UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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FORM
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CURRENT REPORT
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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. ☐
On May 4, 2023, Clearfield, Inc. (the “Company”) issued a press release announcing the results of its second quarter of fiscal 2023 ended March 31, 2023. 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 “Earnings Presentation” 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 second quarter ended March 31, 2023 results.
The information in this Item 2.02, including Exhibits 99.1 and 99.2, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference into any Company filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
(d) Exhibits.
The following exhibits are being furnished herewith:
| 99.1 | Press release of Clearfield, Inc. dated May 4, 2023 | |||
| 99.2 | Presentation of Clearfield, Inc. for May 4, 2023 Live Webcast and Telephone Conference | |||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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: May 4, 2023 | By: | /s/ Cheryl Beranek |
| Cheryl Beranek | ||
| Chief Executive Officer | ||
Exhibit 99.1
Clearfield Reports Fiscal Second Quarter 2023 Results
MINNEAPOLIS, May 04, 2023 (GLOBE NEWSWIRE) -- Clearfield, Inc. (NASDAQ: CLFD), a leader in fiber connectivity, reported results for the second quarter of fiscal 2023.
| (in millions except per share data and percentages) | Q2 2023 | vs. Q2 2022 | Change | Change (%) | ||||||||
| Net Sales | $ | 71.8 | $ | 53.5 | $ | 18.3 | 34 | % | ||||
| Gross Profit ($) | $ | 23.6 | $ | 23.2 | $ | 0.4 | 2 | % | ||||
| Gross Profit (%) | 32.8 | % | 43.3 | % | -10.5 | % | -24 | % | ||||
| Income from Operations | $ | 12.1 | $ | 11.9 | $ | 0.1 | 1 | % | ||||
| Income Tax Expense | $ | 3.0 | $ | 2.8 | $ | 0.2 | 6 | % | ||||
| Net Income | $ | 10.4 | $ | 9.2 | $ | 1.1 | 12 | % | ||||
| Net Income per Diluted Share | $ | 0.67 | $ | 0.66 | $ | 0.01 | 2 | % | ||||
| Fiscal Q2 YTD 2023 Financial Summary | ||||||||||||
| (in millions except per share data and percentages) | 2023 YTD | vs. 2022 YTD | Change | Change (%) | ||||||||
| Net Sales | $ | 157.8 | $ | 104.6 | $ | 53.1 | 51 | % | ||||
| Gross Profit ($) | $ | 54.2 | $ | 46.1 | $ | 8.1 | 18 | % | ||||
| Gross Profit (%) | 34.4 | % | 44.1 | % | -9.7 | % | -22 | % | ||||
| Income from Operations | $ | 29.9 | $ | 25.0 | $ | 5.0 | 20 | % | ||||
| Income Tax Expense | $ | 6.7 | $ | 5.6 | $ | 1.1 | 19 | % | ||||
| Net Income | $ | 24.6 | $ | 19.6 | $ | 5.0 | 25 | % | ||||
| Net Income per Diluted Share | $ | 1.67 | $ | 1.41 | $ | 0.26 | 18 | % | ||||
Management Commentary
“Our second quarter fiscal 2023 results came in relatively in line with our expectations,” said Company President and CEO Cheri Beranek. “However, following our first quarter report, what we originally thought was a transition to a more normalized, seasonally driven ordering and deployment pattern by some of our customers has developed into a much more significant lull in demand as inventory is digested. Specifically, we have experienced order pushouts by several Large Regional Service Providers and some Multiple System Operators (MSOs or Cable TV providers) who had accumulated an excess inventory position during the pandemic period. In light of this inventory digestion, we expect revenue to be lower than we previously anticipated. However, we remain confident that long-term demand remains strong and that we are well-positioned to benefit from the significant rural broadband build that is still in front of us. While we are rightsizing capacity levels to meet current demand, we are maintaining the infrastructure and processes for long-term growth and continue to design products to address our customers’ biggest pain points and reduce the amount of skilled labor required to install.”
“Our balance sheet remains strong with total cash, short-term and long-term investments of $166 million," said CFO Dan Herzog. “Moreover, due to the strong operating leverage inherent in our model, operating expenses as a percentage of net sales in the second quarter declined to 16% from 21% in the same year-ago period. In addition, to provide more transparency around the customer groups that have affected our performance, we have broken out the revenue contribution from our Large Regional Service Providers, which were previously included in the Community Broadband and National Carrier segment. We believe this new customer segmentation will allow investors to better understand the near-term industry dynamics.”
