Clearfield, Inc.
For the period ended Mar 31, 2025. Filed May 9, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 9, 2025
CLFD$28.63-0.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-12-31; filed 2025-02-07.
0001171843-25-000691
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-09.
0001171843-25-003014
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 53 previous paragraphs and 67 current paragraphs.
24 unchanged; 27 reworded; 12 added; 2 removed; 0 previous and 4 current paragraphs rearranged.
Tables are not compared: 4 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (12)
Current report
Recent Developments–** Tariffs**
Current report
The U.S. recently introduced trade policy changes that increased import tariffs across a wide range of countries at various rates, with exemptions for certain goods, including currently United States-Mexico-Canada Agreement (USMCA) compliant goods. In response, many countries implemented retaliatory tariffs on U.S. exports. In early April 2025, the U.S. and certain other countries agreed to delay the effective date of certain of these tariffs, but a number of the new tariffs remain in effect, including significant tariffs between the U.S. and China. While the tariffs did not materially impact our second quarter results, we do anticipate certain tariffs in effect as of May 9, 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.
Current report
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.
Current report
Selling, general and administrative expenses for the three months ended March 31, 2025, were $13,929,000 in comparison to $12,573,000 for the three months ended March 31, 2024, an increase of $1,356,000, or 11%, due to increased wages and performance-based compensation accruals.
Current report
SIX MONTHS ENDED MARCH 31, 2025 VS. SIX MONTHS ENDED MARCH 31, 2024
Current report
Net sales for the six months ended March 31, 2025, were $82,644,000, an increase of approximately 16%, or $11,504,000, from net sales of $71,140,000 for the six months ended March 31, 2024. Net sales to Broadband Service Providers were $77,833,000 and $66,211,000 in the six months ended March 31, 2025 and 2024, respectively. In addition, the Company recorded $13,468,000 in international sales for the six months ended March 31, 2025 versus $16,616,000 for the six months ended March 31, 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 16% and 23% of total net sales for the six months ended March 31, 2025 and March 31, 2024, respectively. Net sales to Legacy customers were $1,199,000 in the six months ended March 31, 2025 versus $1,489,000 in the six months ended March 31, 2024.
Current report
The increase in net sales for the six months ended March 31, 2025, of $11,504,000 compared to the six months ended March 31, 2024, was primarily driven by increased sales to Large Regional Service Provider customers of $7,502,000, or 67%, Community Broadband Service Providers of $2,964,000, or 10%, MSO customers of $2,947,000, or 29%, and National Carrier customers of $1,529,000, or 45%, partially offset by decreased sales to International customer of $3,148,000, or 19%. The increase in sales across these markets for the six months ended March 31, 2025, as compared to the six months ended March 31, 2024, is due to early build season orders as well as reduced excess inventory levels at customers compared to the prior year period. The decrease in sales to International customers was driven by decreased sales by the Nestor Cables segment during the six months ended March 31, 2025.
Current report
Cost of sales for the six months ended March 31, 2025, was $60,270,000, a decrease of $3,341,000, or 5%, from $63,611,000 for the six months ended March 31, 2024. Gross profit percent was 27.1% of net sales for the six months ended March 31, 2025, an increase from 10.6% of net sales for the six months ended March 31, 2024. Gross profit increased $14,845,000, or 197%, to $22,374,000 for the six months ended March 31, 2025, from $7,529,000 for the six months ended March 31, 2024. The improvement in gross margin from the six months ended March 31, 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 $6,767,000 in the six months ended March 31, 2025, reflecting improved inventory utilization and beneficial recoveries from previously reserved inventory.
Current report
Selling, general and administrative expenses increased $655,000, or 3%, to $26,087,000 in the six months ended March 31, 2025, from $25,432,000 for the six months ended March 31, 2024. The increase is due to higher wages and performance-based compensation accruals of $1,474,000, partially offset by lower legal and professional expenses of $839,000.
Current report
Net investment income for the six months ended March 31, 2025, was $3,332,000 compared to $3,918,000 for the six months ended March 31, 2024. The decrease in interest income is due to lower interest rates on investments during the six months ended March 31, 2025.
