Clearfield, Inc.

Greetings and welcome to the Clearfield Fiscal Second Quarter 2024 Mornings Conference Call. At this time, all participants are in a 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 and zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Greg Meknes, Investor Relations for Clearfield. Please go ahead, sir.

Thank you. Joining me on the call today are Sherry Baronet, Clearfield's President and CEO, and Dan Herzog, Clearfield's CFO. 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 Security 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'd like to turn the call over to Clearfield's President and CEO, Sherry Baranek. Sherry?

Good afternoon, everyone. Thank you for joining us today to discuss Clearfield's results for the fiscal second quarter 2024. We also intend to provide an update on our business and current market trends. Please turn to slide four. While we view 2024 as a transition year, we believe that the quarter ending in March represents the beginning of a gradual recovery as broadband service providers continue to deploy equipment and long-term demand remains robust. In the following slides, I will discuss the latest market data which supports this view. Total net sales for the second quarter of fiscal 2024 were $36.9 million, above the high end of our guidance range, driven by higher-than-expected sales from our community broadband customers, as this customer segment was the least impacted by the inventory overhang. Dan will discuss our financial results for the quarter in more detail shortly. I would note that while we continue to expect ordering patterns for the remainder of the year to be impacted by the inventory overhang, predominantly in our large regional and MSO accounts, we have seen a pickup and quoting activity in our second quarter across all markets that is more consistent with the traditional build season. While we believe the recovery will be a gradual process, We remain focused on positioning ClearFill to take share when ordering patterns return to a more normalized cadence. We also continue to expand and enhance our product portfolio. As we announced in February, our newest active cabinet delivers a right-sized small footprint option for role expansion. The small form factor of the FiberFlex 600 is designed to configure the numerous applications, including remote passive optical network distribution, wireless base stations with fiber backhaul aggregation, and active network equipment with backup power needs, utilizing a flexible layout. This is Clearfield's latest and smallest size option in the FiberFlex series. With its small form factor, the FiberFlex 600 will give our customers more flexibility in how it is deployed in the outside plant, helping to overcome permitting and right-of-way challenges as they look to deploy fiber broadband in less populated areas. As with our CraftSmart and BuildSmart products, we are working to ensure these products and all other Clearfield offerings will be compliant with the Build America Buy American Act, known as BABA, as required by the Broadband Equity and Access Deployment Program legislation, known as BEAD. I want to provide a brief update on the BEAD process. As many of you know, the states have started announcing RFPs. While this is a great progress, we do not expect to recognize any significant revenue from customer participation in the BEAD program until calendar year 2025. Turning to the overall industry outlook, as illustrated on slide 5, industry forecasts from RVA indicate that the next five-year period will see up to 59 million additional homes passed with fiber, which equates to a 12.5% compound annual growth rate. Of these 59 million homes, roughly a third are forecasted to have access to more than one fiber provider. We believe the introduction of a two fiber competition among providers is a very healthy development and expands our total addressable market. Coming back to Clearfield's performance, I'd now like to pass the call over to our CFO, Dan Herzog, who will walk us through our financial results for the fiscal second quarter 2024.