Financial Results for the Three Months Ended March 31, 2023
Net sales for the second quarter of fiscal 2023 increased 34% to $71.8 million from $53.5 million in the same year-ago quarter. Organic revenue grew to $60.4 million, representing an increase of 13%, while Nestor Cables generated $11.4 million in revenue.
As of March 31, 2023, order backlog (defined as purchase orders received but not yet fulfilled) was $107.6 million, a decrease of $28.7 million, or 21% compared to $136.3 million as of December 31, 2022, and a decrease of $27.9 million, or 21%, from March 31, 2022. The sequential decrease was due to the Company’s ability to fulfill customer orders more quickly and a return to pre-pandemic ordering patterns.
Gross margin for the quarter was 32.8%, compared to 43.3% in the second quarter of fiscal 2023. Gross margin was negatively affected by the buildup in capacity that was not utilized. The Company is currently realigning capacity to the current market condition.
Operating expenses for the quarter increased 2% to $11.5 million, or 16% of net sales, from $11.2 million, or 21% of net sales in the same year-ago quarter.
Net income for the quarter totaled $10.4 million, or $0.67 per diluted share, compared to $9.2 million, or $0.66 per diluted share, in the same year-ago quarter.
Outlook
Due to customer order trends and an anticipated normalization of inventory carrying practices at customer sites, the Company is updating its fiscal 2023 guidance. Clearfield now expects its full year fiscal 2023 net sales guidance to be within a range of $260 to $275 million, down approximately $120 million from the previous guidance at the mid-point, and net income per share guidance to be $1.80 to $2.10, down $2.45 per share from the previous guidance at the mid-point, respectively. The updated net sales guidance at the midpoint is consistent with fiscal 2022 and the updated net income guidance represents a 45% decrease at the midpoint compared to fiscal 2022.
Conference Call
Management will hold a conference call today, May 4, 2023, 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’s President and CEO Cheri Beranek and CFO Dan Herzog will host the presentation, followed by a question-and-answer period.
U.S. dial-in: 1-844-826-3033
International dial-in: 1-412-317-5185
Conference ID: 8040539
The live webcast of the call can be accessed at the Clearfield Investor Relations website along with the company's earnings press release and presentation.
Please see the Earnings Presentation for recharacterized customer segment revenue.
A replay of the call will be available after 8:00 p.m. Eastern Time on the same day through May 18, 2023, while an archived version of the webcast will be available on the Investor Relations website for 90 days.
U.S. replay dial-in: 1-844-512-2921
International replay dial-in: 1-412-317-6671
Replay ID: 10177264
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 Earnings Presentation 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, future availability of labor impacting our customers’ network builds, 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; inflationary price pressures and uncertain availability of components, raw materials, labor and logistics used by us and our suppliers could negatively impact our profitability; we rely on single-source suppliers, which could cause delays, increase costs or prevent us from completing customer orders; we depend on the availability of sufficient supply of certain materials and global disruptions in the supply chain for these materials could prevent us from meeting customer demand for our products; we rely on our manufacturing operations to produce product to ship to customers and manufacturing constraints and disruptions could result in decreased future revenue; a significant percentage of our sales in the last three fiscal years have been made to a small number of customers, and the loss of these major customers could adversely affect us; 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, and the risks could adversely affect future operating results; we have exposure to movements in foreign currency exchange rates; if we are unable to integrate acquired businesses, our financial results could be materially and adversely affected; adverse global economic conditions and geopolitical issues could have a negative effect on our business, and results of operations and financial condition; our planned growth may strain our business infrastructure, which could adversely affect our operations and financial condition; 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; cyber-security incidents on our information technology systems, including ransomware, data breaches or computer viruses, could disrupt our business operations, damage our reputation, and potentially lead to litigation; 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; if the telecommunications market does not continue to expand, our business may not grow as fast as we expect, which could adversely impact our business, financial condition and operating results; changes in U.S. 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; 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, 2022 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.
