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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
For the transition period from __________________ to ___________________
Commission File Number
(Exact name of registrant as specified in its charter)
|
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
Suite 100
|
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(Address of principal executive offices) |
(Zip Code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
|
Title of each class |
Trading Symbol |
Name of each exchange on which registered |
|
|
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The
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer ☐ Non-accelerated filer ☐ |
Smaller reporting company
Emerging growth company
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
|
Class: |
Outstanding as of August 1, 2025 |
|
Common stock, par value $.01 |
|
CLEARFIELD, INC.
FORM 10-Q
TABLE OF CONTENTS
CLEARFIELD, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
|
June 30,
|
September 30,
|
|||||||
|
Assets |
||||||||
|
Current Assets |
||||||||
|
Cash and cash equivalents |
$ |
|
$ |
|
||||
|
Short-term investments |
|
|
||||||
|
Accounts receivables, net |
|
|
||||||
|
Inventories, net |
|
|
||||||
|
Other current assets |
|
|
||||||
|
Total current assets |
|
|
||||||
|
Property, plant and equipment, net |
|
|
||||||
|
Other Assets |
||||||||
|
Long-term investments |
|
|
||||||
|
Goodwill |
|
|
||||||
|
Intangible assets, net |
|
|
||||||
|
Right-of-use lease assets |
|
|
||||||
|
Deferred tax asset |
|
|
||||||
|
Other |
|
|
||||||
|
Total other assets |
|
|
||||||
|
Total Assets |
$ |
|
$ |
|
||||
|
Liabilities and Shareholders ’ Equity |
||||||||
|
Current Liabilities |
||||||||
|
Current portion of lease liability |
$ |
|
$ |
|
||||
|
Current maturities of long-term debt |
|
|
||||||
|
Accounts payable |
|
|
||||||
|
Accrued compensation |
|
|
||||||
|
Accrued expenses |
|
|
||||||
|
Bank overdraft |
|
|
||||||
|
Factoring liability |
|
|
||||||
|
Total current liabilities |
|
|
||||||
|
Other Liabilities |
||||||||
|
Long-term debt, net of current maturities |
|
|
||||||
|
Long-term portion of lease liability |
|
|
||||||
|
Deferred tax liability |
|
|
||||||
|
Total liabilities |
|
|
||||||
|
Shareholders’ Equity |
||||||||
|
Preferred stock, $
par value;
|
|
|
||||||
|
Common stock, authorized
|
|
|
||||||
|
Additional paid-in capital |
|
|
||||||
|
Accumulated other comprehensive income |
|
|
||||||
|
Retained earnings |
|
|
||||||
|
Total shareholders’ equity |
|
|
||||||
|
Total Liabilities and Shareholders ’ Equity |
$ |
|
$ |
|
||||
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CLEARFIELD, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
June 30, |
June 30, |
|||||||||||||||
|
2025 |
2024 |
2025 |
2024 |
|||||||||||||
|
Net sales |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
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Cost of sales |
|
|
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||||||||||||
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Gross profit |
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||||||||||||
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Operating expenses |
||||||||||||||||
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Selling, general and administrative |
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||||||||||||
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Income (Loss) from operations |
|
(
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) |
(
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) |
(
|
) | |||||||||
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Net investment income |
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|
|
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||||||||||||
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Interest expense |
(
|
) |
(
|
) |
(
|
) |
(
|
) | ||||||||
|
Income (Loss) before income taxes |
|
(
|
) |
|
(
|
) | ||||||||||
|
Income tax expense (benefit) |
|
(
|
) |
|
(
|
) | ||||||||||
|
Net income (loss) |
$ |
|
$ |
(
|
) | $ |
|
$ |
(
|
) | ||||||
|
Net income (loss) per share Basic |
$ |
|
$ |
(
|
) | $ |
|
$ |
(
|
) | ||||||
|
Net income (loss) per share Diluted |
$ |
|
$ |
(
|
) | $ |
|
$ |
(
|
) | ||||||
|
Weighted average shares outstanding: |
||||||||||||||||
|
Basic |
|
|
|
|
||||||||||||
|
Diluted |
|
|
|
|
||||||||||||
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CLEARFIELD, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(IN THOUSANDS)
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
June 30, |
June 30, |
|||||||||||||||
|
2025 |
2024 |
2025 |
2024 |
|||||||||||||
|
Comprehensive income (loss): |
||||||||||||||||
|
Net income (loss) |
$ |
|
$ |
(
|
) | $ |
|
$ |
(
|
) | ||||||
|
Other comprehensive income (loss), net of tax |
||||||||||||||||
|
Unrealized gain (loss) on available-for-sale investments |
|
|
(
|
) |
|
|||||||||||
|
Unrealized gain (loss) on foreign currency translation |
|
(
|
) |
|
|
|||||||||||
|
Total other comprehensive income (loss) |
|
(
|
) |
|
|
|||||||||||
|
Total comprehensive income (loss) |
$ |
|
$ |
(
|
) | $ |
|
$ |
(
|
) | ||||||
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CLEARFIELD, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS ’ EQUITY
(UNAUDITED)
(IN THOUSANDS)
|
For the three months ended June 30, 2025 |
Accumulated other |
|||||||||||||||||||||||
|
Common Stock |
Additional |
comprehensive |
Retained |
Total share- |
||||||||||||||||||||
|
Shares |
Amount |
paid-in capital |
income |
earnings |
holders’ equity |
|||||||||||||||||||
|
Balance at March 31, 2025 |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||
|
Stock-based compensation expense |
- |
|
|
|
|
|
||||||||||||||||||
|
Issuance of common stock under equity compensation plans, net |
(
|
) |
|
|
|
|
|
|||||||||||||||||
|
Issuance of common stock under employee stock purchase plan |
|
|
|
|
|
|
||||||||||||||||||
|
Repurchase of common stock |
(
|
) |
(
|
) |
(
|
) |
|
|
(
|
) | ||||||||||||||
|
Exercise of stock options, net of shares exchanged for payment |
|
|
(
|
) |
|
|
(
|
) | ||||||||||||||||
|
Other comprehensive income |
- |
|
|
|
|
|
||||||||||||||||||
|
Net income |
- |
|
|
|
|
|
||||||||||||||||||
|
Balance at June 30, 2025 |
|
$ | 138 | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||
|
For the three months ended June 30, 2024 |
Accumulated other |
|||||||||||||||||||||||
|
Common Stock |
Additional |
comprehensive |
Retained |
Total share- |
||||||||||||||||||||
|
Shares |
Amount |
paid-in capital |
income (loss) |
earnings |
holders’ equity |
|||||||||||||||||||
|
Balance at March 31, 2024 |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||
|
Stock-based compensation expense |
- |
|
|
|
|
|
||||||||||||||||||
|
Issuance of common stock under employee stock purchase plan |
|
|
|
|
|
|
||||||||||||||||||
|
Repurchase of common stock |
(
|
) |
(
|
) |
(
|
) |
|
|
(
|
) | ||||||||||||||
|
Other comprehensive loss |
- |
|
|
(
|
) |
|
(
|
) | ||||||||||||||||
|
Net loss |
- |
|
|
|
(
|
) |
(
|
) | ||||||||||||||||
|
Balance at June 30, 2024 |
|
$ | 142 | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CLEARFIELD, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS ’ EQUITY
(UNAUDITED)
(IN THOUSANDS)
|
For the nine months ended June 30, 2025 |
Accumulated other |
|||||||||||||||||||||||
|
Common Stock |
Additional |
comprehensive |
Retained |
Total share- |
||||||||||||||||||||
|
Shares |
Amount |
paid-in capital |
income |
earnings |
holders’ equity |
|||||||||||||||||||
|
Balance as of September 30, 2024 |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||
|
Stock-based compensation expense |
- |
|
|
|
|
|
||||||||||||||||||
|
Issuance of common stock under employee stock purchase plan |
|
|
|
|
|
|
||||||||||||||||||
|
Issuance of common stock under equity compensation plans, net |
|
|
(
|
) |
|
|
|
|||||||||||||||||
|
Repurchase of shares for payment of withholding taxes for vested restricted stock grants |
(
|
) |
|
(
|
) |
|
|
(
|
) | |||||||||||||||
|
Exercise of stock options, net of shares exchanged for payment |
|
|
(
|
) |
|
|
(
|
) | ||||||||||||||||
|
Repurchase of common stock |
(
|
) |
(
|
) |
(
|
) |
|
|
(
|
) | ||||||||||||||
|
Other comprehensive income |
- |
|
|
|
|
|
||||||||||||||||||
|
Net income |
- | - |
|
|
|
|
||||||||||||||||||
|
Balance at June 30, 2025 |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||
|
For the nine months ended June 30, 2024 |
Accumulated other |
|||||||||||||||||||||||
|
Common Stock |
Additional |
comprehensive |
Retained |
Total share- |
||||||||||||||||||||
|
Shares |
Amount |
paid-in capital |
income (loss) |
earnings |
holders’ equity |
|||||||||||||||||||
|
Balance as of September 30, 2023 |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
|
$ |
|
||||||||||||
|
Stock-based compensation expense |
- |
|
|
|
|
|
||||||||||||||||||
|
Issuance of common stock under employee stock purchase plan |
|
|
|
|
|
|
||||||||||||||||||
|
Issuance of common stock under equity compensation plans, net |
|
|
(
|
) |
|
|
|
|||||||||||||||||
|
Repurchase of shares for payment of withholding taxes for vested restricted stock grants |
(
|
) |
|
(
|
) |
|
|
(
|
) | |||||||||||||||
|
Exercise of stock options, net of shares exchanged for payment |
|
|
(
|
) |
|
|
(
|
) | ||||||||||||||||
|
Repurchase of common stock |
(
|
) |
(
|
) |
(
|
) |
|
|
(
|
) | ||||||||||||||
|
Adoption of new accounting pronouncement |
- |
|
|
|
|
|
||||||||||||||||||
|
Other comprehensive income |
- | - |
|
|
|
|
||||||||||||||||||
|
Net loss |
- |
|
|
|
(
|
) |
(
|
) | ||||||||||||||||
|
Balance at June 30, 2024 |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CLEARFIELD, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
|
Nine Months Ended |
Nine Months Ended |
|||||||
|
June 30, |
June 30, |
|||||||
|
2025 |
2024 |
|||||||
|
Cash flows from operating activities |
||||||||
|
Net income (loss ) |
$ |
|
$ |
(
|
) | |||
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
|
Depreciation and amortization |
|
|
||||||
|
Amortization of premium and discount on investments, net |
(
|
) |
(
|
) | ||||
|
Deferred taxes |
(
|
) |
(
|
) | ||||
|
Stock-based compensation |
|
|
||||||
|
Changes in operating assets and liabilities, net of acquired amounts: |
||||||||
|
Accounts receivable |
(
|
) |
|
|||||
|
Inventories, net |
|
|
||||||
|
Other assets |
(
|
) |
(
|
) | ||||
|
Accounts payable and accrued expenses |
|
|
||||||
|
Net cash provided by operating activities |
|
|
||||||
|
Cash flows from investing activities |
||||||||
|
Purchases of property, plant and equipment and intangible assets |
(
|
) |
(
|
) | ||||
|
Purchases of investments |
(
|
) |
(
|
) | ||||
|
Proceeds from maturities of investments |
|
|
||||||
|
Net cash provided by investing activities |
|
|
||||||
|
Cash flows from financing activities |
||||||||
|
Issuance of long-term debt |
|
|
||||||
|
Repayment of long-term debt |
|
(
|
) | |||||
|
Proceeds from issuance of common stock under employee stock purchase plan |
|
|
||||||
|
Repurchase of shares for payment of withholding taxes for vested restricted stock grants |
(
|
) |
(
|
) | ||||
|
Withholding related to exercise of stock options |
(
|
) |
(
|
) | ||||
|
Borrowings and repayments of bank overdrafts, net |
|
|
||||||
|
Borrowings and repayments of factoring liability, net |
|
(
|
) | |||||
|
Repurchase of common stock |
(
|
) |
(
|
) | ||||
|
Net cash used in financing activities |
(
|
) |
(
|
) | ||||
|
Effect of exchange rates on cash |
(
|
) |
|
|||||
|
Increase (decrease) in cash and cash equivalents |
|
(
|
) | |||||
|
Cash and cash equivalents, beginning of period |
|
|
||||||
|
Cash and cash equivalents, end of period |
$ |
|
$ |
|
||||
|
Supplemental disclosures for cash flow information |
||||||||
|
Cash paid for income taxes |
$ |
|
$ |
|
||||
|
Cash paid for interest |
$ |
|
$ |
|
||||
|
Right of use assets obtained through lease liabilities |
$ |
|
$ |
|
||||
|
Non-cash financing activities |
||||||||
|
Cashless exercise of stock options |
$ |
|
$ |
|
||||
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Unless the context otherwise requires, for purposes of this Quarterly Report on Form 10-Q, the words “we,” “us,” “our,” the “Company,” and “Clearfield,” refer to Clearfield, Inc. and subsidiaries.
