Clearfield(CLFD) - 2025 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides a comprehensive overview of the company's financial performance and position, including detailed statements and explanatory notes ITEM 1. FINANCIAL STATEMENTS This section presents the Company's condensed consolidated financial statements, including balance sheets, statements of earnings, comprehensive income, shareholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, financial instrument valuations, and segment-specific financial data Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's financial position, detailing assets, liabilities, and shareholders' equity at specific points in time Condensed Consolidated Balance Sheets (in thousands, except share data) | :-------------------------------- | :------------------------ | :------------------- | | Assets | | | | Cash and cash equivalents | $ 33,871 | $ 16,167 | | Short-term investments | 83,358 | 114,825 | | Accounts receivables, net | 26,614 | 21,309 | | Inventories, net | 53,753 | 66,766 | | Other current assets | 15,042 | 10,528 | | Total current assets | 212,638 | 229,595 | | Property, plant and equipment, net| 19,742 | 23,953 | | Long-term investments | 40,168 | 24,505 | | Goodwill | 6,740 | 6,627 | | Intangible assets, net | 10,666 | 6,343 | | Right-of-use lease assets | 18,038 | 15,797 | | Deferred tax asset | 6,029 | 6,135 | | Other assets | 689 | 2,320 | | Total Assets | $ 314,710 | $ 315,275 | | Liabilities and Shareholders' Equity | | | | Current portion of lease liability| $ 4,108 | $ 3,357 | | Current maturities of long-term debt | 2,358 | - | | Accounts payable | 8,687 | 6,720 | | Accrued compensation | 8,235 | 6,977 | | Accrued expenses | 4,695 | 4,378 | | Bank overdraft | 862 | - | | Factoring liability | 6,943 | 2,920 | | Total current liabilities | 35,888 | 24,352 | | Long-term debt, net of current maturities | - | 2,228 | | Long-term portion of lease liability | 14,346 | 12,771 | | Deferred tax liability | - | 161 | | Total liabilities | 50,234 | 39,512 | | Total shareholders' equity | 264,476 | 275,763 | | Total Liabilities and Shareholders' Equity | $ 314,710 | $ 315,275 | Condensed Consolidated Statements of Earnings This statement reports the company's revenues, expenses, and net income or loss over specific periods, reflecting operational profitability Condensed Consolidated Statements of Earnings (in thousands, except share data) | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net sales | $ 49,903 | $ 48,793 | $ 132,547 | $ 119,933 | | Cost of sales | 34,669 | 38,101 | 94,940 | 101,712 | | Gross profit | 15,234 | 10,692 | 37,607 | 18,221 | | Selling, general and administrative | 13,738 | 12,998 | 39,823 | 38,430 | | Income (Loss) from operations | 1,496 | (2,306) | (2,216) | (20,209) | | Net investment income | 1,588 | 1,735 | 4,920 | 5,653 | | Interest expense | (106) | (153) | (275) | (381) | | Income (Loss) before income taxes | 2,978 | (724) | 2,429 | (14,937) | | Income tax expense (benefit) | 1,372 | (277) | 1,401 | (3,311) | | Net income (loss) | $ 1,606 | $ (447) | $ 1,028 | $ (11,626) | | Net income (loss) per share Basic | $ 0.11 | $ (0.04) | $ 0.07 | $ (0.79) | | Net income (loss) per share Diluted | $ 0.11 | $ (0.04) | $ 0.07 | $ (0.79) | | Weighted average shares outstanding: Basic | 13,833,748 | 14,249,755 | 14,047,802 | 14,699,278 | | Weighted average shares outstanding: Diluted | 13,833,748 | 14,249,755 | 14,047,802 | 14,699,278 | Condensed Consolidated Statements of Comprehensive Income (Loss) This statement presents net income alongside other comprehensive income items, providing a complete view of changes in equity from non-owner sources Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | :------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net income (loss) | $ 1,606 | $ (447) | $ 1,028 | $ (11,626) | | Other comprehensive income (loss), net of tax: | | | | | | Unrealized gain (loss) on available-for-sale investments | 9 | 31 | (65) | 275 | | Unrealized gain (loss) on foreign currency translation | 1,126 | (146) | 707 | 283 | | Total other comprehensive income (loss) | 1,135 | (115) | 642 | 559 | | Total comprehensive income (loss) | $ 2,741 | $ (562) | $ 1,670 | $ (11,067) | Condensed Consolidated Statements of Shareholders' Equity This statement details changes in each component of shareholders' equity, including common stock, retained earnings, and other comprehensive income For the three months ended June 30, 2025 (in thousands, except share data) | :--------------------------------------- | :----- | :------------------ | :------------------------- | :------------------------------------- | :---------------- | :------------------------- | | Balance at March 31, 2025 | 13,992 | $ 140 | $ 150,789 | $ 586 | $ 114,384 | $ 265,899 | | Stock-based compensation expense | - | - | 1,313 | - | - | 1,313 | | Issuance of common stock under equity compensation plans, net | (4) | - | - | - | - | - | | Issuance of common stock under employee stock purchase plan | 11 | - | 294 | - | - | 294 | | Repurchase of common stock | (200) | (2) | (5,648) | - | - | (5,650) | | Exercise of stock options, net of shares exchanged for payment | 7 | - | (121) | - | - | (121) | | Other comprehensive income | - | - | - | 1,135 | - | 1,135 | | Net income | - | - | - | - | 1,606 | 1,606 | | Balance at June 30, 2025 | 13,806 | $ 138 | $ 146,627 | $ 1,721 | $ 115,990 | $ 264,476 | For the three months ended June 30, 2024 (in thousands, except share data) | :--------------------------------------- | :----- | :------------------ | :------------------------- | :-------------------------------------------- | :---------------- | :------------------------- | | Balance at March 31, 2024 | 14,410 | $ 144 | $ 162,697 | $ 130 | $ 116,237 | $ 279,208 | | Stock-based compensation expense | - | - | 1,152 | - | - | 1,152 | | Issuance of common stock under employee stock purchase plan | 14 | - | 336 | - | - | 336 | | Repurchase of common stock | (185) | (2) | (5,558) | - | - | (5,560) | | Other comprehensive loss | - | - | - | (115) | - | (115) | | Net loss | - | - | - | - | (447) | (447) | | Balance at June 30, 2024 | 14,239 | $ 142 | $ 158,627 | $ 15 | $ 115,790 | $ 274,574 | For the nine months ended June 30, 2025 (in thousands, except share data) | :-------------------------------------- | :----- | :------------------ | :------------------------- | :------------------------------------- | :---------------- | :------------------------- | | Balance as of September 30, 2024 | 14,229 | $ 142 | $ 159,579 | $ 1,079 | $ 114,963 | $ 275,763 | | Stock-based compensation expense | - | - | 3,740 | - | - | 3,740 | | Issuance of common stock under employee stock purchase plan | 23 | - | 595 | - | - | 595 | | Issuance of common stock under equity compensation plans, net | 115 | 1 | (1) | - | - | - | | Repurchase of shares for payment of withholding taxes for vested restricted stock grants | (17) | - | (494) | - | - | (494) | | Exercise of stock options, net of shares exchanged for payment | 7 | - | (133) | - | - | (133) | | Repurchase of common stock | (551) | (6) | (16,659) | - | - | (16,665) | | Other comprehensive income | - | - | - | 642 | - | 642 | | Net income | - | - | - | - | 1,028 | 1,028 | | Balance at June 30, 2025 | 13,806 | $ 138 | $ 146,627 | $ 1,721 | $ 115,990 | $ 264,476 | For the nine months ended June 30, 2024 (in thousands, except share data) | :-------------------------------------- | :----- | :------------------ | :------------------------- | :-------------------------------------------- | :---------------- | :------------------------- | | Balance as of September 30, 2023 | 15,255 | $ 153 | $ 188,218 | $ (544) | $ 127,336 | $ 315,163 | | Stock-based compensation expense | - | - | 3,436 | - | - | 3,436 | | Issuance of common stock under employee stock purchase plan | 24 | - | 586 | - | - | 586 | | Issuance of common stock under equity compensation plans, net | 133 | 1 | (1) | - | - | - | | Repurchase of shares for payment of withholding taxes for vested restricted stock grants | (9) | - | (240) | - | - | (240) | | Exercise of stock options, net of shares exchanged for payment | 1 | - | (9) | - | - | (9) | | Repurchase of common stock | (1,164)| (12) | (33,362) | - | - | (33,374) | | Adoption of new accounting pronouncement| - | - | - | - | 79 | 79 | | Other comprehensive income | - | - | - | 559 | - | 559 | | Net loss | - | - | - | - | (11,626) | (11,626) |\ | Balance at June 30, 2024 | 14,239 | $ 142 | $ 158,627 | $ 15 | $ 115,790 | $ 274,574 | Condensed Consolidated Statements of Cash Flows This statement categorizes cash inflows and outflows into operating, investing, and financing activities, showing liquidity and solvency Condensed Consolidated Statements of Cash Flows (in thousands) | :------------------------------------------ | :------------------------------ | :------------------------------ | | Cash flows from operating activities | | | | Net income (loss) | $ 1,028 | $ (11,626) | | Depreciation and amortization | 5,766 | 5,481 | | Amortization of premium and discount on investments, net | (1,556) | (3,304) | | Deferred taxes | (157) | (3,523) | | Stock-based compensation | 3,745 | 3,437 | | Accounts receivable | (4,944) | 946 | | Inventories, net | 13,752 | 23,440 | | Other assets | (2,555) | (8,030) | | Accounts payable and accrued expenses | 3,037 | 2,310 | | Net cash provided by operating activities | 18,116 | 9,131 | | Cash flows from investing activities | | | | Purchases of property, plant and equipment and