Q3 2022 Clearfield Inc Earnings Call
Good afternoon, welcome to clear field fiscal third quarter 2022 earnings conference call.
My name is Vikram and I will be our operator this afternoon.
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I would now like to turn the conference over to your host Sophie Pierson from Gateway group She's.
Please go ahead.
Thank you joining us for todays earnings presentation, our Clearfield, President and CEO , Cheri, Beranek and CFO , Dan Herzog following their commentary we will open the call for a question.
I would now like to remind everyone that this call will be recorded and made available for replay via a link in the Investor Relations section of the company's website.
This call is also being webcast 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 will be making forward looking statements regarding future events and the future financial performance of the company.
These forward looking statements are subject to risks and uncertainties that could cause 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 that could cause actual results to differ materially from those in the forward looking statements contained in today's press release field report and in this conference call.
The risk factors section in Clearfield, most recent Form 10-K filing with the Securities and Exchange Commission and its subsequent filings on Form 10-Q provides a description of those risks.
As a reminder, the slides in this presentation are controlled by you. The listener. Please advance forward through the presentation as the speakers present their remarks.
With that I would like to turn the call over to Clearfield, President and CEO Cheri Beranek Sherri.
Thanks.
Good afternoon, and thank you everyone for joining us today. It is such a pleasure to speak with you. This afternoon to share clear sales results for the fiscal third quarter 2022.
Also to provide an update on our business and the trends we are seeing in the market.
As evidenced by our strong Q3 financial results, including the record net sales of $71.3 million.
For high speed broadband remains robust and continues to accelerate.
Not only does our demand for broadband continues to be exceptionally strong, but we continue to execute on our nowadays strategic plan to expand capacity and to rapidly scale, our business to meet the burgeoning market demand.
It may 2022 we announced an agreement for the strategic acquisition of Finnish fiber optic cable manufacturer master cables, a strategic supplier of our field shield product line.
Our synergistic relationship with Masters spans over a decade, he acquisition, which closed on July 26 enables us to vertically integrate the design and supply of steel steel cable to meet future customer dependent.
A few minutes I will go into greater detail on Masters business and what this acquisition means for the future if they're feeling the first thing I would like to welcome then aster team took their field. We are so thrilled to have you working alongside it.
In addition to our record net sales in Q3, we also increased our quarter end backlog by 16% from the prior quarter to a record $157 million.
I've said previously we truly believe we are experiencing a once in a generation investment opportunity in our industry and we believe clearfield is well positioned to capitalize on this growth.
Our product portfolio was carefully developed for this opportunity and our customers have responded enthusiastically.
With our continued strong execution broadband industry tailwind and with our current visibility into this quarter, we are raising our fiscal year 'twenty two net sales guidance to a range of 243 million to $247 million.
Our net sales guidance represents growth of 72% to 75% over fiscal year 2021.
For those of you who may be new to Clearfield and our industry I'd like to provide a brief overview of who we are and what we do.
Clearfield is a leader in the expanding fiber broadband industry, we provide fiber protection fiber management and favorite delivery solutions that enable the rapid and cost effective fiber fed deployment throughout their broadband service provider space.
Our primary end market is community broadband, which is predominantly comprised of tier two and tier three incumbent local exchange carriers and the growing number of municipalities utilities co ops and wireless carriers.
We also serve service providers in the tier one national carrier market and multiple system cable TV operators or msos as well as some international service providers in Canada, the Caribbean Central and South America.
Our so I fully developed product portfolio focuses on scalable modular deployment, enabling clearfield customers to complete their deployments faster and more efficiently.
And then sort of the right of slide four is the patent didn't clear view cassette the foundation of our scalable and modular fiber management platform.
Our entire product line, including the purview cassette is designed to reduce both the amount of necessary skilled labor needed for installation and the level of skill required to install.
Given the significant shortage of trained technicians available in todays market. These qualities are particularly advantageous.
