Q4 2021 Clearfield Inc Earnings Call
[music].
Good afternoon, welcome to clear fields fiscal fourth quarter and full year 2021 earnings conference call I.
That will be your operator this afternoon.
Joining us for today's presentation or the company's president and C E O.
Sure he their neck and CFO, Dan Herzog falling their commentary will open the call for questions I would like to remind everyone that this call will be recorded and made available for replay via a link and Investor Relations section of the company's website. This call's also being webcast slid and accompanied by a powerpoint presentation.
Called the field report, which is also available in the Investor Relations section of the company's website.
Please note that during this call management won't be making forward looking statements regarding future events in the future financial performance of the company.
These forward looking statements are subject to risks and uncertainties that could cause the actual results to differ materially from those in the forward looking statements. It's important to note also that the company undertakes no obligation to update such statements except as required by law. The company cautions you to consider risk factors they called the actual results to differ materially.
From those in the forward looking statements contained in today's press release killed report and in this conference call.
The risk factors section in Clearfield, most recent Form 10-K filings with the Securities and Exchange Commission and its subsequent filings on Form 10-Q.
Five subscription up those risks.
As a reminder, the slides in this presentation are controlled by you Sir.
Sir.
Please advance forward to the presentation speakers cause I'm <unk> remarks.
With that I would like to turn the call over to Clearfield C E O sorry bear neck. Please.
Please proceed.
Whatever solution that enabled a rapid and cost effective fight with that appointment through the broadband service providers space.
We primarily serve the community broadband market, mainly tier two in two or three communications providers, though we also serve customers in the tier one market and a multiple system or cable television operators often called M. S. Those.
<unk> portfolio is focused on scalable modular deployment that allows speedy deployment to a reduction in the amount of unnecessary skilled labor.
At Clearfield, our mission is to enable the lifestyle that better broadband providers.
This was made abundantly clear over the last 18 months, if people were working and going to school from home Oh.
High speed broadband is increasingly essential to be able to participate in this modern society and fibrous fed broadband in particular is being recognized as the answer for future cruise connectivity to the American home and business.
We are now in a position where everyone wants to be able to deploy fiber with a man.
Could be exponential however.
However, the market can only grow as long as they're our technicians and engineers available to meet the demand.
Industry professionals estimate that we need to double the number of trained technicians and engineers in the U S market to deploy all their broadband does that is required.
Or wherever these professionals have also said they believe we can only grow the number of technicians by about 15% a year.
As a result, the deployment of high speed broadband through fiber will be extended.
The market for five referred broadband is not only demand base, but also supplier based suppliers are seeing their fiber networks are easier to maintain and generate more revenue per subscriber. So this is truly a perfect storm of catalysts that will help drive clearfield future growth.
With that I'll now turn the presentation over to Dan who will walk us through our financial performance for the fourth quarter and full fiscal year 2021.
Thank you Sherri and good afternoon, everyone. It's great to be speaking with you today.
Oh I'm looking at her fourth quarter financial results in more detail.
You know carrier market is related to the continuing demand for fiber to the home and fiber to the business applications.
Net sales to our tier one customers in the fourth quarter of fiscal 2021 increased 12% as compared to the fourth quarter of fiscal 2020 to $3 $6 million as the deployment of <unk> solutions into the access part of the network have begun to recover from previous Covid related delays.
We continue to support our sales presence in the tier one national carrier market for both fiber to the home and business as well as for five <unk> initiatives.
Business uncertainties at one of our tier one customers has resulted in a reduction in their capex spend in the consumer markets for fiber to the home, resulting in a slower pace of their spend with us in.
In addition, as we have previously communicated the global pandemic has stalled the introduction and training of our new technologies into the tier one market.
We are optimistic that our tier one revenues will rebound as pandemic restrict restrictions continue to be lifted.
Net sales in our international market were up 221% year over year in the fourth quarter compared to the same period last year and up 132% year over year for the full fiscal year ended September 32021.
As we discussed on our previous call we have seen a strong resurgence in demand for fiber fed broadband in Mexico, and Canada as purchases that had been delayed by the COVID-19 pandemic begin to resume.
Net sales in our legacy business were up 3% from Q4 of last year, but down 20% year over year for the full fiscal year ended September 32021.
As we have previously mentioned our legacy sales are highly dependent upon to customers. In this segment, we believe the business to be fluctuating from normal levels due to the continued impact of COVID-19 related issues.
On an annual basis net sales for fiscal 2021 increased 51% to a record $148 million from $93 $1 million in fiscal 2020.
As mentioned this increase in net sales was primarily due to higher sales in our community broadband NSO and international markets in the fiscal year.
Sales bookings continued their momentum in the fourth quarter, resulting in a 522% year over year increase in sales backlog.
Okay.