Investor Relations Contact:
Greg McNiff
The Blueshirt Group
773-485-7191
[email protected]
| CLEARFIELD, INC. | ||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||
| (UNAUDITED) | ||||||||||||||
| (IN THOUSANDS, EXCEPT SHARE DATA) | ||||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||
| March 31, | March 31, | |||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||
| Net sales | $ | 71,809 | $ | 53,495 | $ | 157,751 | $ | 104,604 | ||||||
| Cost of sales | 48,246 | 30,331 | 103,539 | 58,468 | ||||||||||
| Gross profit | 23,563 | 23,164 | 54,212 | 46,136 | ||||||||||
| Operating expenses | ||||||||||||||
| Selling, general and administrative | 11,508 | 11,233 | 24,266 | 21,155 | ||||||||||
| Income from operations | 12,055 | 11,931 | 29,946 | 24,981 | ||||||||||
| Net investment income | 1,395 | 121 | 1,698 | 241 | ||||||||||
| Interest expense | (112 | ) | - | (356 | ) | - | ||||||||
| Income before income taxes | 13,338 | 12,052 | 31,288 | 25,222 | ||||||||||
| Income tax expense | 2,974 | 2,816 | 6,669 | 5,596 | ||||||||||
| Net income | $ | 10,364 | $ | 9,236 | $ | 24,619 | $ | 19,626 | ||||||
| Net income per share: | ||||||||||||||
| Basic | $ | 0.67 | $ | 0.67 | $ | 1.68 | $ | 1.43 | ||||||
| Diluted | $ | 0.67 | $ | 0.66 | $ | 1.67 | $ | 1.41 | ||||||
| Weighted average shares outstanding: | ||||||||||||||
| Basic | 15,233,848 | 13,767,341 | 14,693,829 | 13,755,291 | ||||||||||
| Diluted | 15,260,769 | 13,902,836 | 14,766,938 | 13,900,180 | ||||||||||
| CLEARFIELD, INC. | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| (IN THOUSANDS, EXCEPT SHARE DATA) | ||||||||
| (Unaudited) | ||||||||
| March 31, | September 30, | |||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 137,081 | $ | 16,650 | ||||
| Short-term investments | 19,984 | 5,802 | ||||||
| Accounts receivable, net | 39,382 | 53,704 | ||||||
| Inventories, net | 100,838 | 82,208 | ||||||
| Other current assets | 3,655 | 1,758 | ||||||
| Total current assets | 300,940 | 160,122 | ||||||
| Property, plant and equipment, net | 21,088 | 18,229 | ||||||
| Other Assets | ||||||||
| Long-term investments | 8,527 | 22,747 | ||||||
| Goodwill | 6,587 | 6,402 | ||||||
| Intangible assets, net | 6,459 | 6,376 | ||||||
| Right-of-use lease assets | 11,938 | 13,256 | ||||||
| Deferred tax asset | 957 | 1,414 | ||||||
| Other | 899 | 582 | ||||||
| Total other assets | 35,367 | 50,777 | ||||||
| Total Assets | $ | 357,395 | $ | 229,128 | ||||
| Liabilities and Shareholders' Equity | ||||||||
| Current Liabilities | ||||||||
| Current portion of lease liability | $ | 3,533 | $ | 3,385 | ||||
| Accounts payable | 16,676 | 24,118 | ||||||
| Accrued compensation | 6,316 | 13,619 | ||||||
| Accrued expenses | 5,050 | 6,181 | ||||||
| Factoring liability | 8,475 | 4,391 | ||||||
| Total current liabilities | 40,050 | 51,694 | ||||||
| Other Liabilities | ||||||||
| Long-term debt | 2,181 | 18,666 | ||||||
| Long-term portion of lease liability | 8,943 | 10,412 | ||||||
| Deferred tax liability | 822 | 774 | ||||||
| Total Liabilities | 51,996 | 81,546 | ||||||
| Shareholders' Equity | ||||||||
| Common stock | 153 | 138 | ||||||
| Additional paid-in capital | 186,058 | 54,539 | ||||||
| Accumulated other comprehensive loss | (234 | ) | (1,898 | ) | ||||
| Retained earnings | 119,422 | 94,803 | ||||||
| Total Shareholders' Equity | 305,399 | 147,582 | ||||||
| Total Liabilities and Shareholders' Equity | $ | 357,395 | $ | 229,128 | ||||
| CLEARFIELD, INC. | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| (IN THOUSANDS, EXCEPT SHARE DATA) | ||||||||
| (Unaudited) | ||||||||
| March 31, | September 30, | |||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 137,081 | $ | 16,650 | ||||
| Short-term investments | 19,984 | 5,802 | ||||||
| Accounts receivable, net | 39,382 | 53,704 | ||||||
| Inventories, net | 100,838 | 82,208 | ||||||
| Other current assets | 3,655 | 1,758 | ||||||
| Total current assets | 300,940 | 160,122 | ||||||