Our mission is to enable the lifestyle better broadband provider.
People need access to high speed broadband to be able to fully participate in modern society.
Well I bet is changing the way we communicate with each other and fiber is the means to enable and future proof that change.
I would now like to take a few minutes to discuss our recently completed acquisition of Master cables and why we are so excited about the business and the opportunities for Clearfield.
Nestor was founded in 2007 in Finland, like cable technology professionals with decades of experience in fiber optical development and manufacturing.
Our relationship with Masters spans over a decade as a developer and component supplier for our field shield product line.
Clearfield owns the patents and IP associated with steel shale well it has been co developed and manufactured for us by next year.
Vertically integrated that design and supply of field she'll cable provides clearfield with the opportunity to expand our manufacturing and supply of this product closer to the North American market.
In fiscal 2021 master generated 31.7 million euros in revenue and was profitable under finish accounting standards.
Approximately 30% of its annual revenues were generated from exports to the European continent.
Final valuation work and integration will be completed by our fiscal year end and that will help us to clarify future net income projections, but we expect it to be accretive to our business in fiscal year 'twenty to 'twenty three.
Moreover, Nestor has established a stellar reputation for providing its customers with reliable and flexible deliveries quick reaction times and operational efficiency characteristics that seamlessly align with Clearfield company culture and values.
The total transaction value, including fees was approximately $23 million and was funded primarily through our credit facility.
That's you will operate as a subsidiary of Clearfield and its financial results will be reported accordingly.
Turning now to slide eight which shows the high level rationale and numerous expected benefits of the acquisition.
The first expected benefit is the ability to vertically integrate the supply of our fiber optic cables to meet future customer demand with the persistent challenges affecting today's supply chain. This capability is critically important in order to meet our customers' deployment schedules.
Further than that your team has deep technical expertise that we intend to leverage at our Mexico facility in order to extend the available supply and feel chose ciber in the North American market.
Not only will this increase the total supply is still short fiber in North America. It also allows us to reduce the cost and complexity of transportation.
We expect to commence the protection of fiber optic cable at our Mexican facility in early calendar year 'twenty 'twenty three.
Another potential benefit of the acquisition is the possibility of introducing a cassette based fiber management solutions into the European market, which could be a significant growth opportunity for clearfield in the longer term.
Overall, Nestor aligns with our vision and will accelerate our company's progress towards this mission, which is to enable the lifestyle better broadband provider.
NASA will extend our market leadership and will strengthen our position to service the growth if I read a climate for every community.
For additional details you may refer to the Nestor acquisition conference call webcast and the accompanying presentation from May 17th 2022 that are both available on our IR site.
With that I'll now turn the presentation over to Dan who will walk us through the financial performance for the third quarter of 2022.
Thank you Sherry and good afternoon, everyone. It's a pleasure to be speaking with you today about our fiscal third quarter 2022 results.
So looking at our third quarter financial results in more detail.
Net sales in the third quarter of fiscal 2022 were a record $71 million and 84% increase from $39 million in the same year ago period, and up 33% from $53 million in our second quarter of 2022.
We had 210% customers in the period, who accounted for 18% and 11% of net sales respectively.
Of these customers were distributors.
Strong momentum in sales bookings persisted into the third quarter of fiscal 2022, resulting in a 289% year over year increase in our sales order backlog.
Order backlog grew to a record $157 million on June 32022 up from $136 million on March 31 2022.
From $40 million on June 30, 2021.
As we've previously discussed we have expanded capacity in our Mexico and U S based facilities, which we expect to allow us to capitalize on our significant revenue opportunities in the quarters ahead.
I'll now review net sales by our key markets.
Our core community broadband market comprised 67% our net sales in the third quarter of fiscal 2022 <unk>.
Consistent with prior quarters in fiscal 2022.
In Q3, we generated net sales of approximately $47 million in community broadband.
73% from the same period, a year ago last year.
