Clearfield, Inc.
(NASDAQ:
CLFD), the specialist in fiber management and
connectivity platforms for communication service providers,
reported results for the fiscal fourth quarter and fiscal year
ended September 30, 2020.
Fiscal Q4 2020
Financial Summary |
|
(in millions
except per share data and percentages) |
Q4 2020 |
vs. Q4 2019 |
Change |
Change (%) |
Revenue |
$ |
27.3 |
|
$ |
24.0 |
|
$ |
3.3 |
|
14 |
% |
|
|
|
|
|
Gross Profit ($) |
$ |
11.2 |
|
$ |
9.3 |
|
$ |
1.9 |
|
21 |
% |
Gross Profit (%) |
|
41.2 |
% |
|
38.8 |
% |
|
2.4 |
% |
6 |
% |
|
|
|
|
|
Income from Operations |
$ |
3.7 |
|
$ |
2.2 |
|
$ |
1.5 |
|
69 |
% |
Income Tax Expense |
$ |
0.8 |
|
$ |
0.5 |
|
$ |
0.3 |
|
54 |
% |
|
|
|
|
|
Net
Income |
$ |
3.0 |
|
$ |
1.9 |
|
$ |
1.2 |
|
62 |
% |
Net
Income per Diluted Share |
$ |
0.22 |
|
$ |
0.14 |
|
$ |
0.08 |
|
57 |
% |
|
|
|
|
|
Fiscal 2020
Financial Summary |
|
(in millions
except per share data and percentages) |
2020 YTD |
vs. 2019 YTD |
Change |
Change (%) |
Revenue |
$ |
93.1 |
|
$ |
85.0 |
|
$ |
8.0 |
|
9 |
% |
|
|
|
|
|
Gross Profit ($) |
$ |
37.9 |
|
$ |
32.7 |
|
$ |
5.2 |
|
16 |
% |
Gross Profit (%) |
|
40.7 |
% |
|
38.4 |
% |
|
2.3 |
% |
6 |
% |
|
|
|
|
|
Income from Operations |
$ |
8.4 |
|
$ |
5.2 |
|
$ |
3.2 |
|
62 |
% |
Income Tax Expense |
$ |
1.9 |
|
$ |
1.4 |
|
$ |
0.5 |
|
37 |
% |
|
|
|
|
|
Net
Income |
$ |
7.3 |
|
$ |
4.6 |
|
$ |
2.7 |
|
60 |
% |
Net
Income per Diluted Share |
$ |
0.53 |
|
$ |
0.34 |
|
$ |
0.19 |
|
56 |
% |
|
|
|
|
|
Management Commentary“The fourth quarter of
fiscal 2020 capped off a record year for Clearfield,” said Company
President and CEO Cheri Beranek. “The fourth quarter marked the
highest quarterly revenue level in our company’s history, bringing
our total revenue for the fiscal year 2020 to a record $93.1
million. Our record topline results were driven by solid
contributions across our core markets, including 48% growth in our
MSO (Multiple System Operators) revenue, 18% growth in our National
Carrier revenue and 10% growth in our Community Broadband
revenue.
“As our overall performance in fiscal Q4 and fiscal 2020
indicate, we are realizing demonstrable results from our execution
of our ‘Coming of Age’ Plan, which is designed to strengthen our
core business and position our company for disruptive growth
opportunities, and from our ability to take advantage of the shifts
in demand driven by COVID-19. Fiscal Q4 represented a continuation
of our Community Broadband customers accelerating their purchasing
decisions and deployments in response to COVID-19. This trend is
carrying into fiscal 2021, supported by continued demand for
broadband and the government programs such as The CARES Act are
helping to fund and accelerate these deployments. Our track record
and reputation in the Community Broadband market has positioned us
extremely well to take share and further capitalize on the
expansion that’s currently underway which we believe will
accelerate due to pending programs including the Rural Digital
Opportunity Fund, or RDOF initiative, which will finance up to
$20.4 billion of gigabit speed broadband over the next ten
years.
