Clearfield Inc

Previous wording

The following discussion and analysis of the Company’s financial condition and results of operations as of and for the three and six months ended March 31, 2024, and 2023 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, 2023.

Current wording

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, 2024, and 2023 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, 2023.

Previous wording

Net sales for the second quarter of fiscal 2024 ended March 31, 2024, were $36,910,000, a decrease of approximately 49%, or $34,890,000, from net sales of $71,809,000 for the second quarter of fiscal 2023. Net sales to Broadband Service Providers were $34,363,000 in the second quarter of fiscal 2024 versus $68,906,000 in the same period of fiscal 2023. Net sales to Legacy customers were $645,000 in the second quarter of 2024 versus $592,000 in the same period of fiscal 2023. In addition, the Company recorded $9,947,000 in international sales for the second quarter of 2024 versus $13,137,000 in the same period of fiscal 2023. The Company allocates sales from external customers to geographic areas based on the location to which the product is transported. International sales represented 27% and 18% of total net sales for the second quarter of 2024 and 2023, respectively.

Current wording

Net sales for the third quarter of fiscal 2024 ended June 30, 2024, were $48,793,000, a decrease of approximately 20%, or $12,491,000, from net sales of $61,284,000 for the third quarter of fiscal 2023. Net sales to Broadband Service Providers were $46,028,000 in the third quarter of fiscal 2024 versus $59,731,000 in the same period of fiscal 2023. Net sales to Legacy customers were $820,000 in the third quarter of 2024 versus $1,553,000 in the same period of fiscal 2023. In addition, the Company recorded $16,493,000 in international sales for the third quarter of 2024 versus $14,186,000 in the same period of fiscal 2023. The Company allocates sales from external customers to geographic areas based on the location to which the product is transported. International sales represented 34% and 23% of total net sales for the third quarter of 2024 and 2023, respectively.

Previous wording

The decrease in net sales for the quarter ended March 31, 2024, of $34,890,000 compared to the quarter ended March 31, 2023, was primarily driven by decreased sales to Community Broadband Service Providers of $17,123,000 or 52%, MSO customers of $5,072,000 or 52%, Large Regional customers of $9,550,000 or 75%, and International customers of $3,190,000 or 24%. The decrease in sales across these markets for the quarter ended March 31, 2024, as compared to the quarter ended March 31, 2023, is due to a lull in demand as customers digest existing products previously purchased during the period of long lead time supply chain created by the pandemic.

Current wording

The decrease in net sales for the quarter ended June 30, 2024, of $12,491,000 compared to the quarter ended June 30, 2023, was primarily driven by decreased sales to Large Regional customers of $12,092,000, or 76%, and MSO customers of $3,637,000, or 39%, partially offset by increased sales to International customers of $2,307,000, or 16%. The decrease in sales in the Large Regional Service Provider customer and MSO customer markets for the quarter ended June 30, 2024, as compared to the quarter ended June 30, 2023, is due to lower demand as customers digest existing products previously purchased during the period of long lead time supply chain created by the pandemic. The increase in sales to International customers was driven by increased sales by the Nestor Cables segment during the current quarter.

Previous wording

Order backlog for the second quarter of 2024 was $47,179,000, an increase of 9% compared to $43,451,000 as of December 31, 2023, and a decrease of $60,407,000, or 56%, from March 31, 2023. The year-over-year decrease was also due to the lull in demand as customers digest previously purchased products.

Current wording

Order backlog as of June 30, 2024 was $32,582,000, a decrease of 31% compared to $47,179,000 as of March 31, 2024, and a decrease of $74,704,000 or 56%, from June 30, 2023. The year-over-year decrease was also due to the lull in demand as customers digest previously purchased products.

Previous wording

Revenue from customers is obtained from purchase orders submitted from time to time, with a limited number of customers issuing purchase orders for longer time frames. 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. 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.

Current wording

Revenue from customers is obtained from purchase orders submitted from time to time, with a limited number of customers issuing purchase orders for longer time frames. 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 customer’s excess inventory. 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.

