Q4 2022 Clearfield Inc Earnings Call
Okay.
Good afternoon, and welcome the Clearfield fiscal fourth quarter and full year of 2022 earnings conference call.
Operator.
Well this afternoon I'll now pass the call over to Mr. Mike Webber from Gateway Group. Please go ahead Sir.
Thank you operator, and good afternoon, joining us for today's presentation are clearfield to president and CEO , Cheri, Beranek and CFO Dan Herzog.
Following their commentary we will open the call for questions.
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 is accompanied by a powerpoint presentation called the field report, which is 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 Clearfield, most recent Form 10-Q filing with the Securities and Exchange Commission and its subsequent filings on Form 10-Q provides descriptions of those risks.
As a reminder of the slides in this presentation are controlled by you. The listener. Please advance forward through the presentation as as the speakers present their remarks.
I would like to turn the call over to Claire fields, President and CEO Cheri Beranek Shari.
Hey, Thanks, Good afternoon, everyone and thank you for joining today. It is a pleasure to speak with you. This afternoon to share their sales results for the fiscal fourth quarter and full year 2022 and to provide an update on current business conditions and market trends.
Please fill delivered another phenomenal quarter of financial results in the fourth quarter, continuing our trend of record setting financial performance total net sales for the fourth quarter were $95 million, which includes a $7 million contribution from Napster cable acquired on July 26 2022.
We also set a new records for annual results and full fiscal year 2022 with total net sales of $271 million.
I'm very proud of these results. It reflects the strong execution and tenacity of our team through a challenging macroeconomic environment and industry labor shortage.
The significant double digit growth Inorganically quarterly result was driven by a 91% year over year increase in community broadband revenue.
Clearfield is a major player in delivering high speed broadband to underserved and under served communities across the United States. After successfully completing our nowadays strategic plan in fiscal year 'twenty 'twenty. Two we recently launched its successor are new leap plan to step up our ability to expand.
The city and to rapidly scale our business.
The rising demand for our scalable craft friendly high speed broadband solution is evident when looking at the backlog for organic sales, which increased 142% at fiscal year end to $160 million.
Currently approximately two thirds of our backlog is expected to ship within the first two quarters of the fiscal year.
With our focus on continuing strong execution broadband industry tailwind that include robust federal subsidies and excellent visibility into our backlog and the pipeline behind it we are guiding to estimated revenue of $380 million to $393 million, representing 40% to <unk>.
45% growth over fiscal year 'twenty to 'twenty two.
For those of you who may be new to Clarksville, and our industry I'd like to provide a brief introduction of who we are and what we do.
Clearfield as a leader in the expanding fiber broadband industry, we provide fiber protection fiber management and favor delivery solution that enabled a rapid and cost effective fiber fed deployment throughout the 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 an increasing number of municipalities utilities co ops and wireless carriers.
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 goal in underlying value proposition is to enable the lifestyle that better broadband provides.
The image on the right of slide four is our patented clear you can set the foundation of our scalable and modular fiber management platform that is used to pass homes and businesses.
Also shown here still shield the core to how we bring fiber into our neighborhoods in order just physically connected homes and businesses.
Our entire product line, including a third he's pissed at Anfield Shield technology was thoughtfully designed.
Our friendly in the field, reducing both the amount of necessary skilled labor needed for installation and the level of skill required to install.
This enables our customers to complete their deployments faster and more efficiently accelerating their time to revenue.
Given that skilled cyber technician shortages continue to persist our connectivity products, particularly advantageous as carriers look for ways to overcome deployment challenges.
We're moving forward and on schedule to vertically integrate the supply ever fiber optic cable to meet future customer demand for field shield.
Given the current supply chain challenges our ability to ensure our supply of fiber optic cable is critically important that our deliveries are maintained and our customers can proceed with their planned deployment schedules.