intangible assets | (5,221) | (5,608) | | Purchases of investments | (78,697) | (124,137) | | Proceeds from maturities of investments | 95,976 | 142,067 | | Net cash provided by investing activities | 12,058 | 12,322 | | Cash flows from financing activities | | | | Issuance of long-term debt | - | 2,142 | | Repayment of long-term debt | - | (2,142) | | Proceeds from issuance of common stock under employee stock purchase plan | 595 | 586 | | Repurchase of shares for payment of withholding taxes for vested restricted stock grants | (494) | (240) | | Withholding related to exercise of stock options | (133) | (9) | | Borrowings and repayments of bank overdrafts, net | 793 | - | | Borrowings and repayments of factoring liability, net | 3,544 | (667) | | Repurchase of common stock | (16,665) | (33,374) | | Net cash used in financing activities | (12,360) | (33,704) | | Effect of exchange rates on cash | (109) | 48 | | Increase (decrease) in cash and cash equivalents | 17,704 | (12,203) | | Cash and cash equivalents, beginning of period | 16,167 | 37,827 | | Cash and cash equivalents, end of period | $ 33,871 | $ 25,624 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements Note 1. Summary of Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing the financial statements, ensuring transparency and comparability - The Company adopted the cumulative expected credit loss model (CECL) on October 1, 2023, for accounts receivable, measuring the allowance for credit losses using a lifetime expected credit loss allowance[70] - A prior period error in the Consolidated Statement of Cash Flows was corrected, reclassifying net borrowings and repayments of factoring receivables from operating to financing activities, increasing both by $667,000 for the nine months ended June 30, 2024[35] - New accounting pronouncements (ASU 2023-07, ASU 2023-09, ASU 2024-03) are being evaluated for future adoption, with ASU 2023-07 applicable for the 2025 annual period, ASU 2023-09 for the annual period starting October 1, 2025, and ASU 2024-03 for the annual period starting October 1, 2027[32][33][34] Note 2. Net Income (Loss) Per Share This note details the calculation of basic and diluted net income or loss per share, providing insight into shareholder profitability Net Income (Loss) Per Share (in thousands, except for share data) | :------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net income (loss) | $ 1,606 | $ (447) | $ 1,028 | $ (11,626) | | Weighted average common shares | 13,833,748 | 14,249,755 | 14,047,802 | 14,699,278 | | Dilutive potential common shares | - | - | - | - | | Weighted average dilutive common shares outstanding | 13,833,748 | 14,249,755 | 14,047,802 | 14,699,278 | | Net income (loss) per common share: Basic | $ 0.11 | $ (0.04) | $ 0.07 | $ (0.79) | | Net income (loss) per common share: Diluted | $ 0.11 | $ (0.04) | $ 0.07 | $ (0.79) | - For the three and nine months ended June 30, 2025, 379,471 and 395,619 stock options, as well as 76,121 performance stock units, were not included in the computation of diluted net income (loss) per share because their effect would have been anti-dilutive[37] Note 3. Cash and Cash Equivalents This note provides a breakdown of the company's cash and cash equivalents, including money market accounts and funds Cash and Cash Equivalents (in thousands) | :------------- | :------------ | :----------------- | | Cash, including money market accounts | $ 9,192 | $ 5,789 | | Money market funds | 24,679 | 10,378 | | Total cash and cash equivalents | $ 33,871 | $ 16,167 | Note 4. Investments This note details the company's investment portfolio, including available-for-sale securities and their fair value measurements Available-for-Sale Investments as of June 30, 2025 (in thousands) | :------------- | :------------- | :--------------- | :---------------- | :--------- | | Short-Term | | | | | | U.S. Treasury securities | $ 83,411 | $ 87 | $ (140) | $ 83,358 | | Investment securities – short-term | $ 83,411 | $ 87 | $ (140) | $ 83,358 | | Long-Term | | | | | | U.S. Treasury securities | $ 39,867 | $ 60 | $ - | $ 39,927 | | Certificates of deposit | 248 | - | (7) | 241 | | Investment securities – long-term | $ 40,115 | $ 60 | $ (7) | $ 40,168 | Available-for-Sale Investments as of September 30, 2024 (in thousands) | :------------- | :------------- | :--------------- | :---------------- | :--------- | | Short-Term | | | | | | U.S. Treasury securities | $ 113,987 | $ 382 | $ (45) | $ 114,324 | | Certificates of deposit | 500 | 1 | - | 501 | | Investment securities – short-term | $ 114,487 | $ 383 | $ (45) | $ 114,825 | | Long-Term | | | | | | U.S Treasury securities | $ 24,514 | $ - | $ (245) | $ 24,269 | | Certificates of deposit | 248 | - | (12) | 236 | | Investment