Clearfield Q2 2026 Earnings Call - BEAD Delays Offset by Private Build Surge

Conference Call Operator: Good afternoon, everyone, and welcome to the Clearfield Fiscal second quarter 2026 conference call. All participants will be in listen-only mode. Brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference call, please press star 0 on your telephone keypad. Please also note today’s event is being recorded. At this time, I’d like to turn the floor over to Gregory McNees, investor relations. Sir, please go ahead.

Gregory McNees, Investor Relations, Clearfield: Thank you. Joining me on today’s call are Cheri Beranek, Clearfield’s President and CEO, and Dan Herzog, Clearfield’s CFO. As a reminder, Clearfield publishes 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 a 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.

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 will turn it over to Cheri Beranek. Cheri Beranek?

Cheri Beranek, President and CEO, Clearfield: Good afternoon, everyone. Thank you for joining us to discuss Clearfield’s results for the second quarter of fiscal 2026. I’ll begin with an overview of the quarter and our strategic priorities, and then I’ll turn the call over to Dan to review the financial details and outlook. Second quarter net sales were $34.4 million, which came in toward the high end of our guidance range of $32 million-$35 million. Our performance was driven by continued strength in our community broadband market, with year-to-date revenues up 5% over the same period of last year. Our net loss per share of $0.04 was within our guidance range.

Our backlog rose 39 sequentially from the first fiscal quarter, resulting in a book-to-bill ratio of 1.3 for the quarter, consistent with typical summer seasonality and supportive of our outlook for the second half of the year. We are focused on consistent execution while investing in Clearfield’s next phase of growth. To that end, we are building a significant pipeline of opportunities beyond our traditional broadband customer base. While these adjacent markets have yet to contribute meaningful revenue, reflecting their longer sales cycles, they do represent a compelling avenue for future expansion, and early indications are encouraging. In particular, we are seeing increasing engagement linked to data center environments where capacity expansion is driving more consistent infrastructure planning needs. As these opportunities develop, we expect them to contribute meaningfully to revenue, driving a gradual broadening of our revenue base.

Recently, Clearfield hosted Fiber to the Future at our headquarters, a program that brought together key thought leaders from across our industry. The event featured demonstrations of our BABA-ready cable extrusion capabilities and optical fiber termination solutions, alongside insights from these leaders. Participants included executives from service providers, our top distributors, industry media, and association leaders gained a clear view of how Clearfield’s innovation and operational excellence position us to meet the growing data infrastructure demands driven by fiber-enabled artificial intelligence. As Edge AI takes shape, Clearfield demonstrated throughout the day its innovation and thought leadership. From an industry perspective, the pace of the BEAD funding process continues to be the primary constraint on our core business. While we are seeing early-stage planning and design activity across our customer base, the timing of funding disbursements remain uncertain, which is delaying order activity.

We continue to expect meaningful BEAD-related revenue to materialize in fiscal 2027 as the program is deployed across the states. In response to the current environment, we have maintained a proactive approach to ensure that we are well-positioned as demand materializes. We are deepening engagement with customers as projects progress toward execution and aligning our resources to support anticipated build activity, including the compliance with BABA requirements. Our focus remains on understanding where customers are in their planning process and how we can best support them as projects take shape. We believe this approach enables us to allocate resources effectively and to stay closely aligned with customers as their deployments advance. Looking ahead, we are increasingly focused on longer-term opportunities tied to distributed compute and edge infrastructure.

Industry trends continue to support a shift toward compute closer to the end user as low latency AI applications require faster processing capabilities between compute and storage, rather than relying solely on centralized data centers. This dynamic will drive the build-out of smaller distributed edge locations that function like compact data centers and require high density fiber connectivity, particularly in markets served by community broadband providers. As a result, there is growing demand for solutions that can be deployed quickly, scaled efficiently, and replicated across numerous sites. We are actively positioning the company to participate in this evolution. Our NOVA platform announced last quarter is designed to address this need by enabling the flexibility and scalability required to support the next generation of Edge AI infrastructure. The platform has been well received, and we anticipate shipping in the second half of this fiscal year.

You can also expect a series of new product launches as we bring proven, hardened, reliable, and scalable outside plant techniques and strategies into this space. With that, I’ll turn the call over to Dan to review our financials and outlook in more detail.

Dan Herzog, Chief Financial Officer, Clearfield: Thank you, Cheri, and good afternoon, everyone. As a reminder, in November, we completed the sale of our Nestor Cables business. As a result, all financial results presented for fiscal year 2025 and all prior periods reflect the Clearfield segment as continuing operations only, with Nestor results reported under discontinued operations in our statement of earnings and statement of cash flows and reported as assets and liabilities held for sale in our balance sheet. With this transaction behind us, our focus and portfolio are now fully centered on the Clearfield business and the execution of our core strategy. Second quarter net sales were $34.4 million, a 15% decrease from $40.6 million in the prior year’s second quarter.

This decline was partially due to a pull-in by a large regional customer into last year’s second quarter from our fiscal year 2025 third quarter. Revenue was flat sequentially, primarily due to expected seasonality in the winter months. Gross profit margin was 32.5%, down from 34.4% in the prior year’s second quarter and down slightly from 33.2% in the first quarter of fiscal 2026, mainly due to lower sales volume. Operating expenses for the second quarter of fiscal 2026 were $13.2 million in comparison to $12.3 million in the prior year’s second quarter, primarily due to investments to support future planned growth, including in adjacent markets.

