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, 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.

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, 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 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.

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 than competitive products. Our products speed up the time to revenue for our service provider customers in Multiple Dwelling Units (MDUs) and Multiple Tenant Units (MTUs) by reducing the amount of labor and materials needed to provide gigabit service. Our products help make business services more profitable through faster building access, easier reconfiguration, and quicker services turn-up. Finally, Clearfield is removing barriers to wireless 4G/5G deployments in backhaul from the tower to the cloud and fiber fronthaul from the tower to the antenna at the cell site through better fiber management, test access, and fiber protection.

Previous wording

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 wording

Earlier this year the U.S. introduced trade policy changes that increased import tariffs across a wide range of trading partners at various rates, with exemptions for certain goods, including currently United States-Mexico-Canada Agreement (USMCA) compliant goods. In response, many trading partners implemented retaliatory tariffs on U.S. exports. The U.S. and certain trading partners have agreed to delay the effective date of certain of these tariffs while various trade deals are being negotiated, but a number of the increased tariffs remain in effect, including significant tariffs between the U.S. and China. While the tariffs did not materially impact our third quarter results, we do anticipate certain tariffs in effect as of August 7, 2025, will impact future financial results, the extent of which is uncertain, difficult to predict and dependent on a number of factors, including the extent and duration of the tariffs, any reversal or suspension of the tariffs, changes in the scope and rates of the tariffs, the availability of exemptions from the tariffs, the imposition of new tariffs, and our ability to successfully implement measures to mitigate the impact of the tariffs. Currently, products imported from our Mexican manufacturing facility are exempt from the new tariffs as they are USMCA compliant. Should the USMCA exemption no longer apply, our future financial results, particularly cost of sales and gross profit, would be negatively impacted by the tariffs. Components we import from China, some of which are from sole-source or limited source suppliers, are subject to the tariffs currently in effect. We are actively monitoring and evaluating the evolving tariff situation and working to mitigate the impact on our business.

Previous 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.

Current wording

Net sales for the three months ended June 30, 2025, were $49,903,000, an increase of approximately 2%, or $1,110,000, from net sales of $48,793,000 for the three months ended June 30, 2024. Net sales to Broadband Service Providers were $46,641,000 and $46,028,000 in the three months ended June 30, 2025 and 2024, respectively. Net sales to Legacy customers were $570,000 in the three months ended June 30,2025 versus $820,000 for the three months ended June 30, 2024. In addition, the Company recorded $12,490,000 in international sales for the three months ended June 30, 2025 versus $16,494,000 for the three months ended June 30, 2024. The Company allocates sales from external customers to geographic areas based on the location to which the product is transported. International sales represented 25% and 34% of total net sales for the three months ended June 30, 2025 and 2024, respectively.

Previous 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.

Current wording

The increase in net sales for the three months ended June 30, 2025, of $1,100,000 compared to the three months ended June 30, 2024, was primarily driven by increased sales to Large Regional Service Provider customers of $3,118,000, up 82%, and MSO customers of $3,418,000, up 59%, partially offset by decreased sales to International customers of $4,004,000, down 24%. The increase in sales in the Large Regional Service Provider and MSO customer markets for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024, is due to higher sales of additional product lines in the quarter to customers in these segments. The decrease in sales to International customers was driven by decreased sales by the Nestor Cables segment during the quarter due to lower demand in Nestor’s European market.

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 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.

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. The Company tests goodwill for impairment annually, or more frequently when events or changes in circumstances indicate that the asset might be impaired. The Company assesses qualitative factors to determine whether the existence of events or circumstances would indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. The Company’s forecast for future revenue, profitability and business climate are among the qualitative factors management considers in its annual analysis of goodwill. The result of the most recent analysis performed, did not indicate an impairment of goodwill. Goodwill represents the excess purchase price over the fair value of tangible net assets acquired in acquisitions after amounts have been allocated to intangible assets. To the extent that a reporting unit's recorded goodwill exceeds the implied fair value of goodwill, a goodwill impairment charge would be recognized in the Company’s consolidated statement of earnings. An analysis of goodwill involves significant management estimates and judgments and an impairment loss, while non-cash, could have a material impact on the Company’s financial statements. During the nine months ended June 30, 2025, the Nestor reporting unit, which has $2.0 million of Goodwill, had a net operating loss. The Company’s next annual test for goodwill impairment will be completed during the quarter ending September 30, 2025 and if operating losses persist into the future, or if there are adverse changes in key assumptions such as discount rates or long-term growth rates, it is reasonably possible that an impairment charge could be recognized for the Nestor reporting unit in future periods.