| Property, plant and equipment, net | 21,088 | 18,229 | ||||||
| Other Assets | ||||||||
| Long-term investments | 8,527 | 22,747 | ||||||
| Goodwill | 6,587 | 6,402 | ||||||
| Intangible assets, net | 6,459 | 6,376 | ||||||
| Right of use lease assets | 11,938 | 13,256 | ||||||
| Deferred tax asset | 957 | 1,414 | ||||||
| Other | 899 | 582 | ||||||
| Total other assets | 35,367 | 50,777 | ||||||
| Total Assets | $ | 357,395 | $ | 229,128 | ||||
| Liabilities and Shareholders' Equity | ||||||||
| Current Liabilities | ||||||||
| Current portion of lease liability | $ | 3,533 | $ | 3,385 | ||||
| Accounts payable | 16,676 | 24,118 | ||||||
| Accrued compensation | 6,316 | 13,619 | ||||||
| Accrued expenses | 5,050 | 6,181 | ||||||
| Factoring liability | 8,475 | 4,391 | ||||||
| Total current liabilities | 40,050 | 51,694 | ||||||
| Other Liabilities | ||||||||
| Long-term debt | 2,181 | 18,666 | ||||||
| Long-term portion of lease liability | 8,943 | 10,412 | ||||||
| Deferred tax liability | 822 | 774 | ||||||
| Total Liabilities | 51,996 | 81,546 | ||||||
| Shareholders' Equity | ||||||||
| Common stock | 153 | 138 | ||||||
| Additional paid-in capital | 186,058 | 54,539 | ||||||
| Accumulated other comprehensive loss | (234 | ) | (1,898 | ) | ||||
| Retained earnings | 119,422 | 94,803 | ||||||
| Total Shareholders' Equity | 305,399 | 147,582 | ||||||
| Total Liabilities and Shareholders' Equity | $ | 357,395 | $ | 229,128 | ||||
| Clearfield, Inc. | |||||||||
| Consolidated Statement of Cashflows | |||||||||
| (Unaudited) | |||||||||
| Six Months Ended | Six Months Ended | ||||||||
| March 31, | March 31, | ||||||||
| 2023 | 2022 | ||||||||
| Cash flows from operating activities | |||||||||
| Net income | $ | 24,619 | $ | 19,626 | |||||
| Adjustments to reconcile net income to cash provided by (used in) operating activities: | |||||||||
| Depreciation and amortization | 2,822 | 1,362 | |||||||
| Amortization of discount on investments | (1,139 | ) | (21 | ) | |||||
| Deferred income taxes | (35 | ) | - | ||||||
| Stock-based compensation | 1,444 | 1,010 | |||||||
| Changes in operating assets and liabilities | |||||||||
| Accounts receivable | 16,353 | (2,398 | ) | ||||||
| Inventories, net | (17,243 | ) | (33,394 | ) | |||||
| Other assets | (2,407 | ) | (811 | ) | |||||
| Accounts payable and accrued expenses | (14,273 | ) | 3,344 | ||||||
| Net cash provided by (used in) operating activities | 10,141 | (11,282 | ) | ||||||
| Cash flows from investing activities: | |||||||||
| Purchases of property, plant and equipment and intangible assets | (4,797 | ) | (4,842 | ) | |||||
| Purchase of investments | (99,126 | ) | (248 | ) | |||||
| Proceeds from sales and maturities of investments | 100,743 | 17,386 | |||||||
| Net cash (used in) provided by investing activities | (3,180 | ) | 12,296 | ||||||
| Cash flows from financing activities: | |||||||||
| Repayment of long-term debt | (16,700 | ) | - | ||||||
| Proceeds from issuance of common stock under employee stock purchase plan | 299 | 249 | |||||||
| Repurchase of shares for payment of withholding taxes for vested restricted stock grants | (954 | ) | (274 | ) | |||||
| Tax withholding and proceeds related to exercise of stock options | (471 | ) | (282 | ) | |||||
| Issuance of stock under equity compensation plans | 954 | - | |||||||
| Net proceeds from issuance of common stock | 130,262 | - | |||||||
| Net cash provided by (used in) financing activities | 113,390 | (307 | ) | ||||||
| Effect of exchange rates on cash | 80 | - | |||||||
| Increase in cash and cash equivalents | 120,431 | 707 | |||||||
| Cash and cash equivalents, beginning of period | 16,650 | 13,216 | |||||||
| Cash and cash equivalents, end of period | $ | 137,081 | $ | 13,923 | |||||
| Supplemental disclosures for cash flow information | |||||||||
| Cash paid for income taxes | $ | 10,211 | $ | 6,934 | |||||
| Cash paid for interest | $ | 266 | $ | - | |||||