Basis of Presentation
The accompanying (a) condensed consolidated balance sheet as of September 30, 2024, which has been derived from audited financial statements, and (b) unaudited interim condensed consolidated financial statements as of and for the three and nine months ended June 30, 2025 have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America for interim financial information, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the condensed consolidated financial statements include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the financial position, results of operations, and cash flows of the interim periods presented. Operating results for the interim periods presented are not necessarily indicative of results to be expected for the full year or for any other interim period, due to variability in customer purchasing patterns, seasonality, and other factors. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2024.
In preparation of the Company’s condensed consolidated financial statements, management is required to make estimates and assumptions that affect reported amounts of assets and liabilities and related revenues and expenses during the reporting periods. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of Clearfield, Inc. and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
New Accounting Pronouncements Not Yet Adopted
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . ASU 2023-07 is intended to enhance financial reporting by requiring incremental disclosures for significant segment expenses on an annual and interim basis by public entities required to report segment information in accordance with Accounting Standards Codification Topic 280. The amendments in ASU 2023-07 are to be applied retrospectively to all periods presented in the financial statements and early adoption is permitted. This standard will be applicable to the Company for the 2025 annual period and quarterly periods thereafter. The Company is evaluating its disclosure approach for ASU 2023-07 and plans to adopt the standard for the year ended September 30, 2025, and filings thereafter.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . The new guidance is expected to improve income tax disclosures primarily related to the rate reconciliation and income taxes paid information by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation, and (2) income taxes paid disaggregated by jurisdiction. The guidance is effective on a prospective basis, although retrospective application and early adoption is permitted. The Company is evaluating its disclosure approach for ASU 2023-09 and anticipates adopting the standard for the annual period starting October 1, 2025.
The FASB issued ASU No. 2024-03, (Subtopic 220-4012): Disaggregation of Income Statement Expenses. ASU No. 2024-03 addresses the disaggregation of income statement expenses and aims to provide more detailed information about the types of expenses included in commonly presented expense captions, such as cost of sales, selling, general, and administrative expenses (SG&A), and research and development. ASU 2024-04 can be applied either prospectively to financial statements issued for reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements. The Company is evaluating its disclosure approach for ASU 2024-03 and anticipates adopting the standard for the annual period starting October 1, 2027.
Correction of Prior Period Error
As disclosed in Note 1 to Company’s 2024 Form 10-K, the Company identified a prior period error in the presentation of its Consolidated Statement of Cash Flows. Management determined its presentation of the net borrowings and repayments of factoring receivables was incorrectly presented within the ‘Accounts payable and accrued expenses’ line within operating activities as opposed to being presented within financing activities. As corrected in the Condensed Consolidated Statements of Cash Flows, accounts payable and accrued expenses and net cash provided by operating activities are each increased by $
Note 2. Net Income (Loss) Per Share
Basic net income (loss) per common share (“EPS”) is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the reporting period. Diluted EPS equals net income (loss) divided by the sum of the weighted average number of shares of common stock outstanding plus all additional common stock equivalents, such as stock options, when dilutive.
The following is a reconciliation of the numerator and denominator of the net income (loss) per common share computations for the three and nine months ended June 30, 2025, and 2024:
|
Three Months Ended June 30, |
Nine months Ended June 30, |
|||||||||||||||
|
(In thousands, except for share data ) |
2025 |
2024 |
2025 |
2024 |
||||||||||||
|
Net income (loss) |
$ |
|
$ |
(
|
) | $ |
|
$ |
(
|
) | ||||||
|
Weighted average common shares |
|
|
|
|
||||||||||||
|
Dilutive potential common shares |
|
|
|
|
||||||||||||
|
Weighted average dilutive common shares outstanding |
|
|
|
|
||||||||||||
|
Net income (loss) per common share: |
||||||||||||||||
|
Basic |
$ |
|
$ |
(
|
) | $ |
|
$ |
(
|
) | ||||||
|
Diluted |
$ |
|
$ |
(
|
) | $ |
|
$ |
(
|
) | ||||||
For the three months and nine months ended June 30, 2025,
Note 3. Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The following table presents the Company’s cash and cash equivalents balances:
|
(In thousands) |
June 30, 2025 |
September 30, 2024 |
||||||
|
Cash and cash equivalents: |
||||||||
|
Cash, including money market accounts |
$ |
|
$ |
|
||||
|
Money market funds |
|
|
||||||
|
Total cash and cash equivalents |
$ |
|
$ |
|
||||
The Company maintains cash balances at multiple financial institutions, and at times, such balances exceeded insured limits. The Company has not experienced any losses in such accounts.
Note 4. Investments
The Company invests in United States Treasury securities (“Treasuries”) with terms of not more than five years and certificates of deposit (“CDs”) that are fully insured by the Federal Deposit Insurance Corporation (“FDIC”), as well as money market funds. The Company’s investment portfolio is classified as available-for-sale, which is reported on the consolidated balance sheet at fair value. The unrealized gain or loss on investment securities is recorded in other comprehensive income, net of tax. Realized gains and losses on available-for-sale securities are recognized upon sale and are included in net investment income in the condensed consolidated statement of earnings.
As of June 30, 2025, available-for-sale investments consisted of the following:
|
June 30, 2025 |
||||||||||||||||
|
(In thousands) |
Amortized Cost |
Unrealized Gains |
Unrealized Losses |
Fair Value |
||||||||||||
|
Short-Term |
||||||||||||||||
|
U.S. Treasury securities |
$ |
|
$ |
|
$ |
(
|
) |
$ |
|
|||||||
|
Investment securities – short-term |
$ |
|
$ |
|
$ |
(
|
) |
$ |
|
|||||||
|
Long-Term |
||||||||||||||||
|
U.S. Treasury securities |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Certificates of deposit |
|
|
(
|
) |
|
|||||||||||
|
Investment securities – long-term |
$ |
|
$ |
|
$ |
(
|
) |
$ |
|
|||||||
As of September 30, 2024, available-for-sale investments consisted of the following:
|
September 30, 2024 |
||||||||||||||||
|
(In thousands) |
Amortized Cost |
Unrealized Gains |
Unrealized Losses |
Fair Value |
||||||||||||
|
Short-Term |
||||||||||||||||
|
U.S. Treasury securities |
$ |
|
$ |
|
$ |
(
|
) |
$ |
|
|||||||
|
Certificates of deposit |
|
|
|
|
||||||||||||
|
Investment securities – short-term |
$ |
|
$ |
|
$ |
(
|
) |
$ |
|
|||||||
|
Long-Term |
||||||||||||||||
|
U.S Treasury securities |
$ |
|
$ |
|
$ |
(
|
) |
$ |
|
|||||||
|
Certificates of deposit |
|
|
(
|
) |
|
|||||||||||
|
Investment securities – long-term |
$ |
|
$ |
|
$ |
(
|
) |
$ |
|
|||||||
As of June 30, 2025, investments in debt securities in an unrealized loss position were as follows:
|
In Unrealized Loss Position For Less Than 12 Months |
In Unrealized Loss Position For Greater Than 12 Months |
|||||||||||||||
|
(In thousands) |
Fair Value |
Gross Unrealized Losses |
Fair Value |
Gross Unrealized Losses |
||||||||||||
|
U.S Treasury securities |
$ |
|
$ |
(
|
) |
$ |
|
$ |
(
|
) |
||||||
|
Certificates of deposit |
|
|
|
(
|
) |
|||||||||||
|
Investment securities |
$ |
|
$ |
(
|
) |
$ |
|
$ |
(
|
) |
||||||
As of September 30, 2024, investments in debt securities in an unrealized loss position were as follows:
|
In Unrealized Loss Position For Less Than 12 Months |
In Unrealized Loss Position For Greater Than 12 Months |
|||||||||||||||
|
(In thousands) |
Fair Value |
Gross Unrealized Losses |
Fair Value |
Gross Unrealized Losses |
||||||||||||
|
U.S Treasury securities |
$ |
|
$ |
(
|
) | $ |
|
$ |
(
|
) | ||||||
|
Certificates of deposit |
|
|
|
(
|
) | |||||||||||
|
Investment securities |
$ |
|
$ |
(
|
) | $ |
|
$ |
(
|
) | ||||||
As of June 30, 2025, there were securities in an unrealized loss position which is due to the market paying a higher interest rate than the coupon rate on these securities. As of September 30, 2024, there were securities in an unrealized loss position which is due to the securities paying lower interest rates than the market. As of June 30, 2025, and September 30, 2024, there are securities which are other than temporarily impaired as the Company intends to hold these securities until their value recovers and there is limited credit risk due to the nature of the securities which are backed by the FDIC and U.S. federal government. The Company had no allowance for credit losses on investments for the three and nine months ended June 30, 2025.