Previous wording

Cost of sales for the second quarter of 2024 was $34,078,000, a decrease of $14,168,000, or 29%, from $48,246,000 in the comparable period of fiscal 2023. Gross profit percent was 7.7% of net sales in the second quarter of 2024, a decrease from 32.8% of net sales for the second quarter of 2023. Gross profit decreased $20,731,000 or 88%, to $2,832,000 for the three months ended March 31, 2024, from $23,563,000 in the comparable period in fiscal 2023. Gross profit margin was negatively affected by unabsorbed overhead in our manufacturing facilities due to lower levels of demand. The Company’s gross profit was also negatively impacted by an increase in inventory reserves of $4,624,000 during the second quarter of fiscal 2024. Inventory reserves are primarily due to excess inventory due to the lull in demand while customers draw down their existing products previously purchased during the period of long lead time supply chain created by the pandemic. The Company expects to operate at these gross profit percentage levels for several quarters with improving margins realized as revenue levels increase, and ongoing cost reduction measures are realized.

Current wording

Cost of sales for the third quarter of 2024 was $38,101,000, a decrease of $4,109,000, or 10%, from $42,210,000 in the comparable period of fiscal 2023. Gross profit percent was 21.9% of net sales in the third quarter of 2024, a decrease from 31.1% of net sales for the third quarter of 2023. Gross profit decreased $8,382,000, or 44%, to $10,692,000 for the three months ended June 30, 2024, from $19,074,000 in the comparable period in fiscal 2023. The Company’s gross profit was negatively impacted by an increase in inventory reserves of $1,154,000 during the three months ended June 30, 2024. While gross margin was down from the year ago quarter, it showed a significant improvement from the previous quarter due to improved production capacity and lower excess inventory charges due to better utilization from higher revenue in the quarter.

Previous wording

Loss from operations for the quarter ended March 31, 2024, was $9,741,000 compared to income from operations of $12,055,000 for the comparable quarter of fiscal 2023, a decrease of approximately 181%. The decrease is the result of decreased net sales and gross profit margin as explained above and increased selling, general and administrative expenses.

Current wording

Loss from operations for the quarter ended June 30, 2024, was $2,307,000 compared to income from operations of $5,625,000 for the comparable quarter of fiscal 2023, a decrease of approximately 141%. The decrease is the result of decreased net sales and gross profit margin as explained above.

Previous wording

Net investment income for the six months ended March 31, 2024, was $3,918,000 compared to $1,698,000 for the comparable quarter for fiscal 2023. The increase in interest income is due to higher interest rates earned and a higher average investments balance in the six months ended March 31, 2024.

Current wording

Net investment income for the quarter ended June 30, 2024, was $1,735,000 compared to $1,630,000 for the comparable quarter for fiscal 2023. The increase in interest income is due to higher interest rates earned during the three months ended June 30, 2024, as compared to the prior year quarter.

Previous wording

Interest expense for the quarter ended March 31, 2024, remained relatively consistent at $102,000, compared to $112,000 for the comparable period of fiscal 2023. Interest expense incurred during these periods are related to factoring liabilities in the Nestor segment.

Current wording

Interest expense for the quarter ended June 30, 2024, remained relatively consistent at $153,000, compared to $195,000 for the comparable period of fiscal 2023. Interest expense incurred during these periods is related to factoring liabilities in the Nestor segment.

Previous wording

The Company recorded an income tax benefit of $2,083,000 and an income tax expense of $2,974,000 for the three months ended March 31, 2024, and 2023, respectively. We record our quarterly provision for income taxes based on our estimated annual effective tax rate for the year. The decrease in tax expense of $5,057,000 in the second quarter of fiscal 2024 from the second quarter of fiscal 2023 is primarily due to decreased income from operations. The income tax expense rate for the second quarter of fiscal 2024 increased to 26.1% from 22.3% recorded in the second quarter of fiscal 2023 due to decreased pretax book income and discrete events during the quarter, including excess tax shortfall from vesting of restricted stock.

Current wording

The Company recorded an income tax benefit of $277,000 and an income tax expense of $1,842,000 for the three months ended June 30, 2024, and 2023, respectively. We record our quarterly provision for income taxes based on our estimated annual effective tax rate for the year. The decrease in tax expense of $2,119,000 in the third quarter of fiscal 2024 from the third quarter of fiscal 2023 is primarily due to decreased income from operations. The income tax expense rate for the third quarter of fiscal 2024 increased to 38.2% from 26.1% recorded in the third quarter of fiscal 2023 due to the higher percentage impact of discrete items due to a low level of pre-tax book loss in the third quarter.