Current report
Net loss in the Nestor Cables segment for the three months ended March 31, 2025, increased 31%, or $286,000, as compared to the three months ended March 31, 2024. The increased net loss was driven by decreased net sales for the three months ended March 31, 2025. Net loss in the Nestor Cables segment for the six months ended March 31, 2025, decreased 5%, or $137,000, as compared to the six months ended March 31, 2024. The decreased net loss for the six months ended March 31, 2025 is due to lower selling, general and administrative expenses, partially offset by decreased net sales.
Current report
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Removed paragraphs (2)
Previous report
Selling, general and administrative expenses for the three months ended December 31, 2024 were $12,158,000 in comparison to $12,859,000 for the three months ended December 31, 2023, a decrease of $701,000 or 6% as a result of cost management efforts to lower expenses.
Previous report
Net loss in the Nestor Cables segment for the three months ended December 31, 2024, decreased 21%, or $424,000, as compared to the three months ended December 31, 2023.
Reworded paragraphs (27)
Previous wording
The following discussion and analysis of the Company’s financial condition and results of operations as of and for the three months ended December 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, 2024.
Current 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, 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.
Previous wording
Clearfield’s products allow its customers to connect twice as many homes in their Fiber to the Home (“FTTH”) builds by using fewer resources in less time. 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.
Current wording
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 vs. 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.
Previous wording
Net sales for the three months ended December 31, 2024, were $35,476,000, an increase of approximately 4%, or $1,246,000, from net sales of $34,230,000 for the three months ended December 31, 2023. Net sales to Broadband Service Providers were $33,440,000 and $31,915,000 in the three months ended December 31, 2024 and 2023, respectively. Net sales to Legacy customers were $2,036,000 in the three months ended December 31, 2024 versus $2,376,000 for the three months ended December 31, 2023. In addition, the Company recorded $6,144,000 in international sales for the three months ended December 31, 2024 versus $6,669,000 for the three months ended December 31, 2023. The Company allocates sales from external customers to geographic areas based on the location to which the product is transported. International sales represented 17% and 19% of total net sales for the three months ended December 31, 2024 and 2023, respectively.
Current wording
Net sales for the three months ended March 31, 2025, were $47,168,000, an increase of approximately 28%, or $10,258,000, from net sales of $36,910,000 for the three months ended March 31, 2024. Net sales to Broadband Service Providers were $44,384,000 and $34,363,000 in the three months ended March 31, 2025 and 2024, respectively. Net sales to Legacy customers were $710,000 in the three months ended March 31,2025 versus $645,000 for the three months ended March 31, 2024. In addition, the Company recorded $7,323,000 in international sales for the three months ended March 31, 2025 versus $9,947,000 for the three months ended March 31, 2024. The Company allocates sales from external customers to geographic areas based on the location to which the product is transported. International sales represented 16% and 27% of total net sales for the three months ended March 31, 2025 and 2024, respectively.
Previous wording
The increase in net sales for the three months ended December 31, 2024, of $1,246,000 compared to the three months ended December 31, 2023, was primarily driven by increased sales to National Carrier customers of $1,409,000, or 106%, Community Broadband customers of $1,029,000, or 8%, and MSO customers of $327,000, or 6%, partially offset by decreased sales to Large Regional Service Provider customers of $638,000, or 8%, International customers of $525,000, or 8%, and Legacy customers of $355,000, or 42%. The increase in sales in the National Carrier and Community Broadband customer markets for the three months ended December 31, 2024, as compared to the three months ended December 31, 2023, is due to increased demand in the quarter. The decrease in sales to International customers was driven by decreased sales by the Nestor Cables segment during the quarter.
Current wording
The increase in net sales for the three months ended March 31, 2025, of $10,258,000 compared to the three months ended March 31, 2024, was primarily driven by increased sales to Large Regional Service Provider customers of $8,140,000, or 255%, MSO customers of $2,620,000, or 53%, and Community Broadband customers of $1,936,000, or 12%, partially offset by decreased sales to International customers of $2,623,000, or 26%. The increase in sales in the Large Regional Service Provider, MSO and Community Broadband customer markets for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, is due to increased demand in the quarter due to early build season orders as well as reduced excess inventory levels at customers compared to the prior year quarter. 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.