Note 5. Fair Value Measurements
The Company determines the fair value of its assets and liabilities based on the market price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company determines the fair value of Treasuries and CDs based on valuations provided by an external pricing service, which obtains them from a variety of industry standard data providers.
The Company’s investments are categorized according to the three-level fair value hierarchy which distinguishes between observable and unobservable inputs, in one of the following levels:
Level 1- Quoted prices in active markets for identical assets or liabilities.
Level 2- Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3- Unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those with fair value measurements that are determined using pricing models, discounted cash flow valuation or similar techniques, as well as significant management judgment or estimation.
The following provides information regarding fair value measurements for the Company’s investment securities as of June 30, 2025, according to the three-level fair value hierarchy:
|
Fair Value Measurements as of June 30, 2025 |
||||||||||||||||
|
( In thousands ) |
Total |
Level 1 |
Level 2 |
Level 3 |
||||||||||||
|
Cash equivalents: |
||||||||||||||||
|
Money market funds |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Total cash equivalents |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Investment securities: |
||||||||||||||||
|
U.S. Treasury securities |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Certificates of deposit |
|
|
|
|
||||||||||||
|
Total investment securities |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
The following provides information regarding fair value measurements for the Company’s investment securities as of September 30, 2024, according to the three-level fair value hierarchy:
|
Fair Value Measurements as of September 30, 2024 |
||||||||||||||||
|
( In thousands ) |
Total |
Level 1 |
Level 2 |
Level 3 |
||||||||||||
|
Cash equivalents: |
||||||||||||||||
|
Money market funds |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Total cash equivalents |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Investment securities: |
||||||||||||||||
|
U.S. Treasury securities |
$ |
|
$ |
|
$ |
|
|
|||||||||
|
Certificates of deposit |
|
|
|
$ |
|
|||||||||||
|
Total investment securities |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
During the three and nine months ended June 30, 2025 and the year ended September 30, 2024, the Company owned Level 3 securities and there were no transfers within the fair value level hierarchy.
Non-financial assets such as equipment and leasehold improvements, goodwill and intangible assets, and right-of-use assets for operating leases are subject to non-recurring fair value measurements if they are deemed impaired. The Company had no re-measurements of non-financial assets to fair value during the three and nine months ended June 30, 2025 and the year ended September 30, 2024.
Note 6. Other Comprehensive Income (Loss)
Changes in components of other comprehensive income (loss), net of tax, are as follows:
|
(In thousands) |
Available-for-Sale Securities |
Foreign Currency Translation |
Accumulated Other Comprehensive Income (Loss) |
|||||||||
|
Balances at September 30, 2024 |
$ |
|
$ |
|
$ |
|
||||||
|
Other comprehensive (loss) for the three months ended December 31, 2024 |
(
|
) |
(
|
) |
(
|
) |
||||||
|
Balances at December 31, 2024 |
$ |
(
|
) |
$ |
|
$ |
(
|
) |
||||
|
Other comprehensive income for the three months ended March 31, 2025 |
|
|
|
|||||||||
|
Balances at March 31, 2025 |
$ |
(
|
) | $ |
|
$ |
|
|||||
|
Other comprehensive income for the three months ended June 30, 2025 |
|
|
|
|||||||||
|
Balances at June 30, 2025 |
$ |
|
$ |
|
$ |
|
||||||
Components of other comprehensive income for the three months ended June 30, 2025 are as follows:
|
Three Months Ended June 30, 2025 |
||||||||||||
|
( In thousands ) |
Before Tax |
Tax Effect |
Net of Tax Amount |
|||||||||
|
Unrealized gain on available-for-sale securities |
$ |
|
$ |
(
|
) |
$ |
|
|||||
|
Unrealized gain on foreign currency translation |
|
(
|
) |
|
||||||||
|
Other comprehensive income |
$ |
|
$ |
(
|
) |
$ |
|
|||||
Components of other comprehensive income for the nine months ended June 30, 2025 are as follows:
|
Nine months Ended June 30, 2025 |
||||||||||||
|
( In thousands ) |
Before Tax |
Tax Effect |
Net of Tax Amount |
|||||||||
|
Unrealized (loss) on available-for-sale securities |
$ |
(
|
) |
$ |
|
$ |
(
|
) | ||||
|
Unrealized gain on foreign currency translation |
|
(
|
) |
|
||||||||
|
Other comprehensive income |
$ |
|
$ |
(
|
) |
$ |
|
|||||
Components of other comprehensive loss for the three months ended June 30, 2024 are as follows:
|
Three Months Ended June 30, 2024 |
||||||||||||
|
( In thousands ) |
Before Tax |
Tax Effect |
Net of Tax Amount |
|||||||||
|
Unrealized gain on available-for-sale securities |
$ |
|
$ |
(
|
) |
$ |
|
|||||
|
Unrealized (loss) on foreign currency translation |
(
|
) |
|
(
|
) | |||||||
|
Other comprehensive (loss) |
$ |
(
|
) |
$ |
|
$ |
(
|
) | ||||
Components of other comprehensive income for the nine months ended June 30, 2024 are as follows:
|
Nine months Ended June 30, 2024 |
||||||||||||
|
( In thousands ) |
Before Tax |
Tax Effect |
Net of Tax Amount |
|||||||||
|
Unrealized gain on available-for-sale securities |
$ |
|
$ |
(
|
) | $ |
|
|||||
|
Unrealized gain on foreign currency translation |
|
(
|
) |
|
||||||||
|
Other comprehensive income |
$ |
|
$ |
(
|
) | $ |
|
|||||
Note 7. Stock-Based Compensation
The Company recorded $
The Company recorded $
Stock Options
The Company uses the Black-Scholes option pricing model to determine the fair value of stock options granted. During the nine months ended June 30, 2025, the Company granted employees non-qualified stock options to purchase an aggregate of
The fair value of stock option awards during the nine months ended June 30, 2025, was estimated as of the respective grant dates using the assumptions listed below:
|
Nine months ended June 30, 2025 |
||||
|
Dividend yield |
|
% | ||
|
Expected volatility |
|
% | ||
|
Risk-free interest rate |
|
% | ||
|
Expected life |
|
|||
|
Vesting period |
|
|||
The expected stock price volatility is based on the historical volatility of the Company’s stock for a period approximating the expected life. The expected life represents the period of time that options are expected to be outstanding after their grant date. The risk-free interest rate reflects the interest rate as of the grant date on zero-coupon U.S. governmental bonds with a remaining life similar to the expected option term.
Options are granted with exercise prices at fair market values determined on the date of grant and vesting normally occurs over a to -year period. Shares issued upon exercise of a stock option are issued from the Company’s authorized but unissued shares.
The following is a summary of stock option activity during the nine months ended June 30, 2025:
|
Number of options |
Weighted average exercise price |
|||||||
|
Outstanding as of September 30, 2024 |
|
$ |
|
|||||
|
Granted |
|
|
||||||
|
Exercised |
(
|
) |
|
|||||
|
Forfeited or expired |
(
|
) |
|
|||||
|
Outstanding as of June 30, 2025 |
|
$ |
|
|||||
The intrinsic value of an option is the amount by which the fair value of the underlying stock exceeds its exercise price. As of June 30, 2025, the weighted average remaining contractual term for all outstanding and exercisable stock options was
Restricted Stock
During the nine months ended June 30, 2025, the Company granted employees restricted stock awards totaling
During the nine months ended June 30, 2025, the Company granted the non-employee directors restricted stock awards totaling
Restricted stock transactions during the nine months ended June 30, 2025, are summarized as follows:
|
Number of shares |
Weighted average grant date fair value |
|||||||
|
Unvested shares as of September 30, 2024 |
|
$ |
|
|||||
|
Granted |
|
|
||||||
|
Vested |
(
|
) |
|
|||||
|
Forfeited |
(
|
) |
|
|||||
|
Unvested as of June 30, 2025 |
|
$ |
|
|||||
Performance Stock Units
During the nine months ended June 30, 2025, the Company granted
Compensation expense for the performance stock units is measured using the fair value of our common stock at the grant date. As of June 30, 2025, the Company believes it is probable that
During the nine months ended June 30, 2024, the Company granted
The following is a summary of performance stock unit activity during the nine months ended June 30, 2025:
|
Number of shares |
Weighted average grant date fair value |
|||||||
|
Unvested shares as of September 30, 2024 |
|
$ |
|
|||||
|
Granted |
|
|
||||||
|
Vested |
|
|
||||||
|
Forfeited |
(
|
) |
|
|||||
|
Unvested as of June 30, 2025 |
|
$ |
|
|||||
Employee Stock Purchase Plan
The Company’s ESPP allows participating employees to purchase shares of the Company’s common stock at a discount through payroll deductions. The ESPP is available to all employees subject to certain eligibility requirements. Terms of the ESPP provide those participating employees the ability to purchase the Company’s common stock on a voluntary after-tax basis. Employees may purchase the Company’s common stock at a price that is no less than the lower of
For the phase that ended on June 30, 2025, employees purchased
Note 8. Revenue
Revenue Recognition
Our revenue is comprised of the sale of our products to customers and is recognized when the Company satisfies its performance obligations under the applicable sales contract. A performance obligation is a promise in a sales contract to transfer a distinct product or service to a customer. Substantially all our sales contracts have a single performance obligation and are short term in nature. We recognize revenue by transferring the promised products to the customer, with substantially all revenue recognized at the point in time when the customer obtains control of the products. Shipping and handling costs charged to our customers are included in net sales, while the corresponding shipping expenses are included in cost of sales. Sales, value add, and other taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from revenue) basis.