Previous wording

The Company’s net loss for the three months ended March 31, 2024, was $5,911,000, or $0.40 per basic and diluted share. The Company’s net income for the three months ended March 31, 2023, was $10,364,000, or $0.67 per basic and diluted share. The decrease in basic and diluted earnings per share for the three months ended March 31, 2024, as compared to March 31, 2023, was due to lower net income.

Current wording

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 Company’s net income for the three months ended June 30, 2023, was $5,218,000, or $0.33 per basic and diluted share. The decrease in basic and diluted earnings per share for the three months ended June 30, 2024, as compared to June 30, 2023, was due to lower net income as a result of decreased net sales and gross profit margin and increased selling, general and administrative expenses as detailed above.

Previous wording

Net sales for the six months ended March 31, 2024 were $71,140,000, a decrease of approximately 55%, or $86,611,000 from net sales of $157,751,000 for the six months ended March 31, 2023. Net sales to Broadband Service Providers were $66,211,000 in the six months ended March 31, 2024 versus $152,861,000 in the same period of fiscal 2023. Among this group, the Company recorded $16,616,000 in international sales for the six months ended March 31, 2024 versus $23,341,000 in the same period of fiscal 2023. The Company allocates sales from external customers to geographic areas based on the location to which the product is transported. Accordingly, international sales represented 23% and 15% of total net sales for the six months ended March 31, 2024 and March 31, 2023, respectively. Net sales to Legacy customers were $1,489,000 in the six months ended March 31, 2024 versus $1,343,000 in the same period of fiscal 2023.

Current wording

Net sales for the nine months ended June 30, 2024, were $119,933,000, a decrease of approximately 45%, or $99,102,000, from net sales of $219,035,000 for the nine months ended June 30, 2023. Net sales to Broadband Service Providers were $112,203,000 in the nine months ended June 30, 2024, versus $211,231,000 in the same period of fiscal 2023. Among this group, the Company recorded $33,110,000 in international sales for the nine months ended June 30, 2024, versus $37,527,000 in the same period of fiscal 2023. The Company allocates sales from external customers to geographic areas based on the location to which the product is transported. Accordingly, international sales represented 28% and 17% of total net sales for the nine months ended June 30, 2024, and June 30, 2023, respectively. Net sales to Legacy customers were $2,310,000 in the nine months ended June 30, 2024, versus $7,804,000 in the same period of fiscal 2023.

Previous wording

The decrease in net sales for the six months ended March 31, 2024 of $86,611,000 compared to the six months ended March 31, 2023 was primarily driven by decreased sales to Community Broadband Service Providers of $41,717,000 or 60%, MSO customers of $20,652,000 or 67%, Large Regional customers of $16,418,000 or 60%, and International customers of $6,725,000 or 29%. The decrease in sales across these markets for the quarter ended March 31, 2024, as compared to the quarter ended March 31, 2023, is due to a lull in demand as customers digest existing products previously purchased during the period of long lead time supply chain created by the pandemic.

Current wording

The decrease in net sales for the nine months ended June 30, 2024, of $99,102,000 compared to the nine months ended June 30, 2023, was primarily driven by decreased sales to Community Broadband Service Providers of $41,244,000, or 46%, Large Regional customers of $28,511,000, or 66%, MSO customers of $24,289,000, or 60%, and International customers of $4,417,000, or 12%. The decrease in sales across these markets for the quarter ended June 30, 2024, as compared to the quarter ended June 30, 2023, is mainly due to lower demand as customers digest existing products previously purchased during the period of long lead time supply chain created by the pandemic.

Previous wording

Revenue from customers is obtained from purchase orders submitted from time to time, with a limited number of customers issuing purchase orders for longer time frames. 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 global supply chain issues, customer deployment schedules and factors affecting customer ordering patterns. 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.

Current wording

Revenue from customers is obtained from purchase orders submitted from time to time, with a limited number of customers issuing purchase orders for longer time frames. 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 global supply chain issues, customer deployment schedules and factors affecting customer ordering patterns including the digestion of customer’s excess inventory. 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.