In addition for the trailing 12 months ended on June 30, 2022 our community broadband market net sales totaled approximately $153 million, which was up 77% from the comparable period last year.
Our MSL business comprised 15% of our net sales in the third quarter of fiscal 'twenty two.
Momentum in the MSR market continues to be strong with net sales growing 151% year over year and were up 130% for the trailing 12 month period.
Net sales in our national carrier market for the third quarter of fiscal 2022 increased 191% year over year.
On a trailing 12 month basis net sales in our national carrier market were up 81% from the comparable year ago period.
Net sales in our international market were down 16% year over year in the third quarter compared to the same period last year and up 34% year over year on a trailing 12 month basis.
Overall as a company our net sales over the trailing 12 months were up 80% an increase from 71% trailing 12 month net sales recorded in the previous quarter end.
Gross profit in the third quarter of fiscal 2022 increased 71% to approximately $29 million or 41, 1% of net sales.
From approximately $17 million or 44, 2% of net sales in the same year ago quarter.
As expected overhead costs associated with the first full quarter of our new facilities in Minnesota, and Mexico negatively impacted gross margins.
Alongside real estate costs increased shipping costs, and inflationary increases and some components negatively affected margins.
Our strategic investment in our growing national carrier business will negatively affect margin for the near future.
We anticipate margins at these levels for the coming quarters.
Not including Mr cables.
Operating expenses for the third quarter of fiscal 2022 were approximately $13 million, which were up from approximately $9 million the same year ago quarter.
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 and professional fees, mainly associated with the acquisition of Nestor cables.
Our higher personnel costs are consistent with the company's strategic investment in sales product management and engineering personnel to establish a firm organizational infrastructure to support the growing business.
As a percentage of net sales operating expenses for the third quarter of fiscal 2022 was 17, 9% down from 24, 4% in the same year ago period.
Although our operating expenses are up with our sales growth our current opex at less than 20% of sales reflects our strong operating leverage.
Net income in the third quarter of fiscal 2022 increased 109% to $12 $7 million from $6 $1 million in the same year ago period, and up from $9 $2 million in the second quarter of fiscal 2022.
Net income increased as a result of higher revenues.
As a percentage of net sales net income for the third quarter of fiscal 2022 was 17, 9% up from 15, 7% in the same year ago period and up from 17, 3% in the second quarter of 2022.
In terms of our balance sheet, we had $1 $9 billion in capital expenditures, mainly to support increased capacity and new facility build outs and increased our inventory $8 $4 million to $69 $3 million in the third quarter as.
As we utilize our cash position to acquire the necessary inventory to meet the high demand for our products is represented in our sales order backlog.
While we ended our third quarter with no debt. The company did utilize approximately $16 million of its line of credit in July to date to fund the Nestor acquisition.
With that I'll turn it back over to Sherri.
Right.
Thanks for the financial update Dan.
Our thoughtfully designed fiber management and fiber connectivity products drive our value proposition.
It is our goal to remove the obstacles that would prevent our customers from adopting fiber broadband.
Since its founding clear films was built to scale and delivering fiber products to historically underserved or Unserved community has been our priority clearly.
But we feel truly is community broadband and we weren't built for this generational opportunity that lies in front of us.
As we've previously discussed Clearfield Nowadays plan is there a multiyear strategic plan to establish clearfield as the platform of choice for fiber management and connectivity.
Three pillars have been nowadays plan are intended to strengthen and solidify clearfield market position within the fiber broadband industry.
Our goal is to capture the fiber to the home and business market share. If clearfield was built to obtain while concurrently powering the innovation for new and existing markets in the years ahead.
Accelerating our operating cadence this pillar reflects clearfield commitment to addressing the markets accelerating demand for fiber fed broadband and to ensure our operation continues to satisfy our customers' demands.
As previously stated we are in the middle of a historic investment cycle for high speed broadband, particularly fiber broadband.