As a percentage of net sales operating expenses for the third quarter of fiscal 2021 was 22, 9% down from 27, 7% in the same year ago period.
The increase in operating expenses consisted primarily of higher compensation costs due to increased personnel and higher performance based compensation as well as increased travel expenses.
Operating expenses for fiscal 2021 were $35 $9 million, which were up from $29 $5 million in fiscal 2020.
The increase in operating expenses for the year consisted primarily of higher compensation costs due to increased personnel and higher performance based compensation as well as higher stock compensation expense.
As a percentage of net sales operating expenses for fiscal 'twenty 'twenty. One was 25, 5% down from 31, 7% in fiscal 2020.
Net income in the fourth quarter of fiscal 2021 increased 144% to a record $7 $4 million from $3 million in the same year ago period, and up from $6 $1 million in our third quarter of 2021.
Net income in the fourth quarter of fiscal 2021 increased 144% to a record $7 $4 million from $3 million in the same year ago period, and up from $6 $1 million in our third quarter of 2021.
As a percentage of net sales net income for the fourth quarter of fiscal 2021 was 16, 4% up from 11, 2% from the same year ago period.
Focus on customer service, including training the drive that clears build value proposition.
As I mentioned earlier, we are in the middle of a historic investment cycle for high speed broadband and fiber led broadband in particular.
On our previous quarterly call, we mentioned over 50% of Americans now work from home, while just 15% of the population did so did so prior to the COVID-19 epidemic.
To provide everyone a sense of the enormous scale of the potential funding opportunity fight 18 shows that chart put together by Jeffreys very sure research that shows the anticipated increase in government funding over the next four years.
This chart has been updated since last quarter, because the expected finding amount has expanded it's also worth noting this chart does not include the infrastructure Bill's currently in discussion in Congress that would be.
<unk> to add additional investments into our market effectively doubling the value of subsidies showing here Clifford.
Clifford is in a strong position to benefit from these incremental funding programs as they represent government dollars that will target the underserved and Unserved community broadband markets that had been economically unviable for fiber investment. In addition to encouraging the broadband service providers to accelerate their rate of deployment in there.
Existing footprint.
Given the physician please don't enjoys in the community broadband market. We believe this truly is a huge opportunity for first though.
Now with highlighted on slide 19, we'd like to share an update to a multiyear strategic plan actually did.
On our last call.
Joseph entered then nowadays phase of its strategic plan with the three pillars that we've identified will establish clearfield as a platform of choice for fiber management and connectivity as a reminder hour now of age plan is designed to capture the fiber to the home and business market Church Clifford was built to obtain blood.
Living in the innovation for new and existing market for the years ahead.
He's representing additional customers with demand spread with a quarter of those orders of greater than $100000. We are growing large account certainly, but we are not dependent upon a single customer.
Finally, after a pillar augmenting capacity for ongoing growth is our commitment to scaling clearfield operation to meet the incredible demand for high speed broadband.
The key here is our utility and the ability to adapt to our customers and their changing needs. We listened to what our customers have this thing about the changes in the market and the issues. They currently face with the global supply chain. As a result, we haven't evolved from being a rapid response supplier to a trusted.
[noise] supplier focused on meeting our customers longer term planning and larger scale deployment.
Clarity toward guidance in coming quarters, as we work to minimize supply chain and capacity challenges and if the timing of some of these government funding program becomes more clear.
In summary, we concluded extra school 2021, setting New records for financial performance. We are very proud of our track record are consistent profitability and positive cash flow over the last decade.
We remain confident that demand for fiber third grade's, Annabelle persist and physical 2022 and in the years to come and are actively committing our capital to expand our production capacity and grow and manage our global supply chain to meet that growing demand.
Continue to make progress on our now of age plan that position first for continued success.
The opportunity ahead of us.
Tremendous and we will continue to execute on our proven strategy to grow our market share.
And with that we're ready to open the call for your question.
<unk>.
Thank you.
Will now begin taking questions from the companies publishing so all sort of English.
Fires.
Yeah. It does not include anything see that they came from tier one at this point. The you know we are continuing our cell decorates and we have been in discussion with several tier one suppliers to help them deal with their capacity limitations and that there has been some challenge.
Is at the tier one level for some of our income and for their incumbent suppliers to meet demand we're aggressively continuing to to work in that area, but we also have our constrained and some of the tier one opportunities you know due to supply chain issues associated with P V D as in other plastic.
Okay. Thanks, a lot guys.
Mmm. Thank you good to talk to Jason.
Mhm.
[noise] [noise] agenda, if you'd like to ask a question today at a star then one started on one task your question.
There being no questions at this time this will conclude our question and answer session. If.
If your question was not taken you may contact Clearfield Investor Relations here.
C L F D a gateway I R Dot com.