Previous wording
Order backlog as of December 31, 2024 was $26,028,000, an increase of 3.6% compared to $25,133,000 as of September 30, 2024, and a decrease of $17,423,000, or 40%, from December 31, 2023. This aligns with the ordering patterns we anticipated from service providers during the winter season.
Current wording
Order backlog as of March 31, 2025, was $34,097,000, an increase of 31% compared to $26,028,000 as of December 31, 2024, and a decrease of $13,082,000, or 27.7%, from March 31, 2024. This sequential increase aligns with the seasonal ordering patterns we typically experience in the start of the build season, and the decrease from prior year reflects higher order fulfilment for orders placed during the pandemic.
Previous wording
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 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. The Company’s future financial results, particularly cost of sales and gross profit, would be negatively impacted by any tariffs that may be imposed on imports from Mexico where we have substantial manufacturing operations or, to a lesser extent, by tariffs that may be imposed on imports from certain other countries. Tariffs by the U.S. government and any retaliatory tariffs on U.S. goods also may cause customers to delay or suspend orders or seek less expensive alternatives to our products, which may negatively impact our future revenue. The current situation is dynamic, and the ultimate impact will be dependent on the products and countries covered by tariffs, tariff rates, and duration of tariffs, all of which are currently unknown.
Current wording
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.
Previous wording
Cost of sales for the three months ended December 31, 2024 was $27,294,000, a decrease of $2,239,000, or 8%, from $29,533,000 for the three months ended December 31, 2023. Gross profit percent was 23.1% of net sales for the three months ended December 31, 2024, an increase from 13.7% of net sales for the three months ended December 31, 2023. Gross profit increased $3,486,000, or 74%, to $8,182,000 for the three months ended December 31, 2024, from $4,696,000 for the three months ended December 31, 2023. The improvement in gross margin from the prior year quarter was due to lower excess inventory charges of $2,346,000 in the current quarter, reflecting improved inventory utilization and beneficial recoveries from previously reserved inventory.
Current wording
Cost of sales for the three months ended March 31, 2025, was $32,976,000, a decrease of $1,102,000, or 3%, from $34,078,000 for the three months ended March 31, 2024. Gross profit percent was 30.1% of net sales for the three months ended March 31, 2025, an increase from 7.7% of net sales for the three months ended March 31, 2024. Gross profit increased $11,359,000, or 401%, to $14,191,000 for the three months ended March 31, 2025, from $2,832,000 for the three months ended March 31, 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 of $4,426,000 in the current quarter, reflecting improved inventory utilization and beneficial recoveries from previously reserved inventory.
Previous wording
Net investment income for the three months ended December 31, 2024, was $1,744,000 compared to $2,069,000 for the three months ended December 31, 2023. The decrease in interest income is due to lower interest rates earned on investments during the quarter.
Current wording
Net investment income for the three months ended March 31, 2025, was $1,589,000 compared to $1,849,000 for the three months ended March 31, 2024. The decrease in net investment income is due to decreased interest income driven by to lower interest rates earned on investments during the quarter.
Previous wording
Interest expense for the three months ended December 31, 2024, remained relatively consistent at $100,000, compared to $126,000 for the three months ended December 31, 2023. Interest expense incurred during these periods is related to factoring liabilities in the Nestor segment.
Current wording
Interest expense for the three months ended March 31, 2025, remained relatively consistent at $69,000, compared to $102,000 for the three months ended March 31, 2024. Interest expense incurred during these periods is related to factoring liabilities in the Nestor segment.
Previous wording
Loss from operations for the three months ended December 31, 2024, was $3,975,000 compared to loss from operations of $8,162,000 for the three months ended December 31, 2023, a decrease of approximately 51%. The decreased loss from operations is the result of increased net sales and gross profit margin, as well as lower selling, general and administrative expenses as explained above.
Current wording
Loss from operations for the six months ended March 31, 2025, was $3,713,000 compared to loss from operations of $17,903,000 for the six months ended March 31, 2024, a decrease of approximately 79%. 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.