Nearly $65 billion and funding is available through the infrastructure investment and jobs that with 42 billion of that amount being allocated to the broadband equity access and deployment program known as beat that is expected to be distributed in late 'twenty or 'twenty three in early 'twenty 'twenty four.
Furthermore, the elevated demand in this market is not a short term event.
New fiber is expected in the next five year periods and all prior years combined.
Industry Research notes that were in the third year of an investment cycle that May peak 2024 through 'twenty 'twenty seven.
As anticipated the 16 million homes will be passed by a favor by 2030.
In this pivotal moment for the fiber broadband industry, our ability to deliver our products on time to our customers is crucial so that their deployment schedules are upheld and their time to revenue can accelerate.
Demand for fiber significantly outpaces its availability in our supply chain issues continue to persist across all industries.
Maintaining strong relationships with our suppliers is critical for our ground and it's fundamental to our customers' success.
The ability to meet future customer demand for field shelf, while at the same time, reducing the time and cost of transporting optical cables from North American customers was a key reason as you pursue the acquisition of Napster.
[laughter] amplifying bolder disruptive growth is the second pillar in our now of age plan.
This objective reflects career fields commitment to continued delivering market changing products for current and future market requirements to build programs for fiber to the home and business. We see today transform into the integration of wireline and wireless networks and future backhaul opportunities over the next several years.
Our record $157 million in backlog up 16% sequentially and 289% year over year reflects the progress we have made toward achieving this pillars objectives, our products provide customers with the flexibility to scale their deployments at a pace that's too.
Their deployment schedules, thanks to our ability to quickly and effectively respond to customer needs, we have been able to add incremental market share for new and existing customers.
Our business is healthy with demonstrated scalability, but our world is not.
Contractor labor ability availability is still restricted various materials supply chain challenges are constant and as a result, we are working closely with our customers to ensure we have the capacity required to meet their needs without over extending our overhead class.
Is there a market growing at an amazing annual rate, we will aim to further expand our share of that growing market.
Our third pillar augmenting capacity for ongoing growth is clear feels commitment just scaling its operations to meet the exponential demand for high speed broadband.
The key features of this pillar, our our agility and our ability to adapt to customers and their changing needs.
We are laser focused on executing on our capacity and following through on our growth strategy.
Earlier this year, we significantly expanded our capacity at our manufacturing facility in Mexico, and our distribution center here in Minnesota in order to meet the substantial and growing demand for our products you can see images at both facilities on their side.
In Mexico alone, we effectively added hundreds of employees to enable expanded production. We continue to train these new employees to improve labor utilization over the coming quarters until we've achieved facility optimization.
As I have mentioned earlier, we intend to leverage the deep technical expertise and the Nestor team to expand production of steel chill cables within North American market. We expect this production to begin in the first half of calendar 'twenty 'twenty three and ensure we can continue to meet future customer demand for field seals fiber optic cable.
We will also look for opportunities that optimize production at masters facilities to help smooth out the historical seasonality of their business.
Supply chain management remains a key priority for Clearfield to ensure we can continue to ship product without delays. This.
This helps to safeguard our deliveries against any supply chain interruptions.
Maintaining and leveraging our supplier relationships are a key importance as we have a strong network of partners that can further augment our capacity and grow demand.
In addition to investing in our organic growth initiatives. We would also evaluate the right inorganic opportunities that would enable us to keep growing with our customers.
To summarize our demand for high speed broadband, especially fiber led broadband remains very strong and we believe we are in the middle of a long term investment cycle for broadband deployment.
We have proactively expanded our capacity and effectively managed our supply chain to meet that customer demand.
Our expertise in serving the community broadband market has us well positioned to further capitalize on industry tailwind.
We have a proven growth strategy and our third quarter financial results demonstrate outstanding execution of that strategy.
We remain very optimistic about their sales growth potential with most of our record backlog scheduled to ship in the next six months.
