Clearfield(CLFD)2024-11-15 17:45Financial Performance - Net sales for fiscal year 2024 decreased by 38% to $166.7 million from $268.7 million in fiscal year 2023, primarily due to decreased demand in the Clearfield segment's core markets[159][160] - Gross profit for fiscal year 2024 decreased by 66% to $28.9 million, with gross profit margin dropping to 17.3% from 31.7% in fiscal year 2023, impacted by lower sales and unabsorbed overhead[162][163] - The company reported a net loss of $12.5 million for fiscal year 2024, compared to a net income of $32.5 million in fiscal year 2023[169] - Clearfield segment net sales decreased by 44% ($100.154 million) for fiscal year 2024 compared to 2023, driven by reduced sales to Community Broadband, MSO/Cable TV, and Large Regional customers[185] - Clearfield segment net loss increased by 128% ($41.348 million) for fiscal year 2024, primarily due to lower gross profit margins and inventory reserves[186] - Nestor Cables segment net sales decreased by 4% ($1.861 million) for fiscal year 2024, excluding sales to the Clearfield segment[188] - Nestor Cables segment net loss increased by 112% ($3.638 million) for fiscal year 2024, driven by lower gross profit margins and higher operating expenses[188] Market and Sales Trends - Sales to the Community Broadband market decreased by 41% to $66.0 million in fiscal year 2024, while sales to the MSO/Cable TV market decreased by 49% to $23.5 million[160] - International sales represented 27% of net sales in fiscal year 2024, up from 19% in fiscal year 2023, reflecting the company's growing presence in global markets[159] - The acquisition of Nestor Cables in July 2022 contributed to a 226% increase in international sales to $49.9 million in fiscal year 2023[171] - Company's sales backlog decreased to $25.133 million as of September 30, 2024, from $57.285 million in 2023, due to reduced demand for fiber connectivity products[189] Expenses and Costs - Selling, general, and administrative expenses increased by 9% to $52.1 million in fiscal year 2024, driven by higher performance-based and stock-based compensation[164] - Rising costs including wages, logistics, components, and commodity prices are negatively impacting the company's profitability[234] - The company is subject to market risk from fluctuating market prices of certain purchased commodities and raw materials[234] - Inflation impacts the company's profitability, including cost of sales and operating expenses[234] - Inflation may have a material impact on the company's financial statements[234] Investments and Cash Flow - Net investment income increased to $7.5 million in fiscal year 2024, up from $5.2 million in fiscal year 2023, due to higher average investment balances and interest rates[166] - Company's combined cash, cash equivalents, and investments totaled $155.497 million as of September 30, 2024, compared to $174.456 million in 2023[190] - Net cash provided by operations for fiscal year 2024 totaled $22.223 million, including a net loss of $12.453 million and a decrease in inventory of $31.990 million[196] - Company received $162.064 million from maturities of investments and used $159.393 million to purchase new investments in fiscal year 2024[200] - Net cash used for financing activities during fiscal year 2024 was $36.907 million, primarily due to $33.058 million spent on stock repurchases[203] - Net cash provided by financing activities in fiscal year 2023 was $115,002,000, primarily from $130,262,000 in net proceeds from common stock issuance and $1,587,000 from borrowings on factored accounts receivables[204] - In fiscal year 2022, the company borrowed $16,700,000 to fund the acquisition of Nestor Cables, resulting in net cash provided by financing activities of $9,397,000[205] Stock Repurchase and Compensation - Company repurchased 1,164,190 shares for approximately $33.058 million during fiscal year 2024, leaving $24.923 million available in the $65 million stock repurchase program[195] - Stock-based compensation is measured using the Black-Scholes option pricing model, with fair value determined based on the company's stock price and assumptions about variables like expected stock price volatility and employee exercise behavior[209] Operational and Financial Policies - The company operates in two reportable segments: Clearfield and Nestor Cables, following the acquisition of Nestor Cables in July 2022[182] - The company has non-cancelable operating leases for office equipment in Minnesota, Mexico, Finland, and Estonia, expiring through August 2034, with certain leases having escalating rent provisions[206] - As of September 30, 2024, the company had a Finnish net operating loss (NOL) of $1,851,000 and a state NOL of $64,000, with no U.S. federal or Estonia NOL carry-forwards[214] - The company reviews long-lived assets for impairment if events indicate the carrying amount may not be recoverable, with no impairment charges recorded for the years ended September 30, 2024, 2023, and 2022[218][223] - Inventory is valued at the lower of cost or net realizable value, with regular reviews to identify and write down excess, slow-moving, or obsolete inventory[225] - The company adopted the FASB's CECL model for recognizing credit losses on financial instruments, effective October 1, 2023, with no material impact on consolidated financial statements[227] - The company plans to adopt new FASB standards on segment reporting (ASU 2023-07) and income tax disclosures (ASU 2023-09) for the fiscal year ending September 30, 2025[228][229] Future Outlook - The company expects gross profit margins to remain at or below current levels for several quarters until revenue levels increase[163]