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Clearfield Reports Record Fiscal Third Quarter 2022 Results

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Clearfield, Inc.
Clearfield, Inc.
  • Revenue For Fiscal Third Quarter Grew 84% Year-over-Year to a Record $71 Million, Driven by 73% Growth in Community Broadband Revenue Compared to the Same Year-Ago Period

  • Quarter-End Backlog Increased 16% Sequentially to a Record $157 Million at the End of Fiscal Third Quarter 2022, Compared to $136 Million at the End of Fiscal Second Quarter 2022

  • Net Income For Fiscal Third Quarter 2022 Totaled a Record $12.7 Million, or $0.92 per diluted share, an Increase of 109% from $6.1 Million, or $0.44 Per Diluted Share, in Fiscal Third Quarter 2021

  • Acquisition of Nestor Cables, strategic opportunity to integrate FieldShield cabling, closed July 26, 2022

  • Company Increases Fiscal 2022 Net Sales Guidance to a Range of $243 Million to $247 Million, (excluding Nestor Cables) Representing Year-over-Year Growth of 72% to 75%

MINNEAPOLIS, July 28, 2022 (GLOBE NEWSWIRE) -- Clearfield, Inc. (NASDAQ: CLFD), the specialist in fiber management and connectivity platforms for communication service providers, reported results for the fiscal third quarter ended June 30, 2022.

Fiscal Q3 2022 Financial Summary

 

(in millions except per share data and percentages)

Q3 2022

vs. Q3 2021

Change

 Change (%)

Net Sales

$

71.3

 

$

38.7

 

$

32.5

 

84

%

 

 

 

 

 

Gross Profit ($)

$

29.3

 

$

17.1

 

$

12.2

 

71

%

Gross Profit (%)

 

41.1

%

 

44.2

%

 

-3.1

%

-7

%

 

 

 

 

 

Income from Operations

$

16.6

 

$

7.7

 

$

8.9

 

115

%

Income Tax Expense

$

3.9

 

$

1.7

 

$

2.2

 

125

%

 

 

 

 

 

Net Income

$

12.7

 

$

6.1

 

$

6.6

 

109

%

Net Income per Diluted Share

$

0.92

 

$

0.44

 

$

0.48

 

108

%

 

 

 

 

 

Fiscal Q3 YTD 2022 Financial Summary

 

(in millions except per share data and percentages)

2022 YTD

vs. 2021 YTD

Change

Change (%)

Net Sales

$

175.9

 

$

95.5

 

$

80.3

 

84

%

 

 

 

 

 

Gross Profit ($)

$

75.4

 

$

41.4

 

$

34.0

 

82

%

Gross Profit (%)

 

42.9

%

 

43.4

%

 

-0.5

%

-1

%

 

 

 

 

 

Income from Operations

$

41.6

 

$

15.9

 

$

25.7

 

162

%

Income Tax Expense

$

9.5

 

$

3.3

 

$

6.1

 

183

%

 

 

 

 

 

Net Income

$

32.4

 

$

12.9

 

$

19.5

 

151

%

Net Income per Diluted Share

$

2.33

 

$

0.94

 

$

1.39

 

148

%

 

 

 

 

 

Management Commentary
“Our strong financial results for the third quarter reflect the continued execution of our growth strategy and the robust tailwinds in the fiber broadband industry,” said Company President and CEO Cheri Beranek. “For the second consecutive quarter, we set new records for quarterly net sales and quarter-end order backlog. We continue to make meaningful progress on our ‘Now of Age’ strategic plan to expand our capacity and rapidly scale our business to meet the significant market demand for high-speed broadband. With our third quarter performance and current visibility for the rest of this quarter, we are raising our fiscal year 2022 net sales guidance to a range of $243 million to $247 million (excluding Nestor Cables), representing 72% to 75% growth over fiscal year 2021.”

