Clearfield, Inc.

Good afternoon and welcome to the Clearfield fiscal third quarter 2024 conference call. All participants are in listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press the star key followed by the zero on your telephone keypad. Please note that this event is being recorded. I would now like to turn the conference over to Greg Magnus, Investor Relations for Clearfield. Please go ahead.

Thank you. Joining me on the call today are Sherry Baranek, 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 risk 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 CLRPA'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 today's earnings presentation. With that, I would 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 third quarter of 2024. We also intend to provide an update on our business and current market trends. Please turn to slide four. We continue to view 2024 as a transition year and believe that we remain in a gradual recovery as broadband service providers continue to deploy equipment and long-term end user demand remains robust. In the following slides, I will discuss the latest market data that supports this view. Total net sales for the third quarter of fiscal 2024 were $48.8 million. above the high end of our guidance range. Our outperformance was driven by strong sales in our international customer segment and higher than expected sales from our community broadband customers, including orders from new customers in the utility segment. Specifically, community broadband revenue is comparable to last year, driven by a higher percentage of revenue from Homes Connected relative to last year. 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. Dan will discuss our financial results for the quarter in more detail shortly. We are encouraged by the growing interest in our active cabinets for new applications in adjacent markets, including transportation support and traffic monitoring, which will expand our customer base to new categories such as municipalities. We see this as an emerging opportunity for Clearfield starting in fiscal 2025. As labor constraints continue to be an issue for our service provider customers, we are committed to helping them reduce installation time, errors, and field issues. To that end, our recently introduced 3D interactive fiber installation tool on the built mobile app is receiving very positive feedback from customers with one large regional provider evaluating whether to make the app available to their entire technical team. I would now like to provide a brief update on the BEAD process. We are seeing a significant increase in quoting activity for our BEAD compliant products from both existing and new customers. As of earlier this week, 26 states and territories have been approved to move into the award process. We continue to expect to recognize initial revenue from customer participation in the B program starting late in calendar 2025 with more significant ramp and activity anticipated in fiscal 2026. We recently enhanced the company's manufacturing facilities in Minnesota to accommodate BABA requirements and ensure customers have the products needed to meet their deployment schedules. We expect the majority of our portfolio to be BEAD compliant by the end of this current fiscal year. Additionally, we are working with the Fiber Broadband Association to lobby the NTIA and reduce complexity and streamline the BEAD award process. While we wait for the ramp and BEAD orders, we are currently receiving orders from service providers eligible for the $18 billion in funds allocated to the Enhanced Alternative Connect America Cost Model, or ACAM, this program as well as private funding sources. Turning to the overall industry outlook as illustrated on slide five, industry forecasts from RVA remain unchanged in that they indicate that the next five-year period will see up to 59 million additional homes passed with Fiverr, which equates to a 12.5% compound annual growth rate. Of these 59 million homes, Roughly a third are forecast to have access to more than one fiber provider. We believe the introduction of two fiber competition among providers is a very healthy development and also expands our total addressable market. Turning 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 third quarter 2024.