Another potential benefit the Nestor acquisition is evaluating the opportunity to introduce a cassette based fiber management solutions and field field technology into the European market, whose fiber deployment legs behind the U S.
Well, you're exploring options in Finland to increase capacity as we strongly believe nextera will extend our market leadership and strengthen our position to service the growth in fiber deployment for every community.
With that I'll now turn the presentation over to Dan who will walk us through our financial performance for the fiscal fourth quarter and full year 2022.
Thank you Sherry and good afternoon, everyone. It's a pleasure to be speaking with you today about our fiscal fourth quarter and full year 2022 results.
Looking at our fiscal fourth quarter and full year 2022 results in more detail.
Consolidated net sales in the fourth quarter of fiscal 2022 were a record $95 million.
110% increase from $45 million in the same year ago period, and up 33% from $71 million in our third quarter of 2022.
This figure includes $88 million from organic Clearfield, and a 7 million dollar contribution.
From the two month period that we owned Nestor cables.
Which we acquired on July 26.
The increase in net sales was due to higher demand across our core end markets, particularly in our community broadband multiple system, operator and national carrier markets.
<unk> with our past quarters of fiscal 2022.
Strong momentum in sales bookings continued into the fourth quarter of fiscal 2022 resulting in a 148% year over year increase in our sales order backlog.
Order backlog grew to a record $165 million on September 32022 up from $157 million on June 32022, and up from $66 million on September 32021.
As we've previously discussed we expect the expanded capacity at our Mexico and U S based facilities will enable us to capitalize on the significant revenue opportunities we expect for the quarters ahead.
I'll now review net sales by our key markets.
Sales to our primary market community broadband.
Comprised 61% of our net sales in the fourth quarter of fiscal 2022 consistent with prior quarters in fiscal 2022.
In Q4, we generated net sales of approximately $58 million in community broadband up 91% from the same period last year. In addition for the trailing 12 months ended on September 32022.
The community broadband market net sales totaled approximately $181 million, which was up 84% from the comparable period last year.
Okay.
Our MSL business comprised 22% of our net sales in the fourth quarter of fiscal 2022.
Momentum in the MSR market continues to be strong with net sales growing 204% year over year and were up 164% for the trailing 12 month period.
Net sales in our national carrier market for the fourth quarter of fiscal 2022 increased 69% year over year.
On a trailing 12 month basis net sales in our national carrier market were up 96% from the comparable year ago period.
Our national carrier market seems to be staging their material to have product on hand before deployment in the spring.
Resulting in more product in the field and we have traditionally seen.
Net sales in our international market increased 166% year over year in the fourth quarter compared to the same period last year.
And up 61% year over year on a trailing 12 month basis due to the acquisition of Mr cables.
Consolidated net sales for fiscal 2022 increased 92% to a record $271 million from $141 million in fiscal 2021.
Revenue for Standalone, Clearfield was $264 million up 87% year over year.
The increase in net sales was due to higher demand across our core end markets, most notably our community broadband M. S O cable T V national carrier and international markets.
Gross profit in the fourth quarter of fiscal 'twenty, 'twenty, two increased 90% to $37.5 million or 39, 5% of net sales.
From approximately $20 million or 43, 6% of net sales in the same year ago quarter.
As expected overhead costs associated with our new facilities in Minnesota, and Mexico, that'd be typically impacted gross margins.
Along side real estate costs increased shipping cost inflationary increases and some components negatively affected margins.
Nestor cables experienced onetime acquisition costs, reducing gross profit by approximately 400000 in the four.
$400000 in the fiscal fourth quarter.
Gross profit for fiscal 2022 increased 85% to 130 $13 million or 41, 7% of net sales.
From $61 million or 43, 5% of net sales in fiscal 2021.
Operating expenses for the fourth quarter of fiscal 2022 were $15 million.
Which were up from approximately $10 million in 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.
Increased travel expenses as well as professional fees, mainly associated with the acquisition of Nestor cables, which were approximately $900000.