“In May 2022, we announced an agreement for the strategic acquisition of Finnish fiber optic cable manufacturer, Nestor Cables Oy, a strategic supplier of our FieldShield product line. Our synergistic relationship with Nestor spans over a decade. The acquisition, which closed July 26, 2022 enables us to vertically integrate the design and supply of FieldShield cable to meet future customer demand. Furthermore, we anticipate leveraging the deep technical expertise of the Nestor team to extend the overall supply of FieldShield cable into the North American market by expanding cable manufacturing at our Mexico facility in early 2023. Given the persistent supply chain challenges in today’s market, Nestor further strengthens our ability to meet our customers’ needs. Pending closing and standard integration costs, we expect the acquisition to be accretive to earnings in fiscal 2023.”

“Clearfield is in the middle of a long-term investment cycle for broadband deployment. The demand for high-speed broadband, especially fiber-led broadband, remains very strong. We have proactively expanded our capacity and effectively managed our supply chain to meet that customer demand. We are effectively executing on our new facility buildouts in Mexico and Minnesota which came online late in our second quarter, which allowed greater capacity and led to our record financial results. Moreover, our expertise in serving the Community Broadband market has us well-positioned to further capitalize on industry tailwinds. Based on our steadfast commitment to customers, operational effectiveness, and innovative, scalable product portfolio, we are confident that we can continue to grow the market leadership that Clearfield was built to achieve.”

Fiscal Third Quarter 2022 Financial Results
Net sales for the fiscal third quarter of 2022 increased 84% to $71.3 million from $38.7 million in the same year-ago quarter. The increase in net sales was due to higher sales across our core end markets, particularly in our Community Broadband, Multiple System Operator (“MSO” or Cable TV) and National Carrier markets, consistent with our past quarters of fiscal 2022.

As of June 30, 2022, order backlog (defined as purchase orders received but not yet fulfilled) was $157 million, an increase of 16% compared to $136 million as of March 31, 2022 and an increase of 289% from $40 million as of June 30, 2021.

Gross profit for the fiscal third quarter of 2022 increased 71% to $29.3 million (or 41.1% of net sales) from $17.1 million (or 44.2% of net sales) in the fiscal third quarter of 2021. As expected, overhead costs associated with the first full quarter of our new facilities in Minnesota and Mexico negatively impacted gross margins. Alongside real estate costs, increased shipping costs and inflationary increases in some components negatively affected margins. Our strategic investment in our growing national carrier business will negatively affect margin for the near future. We anticipate margins at these levels for the coming quarters, excluding Nestor Cables.

Operating expenses for the fiscal third quarter of 2022 increased 35% to $12.7 million (or 17.9% of net sales), from $9.4 million (or 24.4% of net sales) in the same year-ago quarter. The increase in operating expenses consisted primarily of higher compensation costs due to increased personnel and higher performance-based compensation as well as increased travel expenses and professional fees mainly associated with the acquisition of Nestor Cables.

Income from operations for the fiscal third quarter of 2022 increased 115% to $16.6 million from $7.7 million in the same year-ago quarter.

Income tax expense for the fiscal third quarter of 2022 increased 125% to $3.9 million, with an effective tax rate of 23.4%, as compared to $1.7 million, with an effective tax rate of 22.1% in the same year-ago quarter due to higher taxable income. Increase in rate is due to increased permanent addback items including nondeductible compensation and transaction costs.

Net income for the fiscal third quarter of 2022 totaled $12.7 million, or $0.92 per diluted share, compared to $6.1 million, or $0.44 per diluted share, in the same year-ago quarter.

Financial Results for the Nine Months Ended June 30, 2022
Net sales increased 84% to $175.9 million for the nine months ended June 30, 2022 from $95.5 million during the same period in fiscal 2021. The increase in net sales was due to higher sales across our core end markets, most notably our Community Broadband, MSO/Cable TV and National Carrier markets.

Gross profit was $75.4 million (or 42.9% of net sales) for the nine months ended June 30, 2022, an increase of 82% from $41.4 million (or 43.4% of net sales) in the same period in fiscal 2021. The decrease in gross profit margin was due to increased overhead costs associated with our new facilities in Minnesota and Mexico and higher freight and transportation costs, offset by favorable product mix as well as improved manufacturing efficiencies realized with higher sales volumes.

