Clearfield, Inc.

Good day and welcome to Clearfield's fiscal fourth quarter and full year 2023 conference call. All participants will be in listen-only mode. A brief 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 now like to turn the conference over to Greg McNiff, Investor Relations for Clearfield. Please go ahead.

Thank you. Joining me on the call today are Sherry Baranek, Clearfield's President and CEO, Dan Herzog, Clearfield CFO, and Kevin Morgan, Clearfield CMO. As a reminder, the slides in this presentation are controlled by you, the listener. Please advance forward through the presentation as the speaker presents their remarks. 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 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 differ materially from those in the forward-looking statements contained in today's press release, earnings presentation, and on 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 a description of these risks. They are also summarized on Slide 2 of the earnings presentation. With that, I would like to turn the call over to Clearfield's President and CEO, Sherry Baranek. Sherry?

Good afternoon, everyone, and thank you for joining us today to discuss Clearfield's results for the fiscal fourth quarter and full year 2023. We also intend to provide an update on our business and current market trends. A new year is a time for reflection. And as I reflect on the last 12 months, the pendulum swings of our market has been extreme. As we started fiscal year 2023, demand in the industry seemed insatiable as service providers emerging from the pandemic focused on ensuring they had the materials necessary to deploy equipment as their labor constraints eased. Unfortunately, the reality of building a network is hard, and navigating the numerous obstacles coming out of the pandemic have been challenging for our customers and the industry. Yet the difficulty toward the end of this period has put the lens on what Clearfield does best. to reduce the cost of fiber deployment by making the process as efficient as possible. In addition to the need to reduce service provider inventory levels across the market, industry analysts are reporting that they expect the Torrid pace of deployment to slow down as some operators reduce their home's past goals and extend fiber expansion and overbuild into 2024. They cite many socioeconomic reasons for this reduction in pace, including managing their CapEx budgets and higher interest rates. Yet, and importantly, no one is forecasting a reduction in the end-user demand for high-speed broadband. Our fourth quarter of fiscal 2023 results reflect the current state of the industry and are consistent with the commentary that we have provided throughout the year. Total net sales for the fourth quarter were $49.7 million, which includes a $10.6 million contribution from method tables. Dan will discuss our financial results for the quarter and fiscal year in more detail shortly. But first, I want to provide an update on the disbursement of government funding programs, specifically the Broadband Equity Access and Deployment Program, known as BEAD. Currently, the states are working through the BEAD guidelines and drafting their proposals to the National Public Communications and Information Administration, the NTIA. We expect these proposals to be finalized by year end with service provider award announcements in the first part of next year. Based on these assumptions, we expect to see increased demand and to recognize initial revenue for BEAD-related programs sometime late in the second half of calendar 2024. However, until year 25, is the point in which we believe BEAD will make a meaningful contribution to our revenue. We expect BEAD to expand our total available market as fiber connections between homes will be longer in underserved and unserved grow environments than BEAD targets and which align with our community broadband markets. We believe these longer connections will equate to a higher cost per passing and per connected home, driving a larger revenue opportunity for clear sales over the long term. Based on this expected funding cycle, coupled with the ongoing inventory overhang impacting the industry, we expect the first half of fiscal 2024 to remain challenging. Additionally, the industry typically undergoes a slowdown in the winter months. For these reasons, we expect revenues to seasonally soften. Accordingly, we expect the next several quarters results and year-over-year comparisons to be significantly impacted by these dynamics. I now want to discuss our strategy for revenue growth when demand returns. First, while we continue to adjust to demand levels, we are committed to designing products to address our customers' most significant pain points and reduce the amount of skilled labor required to install our hardware. As a reminder, labor makes up approximately 70% of the total bill cost and is a gating factor in deployment. We recently announced two new products designed to reduce deployment time and lower the total cost of deployment. After achieving initial success of more than $1 million in revenue from a single regional service provider with our 10-inch pedestal, we recently announced its smaller variant, a 6-inch version of the Craftsmart Piper First pedestal. These pedestals provide a secure ground access point ideal for service providers looking to deploy into rural areas. Another new product, the FieldSmart FiberFlex 1700 active cabinet, which is an all-in-one design capable of integrating fiber, power, and active equipment, is also tailored to fit into any outdoor environment, and its smaller size is ideal for rural projects. Both the CraftSmart FiberFlex cabin show and the FieldSmart FiberFlex active cabinets are ideal for broadband service providers looking to deploy in rural areas as efficiently and economically as possible. Both the Fiber First pedestal and the FiberFlex active cabinet are generating revenue today and reflect another step toward our goal of providing our customers with end-to-end solutions. We are working to ensure these and all other social product offerings will be BAPA compliant by the end of calendar year 2024. For some additional insight in what we are seeing in the market and a significant long-term opportunity, I would like to welcome our Chief Marketing Officer, Kevin Morgan, to the call. Kevin?