| Non-cash financing activities | |||||||||
| Cashless exercise of stock options | $ | 510 | $ | 210 | |||||
Exhibit 99.2
Clearfield Earnings Presentation: Fiscal Q2 2023 Earnings Call May 4, 2023 1
Important Cautions Regarding Forward - Looking Statements 2 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,” “estimate,” “outlook,” or “continue” or comparab le 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 , a nticipated shipping on backlog and future lead times, future availability of components and materials from the Company’s supply chain, future availability of labor impacting our c ust omers’ network builds, 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 ab ility 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 u pon the Company's current expectations and judgments about future developments in the Company's business. Certain important factors could have a m aterial impact on the Company's performance, including, without limitation: the COVID - 19 pandemic has significantly impacted worldwide economic conditions and could have a material adv erse effect on our business, financial condition and operating results; inflationary price pressures and uncertain availability of components, raw materials, labor and logistics used by us an d our suppliers could negatively impact our profitability; we rely on single - source suppliers, which could cause delays, increase costs or prevent us from completing customer orders; we depend on th e availability of sufficient supply of certain materials and global disruptions in the supply chain for these materials could prevent us from meeting customer demand for our products; we rely o n o ur manufacturing operations to produce product to ship to customers and manufacturing constraints and disruptions could result in decreased future revenue; a significant percentage of ou r sales in the last three fiscal years have been made to a small number of customers, and the loss of these major customers could adversely affect us; further consolidation among our custome rs 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 wit h acquisitions, and the risks could adversely affect future operating results; we have exposure to movements in foreign currency exchange rates; if we are unable to integrate acquired b usi nesses, our financial results could be materially and adversely affected; adverse global economic conditions and geopolitical issues could have a negative effect on our business, and result s o f operations and financial condition; our planned growth may strain our business infrastructure, which could adversely affect our operations and financial condition; product defects or t he 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; cyber - security incidents on our informat ion technology systems, including ransomware, data breaches or computer viruses, could disrupt our business operations, damage our reputation, and potentially lead to litigatio n; our business is dependent on interdependent management information systems; to compete effectively, we must continually improve existing products and introduce new products that ac hie ve market acceptance; if the telecommunications market does not continue to expand, our business may not grow as fast as we expect, which could adversely impact our business, financial con dition and operating results; changes in U.S. government funding programs may cause our customers and prospective customers to delay, reduce, or accelerate purchases, leading to unpr edi ctable 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 pro tection of our patent and intellectual property rights; we face risks associated with expanding our sales outside of the United States; and other factors set forth in Part I, Item IA. Risk Fac tors of Clearfield's Annual Report on Form 10 - K for the year ended September 30, 2022 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. © Copyright 2023 Clearfield, Inc. All Rights Reserved.
