Clearfield, Inc.

Good afternoon. Welcome to Clearfield's Fiscal Fourth Quarter and Full Year 2020 Earnings Conference Call. This is your conference operator. Joining us for today's presentation are the company's President and CEO, Sherry Baranek, 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 webcasted 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 the course of 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 reports, and in this conference call. 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 provides descriptions of those risks. As a reminder, the slides in this presentation are not controlled by the speaker, but rather 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 CEO, Sherry Berman. Please proceed.

Good afternoon, and thank you everyone for joining us today. I hope you are all continuing to stay safe and healthy. It's a pleasure to speak with you this afternoon to share Clearfield's results for the fiscal fourth quarter and full year 2020. The fourth quarter of fiscal 2020 capped off a record year for Clearfield. From a top line standpoint, this fourth quarter marked the highest quarterly revenue level in our company's history, bringing our total revenue for the fiscal year 2020 to a record $93.1 million. An integral part of our success, has been our employees' unwavering commitment to providing best-in-class products and customer support, and none of this could have been accomplished without their dedication to our mission. Looking more specifically at our fourth quarter for fiscal 2020 results, the $27.3 million in revenue we reported was up 14% year-over-year. This robust growth was driven by solid contributions from our MSO and community broadband markets, which were up 51% and 25% year over year respectfully. The record top line performance in fiscal year 20, Q4, also helped to drive solid growth profit, which totaled $10.8 million. As a percentage of revenue, the 41.2% margin marked the second highest gross profit margin we've achieved as a company in more than two years, just behind the 41.5% we reported last quarter. From a profitability standpoint, we generated $3 million in net income. We ended the year with a robust order backlog, totaling a record $10.7 million, up 153% year over year, providing clear visibility into growth in the new fiscal year. I'm also encouraged to report that we continue to look at industry best lead times for our standard products as well. Our solid performance in the fourth quarter drove several additional and noteworthy record results for the year. In addition to the 93.1 million we generated in revenue, we produced record gross profit of 37.9 million, which totaled 40.7% of total revenue. We also realized strong bottom line results, generating $7.3 million in net income, or 53 cents per diluted share. The market for Clearfield products was exceptionally strong in the second half of the year, and that strength is carried into our new fiscal year. Along that line, I'd like to spend a moment reviewing some of our recent operational updates and progress in our core end markets. Then our CFO, Dan Herzog, will walk you through our financial performance in more detail. Let's look at our market segments by revenue, starting first with our core community broadband market. In the fourth quarter, we generated revenue of $18.5 million, which was up 25% from the same period last year. For the full fiscal year ended September 30, 2020, Community broadband market revenue totaled $59 million, which was up 10% from the comparable period last year. Our MSO business comprised 13% of our total revenue in fiscal Q4. From a growth standpoint, we built on the momentum we established over the last several quarters, realizing a 51% year-over-year increase in revenue to $3.6 million in Q4 and a 48% year-over-year increase to $12.4 million for the fiscal 2020. Revenue in our national carrier market was up 18% year-over-year to $14.1 million for the full fiscal year. As I've talked about on past field reports, the growth we're seeing in the national carrier market is related to the continued demand for fiber-to-the-home and fiber-to-the-business applications. Due to ordering cycles, revenue for the fourth quarter was down 19% year-over-year to $3.2 million. Revenue in our international market was down 16% year-over-year in the fourth quarter and down 37% year-over-year for the full fiscal year. Revenue in our legacy build-to-print business was down 41% year-over-year in Q4 and down 24% year-over-year for the full fiscal year 2020. revenue remains near the $4 million level, which is consistent with our expectations for the year. With that, I'll now turn the presentation over to Dan, who will walk us through our financial performance for the fourth quarter and full fiscal year of 2020.

Thank you, Sherry, and good afternoon, everyone. Now looking at our fourth quarter financial results in more detail. Our revenue in the fourth quarter of fiscal 2020 increased 14%, $27.3 million from $24 million in the same year-ago period. The increase in revenue was primarily due to higher sales in our community broadband and MSO markets, partially offset by lower national carrier and international sales, as Sherry just mentioned. Gross profit for the fourth quarter of fiscal 2020 totaled $11.2 million, or 41.2% of total revenue. This was an improvement from $9.3 million, or 38.8% of total revenue, in the fourth quarter last year. The increase in gross profit dollars was due to increased sales volume. The increase in gross margin was due to more favorable product mix and cost reduction efforts across our product lines, as well as expanded use of our Mexico manufacturing plants, which included adding a second facility in the second quarter of fiscal 2020. Also, efficiencies realized from our supply chain programs and lower tariff costs. Our operating expenses for the fourth quarter of fiscal 2020 were $7.6 million, which were up from $7.1 million in the same year-ago quarter. As a percentage of total revenue, operating expenses in fiscal year 20 Q4 were 27.7% compared to 29.7% in the same year-ago period. The increase in operating expense dollars was primarily due to higher costs related to performance compensation accruals. In terms of our profitability measures, income from operations was $3.7 million in the fourth quarter of fiscal 2020, which compares to $2.2 million in the same year ago quarter. Income tax expense increased to $786,000 in the fourth quarter of fiscal 2020, up from $511,000 in the fourth quarter of 2019. Net income totaled $3 million, or 22 cents per diluted share, an improvement from $1.9 million, or 14 cents per diluted share, in the same year-ago quarter.