As we look towards fiscal fourth quarter, we look to repeat our third quarter performance and maintain a high degree of customer success as well as integrating the nestor team into our operations.
With our current visibility into our substantial order backlog as well as the pipeline behind it we are raising our guidance for net sales from the range of $204 million to $218 million to a range of $243 million to $247 million, excluding Nestor cables.
Well your 2022.
Representing growth of 72% to 75% over fiscal year 2021.
Our growth outlook excludes any revenue contribution from napster.
We are confident that we can continue to grow that market leadership. There clearfield was built to achieve based on our commitment to customers needs operational effectiveness market expertise and innovative product portfolio.
And with that we're ready to open the call for your questions.
Thank you.
We will now be taking questions from the company's publishing satisfied analyst.
Yeah.
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One moment please for questions.
We have a first question from the line of Jason Smith.
With Lake Street capital markets. Please go ahead.
Hey, guys. Thanks for taking my questions and congrats on the really impressive results I'm just wanted to start with that backlog number just curious if the composition of that backlog is pretty similar to the revenue breakdown you saw this past quarter I guess just year to date.
The backlog is pretty consistent with our third quarter and some increase in regard to longer term solutions. Yeah. We're seeing in the market that more and more customers are looking to to actually place long term.
Scheduled orders into next year, so that would be the only caveat other than that it's pretty consistent with where we've been at in the last quarter.
Yeah.
Okay. That's helpful and sure I know you alluded to some just overall supply and labor constraints are curious if there was some demand that you were unable to ship in the June quarter, and I guess Relatedly. How are you guys thinking about that overall backdrop do you expect any in them.
<unk> made as we progress through the remainder of this calendar year.
Yeah, well, we haven't had labor that has affected our manufacturing and ability to ship I mean, we've had I'm.
Actually an amazing time to.
Much more accelerated rate of bringing people.
Onboard in both Mexico and in Minnesota, So from our perspective, we've been able to achieve labor, but I have spoken with several customers. Some of our larger customers who are experiencing a challenge to be able to get new people into the market are and what we're seeing in a very accelerated.
I did need for training and I expect that problem to actually get a little worse before it gets better.
Because we're really at this point, where where people are ready to try to kind of get some things are in place and now I will turn into winter and they'll have to figure out how the out of the build season has affected next spring.
So I think we've got kind of 12 months of kind of uncertainty around labor demand in the or labor availability.
Billety amongst service providers and contractors see them, but we are investing in an aggressive program to accelerate training programs available from Clearfield to help support the installation of our products.
And I'm looking to significantly increase our investment in application engineers and other training resources to help alleviate some of that concern from our customer base.
Oh, Okay got it and then just the last one for me and I'll jump back into queue. Just a clarification I know the new guided range does not include any contribution from Nestor cables. However are you expecting any rev.
New from them or was the guided range just given so it would be would be on an apples to apples basis.
We felt it was important for it to be apples to apples.
And you know with the rate of our accelerated growth in the amount of organic growth that we are recording we wanted to make sure that their shareholders would be would be able to see that very clearly.
Nestor cables, you know is a their financial audits were done and you know in Finland to finish accounting standards. So we're referencing the revenue that they were able to achieve in fiscal year 'twenty, one which is what actually was audited.
Audited, Oh, and I'm more international basis, which was 31 million euros. They have some level of seasonality to their business it'll start to tick down now in September and October are in that they do most of their business and in northern Europe . So they're going to have some capacity available for us yeah. We.
Anticipate the there probably will be a five or $6 million and revenue from nester in the period ending in September .
Profitability is much more difficult to to walk through because there's all of these integration valuation issues at its fair value.
We view the depreciation review, so we'll be able to give them much more clean and accurate a vision of what that with their with the integrated program a master as a part of herself means when we announce year end financials in November .
Okay appreciate that color. Thanks, a lot guys.
Thanks <unk>.
Yeah.
Thank you we have next.