“Our successful execution on our operational effectiveness
initiatives over the last several quarters are most evident by our
increasing gross profit in fiscal Q4. One of the underlying drivers
for this improvement is leveraging our core nucleus of U.S.-based
operations for value-added integration while we’ve capitalized on
the investments we’ve made in our operations in Mexico. These
investments are starting to yield beneficial results both in
improved efficiencies and cost effectiveness.
“An integral part of our success has been our employees’
unwavering commitment to providing best-in-class products and
customer support, and none of this could have been accomplished
without their dedication to our mission.
“Our strong financial and operational performance in fiscal 2020
speaks to the resiliency of our business as well as our strategic
positioning within our customer base and industry. Our success in
fiscal Q4 specifically has given us significant momentum starting
our fiscal year Q1, giving us a bullish outlook for fiscal 2021.
The business case for optical fiber markets for 5G and Access
Networks deployment couldn’t be more evident. Based on our strong
backlog, ongoing robust bookings and pipeline of business, we
currently anticipate a strong first quarter of fiscal 2021 compared
to the same year-ago period. Longer term, the traction we are
getting with our ‘Coming of Age’ Plan and the success of our
operational improvements positions Clearfield for even greater
success in the years ahead.”
Financial Results for the Year
Ended September
30, 2020Revenues
increased 9% to $93.1 million for the year ended September 30, 2020
from $85.0 million in fiscal 2019. The increase in revenues was
primarily due to higher sales in the Company’s National Carrier,
MSO and Community Broadband markets, partially offset by lower
sales in the Company’s international and contract manufacturing
markets. We anticipate the momentum will continue into FY 2021 Q1
in that order backlog (defined as purchase orders received but not
yet fulfilled) as of September 30, 2020 increased 26% to $10.7
million from $8.5 million at June 30, 2020 and increased 153% to
$10.7 million from $4.2 million as of September 30, 2019.
Gross profit was $37.9 million, or 40.7% of revenue, for the
year ended September 30, 2020, an increase of 16% from $32.7
million, or 38.4% of revenue, in fiscal 2019. The increase in gross
profit dollars was due to increased sales volume. The increase in
gross profit percent was due to a favorable product mix and cost
reduction efforts across the Company’s product lines, including
increased production at its Mexico manufacturing plants and
efficiencies realized from supply chain programs, and lower tariff
costs.
Operating expenses increased 7% to $29.5 million for the year
ended September 30, 2020 from $27.5 million during the same period
in fiscal 2019. The increase in operating expenses was primarily
due to the higher compensation and performance incentive expenses
and external sales commissions and agent fees, offset by lower
stock-based compensation expense and travel, entertainment and
marketing costs due to COVID-19 restrictions.
Income from operations totaled $8.4 million for the year ended
September 30, 2020 compared to $5.2 million in fiscal 2019.
Income tax expense was $1.9 million for the year ended September
30, 2020 as compared to $1.4 million during the same period in
fiscal 2019 due to higher taxable income. Net income totaled $7.3
million, or $0.53 per diluted share, for the year ended September
30, 2020, an improvement from $4.6 million, or $0.34 per diluted
share, in fiscal 2019.
As of September 30, 2020, cash, cash equivalents and investments
totaled $52.2 million, which compares to $47.5 million as of
September 30, 2019.
Financial Results for the Quarter Ended September 30,
2020
Revenue for the fourth quarter of fiscal 2020 increased 14% to
$27.3 million from $24.0 million in the same year-ago quarter. The
increase in revenues was primarily due to higher sales in the
Company’s Community Broadband and MSO markets, partially offset by
decreases in national carrier revenue due to ordering cycles and
our international market.
Gross profit for the fourth quarter of fiscal 2020 increased 21%
to $11.2 million, or 41.2% of revenue, from $9.3 million, or 38.8%
of revenue, in the fourth quarter of fiscal 2019. The increase in
gross profit dollars was due to increased sales volume. The
increase in gross profit percent was due to a favorable product mix
and cost reduction efforts across the Company’s product lines,
including increased production at its Mexico manufacturing plants,
and efficiencies realized from supply chain programs and lower
tariff costs.
