Clearfield, Inc.

Good afternoon. Welcome to Clearfield's fiscal third quarter 2022 earnings conference call. My name is Bikram, and I will be your operator this afternoon. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would like to turn the conference over to your host, Sophie Pearson from Gateway Group. Please go ahead.

Thank you. Joining us for today's earnings presentation are Clearfield's President and CEO, Sherry Baranek, and CSO, 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 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'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 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's President and CEO, Sherry Baranek. Sherry?

Thanks, Sophie. Good afternoon, and thank you, everyone, for joining us today. It is such a pleasure to speak with you this afternoon to share Clearfield's results for the fiscal third quarter of 2022, and 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, the demand for high-speed broadband remains robust and continues to accelerate. Not only does our demand for broadband continue to be exceptionally strong, but we continue to execute on our now-of-age strategic plan to expand capacity and to rapidly scale our business to meet the burgeoning market demand. In May 2022, we announced an agreement for the strategic acquisition of Finnish fiber optic cable manufacturer Nestor Cables, a strategic supplier of our FieldShield product line. Our synergistic relationship with Nestor spans over a decade, The acquisition, which closed on July 26, enables us to vertically integrate the design and supply of FieldShield cable to meet future customer demand. In a few minutes, I will go into greater detail on Nestor's business and what this acquisition means for the future of Clearfield. But first, I would like to welcome the Nestor team to Clearfield. We are so thrilled to have you working alongside us. 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. As I have 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 22 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. To 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 fiber delivery solutions that enable the 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 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 thoughtfully developed product portfolio focuses on scalable modular deployments, enabling Clearfield customers to complete their deployments faster and more efficiently. The image on the right of slide four is the patented Clearview cassette, the foundation of our scalable and modular fiber management platform. Our entire product line, including the Clearview 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 today's market, these qualities are particularly advantageous. Our mission at Clearfield is to enable the lifestyle better broadband provides. People need access to high-speed broadband to be able to fully participate in modern society. Broadband is changing the way we communicate with each other, and fiber is the means to enable and future-proof that change. Our company's founding mission was to deliver the products that build a better broadband network for all communities. This vision is fundamental to who we are as an organization. We have developed a product portfolio, sales organization, and operational infrastructure to service the growth in fiber deployment for every community. I would now like to take a few minutes to discuss our recently completed acquisition of Nestor Cables, and why we are so excited about the business and the opportunities for Clearfield. Nestor was founded in 2007 in Finland by cable technology professionals with decades of experience in fiber optical development and manufacturing. Our relationship with Nestor spans over a decade as a developer and component supplier for our FieldShield product line. Clearfield owns the patents and IP associated with FieldShield while it has been co-developed and manufactured for us by Nestor. Vertically integrating the design and supply of FieldShield cable provides Clearfield with the opportunity to expand the manufacturing and supply of this product closer to the North American market. In fiscal 2021, Nestor generated €31.7 million in revenue and was profitable under Finnish 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 clarify future net income projections, but we expect it to be accretive to our business in fiscal year 2023. 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's company culture and values. The total transaction value, including fees, was approximately $23 million and was funded primarily through our credit facility. Nestor 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, the Nestor team has deep technical expertise that we intend to leverage at our Mexico facility in order to extend the available supply of field-shield fiber in the North American market. Not only will this increase the total supply of field-shield fiber in North America, it also allows us to reduce the cost and complexity of transportation. We expect to commence the production of fiber optic cable at our Mexican facility in early calendar year 2023. Another potential benefit of the acquisition is the possibility of introducing our 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 toward its mission, which is to enable the lifestyle that our broadband provides. Nestor will extend our market leadership and will strengthen our position to service the growth and fiber deployment for every community. For additional details, you may refer to the Nester Acquisition Conference Call webcast and the accompanying presentation from May 17, 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 of the third quarter of 2022.