Q4 2024 Clearfield Inc Earnings Call

Operator: Good afternoon, and welcome to the Clearfield Fiscal Fourth Quarter and Full Year 2024 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Good afternoon, and welcome to the clear field fiscal fourth quarter and full year 2024 conference call.

All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then 1. Please note that this event is being recorded.

After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone to withdraw your question. Please press Star then two.

Please note that this event is being recorded.

Greg McNiff: I would now like to turn the conference over to Greg McNiff, Investor Relations for Clearfield.

Speaker Change: I would now like to turn the conference over to Greg Mcniff Investor Relations for Clearfield. Please go ahead.

Operator: Please go ahead. Thank you.

Yeah.

Speaker Change: Thank you joining me on today's call are Sherry Baronet, Clearfield, President and CEO and Dan Herzog Clearfield CFO, starting this quarter Clearfield will be publishing our quarterly shareholder letter, which provides an overview of the company's financial results operational highlights and future outlook you can find both the shareholder letter and the Earth.

Greg McNiff: Joining me on today's call are Sherry Beranek, Clearfield's President and CEO, and Dan Herzog, Clearfield's CFO.

Sherry Beranek: Starting this quarter, Clearfield will be publishing a quarterly shareholder letter, which provides an overview of the company's financial results, operational highlights, and future outlook. You can find both the shareholder letter and the earnings release on Clearfield's investor relations website.

Speaker Change: <unk> release unclear builds investor Relations website.

Sherry Beranek: After brief prepared remarks, we will open the floor for a question and answer session. Please note that during this call, management will be making remarks regarding future events and the future financial performance of the company. These remarks constitute forward-looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statement.

Speaker Change: After brief prepared remarks, we will open the floor for a question and answer session. Please note that during this call management will be making remarks regarding future events and the future financial performance of the company. These remarks constitute forward looking statements for purposes of the Safe Harbor provisions of the private Securities Litigation Reform Act.

Speaker Change: These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward looking statements. It is important to also note 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.

Sherry Beranek: It is important to also note 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, shareholder letter, and on this conference call.

Speaker Change: Differ materially from those in the forward looking statements contained in today's press release shareholder letter and on this conference call. The risk factors section in <unk>. Most recent Form 10-K filing with the Securities and Exchange Commission and in subsequent filings on Form 10-Q provide a description of these risks with that I would like to turn the call.

Sherry Beranek: The risk factors section in Clearfield's most recent Form 10-K filing with the Securities and Exchange Commission and its subsequent filings on Form 10-Q provide a description of these risks.

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

Speaker Change: Over to Clearfield, President and CEO Cheri Beranek Sherri.

Sherry Beranek: Sherry? Good afternoon, everyone, and thank you for joining us today to discuss Clearfield's results for the fiscal fourth quarter and full year 2024. We'll provide a brief update on our business performance and current market trends.

Speaker Change: Good afternoon, everyone and thank you for joining us today to discuss results for the fiscal fourth quarter and full year 'twenty 'twenty four will provide a brief update on our business performance and current market trends for more detailed information. Please refer to our shareholder letter posted on the IR section of our website.

Sherry Beranek: For more detailed information, please refer to our shareholder letter posted on the IR section of our website. We have chosen to present our financial and operational performance in this new format as we believe it offers a more comprehensive picture of our business and allows for more thoughtful Q&A. I will start by highlighting some key themes and then turn it over to Dan for a summary of our performance and outcome. First, looking back at Fiscal 2024 and its challenging industry dynamics, we are proud of our steady focus on investing in the business and positioning Clearfield to capitalize on the significant opportunities ahead.

Speaker Change: We have chosen to present, our financial and operational performance in this new format. As we believe it offers a more comprehensive picture of our business and allows for more thoughtful Q&A.

Speaker Change: I will start by highlighting some key themes and then turn it over to Dan for a summary of our performance and outlook.

Speaker Change: First looking back at fiscal 'twenty, 'twenty, four and it's challenging industry dynamics, we are proud of our steady focus on investing in the business and positioning clearfield to capitalize on the significant opportunities to add to.

Sherry Beranek: To that end, we exited Fiscal 2024 with stronger customer relationships, launched several new products that reduced deployment time, and optimized our cost and operating structure. Our revenue from Homes Connected continues to grow, and we are encouraged by the positive customer response to our active cabinet solution. Looking forward, we are excited about the opportunities for both public and private funding for our rural broadband expansion. As many of you know, a core aspect of the value Clearfield brings to the market is our decades-long commitment to supporting the homes and businesses in rural and small-town communities. We focus on providing solutions which are scalable and reduce the cost of deployment by lowering the level of skilled labor required.

Speaker Change: To that end, we exited fiscal 'twenty 'twenty four with stronger customer relationships launched several new products that reduce deployment times and optimized our cost and operating structure.