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 fourth quarter of fiscal 'twenty 'twenty. Two was 16, 1% down six 8% from 22, 9% in the same year ago period.
Our current opex at less than 17% of sales continues to reflect strong operating leverage.
Operating expenses for fiscal 2022 were $49 million, which were up from $36 million in fiscal 2021.
As a percentage of net sales operating expenses for fiscal 'twenty to 'twenty 'twenty. Two was 18, 1% down from 25, 5% in fiscal 2021.
The increase in operating expenses consisted primarily of higher compensation costs due to increased personnel and higher performance based compensation increased travel expenses as well as acquisition related professional fees of approximately $1.6 million.
Net income in the fourth quarter of fiscal 2022 increased 129% to $17 million from approximately $7 million in the same year ago period.
Up from approximately $13 million in the third quarter of fiscal 2022.
Net income increased as a result of higher revenues.
As a percentage of net sales net income for the fourth quarter of fiscal 2022 was 17, 9% up from 16, 4% in the same year ago period and up from 17, 9% in the third quarter of fiscal 2022.
In terms of our balance sheet, we had $2 $4 million in capital expenditures in the quarter to support increased capacity and new facility build outs.
Inventory balance increased from 69 million to $82 million in the fourth quarter due to the acquisition of Napster.
The company did utilize approximately $16 $7 million of its line of credit July 2022 to fund the Nestor acquisition instead.
Since that time Clearfield has not drawn on our line of credit.
Net income for fiscal 2022 increased 143% to a record $49 million from $20 million in fiscal 2021.
As a percentage of net sales net income for fiscal 'twenty to 'twenty two was 18, 2%.
Up from 14, 4% in fiscal 2021.
That concludes my prepared remarks for our fourth quarter of fiscal 2022 I will now turn the call back over to Sherry Sherry.
Thanks, Dan.
As I mentioned in our opening remarks, we recently launched a new multiyear strategic plan leap after successfully executing on our previous nowadays plan Sheila asleep means jumping higher further and with greater force than.
Plan is our road map to how we will scale as a company in order to seize the opportunity Clearfield was built to achieve there are four tenants and our leap plan one for each letter.
The L is to leverage our decade long excellence in community broadband we are a leader in community broadband fiber connectivity and had been focused on serving this market. Since we were founded we make decisions by listening to our clients in understanding their evolving needs building on our decade plus of proven success in this.
Market, we've demonstrated that we can nimbly adapt to a changing marketplace and grow with our customers as they grow.
One building block of this tenant is our innovative fast past approach fast pass you did indicate that splicing to significantly reduce fiber distribution hub cabinet class and speed up installation time.
This enables broadband providers to paas twice as many homes as the competition, while also reducing the time to turn up new dwellings by 50%.
We were able to leverage our deep expertise in community broadband to develop a solution that is particularly well suited for this market where faster fiber deployments are a clear competitive advantage.
But he is to execute capacity enhancement. This tenant is the successor to the nowadays pillar augmenting capacity for ongoing growth.
Clearfield maintained its leadership position continue to gain market share from competitors and grow the business overall, our capacity must continue to expand to address the significant market demand for fiber broadband.
There are several recent examples of how we have a plan to enhance our capacity.
The acquisition that that's your cables brings us in house cable manufacturing alongside our termination program optimizing our time to market.
Kipling, our Mexican facility footprint and expanding capacity at our Minnesota facility.
Developing our supply chain partners, allowing us to add additional flexibility and to increase production as well and then virtual programming such as our cabling centers, which allows us to scale without adding overhead.
Furthermore, as I mentioned earlier, we will also look to expand not just capacity to support their growth in Finland and other European markets.
The a and Lee is there a plan to accelerate infrastructure investment.
This tenant reflects our commitment to continue investing in our organizational infrastructure.
The growing business and effectively manage our expanded capacity.