3 Introduction & Highlights
OUR MISSION: Enabling the l ifestyle b etter b roadband p rovides WHAT WE DO : Clearfield provides fiber protection, fiber management and fiber delivery solutions that enable rapid and cost - effective fiber - fed deployment throughout the broadband service provider space 4
NASDAQ:CLFD x SeeChange Ρ and Clearview® Cassette 5 Modular and Scalable Products
Providing Optimized Price Performance and Deep Technical Expertise NASDAQ:CLFD x Singularly Focused on Serving the Fiber Market x Attractive Total Cost of Ownership through Reduced Installation Cost and Maintenance Time x Our Testing Shows FastPass TM Approach Cuts Install Time Required for Homes Passed by 50% x Ease, Speed, and Cost of Deployment x Delivery of a Comprehensive Solution x Commitment to Quality and Customers x Acquisition of Nestor Cables Highlights Investment to Integrate and Optimize Solutions and Mitigate Supply Chain Risk 6 Why We Win
Fiber Deployment shift is occurring in 2023 Source: RVA, February 2023 Proprietary & Confidential 7 0 10 20 30 40 50 60 70 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 Millions FTTH Homes Marketed U.S. Cumulative Tel - ILEC Tier 1 Other Service Providers 7 * * * * * Projected
8 Financial Performance
Quarterly Revenue $53 $71 $88 $78 $61 $- $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 Q2 22 Q3 22 Q4 22 Q1 23 Q2 23 Clearfield Organic Nestor Cables * * * FINANCIAL PERFORMANCE 34 % Q2 2023 Growth Rate YO Y $72M Q2 2023 Revenue 9 $95 $ 86 $72 *Includes contribution from subsidiary Nestor Cables, which was acquired on July 26, 2022
Q2 FY23 Net Sales Comparison by Market NASDAQ:CLFD All dollar figures in millions 1) Based on net sales of $72 million for Clearfield (including an $11M contribution from Nestor Cables within our international market) and Point of Sales (POS) reporting from distributors who resell our product line into these markets. Q2 FY23 Net Sales Composition Ended 3 /31/23 1 Legacy (Legacy contract manufacturing and misc. sales) 47% 17% 3% 14% 18% 1% $89 $152 Community Broadband FQ2 22 FQ2 23 Quarterly Net Sales TTM Net Sales Community Broadband (Tier 2&3, utilities, municipalities, and alternative carriers) MSO (Cable TV) International (Europe, Canada, Mexico, and Caribbean Markets) 10 $27 $34 Community Broadband FQ2 22 FQ2 23 National Carrier (Tier 1 Wireline and all Wireless Markets) Large Regional Service Providers (ILEC operating a multi - state network with more than 500,000 subscribers)
NASDAQ:CLFD $8 $28 $10 $3 $51 $10 $63 $35 $3 $61 National Carrier MSO International Legacy Large Regional FQ2 22 FQ2 23 $2 $7 $1 $1 $15 $2 $10 $13 $1 $12 National Carrier MSO International Legacy Large Regional FQ2 22 FQ2 23 Q2 FY23 Net Sales Comparison by Market Quarterly Net Sales TTM Net Sales All dollar figures in millions 1) Based on net sales of $72 million for Clearfield (including an $11M contribution from Nestor Cables within our international market) and Point of Sales (POS) reporting from distributors who resell our product line into these markets. Q2 FY23 Net Sales Composition Ended 3 /31/23 1 Legacy (Legacy contract manufacturing and misc. sales) 47% 17% 3% 14% 18% 1% Community Broadband (Tier 2&3, utilities, municipalities, and alternative carriers) MSO (Cable TV) International (Europe, Canada, Mexico, and Caribbean Markets) 11 National Carrier (Tier 1 Wireline and all Wireless Markets) Large Regional Service Providers (ILEC operating a multi - state network with more than 500,000 subscribers)
Quarterly Gross Profit and Margin $23.2 $29.3 $37.5 $30.6 $23.6 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% $- $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 $40.0 Q2 22 Q3 22 Q4 22 Q1 23 Q2 23 Gross Profit ($) Gross Profit (%) FINANCIAL PERFORMANCE 12 Gross profit levels have declined due to the unused capacity at our Mexico facility and Nestor Cables as a higher percentage of our business this quarter * *Includes contribution from subsidiary Nestor Cables, which was acquired on July 26, 2022 * *