Disaggregation of Revenue
The Company allocates sales from external customers to geographic areas based on the location to which the product is transported. Sales outside the United States are principally to customers in Europe, the Caribbean, Canada, Central and South America.
Revenues related to the following geographic areas were as follows for the three and nine months ended:
|
Three Months Ended June 30, |
Nine months Ended June 30, |
|||||||||||||||
|
(In thousands) |
2025 |
2024 |
2025 |
2024 |
||||||||||||
|
United States |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
All other countries |
|
|
|
|
||||||||||||
|
Total Net Sales |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
The Company sells its products to the Broadband Service Provider marketplace. In addition, the Company provides products to original equipment manufacturers, primarily copper cable assemblies built to their specification (Legacy).
The percentages of our sales by markets were as follows for the three and nine months ended:
|
Three Months Ended June 30, |
Nine months Ended June 30, |
|||||||||||||||
|
(In thousands) |
2025 |
2024 |
2025 |
2024 |
||||||||||||
|
Broadband service providers |
|
% |
|
% |
|
% |
|
% | ||||||||
|
Other customers |
|
% |
|
% |
|
% |
|
% | ||||||||
|
Total Net Sales |
|
% |
|
% |
|
% |
|
% | ||||||||
Broadband Service Providers are made up of Community Broadband, which includes local and regional telecom companies, utilities, municipalities and alternative carriers, also referred to as Tier 2 and Tier 3 customers; National Carriers, which includes large national and global wireline and wireless providers, also referred to as Tier 1 customers; Large Regional Service Providers with a national footprint; Multiple System Operators (“MSOs”), which include cable television companies; and International customers.
Accounts Receivable
Credit is extended based on the evaluation of a customer’s financial condition, and collateral is generally not required. Accounts that are outstanding longer than the contractual payment terms are considered past due. On October 1, 2023, the Company adopted the cumulative expected credit loss model (CECL). Upon adoption of CECL, the Company measures the allowance for credit losses using an expected credit loss model, which uses a lifetime expected credit loss allowance for all accounts receivable. To measure the expected credit losses, accounts receivable are grouped based on shared credit risk characteristics and the days past due. In calculating an allowance for credit losses, the Company uses its historical experience, external indicators, and forward-looking information to calculate expected credit losses using an aging method. The Company assesses impairment of accounts receivable on a collective basis as they possess shared credit risk characteristics which have been grouped based on the days past due. The expected loss rates are based on the Company’s historical credit losses experience. The historical loss rates are adjusted to reflect current and forward-looking information. As of June 30, 2025 and September 30, 2024, the Company’s allowance for credit losses was $
See Note 9 “Major Customer Concentration” for further information regarding accounts receivable and net sales.
Note 9. Major Customer Concentration
For the three months ended June 30, 2025, the Company had
customers that comprised
For the three months ended June 30, 2024, the Company had
customer that comprised
As of June 30, 2025,
customer accounted for
Note 10. Inventories
Inventories consist of finished goods, raw materials, and work-in-process and are stated at average cost, subject to the lower of cost or net realizable value. Certain components of the Company’s inventory classified as raw materials or finished goods can be used as a component to manufacture products or can be sold directly to the customer. Inventory is valued using material costs, labor charges, and allocated factory overhead charges and consists of the following:
|
(In thousands) |
June 30, 2025 |
September 30, 2024 |
||||||
|
Raw materials |
$ |
|
$ |
|
||||
|
Work-in-process |
|
|
||||||
|
Finished goods |
|
|
||||||
|
Inventories, gross |
|
|
||||||
|
Inventory reserve |
(
|
) |
(
|
) |
||||
|
Inventories, net |
$ |
|
$ |
|
||||
On a regular basis, the Company reviews its inventory and identifies that which is excess, slow moving, and obsolete by considering factors such as inventory levels, expected product life, and forecasted sales demand. A reserve is established for any identified excess, slow moving, and obsolete inventory through a charge to cost of sales. Inventory write-down charges may be required in the future if there is a significant decline in demand for the Company’s products and the Company does not adjust its manufacturing production accordingly, if new products are not accepted by the market, or if products are end of life through life cycle management.
Note 11. Goodwill and Intangible Assets
The Company tests goodwill for impairment annually at fiscal year-end, or more frequently when events or changes in circumstances indicate that the asset might be impaired. The Company assesses qualitative factors to determine whether the existence of events or circumstances would indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. The result of the analysis performed as of September 30, 2024, did indicate an impairment of goodwill. During the nine months ended June 30, 2025, there were no triggering events that indicate potential impairment exists. The Company’s next annual test for goodwill impairment will be performed as of June 30, 2025 and will include an analysis of the value of goodwill of each reportable segment: (1) Clearfield; and (2) Nestor Cables.
The Company capitalizes legal costs incurred to obtain patents. Once accepted by either the United States Patent and Trademark Office or the equivalent office of a foreign country, these legal costs are amortized using the straight-line method over the remaining estimated lives, not exceeding
In addition, the Company has various finite lived intangible assets, most of which were acquired as a result of the acquisition of the active cabinet product line from Calix, Inc. during fiscal year 2018 and the acquisition of Nestor Cables in fiscal year 2022. The Company analyzes its intangible assets for impairment annually or at interim periods when events occur or changes in circumstances indicate potential impairment. The result of the analysis performed as of September 30, 2024, did indicate an impairment of our intangible assets. During the nine months ended June 30, 2025, there were no triggering events that indicate potential impairment exists.
The changes in the carrying amount of goodwill by reportable segment for the nine months ended June 30, 2025, and 2024 were as follows:
|
(In thousands) |
Clearfield, Inc. |
Nestor Cables |
Total |
|||||||||
|
Balance as of September 30, 2024 |
$ |
|
$ |
|
$ |
|
||||||
|
Currency translation effect on foreign goodwill balances |
|
|
|
|||||||||
|
Balance as of June 30, 2025 |
$ |
|
$ |
|
$ |
|
||||||
|
(In thousands) |
Clearfield, Inc. |
Nestor Cables |
Total |
|||||||||
|
Balance as of September 30, 2023 |
$ |
|
$ |
|
$ |
|
||||||
|
Currency translation effect on foreign goodwill balances |
|
|
|
|||||||||
|
Balance as of June 30, 2024 |
$ |
|
$ |
|
$ |
|
||||||
Finite life intangible assets as of June 30, 2025, are as follows:
|
June 30, 2025 |
||||||||||||||||
|
(In thousands) |
Useful Life (Years) |
Gross Carrying Amount |
Accumulated Amortization |
Net Book Value Amount |
||||||||||||
|
Customer relationships |
|
$ |
|
$ |
|
$ |
|
|||||||||
|
Certifications |
|
|
|
|
||||||||||||
|
Trademarks |
|
|
|
|
||||||||||||
|
Patents |
|
|
|
|
||||||||||||
|
Developed Technology |
|
|
|
|
||||||||||||
|
Other |
|
|
|
|
||||||||||||
|
Software |
|
|
|
|
||||||||||||
|
Totals |
$ |
|
$ |
|
$ |
|
||||||||||
Finite life intangible assets as of September 30, 2024, are as follows:
|
September 30, 2024 |
||||||||||||||||
|
(In thousands) |
Useful Life (Years) |
Gross Carrying Amount |
Accumulated Amortization |
Net Book Value Amount |
||||||||||||
|
Customer relationships |
|
$ |
|
$ |
|
$ |
|
|||||||||
|
Certifications |
|
|
|
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Trademarks |
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Patents |
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Developed Technology |
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Other |
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Totals |
$ |
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$ |
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$ |
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Amortization expense related to these assets was $
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(In thousands) |
Estimated amortization expense |
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FY 2025 (remaining) |
$ |
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FY 2026 |
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FY 2027 |
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FY 2028 |
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FY 2029 |
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Thereafter |
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Total |
$ |
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Note 12. Segment Reporting
The Company’s reportable segments are based on the Company’s method of internal reporting. These results are not necessarily indicative of the results of operations that would have occurred had each segment been an independent, stand-alone entity during the periods presented. The internal reporting of these operating segments is defined based in part on the reporting and review process used by the Company’s Chief Executive Officer.
The Company has reportable segments: (1) Clearfield; and (2) Nestor Cables. Clearfield’s Finnish holding company, Clearfield Finland Oy, purchased Nestor Cables Oy, including its Estonian subsidiary, Nestor Cables Baltics OÜ, on July 26, 2022. These entities comprise the Nestor Cables Segment.
