8-K
Clearfield, Inc. (CLFD)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________
Form 8-K _____________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event Reported): July 22, 2021
CLEARFIELD, INC. (Exact Name of Registrant as Specified in Charter)
| Minnesota | 000-16106 | 41-1347235 |
|---|---|---|
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) |
| 7050 Winnetka Avenue North, Suite 100, Brooklyn Park, Minnesota 55428 | ||
| --- | ||
| (Address of Principal Executive Offices) (Zip Code) |
(763) 476-6866 (Registrant's telephone number, including area code)
Not Applicable (Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $0.01 par value | CLFD | The NASDAQ Stock Market LLC |
| Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | ||
| --- | --- | --- |
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Items under Sections 1, 3, 4, and 6 through 8 are not applicable and therefore omitted.
Item 2.02. Results of Operations and Financial Condition.
On July 22, 2021, Clearfield, Inc. (the “Company”) issued a press release announcing the results of its third quarter of fiscal 2021 and nine months ended June 30, 2021. A copy of that press release is furnished hereto as Exhibit 99.1 and is hereby incorporated by reference. Also furnished hereto as Exhibit 99.2 is the slide presentation that is part of the Company’s “FieldReport” to be used by Cheryl Beranek, the Company’s President and Chief Executive Officer, and Daniel Herzog, the Company’s Chief Financial Officer, during the live webcast and telephone conference relating to the third quarter and nine months ended June 30, 2021 results.
Item 9.01. Financial Statements and Exhibits.
The following exhibits are being furnished herewith:
99.1 Press release of Clearfield, Inc. dated July 22, 2021
99.2 Presentation of Clearfield, Inc. for July 22, 2021 Live Webcast and Telephone Conference
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CLEARFIELD, INC. | ||
|---|---|---|
| Date: July 22, 2021 | By: | /s/ Cheryl Beranek |
| Cheryl Beranek | ||
| Chief Executive Officer |
EdgarFiling
EXHIBIT 99.1
Clearfield Reports Record Fiscal Third Quarter and Nine Month 2021 Financial Results
49% Increase in Net Sales, Driven by 64% Growth in Community Broadband Revenue Compared to the Same Year-Ago Quarter. Company Backlog Increased 377% to Record $40.3 Million at Quarter End Compared to the Same Year-ago Quarter End and 110% Compared to March 31, 2021
Continued Execution on Operational Effectiveness Initiatives and Favorable Product Mix Produces 44.2% Quarterly Gross Profit Margin for Q3 FY2021
Net Income for Q3 2021 Increased 104% to $6.1 Million, or $0.44 per diluted share, an Improvement from $3.0 Million, or $0.22 per diluted share, in the Same Year-ago Quarter
Company Raises Fiscal 2021 Net Sales Guidance to $130 Million to $135 Million, Representing 42% Year-over-Year Growth at the Midpoint
MINNEAPOLIS, July 22, 2021 (GLOBE NEWSWIRE) -- Clearfield, Inc. (NASDAQ: CLFD), the specialist in fiber management for communication service providers, reported results for the fiscal third quarter and nine months ended June 30, 2021.