Question from the line of Ryan <unk> with Needham and company. Please go ahead.
Thanks for the question.
I'm merely out of superlative cheer for Clearfield, just a spectacular quarter.
Congrats are due to the team so.
Keep it up.
Okay.
Sure you could help us understand what's happening with the inflection we're seeing those the national carriers and Msos are these new wins for the companies are these existing programs youre attached to that or any more budget.
Placing other vendors, maybe any kind of color.
Color there across those two segments would be great.
Uh-huh.
Our ability to execute in the national carrier business is really exciting for us because it represents the fact that we can use the same product line and community broadband as we do in National carriers. You know, we've said that from the very beginning that the private client scale from the small as to the largest network.
And especially as it relates to the cabinet infrastructure that as we pass more and more homes.
That the national carrier markets that we work with are starting to really put.
Put to get their act together and being able to move forward. So it is a variety of work and passing homes with a national carrier market and using the existing product portfolio.
And the cable TV space and MSL market, it's really an extension of the work we've already been doing in the tier two markets. The tier two service providers continuing in the cable market to extend their fiber reach.
And to be able to.
Port, they're highly dense markets with a higher concentration of flavor.
Proactive rather than a defensive mode.
And we're also seeing some success and really exciting success with our active cabinet business in the cable TV market. So that's a new.
The level of a win for us.
Active cabinets in cable T V as they bring their electronics clothing are further out into the network and to be able to capture some.
Some of the protect what they currently have and really invest and where they're going so.
So we see both of those programs as the long term opportunities that we can support at current levels and grow into as well as their needs expand.
It makes a lot of sense. The cable guys are moving to the distributed access architecture and need to power all those remote nodes. So makes a lot of sense.
Hello.
But I'm not sure.
And there's a lot of cables, they're going to follow through with that so we're excited that active cabinet is actually build kind of activity and demand for connectivity that we can then provide as well.
Alright, great.
And then on the subsidies are you you know what.
Kind of I know you probably can't give us a number but can you give us on.
The revenue contribution for the subsidies from either ARPA or art off are they material yet.
Or are we in the cycle for those two earlier programs.
So there are less than 5% of our revenues are very very very early.
Got it helpful.
And then on.
The product mix in the quarter any any made it as far as kind of paas things versus connections versus historical mix.
Any difference there.
No no difference yeah. It was still very heavily weighted.
Towards passing of homes, and so the architectures associated with cabinets and alike and and that's really what is reflected in the gross margin. I'm. You know are we knew that we were gonna see some impact in profitability.
Stability in gross profit associated with the new buildings, but we did see with kind of record increases in our cabinet business that the rate.
Right as a inflationary class a sheet metal has outpaced our ability to reduce the cost structure of the manufacture ability of those yeah, we'll be addressing that over the next probably six months.
But it is and unfortunate.
Unfortunate kind of statement of a fact of where we're at that you know sheet metal is a significant part of our cost structure, it's not our it's not one of our core competencies.
We can design abdominal sheet metal closures, but we don't actually been sheet metal and and that's something that we've had to be able to deal with in this last quarter in a more accelerated rate.
Right. So when you said unfortunately looking to probably pass along price increases in areas, where you're feeling some pain there yeah.
Yeah, we're hoping to be able to actually hold prices most of the way through them and our partnership with our service provider customers. So any increase in revenue from us won't because of price increases there are some places we'll need to but as a statement of kind of a cross.
Our platform.
We're going to hold it while we can.
That's great. That's all the questions that thanks, so much sure.
Thank you.
Yeah.
Thank you.
Next question from the line of James Abbott, Joe with.
North Atlanta capital markets. Please go ahead.
Yeah.
Hi, good afternoon.
Pardon me add my congratulations.
On the strong results.
My first question is around capacity or capacity utilization.
No you go ahead.
A lot of new manufacturing capability coming online.
In the U S and in Mexico, I think you've tripled your capacity down there, but you.