Operating expenses increased 32% to $33.9 million (or 19.3% of net sales) for the nine months ended June 30, 2022 from $25.6 million (or 26.8% of net sales) during the same period in fiscal 2021. The increase in operating expenses consisted primarily of higher compensation costs due to increased personnel and higher performance-based compensation as well as increased travel expenses and professional fees.

Income from operations increased 162% to $41.6 million for the nine months ended June 30, 2022 from $15.9 million during the same period in fiscal 2021.

Income tax expense increased 183% to $9.5 million, with an effective tax rate of 22.7%, for the nine months ended June 30, 2022 as compared to $3.3 million, with an effective tax rate of 20.6% during the same period in fiscal 2021 due to higher taxable income.

Net income totaled $32.4 million, or $2.33 per diluted share, for the nine months ended June 30, 2022, an increase of 151% from $12.9 million, or $0.94 per diluted share, during the same period in fiscal 2021.

Conference Call
Clearfield management will hold a conference call today, July 28, 2022 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: 1-877-407-0792
International dial-in: 1-201-689-8263
Conference ID: 13731557

The conference call will be webcast live and available for replay here.

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 11, 2022.

U.S. replay dial-in: 1-844-512-2921
International replay dial-in: 1-412-317-6671
Replay ID: 13731557

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: 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; the acquisition of Nestor Cables and integration activities could adversely affect our operating results; 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, increase 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; 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; 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; 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; 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, 2021 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:
Matt Glover and Sophie Pearson
Gateway Group, Inc.
1-949-574-3860
CLFD@gatewayir.com

CLEARFIELD, INC.
STATEMENTS OF EARNINGS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

(Unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

 

2022

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

71,250

 

$

38,735

 

$

 

175,854

 

$

 

95,519

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

41,943

 

 

21,598

 

 

 

100,411

 

$

 

54,071

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

29,307

 

 

17,137

 

 

 

75,443

 

 

 

41,448

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and

 

 

 

 

 

 

 

 

 

 

 

 

 

administrative

 

12,721

 

 

9,435

 

 

 

33,877

 

$

 

25,581

 

 

Income from operations

 

16,586

 

 

7,702

 

 

 

41,566

 

 

 

15,867

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

43

 

 

121

 

 

 

284

 

$

 

378

 

 

Income before income taxes

 

16,629

 

 

7,823

 

 

 

41,850

 

 

 

16,245

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

3,884

 

 

1,725

 

 

 

9,480

 

$

 

3,344

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

$

12,745

 

$

6,098

 

$

 

32,370

 

$

 

12,901

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.93

 

$

0.44

 

$

 

2.35

 

$

 

0.94

 

 

Diluted

$

0.92

 

$

0.44

 

$

 

2.33

 

$

 

0.94

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

13,772,269

 

 

13,732,913

 

 

 

13,760,950

 

 

 

13,718,394

 

 

Diluted

 

13,899,698

 

 

13,812,510

 

 

 

13,900,019

 

 

 

13,762,897

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CLEARFIELD, INC.
BALANCE SHEETS
(IN THOUSANDS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

 

 

 

 

June 30,

 

 

September 30,

 

 

 

2022

 

 

 

2021

 

Assets

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

$

14,192

 

 

 

13,216

 

Short-term investments

 

3,894

 

 

 

10,374

 

Accounts receivable, net

 

31,594

 

 

 

19,438

 

Inventories, net

 

69,341

 

 

 

27,524

 

Deferred tax asset

 

0

 

 

 

0

 

Other current assets

 

1,050

 

 

 

954

 

Total current assets

 

120,071

 

 

 

71,506

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

9,567

 

 

 

4,998

 

 

 

 

 

 

 

 

Other Assets

 

 

 

 

 

 

Long-term investments

 

24,994

 

 

 

36,913

 

Goodwill

 

4,709

 

 

 

4,709

 

Intangible assets, net

 