Previous 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.

Current wording

Cost of sales for the three months ended June 30, 2025, was $34,669,000, a decrease of $3,432,000, or 9%, from $38,101,000 for the three months ended June 30, 2024. Gross profit percent was 30.5% of net sales for the three months ended June 30, 2025, an increase from 21.9% of net sales for the three months ended June 30, 2024. Gross profit increased $4,542,000, or 42%, to $15,234,000 for the three months ended June 30, 2025, from $10,692,000 for the three months ended June 30, 2024. The improvement in gross margin from the prior year quarter was due to increased volumes within the Clearfield segment resulting in improved utilization of manufacturing overhead, as well as lower excess inventory charges in the Clearfield segment of $2,485,000 which resulted in a benefit to cost of goods sold of $1,131,000 in the current quarter, reflecting improved inventory utilization and beneficial recoveries from previously reserved inventory.

Previous wording

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 wording

Income from operations for the three months ended June 30, 2025, was $1,496,000 compared to loss from operations of $2,307,000 for the three months ended June 30, 2024, an increase of approximately 165%. The increased income from operations is the result of increased net sales and gross profit margin as explained above.

Previous 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.

Current wording

Net investment income for the three months ended June 30, 2025, was $1,588,000 compared to $1,735,000 for the three months ended June 30, 2024. The decrease in net investment income is due to decreased interest income driven by lower interest rates earned on investments during the quarter.

Previous 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.

Current wording

Interest expense for the three months ended June 30, 2025, remained relatively consistent at $106,000, compared to $153,000 for the three months ended June 30, 2024. Interest expense incurred during these periods is related to factoring liabilities in the Nestor segment.

Previous wording

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 wording

The Company recorded an income tax expense of $1,372,000 and income tax benefit of $277,000 for the three months ended June 30, 2025, and 2024, respectively. We record our quarterly provision for income taxes based on our estimated annual effective tax rate for the year. The income tax expense rate for the three months ended June 30, 2025, increased to 46.1% from 38.2% recorded for the three months ended June 30, 2024, primarily due to a valuation allowance of $780,000 recorded against the deferred tax assets of the Nestor Cables segment.

Previous wording

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 wording

The Company’s net income for the three months ended June 30, 2025, was $1,606,000, or $0.11 per basic and diluted share. The Company’s net loss for the three months ended June 30, 2024, was $447,000, or $0.04 per basic and diluted share. The increase in basic and diluted earnings per share for the three months ended June 30, 2025, as compared to June 30, 2024, was due to higher net income as a result of increased gross profit margin, partially offset by increased selling, general and administrative expenses, and income tax expense as detailed above.

Previous wording

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 wording

Net sales for the nine months ended June 30, 2025, were $132,547,000, an increase of approximately 11%, or $12,614,000, from net sales of $119,933,000 for the nine months ended June 30, 2024. Net sales to Broadband Service Providers were $124,659,000 and $112,203,000 in the nine months ended June 30, 2025 and 2024, respectively. In addition, the Company recorded $25,958,000 in international sales for the nine months ended June 30, 2025 versus $33,110,000 for the nine months ended June 30, 2024. The Company allocates sales from external customers to geographic areas based on the location to which the product is transported. Accordingly, international sales represented 20% and 28% of total net sales for the nine months ended June 30, 2025 and June 30, 2024, respectively. Net sales to Legacy customers were $1,769,000 in the nine months ended June 30, 2025 versus $2,310,000 in the nine months ended June 30, 2024.

Previous wording

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 wording

The increase in net sales for the nine months ended June 30, 2025, of $12,614 ,000 compared to the nine months ended June 30, 2024, was primarily driven by increased sales to Large Regional Service Provider customers of $10,620,000, up 71%, Community Broadband Service Providers of $1,992,000, up 4%, MSO customers of $6,364,000, up 40%, and National Carrier customers of $1,331,000, up 23%, partially offset by decreased sales to International customer of $7,152,,000, down 22%. The increase in sales across these markets for the nine months ended June 30, 2025, as compared to the nine months ended June 30, 2024, is due to early build season orders as well as reduced excess inventory levels at customers compared to the prior year period, and higher sales of additional product lines to customers in the Large Regional Service Provider and MSO markets. The decrease in sales to International customers was driven by decreased sales by the Nestor Cables segment during the nine months ended June 30, 2025.