<unk>, adding personnel in sales product management, and engineering, who can navigate clearfield to achieve scalable growth. This may also include adding head count at our facilities in the U S, Mexico, and Finland to ensure we can maintain our product deliveries to customers.
The shortage of trained labor in the market continues to be a challenge for our industry look for announcements as we expand Clearfield College, adding virtual online instructor led as well as infield training programs.
Finally, the Pea and leaks gas for position innovation at the forefront of our value proposition.
Accelerating our customers' time to revenue by designing craft friendly products that require less skilled labor is the foundation of our value proposition.
We intend to achieve this tenant.
So I think innovation in our product designs and increasing the cadence of our product expansions with the goal of facilitating our customers' fiber broadband deployments.
A great example of an innovative new product is their fiber first pedestal, which we announced in August 2022.
If I had my first pet is still is the first of its kind in the industry built for the optimal deployment of fiber, particularly in rural markets.
That is still is deployable in any outdoor environment is cost effective and exceeds industry standards for strength reliability and environmental concerns.
We expect to launch more fiber connectivity and fiber management solutions that offer our customers faster more streamlined installations that are aligned with federal and state funding program requirements.
To summarize our fourth quarter and full year financial results demonstrate outstanding execution of our proven growth strategy.
Demand for fiber fed broadband remains very strong in.
In addition to our organic customer demand for high speed broadband operators will begin to see additional disbursement of federal funding to support the development of broadband infrastructure.
We continue to remain very optimistic about clear sales growth potential.
With our newly plan, we will leverage our deep expertise in community broadband.
You need to enhance our capacity and prioritize innovative product design to meet this robust customer demand and to capitalize on strong industry tailwind.
Our backlog currently stands at an unprecedented $165 million, including 4 million semester cables with roughly two thirds of that total scheduled for customer deployments in the next two quarters.
We anticipate revenues to follow your over your seasonal patterns, resulting in expected strong year over year growth in the first half of fiscal year 'twenty to 'twenty three.
We will continue to build capacity and expect to reduce the order backlog and as a result, the lead time associated with our product line.
While our pipeline and outlook remain strong there continues to be uncertainty regarding the availability of labor necessary for our customers to build their networks.
We expect will be most prevalent in the second half of fiscal year 'twenty two 'twenty three.
We are guiding to estimated revenues of $380 million to $393 million, representing 40% to 45% growth over fiscal year 2022.
So there still is a leader in community broadband fiber connectivity and we were built for this generational opportunity that lies ahead of us.
With that we're ready to open the call to your questions.
Okay.
Thank you well now begin taking questions from the company's publishing sell side analysts ask a question you May Press Star then one of your Touchtone phone.
Speakerphone, please pick up your handset before pressing the keys.
Your question. Please press Star then two.
We will pause momentarily to assemble the roster.
First question comes from Jason Smith.
Please go ahead Sir.
Hey, guys. Thanks for taking my questions and congrats on some really impressive results and a fantastic outlook.
Want to start Cherry, what's kind of your most recent comments there towards the end about some uncertainty in the second half of your fiscal year is this what your customers are already telling you were or are already seeing or at least a concern. It's more due to just the general macro uncertainty out there.
Yeah. This is more general macro environment and yet.
You know, there's a continuing com.
Commentary from everyone about how are we going to put this altogether, but not any specific individual organization.
Okay. That's helpful and then the migration of the Nestor products to Mexico, you mentioned early our calendar next calendar year when should we expect to see any potential gross margin benefit from some of these cost savings.
So probably 12 months yeah, it's a it's not a short term expectation there.
We will start manufacturing as I said in the first quarter, but that's predominantly to enhance capacity, we will not be reducing the amount of product that we're manufacturing in Finland, we're actually going to be increasing that and using the Mexican plant for augmentation at this point in time and then over the course of the next 12 months.
We'll be looking at you know when the crossover point comes where it's more effective than to be building more in Mexico.