securities – long-term | $ 24,762 | $ - | $ (257) | $ 24,505 | - As of June 30, 2025, five securities were in an unrealized loss position due to higher market interest rates, but none were considered other than temporarily impaired, as the Company intends to hold them until value recovers with limited credit risk[42] Note 5. Fair Value Measurements This note outlines the fair value hierarchy and measurements for financial assets and liabilities, ensuring transparency in valuation Fair Value Measurements as of June 30, 2025 (in thousands) | :------------- | :-------- | :-------- | :-------- | :-------- | | Cash equivalents: | | | | | | Money market funds | $ 24,679 | $ 24,679 | $ - | $ - | | Total cash equivalents | $ 24,679 | $ 24,679 | $ - | $ - | | Investment securities: | | | | | | U.S. Treasury securities | $ 123,285 | $ - | $ 123,285 | $ - | | Certificates of deposit | 241 | - | 241 | - | | Total investment securities | $ 123,526 | $ - | $ 123,526 | $ - | Fair Value Measurements as of September 30, 2024 (in thousands) | :------------- | :-------- | :-------- | :-------- | :-------- | | Cash equivalents: | | | | | | Money market funds | $ 10,378 | $ 10,378 | $ - | $ - | | Total cash equivalents | $ 10,378 | $ 10,378 | $ - | $ - | | Investment securities: | | | | | | U.S. Treasury securities | $ 138,592 | $ - | $ 138,592 | $ - | | Certificates of deposit | 738 | - | 738 | $ - | | Total investment securities | $ 139,330 | $ - | $ 139,330 | $ - | - The Company owned no Level 3 securities and experienced no transfers within the fair value level hierarchy during the three and nine months ended June 30, 2025, and the year ended September 30, 2024[48] Note 6. Other Comprehensive Income (Loss) This note details the components of other comprehensive income or loss, including unrealized gains and losses on investments and foreign currency translation Changes in Components of Other Comprehensive Income (Loss) (September 30, 2024 to June 30, 2025) (in thousands) | :------------- | :---------------------------- | :--------------------------- | :-------------------------------- | | Balances at September 30, 2024 | $ 66 | $ 1,013 | $ 1,079 | | Other comprehensive (loss) for the three months ended December 31, 2024 | (125) | (971) | (1,096) | | Balances at December 31, 2024 | $ (59) | $ 42 | $ (17) | | Other comprehensive income for the three months ended March 31, 2025 | 51 | 552 | 603 | | Balances at March 31, 2025 | $ (8) | $ 594 | $ 586 | | Other comprehensive income for the three months ended June 30, 2025 | 9 | 1,126 | 1,135 | | Balances at June 30, 2025 | $ 1 | $ 1,720 | $ 1,721 | Components of Other Comprehensive Income (Loss) (Three and Nine Months Ended June 30, 2025) (in thousands) | :------------- | :--------- | :--------- | :---------------- | | Three Months Ended June 30, 2025 | | | | | Unrealized gain on available-for-sale securities | $ 11 | $ (2) | $ 9 | | Unrealized gain on foreign currency translation | 1,334 | (208) | 1,126 | | Other comprehensive income | $ 1,345 | $ (210) | $ 1,135 | | Nine Months Ended June 30, 2025 | | | | | Unrealized (loss) on available-for-sale securities | $ (82) | $ 17 | $ (65) | | Unrealized gain on foreign currency translation | 830 | (123) | 707 | | Other comprehensive income | $ 748 | $ (106) | $ 642 | Components of Other Comprehensive Income (Loss) (Three and Nine Months Ended June 30, 2024) (in thousands) | :------------- | :--------- | :--------- | :---------------- | | Three Months Ended June 30, 2024 | | | | | Unrealized gain on available-for-sale securities | $ 40 | $ (9) | $ 31 | | Unrealized (loss) on foreign currency translation | (170) | 24 | (146) | | Other comprehensive (loss) | $ (130) | $ 15 | $ (115) | | Nine Months Ended June 30, 2024 | | | | | Unrealized gain on available-for-sale securities | $ 373 | $ (97) | $ 275 | | Unrealized gain on foreign currency translation | 368 | (85) | 283 | | Other comprehensive income | $ 741 | $ (182) | $ 559 | Note 7. Stock-Based Compensation This note provides information on stock-based compensation plans, including expense recognition, option activity, and restricted stock transactions Stock-Based Compensation Expense (in thousands) | :------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Total compensation expense | $ 1,313 | $ 1,152 | $ 3,740 | $ 3,437 | | Included in selling, general and administrative expense | 1,250 | 1,099 | 3,568 | 3,280 | | Included in cost of sales | 63 | 53 | 172 | 157 | - As of June 30, 2025, $6,885,000 of total unrecognized compensation expense related to non-vested restricted stock awards, performance share units, and stock options is expected to be recognized over approximately 2.4 years[52] Stock Option Activity (Nine Months Ended June 30, 2025) (in