Clearfield, Inc. Q4 FY2025 earnings call

• Divested the Nestor business to redeploy resources to core North American operations and higher return opportunities. The acquisition of Nestor helped in vertical integration and Build America, Buy America compliance but was a lower margin opportunity outside Finland.
• Focus on Better Broadband and Beyond strategy with three core pillars: protecting core community broadband business, leveraging market position into new fiber connectivity applications, and expanding into adjacent markets.
• Plan to launch two new product lines in 2026: a complete line of splice cases and a next-generation fiber management cassette for non-hyperscale data centers.
• Enhanced sales leadership team with new executives like Chief Commercial Officer, Vice President of Broadband Sales, and Vice President of Distribution Channels and Strategic Alliances. Added Wiremasters as a distribution partner and plan to add a wireless-focused partner.
• 18 of 52 BEAD program proposals approved by NTIA, and Clearfield intends to pursue this opportunity vigorously.

Fourth quarter net sales from Clearfield's continuing operations were $41.1 million, up 13% year over year. For the full year, Clearfield's continuing operations net sales grew 20% to $150 million. Nestor Cables business was divested, so only the Clearfield segment is reported now. Fourth quarter gross margin improved from 26.6% to 34.6% due to better manufacturing efficiencies and overhead absorption with higher volume. Full year gross margin expanded from 20.6% to 33.7% mainly from better overhead absorption, lower inventory reserve charges, and production efficiency improvements.

• Fiscal 2026 continuing operations net sales expected in the range of $160 to $170 million. Growth driven by steady demand for fiber connectivity, but early year pressure from BEAD program delay and government shutdown on community broadband. Operating expenses as percentage of revenue to remain consistent with fiscal 2025, earnings per share from continuing operations in range of 48¢ to 62¢.
• Fiscal 2026 non-continuing operations net sales anticipated in range of $30 million to $33 million, total operating expenses consistent with 2025, net loss per share in range of 8¢ to breakeven.

• Government shutdown affected bookings and forecast for fiscal Q1, though expected to normalize by second quarter. Delay in BEAD program affected community broadband deployments and planning.
• Industry fiber supply issues with Corning's allocation affecting broadband deployments, and Clearfield is working to source equivalent fibers for customers.

Q: Asked about impacts of shutdown on revenue, bookings, and outlook for fiscal Q1.

A: Government shutdown affected bookings, with soft community broadband in fourth quarter, but expected to normalize by second quarter.

Q: Asked about gross margin outlook and how to read margins going forward.

A: Gross margin is volume dependent, with first quarter lighter but expecting scaling with revenue increases.

Q: Asked about industry fiber supply concerns.

A: Fiber supply issues are a concern across all customers, with data center glut affecting Corning's allocation, and Clearfield is sourcing equivalent fibers.

Q: Asked about Nestor's revenue in September and sequential outlook by customer classifications.

A: Nestor had $9.4 million in revenue in September. Community broadband pressured by government and BEAD delay, but large regional and MSO markets are strong.

Q: Asked about BEAD initial orders and magnitude of opportunity.

A: Quoting activity for BEAD but significant revenue expected in summer construction season. Clearfield sees 4-5% of BEAD deployment costs as addressable, but it's a multi-year build.