Good afternoon. Welcome to Clearfield's Fiscal Second Quarter 2020 Earnings Conference Call. My name is Daryl, and I will be your operator this afternoon. Joining us for today's presentation are the company's President and CEO, Cheri Beranek; and CFO, 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 FieldReport, which is also available in the Investor Relations section of the company's website. Please note that during the course of this call, management will make 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 is 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, FieldReport and in this conference call. The Risk Factors section in Clearfield's most recent Form 10-K filing with the Securities and Exchange Commission provides descriptions of those risks. With that, I would like to turn the call over to Clearfield's CEO, Cheri Beranek, please proceed.

Good afternoon, and thank you, everyone, for joining us today. As you can see, some of the things we just take for granted in earlier times when we're in a situation like this, we do our best that we can. So thank you for sticking with us. Dan and I are both at our own perspective homes and doing the normal routine that most people are doing today, which is social distancing, working from home, and the remote life that is now becoming our new normal. We were pleased that due to the critical role Clearfield solutions play in supporting the communications infrastructure, Clearfield operations have been classified as critical sector works. We have continued to be fully operational since the beginning of 2020, despite the unprecedented global business closures and slowdown caused by COVID-19. We continue with production operations in both the U.S. and Mexican manufacturing facilities and have established multiple contingency plans in the event our ability to operate would be diminished or is eliminated at either location. As of today, our employees are healthy, and we have no reported COVID-19 cases. However, this, of course, can change at any time. The second quarter was a strong period for Clearfield as we achieved the highest level of revenue for any fiscal Q2 in our company's history at $20.4 million, which was up 5% sequentially and 7% year-over-year. This trajectory is consistent with our expectations and was driven by strong contributions from our National Carrier and MSO markets, which were up 66% and 75% year-over-year, respectively. In terms of efficiency, we realized another quarter of solid gross profit margin at nearly 40%, which is the highest level in 8 quarters. This achievement reflects the success of the operational efficiency initiatives that we've implemented across the organization over the last 6 months, particularly the cost reduction efforts across our product lines and the expanded use of our Mexico manufacturing plant. From a production standpoint, we too saw a healthy increase in our order backlog in the second quarter, which increased 61% sequentially and 62% from the same year ago period to $9.3 million. For the most part, we continue to book at industry-leading lead times for standard products. Now before I turn the call over to our CFO, Dan Herzog, to discuss our financial performance in more detail, I'd like to spend a moment reviewing some of our recent operational updates and market progress. Although COVID-19's impact began to deepen in March 2020 here in the United States, we did not experience any particular customer ordering delays or changes in ordering patterns. Looking at our market segments by revenue more closely, starting with our core community broadband market. In the second quarter, we generated revenue of $12.2 million, which was consistent with the same period last year. On a trailing 12-month basis ended March 31, 2020, community broadband market revenue totaled $52.2 million, which was down 3% from the comparable period last year. Our National Carrier business was our second largest market, comprising 19% of total revenue in Q2 and 17% of our total revenue for the trailing 12-month period. From a growth standpoint, we've built on the momentum we established over the last several quarters, realizing a 66% year-over-year increase in revenue to $3.9 million in the second quarter and a 46% year-over-year increase to $14.3 million for the trailing 12-month period. As I spoke to on the Q1 FieldReport, the primary factor driving this growth is the continued demand from fiber-to-the-home and fiber-to-the-business applications. We believe the momentum in our national carrier market to date validates the strategic investments we've made to capitalize on the Tier 1 market, including the 5G opportunity. In addition to the positive results we experienced in our National Carrier market, we realized another quarter of double-digit growth in our MSO or cable TV market. In fiscal Q2, we generated $2.6 million in revenue, which was up 75% year-over-year and generated $9.9 million for the trailing 12-month period, which was up 23% year-over-year. Revenue in our international market was down 51% year-over-year and down 25% on a trailing 12-month basis. The decline was primarily due to delayed orders that we expect to recognize later in the fiscal year. Revenue in our legacy Build-to-Print business was down 39% in the second quarter and down 8% over the trailing 12-month period. On a trailing 12-month basis, total revenue was $4.2 million, which is consistent with our expectations for this business to operate at approximately $4 million in annual run rate for the foreseeable future. With that, I'll now turn the presentation over to Dan, who will walk us through our financial performance for the second quarter of fiscal 2020.

