Clearfield Q4 2024 Earnings Report

Clearfield EPS Results

• Actual EPS: -$0.06
• Consensus EPS: -$0.19
• Beat/Miss: Beat by +$0.13
• One Year Ago EPS: $0.17

Clearfield Revenue Results

• Actual Revenue: $46.80 million
• Expected Revenue: $41.95 million
• Beat/Miss: Beat by +$4.85 million
• YoY Revenue Growth: -5.80%

Clearfield Announcement Details

• Quarter: Q4 2024
• Date: 11/7/2024
• Time: After Market Closes
• Conference Call Date: Thursday, November 7, 2024
• Conference Call Time: 5:00PM ET

Clearfield (NASDAQ:CLFD) (NASDAQ: CLFD) is a Minneapolis-based company specializing in fiber management products for broadband network deployments. The company’s core offerings include fiber distribution hubs, enclosures, splice trays, patching panels and connectivity accessories designed to simplify installation and maintenance of fiber-optic networks. Clearfield’s modular FieldSmart™ platform provides a scalable approach for service providers, utilities and enterprise organizations looking to expand or upgrade their fiber infrastructure.

Clearfield serves a diverse customer base that includes cable and internet service providers, telecommunications operators, wireless carriers, utilities and municipalities. Through its network of distribution partners and value-added resellers, the company supports deployments across North America, Latin America, the Caribbean and select international markets. Its products are engineered for both indoor and outdoor environments, offering dust-tight, weather-resistant enclosures to protect critical fiber connections.

Founded in 2000 and headquartered in Minneapolis, Clearfield went public on the Nasdaq exchange, extending its reach and product development capabilities. Over the years, the company has introduced innovations such as pre-terminated drop cable assemblies, streamlined splicing solutions and multifunctional fiber hubs that reduce field labor and installation time. The FieldShield® hardened fiber cable system further complements its portfolio, delivering robust cable protection in demanding outdoor applications.

Under the leadership of President and Chief Executive Officer William (Bill) Schrier, Clearfield has focused on operational efficiency, product quality and customer support. The management team emphasizes close collaboration with network operators to address evolving requirements for high-density connectivity, rapid deployment and ongoing network management. By combining modular design with in-factory termination and testing, Clearfield aims to help customers achieve reliable, cost-effective fiber networks.

Clearfield Q4 2024 Earnings Call Transcript

Key Takeaways

• Q4 net sales of $46.8 million beat guidance of $40 – $43 million despite a 6% YoY decline, and the company generated $12.9 million in operating cash flow driven by an $8.1 million inventory reduction.
• Fiscal 2024 net sales fell 38% YoY to $166.7 million, but Clearfield maintained positive operating cash flow of $22.2 million.
• Clearfield introduced new products—including SeaChange, Craft Smart Fiber First Pedestal, Craft Smart Deploy Rail Tap Box, FiberFlex cabinets and a 3D interactive installation app—to simplify and reduce the cost of rural broadband deployments.
• An inventory overhang at MSO accounts continues to weigh on ordering patterns, although community broadband and large regional provider demand have normalized.
• For fiscal 2025, management guides to $170 million – $185 million in revenue with U.S. growth at or above industry forecasts and expects BEAD funding to accelerate demand in 2026, but anticipates a Q1 net loss of $0.28 – $0.35 per share.

Presentation

[Operator]

Please note that this event is being recorded. I would now like to turn the conference over to Greg McNiff, Investor Relations for Clearfield. Please go ahead.

[Greg McNiff, Head of Investor Relations at Clearfield]

Thank you. Joining me on today's call are Cheri Beranek, Clearfield's President and CEO, and Dan Herzog, Clearfield's CFO. Starting this quarter, Clearfield will be publishing a quarterly shareholder letter, which provides an overview of the company's financial results, operational highlights, and future outlook. You can find both the shareholder letter and the earnings release on Clearfield's Investor Relations website. After brief prepared remarks, we will open the floor for a question-and-answer session. Please note that during this call, management will be making remarks regarding future events and the future financial performance of the company. These remarks constitute forward-looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements.

[Greg McNiff, Head of Investor Relations at Clearfield]

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, shareholder letter, and on this conference call. The risk factors section in Clearfield'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. With that, I would like to turn the call over to Clearfield's President and CEO, Cheri Beranek. Cheri?

[Cheri Beranek, CEO at Clearfield]

Good afternoon, everyone, and thank you for joining us today to discuss Clearfield's results for the Fiscal Fourth Quarter and Full Year 2024. We'll provide a brief update on our business performance and current market trends. For more detailed information, please refer to our shareholder letter posted on the IR section of our website. We have chosen to present our financial and operational performance in this new format as we believe it offers a more comprehensive picture of our business and allows for more thoughtful Q&A. I will start by highlighting some key themes and then turn it over to Dan for a summary of our performance and outlook. First, looking back at fiscal 2024 and its challenging industry dynamics, we are proud of our steady focus on investing in the business and positioning Clearfield to capitalize on the significant opportunities ahead.