Operating expenses for the fourth quarter of fiscal 2020 totaled
$7.6 million, which compares to $7.1 million 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 increased 69% to $3.7 million for the
fourth quarter of fiscal 2020 from $2.2 million in the same
year-ago quarter.
Income tax expense increased 54% to $786,000 for the fourth
quarter of fiscal 2020 from $511,000 in the same year-ago quarter
due to higher taxable income. Net income was $3.0 million for the
fourth quarter of fiscal 2020, or $0.22 per diluted share, from
$1.9 million, or $0.14 per diluted share in the same year-ago
quarter.
Conference CallClearfield management will hold
a conference call today, November 4, 2020 at 5:00 p.m. Eastern
Standard Time (4:00 p.m. Central Standard 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: 1-800-771-6883International dial-in:
1-212-231-2915Conference ID: 21971085
The conference call will be webcast live and available for
replay here: http://public.viavid.com/index.php?id=142048.
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 November 18, 2020.
U.S. replay dial-in: 1-844-512-2921International replay dial-in:
1-412-317-6671Replay ID: 21971085
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
InformationForward-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 expected impact of COVID-19 and related
economic uncertainty, the Company’s future revenue and operating
performance, the impact of the CARES Act or other government
programs on the demand for the Company’s products or timing of
customer orders, 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 as yet-unknown impact of COVID-19 and related economic
uncertainty; to compete effectively, we must continually improve
existing products and introduce new products that achieve market
acceptance; our expected growth is based upon the expansion of the
telecommunications market; our operating results may fluctuate
significantly from quarter to quarter, which may make budgeting for
expenses difficult and may negatively affect the market price of
our common stock; our success depends upon adequate protection of
our patent and intellectual property rights; intense competition in
our industry may result in price reductions, lower gross profits
and loss of market share; we rely on single-source suppliers, which
could cause delays, increases in costs or prevent us from
completing customer orders, all of which could materially harm our
business; 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 or significant decline in business
with these major customers would 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 that could adversely affect
future operating results; 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 upon
key personnel; we face risks associated with expanding our sales
outside of the United States; our business is dependent on
effective management information systems and information technology
infrastructure; our results of operations could be adversely
affected by economic conditions and the effects of these conditions
on our customers’ businesses; changes in government funding
programs may cause our customers and prospective customers to delay
or reduce purchases; 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.
Investor Relations Contact:Matt Glover
and Tom ColtonGateway Investor
Relations1-949-574-3860CLFD@gatewayir.com
CLEARFIELD, INC. |
|