Third quarter results I mean can you relate that.
And whether you're fully scaled up now or where you were where you might be shortly.
To your total revenue capacity.
Where are you running now and.
You know what what capability much you have going forward in terms of overall revenue capacity.
The follow up.
Yeah, well we were extremely pleased.
On how rapidly we were able to execute to the strategy that we've that we've been calling forward really for the last nine to 12 months that we are making a very significant investment in real estate and that we were able to execute in both the AR and an environment, where labor was short.
Where contractors were difficult to deal with that we were able to build those facilities on schedule that we were working with a team of managers that we were able to bring those people on board and you bring them on board effective way, so that we could get the revenue out in place.
What you'll see really from US is each month, we are adding to our capacity one of the things that has been critical to our ongoing commitment to quality is to grow at a pace that can ensure a quality design and quality manufacturing so each month of each quarter.
A little bit bigger than the one before.
Pending.
Pending sheet metal and so and pending other components to be able to ship.
And so we were able to ship more than we expected in third quarter, because we were able to expedite some sheet metal being able to get some things in place.
We are bringing on additional suppliers to be able to lessen that issue.
But at the same time you know we've got you know.
Every day, there's a different.
Yeah, a commitment and a different supplier that we need to manage and so our once we can get a bomb on the floor. We are at an amazing commitment.
Commitment to lead time and commitment to manufacturing capacity, but its getting all the materials in place and so that's why you see such a significant increase in.
Inventory as well.
We didn't build this facility for for one year, we built it for this generational infrastructure development, there's more capex that's required to fully utilize the building.
But this felt this market is growing somewhere between 12 and 15%. We saw you know companies like Calix, and and Corning announced numbers. This week that were about 17, 18% of them ever market. So you know, we're gonna grow at least that amount over an annual basis.
Yeah, and I can't give you a finite number because it's really a product specific yeah, but we believe we can grow with this market and done so.
Okay.
Yeah.
Okay.
Great. Thanks for all that color.
If I could just follow up back on the tier one.
Obviously, you got it.
Pretty impressive increase.
There.
And I guess should we look at that is.
Some sort of significant penetration of one of these larger guys you've been chasing for a while.
You know something that you can kind of build on after you just sort of step function higher.
Or maybe something that might be a little more.
Lumpy overtime.
And can you say, whether you're you've got one major customer driving that or are multiple national carriers that you see increases were.
And this is not project business. So it is ongoing revenue that is being charted out for delivery on a monthly basis and so it is a significant part of backlog at about the same.
Percentage rate as what you've seen here is that we are we started shipping.
That product.
Early in the quarter and will continue to be able to ship it kind of at that rate moving forward.
It's the increase at least we do sell to all of the national carriers in the wireless carriers as well, but the increase is predominantly related to a single carrier.
Okay.
Great. Thanks, very much since congrats again.
Thank you.
Yeah.
Thank you.
At this time this concludes the company's question and answer session.
If your question was not taken.
You may contact Clearfield Investor Relations team at C. L. F D at Jeopardy, IR Dot Com I don't know.
I'd like to turn the call back over to Mr. <unk> for closing remarks over to you ma'am.
Thank you for it it has been an absolutely amazing time.
To be able to work with our customers and to work with the Clearfield community.
To demonstrate this level of success, we weren't built as I've said many times before for community broadband and are thrilled that we're able to provide the equipment necessary for our customers.
Moreover, we are now extremely excited about the next stage of Clearfield and the acquisition of Napster and and what that does for our product portfolio and our opportunity to really be even earlier and more strategically involved with our customers planning processes. We look forward to speaking with you again at the end of our fiscal year.
He will report sometime.
In mid to late November .
November December as the integration materials are put together, thanks, so much and good day.
Thank you very much ladies and gentlemen, thank you for joining us today for Clearfield fiscal third quarter 'twenty to 'twenty two earnings conference call. You May now disconnect your lines.
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