[Cheri Beranek, CEO at Clearfield]

To that end, we exited fiscal 2024 with stronger customer relationships, launched several new products that reduced deployment time, and optimized our cost and operating structure. Our revenue from Homes Connected continues to grow, and we are encouraged by the positive customer response to our active cabinet solutions. Looking forward, we are excited about the opportunities from both public and private funding for our rural broadband expansion. As many of you know, a core aspect of the value Clearfield brings to the market is our decades-long commitment to supporting the homes and businesses in rural and small-town communities. We focus on providing solutions which are scalable and reduce the cost of deployment by lowering the level of skilled labor required.

[Cheri Beranek, CEO at Clearfield]

To that end, in the past year, we introduced several new products aimed at reducing the cost and time of connecting homes, including SeeChange, the CraftSmart FiberFirst Pedestal, the CraftSmart DeployReel Tapbox, and the FiberFlex series of active cabinets. We also introduced a 3D interactive fiber installation tool delivered via the BILT mobile app, which simplifies the deployment process. We will continue to support the rural broadband segment into 2025 and beyond through additional product releases and investments. We are finalizing the design of a new distributed tap portfolio that we intend to introduce in the coming months. We are thrilled that Ines Kamman has joined the company and was recently promoted to Chief Marketing Officer. Annis brings over 25 years of industry experience with a diverse set of leadership skills. We'd also like to thank Kevin Morgan for all of his tireless effort in promoting the Clearfield message.

[Cheri Beranek, CEO at Clearfield]

We are pleased that Kevin will continue to work with us in an advisory capacity and will represent Clearfield on the Fiber Broadband Association and at other industry events. While we continue to expect ordering patterns to be impacted by the inventory overhang, we believe that this excess is primarily located at the MSO accounts, while the community broadband segment and large regional providers have mostly recovered and returned to a normal ordering cadence. We believe that this improved outlook, coupled with the shift to the second phase of the E-ACAM program, which focuses on deployment, will serve as the growth catalyst for the later part of 2025, while we anticipate significant BEAD-driven demand in 2026.

[Cheri Beranek, CEO at Clearfield]

I'd now like to pass the call over to our CFO, Dan Herzog, who will provide an overview of our financial results for the fiscal quarter and full year 2024, as well as share our outlook.

[Daniel Herzog, CFO at Clearfield]

Thank you, Cheri, and good afternoon, everyone. Consolidated net sales in the fourth quarter of fiscal 2024 were $46.8 million, a 6% decrease from $49.7 million in the same year-ago period, but above our guidance range of $40 million-$43 million. This figure includes $35.7 million of North American net sales and $11.1 million of international net sales. The stronger-than-expected results were driven by higher sales in both the MSO and large regional service provider markets, as we've seen inventory levels decrease in certain product categories. Additionally, the company generated positive cash flow from operations of approximately $12.9 million in the fourth quarter, mainly due to a reduction in net inventory of approximately $8.1 million in the quarter. For the full fiscal year, consolidated net sales were $166.7 million, a 38% decrease from $268.7 million in fiscal 2023.

[Daniel Herzog, CFO at Clearfield]

Clearfield generated positive cash flow from operations of approximately $22.2 million for the full year. For both the quarter and the year, we saw revenue from Homes Connected continue to represent a larger portion of overall revenue relative to comparable year-ago periods. We expect this trend to continue into fiscal 2025 as operators focus on cash flow generation over deployments while awaiting BEAD program funding. Over the past year, Clearfield has successfully transitioned into an end-to-end portfolio supplier of products for both passing and connecting homes, which has positioned the company for growth consistent with the general industry outlook. As a result, we are guiding to revenues of $170 million-$185 million for fiscal year 2025. We anticipate U.S. revenue growth to be in-line or above industry focus forecasts, with minimal revenue growth from our international market as we focus on gross profit improvements for that segment.

[Daniel Herzog, CFO at Clearfield]

We anticipate this growth to accelerate with the positive impact of BEAD funding in 2026 and beyond, as it is focused on the rural markets where Clearfield is strongest. Although service providers remain bullish on the utilization of fiber in their build plans, we are currently seeing some level of conservatism on capital spending. As a result, we anticipate a somewhat slow start to the year with our first quarter fiscal 2025 net sales in the range of $33-$38 million. We expect to generate a net loss per share in the range of $0.28-$0.35 in the first quarter of fiscal 2025, and with that, we will open the call to your questions.

[Operator]

We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause for just a moment to assemble our roster. Again, if you have a question, please press star and then one. Seeing no further questions, this will conclude our question and answer session. I would like to turn the conference back over to Cheri Beranek for any closing remarks.

[Cheri Beranek, CEO at Clearfield]

I want to thank everyone who has joined us today. It has been a challenging year with a level of dynamics that continue to change on a monthly and quarterly basis, but our focus and commitment to this environment and being able to enable the lifestyle that better broadband provides to our customer base is absolutely consistent, so we look forward to speaking with you again and to serving our community over the course of fiscal year 2025.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines and have a pleasant day.

Participants

Executives

• Daniel Herzog, CFO
• Cheri Beranek, CEO
• Greg McNiff, Head of Investor Relations