The following table summarizes the amounts between the reportable segments for the three and nine months ended June 30, 2025, and 2024:
|
Three months ended June 30, 2025 |
||||||||||||||||
|
Clearfield |
Nestor Cables |
Eliminations |
Consolidated |
|||||||||||||
| (in thousands) | ||||||||||||||||
|
Revenue from external customers |
$ |
|
$ |
|
$ |
|
$ |
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Revenue from internal customers (Clearfield, Inc.) |
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(
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Net investment income |
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(
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Interest expense |
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Depreciation and amortization |
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Stock based compensation |
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Income tax expense |
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Net income (loss) |
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(
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Capital expenditures |
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Nine months ended June 30, 2025 |
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Clearfield |
Nestor Cables |
Eliminations |
Consolidated |
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| (in thousands) | ||||||||||||||||
|
Revenue from external customers |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
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Revenue from internal customers (Clearfield, Inc.) |
|
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(
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) |
|
|||||||||||
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Net investment income |
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(
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) |
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Interest expense |
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(
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) |
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Depreciation and amortization |
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Stock based compensation |
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Income tax expense (benefit) |
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(
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) |
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|
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Net income (loss) |
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(
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) |
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Capital expenditures |
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Three months ended June 30, 2024 |
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Clearfield |
Nestor Cables |
Eliminations |
Consolidated |
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(in thousands) |
||||||||||||||||
|
Revenue from external customers |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Revenue from internal customers (Clearfield, Inc.) |
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(
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) |
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|||||||||||
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Net investment income |
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(
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) |
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|||||||||||
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Interest expense |
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(
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) |
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|||||||||||
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Depreciation and amortization |
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||||||||||||
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Stock based compensation |
|
|
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|
||||||||||||
|
Income tax benefit |
(
|
) |
(
|
) |
|
(
|
) |
|||||||||
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Net income (loss) |
(
|
) |
(
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) |
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(
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) | |||||||||
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Capital expenditures |
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Nine months ended June 30, 2024 |
||||||||||||||||
|
Clearfield |
Nestor Cables |
Eliminations |
Consolidated |
|||||||||||||
|
(in thousands) |
||||||||||||||||
|
Revenue from external customers |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Revenue from internal customers (Clearfield, Inc.) |
|
|
(
|
) |
|
|||||||||||
|
Net investment income |
|
|
(
|
) |
|
|||||||||||
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Interest expense |
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(
|
) |
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|||||||||||
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Depreciation and amortization |
|
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||||||||||||
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Stock based compensation |
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Income tax benefit |
(
|
) |
(
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) |
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(
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) | |||||||||
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Net loss |
(
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) |
(
|
) |
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(
|
) | |||||||||
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Capital expenditures |
|
|
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||||||||||||
The following table summarizes the amounts between the reportable segments as of June 30, 2025, and as of September 30, 2024:
|
June 30, 2025 |
||||||||||||||||
|
Clearfield |
Nestor Cables |
Eliminations |
Consolidated |
|||||||||||||
|
(in thousands) |
||||||||||||||||
|
Goodwill |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Total assets |
$ |
|
$ |
|
$ |
(
|
) |
$ |
|
|||||||
|
September 30, 2024 |
||||||||||||||||
|
(in thousands ) |
Clearfield |
Nestor Cables |
Eliminations |
Consolidated |
||||||||||||
|
Goodwill |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Total assets |
$ |
|
$ |
|
$ |
(
|
) |
$ |
|
|||||||
Note 13. Financing Receivables
Nestor Cables factors certain of its accounts receivable, with recourse provisions that are accounted for as a secured borrowing. Nestor Cables has a total factoring liability of $
Note 14. Income Taxes
For the three and nine months ended June 30, 2025, the Company recorded an income tax expense of $
For the three and nine months ended June 30, 2024, the Company recorded an income tax benefit of $
Deferred taxes recognize the impact of temporary differences between the amounts of the assets and liabilities recorded for financial statement purposes and these amounts measured in accordance with tax laws. The Company’s realization of deferred tax temporary differences is contingent upon future taxable earnings. The Company reviewed its deferred tax asset for expected utilization using a “more likely than not” criteria by assessing the available positive and negative factors surrounding its recoverability. ASC 740 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of evidence, it is more than likely than not that some portion or all of the deferred tax assets will not be recognized. After consideration of all the evidence, both positive and negative, the Company has determined that a $
As of June 30, 2025, the Company does have any unrecognized tax benefits. It is the Company’s practice to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. The Company does not expect any material changes in its unrecognized tax positions over the next 12 months.
The One Big Beautiful Bill Act ("OBBBA") was enacted on July 4, 2025 and the Company continues to evaluate the impact on its financial position. The OBBBA is not currently expected to materially impact the Company's effective tax rate or cash flows in the current fiscal year.
Note 15. Leases
The Company leases an approximately
The Company indirectly leases an approximately
The Company leases an approximately
Nestor Cables leases an approximately
Nestor Cables previously leased a facility in Keila, Estonia which was terminated in the first quarter of fiscal 2025, with the operations of the Keila facility being consolidated into the Nestor Cables facility in Tabasalu, Estonia.
Nestor Cables leases a manufacturing facility in Tabasalu, Estonia, which was expanded in the first quarter of fiscal 2025 from approximately
Right-of-use lease assets and lease liabilities are recognized as of the commencement date based on the present value of the remaining lease payments over the lease term which includes renewal periods we are reasonably certain to exercise. Our leases do not contain any material residual value guarantees or material restrictive covenants.
Operating lease expense included within cost of goods sold and selling, general and administrative expense was as follows for the three and nine months ended:
|
Operating lease expense within: |
Three Months Ended June 30, |
Nine months Ended June 30, |
||||||||||||||
| (in thousands) |
2025 |
2024 |
2025 |
2024 |
||||||||||||
|
Cost of sales |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Selling, general and administrative |
|
|
|
|
||||||||||||
|
Total lease expense |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
Future maturities of lease liabilities were as follows as of June 30, 2025 (in thousands):
|
FY2025 (Remaining) |
$ |
|
||
|
FY2026 |
|
|||
|
FY2027 |
|
|||
|
FY2028 |
|
|||
|
FY2029 |
|
|||
|
Thereafter |
|
|||
|
Total lease payments |
|
|||
|
Less: Interest |
(
|
) |
||
|
Present value of lease liabilities |
$ |
|
The weighted average term and weighted average discount rate for the Company’s leases as of June 30, 2025, were
For the three and nine months ended June 30, 2025, the operating cash outflows from the Company’s leases was $
Note 16. Debt
On April 27, 2022, the Company entered into a loan agreement and a security agreement with a bank that provides the Company with a $
On August 5, 2024, the Company entered into an amendment to the loan agreement that, among other things, (i) eliminated the requirement that the Company maintain a debt service coverage ratio of not less than
On April 25, 2025, the Company entered into an amendment to the loan agreement that extended the maturity of the line of credit from April 27, 2025 to April 25, 2026.
During March 2021, Nestor Cables entered into a loan agreement, providing a €
One of Nestor Cable’s bank accounts includes a feature that allows for applicable bank accounts to be in a negative position up to a certain maximum overdraft up to €
ITEM 2. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company’s financial condition and results of operations as of and for the three and nine months ended June 30, 2025, and 2024 should be read in conjunction with the financial statements and related notes in Item 1 of this report and our Annual Report on Form 10-K for the year ended September 30, 2024.
OVERVIEW
General
Clearfield, Inc., together with its subsidiaries, is referred to in this report as “we,” “us,” “our,” and the “Company.” We design, manufacture, and distribute fiber protection, fiber management, and fiber delivery solutions to enable rapid and cost-effective fiber-fed deployment throughout the broadband service provider space primarily across North America. Our “fiber to anywhere” platform serves the unique requirements of Community Broadband customers (Tier 2 and 3 telco carriers, utilities, municipalities, and alternative carriers), Multiple System Operators (cable television), Large Regional Service Providers (ILEC operating a multi-state network with more than 500,000 subscribers), National Carriers (wireline/wireless national telco carriers (Tier 1)), and International customers (primarily Europe, Canada, Mexico, and Caribbean Markets).
We are engaged in global operations. Our operations currently comprise of two reportable segments: the Clearfield Operating Segment (referred to herein as “Clearfield”), and the Nestor Cables Operating Segment (referred to herein as “Nestor Cables” or “Nestor”), which we established following our acquisition of Nestor Cables on July 26, 2022. Prior to July 26, 2022, we had a single reportable segment structure.
Clearfield Operating Segment
Clearfield is focused on providing fiber management, fiber protection, and fiber delivery products that accelerate the turn-up of fiber-based networks in residential homes, businesses, and network infrastructure in the wireline and wireless access network. We offer a broad portfolio of fiber products that allow service providers to build fiber networks faster, meet service delivery demands, and align build costs with take rates.
Clearfield’s products are designed to allow its customers to pass and connect homes in their Fiber to the Home (FTTH) builds by using fewer resources in less time than competitive products. Our products speed up the time to revenue for our service provider customers in Multiple Dwelling Units (MDUs) and Multiple Tenant Units (MTUs) by reducing the amount of labor and materials needed to provide gigabit service. Our products help make business services more profitable through faster building access, easier reconfiguration, and quicker services turn-up. Finally, Clearfield is removing barriers to wireless 4G/5G deployments in backhaul from the tower to the cloud and fiber fronthaul from the tower to the antenna at the cell site through better fiber management, test access, and fiber protection.
Substantially all of the final build and assembly is completed at Clearfield’s plants in Brooklyn Park, Minnesota and Tijuana, Mexico, with manufacturing support from a network of domestic and global manufacturing partners. Clearfield specializes in producing these products on both a quick-turn and scheduled delivery basis.
Nestor Cables Operating Segment
Nestor Cables is based in Oulu, Finland, with operations in Estonia through its wholly owned subsidiary, Nestor Cables Baltics OÜ. Nestor Cables manufactures fiber optic and copper telecommunication cables and equipment which it distributes to telecommunication operators, network owners, electric companies, building contractors, and industrial companies. Nestor has two types of production processes, the process of making cable in its Finland and Estonia facility and the finished assembly portion of its business performed in Estonia. Nestor Cables’ customer base includes telecom operators, network owners, contractors, industries and wholesalers. Products are sold via distributors and directly to end users. Nestor Cables is subject to Finnish government regulation and Nestor Cables Baltics is subject to Estonian government regulation.