Previous wording

Cost of sales for the six months ended March 31, 2024 was $63,611,000, a decrease of $39,928,000, or 39%, from $103,539,000 in the comparable period of fiscal 2023.Gross profit percent was 10.6% of net sales for the six months ended March 31, 2024, a decrease from 34.4% of net sales for the six months ended March 31, 2023. Gross profit decreased $46,683,000, or 86%, to $7,529,000 for the six months ended March 31, 2024, from $54,212,000 in the comparable period in fiscal 2023. Gross profit margin was negatively affected by unabsorbed overhead in our manufacturing facilities due to lower levels of demand. The Company’s gross profit was also negatively impacted by an increase in inventory reserves of $7,790,000 during the six months ended March 31, 2024. Inventory reserves are primarily due to excess inventory due to the lull in demand while customers draw down their existing products previously purchased during the period of long lead time supply chain created by the pandemic. The Company expects to operate at these gross profit percentage levels for several quarters with improving margins realized as revenue levels increase, and ongoing cost reduction measures are realized.

Current wording

Cost of sales for the nine months ended June 30, 2024, was $101,712,000, a decrease of $44,038,000, or 30%, from $145,750,000 in the comparable period of fiscal 2023. Gross profit percent was 15.2% of net sales for the nine months ended June 30, 2024, a decrease from 33.5% of net sales for the nine months ended June 30, 2023. Gross profit decreased $55,064,000, or 75%, to $18,221,000 for the nine months ended June 30, 2024, from $73,285,000 in the comparable period in fiscal 2023. Gross profit margin was negatively affected by unabsorbed overhead in our manufacturing facilities due to lower levels of demand. The Company’s gross profit was also negatively impacted by an increase in inventory reserves of $8,944,000 during the nine months ended June 30, 2024. Inventory reserves are primarily due to excess inventory due to the lull in demand while customers draw down their existing products previously purchased during the period of long lead time supply chain created by the pandemic.

Previous wording

Loss from operations for the six months ended March 31, 2024, was $17,903,000 compared to income from operations of $29,946,000 for the comparable quarter of fiscal 2023, a decrease of approximately 160%. The decrease is the result of decreased net sales and gross profit margin as explained above and increased selling, general and administrative expenses.

Current wording

Loss from operations for the nine months ended June 30, 2024, was $20,210,000 compared to income from operations of $35,571,000 for the comparable quarter of fiscal 2023, a decrease of 157%. The decrease is the result of decreased net sales and gross profit margin and increased selling, general and administrative expenses explained above.

Previous wording

Net investment income for the quarter ended March 31, 2024, was $1,849,000 compared to $1,395,000 for the comparable quarter for fiscal 2023. The increase in interest income is due to a higher average investments balance and higher interest rates earned. The higher investments balance is a result of the Company’s capital raise of approximately $130,000,000 completed late in the first fiscal quarter of 2023.

Current wording

Net investment income for the nine months ended June 30, 2024, was $5,653,000 compared to $3,328,000 for the comparable quarter for fiscal 2023. The increase in interest income is due to higher interest rates earned and a higher average investments balance in the nine months ended June 30, 2024. The higher investments balance is a result of the Company’s capital raise of $130,262,000 completed late in the first fiscal quarter of 2023.

Previous wording

Interest expense for the six months ended March 31, 2024, was $228,000 compared to $356,000 for the comparable quarter of fiscal 2024. The decrease was due to repayment of the Company’s line of credit in December 2022, which had been previously drawn on for the acquisition of Nestor Cables, following the Company’s secondary offering completed in December 2023.

Current wording

Interest expense for the nine months ended June 30, 2024, was $381,000 compared to $551,000 for the comparable quarter of fiscal 2023. The decrease was due to repayment of the Company’s line of credit in December 2022, which had been previously drawn on for the acquisition of Nestor Cables, following the Company’s secondary offering completed in December 2023.