Finland.
Oh, Okay got it and then just the last one for me and I'll jump back into queue. If I recall correctly in the past I think you mentioned you thought about 5% or so of your Avenue was there was a result of the government programs such as art offs. I mean, when you look into fiscal 'twenty three what do you think this percentage.
Potentially be.
You know I actually don't see twenty-three growing hugely.
Certainly the you know the oracles finds in the Arda funds are beginning to enter our world and ER and that will be in it and we'll see more of that in 'twenty, three but the big stuff the stuff associated with the infrastructure Act that Unfortunately is a long involved process the yeah.
Now in November the whole orientation around the infrastructure Act is that it's gonna be distributed through the state.
And distributed through the states based upon mapped unserved and underserved communities.
Those maps are being released now in November but released under their guidance that they will have six months by which to review and challenge them, meaning that we won't see distribution of funding probably until next summer, which means we probably won't see builds until late next year and then into 'twenty four.
So unfortunately I don't think infrastructure act is going to be a big part of the builds for next year, but I do believe that what we're seeing today interact organics investment private equity investment in municipal investments private public partnerships all of those are under.
Away and making very good progress.
Okay.
Great color. Thanks, a lot guys.
You're very welcome.
Thank you next question will be for a while ago, So Needham and company. Please go ahead.
Hey, good morning, good morning, good afternoon.
Congrats on a phenomenal quarter.
Within the community broadband segment there.
Would you are you still acquiring.
A number of new customers in that segment or is it more.
Same store sales is it more customers are spending more on their fiber builds.
Oh, it's both.
Yeah, we're definitely seeing our existing customer group starting to get into you know some of them are still struggling a little bit to get into the groove and to establish a cadence, but many are beginning to expand the number of.
Our solution that they're able to meet the door, if theyre able to penetrate them and then we're seeing a number of new companies. Both both new startups that are kind of new to our industry in general as well as new spaces that are new to declare yourself that have been in the market in the past, but are now using our products for the first time.
That's great color. Thanks.
Cable front really nice pick up this quarter there obviously.
Would you how would you characterize that.
Split between.
The drivers behind fiber to the home versus more of the.
Active cabinet DAA type deployments.
Right.
What the commuted the biggest portion of that is still tier two cable T v's going to fiber to the home and that is that the smaller regional cable providers, who are committed to fiber to the home, but theres a growing Ah Ah Ah Ah mom.
Our revenue coming from more of the larger cable operators are looking to reduce the size of their serving area, but you know by flavor penetrating their fiber deeper and actively using actively using are increasingly using our active cabinets.
Got it.
And then.
Maybe a question for Dan here on the on the gross margin compare can you help us understand on an organic basis, how that how clearfield organic compared sequentially there on a clear field margins.
Yeah, So clearfield organic would be just under.
Just under for the quarter just under 42%.
Okay.
You know maintained pretty good steady.
Yeah great.
That's awesome and as we think about next year.
Relative to.
The nice guys you laid out there you know how should we think about your opex plans and it sounds like you have some pretty aggressive hiring plans in different areas should we think about that.
You know the model remaining pretty consistent consistent with what you've communicated.
Communicated before in terms of your Opex.
Approaching 20%.
The 15% range sorry.
Right Yep.
That's absolutely right exactly where we're targeting.
Great.
That's it.
Alright, great.
Q.
Uh huh.
Thank you again, if you have a question. Please press Star then one.
Yeah.
Next question will be from Greg, mostly all Oh, what bar capital. Please go ahead.
Thank you for taking my question and congrats on a great quarter and a good.
Shown on your customer profile are you seeing any growing interest from larger carriers for your products and.
And part two of that question would be or any of your larger mainstream competitors starting to sniff around and smart to your market that you are dominating.
[laughter] right if you.
