating? you the that On in Nestor. from the of saw Fiber in something strong

Cheryl Beranek

don't spaces. The date, product the data definitely we those channel a fit have world. would into into To center

not yes, being consideration but opportunity. near we're say, that evaluating, I would I into as in should think take something So term shareholders

Operator

from Street Schmidt comes question next The Jaeson Capital. Lake of

Jaeson Schmidt

strong and June of a here, June? quarter revenue do any really Obviously, pulled of highlighted know I into But sort you drivers there. you the think your was

Cheryl Beranek

that's had. in was maximize million that to markets. the customer international some of And Only couple in the we third for that product little quarter. markets, third markets, American period. less was fourth a It European to why bill but we quarter European in U.S. a -- backlog dollars fourth who than in the the the the markets space be their asked early Had quarter in season forecasting take in a and to are consistent North

Jaeson Schmidt

Is And you helpful. Cables be where it within margin the could ramped? at That's still on upside line where Okay. once is guys Nestor thought looking fully the was this the originally margin business potential -- for it gross there Nestor? that gross business. business Or

Cheryl Beranek

we're cost There's That's it's in mostly manufacturing upside. in the significantly high-speed we're we to plant, to some investing certainly being lower to it things the why the environment. it's about with Those Estonia things there's investing line. be. that more fiber And able capacity, -- but we of could where not continue in do want why no,

Jaeson Schmidt

jump look just back for last decline I'll to should continue to queue. your the Okay. we for in On here levels me, September? one And in the That's then and Dan, helpful. inventory,

Daniel Herzog

Yes.

this rate good that utilization, the Nestor. we feel more, think here. we not at a just us about I including declining good bit some obviously, in did But at quarter maybe I had little

yes, you ramp. factor that lesser by So I but would it saw, decline on what than a

Operator

question of from next Our Capital Instructions] Scott Partners. comes [Operator ROTH Searle

Scott Searle

Nice Dan, sure if the see heard a was to for Nestor could number there I I not But gross number terms business wondering apologize, provided if a follow-ups. -- was the with starting on I several got a And September the And I'm sales I little margin in that you international. bottoming you to late I of then and had quarter? recover. call. bit just

Daniel Herzog

For quarter. September the

of margin? So you're we the million at the our our about international $XX Nestor, looking And on -- pool. in -- for had guide our gross

Scott Searle

Correct. Yes.

Daniel Herzog

million. was, $XX.X mid I At it's around at guide Our think midpoint.

Scott Searle

you. Got Connect probably coming little I'm or this initially, Fiber BEAD, XX Xs. swing to there the the towards bit XX of talk diving Cheri, we week. about And wondering, ago, then, on front out BEAD a when going started months Tier started be to momentum back

that like shift the just are feels there to been it the back Now funding. has terms a getting allocate of in states

Tier How are So play impact community Xs terms about the you the so that benefit a of the thinking share in provider, that seeing shift expectations? out Xs in into and it this that? I you Tier are has share how market versus mean, ultimately there seeing broadband the are you more? early

Cheryl Beranek

well, NTIA I original to program. the think early to process done has try change, -- and listening trying meet and continues the right? job the I mean, intention to think the of adapt mean, I to I of qualification a phenomenal

back was as That close Tier that that small of was the user the to we on, Xs the early and credit then would just provider the small thought original customer provider. the from to length the requirement well of away required. letter process complexity application providers the the the of and being heavy the and the large shifting So of because was as see

away taken and be the the to to they've of others that FBA our efforts many Now as, try said, I at process. able is like lot well as they streamline and reasonableness a of to continue complexity through environment, the the

it's of And so ground an than I as think result, was a equal playing it more before. ever

it's going to think heterogeneous award. a I very So be

to going to You're see state. from very things state different

I application the done the providers census process the going be is challenge biggest to think is be that's census going large for to map map. by that

XX going doesn't the provider most large to to got necessarily advantage a whereas really the areas the they so that have administration do of on make a a small hone times, it sense is fact them. and in provider because for huge And

already customers and the is established. X to be of about customers middle-mile lines talking One how things of go that perfect strategic an a large but BEAD we sense may provider. complex, that been them is to That unserved island have if sense they that is zero makes after for by it for have bracketed been have

serving On XXX area to big you're the to and see concourse be -- the square that come scenario, going I be probably miles, that guys contrary, going if a you've a might different that's mean, in. got

of our to of out be way. think, X anxious think the Tier don't have still to work that we're And a will our fit in ability with products all our them. So advantage. a footprint, to even cut markets, be of because they provide that We understanding rural I to we're deployed rural

Scott Searle

if I And could helpful. Very follow up.

But Just Broadband large in in terms to shipments elevated to little providers MSOs. guys in? that clears your you of and with and inventory the started had a some at terms demand your like, bottomed early seem start inventory wondering specifically think of the I'm are you inventories terms bit. comments market of to customers, think levels we back thoughts to Community end least some when equilibrium get what and remain that of recover service and I they've in

Cheryl Beranek

and way at to The cash big regionals rich, highlighted, the have by the they Community large you think, not is if say close, Broadband, MSOs end I Like and very MSOs small least when season. a that this to advantage. of the have Yes. had use They would I there, been, the Unfortunately, have go. so build regionals, we books started. pocket their traditionally been

So have MSO market. the in time of period a yet I think we

first am potentially large that of getting by the season, see by close. would anticipating end new we the I fiscal a this build year. And next are regionals orders think I of of quarter range our

Scott Searle

in elsewhere. about to of terms We're I starting how if in of could, cash lastly, thinking And utilization, of things helpful. look Very you're kind just Great. buyback? terms

normalized and about starting now the As you has opportunities? think found bottom, you are inorganic to the market

Daniel Herzog

I opportunities something on as a are We're taken the little the bit going Well, playbook. that share -- actions to was evaluating as buyback watch be that is well. always we more But that. in say, inorganic we'll our with happy to and going inorganic putting always as absolutely continue really to we've focus well

Cheryl Beranek

I would to augment areas that we the we adjacent just already that where have to What of by want saying evaluate being non-telco pockets of markets adjacent continue success. wouldn't we environment able and go The do into build it's foreign in you is to us. be to which an which you entirely new to are a space at upon. acquisitions have ones base can where best markets

so Active some used that the -- always in Cabinets some Active use with we as we've and traffic highlighted And we're things Cabinets our you backhaul. Active see in our transportation, of in the monitoring, of doing Cabinets the perhaps

a there's options. of So variety

for those I not adjacent commitment and best we're as there's that, markets for evaluating that's match. any would looking opportunity, public a say -- prudent an a but standpoint company, the inorganic rather

Operator

over no Ladies closing it that and further question queue. I now question-and-answer Cheri concludes session. in questions Beranek the hand we have will gentlemen, gentlemen, and for remarks. today's to appears Ladies

Cheryl Beranek

the in all opportunities Well, us. that But us. build. Association investment meetings you We're Clearfield. of as Nashville, us. the us opportunity front Fiber treasure excited this being about in for having I Broadband trust from home here in placed come generational talk couldn't investors in be just a We the more about as the have of We front an in reaching thank you joining and absolutely

for -- look in person you meet to meeting again meet over in Goodbye forward to and to pleased the now. future. you So near the you airwaves

Operator

may concludes you. Thank your Thank That disconnect today's lines. you event. you attending, now for and

Clearfield (CLFD) 1 Aug 242024 Q3 Earnings call transcript