Trade and Tariffs Update
Earlier this year the U.S. introduced trade policy changes that increased import tariffs across a wide range of trading partners at various rates, with exemptions for certain goods, including currently United States-Mexico-Canada Agreement (USMCA) compliant goods. In response, many trading partners implemented retaliatory tariffs on U.S. exports. The U.S. and certain trading partners have agreed to delay the effective date of certain of these tariffs while various trade deals are being negotiated, but a number of the increased tariffs remain in effect, including significant tariffs between the U.S. and China. While the tariffs did not materially impact our third quarter results, we do anticipate certain tariffs in effect as of August 7, 2025, will impact future financial results, the extent of which is uncertain, difficult to predict and dependent on a number of factors, including the extent and duration of the tariffs, any reversal or suspension of the tariffs, changes in the scope and rates of the tariffs, the availability of exemptions from the tariffs, the imposition of new tariffs, and our ability to successfully implement measures to mitigate the impact of the tariffs. Currently, products imported from our Mexican manufacturing facility are exempt from the new tariffs as they are USMCA compliant. Should the USMCA exemption no longer apply, our future financial results, particularly cost of sales and gross profit, would be negatively impacted by the tariffs. Components we import from China, some of which are from sole-source or limited source suppliers, are subject to the tariffs currently in effect. We are actively monitoring and evaluating the evolving tariff situation and working to mitigate the impact on our business.
Tariffs and other trade restrictions may increase the cost of raw materials and components imported from other countries, leading to higher production costs and product pricing to the extent those increased costs are offset through price increases to our customers (which may result in declines in sales); disrupt established supply chains, forcing the Company to find new suppliers or relocate production, which could be time-consuming and costly; limit the attractiveness of certain geographic markets for our product and, in turn, result in reduced sales; lower profitability; result in uncertainty related to planning long-term investments and strategies; and have other competitive effects.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2025 VS. THREE MONTHS ENDED JUNE 30, 2024
Net sales for the three months ended June 30, 2025, were $49,903,000, an increase of approximately 2%, or $1,110,000, from net sales of $48,793,000 for the three months ended June 30, 2024. Net sales to Broadband Service Providers were $46,641,000 and $46,028,000 in the three months ended June 30, 2025 and 2024, respectively. Net sales to Legacy customers were $570,000 in the three months ended June 30,2025 versus $820,000 for the three months ended June 30, 2024. In addition, the Company recorded $12,490,000 in international sales for the three months ended June 30, 2025 versus $16,494,000 for the three months ended June 30, 2024. The Company allocates sales from external customers to geographic areas based on the location to which the product is transported. International sales represented 25% and 34% of total net sales for the three months ended June 30, 2025 and 2024, respectively.
The increase in net sales for the three months ended June 30, 2025, of $1,100,000 compared to the three months ended June 30, 2024, was primarily driven by increased sales to Large Regional Service Provider customers of $3,118,000, up 82%, and MSO customers of $3,418,000, up 59%, partially offset by decreased sales to International customers of $4,004,000, down 24%. The increase in sales in the Large Regional Service Provider and MSO customer markets for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024, is due to higher sales of additional product lines in the quarter to customers in these segments. The decrease in sales to International customers was driven by decreased sales by the Nestor Cables segment during the quarter due to lower demand in Nestor’s European market.
Order backlog as of June 30, 2025, was $36,092,000, an increase of 6% compared to $34,097,000 as of March 31, 2025, and an increase of $3,509,000, or 11%, from June 30, 2024. The increase in backlog is consistent with the normal seasonality in our business as well as increased demand.
Revenue from customers is obtained from purchase orders submitted from time to time. The Company’s ability to predict orders in future periods or trends affecting orders in future periods is limited. The Company’s ability to predict revenue is further limited by customer deployment schedules and factors affecting customer ordering patterns, including the digestion of customers’ excess inventory, the impact of tariffs and other macroeconomic economic policies, and uncertainties relating to the economic outlook in the United States and other countries in which we sell products. The Company’s ability to recognize revenue in the future for customer orders will depend on the Company’s ability to manufacture and deliver products to the customers and fulfill its other contractual obligations. The Company tests goodwill for impairment annually, or more frequently when events or changes in circumstances indicate that the asset might be impaired. The Company assesses qualitative factors to determine whether the existence of events or circumstances would indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. The Company’s forecast for future revenue, profitability and business climate are among the qualitative factors management considers in its annual analysis of goodwill. The result of the most recent analysis performed, did not indicate an impairment of goodwill. Goodwill represents the excess purchase price over the fair value of tangible net assets acquired in acquisitions after amounts have been allocated to intangible assets. To the extent that a reporting unit's recorded goodwill exceeds the implied fair value of goodwill, a goodwill impairment charge would be recognized in the Company’s consolidated statement of earnings. An analysis of goodwill involves significant management estimates and judgments and an impairment loss, while non-cash, could have a material impact on the Company’s financial statements. During the nine months ended June 30, 2025, the Nestor reporting unit, which has $2.0 million of Goodwill, had a net operating loss. The Company’s next annual test for goodwill impairment will be completed during the quarter ending September 30, 2025 and if operating losses persist into the future, or if there are adverse changes in key assumptions such as discount rates or long-term growth rates, it is reasonably possible that an impairment charge could be recognized for the Nestor reporting unit in future periods.
Cost of sales for the three months ended June 30, 2025, was $34,669,000, a decrease of $3,432,000, or 9%, from $38,101,000 for the three months ended June 30, 2024. Gross profit percent was 30.5% of net sales for the three months ended June 30, 2025, an increase from 21.9% of net sales for the three months ended June 30, 2024. Gross profit increased $4,542,000, or 42%, to $15,234,000 for the three months ended June 30, 2025, from $10,692,000 for the three months ended June 30, 2024. The improvement in gross margin from the prior year quarter was due to increased volumes within the Clearfield segment resulting in improved utilization of manufacturing overhead, as well as lower excess inventory charges in the Clearfield segment of $2,485,000 which resulted in a benefit to cost of goods sold of $1,131,000 in the current quarter, reflecting improved inventory utilization and beneficial recoveries from previously reserved inventory.
Selling, general and administrative expenses for the three months ended June 30, 2025, were $13,738,000 in comparison to $12,999,000 for the three months ended June 30, 2024, an increase of $739,000, or 6%, due to an increase in depreciation and amortization and increased software maintenance costs.
Income from operations for the three months ended June 30, 2025, was $1,496,000 compared to loss from operations of $2,307,000 for the three months ended June 30, 2024, an increase of approximately 165%. The increased income from operations is the result of increased net sales and gross profit margin as explained above.
Net investment income for the three months ended June 30, 2025, was $1,588,000 compared to $1,735,000 for the three months ended June 30, 2024. The decrease in net investment income is due to decreased interest income driven by lower interest rates earned on investments during the quarter.
Interest expense for the three months ended June 30, 2025, remained relatively consistent at $106,000, compared to $153,000 for the three months ended June 30, 2024. Interest expense incurred during these periods is related to factoring liabilities in the Nestor segment.
The Company recorded an income tax expense of $1,372,000 and income tax benefit of $277,000 for the three months ended June 30, 2025, and 2024, respectively. We record our quarterly provision for income taxes based on our estimated annual effective tax rate for the year. The income tax expense rate for the three months ended June 30, 2025, increased to 46.1% from 38.2% recorded for the three months ended June 30, 2024, primarily due to a valuation allowance of $780,000 recorded against the deferred tax assets of the Nestor Cables segment.
The Company’s net income for the three months ended June 30, 2025, was $1,606,000, or $0.11 per basic and diluted share. The Company’s net loss for the three months ended June 30, 2024, was $447,000, or $0.04 per basic and diluted share. The increase in basic and diluted earnings per share for the three months ended June 30, 2025, as compared to June 30, 2024, was due to higher net income as a result of increased gross profit margin, partially offset by increased selling, general and administrative expenses, and income tax expense as detailed above.
NINE MONTHS ENDED JUNE 30, 2025 VS. NINE MONTHS ENDED JUNE 30, 2024
Net sales for the nine months ended June 30, 2025, were $132,547,000, an increase of approximately 11%, or $12,614,000, from net sales of $119,933,000 for the nine months ended June 30, 2024. Net sales to Broadband Service Providers were $124,659,000 and $112,203,000 in the nine months ended June 30, 2025 and 2024, respectively. In addition, the Company recorded $25,958,000 in international sales for the nine months ended June 30, 2025 versus $33,110,000 for the nine months ended June 30, 2024. The Company allocates sales from external customers to geographic areas based on the location to which the product is transported. Accordingly, international sales represented 20% and 28% of total net sales for the nine months ended June 30, 2025 and June 30, 2024, respectively. Net sales to Legacy customers were $1,769,000 in the nine months ended June 30, 2025 versus $2,310,000 in the nine months ended June 30, 2024.
The increase in net sales for the nine months ended June 30, 2025, of $12,614 ,000 compared to the nine months ended June 30, 2024, was primarily driven by increased sales to Large Regional Service Provider customers of $10,620,000, up 71%, Community Broadband Service Providers of $1,992,000, up 4%, MSO customers of $6,364,000, up 40%, and National Carrier customers of $1,331,000, up 23%, partially offset by decreased sales to International customer of $7,152,,000, down 22%. The increase in sales across these markets for the nine months ended June 30, 2025, as compared to the nine months ended June 30, 2024, is due to early build season orders as well as reduced excess inventory levels at customers compared to the prior year period, and higher sales of additional product lines to customers in the Large Regional Service Provider and MSO markets. The decrease in sales to International customers was driven by decreased sales by the Nestor Cables segment during the nine months ended June 30, 2025.
Cost of sales for the nine months ended June 30, 2025, was $94,940,000, a decrease of $6,773,000, or 7%, from $101,712,000 for the nine months ended June 30, 2024. Gross profit percent was 28.4% of net sales for the nine months ended June 30, 2025, an increase from 15.2% of net sales for the nine months ended June 30, 2024. Gross profit increased $19,387,000, or 106%, to $37,608,000 for the nine months ended June 30, 2025, from $18,221,000 for the nine months ended June 30, 2024. The improvement in gross margin from the nine months ended June 30, 2024, was due to increased volumes within the Clearfield segment resulting in improved utilization of manufacturing overhead, as well as lower excess inventory charges of $9,319,000 in the nine months ended June 30, 2025, reflecting improved inventory utilization and beneficial recoveries from previously reserved inventory.
Selling, general and administrative expenses increased $1,393,000, or 4%, to $39,823,000 in the nine months ended June 30, 2025, from $38,430,000 for the nine months ended June 30, 2024. The increase is primarily due to higher wages and performance-based compensation accruals of $1,562,000.
