Clearfield, Inc.

Thank you for standing by. With that, I will turn the call over to Clearfield CEO Sherry Beranek. Please proceed.

Good afternoon and thank you everyone for joining us today. As you can see, some of the things we just take for granted in earlier times when we're in a situation like this, we do our best that we can. Thank you for sticking with us. Dan and I are both at our own prospective homes and doing the normal routine that most people are doing today, which is social distancing, work from home, and the remote life that is now becoming our new normal. We were pleased that due to the critical role Clearfield Solutions play in supporting the communications infrastructure, Clearfield operations have been classified as critical sector work. We have continued to be fully operational since the beginning of 2020, despite the unprecedented global business closures and slowdown caused by COVID-19. We continue with production operations in both the US and Mexican manufacturing facilities and have established multiple contingency plans in the event our ability to operate would be diminished or is eliminated at either location. As of today, our employees are healthy and we have no reported COVID-19 cases. However, this of course can change at any time. The second quarter was a strong period for Clearfield as we achieved the highest level of revenue for any fiscal Q2 in our company's history at 20.4 million, which was up 5% sequentially and 7% year over year. This trajectory is consistent with our expectations and was driven by strong contributions from our national carrier and MSO markets, which were up 66% and 75% year over year respectfully. In terms of efficiency, we realized another quarter of solid gross profit margin at nearly 40%, which is the highest level in eight quarters. This achievement reflects the success of the operational efficiency initiatives that we've implemented across the organization over the last six months. particularly the cost reduction efforts across our product lines and the expanded use of our Mexico manufacturing plant. From a production standpoint, we too saw a healthy increase in our order backlog in the second quarter which increased 61% sequentially and 62% from the same year-ago period to $9.3 million. For the most part, we continue to book at industry-leading lead times for standard products. Now before I turn the call over to our CFO, Dan Herzog, to discuss our financial performance in more detail, I'd like to spend a moment reviewing some of our recent operational updates and market progress. Although COVID-19's impact began to deepen in March 2020 here in the United States, we did not experience any particular customer ordering delays or changes in ordering patterns. Looking at our market segments by revenue more closely, starting with our core community broadband market. In the second quarter, we generated revenue of $12.2 million, which was consistent with the same period last year. On a trailing 12-month basis ended March 31, 2020, community broadband market revenue totaled $52.2 million, which was down 3% from the comparable period last year. Our national carrier business was our second largest market, comprising 19% of total revenue in Q2 and 17% of our total revenue for the trailing 12-month period. From a growth standpoint, we built on the momentum we established over the last several quarters, realizing a 66% year-over-year increase in revenue to $3.9 million in the second quarter and a 46% year-over-year increase to $14.3 million for the trailing 12-month period. As I spoke to you on the Q1 field report, the primary factor driving this growth is the continued demand from fiber to the home and fiber to the business application. We believe the momentum in our national carrier market to date validates the strategic investments we've made to capitalize on the Tier 1 market, including the 5G opportunity. In addition to the positive results we experienced in our national carrier market, We realized another quarter of double-digit growth in our MSO or cable TV market. In fiscal Q2, we generated $2.6 million in revenue, which was up 75% year over year and generated $9.9 million for the trailing 12-month period, which was up 23% year over year. Revenue in our international market was down 51% year over year and down 25% on a trailing 12-month basis. The decline was primarily due to delayed orders that we expect to recognize later in the fiscal year. Revenue in our legacy bill to print business was down 39% in the second quarter and down 8% over the trailing 12-month period. On a trailing 12-month basis, total revenue was $4.2 million, which is consistent with our expectations for this business, to operate at approximately $4 million in annual run rate for the foreseeable future. With that, I'll now turn the presentation over to Dan, who will walk us through our financial performance for the second quarter of fiscal 2020.

Thank you, Sherry, and good afternoon, everyone. Now, looking at our second quarter financial results in more detail. Our revenue in the second quarter of fiscal 2020 increased 7% to $20.4 million from $19.1 million in the same year ago period. The increase in revenue was primarily due to higher sales in our Tier 1 and MSO markets, offset by lower international sales, as Sherry mentioned. Gross profit for the second quarter of fiscal 2020 totaled $8.2 million, or 39.9% of total revenue. This was an improvement from $7 million, or 36.8% of total revenue in the second quarter of fiscal 2019. The increase in gross profit dollars was due to increased sales volume while the increase in gross profit percent was due to cost reduction efforts across our product lines, including expanded use of our Mexico manufacturing plant and efficiencies realized from our supply chain programs. Our operating expenses for the second quarter of fiscal 2020 were $7.4 million which were up from $6.7 million in the same year-ago quarter. As a percentage of total revenue, operating expenses in Q2 were 36.4% compared to 35.3% in the same year-ago period. The increase in operating expenses was primarily due to increased compensation costs and the costs associated with product testing required for Tier 1 certifications. Income from operations was $720,000 in the second quarter of fiscal 2020 in comparison to $297,000 in the same year go quarter. Income tax expense increased from $99,000 in the second quarter of 2019 to $190,000 in the second quarter of fiscal 2020. In the second quarter of fiscal 2020, net income totaled $748,000 or 5 cents per diluted share which is an improvement from $368,000 or 2 cents per diluted share in the same year-ago quarter. During the second quarter, our cash, cash equivalents and investments increased $1.6 million to $48.4 million from $46.8 million in the prior quarter ended December 31, 2019. Thank you for joining us. During the quarter, we repurchased 41,796 shares of our common stock for an aggregate value of approximately $429,000. Our board and management team will continue to evaluate how we deploy our capital to generate the highest returns for our shareholders. To further ensure our financial stability during these uncertain times, we have suspended our share repurchase plan. That concludes my prepared remarks. I will now turn the call back over to Sherry. Sherry?