| Fiscal Q3 2021 Financial Summary | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (in millions except per share data and percentages) | Q3 2021 | vs. Q3 2020 | Change | Change (%) | |||||||
| Net Sales | $ | 38.7 | $ | 26.0 | $ | 12.8 | 49 | % | |||
| Gross Profit ($) | $ | 17.1 | $ | 10.8 | $ | 6.3 | 59 | % | |||
| Gross Profit (%) | 44.2 | % | 41.5 | % | 2.7 | % | 6 | % | |||
| Income from Operations | $ | 7.7 | $ | 3.6 | $ | 4.1 | 115 | % | |||
| Income Tax Expense | $ | 1.7 | $ | 0.8 | $ | 1.0 | 126 | % | |||
| Net Income | $ | 6.1 | $ | 3.0 | $ | 3.1 | 104 | % | |||
| Net Income per Diluted Share | $ | 0.44 | $ | 0.22 | $ | 0.22 | 100 | % | |||
| Fiscal Q3 YTD 2021 Financial Summary | |||||||||||
| (in millions except per share data and percentages) | 2021 YTD | vs. 2020 YTD | Change | Change (%) | |||||||
| Net Sales | 95.5 | $ | 65.8 | $ | 29.8 | 45 | % | ||||
| Gross Profit ($) | $ | 41.4 | $ | 26.7 | $ | 14.8 | 55 | % | |||
| Gross Profit (%) | 43.4 | % | 40.6 | % | 2.8 | % | 7 | % | |||
| Income from Operations | $ | 15.9 | $ | 4.7 | $ | 11.2 | 237 | % | |||
| Income Tax Expense | $ | 3.3 | $ | 1.1 | $ | 2.3 | 211 | % | |||
| Net Income | $ | 12.9 | $ | 4.2 | $ | 8.7 | 204 | % | |||
| Net Income per Diluted Share | $ | 0.94 | $ | 0.31 | $ | 0.63 | 203 | % |
Management Commentary “Fiber-fed broadband is being recognized as the answer for future-proofed connectivity to the American home and business,” said Clearfield President and CEO Cheri Beranek. “Our record-setting financial performance for the third quarter and first nine months of fiscal 2021 reflects Clearfield’s unique positioning in the market and our ability to capitalize on the robust growth vectors. The continued demand for high-speed broadband drove a 49% year-over-year increase in net sales to a record $38.7 million, bringing our total net sales for the first nine months of the year to a record $95.5 million, which was up 45% year-over-year.
“The labor-saving practices that are instrumental to Clearfield’s product architecture are being recognized by service providers throughout the broadband marketplace. Order bookings, which accelerated at the end of the second quarter, continued their momentum in the third quarter, resulting in a 377% year-over-year increase in backlog to $40.3 million. We continue to build additional capacity to respond to the demand and expect to ship the majority of our backlog in our current quarter ending September 30, 2021. In addition, due to the unprecedented lead times and challenges in the global supply chain, we are working with our customers to place longer lead-time purchase orders to ensure availability of components and materials from our supply chain. Based on current supply chain dynamics, lead times have stretched to 8 to 10 weeks for certain product categories. Over the next several quarters, we will be working to normalize lead times to more historic levels of 4 to 6 weeks from receipt of purchase order.
“Our customers, no matter if they are local exchange carriers, over-builders, cable providers, rural electrical utilities or new to this market, recognize that fiber is the only technology to provide symmetrical up-stream and down-stream performance. Currently, there are multiple government funded programs that are accelerating broadband deployment, such as the Rural Digital Opportunity Fund (RDOF), which will start to be deployed later this summer and fall. In addition, the proposed bi-partisan infrastructure framework looks promising toward enhancing the funding available to future-proof broadband deployment.
“Looking ahead, we believe all our broadband markets remain ripe for sustained growth. The market presence we have established over the last 10 years, along with our recent strategic investments, will enable us to respond to market demand and grow with our customers. While the supply chain remains volatile and may pose challenges in the future, our strong financial performance and $40.3 million backlog, give us confidence to increase our net sales guidance for fiscal 2021 to $130 million to $135 million, which represents year-over-year growth of more than 40%. We anticipate our selling, general and administrative costs will also grow moderately, as increased travel resumes, and we add additional customer-facing positions. We anticipate net income as a percentage of total net sales to be consistent with year-to-date levels.
“Over the last three years, we have been building upon a strategic plan that began as our ‘Coming of Age’ plan and then became our ‘Comes of Age’ plan this past year. Moving forward, we are now underway with our ‘Now of Age’ plan in which we offer the maturity and capacity to scale to this expanding marketplace. The multi-year plan is designed to capture the fiber to the home and business market share Clearfield was built to obtain, while delivering the innovation for new and existing markets in the years ahead. While very early, we believe with current demand, new government initiatives and overall market strength our, current market forecasts will translate to projected annual net sales of $150 million to $160 million in fiscal year 2022, representing growth of 15% to 20% over projected fiscal year 2021 revenues.”
Third Quarter of Fiscal 2021 Financial Results Net sales for the third quarter of fiscal 2021 increased 49% to $38.7 million from $26.0 million in the same year-ago quarter. The increase in net sales was primarily due to higher sales in the Company’s Community Broadband, International and Multiple System Operators (MSO or Cable TV) markets, partially offset by decreases in the Company’s Legacy and National Carrier markets.