thousands) | :-------------------------------------- | :---------------- | :------------------------------ | | Outstanding as of September 30, 2024 | 366,984 | $ 33.83 | | Granted | 38,198 | 30.90 | | Exercised | (22,749) | 20.29 | | Forfeited or expired | (2,962) | 47.64 | | Outstanding as of June 30, 2025 | 379,471 | $ 34.24 | Restricted Stock Transactions (Nine Months Ended June 30, 2025) (in thousands) | :-------------------------------------------- | :--------------- | :------------------------------------- | | Unvested shares as of September 30, 2024 | 162,207 | $ 34.91 | | Granted | 122,577 | 31.12 | | Vested | (71,691) | 57.35 | | Forfeited | (7,432) | 26.76 | | Unvested as of June 30, 2025 | 205,661 | $ 27.79 | - During the nine months ended June 30, 2025, the Company granted 50,747 performance stock units, with 100% vesting deemed probable based on achievement of fiscal year 2025 performance goals[60][61] - In contrast, the fiscal year 2024 performance goal was not achieved, and 47,745 performance stock units were not earned and forfeited[62][63] Note 8. Revenue This note details the company's revenue recognition policies and provides a breakdown of net sales by geographic area and market segments - Substantially all revenue is recognized at the point in time when the customer obtains control of the products, as sales contracts typically have a single, short-term performance obligation[66] Revenues by Geographic Area (in thousands) | :------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | United States | $ 37,413 | $ 32,300 | $ 106,590 | $ 86,823 | | All other countries | 12,490 | 16,493 | 25,957 | 33,110 | | Total Net Sales | $ 49,903 | $ 48,793 | $ 132,547 | $ 119,933 | Percentages of Sales by Markets (in thousands) | :------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Broadband service providers | 95% | 94% | 94% | 94% | | Other customers | 5% | 6% | 6% | 6% | | Total Net Sales | 100% | 100% | 100% | 100% | Note 9. Major Customer Concentration This note identifies significant customer concentrations that could impact the company's financial performance and accounts receivable - For the three months ended June 30, 2025, one customer comprised 15% of net sales[72] - For the nine months ended June 30, 2025, two customers comprised 14% and 10% of net sales, respectively, all distributors within the broadband service provider category[72] - As of June 30, 2025, one customer accounted for 22% of accounts receivable, a distributor within the broadband service provider category[74] Note 10. Inventories This note provides a detailed breakdown of inventory components, including raw materials, work-in-process, finished goods, and inventory reserves Inventories (in thousands) | :------------- | :------------ | :----------------- | | Raw materials | $ 44,161 | $ 56,842 | | Work-in-process | 3,753 | 1,790 | | Finished goods | 20,629 | 23,389 | | Inventories, gross | 68,543 | 82,021 | | Inventory reserve | (14,790) | (15,255) | | Inventories, net | $ 53,753 | $ 66,766 | Note 11. Goodwill and Intangible Assets This note details the company's goodwill and finite-life intangible assets, including changes in carrying amounts and estimated amortization expense - No impairment of goodwill or intangible assets was indicated as of September 30, 2024, and no triggering events occurred during the nine months ended June 30, 2025[76][78] - The next annual goodwill impairment test will be performed as of June 30, 2025[78] Changes in Carrying Amount of Goodwill by Reportable Segment (in thousands) | :------------- | :--------------- | :------------ | :---- | | Nine Months Ended June 30, 2025 | | | | | Balance as of September 30, 2024 | $ 4,709 | $ 1,918 | $ 6,627 | | Currency translation effect on foreign goodwill balances | - | 113 | 113 | | Balance as of June 30, 2025 | $ 4,709 | $ 2,031 | $ 6,740 | | Nine Months Ended June 30, 2024 | | | | | Balance as of September 30, 2023 | $ 4,709 | $ 1,819 | $ 6,528 | | Currency translation effect on foreign goodwill balances | - | 25 | 25 | | Balance as of June 30, 2024 | $ 4,709 | $ 1,844 | $ 6,553 | Finite Life Intangible Assets (in thousands) | :------------- | :------------------ | :-------------------- | :----------------------- | :-------------------- | | June 30, 2025 | | | | | | Customer relationships | 15 | $ 4,921 | $ 2,071 | $ 2,850 | | Certifications | 8 | 1,068 | 985 | 83 | | Trademarks | 8-10 | 1,153 | 692 | 461 | | Patents | 20 | 1,416 | 263 | 1,153 | | Developed Technology | 10 | 366 | 106 | 260 | | Other | 5 | 6 | 6 | - | | Software | 1-10 | 9,333 | 3,474 | 5,859 | | Totals | | $ 18,263 | $ 7,597 | $ 10,666 | | September 30, 2024 | | | | | | Customer relationships | 15 | $ 4,856 | $ 1,815 | $ 3,041 | | Certifications | 8 | 1,068 | 884 | 184 | | Trademarks | 