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|
|
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STATEMENTS OF EARNINGS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
(Unaudited) |
|
|
|
|
Three Months
Ended |
|
Year Ended |
|
|
September 30, |
|
September 30, |
|
|
|
|
2020 |
|
|
|
2019 |
|
|
|
2020 |
|
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
$ |
|
27,317,969 |
|
$ |
|
23,968,423 |
|
$ |
|
93,074,514 |
|
$ |
|
85,034,182 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales |
|
|
16,072,909 |
|
|
|
14,663,868 |
|
|
|
55,160,316 |
|
|
|
52,345,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit |
|
|
11,245,060 |
|
|
|
9,304,555 |
|
|
|
37,914,198 |
|
|
|
32,689,123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and |
|
|
|
|
|
|
|
|
|
|
|
|
administrative |
|
|
7,565,160 |
|
|
|
7,126,376 |
|
|
|
29,530,198 |
|
|
|
27,500,989 |
|
Income from
operations |
|
|
3,679,900 |
|
|
|
2,178,179 |
|
|
|
8,384,000 |
|
|
|
5,188,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
155,427 |
|
|
|
220,985 |
|
|
|
770,950 |
|
|
|
738,459 |
|
Income before income taxes |
|
3,835,327 |
|
|
|
2,399,164 |
|
|
|
9,154,950 |
|
|
|
5,926,593 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense |
|
|
785,884 |
|
|
|
511,437 |
|
|
|
1,861,884 |
|
|
|
1,360,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
$ |
|
3,049,443 |
|
$ |
|
1,887,727 |
|
$ |
|
7,293,066 |
|
$ |
|
4,566,156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
per share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
|
0.22 |
|
$ |
|
0.14 |
|
$ |
|
0.53 |
|
$ |
|
0.34 |
|
Diluted |
$ |
|
0.22 |
|
$ |
|
0.14 |
|
$ |
|
0.53 |
|
$ |
|
0.34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
13,650,316 |
|
|
|
13,502,178 |
|
|
|
13,643,355 |
|
|
|
13,442,871 |
|
Diluted |
|
|
13,650,316 |
|
|
|
13,502,178 |
|
|
|
13,643,355 |
|
|
|
13,451,214 |
|
|
|
|
|
|
|
|
|
|
|
|
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|
CLEARFIELD, INC. |
|
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BALANCE SHEETS |
|
|
|
|
|
|
|
September
30, |
|
|
September
30, |
|
|
2020 |
|
|
2019 |
Assets |
|
|
|
|
|
Current
Assets |
|
|
|
|
|
Cash and
cash equivalents |
$ |
16,449,636 |
|
$ |
10,081,721 |
Short-term
investments |
|
10,582,527 |
|
|
13,524,270 |
Accounts
receivable, net |
|
10,496,672 |
|
|
9,118,639 |
Inventories,
net |
|
14,408,538 |
|
|
9,012,980 |
Other
current assets |
|
585,436 |
|
|
769,161 |
Total
current assets |
|
52,522,809 |
|
|
42,506,771 |
|
|
|
|
|
|
Property,
plant and equipment, net |
|
5,109,988 |
|
|
5,413,241 |
|
|
|
|
|
|
Other
Assets |
|
|
|
|
|
Long-term
investments |
|
25,143,000 |
|
|
23,902,000 |
Goodwill |
|
4,708,511 |
|
|
4,708,511 |
Intangible
assets, net |
|
4,829,047 |
|
|
5,147,135 |
Right of use
lease assets |
|
2,539,100 |
|
|
- |
Deferred tax
asset |
|
178,118 |
|
|
- |
Other |
|
266,857 |
|
|
210,905 |
Total other
assets |
|
37,664,633 |
|
|
33,968,551 |
Total
Assets |
$ |
95,297,430 |
|
$ |
81,888,563 |
|
|
|
|
|
|
Liabilities
and Shareholders' Equity |
|
|
|
|
|
Current
Liabilities |
|
|
|
|
|
Current
portion of lease liability |
$ |
665,584 |
|
$ |
- |
Accounts
payable |
|
3,689,587 |
|
|
3,173,599 |
Accrued
compensation |
|
4,856,885 |
|
|
3,224,860 |
Accrued
expenses |
|
1,202,753 |
|
|
208,603 |
Total
current liabilities |
|
10,414,809 |
|
|
6,607,062 |
|
|
|
|
|
|
Other
Liabilities |
|
|
|
|
|
Long-term