Gross profit for the third quarter of fiscal 2021 increased 59% to $17.1 million (or 44.2% of net sales), from $10.8 million (or 41.5% of net sales) in the same year-ago quarter. The increase in gross profit margin was due to a favorable product mix associated with higher net sales in the Company’s Community Broadband markets and cost reduction efforts across the Company’s product lines, including increased production at its Mexico plants as well as manufacturing efficiencies realized with increased sales volumes.
Operating expenses for the third quarter of fiscal 2021 totaled $9.4 million (or 24.4% of net sales), which compares to $7.2 million (or 27.8% of net sales) in the same year-ago quarter. The increase in operating expenses consisted primarily of higher compensation costs related to performance compensation accruals.
Income from operations for the third quarter of fiscal 2021 increased 115% to $7.7 million from $3.6 million in the same year-ago quarter.
Income tax expense for the third quarter of fiscal 2021 increased 126% to $1.7 million, or an effective tax rate of 22.1%, from $763,000, or an effective tax rate of 20.3%, in the same year-ago quarter due to higher taxable income.
Net income for the third quarter of fiscal 2021 totaled $6.1 million, or $0.44 per diluted share, a 104% improvement from $3.0 million, or $0.22 per diluted share, in the same year-ago quarter.
Cash and cash equivalents and short and long-term investments totaled $58.9 million at June 30, 2021, compared to $52.2 million as of September 30, 2020.
Financial Results for the Nine Months Ended June 30, 2021 Net sales increased 45% to $95.5 million for the nine months ended June 30, 2021 from $65.8 million during the same period in fiscal 2020. The increase in net sales was primarily due to higher sales in the Company’s Community Broadband, International and MSO markets, partially offset by decreases in the Company’s Legacy and National Carrier markets.
Gross profit was $41.4 million (or 43.4% of net sales) for the nine months ended June 30, 2021, an increase of 55% from $26.7 million (or 40.6% of net sales) in the same period in fiscal 2020. The increase in gross profit dollars was due to increased sales volume. The increase in gross profit margin was due to cost reduction efforts across the Company’s product lines, including greater use of its Mexico manufacturing facilities as well as manufacturing efficiencies realized with increased sales volumes.
Operating expenses increased 16% to $25.6 million (or 26.8% of net sales) for the nine months ended June 30, 2021, from $22.0 million (or 33.4% of net sales) during the same period in fiscal 2020. The increase in operating expenses was primarily due to increases in compensation costs and performance compensation accruals.
Income from operations totaled $15.9 million for the nine months ended June 30, 2021, compared to $4.7 million during the same period in fiscal 2020.
Income tax expense was $3.3 million, with an effective tax rate of 20.6%, for the nine months ended June 30, 2021, as compared to $1.1 million, with an effective tax rate of 20.2% during the same period in fiscal 2020.
Net income totaled $12.9 million, or $0.94 per diluted share, for the nine months ended June 30, 2021, an increase of 204% from $4.2 million, or $0.31 per diluted share, during the same period in fiscal 2020.
Conference Call Clearfield management will hold a conference call today (Thursday, July 22, 2021) at 5:00 p.m. Eastern Time (4:00 p.m. Central Time) to discuss these results and provide an update on business conditions.
Clearfield President and CEO Cheri Beranek and CFO Dan Herzog will host the presentation, followed by a question-and-answer period.
U.S. dial-in: 1-877-407-0792 International dial-in: 1-201-689-8263 Conference ID: 13721495
The conference call will be webcast live and available for replay here: http://public.viavid.com/index.php?id=145687
Please call the conference telephone number 10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at 1-949-574-3860.
A replay of the call will be available after 8:00 p.m. Eastern time on the same day through August 5, 2021.
U.S. replay dial-in: 1-844-512-2921 International replay dial-in: 1-412-317-6671 Replay ID: 13721495
About Clearfield, Inc. Clearfield, Inc. (NASDAQ: CLFD) designs, manufactures, and distributes fiber optic management, protection, and delivery products for communications networks. Our “fiber to anywhere” platform serves the unique requirements of leading incumbent local exchange carriers (traditional carriers), competitive local exchange carriers (alternative carriers), and MSO/Cable TV companies, while also catering to the broadband needs of the utility/municipality, enterprise, data center and military markets. Headquartered in Minneapolis, MN, Clearfield deploys more than a million fiber ports each year. For more information, visit www.SeeClearfield.com.
