Scott Searle: Great. Thanks. I’ll get back in the queue. And, Cheri, please send that warm weather east. Thanks.
Cheri Beranek: Thank you.
Scott Searle: No.
Operator: Our next question comes from the line of Ryan Koontz with Needham and Company. Please proceed with your question.
Ryan Koontz: Thanks for the question. On your customer segments here with the step down at community broadband, it’s definitely at a multiyear low pre-pandemic. And I wonder if you thought about if you parsed out the results you had in December and thought forward at least into March, what the impact – what the headwind is there specifically in community broadband? Is it dominantly inventory? Is it dominantly conservation of capital and resources to plan for bead? If you can help us there, that’d be really helpful? Thank you.
Cheri Beranek: Yes. I think it’s a combination of all of the above. I mean, mostly community broadband did not have a strong inventory position. The higher level of inventory being held is at the large regional providers and so with those regional providers now starting to kind of work through their mix, that’s actually a really positive sign for us. I think the community broadband numbers are very relative to what others in the industry. As Scott said from Roth the Calix announcements earlier this week, it’s very consistent. Community broadband is holding back, evaluating what they’re going to do, making sure they have the right funding, and they’re going to be able to have their engineers in the right place for where they get their funding or where they don’t.
So, I mean, those of us who have been in this market for a long time know that government funding is fabulous, but it also is frustrating because back in 2008 when we probably got the previous time that we got a chunk of money into this market, it put a lull in our business for probably close to nine months, and so this is no different. So we’re confident it’ll come back. It is just a reflection of people evaluating their options.
Ryan Koontz: Great. And it sounds like from your comment there, the regional’s you’re seeing some improvement in the inventory situation at your regionals and a little more pull, is that accurate?
Cheri Beranek: Right. I think it’s the standpoint of the analogy I’ve used. I think it’s very descriptive of forks and knives. They’ve got all the forks they need, but now they’re finding out they need more knives. And so that’s a really good sign that it’s starting to kind of work itself out and that they made estimates upon what they’re going to need and they made estimates in regard to the mix of what they’re going to need. So it is definitely starting to improve. And I think it’s important to note that we did have a record high in the number of homes passed last year. And so this disconnect between the number of homes actually connected and the number of the dollar signs being shown by the manufacturers is a mismatch at the moment. I think that’s really the best reflection or answer to your question.
Ryan Koontz: Okay, great. That’s all I have.
Operator: Our next question comes from the line of Tim Savagenou with Northland Capital Markets. Please proceed with your question.
Tim Savagenou: Hi, good afternoon. I think you might have touched on this a little bit, but I did note a little uptick at least sequentially amongst the larger regional players. And I guess as you look forward here for your – I don’t know, your guide for Fiscal Q2 or even farther out. What do you – €I guess, what do you expect to see from that cohort, and is there any reason that that would diverge from what you’re seeing from your broader community broadband market? And I’ll follow up from there.
Cheri Beranek: I wouldn’t call it diverge. I mean, I think what we’re seeing is Clearfield has been strong for a decade in community broadband, but is emerging as a presence in the large regional providers, in that we took share during the pandemic period. We’re working very hard during that time and now to ensure the stickiness of that relationship, the partnering that we’re doing to help them manage their inventory, to help them reduce the cost of their deployment by taking out labor. So, I think it’ll be an increasing part of our business, but it could be lumpy, because you get an order from a large regional provider that can dwarf some of the other business and maybe put it out of perspective. So, I wouldn’t read into a single quarter at this point in time, but I think it’s good for you – for all of us to see the level of activity underway and the pull through that we’re starting to see.
Tim Savagenou: Okay, great. And obviously I think you saw a seasonal downturn on the international side. I imagine that will. Do you expect that to continue to decline into a Q2 or save a lot – to further deployment…
Johnny Hill: Yes, no, I apologize for interrupting, Tim. Very seasonal and it’s very cold in Northern Europe, even colder than a normal year and started – and the winter started very early as well. So, that the first quarter down in international sales is very seasonal and I fully expect that to be a better number next quarter.
Tim Savagenou: Okay. And last one for me. And you may have touched on this, apologies if you did, but given the bottom line guide, I’m assuming you’re looking for a little more pressure on the gross margin front in Q2. But if you have any specifics you want to share there, that’d be great. Thanks.
Johnny Hill: Yes, it’s kind of consistent with where we finished our Q1 in revenue. So, we’re not forecasting going up on that. So, you’d see, you’re kind of seeing it slightly lower the range that we provided. So that’s there. And then it’s predominantly related to the non-cash inventory reserves that we’d be taking. So like I mentioned to Scott, like 5.5 [ph] on that, so that puts pressure on us. Obviously, the lower volume is there. That’s just going to be a given anytime that were, let’s say below our higher revenue quarters. So that’s a given. But the big change is related to the excess inventory reserves. That’s what pushes the margin down.
Tim Savagenou: Got it. Thanks very much.
Operator: [Operator Instructions] Our next question comes from the line of Jaeson Schmidt with Lake Street. Please proceed with your question.
Jaeson Schmidt: Hey guys, thanks for taking my questions. Just a few questions on Nestor. I think previously there was the expectation for the Nestor business to be able to ramp to that $15 million range in the summer months. Is that still possible?