Thank you, Cheri, and good afternoon, everyone. Now looking at our second quarter financial results in more detail. Our revenue in the second quarter of fiscal 2020 increased 7% to $20.4 million from $19.1 million in the same year ago period. The increase in revenue was primarily due to higher sales in our Tier 1 and MSO markets, offset by lower international sales, as Cheri mentioned. Gross profit for the second quarter of fiscal 2020 totaled $8.2 million or 39.9% of total revenue. This was an improvement from $7 million or 36.8% of total revenue in the second quarter of fiscal 2019. The increase in gross profit dollars was due to increased sales volume, while the increase in gross profit percent was due to cost reduction efforts across our product lines, including expanded use of our Mexico manufacturing plant and efficiencies realized from our supply chain programs. Our operating expenses for the second quarter of fiscal 2020 were $7.4 million, which were up from $6.7 million in the same year ago quarter. As a percentage of total revenue, operating expenses in Q2 were 36.4% compared to 35.3% in the same year ago period. The increase in operating expenses was primarily due to increased compensation costs and the costs associated with product testing required for Tier 1 certification. Income from operations was $720,000 in the second quarter of fiscal 2020 in comparison to $297,000 in the same year ago quarter. Income tax expense increased from $99,000 in the second quarter of 2019 to $190,000 in the second quarter of fiscal 2020. In the second quarter of fiscal 2020, net income totaled $748,000 or $0.05 per diluted share, which is an improvement from $368,000 or $0.02 per diluted share in the same year ago quarter. During the second quarter, our cash, cash equivalents, and investments increased $1.6 million to $48.4 million from $46.8 million in the prior quarter ended December 31, 2019. It's worth noting that our excess cash is invested mainly in CDs backed by the FDIC, U.S. Treasury Securities, and money market accounts, which are secure and highly liquid. We believe our existing cash and short-term investments, along with cash flow from operations, is sufficient to meet our working capital and investment requirements for beyond the next 12 months. During the quarter, we repurchased 41,796 shares of our common stock for an aggregate value of approximately $429,000. Our Board and management team will continue to evaluate how we deploy our capital to generate the highest returns for our shareholders. To further ensure our financial stability during these uncertain times, we have suspended our share repurchase plan. That concludes my prepared remarks. I will now turn the call back over to Cheri. Cheri?