8-10 | 1,120 | 588 | 532 | | Patents | 20 | 1,302 | 219 | 1,083 | | Developed Technology | 10 | 346 | 75 | 271 | | Other | 5 | 6 | 6 | - | | Software | 1-3 | 3,475 | 2,243 | 1,232 | | Totals | | $ 12,173 | $ 5,830 | $ 6,343 | Estimated Future Amortization Expense for Identifiable Intangibles (in thousands) | :------------- | :----------------------------- | | FY 2025 (remaining) | $ 1,475 | | FY 2026 | 1,501 | | FY 2027 | 1,143 | | FY 2028 | 1,050 | | FY 2029 | 930 | | Thereafter | 4,567 | | Total | $ 10,666 | Note 12. Segment Reporting This note provides financial information for the company's reportable segments, including revenue, net income, and assets Segment Financial Summary (Three and Nine Months Ended June 30, 2025) (in thousands) | :------------- | :------------------- | :---------------------- | :--------------------- | :--------------------- | :------------------- | :---------------------- | :--------------------- | :--------------------- | | Revenue from external customers | $ 38,755 | $ 11,148 | $ - | $ 49,903 | $ 109,074 | $ 23,473 | $ - | $ 132,547 | | Revenue from internal customers (Clearfield, Inc.) | - | 262 | (262) | - | - | 1,226 | (1,226) | - | | Net investment income | 1,646 | - | (58) | 1,588 | 5,099 | - | (179) | 4,920 | | Interest expense | - | 164 | (58) | 106 | - | 454 | (179) | 275 | | Depreciation and amortization | 1,581 | 336 | - | 1,917 | 4,763 | 1,003 | - | 5,766 | | Stock based compensation | 1,196 | 117 | - | 1,313 | 3,417 | 323 | - | 3,740 | | Income tax expense (benefit) | 787 | 585 | - | 1,372 | 1,562 | (161) | - | 1,401 | | Net income (loss) | 2,219 | (709) | 96 | 1,606 | 4,064 | (3,335) | 299 | 1,028 | | Capital expenditures | 406 | 1 | - | 407 | 2,796 | 1,684 | - | 4,480 | Segment Financial Summary (Three and Nine Months Ended June 30, 2024) (in thousands) | :------------- | :------------------- | :---------------------- | :--------------------- | :--------------------- | :------------------- | :---------------------- | :--------------------- | :--------------------- | | Revenue from external customers | $ 33,670 | $ 15,123 | $ - | $ 48,793 | $ 89,371 | $ 30,562 | $ - | $ 119,933 | | Revenue from internal customers (Clearfield, Inc.) | - | 389 | (389) | - | - | 1,490 | (1,490) | - | | Net investment income | 1,799 | - | (64) | 1,735 | 5,832 | - | (179) | 5,653 | | Interest expense | - | 213 | (60) | 153 | - | 558 | (177) | 381 | | Depreciation and amortization | 1,535 | 375 | - | 1,910 | 4,383 | 1,098 | - | 5,481 | | Stock based compensation | 1,080 | 72 | - | 1,152 | 3,242 | 195 | - | 3,437 | | Income tax benefit | (249) | (28) | - | (277) | (2,657) | (654) | - | (3,311) | | Net income (loss) | (478) | (164) | 195 | (447) | (8,862) | (2,836) | 72 | (11,626) | | Capital expenditures | 1,115 | 106 | - | 1,221 | 4,207 | 1,401 | - | 5,608 | Segment Assets (in thousands) | :------------- | :------------------------- | :---------------------------- | :--------------------------- | :--------------------------- | :-------------------------------- | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Goodwill | $ 4,709 | $ 2,031 | $ - | $ 6,740 | $ 4,709 | $ 1,918 | $ - | $ 6,627 | | Total assets | $ 292,178 | $ 46,204 | $ (23,672) | $ 314,710 | $ 300,472 | $ 38,773 | $ (23,970) | $ 315,275 | Note 13. Financing Receivables This note details the company's factoring liability, including outstanding balances and associated interest rates - Nestor Cables has a total factoring liability of $6,943,000 as of June 30, 2025, accounted for as secured borrowing due to recourse provisions[84] - The average interest rate was 3.19% for the three months and 5.59% for the nine months ended June 30, 2025[84] Note 14. Income Taxes This note provides a breakdown of income tax expense or benefit and the effective tax rates, explaining significant adjustments Income Tax Expense (Benefit) and Effective Tax Rates (in thousands) | :------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Income tax expense (benefit) | $ 1,372 | $ (277) | $ 1,401 | $ (3,311) | | Effective tax rate | 46.1% | 38.2% | 57.7% | 22.1% | - A $780,000 valuation allowance was recorded against the deferred tax assets of the Nestor Cables segment as of June 30, 2025, which significantly impacted the effective tax rate for the three and nine months ended June 30, 2025[85][87] Note 15. Leases This note describes the company's lease arrangements, including leased facilities, lease expense, and future lease liabilities - The Company leases various facilities, including an 85,000 sq ft corporate/manufacturing facility in Brooklyn Park, MN, a 318,000 sq ft manufacturing facility in Tijuana, Mexico, a 105,000 sq ft warehouse in Brooklyn Park, MN, and manufacturing facilities in Oulu, Finland (25,000 sq ft) and