Net loss in the second quarter of fiscal 2026 was $500,000 or a net loss of $0.04 per diluted share compared to net income of $1.3 million or net income of $0.18 per diluted share in the prior year’s second quarter. We ended the quarter with approximately $147 million in cash, short-term and long-term investments and no debt. During the quarter, we repurchased 237,000 shares for $7.3 million as part of our share buyback program. For the third fiscal quarter of 2026, we anticipate net sales from continuing operations to be in the range of $42 million-$46 million. Operating expenses to remain relatively consistent with our second quarter and net income per diluted share in the range of $0.17-$0.21.

The earnings per share ranges are based on the number of shares outstanding at the end of the second quarter of fiscal 2026 and do not reflect potential additional share repurchases completed. For the full year fiscal 2026, we are reiterating our guidance for net sales from continuing operations in the range of $160 million-$170 million, which represents approximately 10% top-line growth at the midpoint. Operating expenses as a percentage of revenue to remain consistent with fiscal 2025, net income per share to be in the range of $0.48-$0.62. With that, we will open the call to your questions.

Conference Call Operator: Thank you. To ask a question, you may press star then one on your telephone keypad. If you’re 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’ll pause momentarily to assemble a roster. Once again, if you have a question, please press star then one. The first question comes from Brian Coots with Needham and Company. Please go ahead.

Brian Coots, Analyst, Needham and Company: Hey, guys. Thanks for the question. I wonder if you could, you know, give us a little more color on where BEAD is here. We’re hearing, you know, from other vendors and just, you know, industry press that maybe operators are starting to see that money and engaging in projects. I mean, what are you seeing in terms of hard data from operators that are gonna get BEAD awards? Are you starting to see forecasts or maybe early orders? Maybe any color there would be great. Thank you.

Cheri Beranek, President and CEO, Clearfield: Hi, Ryan. Yeah, the BEAD is unfortunately, I would say, slower than expected. We are, or expected by the industry, but consistent with our outlook that we believe it is a 27 revenue opportunity for us, you know, starting in, you know, late fall, early winter, and moving into next year. The, you know, we absolutely are seeing, you know, customers talking about their planning cycles. We’re talking to customers about, you know, their network designs and the kind of products that they’ll be, you know, looking for from us and quoting that activity.

The, I would say that there have been some challenges, you know, associated with trying to be able to align the availability of optical fiber from the fiber vendors, so that there’s a knowledge of when that product, those materials are going to ship so they can plan accordingly and to receive their financing. So I would say, today you know, I think the government still has some work to do in order to get material or, you know, the program underway. We’re gonna have some obstacles associated with, you know, just how that fiber, or excuse me, the project financing, the match, gets aligned.

Again, as I indicated, some of the fiber that needs to be able to come from the domestic providers.

Brian Coots, Analyst, Needham and Company: Great. That’s helpful. It’s 27 for you guys. It’s, you know, pretty much in line with what we’ve been thinking. Maybe on the regional service providers, any updates there in terms of, you know, puts and takes and how you’re thinking about, you know, this build season with the regionals?

Cheri Beranek, President and CEO, Clearfield: Right, yeah.

Brian Coots, Analyst, Needham and Company: you know, broadly?

Cheri Beranek, President and CEO, Clearfield: I would say that, you know, that’s so we, you know, we started with the negative, which is the things we can’t control, which are, you know, the programs under BEAD. As it relates to private financing, both in community broadband as well as in the large regionals, we’re seeing a strong, you know, build season, which is why we’re looking at, you know, forecasting a 10% increase over last year, for the year after a pretty slow start for the first half of the year.

You know, there has been some uncertainty in the large regionals, as they have been acquired by the tier ones, so that those accounts have a little bit of learning to do in regard to where their, you know, where the bathroom is in the new, in the new place or how they place their purchase orders, I guess is a better way to say it. We also are seeing other large regionals, you know, start to, you know, come into play, and start to be more active in their deployments. I think across the board, the large regionals are a nice, healthy marketplace that will continue to build both with internal financing and with private financing from other vendors.

Brian Coots, Analyst, Needham and Company: Helpful, Cheri. Thank you.

Conference Call Operator: Once again, if you have a question, please press star then one. Since there are no more questions, this concludes the question and answer session. I would like to turn the conference back over to Cheri Beranek for any closing remarks. Please go ahead.

Cheri Beranek, President and CEO, Clearfield: All right. Thank you so much. While it’s unfortunate and disappointing that the BEAD programs are going to be delayed into 2027 for any meaningful revenue, we are extremely proud and pleased of the work that we’ve done to stay alongside our customers and to be supporting them in their planning process. We thank our shareholders for continuing to be patient with us, you know, as we continue to support our customers and are, like, very excited about where that will go as we move forward.

Also want to reiterate the strength of private financing and the work that’s being done to allow fiber to the home to continue to expand, as we know that fiber-driven networks, you know, do provide the best average revenue increase per subscriber for our shareholder, or excuse me, our service provider customers, and are pleased and excited about where that will go. Finally, I did want to point out or remind everyone that Clearfield is about a fiber to anywhere opportunity, and our strategic plan very strongly supports our core marketplace and making sure that we protect our core. We are investing over the course of the last really 18 months in adjacent market opportunities, both bringing our existing product line to new markets as well as to be able to introduce new customers to new product lines.

continue to look forward to telling you about those in the coming months and quarters ahead. With that, we’re excited about the build season and fortunately, we’re looking forward to warmer weather. It’s a little chilly here in Minnesota today. Thanks so much. We appreciate your support.

Conference Call Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.