- Total Net Sales: $48.8 million, a 20% decrease from $61.3 million in the same year-ago period.
- Community Broadband Net Sales: $19.6 million, up 2% from the prior year third quarter.
- MSO Business Net Sales: $5.8 million, a decrease of approximately 39% from the prior year third quarter.
- Large Regional Service Provider Net Sales: $3.8 million, a decline of approximately 76% from the prior year third quarter.
- National Carrier Market Net Sales: $2.3 million, up 17% from the prior year third quarter.
- International Market Net Sales: $16.5 million, an increase of approximately 16% from the prior year third quarter.
- Gross Profit Margin: 21.9% of net sales, down from 31.1% in the same year-ago quarter.
- Operating Expenses: $13 million, down from $13.4 million in the same year-ago quarter.
- Net Loss: $447,000, compared to net income of $5.2 million in the same year-ago period.
- Order Backlog: Decreased 31% to $32.6 million from $47.2 million on March 31, 2024.
- Cash, Short-term and Long-term Investments: $148 million.
- Debt: $2.1 million.
- Capital Expenditures: $1.2 million in the quarter, $5.6 million year-to-date.
- Inventory Balance: Decreased from $84 million to $75 million.
- Positive Cash Flow from Operations: $3.9 million in the third quarter, $8.5 million year-to-date.
- Share Repurchases: $5.5 million in the third quarter, representing 184,751 shares at an average price of $29.91.
- Fourth Quarter Fiscal 2024 Net Sales Guidance: $40 million to $43 million.
- Fourth Quarter Fiscal 2024 Net Loss Per Share Guidance: $0.17 to $0.22.
Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total net sales for the third quarter of fiscal 2024 were $48.8 million, above the high end of the guidance range.
- Strong sales in the international customer segment and higher than expected sales from community broadband customers.
- Growing interest in active cabinets for new applications in adjacent markets, including transportation support and traffic monitoring.
- Positive feedback for the recently introduced 3D interactive fiber installation tool on the BILT mobile app.
- Healthy balance sheet with $148 million of cash, short-term and long-term investments, and just $2.1 million of debt.
Negative Points
- Consolidated net sales in the third quarter of fiscal 2024 were down 20% from the same year-ago period.
- Order backlog decreased 31% to $32.6 million on June 30, 2024, from $47.2 million on March 31, 2024.
- Gross profit margin in the third quarter was 21.9% of net sales, down from 31.1% in the same year-ago quarter.
- Net loss in the third quarter was $447,000, compared to net income of $5.2 million in the same year-ago period.
- Visibility remains limited beyond the fourth quarter, as the industry is working through remaining inventory-related challenges.
Q & A Highlights
Q: Can you provide more details on the timing of BEAD projects and your expectations for revenue recognition?
A: We are being realistic about the timeline. While there is industry optimism for projects beginning mid-2025, we expect significant revenue from BEAD projects to start late in calendar 2025, with more substantial activity in fiscal 2026. Given our fiscal year ends in September, it will be challenging to see revenue within the next fiscal year.
Q: Which international markets and products are driving growth for Nestor Cables?
A: Finland remains our core market, but we are also seeing opportunities in Germany, particularly with alternative carriers. Our early success in Germany is with Microduct, providing a high-quality make-ready solution, which we aim to leverage for future build-out processes.
Q: How has the product mix in community broadband shifted, and what are your expectations going forward?
A: There has been a significant shift towards connected homes, with our cabinet business down and connected business sales up. Currently, the mix is about 50-50, which is healthy. We expect this trend to continue as homes passed are connected over the next two to three years.
Q: Are you seeing any share gains in the community broadband market?
A: While we are gaining a share of the pocketbook, we are cautious about quantifying share gains. Many of these customers are new, and we are monitoring the process to provide accurate information to the market.
Q: Can you clarify the impact of the E&O write-off on gross margins this quarter?
A: The E&O write-off was lower than expected, around $1.7 million compared to the forecasted $3 million. This better utilization was due to higher demand, positively impacting our gross margins.
Q: Is there an opportunity for Nestor Cables in the data center market?
A: While our products fit into the data center space, we currently do not have a channel into that market. We are evaluating the opportunity, but it is not a near-term focus for shareholders to consider.
Q: Was any revenue pulled into the June quarter, and what are your expectations for the fourth quarter?
A: Only in the international markets, where a European customer took some product early to maximize their build season. We expect the fourth quarter to be slightly lower in Europe but consistent in North America.
Q: Is there potential upside in the gross margin for Nestor Cables?
A: Yes, there is significant upside. We are investing in the Estonia plant and high-speed fiber line to lower manufacturing costs and improve margins.
Q: What are your thoughts on inventory levels with large service providers and MSOs?
A: Community broadband inventories are close to normalizing, but large regionals and MSOs still have elevated levels. We anticipate new orders from large regionals by the first quarter of our next fiscal year.
Q: How are you thinking about cash utilization, including share buybacks and inorganic opportunities?
A: We are evaluating inorganic opportunities, focusing on adjacent markets where we already have a base. We are also pleased with our share buyback actions and continue to monitor them.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