Cautionary Statement Regarding Forward-Looking Information Forward-looking statements contained herein and in any related presentation or in the related FieldReport are made pursuant to the safe harbor provisions of the Private Litigation Reform Act of 1995. Words such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “outlook,” or “continue” or comparable terminology are intended to identify forward-looking statements. Such forward looking statements include, for example, statements about the Company’s future revenue and operating performance, anticipated shipping on backlog and future lead times, future availability of components and materials from the Company’s supply chain, the impact of the Rural Digital Opportunity Fund (RDOF) or other government programs on the demand for the Company’s products or timing of customer orders, the Company’s ability to add capacity to meet expected future demand, and trends in and growth of the FTTx markets, market segments or customer purchases and other statements that are not historical facts. These statements are based upon the Company's current expectations and judgments about future developments in the Company's business. Certain important factors could have a material impact on the Company's performance, including, without limitation: the COVID-19 pandemic has significantly impacted worldwide economic conditions and could have a material adverse effect on our business, financial condition and operating results; we rely on single-source suppliers, which could cause delays, increases in costs or prevent us from completing customer orders; fluctuations in product and labor costs which may not be able to be passed on to customers that could decrease margins; we depend on the availability of sufficient supply of certain materials, such as fiber optic cable and resins for plastics, and global disruptions in the supply chain for these materials could prevent us from meeting customer demand for our products; a significant percentage of our sales in the last three fiscal years have been made to a small number of customers; further consolidation among our customers may result in the loss of some customers and may reduce sales during the pendency of business combinations and related integration activities; we may be subject to risks associated with acquisitions; product defects or the failure of our products to meet specifications could cause us to lose customers and sales or to incur unexpected expenses; we are dependent on key personnel; our business is dependent on interdependent management information systems; to compete effectively, we must continually improve existing products and introduce new products that achieve market acceptance; changes in government funding programs may cause our customers and prospective customers to delay, reduce, or accelerate purchases, leading to unpredictable and irregular purchase cycles; intense competition in our industry may result in price reductions, lower gross profits and loss of market share; our success depends upon adequate protection of our patent and intellectual property rights; if the telecommunications market does not expand as we expect, our business may not grow as fast as we expect; we face risks associated with expanding our sales outside of the United States; and other factors set forth in Part I, Item IA. Risk Factors of Clearfield's Annual Report on Form 10-K for the year ended September 30, 2020 as well as other filings with the Securities and Exchange Commission. The Company undertakes no obligation to update these statements to reflect actual events unless required by law.
CLEARFIELD, INC. STATEMENTS OF EARNINGS (Unaudited)
| (Unaudited) | (Unaudited) | |||||||
|---|---|---|---|---|---|---|---|---|
| Three Months Ended | Nine Months Ended | |||||||
| June 30, | June 30, | |||||||
| 2021 | 2020 | 2021 | 2020 | |||||
| Revenues | $ | 38,735,356 | $ | 25,970,045 | $ | 95,519,437 | $ | 65,756,545 |
| Cost of sales | 21,597,574 | 15,179,875 | 54,070,830 | 39,087,407 | ||||
| Gross profit | 17,137,782 | 10,790,170 | 41,448,607 | 26,669,138 | ||||