Speaker Change: Our revenue from homes connected continues to grow and we are encouraged by the positive customer response to our active cabinet solutions.

Speaker Change: Looking forward, we are excited about the opportunities from both public and private funding for our rural broadband expansion.

Speaker Change: As many of you know a core aspect of the value clear Philip brings to the market is there a decades long commitment to supporting our homes and businesses in rural and small town communities, we focus on providing solutions, which are scalable and reduce the cost of deployment by lowering the level of skilled labor required.

Sherry Beranek: To that end, in the past year, we introduced several new products aimed at reducing the cost and time of connecting homes, including C-Change, the CraftSmart Fiber First Pedestal, the CraftSmart Deploy Rail Tap Box, and the FiberFlex series of active cabinets. We also introduced a 3D interactive fiber installation tool delivered via the built mobile app, which simplifies the deployment process. We will continue to support the rural broadband segment into 2025 and beyond through additional product releases and investments. We are finalizing the design of a new distributed TAP portfolio that we intend to introduce in the coming months.

Speaker Change: To that end in the past year, we introduced several new products aimed at reducing the cost and time that connecting homes, including sea change the craft smart fiber first pedestal the craft smart acquire real top box and the five reflects theories of active cabinets.

Speaker Change: We also introduced a three D interactive fiber installation tool delivered via the build mobile app, which simplifies the deployment process.

Speaker Change: We will continue to support the rural broadband segment ended 2025 and beyond two additional product releases and investments.

Speaker Change: We're finalizing the design of a new distributor tap portfolio that we intend to introduce in the coming months.

Sherry Beranek: We are thrilled that Anise Kacaman has joined the company and was recently promoted to Chief Marketing Officer. Anise brings over 25 years of industry experience with a diverse set of leadership skills. We'd also like to thank Kevin Morgan for all of his tireless effort in promoting the Clearfield message. We are pleased that Kevin will continue to work with us in an advisory capacity and will represent Clearfield on the Fiber Broadband Association and at other industry events. While we continue to expect ordering patterns to be impacted by the inventory overhang, we believe that this excess is primarily located at the MSO accounts while the community broadband segment and large regional providers have mostly recovered and returned to a normal ordering pattern.

Speaker Change: We are thrilled that a nice kick common has joined the company and was recently promoted to Chief marketing Officer.

Speaker Change: He brings over 25 years of industry experience with a diverse set of leadership skills. We'd also like to thank Kevin Morgan for all of his tireless soccer and promoting a clearfield message. We are pleased that Kathleen will continue to work with us in an advisory capacity and will represent clear filter in the fiber broadband.

Speaker Change: The Asian and other industry events.

Speaker Change: Well, we continue to expect ordering pattern to be impacted by the inventory overhang.

Speaker Change: I believe that this excess is primarily located at the MSL accounts, while the community broadband segment and large regional providers have mostly recovered and returned to a normal ordering cadence. We believe that this improved outlook coupled with the shift to the second phase of the a Cam program, which focuses on.

Sherry Beranek: We believe that this improved outlook, coupled with the shift to the second phase of the EA-CAM program, which focuses on deployment, will serve as the growth catalyst for the later part of 2025, while we anticipate significant bead-driven demand in 2026.

Speaker Change: Unemployment will serve as the growth catalysts for the later part of 2025, while we anticipate seeing significant be driven demand in 2026.

Dan Herzog: I'd now like to pass the call over to our CFO, Dan Herzog, who will provide an overview of our financial results for the fiscal quarter and full year 2020-2024, as well as share our outlook.

Speaker Change: I'd now like to pass the call over to our CFO, Dan Herzog, who will provide an overview of our financial results for the fiscal quarter and full year 'twenty 'twenty 'twenty four as we as well as to our outlook.

Dan Herzog: Thank you, Sherry, and good afternoon, everyone. Consolidated net sales in the 4th quarter of fiscal 2024 were $46.8 million, a 6% decrease from $49.7 million in the same year-ago period, but above our guidance range of $40 million to $43 million. This figure includes $35.7 million of North American net sales and $11.1 million of international net sales. The stronger than expected results were driven by higher sales in both the MSO and large regional service provider markets, as we've seen inventory levels decrease in certain product categories. Additionally, the company generated positive cash flow from operations of approximately $12.9 million in the fourth quarter, mainly due to reduction in net inventory of approximately $8.1 million in the quarter.

Dan Herzog: Thank you Sherry and good afternoon, everyone.

Dan Herzog: Consolidated net sales in the fourth quarter of fiscal 2024 were $46 $8 million, a 6% decrease from $49 $7 million in the same year ago period, but above our guidance range of 40 million to $43 million.

Dan Herzog: This figure includes $35.7 million of North American net sales and $11 $1 million of international net sales.

Dan Herzog: The stronger than expected results were driven by higher sales in both the Msos and large regional service provider markets as we've seen inventory levels decrease in certain product categories.