Thanks, Dan. Over the last two years, we've been executing on our Coming of Age plan, which is our three year strategic plan designed to strengthen our core business and position our company for disruptive growth opportunities, specifically around 5G. As our financial and operational performance in Q2 demonstrated, we're now starting to realize the results of this plan. I'll now spend a moment providing a brief update on our three major initiatives within it. In terms of our first initiative, expanding our core community broadband business, we are seeing emerging opportunities with utilities, in which we expect our unique modular architecture will help us capitalize on these opportunities and grow our share in this market. Further, we expect to be successful in working with service providers who will benefit from the expanded funding programs for broadband deployment sponsored by the federal government. In terms of our progress enhancing our operational effectiveness, our success in this area was most clearly demonstrated by the 40% gross profit margin we realized in the quarter. In addition to benefiting from the cost reduction efforts across the product lines as Dan mentioned, we are continually looking for ways to improve our manufacturing capabilities and supply chain efficiencies. During Q2, we signed a lease for a second manufacturing facility in Mexico, which has doubled our square footage and allows us to establish lean manufacturing initiatives by dedicating 1 facility to connectivity and the other to splicing operations associated with our enclosures. The COVID-19 impact in Mexico caused temporary delays in our ability to begin shipping products from the facility, but did not significantly impact the planned level of revenue shipped this quarter. Based on the current assessment, we believe we can commence shipping from the facility in the coming weeks. In terms of our competitive position, we recently introduced home deployment kits, which are designed to ease the task of fiber-to-the-home deployment and reduce install time by approximately 30 minutes per home. In addition, these products can be installed directly by the homeowner within their own structure, providing for a contact-free installation. The third initiative of our plan involves capitalizing on our 5G opportunities within the wireline markets of national carriers and all wireless markets. In the second quarter, we introduced the StreetSmart portfolio of fiber management products to support 5G small cell densification. Serving as the demarcation point between the backhaul fiber provider and the mobile network operator, the StreetSmart Fiber Hand-Off Box creates a secure carrier-class separation between the wireline and wireless fiber connections. From our vantage point, including conversations with customers and other industry participants over the last several weeks, 5G builds are still committed and we've even seen some Tier 1 players increase their 5G-related CapEx budget for this year despite the COVID-19 uncertainties. In response to the changing landscape created by the COVID-19 pandemic, Clearfield has instituted multiple policies to protect the safety of our employees, to adapt to new trends in the global workforce, and to ensure the long-term viability remains intact. I'm also encouraged to report that there have been no layoffs. All nonproduction employees are able to do their jobs remotely and that our production operations are working at normal capacity while adhering to state and federal government guidelines. As we move through the fiscal third quarter, our nonproduction employees are all working remotely. We are actively promoting and demonstrating our product solutions through videoconferencing and other methods. We dual source the majority of our components. And as of now, most of our supply chain partners remain operational and have continued to provide the necessary components for our products. We have increased our stocking position in each plant to ensure dual manufacturing sites. We have invested in additional manufacturing equipment and personnel to provide alternative capacity on 1 location or the other, should we have an illness breakout in 1 or both of our production sites. We are providing hazard pay and productivity bonuses and have relayed out our plant floor to allow for social distancing. In addition, we have established a COVID task force among the production workforce to ensure all health needs are being addressed. However, these are highly uncertain times, and the pandemic will undoubtedly create circumstances beyond our immediate control. Our contingency plans may not be sufficient to meet customer demand and that could result in a potentially significant increase in manufacturing costs. Due to these economic uncertainties, we received a $3.7 million loan under the Payroll Protection Program under the Coronavirus Aid, Relief and Economic Security or CARES Act. The loan bears interest at a fixed rate of 1% and will be forgiven if Clearfield meets certain conditions. The PPP loan provides us with an additional layer of financial protection of continuing to employ all of our team members throughout this period of significant uncertainty. As we move through the fiscal third quarter, our business remains strong, with production currently stable and operational. We believe we have the right plan and foundation in place to ensure we successfully navigate these uncharted waters backed by our nearly $50 million in cash and investments, industry-leading solutions, and a world-class team. We remain confident these factors will enable us to capitalize on the disruptive growth opportunities within the fiber optics industry, both in the near term and long term as well. I'm very proud of our team. Our team has seamlessly adapted to today's dynamic working environment. We've built a highly resilient business as evidenced by our strong results in Q2 as well as our ability to continue supporting the critical needs of our customers during a time that is challenging for many businesses, regardless of industry. As of today, Clearfield business remains strong with bookings in the fiscal third quarter of 2020 outpacing the levels realized in the fiscal second quarter of 2020. However, the lack of visibility in the broader global markets and intensifying demand uncertainty could potentially disrupt Clearfield supply chain and customer ordering patterns as well as reduce the overall demand for its products in the near term. Recognizing this reality, Clearfield's leadership team and Board of Directors believe it is prudent and necessary to temporarily withdraw the company's fiscal 2020 financial guidance until such time that visibility returns to pre-COVID-19 levels. And with that, we're ready to open the call for your questions. Operator, I turn it to you.

Our first questions come from Tim Savageaux of Northland Capital Markets.

This is actually Steven on for Tim. I was wondering if you could give us any color on what drove the increase in backlog.

A couple of points to mention. The increase in backlog was due to a higher volume of orders towards the end of March. This backlog is being driven company-wide, particularly in community broadband, MSO, and the carrier business. Some orders arrived late in March, and part of this was related to our operations in Mexico. The COVID situation prevented us from opening our second plant since the construction team assigned to our project was redirected to a federal project in Mexico. However, the overall business remains consistent and positive in the long term.

Okay. That's great. Can you let us know if the traffic increases due to the pandemic are positively impacting your business or causing any delays?

When you say traffic, broadband traffic?

Yes. Correct.

We are definitely noticing a significant interest from our service provider customers, whose clients are requesting service turn-ups. This is an ideal time to highlight the importance of broadband connectivity and its impact on our daily lives. While we have observed a slight increase in the second quarter, it is still modest and there is potential ahead. Our service providers are experiencing higher take rates than before, as the demand for connectivity grows. This presents both short-term and long-term opportunities for us, reflecting the recognition of the success that broadband delivers.

I would now like to turn the call back to CEO, Cheri Beranek, for her closing comments.

Thank you, everyone. I appreciate you joining us today. We, as a company, traditionally take questions from our covering analysts. If you have a question that has not been addressed in today's information, please feel free to reach out to us by sending an e-mail to myself personally, which is [email protected] or to our IRR firm, which is [email protected]. I ask you to stay safe, wash your hands, and social distancing is not a choice, it's a requirement. Thanks very much. Bye for now.

Goodbye.

Thank you for joining us today for Clearfield's Fiscal Second Quarter 2020 Earnings Conference Call. You may now disconnect.