Long-term trends in broadband infrastructure markets remain strong as more rural communities are expected to be connected to high-speed services. Unfortunately, shorter term, the picture is not as clear.

Brooklyn Park-based broadband equipment provider Clearfield demonstrated that in reporting its fourth-quarter results Thursday after the stock market closed.

"The pendulum swings in our market over the last 12 months have been extreme," Cheri Beranek, Clearfield's chief executive, said in the company's news release.

For its fourth quarter ended Sept. 30, Clearfield earned $2.7 million, or 17 cents a share. Earnings were down 84% from the third quarter of 2023, while revenue decreased 48% to $49.7 million.

Despite the declines in revenue and earnings the company beat analyst expectations of 10 cents a share for the quarter.

"Despite the industry's ongoing challenges, we remain confident in the long-term demand for fiber broadband," Beranek said.

The reason for the short-term fluctuations: While there remains strong end-user demand for rural residents, the companies that build those connections were re-examining their capital spending budgets.

Increased interest rates, a tight labor market, higher inventory levels and slowing economic activity all contributed to the large regional service providers slowing installations, company officials said.

Clearfield's revenue for the full year was $268.7 million, down less than 1%. Net income for the fiscal year was $32.5 million, down 12.1% from the prior year.

Company officials said on the earnings call finances are strong and able to withstand the cyclical downturn.

Clearfield was one of hottest Minnesota stocks in 2021 and 2022 as it benefited from pandemic trends and the growing importance of high-speed internet connections. This year, Clearfield's stock price is down 74% since the start of this year.

Clearfield is working through the guidelines needed to take advantage of recent federal infrastructure bills including the Broadband Equity Access and Deployment (BEAD) program, which has budgeted $42.5 billion for rural broadband funding across all 50 states and the Build America, Buy America (BABA) provisions.

Clearfield is well-suited to benefit from the infrastructure spending in rural and underserved markets. "The rural markets is where our heart is," Beranek said in an interview.

Labor accounts for about 70% of installation-project costs. Clearfield's modular products make installations easier and more efficient for installers by requiring less time-consuming wire splicing and making component connections easier.

Beranek said on the earnings call the company expects grants from the BEAD programs to be made in the second half of 2024. Given the timing of project planning to shovels in the ground, it means Clearfield would see the benefit to its business in 2025.

"There is more market in front of us than we have behind us," Beranek said on the call, asking for patience.