Previous wording
The Company recorded an income tax benefit of $426,000 and $951,000 for the three months ended December 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 benefit of $525,000 is primarily due to decreased loss from operations. The income tax expense rate for the three months ended December 31, 2024, increased to 18.3% from 15.3% recorded for the three months ended December 31, 2023, due to the higher percentage impact of discrete items and a lower level of pre-tax book loss in the first quarter.
Current wording
The Company recorded an income tax expense of $29,000 and income tax benefit of $3,034,000 for the six months ended March 31, 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 $3,063,000 in the second quarter of fiscal 2025 from the second quarter of fiscal 2024 is primarily due to decreased loss from operations. The income tax expense rate for the six months ended March 31, 2025, was (5.3%) compared to 21.3% for the six months ended March 31, 2024. The change in the effective tax rate was due to the higher percentage impact of discrete items and a lower level of pre-tax book loss for the six months ended March 31, 2025.
Previous wording
The Company’s net loss for the three months ended December 31, 2024, was $1,906,000, or $0.13 per basic and diluted share. The Company’s net loss for the three months ended December 31, 2023, was $5,268,000, or $0.35 per basic and diluted share. The decrease in basic and diluted loss per share for the three months ended December 31, 2024, as compared to December 31, 2023, was due to lower net loss as a result of increased net sales and gross profit margin and decreased selling, general and administrative expenses as detailed above.
Current wording
The Company’s net loss for the six months ended March 31, 2025, was $579,000 or $0.04 per basic share and diluted share. The Company’s net loss for the six months ended March 31, 2024, was $11,179,000, or $0.75 per basic share and diluted share. The decrease in basic and diluted loss per share for the six months ended March 31, 2025, as compared to March 31, 2024, was due to lower net loss as a result of increased sales and increased gross profit margin, partially offset by 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 months ended:
Current wording
The following table provides net sales and net income for the Clearfield segment for the three and six months ended:
Previous wording
Net sales in the Clearfield segment increased 6%, or $1,597,000, for the three months ended December 31, 2024, as compared to the three months ended December 31, 2023, resulting from increased sales to its National Carrier and Community Broadband customers as both markets had increased demand in the quarter.
Current wording
Net sales in the Clearfield segment increased 47%, or $13,021,000, for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. Net sales in the Clearfield segment increased 26%, or $14,619,000, for the six months ended March 31, 2025 as compared to the six months ended March 31, 2024, resulting primarily from increased sales to its Large Regional Service Provider, MSO and Community Broadband customers as these markets had increased demand in the quarter related to seasonality as well as reduced excess inventory levels at customers compared to the prior year.
Previous wording
Net loss in the Clearfield segment for the three months ended December 31, 2024, decreased 89%, or $2,938,000, as compared to the three months ended December 31, 2023, driven by the changes in sales outlined above, as well as increased gross profit margin which was positively affected by decreased provision for excess inventory reserves of $2,455,000.
Current wording
Net income in the Clearfield segment for the three months ended March 31, 2025, increased 151%, or $7,524,000 from a net loss, as compared to the three months ended March 31, 2024. Net income in the Clearfield segment for the six months ended March 31, 2025 increased 127%, or $10,463,000 from a net loss, as compared to the six months ended March 31, 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.
Previous wording
The following table provides net sales and net income for the Nestor Cables segment for the three months ended:
Current wording
The following table provides net sales and net income for the Nestor Cables segment for the three and six months ended:
Previous wording
Net sales in the Nestor Cables segment decreased 6%, or $351,000, for the three months ended December 31, 2024, as compared to the three months ended December 31, 2023, excluding sales to the Clearfield Segment. The decrease in net sales for the Nestor Cables segment was driven by decreased demand in the quarter.
Current wording
Net sales in the Nestor Cables segment decreased 30%, or $2,763,000, for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, excluding sales to the Clearfield Segment. Net sales in the Nestor Cables segment decreased 20%, or $3,114,000, for the six months ended March 31, 2025, as compared to the six months ended March 31, 2024, excluding sales to the Clearfield Segment. The decrease in net sales for the Nestor Cables segment was driven by decreased demand for the three and six months ended March 31, 2025.