| Operating expenses | ||||||||
| Selling, general and | ||||||||
| administrative | 9,435,877 | 7,207,157 | 25,581,534 | 21,965,038 | ||||
| Income from operations | 7,701,905 | 3,583,013 | 15,867,073 | 4,704,100 | ||||
| Interest income | 121,208 | 174,555 | 378,263 | 615,523 | ||||
| Income before income taxes | 7,823,113 | 3,757,568 | 16,245,336 | 5,319,623 | ||||
| Income tax expense | 1,725,000 | 763,000 | 3,344,000 | 1,076,000 | ||||
| Net income | $ | 6,098,113 | $ | 2,994,568 | $ | 12,901,336 | $ | 4,243,623 |
| Net income per share: | ||||||||
| Basic | $ | 0.44 | $ | 0.22 | $ | 0.94 | $ | 0.31 |
| Diluted | $ | 0.44 | $ | 0.22 | $ | 0.94 | $ | 0.31 |
| Weighted average shares outstanding: | ||||||||
| Basic | 13,732,913 | 13,497,955 | 13,718,394 | 13,510,413 | ||||
| Diluted | 13,812,510 | 13,497,955 | 13,762,897 | 13,547,124 |
CLEARFIELD, INC. BALANCE SHEETS
| (Unaudited) | ||||
|---|---|---|---|---|
| June 30, | September 30, | |||
| 2021 | 2020 | |||
| Assets | ||||
| Current Assets | ||||
| Cash and cash equivalents | $ | 21,305,392 | $ | 16,449,636 |
| Short-term investments | 10,864,831 | 10,582,527 | ||
| Accounts receivable, net | 16,182,713 | 10,496,672 | ||
| Inventories, net | 20,979,139 | 14,408,538 | ||
| Other current assets | 652,320 | 585,436 | ||
| Total current assets | 69,984,395 | 52,522,809 | ||
| Property, plant and equipment, net | 4,925,245 | 4,952,819 | ||
| Other Assets | ||||
| Long-term investments | 26,721,221 | 25,143,000 | ||
| Goodwill | 4,708,511 | 4,708,511 | ||
| Intangible assets, net | 4,765,194 | 4,986,216 | ||
| Right of use lease asset | 2,515,743 | 2,539,100 | ||
| Deferred tax asset | 178,118 | 178,118 | ||
| Other | 259,548 | 266,857 | ||
| Total other assets | 39,148,335 | 37,821,802 | ||
| Total Assets | $ | 114,057,975 | $ | 95,297,430 |
| Liabilities and Shareholders' Equity | ||||
| Current Liabilities | ||||
| Current portion of lease liability | $ | 901,063 | $ | 665,584 |
| Accounts payable | 6,648,416 | 3,689,587 | ||
| Accrued compensation | 7,014,488 | 4,856,885 | ||
| Accrued expenses | 1,150,672 | 1,202,753 | ||
| Total current liabilities | 15,714,639 | 10,414,809 | ||
| Other Liabilities | ||||
| Long-term portion of lease liability | 1,849,067 | 2,129,343 | ||
| Total other liabilities | 1,849,067 | 2,129,343 | ||
| Total Liabilities | 17,563,706 | 12,544,152 | ||
| Shareholders' Equity | ||||
| Common stock | 137,425 | 136,500 | ||
| Additional paid-in capital | 58,341,635 | 57,502,905 | ||
| Retained earnings | 38,015,209 | 25,113,873 | ||
| Total Shareholders' Equity | 96,494,269 | 82,753,278 | ||
| Total Liabilities and Shareholders' Equity | $ | 114,057,975 | $ | 95,297,430 |
CLEARFIELD, INC. STATEMENTS OF CASH FLOWS (Unaudited)
| Nine Months Ended | Nine Months Ended | |||||
|---|---|---|---|---|---|---|
| June 30, | June 30, | |||||
| 2021 | 2020 | |||||
| Cash flows from operating activities | ||||||
| Net income | $ | 12,901,336 | $ | 4,243,623 | ||
| Adjustments to reconcile net income to cash provided | ||||||
| by (used in) operating activities: | ||||||
| Depreciation and amortization | 1,725,509 | 1,824,517 | ||||
| Change in allowance for doubtful accounts | 209,612 | - | ||||
| Amortization of discount on investments | (876 | ) | (64,327 | ) | ||
| Stock-based compensation expense | 966,290 | 541,884 | ||||
| Changes in operating assets and liabilities | ||||||
| Accounts receivable | (5,895,653 | ) | 18,912 | |||
| Inventories, net | (6,570,601 | ) | (5,868,972 | ) | ||
| Other assets | (261,371 | ) | 190,796 | |||
| Accounts payable and accrued expenses | 5,042,911 | 1,553,798 | ||||
| Net cash provided by operating activities | 8,117,157 | 2,440,231 | ||||
| Cash flows from investing activities: | ||||||
| Purchases of property, plant and equipment and | ||||||
| intangible assets | (1,275,117 | ) | (1,493,341 | ) | ||
| Purchase of investments | (11,903,649 | ) | (31,837,930 | ) | ||
| Proceeds from maturities of investments | 10,044,000 | 30,163,000 | ||||