Yeah. If you look at some of the material that are I guess I'd call. Your attention to I think it's slide four nine I think it shows some of the increase in regard to our national carrier business and how it relates to our overall growth.
National you're a national carrier the Big Guy has increased 100% from 12 million to $25 million.
For you know for the period and represents about 6% of our business B M. I think what are the things that was crucial to our product line and our positioning in the marketplace is that while our while our initial solutions were used by small carriers. It was because that was our target at the time that we started that.
A company with a private clients are meant to scale to the largest of networks and are effectively used in many of them.
In regard to community broadband our larger competitors have always been part of the community.
<unk> band initiative. However, they were using products and continue to use products that are more designed for larger more density our cities and communities rather than for the diversity of networks and the.
A lack of density in more rural markets and so as a result, our products continue to have that competitive advantage.
Thank you for that color and just a quick.
Numbers question did you disclose what what are the dsos in the quarter the Delta sales outstanding.
We didn't disclose those will come out in our K, but they increase this year or I'm sorry. This this quarter here too around but I think it's around 50.
Great.
Yeah, you're welcome.
Okay.
Yeah.
Thank you a question will be from Tim Hello, Joe Oh, Northland Capital markets. Please go ahead.
Hey, congratulations as well on the great results and I'll follow up right there on the receivables front.
And just wanted to see to what extent.
The acquisition contributed to that increase and maybe ask a question about kind of overall shipment linearity throughout the quarter and then I have a couple of follow ups.
Yeah.
Yeah, Duster did not contribute that much to to the DSO, a little bit, but clearfield continues to do business with larger and larger customers and while they may be.
Under 10%, they maybe only slightly under 10% and some of those customers and the larger they are sometimes you have a little bit longer payment terms and that's pretty standard in the industry.
And then as far as shipping linearity, we were pretty consistent.
You just take the quarter you don't take out the 7 million nester take out the quarter I think we average about 29 is it.
And that's you know we were right within that range of.
29 to 30.
Each each.
Each month, each month of the quarter.
Great and kind of got to another question a mine there about customers, which has historically been pretty well distributed them for you guys was that.
Commentary for the quarter and I know, you're finishing up the year here I'm, assuming no 10% customers for the year, but I guess I'll ask the question or the quarter.
111 for the year one for the year.
Great.
Okay and moving.
Moving on to cable and it's a pretty.
Crescive kind of step function here really the last couple of quarters.
I Wonder if you can give us any color on kind of how you expect that to proceed going forward you've been moving up pretty significantly here.
Is this.
You know kind of a new run rate or do you expect that cable number to bounce around a little bit with them, giving them bigger operators, who are working with.
Hum.
Parts of that business are.
Our consistent on a on a month to month with a long term AR.
Schedule P is scheduled manufacturing program, yet and so that will be consistent and then on top of that the regional carriers tend to be more project based with a little more volatility in regard to their world.
And they'll and because they're regional and many are located in more northern climates and.
And with them, except the call that we've had now so early this quarter I think we'll see the rate of cable T. V go down just a little bit more consistent with our overall growth projections rather than the explosion that we've seen in the last six to nine months.
Right, that's very very helpful.
And I guess last question for me is sort of coming back on the competitive side.
Yeah, We I think we did see something out of Corning and Nokia are trying to target the rural broadband market with a.
Via distributor.
I imagine you've had a chance to just.
We don't see that and I'd be interested in if you have any more specific comments about.
Expectations for for increased competition from those larger guys as we go forward here. Thanks.
Well certainly the amount of.
Revenue that is coming to community broadband from they are infrastructure action is certainly one that is attractive to all of us and.
Our competitors across the board are looking at that and seeing how they can get a piece of the pie and a bigger piece of the pie than what they got over the course of the last calendar year.
And you know what all of our competitors are very formidable very sizable organization.
I think a clearfield continues to to have an advantage not only because of the product lines, which we promote.