Previous wording
As of December 31, 2024, our principal source of liquidity was our cash, cash equivalents, and short-term investments. These sources total $113,014,000 as of December 31, 2024, 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 December 31, 2024. Our excess cash is invested mainly in U.S. Treasury securities, certificates of deposit backed by the FDIC, and money market funds. Investments considered long-term were $41,916,000 as of December 31, 2024, 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 December 31, 2024, our cash, cash equivalents, and short-term and long-term investments totaled $154,930,000, compared to $155,497,000 as of September 30, 2024.
Current wording
As of March 31, 2025, our principal source of liquidity was our cash, cash equivalents, and short-term investments. These sources total $111,990,000 as of March 31, 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 March 31, 2025. Our excess cash is invested mainly in U.S. Treasury securities, certificates of deposit backed by the FDIC, and money market funds. Investments considered long-term were $41,356,000 as of March 31, 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 March 31, 2025, our cash, cash equivalents, and short-term and long-term investments totaled $153,346,000, compared to $155,497,000 as of September 30, 2024.
Previous wording
Net cash provided by operating activities totaled $7,150,000 for the three months ended December 31, 2024. This consisted of a net loss of $1,906,000, non-cash expenses for depreciation and amortization of $1,838,000, stock-based compensation of $1,139,000, amortization of discounts on investments of $766,000 and increased deferred income taxes of $544,000, 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 $6,871,000 and a decrease in accounts receivable of $6,873,000. The decrease in inventory is due to decreased inventory purchases during the three months ended December 31, 2024, as the Company utilizes inventory on hand to fulfill customer orders and achieve lower stocking levels. The decrease in accounts receivable is due to decreased net sales during the three months ended December 31, 2024. Days sales outstanding, which measures how quickly receivables are collected, decreased 11 days to 36 days as of December 31, 2024, compared to 47 days from December 31, 2023. The primary change in operating assets and liabilities using cash was a decrease in accounts payable and accrued expenses of $5,328,000 due to timing of payments and the payment of fiscal year 2024 incentive compensation accruals during the three months ended December 31, 2024, along with an increase in other assets of $1,027,000, related to the increases in prepaid taxes and prepaid expenses.
Current wording
Net cash provided by operating activities totaled $10,198,000 for the six months ended March 31, 2025. This consisted of a net loss of $579,000, non-cash expenses for depreciation and amortization of $3,711,000, stock-based compensation of $2,427,000, amortization of premium and discounts on investments of $1,202,000, and increased deferred income taxes of $891,000, 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 $10,478,000 and an increase in accounts payable and accrued expenses of $1,855,000 due to timing of payments. The decrease in inventory is due to increased sales to customers during the six months ended March 31, 2025 as the Company utilized 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 $3,447,000, along with an increase in other assets of $2,154,000, related to the increases in prepaid taxes and prepaid expenses. The increase in accounts receivable is due to increased net sales during the six months ended March 31, 2025. Days sales outstanding, which measures how quickly receivables are collected, decreased 8 days to 47 days as of March 31, 2025, compared to 55 days from March 31, 2024.
Previous wording
Net cash provided by operating activities totaled $10,800,000 for the three months ended December 31, 2023. This consisted of a net loss of $5,268,000, non-cash expenses for depreciation and amortization of $1,651,000, stock-based compensation of $1,271,000 and amortization of discounts on investments of $1,160,000, 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 accounts receivable of $11,750,000, and a decrease in inventory of $4,169,000. The decrease in accounts receivable is due to the decrease in sales volume in the three months ended December 31, 2023. Days sales outstanding decreased 6 days to 47 days as of December 31, 2023, compared to 53 days from September 30, 2023. The decrease in inventory is due to decreased inventory purchases in the three months ended December 31, 2023 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 a decrease in accounts payable and accrued expenses of $2,108,000, due to the timing of payments to vendors and lower inventory purchases in the three months ended December 31, 2023.
Current wording
Net cash provided by operating activities totaled $5,094,000 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 was due to decreased inventory purchases during the six months ending March 31, 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 decrease in accounts receivable was due to the decrease in sales volume during the second quarter of fiscal 2024. Days sales outstanding 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 $2,256,000 and an increase in other assets of $5,951,000. 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.