| Net cash used in investing activities | (3,134,766 | ) | (3,168,271 | ) | ||
| Cash flows from financing activities | ||||||
| Proceeds from issuance of common stock under | 383,697 | 348,776 | ||||
| employee stock purchase plan | ||||||
| Tax withholding and proceeds related to exercise of stock options | (456,124 | ) | 10,968 | |||
| Tax withholding related to vesting of restricted stock grants | (54,208 | ) | (5,803 | ) | ||
| Repurchase of common stock | - | (428,654 | ) | |||
| Net cash used in financing activities | (126,635 | ) | (74,713 | ) | ||
| Increase (Decrease) in cash and cash equivalents | 4,855,756 | (802,753 | ) | |||
| Cash and cash equivalents, beginning of period | 16,449,636 | 10,081,721 | ||||
| Cash and cash equivalents, end of period | $ | 21,305,392 | $ | 9,278,968 | ||
| Supplemental disclosures for cash flow information | ||||||
| Cash paid during the year for income taxes | $ | 3,559,502 | $ | 469,529 | ||
| Non-cash financing activities | ||||||
| Cashless exercise of stock options | $ | 1,269,414 | $ | 10,962 |
Investor Relations Contact: Matt Glover, Tom Colton, and Sophie Pearson Gateway Investor Relations 1-949-574-3860 [email protected]
EdgarFiling
EXHIBIT 99.2
FieldReport / Fiscal Q3 2021 Earnings Call / July 22, 2021 NASDAQ:CLFD The Industry Leader in Craft Friendly Fiber Optic Management and Connectivity Solutions Fiscal Q3 2021 Earnings Call FieldReport
FieldReport / Fiscal Q3 2021 Earnings Call / July 22, 2021 NASDAQ:CLFD Important Cautions Regarding Forward - Looking Statements Forward - looking statements contained herein and in any related presentation or in the related Earnings Release are made pursuant to the safe harbor provisions of the Private Litigation Reform Act of 1995. Words such as “may,” “will,” “expect,” “believe,” “anticipate,” “est ima te,” “outlook,” or “continue” or comparable terminology are intended to identify forward - looking statements. Such forward looking statements include, for exam ple, statements about the Company’s future revenue and operating performance, anticipated shipping on backlog and future lead times, future availab ili ty of components and materials from the Company’s supply chain, the impact of the Rural Digital Opportunity Fund (RDOF) or other government progra ms on the demand for the Company’s products or timing of customer orders, the Company’s ability to add capacity to meet expected future demand, an d t rends in and growth of the FTTx markets, market segments or customer purchases and other statements that are not historical facts. These statements are based u pon the Company's current expectations and judgments about future developments in the Company's business. Certain important factors c oul d have a material impact on the Company's performance, including, without limitation: the COVID - 19 pandemic has significantly impacted worldwide e conomic conditions and could have a material adverse effect on our business, financial condition and operating results; we rely on single - source su ppliers, which could cause delays, increases in costs or prevent us from completing customer orders; fluctuations in product and labor costs which may n ot be able to be passed on to customers that could decrease margins; we depend on the availability of sufficient supply of certain materials, such as fiber op tic cable and resins for plastics, and global disruptions in the supply chain for these materials could prevent us from meeting customer demand for ou r p roducts; a significant percentage of our sales in the last three fiscal years have been made to a small number of customers; further consolidation a mon g our customers may result in the loss of some customers and may reduce sales during the pendency of business combinations and related integratio n a ctivities; we may be subject to risks associated with acquisitions; product defects or the failure of our products to meet specifications could ca use us to lose customers and sales or to incur unexpected expenses; we are dependent on key personnel; our business is dependent on interdependent managem