4,691

 

 

 

4,696

 

Right of use lease assets

 

12,715

 

 

 

2,305

 

Deferred tax asset

 

647

 

 

 

365

 

Other

 

553

 

 

 

420

 

Total other assets

 

48,309

 

 

 

49,408

 

Total Assets

$

177,947

 

 

$

125,912

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

Current portion of lease liability

$

2,774

 

 

 

915

 

Accounts payable

 

16,243

 

 

 

9,215

 

Accrued compensation

 

8,918

 

 

 

8,729

 

Accrued expenses

 

2,758

 

 

 

1,613

 

Total current liabilities

 

30,693

 

 

 

20,472

 

 

 

 

 

 

 

 

Other Liabilities

 

 

 

 

 

 

Long-term portion of lease liability

 

10,480

 

 

 

1,615

 

Total Liabilities

 

41,173

 

 

 

22,087

 

 

 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

 

Common stock

 

138

 

 

 

137

 

Additional paid-in capital

 

59,784

 

 

 

58,246

 

Accumulated other comprehensive loss

 

(960

)

 

 

-

 

Retained earnings

 

77,812

 

 

 

45,442

 

Total Shareholders' Equity

 

136,774

 

 

 

103,825

 

Total Liabilities and Shareholders' Equity

$

177,947

 

 

$

125,912

 

 

 

 

 

 

 

 

CLEARFIELD, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)

 

 

 

 

 

Nine Months Ended

 

 

Nine Months Ended

 

 

 

 

 

 

 

 

 

 

June 30,

 

 

June 30,

 

 

 

 

 

 

 

 

 

 

2022

 

 

 

2021

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

$

32,370

 

 

$

12,901

 

 

 

 

 

 

 

Adjustments to reconcile net income to cash (used in)

 

 

 

 

 

 

 

 

 

 

 

 

 

provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

2,174

 

 

 

1,725

 

 

 

 

 

 

 

Change in allowance for doubtful accounts

 

 

 

-

 

 

 

210

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

1,647

 

 

 

966

 

 

 

 

 

 

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

 

(12,156

)

 

 

(5,896

)

 

 

 

 

 

 

Inventories, net

 

 

 

(41,816

)

 

 

(6,571

)

 

 

 

 

 

 

Other assets

 

 

 

(185

)

 

 

(261

)

 

 

 

 

 

 

Accounts payable and accrued expenses

 

 

 

8,677

 

 

 

5,043

 

 

 

 

 

 

 

Net cash (used in) provided by operating activities

 

 

 

(9,289

)

 

 

8,117

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment and

 

 

 

 

 

 

 

 

 

 

 

 

 

intangible assets

 

 

 

(6,764

)

 

 

(1,275

)

 

 

 

 

 

 

Purchase of investments

 

 

 

(248

)

 

 

(11,904

)

 

 

 

 

 

 

Proceeds from sales and maturities of investments

 

 

 

17,386

 

 

 

10,044

 

 

 

 

 

 

 

Net cash provided by (used in) investing activities

 

 

 

10,374

 

 

 

(3,135

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock under

 

 

 

544

 

 

 

383

 

 

 

 

 

 

 

employee stock purchase plan

 

 

 

 

 

 

 

 

 

 

 

 

 

Repurchase of shares for payment of withholding taxes for vested restricted stock grants

 

 

 

(274

)

 

 

(54

)

 

 

 

 

 

 

Withholding related to exercise of stock options

 

 

 

(379

)

 

 

(456

)

 

 

 

 

 

 

Net cash used in financing activities

 

 

 

(109

)

 

 

(127

)

 

 

 

 

 

 

Increase in cash and cash equivalents

 

 

 

976

 

 

 

4,855

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

 

 

13,216

 

 

 

16,450

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

 

$

14,192

 

 

$

21,305

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures for cash flow information

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid during the year for income taxes

 

 

$

9,913

 

 

$

3,560

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash financing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

Cashless exercise of stock options

 

 

$

276

 

 

$

1,269