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 three months ended December 31, 2024, we received proceeds from the maturity of investment securities of $54,476,000 and used cash to purchase $39,015,000 of investment securities. Purchases of property, plant, and equipment, mainly related to manufacturing equipment and intangible assets, consumed $2,069,000 of cash during the three months ended December 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 six months ended March 31, 2025, we received proceeds from the maturity of investment securities of $75,176,000 and used cash to purchase $59,234,000 of investment securities. Purchases of property, plant, and equipment, mainly related to manufacturing equipment and intangible assets, consumed $4,722,000 of cash during the six months ended March 31, 2025.
Previous wording
For the three months ended December 31, 2023, we received proceeds from the maturity of investment securities of $51,068,000 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, consumed $2,412,000 of cash for the three months ended December 31, 2023.
Current wording
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.
Previous wording
For the three months ended December 31, 2024, we used cash to repurchase $6,275,000 of our common stock on the open market under our stock repurchase program, which includes U.S. Federal excise taxes. We received $301,000 from employees’ participation and purchase of stock through our ESPP and used $491,000 for payment of withholding taxes for vesting of restricted stock grants. The Company also borrowed cash of $77,000 on repayments on factored accounts receivables, net of borrowings.
Current wording
For the six months ended March 31, 2025, we used cash to repurchase $11,015,000 of our common stock on the open market under our stock repurchase program, which includes U.S. Federal excise taxes. We received $301,000 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 also received cash of $1,253,000 on net borrowings and repayments of factoring liabilities. The Company also received cash from bank overdrafts of $1,212,000.
Previous wording
For the three months ended December 31, 2023, we used cash to repurchase $12,184,000 of our common stock on the open market under our stock repurchase program. The Company also used cash of $2,972,000 on repayments on factored accounts receivables, net of borrowings. We received $250,000 from employees’ participation and purchase of stock through our ESPP and used $236,000 for payment of withholding taxes for vesting of restricted stock grants.
Current 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. The Company also used cash of $497,000 on net borrowings and repayments of factoring liabilities.
Previous wording
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 months ended December 31, 2024.
Current wording
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 six months ended March 31, 2025.
Previous wording
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 months ended December 31, 2024.
Current wording
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 six months ended March 31, 2025.
Previous wording
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,” “continue” and other words and terms of similar meaning, typically identify these forward-looking statements. Forward-looking statements are based on certain assumptions and expectations of future events and trends that are subject to risks and uncertainties. Actual results could differ from those projected in any forward-looking statements because of the factors identified in and incorporated by reference from Part* I, Item 1A,“Risk Factors,”* of our Annual Report on Form 10-K for the year ended September 30, 2024 and Part II, Item 1A.“Risk Factors” of this Quarterly Report on Form 10-Q, as well as in other filings we make with the Securities and Exchange Commission, which should be considered an integral part of Part* I, Item 2,“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”* All forward-looking statements included herein are made as the date of this Quarterly Report on Form 10-Q and we assume no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.*
Current wording
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 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 exposu…
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Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
Income from operations for the three months ended March 31, 2025, was $262,000 compared to loss from operations of $9,741,000 for the three months ended March 31, 2024, an increase of approximately 103%. The increased income from operations is the result of increased net sales and gross profit margin as explained above.
Current report — wording carried from elsewhere
The Company recorded an income tax expense of $455,000 and income tax benefit of $2,083,000 for the three months ended March 31, 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 $2,538,000 is primarily due to increased income from operations. The income tax expense rate for the three months ended March 31, 2025, remained relatively consistent at 25.5% from 26.1% recorded for the three months ended March 31, 2024.
Current report — wording carried from elsewhere
The Company’s net income for the three months ended March 31, 2025, was $1,327,000, or $0.09 per basic and diluted share. 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 increase in basic and diluted earnings per share for the three months ended March 31, 2025, as compared to March 31, 2024, was due to higher net income as a result of increased net sales and gross profit margin, partially offset by increased selling, general and administrative expenses as detailed above.
Current report — wording carried from elsewhere
Interest expense for the six months ended March 31, 2025, was $168,000 compared to $228,000 for the six months ended March 31, 2024. Interest expense incurred during these periods due to factoring liabilities in the Nestor segment.