Tabasalu, Estonia (expanded to 115,000 sq ft)[90][91][92][93][95] Operating Lease Expense (in thousands) | :------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Cost of sales | $ 1,192 | $ 1,081 | $ 3,474 | $ 3,193 | | Selling, general and administrative | 143 | 80 | 376 | 229 | | Total lease expense | $ 1,335 | $ 1,161 | $ 3,850 | $ 3,422 | Future Maturities of Lease Liabilities as of June 30, 2025 (in thousands) | :----------------- | :------ | | FY2025 (Remaining) | $ 1,690 | | FY2026 | 5,081 | | FY2027 | 4,099 | | FY2028 | 3,508 | | FY2029 | 2,188 | | Thereafter | 5,450 | | Total lease payments | 22,016 | | Less: Interest | (3,562) | | Present value of lease liabilities | $ 18,454 | - The weighted average lease term and weighted average discount rate for the Company's leases as of June 30, 2025, were 5.64 years and 6.38%, respectively[96] Note 16. Debt This note outlines the company's debt obligations, including revolving lines of credit, senior loans, and bank overdrafts - The Company has a $40,000,000 revolving line of credit, extended to April 25, 2026, with no outstanding balance as of June 30, 2025, and was in compliance with debt covenants[98][99][100] - Nestor Cables has a €2,000,000 senior loan, due March 31, 2026, fully secured by a Finnish government guarantee, with an outstanding balance of $2,358,000 as of June 30, 2025[101] - Nestor Cables utilized bank overdrafts totaling $862,000 as of June 30, 2025, accruing interest at the 3-month Euribor rate plus 1.15%[102] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the Company's financial condition, results of operations, and liquidity for the three and nine months ended June 30, 2025, compared to the prior year, discussing key drivers of performance, segment results, and future outlook OVERVIEW This section provides a general introduction to the company's business, operational segments, and recent trade policy impacts General This subsection introduces Clearfield, Inc.'s core business of fiber solutions and its two primary operating segments - Clearfield, Inc. designs, manufactures, and distributes fiber protection, management, and delivery solutions to broadband service providers, primarily across North America[104] - The Company operates two reportable segments: the Clearfield Operating Segment and the Nestor Cables Operating Segment, established after the acquisition of Nestor Cables on July 26, 2022[105] Clearfield Operating Segment This subsection details the Clearfield segment's focus on fiber management products for broadband service providers and its manufacturing operations - The Clearfield segment focuses on providing fiber management, protection, and delivery products to accelerate the deployment of fiber-based networks in residential homes, businesses, and network infrastructure[106] - Products are designed to reduce labor and materials for Fiber to the Home (FTTH) builds, improve business services profitability, and support wireless 4G/5G deployments[107] - Final build and assembly are completed at Clearfield's plants in Brooklyn Park, Minnesota, and Tijuana, Mexico, with manufacturing support from domestic and global partners[108] Nestor Cables Operating Segment This subsection describes Nestor Cables' operations in manufacturing fiber optic and copper telecommunication cables for various European markets - Nestor Cables, based in Oulu, Finland, with operations in Estonia, manufactures fiber optic and copper telecommunication cables and equipment[109] - Products are distributed to telecommunication operators, network owners, electric companies, building contractors, and industrial companies, sold via distributors and directly to end users[109] Trade and Tariffs Update This subsection discusses the impact of U.S. trade policy changes and tariffs on the company's production costs and profitability - U.S. trade policy changes increased import tariffs across various trading partners, with exemptions for USMCA compliant goods from Mexico, while components from China remain subject to tariffs[110][111] - Tariffs are anticipated to negatively impact future financial results by increasing production costs, disrupting supply chains, limiting market attractiveness, and lowering profitability[111][112] RESULTS OF OPERATIONS This section analyzes the company's financial performance for the current reporting periods, highlighting key revenue and profitability trends THREE MONTHS ENDED JUNE 30, 2025 VS. THREE MONTHS ENDED JUNE 30, 2024 This subsection compares the company's financial results for the three-month periods, focusing on sales, gross profit, and net income changes Key Financial Performance (Three Months Ended June 30, 2025 vs. 2024) (in thousands, except share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Net