portion of lease liability |
|
2,129,343 |
|
|
- |
Deferred tax
liability |
|
- |
|
|
101,690 |
Deferred
rent |
|
- |
|
|
246,424 |
Total other
liabilities |
|
2,129,343 |
|
|
348,114 |
Total
Liabilities |
|
12,544,152 |
|
|
6,955,176 |
|
|
|
|
|
|
Shareholders' Equity |
|
|
|
|
|
Common
stock |
|
136,500 |
|
|
136,418 |
Additional
paid-in capital |
|
57,502,905 |
|
|
56,976,162 |
Retained
earnings |
|
25,113,873 |
|
|
17,820,807 |
Total
Shareholders' Equity |
|
82,753,278 |
|
|
74,933,387 |
Total
Liabilities and Shareholders' Equity |
$ |
95,297,430 |
|
$ |
81,888,563 |
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
Year Ended |
|
|
|
|
September 30, |
|
|
September 30, |
|
|
|
|
2020 |
|
|
2019 |
Cash flows
from operating activities: |
|
|
|
|
|
|
|
Net income |
|
|
$ |
7,293,066 |
|
|
$ |
4,566,156 |
|
Adjustments to reconcile net income to cash provided |
|
|
|
|
|
|
|
by (used in) operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
2,421,754 |
|
|
|
2,178,409 |
|
Change in allowance for doubtful accounts |
|
|
|
- |
|
|
|
210,000 |
|
Amortization of discount on investments |
|
|
|
(64,327 |
) |
|
|
(71,652 |
) |
Deferred income taxes |
|
|
|
(279,808 |
) |
|
|
(3,245 |
) |
Loss on disposal of assets |
|
|
|
5,785 |
|
|
|
- |
|
Stock-based compensation expense |
|
|
|
773,555 |
|
|
|
1,729,025 |
|
Changes in operating assets and liabilities; |
|
|
|
|
|
|
|
Accounts receivable |
|
|
|
(1,378,033 |
) |
|
|
3,492,619 |
|
Inventories |
|
|
|
(5,395,558 |
) |
|
|
1,037,155 |
|
Other current assets |
|
|
|
127,773 |
|
|
|
(10,469 |
) |
Accounts payable, accrued expenses and |
|
|
|
|
|
|
|
deferred rent |
|
|
|
3,151,566 |
|
|
|
1,604,655 |
|
Net cash
provided by operating activities |
|
|
|
6,655,773 |
|
|
|
14,732,653 |
|
|
|
|
|
|
|
|
|
Cash flows
from investing activities: |
|
|
|
|
|
|
|
Purchases of property, plant and equipment and |
|
|
|
|
|
|
|
intangible assets |
|
|
|
(1,806,198 |
) |
|
|
(2,511,646 |
) |
Purchase of investments |
|
|
|
(34,056,930 |
) |
|
|
(20,311,393 |
) |
Proceeds from maturities of investments |
|
|
|
35,822,000 |
|
|
|
9,861,000 |
|
Net cash
used in investing activities |
|
|
|
(41,128 |
) |
|
|
(12,962,039 |
) |
|
|
|
|
|
|
|
|
Cash flows
from financing activities: |
|
|
|
|
|
|
|
Repurchases of common stock |
|
|
|
(428,654 |
) |
|
|
- |
|
Proceeds from issuance of common stock under |
|
|
|
348,776 |
|
|
|
313,891 |
|
employee stock purchase plan |
|
|
|
|
|
|
|
Proceeds from issuance of common stock |
|
|
|
9,564 |
|
|
|
2,604 |
|
employee stock purchase plan |
|
|
|
|
|
|
|
Tax withholding related to vesting of restricted stock |
|
|
|
|
|
|
|
grants and exercise of stock options |
|
|
|
(176,416 |
) |
|
|
(553,165 |
) |
Net cash
used in financing activities |
|
|
|
(246,730 |
) |
|
|
(236,670 |
) |
Increase in
cash and cash equivalents |
|
|
|
6,367,915 |
|
|
|
1,533,944 |
|
Cash and
cash equivalents at beginning of year |
|
|
|
10,081,721 |
|
|
|
8,547,777 |
|
Cash and
cash equivalents at end of year |
|
|
$ |
16,449,636 |
|
|
$ |
10,081,721 |
|
|
|
|
|
|
|
|
|
Supplemental
disclosures for cash flow information |
|
|
|
|
|
|
|
Cash paid
during the year for income taxes |
|
|
$ |
1,442,079 |
|
|
$ |
1,683,113 |
|
|
|
|
|
|
|
|
|
Non-cash
financing activities |
|
|
|
|
|
|
|
Cashless
exercise of stock options |
|
|
$ |
97,811 |
|
|
$ |
17,390 |
|
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