Previous wording

The Company recorded an income tax benefit of $3,034,000 and an income tax expense of $6,669,000 for the six months ended March 31, 2024, and 2023, respectively. We record our quarterly provision for income taxes based on our estimated annual effective tax rate for the year. The decrease in tax expense of $9,703,000 in the second quarter of fiscal 2024 from the second quarter of fiscal 2023 is primarily due to decreased income from operations. The income tax expense rate for the six months ended March 31, 2024, and 2023 remained unchanged at 21.3%.

Current wording

The Company recorded an income tax benefit of $3,311,000 and an income tax expense of $8,511,000 for the nine months ended June 30, 2024, and 2023, respectively. We record our quarterly provision for income taxes based on our estimated annual effective tax rate for the year. The decrease in tax expense of $11,822,000 in the third quarter of fiscal 2024 from the third quarter of fiscal 2023 is primarily due to decreased income from operations. The income tax expense rate for the nine months ended June 30, 2024, and 2023 remained unchanged at 22.2%.

Previous wording

The Company’s net loss for the six months ended March 31, 2024, was $11,179,000, or $0.75 per basic share and per diluted share. The Company’s net income for the six months ended March 31, 2023, was $24,619,000, or $1.68 per basic share or $1.67 per diluted share. The decrease in basic and diluted earnings per share for the six months ended March 31, 2024, as compared to March 31, 2023, was due to lower net income as a result of lower sales, lower gross profit margin and higher selling, general and administrative expenses as detailed above.

Current wording

The Company’s net loss for the nine months ended June 30, 2024, was $11,626,000, or $0.79 per basic share and per diluted share. The Company’s net income for the nine months ended June 30, 2023, was $29,837,000, or $2.01 per basic share or $2.00 per diluted share. The decrease in basic and diluted earnings per share for the nine months ended June 30, 2024, as compared to June 30, 2023, was due to lower net income as a result of lower sales, lower gross profit margin and higher selling, general and administrative expenses as detailed above.

Previous wording

The following table provides net sales and net income for the Clearfield segment for the three and six months ended:

Current wording

The following table provides net sales and net income for the Clearfield segment for the three and nine months ended:

Previous wording

Net sales in the Clearfield segment decreased 54%, or $32,851,000, for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. Net sales in the Clearfield segment decreased 60%, or $83,106,000, for the six months ended March 31, 2024 as compared to the six months ended March 31, 2023, resulting from decreased sales to its Community Broadband, MSO/Cable TV, and Large Regional customers as these customers work to digest inventory that was purchased previously during the period of long lead time supply chain created by the pandemic.

Current wording

Net sales in the Clearfield segment decreased 30%, or $14,186,000, for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. Net sales in the Clearfield segment decreased 52%, or $97,291,000, for the nine months ended June 30, 2024, as compared to the nine months ended June 30, 2023, resulting from decreased sales to its Community Broadband, MSO/Cable TV, and Large Regional customers as these customers work to digest inventory that was purchased previously during the period of long lead time supply chain created by the pandemic.

Previous wording

Net income (loss) in the Clearfield segment for the three months ended March 31, 2024, decreased 148%, or $15,370,000, as compared to the three months ended March 31, 2023. Net income (loss) in the Clearfield segment for the six months ended March 31, 2024, decreased 133%, or $33,382,000, as compared to the six months ended March 31, 2023, driven by the changes in sales outlined above, as well as lower gross profit margin which was negatively affected by the buildup in capacity that was not utilized and increased reserves for excess inventory.

Current wording

Net income (loss) in the Clearfield segment for the three months ended June 30, 2024, decreased 109%, or $5,627,000, as compared to the three months ended June 30, 2023. Net income (loss) in the Clearfield segment for the nine months ended June 30, 2024, decreased 129%, or $39,125,000, as compared to the nine months ended June 30, 2023, driven by the changes in sales outlined above, as well as lower gross profit margin which was negatively affected by the buildup in capacity that was not utilized and increased reserves for excess inventory.

Previous wording

The following table provides net sales and net income for the Nestor Cables segment for the three and six months ended:

Current wording

The following table provides net sales and net income for the Nestor Cables segment for the three and nine months ended:

Previous wording

Net sales in the Nestor Cables segment decreased 18%, or $2,048,000, for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, excluding sales to the Clearfield Segment. Net sales in the Nestor Cables segment decreased 19%, or $3,506,000, for the six months ended March 31, 2024, as compared to the six months ended March 31, 2023, excluding sales to the Clearfield Segment.

