Clearfield, Inc.

Good afternoon. Welcome to Clearfield's fiscal first quarter 2023 earnings conference call. My name is Paul, and I will be your operator this afternoon. I'll now pass the call over to Jackie Kessner from Gateway Group.

Thank you. 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 provide 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 Biernack. Sherry?

Good afternoon, everyone, and thank you for joining us today. It is a pleasure to speak with our new and returning investors and analysts this afternoon. to share Clearfield's results for the first quarter of fiscal 2023, as well as provide an update on our business and current market trends. Our strong financial performance in the first quarter of fiscal 2023 reflects our ongoing execution on our strategic growth plan, as well as the robust and sustained demand for high-speed broadband. Total net sales for the first quarter were $86 million, which includes an $8 million contribution from Nestor Cables. Our organic net sales growth continues to be driven by our leadership and community broadband and expansion across each of our core end markets. As we continue to execute on our LEAP strategic plan, we aim to strengthen our existing competitive advantages as we build the scale necessary to serve the long-term demand runway for high-speed broadband in unserved and underserved communities nationwide. Based upon consideration of the expected investments and impact of our progress on our lead strategic plan, as well as our ability to manage countervailing headwinds that could develop in customer ordering patterns and component sourcing, we are reiterating our previously stated revenue guidance for fiscal year 2023. In addition, we are introducing 2023 net income guidance of $4.30 to $4.50 a share. Before I review our performance and current market dynamics in greater detail, I'd like to briefly introduce you to who we are and what we do for those of you who may be new to Clearfield and our industry. Clearfield is a leader in the expanding fiber broadband industry. Our goal and underlying value proposition is to enable the lifestyle as better broadband provides. We provide craft-friendly fiber protection, fiber management, and fiber delivery solutions that enable rapid, cost-effective, fiber-fed deployments throughout the broadband service provider space. Our primary end market is community broadband, which is predominantly comprised of Tier 2 and Tier 3 incumbent local exchange carriers and an increasing number of municipalities, utilities, co-ops, and wireless carriers. We also serve service providers in the Tier 1 national carrier market, and multiple system cable TV operators, or MSOs, as well as some international service providers. Pictured on slide four is the Clearview cassette, which has changed the rules of fiber management. This integrated fiber management system is based on multiples of 12 fibers and can be utilized whenever and wherever it is required in the network. Our FieldShield platform offers protected pathways and fiber options that suits the needs of any network deployment. Our entire product line was thoughtfully designed to be craft-friendly in the field, reducing both the amount of necessary skilled labor needed for installation and the level of skills required to install. This enables our customers to complete their deployments faster and more efficiently, accelerating their time to revenue. With these capabilities and the competitive advantages we summarized on slide five, we've expanded our market leadership and underserved rural broadband. To further enhance our positioning, we have worked to improve our product delivery lead times, which represented another key area of industry leadership before the COVID-19 pandemic. Across our industry, pandemic-fueled supply constraints held fiber lead times to a range of 10 to 12 months. By contrast, Clearfield is now targeting lead times within the range of 8 to 10 weeks. I am proud to say that we have already achieved these lead times within the range for all product lines, with the exception of active cabinets, which have been negatively impacted by the longer lead times associated with power conditioning subcomponents used in their manufacturing process. This work to improve our lead times comes as our customer ordering cycles return to pre-COVID patterns, but at post-COVID values. Over the past three years, our customers ordered products early in their deployment schedules to stay ahead of any supply chain challenges as they plan their fiber bills. These advanced orders led to growth in our backlog, which reached record levels by the end of fiscal year 2022. Our customers have moved to staging less equipment in their yards and have now began ordering according to more normalized, seasonally-driven deployment schedules. We believe this trend will continue in 2023 as customers readjust their ordering planning to our improved product lead times and try to match their order timing to their deployment schedules. Consistent with the return of this traditional ordering and delivery patterns, We anticipate approximately 40% of our expected revenue in the first six months of our fiscal year and 60% in the second half. We believe long-term demand remains exceptionally strong. Nearly all of our customers are indicating an increase in the number of homes they are passing and connecting in comparison to the previous year. In addition, the increase in the number of service providers we serve is exciting. For some additional insights on what we're seeing in the market and the significant long-term growth runway for fiber deployments, I'd like to welcome our Chief Marketing Officer, Kevin Morgan, to the call. Kevin?