$11.2 $12.7 $15.3 $12.8 $11.5 0% 5% 10% 15% 20% 25% $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 $16.0 $18.0 Q2 22 Q3 22 Q4 22 Q1 23 Q2 23 Operating Expenses in $Millions Operating Expenses as a % of Net Sales * * * FINANCIAL PERFORMANCE 5 Percentage Points YOY Decrease in Operating Expenses as a percent of Net Sales 13 Quarterly Operating Expenses *Includes contribution from subsidiary Nestor Cables, which was acquired on July 26, 2022
$9.2 $12.7 $17.0 $14.3 $10.4 0% 5% 10% 15% 20% 25% 30% $- $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 $16.0 $18.0 Q2 22 Q3 22 Q4 22 Q1 23 Q2 23 Net Income $ Net Margin (%) * * * $ 10.4 M Q2 2023 Net Income 14% Q2 2023 Percent of Net Sales FINANCIAL PERFORMANCE 14 Quarterly Net Income *Includes contribution from subsidiary Nestor Cables, which was acquired on July 26, 2022
Balance Sheet FINANCIAL PERFORMANCE 15 x $166 million of cash, short - term and long - term investments x $2 million of debt x Raised $130 million in net proceeds in December 2022 secondary offering for working capital and general corporate purposes
16 Business Update & Outlook
17 Leverage our decade - long excellence in Community Broadband Execute capacity growth in advance of market opportunity Accelerate infrastructure investment Position innovation at the forefront of our value proposition x Launched SeeChange Ρ • Reduces customer deployment times and labor costs x Rightsizing capacity • Optimizes cost structure to navigate current market dynamics x Strengthening supply chain • Reduces lead times x Pursuing cross - selling opportunities with Nestor Cables • Increases revenue potential domestically and abroad x Expanding Clearfield College • Provides online and in - field customer training support x Increasing cadence of product releases • Expands value proposition
Estimated US FTTH Market $12.5B+ Cumulative 5G Cycle Spend by 2035 ~$200B Committed Fiber Homes Passed By 2030 ~55M Allocated For Broadband Under Biden Infrastructure Package $100B Annual Broadband Infrastructure Subsidies Over Next 3 Years $10B+ Target Broadband Coverage By 2030 Under Biden Administration 100% Tremendous Market Across Rural Broadband Source: Wall Street Research, US Congress, Benton, JD Supra, & Clearfield Company Estimates 18 https:// www.fiercetelecom.com /telecom/biden - targets - universal - broadband - access - 2t - plan
NASDAQ:CLFD x Government Funding for unserved and underserved communities x European Expansion x 5G: Wireless and Wireline Integration x Cloud, Edge and IoT Architecture 19 Long - term Catalysts
FY19 Actual FY20 Actual FY21 Actual FY22 Actual FY23 Forecast $85 $93 $141 $271 $260 to $275 NASDAQ:CLFD FY 2023 net sales guidance issued and effective as of May 4, 2023. Growth rate is based on midpoint of net sales guidance ra nge and includes contribution from subsidiary Nestor Cables . FY 2023 net income per diluted share guidance issued and effective as of May 4, 2023. Annual Net Sales ($ in millions) 20 Financial Outlook $380 - $393 FY19 Actual FY20 Actual FY21 Actual FY22 Actual FY23 Forecast $0.34 $0.53 $1.47 $3.57 $1.80 to $2.10 Net Income Per Share ($)
Cheri Beranek PRESIDENT & CEO Dan Herzog CHIEF FINANCIAL OFFICER Q&A 21 Kevin Morgan CHIEF MARKETING OFFICER
NASDAQ:CLFD 22 Appendix Net Sales by Market Trailing 8 Quarters Through March 31, 2023 (in thousands) Q3 21 6/30/2021 Q4 21 9/30/2021 Q1 22 12/31/2021 Q2 22 3/31/2022 Q3 22 6/30/2022 Q4 22 9/30/2022 Q1 23 12/31/2022 Q2 23 3/31/2023 Market $2,929 $3,542 $1,994 $1,462 $2,515 $9,345 $10,204 $13,138 International 636 906 725 708 624 557 751 593 Legacy 2,076 2,170 1,845 2,326 3,510 2,713 2,305 1,954 National Carrier 8,508 11,387 16,152 15,078 16,323 17,468 14,637 12,498 Large Regional Service Providers 4,288 6,961 9,048 7,282 10,414 21,316 20,819 10,100 MSO (Cable TV) 20,298 20,270 21,343 26,639 37,864 43,630 37,226 33,526 Community Broadband $38,735 $45,236 $51,109 $53,495 $71,250 $95,029 $85,942 $71,809 Total
23 Contact Us COMPANY CONTACT: Cheri Beranek President & CEO Clearfield, Inc. [email protected] INVESTOR RELATIONS: The Blueshirt Group Greg McNiff T: 773 - 485 - 7191 [email protected]