Current wording

Net sales in the Nestor Cables segment increased 13%, or $1,695,000, for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, excluding sales to the Clearfield Segment. Net sales in the Nestor Cables segment decreased 6%, or $1,810,000 for the nine months ended June 30, 2024, as compared to the nine months ended June 30, 2023, excluding sales to the Clearfield Segment.

Previous wording

Net loss in the Nestor Cables segment for the three months ended March 31, 2024, increased 2,919%, or $905,000, as compared to the three months ended March 31, 2023. Net loss in the Nestor Cables segment for the six months ended March 31, 2024, increased 489%, or $2,416,000, as compared to the six months ended March 31, 2023.

Current wording

Net loss in the Nestor Cables segment for the three months ended June 30, 2024, increased 55%, or $38,000, as compared to the three months ended June 30, 2023. Net loss in the Nestor Cables segment for the nine months ended June 30, 2024, increased 549%, or $2,338,000, as compared to the nine months ended June 30, 2023.

Previous wording

As of March 31, 2024, our principal source of liquidity was our cash, cash equivalents, and short-term investments. These sources total $142,907,000 as of March 31, 2024, compared to $168,113,000 as of September 30, 2023. Additionally, we have a line of credit for $40 million that has no outstanding borrowing as of March 31, 2024. Our excess cash is invested mainly in certificates of deposit backed by the FDIC, U.S. Treasury securities, and money market funds. Investments considered long-term were $6,523,000 as of March 31, 2024, compared to $6,343,000 as of September 30, 2023. 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 March 31, 2024, our cash, cash equivalents, and short-term and long-term investments totaled $149,430,000, compared to $174,456,000 as of September 30, 2023.

Current wording

As of June 30, 2024, our principal source of liquidity was our cash, cash equivalents, and short-term investments. These sources total $123,819,000 as of June 30, 2024, compared to $168,113,000 as of September 30, 2023. Additionally, we have a line of credit for $40 million that has no outstanding borrowing as of June 30, 2024. Our excess cash is invested mainly in certificates of deposit backed by the FDIC, U.S. Treasury securities, and money market funds. Investments considered long-term were $24,180,000 as of June 30, 2024, compared to $6,343,000 as of September 30, 2023. 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, 2024, our cash, cash equivalents, and short-term and long-term investments totaled $147,999,000, compared to $174,456,000 as of September 30, 2023.

Previous wording

Net cash provided by operating activities totaled $4,597,000 for the six months ended March 31, 2024. This consisted of a net loss of $11,179,000, non-cash expenses for depreciation and amortization of $3,572,000, stock-based compensation of $2,284,000 and amortization of discounts on investments of $2,196,000, 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 $14,414,000 and a decrease in accounts receivable of $6,600,000. The decrease in inventory is due to decreased inventory purchases during the six months ending March 31, 2024 as the Company utilizes 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 decrease in accounts receivable is due to the decrease in sales volume during the second quarter of fiscal 2024. Days sales outstanding, which measures how quickly receivables are collected, increased 2 days to 55 days as of March 31, 2024, compared to 53 days from September 30, 2023. The primary change in operating assets and liabilities using cash was a decrease in accounts payable and accrued expenses of $2,752,000 and an increase in other assets of $5,591,000. The accounts payable and accrued expenses decreased due to the timing of payments to vendors and lower inventory purchases during the six months ending March 31, 2024. Other assets increased due to increases in prepaid taxes and prepaid expenses.

Current wording

Net cash provided by operating activities totaled $8,464,000 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 a decrease in accounts payable and accrued expenses of $1,643,000. The decrease in inventory is due to decreased inventory purchases during the nine months ending June 30, 2024, as the Company utilizes 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 the increases in prepaid taxes and prepaid expenses.