Previous wording

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 wording

Cost of sales for the nine months ended June 30, 2025, was $94,940,000, a decrease of $6,773,000, or 7%, from $101,712,000 for the nine months ended June 30, 2024. Gross profit percent was 28.4% of net sales for the nine months ended June 30, 2025, an increase from 15.2% of net sales for the nine months ended June 30, 2024. Gross profit increased $19,387,000, or 106%, to $37,608,000 for the nine months ended June 30, 2025, from $18,221,000 for the nine months ended June 30, 2024. The improvement in gross margin from the nine months ended June 30, 2024, was due to increased volumes within the Clearfield segment resulting in improved utilization of manufacturing overhead, as well as lower excess inventory charges of$9,319,000 in the nine months ended June 30, 2025, reflecting improved inventory utilization and beneficial recoveries from previously reserved inventory.

Previous wording

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 wording

Selling, general and administrative expenses increased $1,393,000, or 4%, to $39,823,000 in the nine months ended June 30, 2025, from $38,430,000 for the nine months ended June 30, 2024. The increase is primarily due to higher wages and performance-based compensation accruals of $1,562,000.

Previous 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.

Current wording

Loss from operations for the nine months ended June 30, 2025, was $2,217,000 compared to loss from operations of $20,210,000 for the nine months ended June 30, 2024, a decrease of approximately 89%. The decrease is the result of increased net sales and gross profit margin as explained above, partially offset by increased selling, general and administrative expenses.

Previous wording

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 wording

Net investment income for the nine months ended June 30, 2025, was $4,920,000 compared to $5,653,000 for the nine months ended June 30, 2024. The decrease in interest income is due to lower interest rates on investments during the nine months ended June 30, 2025.

Previous wording

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.

Current wording

Interest expense for the nine months ended June 30, 2025, was $275,000 compared to $381,000 for the nine months ended June 30, 2024. Interest expense incurred during these periods is due to factoring liabilities in the Nestor segment.

Previous 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.

Current wording

The Company recorded an income tax expense of $1,401,000 and income tax benefit of $3,311,000 for the nine months ended June 30, 2025, and 2024, respectively. We record our quarterly provision for income taxes based on our estimated annual effective tax rate for the year. The increase in tax expense of $4,712,000 for the nine months ended June 30, 2025 in from fiscal 2024 is primarily due to increased income from operations offset by a valuation allowance of $780,000 recorded against the deferred tax assets of the Nestor Cables segment recorded in the Company’s fiscal 2025 third quarter. The income tax expense rate for the nine months ended June 30, 2025, was 57.7%compared to 22.2% for the nine months ended June 30, 2024. The change in the effective tax rate was primarily due to the aforementioned valuation allowance recorded on the deferred tax assets of the Nestor Cables segment.

Previous 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.

Current wording

The Company’s net income for the nine months ended June 30, 2025, was $1,028,000 or $0.07 per basic share and diluted share. The Company’s net loss for the nine months ended June 30, 2024, was $11,626,000, or $0.79 per basic share and diluted share. The increase in basic and diluted income per share for the nine months ended June 30, 2025, as compared to June 30, 2024, was due to increased net income as a result of increased sales and increased gross profit margin, partially offset by higher selling, general and administrative expenses and income tax expense as detailed above.

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 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.

Current wording

Net sales in the Clearfield segment increased 15%, or $5,085,000, for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024. Net sales in the Clearfield segment increased 22%, or $19,703,000, for the nine months ended June 30, 2025, as compared to the nine months ended June 30, 2024, resulting primarily from higher sales of additional product lines to customers in the Large Regional Service Provider and MSO markets.

Previous 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.

Current wording

Net income in the Clearfield segment for the three months ended June 30, 2025, increased 1288%, or $2,524,000, from a net loss, as compared to the three months ended June 30, 2024. Net income in the Clearfield segment for the nine months ended June 30, 2025, increased 153%, or $12,986,000, from a net loss, as compared to the nine months ended June 30, 2024, driven by the changes in sales outlined above, as well as increased gross profit margin which was positively affected by increased volume and decreased provision for excess inventory reserves.

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 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.

Current wording

Net sales in the Nestor Cables segment decreased 26%, or $3,975,000, for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024, excluding sales to the Clearfield segment. Net sales in the Nestor Cables segment decreased 23%, or $7,089,000, for the nine months ended June 30, 2025, as compared to the nine months ended June 30, 2024, excluding sales to the Clearfield segment. The decrease in net sales for the Nestor Cables segment was a result of lower demand in their European market for the three and nine months ended June 30, 2025.