Loss from operations for the nine months ended June 30, 2025, was $2,217,000 compared to loss from operations of $20,210,000 for the nine months ended June 30, 2024, a decrease of approximately 89%. The decrease is the result of increased net sales and gross profit margin as explained above, partially offset by increased selling, general and administrative expenses.
Net investment income for the nine months ended June 30, 2025, was $4,920,000 compared to $5,653,000 for the nine months ended June 30, 2024. The decrease in interest income is due to lower interest rates on investments during the nine months ended June 30, 2025.
Interest expense for the nine months ended June 30, 2025, was $275,000 compared to $381,000 for the nine months ended June 30, 2024. Interest expense incurred during these periods is due to factoring liabilities in the Nestor segment.
The Company recorded an income tax expense of $1,401,000 and income tax benefit of $3,311,000 for the nine months ended June 30, 2025, and 2024, respectively. We record our quarterly provision for income taxes based on our estimated annual effective tax rate for the year. The increase in tax expense of $4,712,000 for the nine months ended June 30, 2025 in from fiscal 2024 is primarily due to increased income from operations offset by a valuation allowance of $780,000 recorded against the deferred tax assets of the Nestor Cables segment recorded in the Company’s fiscal 2025 third quarter. The income tax expense rate for the nine months ended June 30, 2025, was 57.7% compared to 22.2% for the nine months ended June 30, 2024. The change in the effective tax rate was primarily due to the aforementioned valuation allowance recorded on the deferred tax assets of the Nestor Cables segment.
The Company’s net income for the nine months ended June 30, 2025, was $1,028,000 or $0.07 per basic share and diluted share. The Company’s net loss for the nine months ended June 30, 2024, was $11,626,000, or $0.79 per basic share and diluted share. The increase in basic and diluted income per share for the nine months ended June 30, 2025, as compared to June 30, 2024, was due to increased net income as a result of increased sales and increased gross profit margin, partially offset by higher selling, general and administrative expenses and income tax expense as detailed above.
Reportable Segments
The Company’s reportable segments are based on the Company’s method of internal reporting. These results are not necessarily indicative of the results of operations that would have occurred had each segment been an independent, stand-alone entity during the periods presented. The internal reporting of these operating segments is defined based, in part, on the reporting and review process used by the Company’s Chief Executive Officer.
Reportable segments are as follows:
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● |
Clearfield Segment – The Clearfield segment designs, manufactures, and sells fiber management, protection, and delivery solutions. For the three months ended June 30, 2025 and 2024, net sales from the Clearfield segment comprised 78% and 69% of the Company’s total net sales, respectively. For the nine months ended June 30, 2025 and 2024, net sales from the Clearfield segment compromised 82% and 75% of the Company’s total net sales, respectively. |
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● |
Nestor Cables Segment – The Nestor Cables segment designs, manufactures, and sells fiber optic and copper telecommunication cables and equipment. For the three months ended June 30, 2025, and 2024, net sales from the Nestor Cables segment comprised 22% and 31% of the Company’s total net sales, respectively. For the nine months ended June 30, 2025 and 2024, net sales from the Nestor Cables segment compromised 18% and 25% of the Company’s total net sales, respectively. |
Clearfield Segment
The following table provides net sales and net income for the Clearfield segment for the three and nine months ended:
|
Three Months Ended June 30, |
Nine months Ended June 30, |
|||||||||||||||
|
(In thousands ) |
2025 |
2024 | 2025 |
2024 |
||||||||||||
|
Segment net external sales |
$ | 38,755 | $ | 33,670 | $ | 109,074 | $ | 89,371 | ||||||||
|
Segment net (loss) income |
$ | 2,328 | $ | (196 | ) | $ | 4,522 | $ | (8,464 | ) | ||||||
Net sales in the Clearfield segment increased 15%, or $5,085,000, for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024. Net sales in the Clearfield segment increased 22%, or $19,703,000, for the nine months ended June 30, 2025, as compared to the nine months ended June 30, 2024, resulting primarily from higher sales of additional product lines to customers in the Large Regional Service Provider and MSO markets.
Net income in the Clearfield segment for the three months ended June 30, 2025, increased 1288%, or $2,524,000, from a net loss, as compared to the three months ended June 30, 2024. Net income in the Clearfield segment for the nine months ended June 30, 2025, increased 153%, or $12,986,000, from a net loss, as compared to the nine months ended June 30, 2024, driven by the changes in sales outlined above, as well as increased gross profit margin which was positively affected by increased volume and decreased provision for excess inventory reserves.
Nestor Cables Segment
The following table provides net sales and net income for the Nestor Cables segment for the three and nine months ended:
|
Three Months Ended June 30, |
Nine months Ended June 30, |
|||||||||||||||
|
(In thousands ) |
2025 |
2024 |
2025 |
2024 |
||||||||||||
|
Segment net external sales |
$ | 11,148 | $ | 15,123 | $ | 23,473 | $ | 30,562 | ||||||||
|
Segment net (loss) |
$ | (722 | ) | $ | (252 | ) | $ | (3,494 | ) | $ | (3,162 | ) | ||||
Net sales in the Nestor Cables segment decreased 26%, or $3,975,000, for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024, excluding sales to the Clearfield segment. Net sales in the Nestor Cables segment decreased 23%, or $7,089,000, for the nine months ended June 30, 2025, as compared to the nine months ended June 30, 2024, excluding sales to the Clearfield segment. The decrease in net sales for the Nestor Cables segment was a result of lower demand in their European market for the three and nine months ended June 30, 2025.
Net loss in the Nestor Cables segment for the three months ended June 30, 2025, increased 186%, or $470,000, as compared to the three months ended June 30, 2024. The increased net loss was driven by lower sales and increased income tax expense for the three months ended June 30, 2025. Net loss in the Nestor Cables segment for the nine months ended June 30, 2025, increased 10%, or $332,000, as compared to the nine months ended June 30, 2024. The increased net loss for the nine months ended June 30, 2025, is due to lower sales and the tax valuation allowance recorded in the third quarter of fiscal 2025.
Liquidity and Capital Resources
As of June 30, 2025, our principal source of liquidity was our cash, cash equivalents, and short-term investments. These sources total $117,229,000 as of June 30, 2025, compared to $130,992,000 as of September 30, 2024. Additionally, we have a line of credit for $40 million that has no outstanding borrowing as of June 30, 2025. Our excess cash is invested mainly in Treasuries, CDs backed by the FDIC, and money market funds. Investments considered long-term were $40,168,000 as of June 30, 2025, compared to $24,505,000 as of September 30, 2024. We believe the combined balances of short-term cash and investments, long-term investments, along with our line of credit provide a more accurate indication of our available liquidity. As of June 30, 2025, our cash, cash equivalents, and short-term and long-term investments totaled $157,397,000, compared to $155,497,000 as of September 30, 2024.
We believe our existing cash equivalents, short-term investments, and line of credit facility along with cash flow from operations will be sufficient to meet our working capital and investment requirements beyond the next 12 months. The Company intends on utilizing its available cash and assets primarily for its continued organic growth, potential future strategic transactions, and the Company’s share repurchase program.
Operating Activities
Net cash provided by operating activities totaled $18,116,000 for the nine months ended June 30, 2025. This consisted of net income of $1,028,000, non-cash expenses for depreciation and amortization of $5,766,000, stock-based compensation of $3,745,000, amortization of premium and discounts on investments of $1,556,000, and decreased deferred income taxes of $157,000, in addition to changes in operating assets and liabilities providing and using cash. The primary change in operating assets and liabilities providing cash was a decrease in inventory of $13,752,000 and an increase in accounts payable and accrued expenses of $3,037,000, due to timing of payments. The decrease in inventory is due to increased sales to customers during the nine months ended June 30, 2025 as the Company has continued to utilize inventory on hand to fulfill customer orders and achieve lower stocking levels. The primary change in operating assets and liabilities using cash was an increase in accounts receivable of $4,944,000, along with an increase in other assets of $2,555,000, related to the increases in prepaid taxes and prepaid expenses. The increase in accounts receivable is due to increased net sales during the nine months ended June 30, 2025. Days sales outstanding, which measures how quickly receivables are collected, decreased 3 days to 49 days as of June 30, 2025, compared to 52 days as of June 30, 2024.
Net cash provided by operating activities totaled $9,131,000 for the nine months ended June 30, 2024. This consisted of a net loss of $11,626,000, non-cash expenses for depreciation and amortization of $5,481,000, stock-based compensation of $3,437,000, amortization of discounts on investments of $3,304,000 and increased deferred income taxes of $3,523,000, in addition to changes in operating assets and liabilities providing and using cash. The primary change in operating assets and liabilities providing cash was a decrease in inventory of $23,440,000 and an increase in accounts payable and accrued expenses of $2,310,000. The decrease in inventory was due to decreased inventory purchases during the nine months ending June 30, 2024, as the Company utilized inventory on hand to fulfill customer orders and achieve lower stocking levels to support the decreased sales order backlog, as well as higher excess inventory reserves. The primary change in operating assets and liabilities using cash was an increase in other assets of $8,030,000 related to increases in prepaid taxes and prepaid expenses.
Investing Activities
We invest our excess cash in money market accounts, Treasuries, money market funds, and bank CDs in denominations across numerous banks. We believe we obtain a competitive rate of return given the economic climate and relative risk profile of these investments. During the nine months ended June 30, 2025, we received proceeds from the maturity of investment securities of $95,976,000 and used cash to purchase $78,697,000 of investment securities. Purchases of property, plant, and equipment, mainly related to manufacturing equipment and intangible assets, consumed $5,221,000 of cash during the nine months ended June 30, 2025.
During the nine months ended June 30, 2024, we received proceeds from the maturity of investment securities of $142,067,000 and used cash to purchase $124,137,000 of investment securities. Purchases of property, plant, and equipment, mainly related to manufacturing equipment and intangible assets, consumed $5,608,000 of cash during the nine months ended June 30, 2024.
Financing Activities
For the nine months ended June 30, 2025, we used cash to repurchase $16,665,000 of our common stock on the open market under our stock repurchase program, which includes U.S. Federal excise taxes. We received $595,000 from employees’ participation and purchase of stock through our ESPP and used $494,000 for payment of withholding taxes for vesting of restricted stock grants. The Company received cash of $3,544,000 on net borrowings and repayments of factoring liabilities. The Company also received cash from net borrowings on bank overdrafts of $793,000.