Previous wording

Net cash provided by operating activities totaled $10,141,000 for the six months ended March 31, 2023. This was primarily due to net income of $24,619,000, non-cash expenses for depreciation and amortization of $2,822,000, stock-based compensation of $1,444,000, and non-cash income related to amortization of discounts on investments of $1,139,000, in addition to changes in operating assets and liabilities providing and using cash. The primary change in operating assets and liabilities using cash was a decrease in accounts payable and accrued expenses of $14,273,000 and an increase in inventory of $17,243,000. The decrease in accounts payable and accrued expenses is due to the timing of payments to vendors. The Company increased stocking levels of inventory during the quarter ending March 31, 2023 to support previously anticipated demand. Days sales outstanding, which measures how quickly receivables are collected, decreased 3 days to 49 days as of March 31, 2023, compared to 52 days from September 30, 2022.

Current wording

Net cash provided by operating activities totaled $13,481,000 for the nine months ended June 30, 2023. This was primarily due to net income of $29,837,000, non-cash expenses for depreciation and amortization of $4,411,000, stock-based compensation of $2,504,000, and non-cash income related to amortization of discounts on investments of $2,429,000, in addition to changes in operating assets and liabilities providing and using cash. The primary change in operating assets and liabilities using cash was a decrease in accounts payable and accrued expenses of $20,326,000 and an increase in inventory of $21,510,000. The decrease in accounts payable and accrued expenses is due to the timing of payments to vendors. The Company increased stocking levels of inventory during the quarter ending June 30, 2023, to support previously anticipated demand. The primary change in operating assets and liabilities providing cash was a decrease in accounts receivable of $24,519,000. Days sales outstanding, which measures how quickly receivables are collected, decreased 5 days to 47 days as of June 30, 2023, compared to 52 days from September 30, 2022.

Previous wording

We invest our excess cash in money market accounts, U.S. Treasury securities, money market funds, and bank certificates of deposit 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 six months ended March 31, 2024, we received proceeds from the maturity of investment securities of $53,293,000 and used cash to purchase $47,748,000 of investment securities. Purchases of property, plant, and equipment, mainly related to manufacturing equipment and intangible assets, mainly patent related, consumed $4,389,000 of cash during the six months ended March 31, 2024.

Current wording

We invest our excess cash in money market accounts, U.S. Treasury securities, money market funds, and bank certificates of deposit 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, 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.

Previous wording

During the six months ended March 31, 2023, we received proceeds from maturities of investments of $100,743,000 and used cash to purchase $99,126,000 of investment securities. Purchases of property, plant and equipment, mainly related to manufacturing equipment and intangible assets, mainly patent related, consumed $4,798,000 of cash during the six months ended March 31, 2023.

Current wording

During the nine months ended June 30, 2023, we received proceeds from maturities of investments of $105,077,000 and used cash to purchase $210,923,000 of investment securities. Purchases of property, plant and equipment, mainly related to manufacturing equipment and intangible assets, consumed $6,529,000 of cash during the nine months ended June 30, 2023.

Previous wording

For the six months ended March 31, 2024, we used cash to repurchase $27,814,000 of our common stock on the open market under our stock repurchase program. We received $250,000 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

Current wording

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.

Previous wording

For the six months ended March 31, 2023, we received $130,262,000 of net proceeds through the issuance of common stock. We used $16,700,000 to pay down the principal on our line of credit, which was originally drawn in the fourth quarter of fiscal 2022 to fund the acquisition of Nestor Cables. We received $299,000 from employees’ participation and purchase of stock through our ESPP, we received $954,000 related to the issuance of stock as payment for incentive compensation previously earned, we used $471,000 related to share withholding for the exercise price and taxes associated with the issuance of common stock upon cashless exercises of stock options and used $954,000 for payment of withholding taxes for stock grants. We did not repurchase common stock under our share repurchase program in the six months ended March 31, 2023.

Current wording

For the nine months ended June 30, 2023, we received $130,262,000 of net proceeds through the issuance of common stock. We used $16,700,000 to pay down the principal on our line of credit, which was originally drawn in the fourth quarter of fiscal 2022 to fund the acquisition of Nestor Cables. We received $612,000 from employees’ participation and purchase of stock through our ESPP, we received $954,000 related to the issuance of stock as payment for incentive compensation previously earned, we used $493,000 related to share withholding for the exercise price and taxes associated with the issuance of common stock upon cashless exercises of stock options and used $954,000 to pay for taxes as a result of employees’ vesting of restricted shares using share withholding. We did not repurchase common stock under our share repurchase program in the nine months ended June 30, 2023.