Additionally, the company generated positive cash flow from operations of approximately $12 $9 million in the fourth quarter, mainly due to a reduction in net inventory of approximately $8 $1 million in the quarter.

Dan Herzog: For the full fiscal year, consolidated net sales were $166.7 million, a 38% decrease from $268.7 million in fiscal 2023. Clearfield generated positive cash flow from operations of approximately $22.2 million for the full year. For both the quarter and the year, we saw revenue from homes connected continue to represent a larger portion of overall revenue relative to comparable year-ago period. We expect this trend to continue into fiscal 2025 as operators focus on cash flow generation over deployments while awaiting BEAD program funding.

Dan Herzog: For the full fiscal year consolidated net sales were $166 $7 million or 38% decrease from $268 $7 million in fiscal 2023.

Speaker Change: Clearfield generated positive cash flow from operations of approximately $22 $2 million for the full year.

Speaker Change: For both the quarter and the year, we saw revenue from homes connected continue to represent a larger portion of overall revenue relative to comparable year ago periods.

Speaker Change: We expect this trend to continue into fiscal 'twenty 'twenty five as operators focus on cash flow generation over deployments, while awaiting bead program funding.

Dan Herzog: Over the past year, Clearfield has successfully transitioned into an end-to-end portfolio supplier of products for both passing and connecting homes, which has positioned the company for growth consistent with the general industry outlook. As a result, we are guiding to revenues of $170 million to $185 million for fiscal year 2025. We anticipate U.S. revenue growth to be in-line or above industry-focused forecasts with minimal revenue growth from our international market as we focus on gross profit improvements for that segment. We anticipate this growth to accelerate with the positive impact of BEED funding in 2026 and beyond, as it is focused on the rural markets where Clearfield is strongest.

Speaker Change: Over the past year Clearfield has successfully transitioned into an end to end portfolio supplier products for both passing and connecting homes, which has positioned the company for growth consistent with the general industry outlook.

Speaker Change: As a result, we are guiding to revenues of 170 million to $185 million for fiscal year 2025.

Speaker Change: We anticipate U S revenue growth to be inline or above industry focused forecast with minimal revenue growth from our international market as we focus on gross profit improvements for that segment.

Speaker Change: We anticipate this growth to accelerate with the positive impact of beat funding in 2026 and beyond.

Speaker Change: As it is focused on the rural markets, where clearfield is strongest.

Dan Herzog: Although service providers remain bullish on the utilization of fiber in their build plans, we are currently seeing some level of conservatism on capital spending. As a result, we anticipate a somewhat slow start to the year with our first quarter fiscal 2025 net sales in the range of $33 million to $38 million.

Speaker Change: Although service providers remain bullish on the utilization of fiber in their build plans. We are currently seeing some level of conservatism on capital spending.

Speaker Change: As a result, we anticipate a somewhat slow start to the year with our first quarter fiscal 2025 net sales in the range of 33 million to $38 million.

Dan Herzog: We expect to generate a net loss per share in the range of $0.28 to $0.35 in the first quarter of fiscal 2025.

Speaker Change: We expect to generate a net loss per share in the range of 28 to 35 cents in the first quarter of fiscal 2025.

Operator: And with that, we will open the call to your questions. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press star then.

Speaker Change: And with that we will open the call to your questions.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

Speaker Change: If you were using a speakerphone please pick up your handset before pressing the keys.

If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

Operator: At this time, we will pause for just a moment to assemble our roster. Again, if you have a question, please press star and then 1.

Speaker Change: At this time, we will pause for just a moment to assemble our roster.

Speaker Change: Again, if you have a question. Please press star and then one.

Operator: Seeing no further questions, this will conclude our question and answer session.

Speaker Change: Seeing no further questions. This will conclude our question and answer session I would like to turn the conference back over to Sherri Baron.

Sherry Beranek: I would like to turn the conference back over to Sherry Beranek for any closing remarks. Yeah, I want to thank everyone who has joined us today. It has been a challenging year, it's a level of dynamics that continues to change on a monthly and quarterly basis. But our focus and commitment to this environment and being able to enable the lifestyle that Better Broadband provides to our customer base is absolutely consistent.

Sherri Baron: For any closing remarks.

Sherri Baron: Yeah, I want to thank everyone, who has joined us today.

Sherri Baron: It has been a challenging here.

Sherri Baron: It's a level of dynamics that continues to change on a monthly and quarterly basis, and our focus and commitment to this environment and being able to enable the lifestyle that better broadband providers to our customer base is absolutely consistent.

Sherry Beranek: So we look forward to speaking with you again and to serving our community over the course of fiscal year 2020.

Sherri Baron: We look forward to speaking with you again and to serving our community over the course of fiscal year 2025.

Operator: The conference has now concluded. Thank you for attending today's presentation.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines and have a pleasant day.

Operator: You may now disconnect your lines and have a pleasant day.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].