Here and the time savings and labor savings that we promoted within field in the field report, but but what are the things that is really core to who we are is the fact that we built a national sales team for community broadband, which is very distributed across the country.
And it's very technical with a very hands on approach matched with a team of smart Guy is via its what we call them are smart guys that have their previous.
Employee that's why he's until our customers who become unemployed or many of our military personnel, who have deployed fiber in the harshest environments and I think that sales organization, which deals directly with our customer base.
On a technical perspective, it's one of our biggest competitive advantages we also.
To support our.
Our distributors as well and about 50% of our business does go through distribution based upon customers request for a financial or a fiduciary relationship, but being able to have that technical relationship in that training relationship on a direct basis, I think will be what strengthens our relationship or our revenue.
The opportunities over the long term.
But we certainly respect what our competitors are doing and expect that there's going to be a big enough market. There for all of us to get an increasing amount of revenue moving forward.
Great Thanks, and congratulations again.
Okay. Thank you.
Thank you and again if you have a question. Please press Star then one.
That's we have a follow up question from Michael Needleman <unk> Company. Please go ahead.
Oh, Thanks for the quick follow up.
That's about backlog and composition of backlog, you know I see that coming down as a percentage of total revenue as your.
Revenue Outgrows at does that mean your lead times are coming down and and what does that mean for your customers as your lead times come down does that give you more opportunity for share gain.
Yeah.
We are even though the backlog went up as a as a dollar value.
We're aggressively working to increase capacity and whether that is in Minnesota or whether that's in Mexico, whether that's in Finland.
Capacity increase is his core because we see this market just continuing to grow and grow for the next really five to 10 years and so.
And in fact, I will talk to people and say, we're done with it only by our ability.
To scale as fast as our quality system and for scale and that's that's the gating factor for our revenue and our quality systems have done a fabulous.
Job as we've hit to this point and so we're kind of kind of hit that a kind of a rhythm now and I think we're gonna see moving forward some normalization and so as a result that will mean that our backlogs will come down the dollar values and I come down.
As we increase that capacity eat into their backlog and reduce lead times and provide the opportunity for the organization for our customers to you know to dependent upon us more and more as they have in the past. So absolutely we think that will be a competitive advantage for us.
Dan and we'll work to be able to you know to not only have.
Limited lead times, but more or equally importantly is to be able to ship to our promise dates.
Because we need our service provider customers to be able to really maximize their labor teams and that ability to ship to a to the candidate is really core to the ongoing savings and I think our growth for ourselves.
Sure that's really great to hear and on the mix of backlog any any changes there or is it pretty is it pretty representative of the current mix of revenue in general or how would you characterize the mix in the backlog.
Yeah.
I mean, the backlog is a little more oriented towards the larger carriers right now.
And that where you do have we changed over the course of the last quarter.
90 days ago, 75% of our revenue was with shipping in the next six months now we're at about 65%, which means we've got more orders associated with those longer scheduled events and so it's a little bit of a skewed towards the larger carriers and cable T V.
And the national carrier community, but not so significant that it really kind.
Kinda wharf's the outlook.
Perfect Super Thanks for the help.
Thank you at this time. This concludes the company's question and answer session. Your question. That's all been taken you may contact Clearfield investor relation team at E. L. F D at Gateway IR Dot com.
I would like to turn the call back over those Meramec for closing remarks.
Thank you everyone.
I've had a wonderful day being able to speak with many of you over the course of the last week and also been able to speak with my employees about some exciting things that we're doing and being able to provide their bonus checks and I'm just trying to celebrate and you know that's one of the things that I would encourage you all to do list.
Great with their families service.
Sure. The gratitude you have of being a part of this wonderful broadband community and just a.
Time to share with your family So happy Thanksgiving I'm grateful for your support and careful and grateful for everything that our employees do for our customers.
Thank you for joining us today for Clearfield fiscal fourth quarter and for year of 2022 Conference call. You may now disconnect.