For the nine months ended June 30, 2024, we used cash to repurchase $33,374,000 of our common stock on the open market under our stock repurchase program, which includes U.S. Federal excise taxes. We received $586,000 from employees’ participation and purchase of stock through our ESPP, used $240,000 for payment of withholding taxes for vesting of restricted stock grants, and used $9,000 related to share withholding for the exercise price and taxes associated with the issuance of common stock upon cashless exercises of stock options. The Company also used cash of $667,000 on net borrowings and repayments of factoring liabilities.
CRITICAL ACCOUNTING ESTIMATES
Management utilizes its technical knowledge, cumulative business experience, judgment and other factors in the selection and application of the Company’s accounting estimates. The accounting estimates considered by management to be the most critical to the presentation of the financial statements because they require the most difficult, subjective, and complex judgments include the fair value of investments, stock-based compensation, and valuation of inventory, long-lived assets, finite lived intangible assets and goodwill.
These accounting estimates are described in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Annual Report on Form 10-K for the year ended September 30, 2024. Management made no changes to the Company’s critical accounting estimates during the three and nine months ended June 30, 2025.
In applying its critical accounting estimates, management reassesses its estimates each reporting period based on available information. Changes in these estimates did not have a significant impact on earnings for the three and nine months ended June 30, 2025.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are “ forward-looking statements ” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to future events and typically address the Company ’ s expected future business and financial performance. Words such as “ may, ” “ plan, ” “ expect, ” “ aim, ” “ believe, ” “ project, ” “ target, ” “ anticipate, ” “ intend, ” “ estimate, ” “ will, ” “ should, ” “ could, ” “ outlook, ” or “ continue ” or comparable terminology are intended to identify forward-looking statements. Such forward looking statements include, for example, statements about the Company ’ s future revenue and operating performance, the impact of recent trade policy changes, including new and increased tariffs, retaliatory tariffs, trade disputes, and market and economic reactions to such changes, expected customer ordering patterns and future supply agreements with customers, anticipated shipping on backlog and future lead times, future availability of components and materials from the Company ’ s supply chain, compliance with Build America Buy America (BABA) Act requirements, future availability of labor impacting our customers ’ network builds, the impact of the Broadband Equity, Access, and Deployment (BEAD) Program, Rural Digital Opportunity Fund (RDOF) or other government programs on the demand for the Company ’ s products or timing of customer orders, the Company ’ s ability to match capacity to meet demand, expansion into new markets and trends in and growth of the FTTx markets, market segments or customer purchases, future goodwill analysis and other statements that are not historical facts. These statements are based upon the Company's current expectations and judgments about future developments in the Company's business. Certain important factors could have a material impact on the Company's performance, including, without limitation: our business is dependent on interdependent management information systems; inflationary price pressures and uncertain availability of components, raw materials, labor and logistics used by us and our suppliers could negatively impact our profitability; we rely on single-source suppliers, which could cause delays, increase costs or prevent us from completing customer orders; we depend on the availability of sufficient supply of certain materials and global disruptions in the supply chain for these materials could prevent us from meeting customer demand for our products; a significant percentage of our sales in the last three fiscal years have been made to a small number of customers, and the loss of these major customers could adversely affect us; further consolidation among our customers may result in the loss of some customers and may reduce sales during the pendency of business combinations and related integration activities; we may be subject to risks associated with acquisitions, and the risks could adversely affect future operating results; we have exposure to movements in foreign currency exchange rates; adverse global economic conditions and geopolitical issues could have a negative effect on our business, and results of operations and financial condition; growth may strain our business infrastructure, which could adversely affect our operations and financial condition; product defects or the failure of our products to meet specifications could cause us to lose customers and sales or to incur unexpected expenses; we are dependent on key personnel; cyber-security incidents, including ransomware, data breaches or computer viruses, could disrupt our business operations, damage our reputation, result in increased expense, and potentially lead to legal proceedings; natural disasters, extreme weather conditions or other catastrophic events could negatively affect our business, financial condition, and operating results; pandemics and other health crises could have a material adverse effect on our business, financial condition, and operating results; to compete effectively, we must continually improve existing products and introduce new products that achieve market acceptance; if the telecommunications market does not continue to expand, our business may not grow as fast as we expect, which could adversely impact our business, financial condition and operating results; changes in U.S. government funding programs may cause our customers and prospective customers to delay, reduce, or accelerate purchases, leading to unpredictable and irregular purchase cycles; intense competition in our industry may result in price reductions, lower gross profits and loss of market share; our success depends upon adequate protection of our patent and intellectual property rights; we face risks associated with expanding our sales outside of the United States ; expectations relating to environmental, social and governance matters may increase our cost of doing business and expose us to reputational harm and potential liability; our operating results may fluctuate significantly from quarter to quarter, which may make budgeting for expenses difficult and may negatively affect the market price of our common stock; our stock price has been volatile historically and may continue to be volatile - the price of our common stock may fluctuate significantly; anti-takeover provisions in our organizational documents, Minnesota law and other agreements could prevent or delay a change in control of our Company; and other factors set forth in Part I, Item IA. “ Risk Factors ” of Clearfield's Annual Report on Form 10-K for the year ended September 30, 2024, Part II, Item 1A “ Risk Factors ” of this Quarterly Report on Form 10-Q, as well as other filings with the Securities and Exchange Commission. The Company undertakes no obligation to update these statements to reflect actual events unless required by law.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Clearfield is exposed to market risk due to the risk of loss arising from adverse changes in interest rates, foreign currency exchange rates, and commodity prices. Changes in those factors could impact the Company’s results of operations and financial condition. For a discussion of sensitivity analysis related to these types of market risks, refer to Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in our Annual Report on Form 10-K for the year ended September 30, 2024. There have been no material changes in information that would have been provided in the context of Item 3 for the three and nine months ended June 30, 2025.
The Company currently invests its excess cash in bank CDs that are fully insured by the FDIC and Treasuries with terms of not more than five years, as well as money market funds. The fair value of these investments fluctuates subject to changes in market interest rates.
Foreign Exchange Rates
The Company uses the U.S. Dollar as its reporting currency. The functional currency of Nestor Cables is the Euro. The changing relationships of the U.S. Dollar to the Euro could have a material impact on our financial results. Fluctuations in the Euro to U.S. Dollar exchange rate impacts our condensed consolidated balance sheets, as well as sales, cost of sales, and net income. If the Euro had appreciated or depreciated by 10% relative to the U.S. Dollar, our operating expenses would have increased or decreased by approximately $159,000 and $468,000, or approximately 1%, for the three and nine months ended June 30, 2025. We do not hedge against foreign currency fluctuations. As such, fluctuations in foreign currency exchange rates could have a material impact on the Company’s condensed consolidated financial statements.
Inflation
Rising costs, including wages, logistics, components, and commodity prices, are negatively impacting our profitability. We are subject to market risk from fluctuating market prices of certain purchased commodities and raw materials such as fiber cable and other components, which has outpaced our ability to reduce the cost structure and manufacturability or increase prices. We do not hedge commodity prices. Accordingly, inflation impacts our profitability, including cost of sales and operating expenses, and may have a material impact on the Company’s condensed consolidated financial statements.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company’s management carried out an evaluation, under the supervision and with the participation of the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of June 30, 2025. Based upon that evaluation, the Company’s Chief Executive Officer and the Company’s Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
During the three months ended June 30, 2025, the Company implemented a new ERP system in the Clearfield segment, which changed a number of the Company’s processes and internal controls over financial reporting, as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934. These changes are primarily in our revenue, inventory, accounts payable and financial reporting processes. In connection with this implementation we have updated aspects of our control environment related to these processes to ensure our controls remain effective.
There are no pending legal proceedings against or involving the Company for which the outcome is likely to have a material adverse effect upon its financial position or results of operations.
The most significant risk factors applicable to the Company are described in Part II, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended September 30, 2024. There have been no material changes from the risk factors previously disclosed.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The Company repurchased shares of stock associated with exercise and satisfaction of employee tax withholding requirements on vesting or exercise of equity awards under the Company’s Stock Compensation Plans for the three months ended June 30, 2025, as well as the repurchase of shares on the open market under the Company’s stock repurchase program. Accordingly, the Company’s purchases of equity securities for the three months ended June 30, 2025, were as follows:
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ISSUER PURCHASES OF EQUITY SECURITIES |
||||||||||||||||
|
Period |
Total
|
Average
|
Total Number of
|
Approximate Dollar Value
|
||||||||||||
|
April 1-30, 2025 |
153,837 | 27.30 | 153,837 | 9,793,000 | ||||||||||||
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May 1- 31, 2025 |
45,937 | 27.97 | 45,937 | 8,393,000 | ||||||||||||
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June 1- 30, 2025 |
- | - | - | 8,393,000 | ||||||||||||
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Total |
199,774 | 27.72 | 199,774 | 8,393,000 | ||||||||||||
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(1) |
Effective April 30, 2024, the Company’s board of directors increased the share repurchase program to an aggregate of $65 million from the prior $40 million. |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
During the three and nine months ended June 30, 2025, of our directors or officers informed us of the adoption, modification or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Regulation S-K, Item 408(a).
101 – The following materials from Clearfield, Inc.’s Quarterly Report on Form 10-Q for the period ended June 30, 2025 are formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at June 30, 2025 and September 30, 2024; (ii) Condensed Consolidated Statements of Earnings for the three and nine months ended June 30, 2025 and 2024; (iii) Condensed Consolidated Statements of Shareholders’ Equity for the three and nine months ended June 30, 2025 and 2024; (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2025 and 2024; and (v) Notes to the Condensed Consolidated Financial Statements.
104 - Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CLEARFIELD, INC. | |
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August 7, 2025 |
/s/ Cheryl Beranek |
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By: Cheryl Beranek Its: President and Chief Executive Officer |
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(Principal Executive Officer) |
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August 7, 2025 |
/s/ Daniel Herzog |
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By: Daniel Herzog Its: Chief Financial Officer |
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(Principal Financial and Accounting Officer) |