sales | $ 49,903,000 | $ 48,793,000 | $ 1,110,000 | 2% | | Gross profit | $ 15,234,000 | $ 10,692,000 | $ 4,542,000 | 42% | | Gross profit percent | 30.5% | 21.9% | 8.6 pp | | | Income (Loss) from operations | $ 1,496,000 | $ (2,307,000) | $ 3,803,000 | 165% | | Net income (loss) | $ 1,606,000 | $ (447,000) | $ 2,053,000 | 459% | | Net income (loss) per share Basic | $ 0.11 | $ (0.04) | $ 0.15 | | - Net sales increased by 2% to $49,903,000, primarily driven by increased sales to Large Regional Service Provider customers (up 82%) and MSO customers (up 59%), partially offset by a 24% decrease in International sales due to lower demand in Nestor's European market[113][114] - Gross profit percentage improved significantly to 30.5% from 21.9%, primarily due to increased volumes within the Clearfield segment, improved utilization of manufacturing overhead, and lower excess inventory charges[117] NINE MONTHS ENDED JUNE 30, 2025 VS. NINE MONTHS ENDED JUNE 30, 2024 This subsection compares the company's financial results for the nine-month periods, highlighting significant changes in sales and profitability Key Financial Performance (Nine Months Ended June 30, 2025 vs. 2024) (in thousands, except share data) | Metric | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------------------------ | :------------------------------ | :--------- | :--------- | | Net sales | $ 132,547,000 | $ 119,933,000 | $ 12,614,000 | 11% | | Gross profit | $ 37,608,000 | $ 18,221,000 | $ 19,387,000 | 106% | | Gross profit percent | 28.4% | 15.2% | 13.2 pp | | | Loss from operations | $ (2,217,000) | $ (20,210,000) | $ 17,993,000 | 89% | | Net income (loss) | $ 1,028,000 | $ (11,626,000) | $ 12,654,000 | 109% | | Net income (loss) per share Basic | $ 0.07 | $ (0.79) | $ 0.86 | | - Net sales increased by 11% to $132,547,000, driven by strong growth in Large Regional Service Provider (up 71%), Community Broadband (up 4%), MSO (up 40%), and National Carrier (up 23%) markets, partially offset by a 22% decrease in International sales[124][125] - Gross profit percentage more than doubled to 28.4% from 15.2%, attributed to increased Clearfield segment volumes, improved manufacturing overhead utilization, and lower excess inventory charges of $9,319,000[126] Reportable Segments This section provides a detailed financial analysis of the performance of each of the company's operating segments Clearfield Segment This subsection analyzes the Clearfield segment's sales growth and net income improvement, driven by increased product line sales Clearfield Segment Net Sales and Net Income (in thousands) | :------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Segment net external sales | $ 38,755 | $ 33,670 | $ 109,074 | $ 89,371 | | Segment net (loss) income | $ 2,328 | $ (196) | $ 4,522 | $ (8,464) | - Clearfield segment net sales increased by 15% for the three months and 22% for the nine months ended June 30, 2025, primarily due to higher sales of additional product lines to Large Regional Service Provider and MSO markets[133] - Net income for the Clearfield segment significantly improved, increasing by 1288% for the three months and 153% for the nine months, driven by increased sales volume and improved gross profit margin from decreased provision for excess inventory reserves[134] Nestor Cables Segment This subsection examines the Nestor Cables segment's sales decline and increased net loss due to lower European market demand Nestor Cables Segment Net Sales and Net Loss (in thousands) | :------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Segment net external sales | $ 11,148 | $ 15,123 | $ 23,473 | $ 30,562 | | Segment net (loss) | $ (722) | $ (252) | $ (3,494) | $ (3,162) | - Nestor Cables segment net sales decreased by 26% for the three months and 23% for the nine months ended June 30, 2025, primarily due to lower demand in their European market[137] - Net loss for the Nestor Cables segment increased by 186% for the three months and 10% for the nine months, driven by lower sales and the tax valuation allowance was recorded in the third quarter of fiscal 2025[138] Liquidity and Capital Resources This section assesses the company's ability to generate and manage cash, covering operating, investing, and financing activities Operating Activities This subsection details cash flows generated from the company's primary business operations, including changes in working capital - Net cash provided by operating activities totaled $18,116,000 for the nine months ended June 30, 2025, an increase from $9,131,000 in the prior year[141][142] - Key drivers for the increase in operating cash flow include net income of $1,028,000, a decrease in inventory of $13,752,000, and an increase in accounts payable and accrued expenses of $3,037,000