ent information systems; to compete effectively, we must continually improve existing products and introduce new products that achieve market ac ceptance; changes in government funding programs may cause our customers and prospective customers to delay, reduce, or accelerate purchases, lead ing to unpredictable and irregular purchase cycles; intense competition in our industry may result in price reductions, lower gross profits and lo ss of market share; our success depends upon adequate protection of our patent and intellectual property rights; if the telecommunications market does not ex pan d as we expect, our business may not grow as fast as we expect; we face risks associated with expanding our sales outside of the United States; a nd other factors set forth in Part I, Item IA. Risk Factors of Clearfield's Annual Report on Form 10 - K for the year ended September 30, 2020 as well as other filings with the Securities and Exchange Commission. The Company undertakes no obligation to update these statements to reflect actual events unless requ ire d by law. © Copyright 2021 Clearfield, Inc. All Rights Reserved. NASDAQ:CLFD 2
FieldReport / Fiscal Q3 2021 Earnings Call / July 22, 2021 NASDAQ:CLFD Welcome Cheri Beranek PRESIDENT & CEO NASDAQ:CLFD 3
FieldReport / Fiscal Q3 2021 Earnings Call / July 22, 2021 NASDAQ:CLFD FY 21 Q3 and YTD Highlights NASDAQ:CLFD 4 Third Quarter of Fiscal 2021: • Net sales of $38.7M, up 49% y/o/y • Gross profit up 59% to $17.1M (44.2% of net sales) • Net income of $6.1M or $0.44 per diluted share • Order backlog increased 377% to $40.3M • Cash and investments: $58.9M First Nine Months of Fiscal 2021: • Net sales of $95.5M, up 45% y/o/y • Gross profit of $41.4M (43.4% of net sales), up 55% y/o/y • Net income of $12.9M or $0.94 per diluted share, up 204% from $4.2M or $0.31 per diluted share last year $26.0M $27.3M $27.1M $29.7M $38.7M Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Quarterly Net Sales $89.7M $122.8M Q3-20 Q3-21 Trailing - Twelve Month (TTM) Net Sales
FieldReport / Fiscal Q3 2021 Earnings Call / July 22, 2021 NASDAQ:CLFD FY 21 Q3 & TTM Net Sales Comparison by Market NASDAQ:CLFD 5 All dollar figures in millions 1) Based on net sales of $122.8 million and Point of Sales (POS) reporting from distributors who resell our product line into these markets. TTM Net Sales Composition Ended 6/30/21 1 Community Broadband (Tier 2 & 3, utilities, municipalities, and alternative carriers) National Carrier (Tier 1 Wireline and all Wireless Markets) MSO (Cable TV) International (Canada, Mexico, and Caribbean Markets) Legacy (Legacy contract manufacturing and misc. sales) 70% 9% 13% 6% 2% $55.3 $14.9 $11.1 $4.3 $4.2 $11.6 $15.3 $7.1 $2.8 Community Broadband National Carrier MSO International Legacy FQ3 20 FQ3 21 Quarterly Net Sales TTM Net Sales $86.1 $16.7 $3.9 $3.7 $0.9 $0.7 $27.4 $3.4 $4.5 $2.9 $0.6 Community Broadband National Carrier MSO International Legacy FQ3 20 FQ3 21
FieldReport / Fiscal Q3 2021 Earnings Call / July 22, 2021 NASDAQ:CLFD Financial Update Dan Herzog CHIEF FINANCIAL OFFICER NASDAQ:CLFD 6
FieldReport / Fiscal Q3 2021 Earnings Call / July 22, 2021 NASDAQ:CLFD Quarterly Financial Performance 7 NASDAQ:CLFD Note: Dollar figures in millions $26.0 $27.3 $27.1 $29.7 $38.7 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Net Sales +19% +14% +40% +45% +49% Year - over - Year Growth Rate
FieldReport / Fiscal Q3 2021 Earnings Call / July 22, 2021 NASDAQ:CLFD Quarterly Financial Performance 8 NASDAQ:CLFD Note: Dollar figures in millions $26.0 $27.3 $27.1 $29.7 $38.7 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Net Sales +19% +14% +40% +45% +49% Year - over - Year Growth Rate $10.8 $11.2 $11.4 $12.9 $17.1 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Gross Profit 41.5% 41.2% 42.0% 43.6% 44.2% Gross Profit (%)
FieldReport / Fiscal Q3 2021 Earnings Call / July 22, 2021 NASDAQ:CLFD Quarterly Financial Performance 9 NASDAQ:CLFD Note: Dollar figures in millions $26.0 $27.3 $27.1 $29.7 $38.7 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Net Sales +19% +14% +40% +45% +49% Year - over - Year Growth Rate $10.8 $11.2 $11.4 $12.9 $17.1 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Gross Profit 41.5% 41.2% 42.0% 43.6% 44.2% Gross Profit (%) 27.8% 27.7% 28.3% 28.6% 24.4% OPEX as % of Net Sales $7.2 $7.6 $7.7 $8.5 $9.4 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Operating Expenses
FieldReport / Fiscal Q3 2021 Earnings Call / July 22, 2021 NASDAQ:CLFD Quarterly Financial Performance 10 NASDAQ:CLFD Note: Dollar figures in millions $26.0 $27.3 $27.1 $29.7 $38.7 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Net Sales +19% +14% +40% +45% +49% Year - over - Year Growth Rate $10.8 $11.2 $11.4 $12.9 $17.1 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Gross Profit 41.5% 41.2% 42.0% 43.6% 44.2% Gross Profit (%) 27.8% 27.7% 28.3% 28.6% 24.4% OPEX as % of Net Sales $7.2 $7.6 $7.7 $8.5 $9.4 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Operating Expenses 11.5% 11.2% 11.7% 12.3% 15.7% Net Margin $3.0 $3.0 $3.2 $3.6 $6.1 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Net Income
FieldReport / Fiscal Q3 2021 Earnings Call / July 22, 2021 NASDAQ:CLFD COVID - 19 Operational Update • Critical manufacturer status • Operating at normal capacity and adhering to state and federal government social distancing guidelines • Enhanced safety measures for on - site production personnel • Majority of supply chain remains operational • Maintaining higher minimum stocking levels on component level inventory to ensure customer needs are met NASDAQ:CLFD 11
FieldReport / Fiscal Q3 2021 Earnings Call / July 22, 2021 NASDAQ:CLFD Operational Update Cheri Beranek PRESIDENT & CEO NASDAQ:CLFD 12
FieldReport / Fiscal Q3 2021 Earnings Call / July 22, 2021 NASDAQ:CLFD
FieldReport / Fiscal Q3 2021 Earnings Call / July 22, 2021 NASDAQ:CLFD Clearfield "Now of Age" Plan NASDAQ:CLFD 14 A Augmenting Capacity for Ongoing Growth • Investing in products, manufacturing and supply chain to increase competitiveness and reduce costs • Building upon Asian partnerships for faster product innovation and cost reduction programs Accelerating our Operating Cadence • Active investment in systems and processes to enable our agile work environment • Speed of delivery in every part of our organization is paramount to our success Amplifying Bold and Disruptive Growth • Leveraging Community Broadband for One - Fiber Backhaul • Removing obstacles for the integration of wireline and wireless networks • Bringing fiber management expertise to 5G, NG - PON, and edge computing
FieldReport / Fiscal Q3 2021 Earnings Call / July 22, 2021 NASDAQ:CLFD Legislation Supporting Broadband – What’s Known 15 Source: US Congress, Benton, JD Supra, Jeffries Research NASDAQ:CLFD
FieldReport / Fiscal Q3 2021 Earnings Call / July 22, 2021 NASDAQ:CLFD $73.9M $77.7M $85.0M $93.1M $130M - $135M 15 - 20% YoY Growth FY 2017 FY 2018 FY 2019 FY 2020 FY 2021E FY 2022E Financial Outlook 16 NASDAQ:CLFD FY 2021 guidance issued and effective as of July. 22, 2021; growth rate is based on midpoint of net sales guidance range Annual Net Sales ($ in millions)
FieldReport / Fiscal Q3 2021 Earnings Call / July 22, 2021 NASDAQ:CLFD Key Takeaways Proven business model and management execution Enhanced management team and expansion of total addressable market Strong competitive position in a rapidly growing multi - billion - dollar fiber - fed broadband industry Healthy balance sheet: $58.9M in cash and investments Year history of profitability and positive free cash flow 13 NASDAQ:CLFD 17
FieldReport / Fiscal Q3 2021 Earnings Call / July 22, 2021 NASDAQ:CLFD Q&A Cheri Beranek PRESIDENT & CEO NASDAQ:CLFD 18 Dan Herzog CHIEF FINANCIAL OFFICER
FieldReport / Fiscal Q3 2021 Earnings Call / July 22, 2021 NASDAQ:CLFD NASDAQ:CLFD 19
FieldReport / Fiscal Q3 2021 Earnings Call / July 22, 2021 NASDAQ:CLFD Contact Us NASDAQ:CLFD 20 COMPANY CONTACT: Cheri Beranek President & CEO Clearfield, Inc. [email protected] INVESTOR RELATIONS: Matt Glover | Tom Colton | Sophie Pearson Gateway Investor Relations (949) 574 - 3860 [email protected]