Previous wording

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 wording

Net loss in the Nestor Cables segment for the three months ended June 30, 2025, increased 186%, or $470,000, as compared to the three months ended June 30, 2024. The increased net loss was driven by lower sales and increased income tax expense for the three months ended June 30, 2025. Net loss in the Nestor Cables segment for the nine months ended June 30, 2025, increased 10%, or $332,000, as compared to the nine months ended June 30, 2024. The increased net loss for the nine months ended June 30, 2025, is due to lower sales and the tax valuation allowance recorded in the third quarter of fiscal 2025.

Previous 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.

Current wording

As of June 30, 2025, our principal source of liquidity was our cash, cash equivalents, and short-term investments. These sources total $117,229,000 as of June 30, 2025, compared to $130,992,000 as of September 30, 2024. Additionally, we have a line of credit for $40 million that has no outstanding borrowing as of June 30, 2025. Our excess cash is invested mainly in Treasuries, CDs backed by the FDIC, and money market funds. Investments considered long-term were $40,168,000 as of June 30, 2025, compared to $24,505,000 as of September 30, 2024. We believe the combined balances of short-term cash and investments, long-term investments, along with our line of credit provide a more accurate indication of our available liquidity. As of June 30, 2025, our cash, cash equivalents, and short-term and long-term investments totaled $157,397,000, compared to $155,497,000 as of September 30, 2024.

Previous 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.

Current wording

Net cash provided by operating activities totaled $18,116,000 for the nine months ended June 30, 2025. This consisted of net income of $1,028,000, non-cash expenses for depreciation and amortization of $5,766,000, stock-based compensation of $3,745,000, amortization of premium and discounts on investments of $1,556,000, and decreased deferred income taxes of $157,000, in addition to changes in operating assets and liabilities providing and using cash. The primary change in operating assets and liabilities providing cash was a decrease in inventory of $13,752,000 and an increase in accounts payable and accrued expenses of $3,037,000, due to timing of payments. The decrease in inventory is due to increased sales to customers during the nine months ended June 30, 2025 as the Company has continued to utilize inventory on hand to fulfill customer orders and achieve lower stocking levels. The primary change in operating assets and liabilities using cash was an increase in accounts receivable of $4,944,000, along with an increase in other assets of $2,555,000, related to the increases in prepaid taxes and prepaid expenses. The increase in accounts receivable is due to increased net sales during the nine months ended June 30, 2025. Days sales outstanding, which measures how quickly receivables are collected, decreased 3 days to 49 days as of June 30, 2025, compared to 52 days as of June 30, 2024.

Previous 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.

Current wording

Net cash provided by operating activities totaled $9,131,000 for the nine months ended June 30, 2024. This consisted of a net loss of $11,626,000, non-cash expenses for depreciation and amortization of $5,481,000, stock-based compensation of $3,437,000, amortization of discounts on investments of $3,304,000 and increased deferred income taxes of $3,523,000, in addition to changes in operating assets and liabilities providing and using cash. The primary change in operating assets and liabilities providing cash was a decrease in inventory of $23,440,000 and an increase in accounts payable and accrued expenses of $2,310,000. The decrease in inventory was due to decreased inventory purchases during the nine months ending June 30, 2024, as the Company utilized inventory on hand to fulfill customer orders and achieve lower stocking levels to support the decreased sales order backlog, as well as higher excess inventory reserves. The primary change in operating assets and liabilities using cash was an increase in other assets of $8,030,000 related to increases in prepaid taxes and prepaid expenses.

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, 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.

Current wording

We invest our excess cash in money market accounts, Treasuries, money market funds, and bank CDs in denominations across numerous banks. We believe we obtain a competitive rate of return given the economic climate and relative risk profile of these investments. During the nine months ended June 30, 2025, we received proceeds from the maturity of investment securities of $95,976,000 and used cash to purchase $78,697,000 of investment securities. Purchases of property, plant, and equipment, mainly related to manufacturing equipment and intangible assets, consumed $5,221,000 of cash during the nine months ended June 30, 2025.

Previous 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.

Current wording

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

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.

Current wording

For the nine months ended June 30, 2025, we used cash to repurchase $16,665,000 of our common stock on the open market under our stock repurchase program, which includes U.S. Federal excise taxes. We received $595,000 from employees’ participation and purchase of stock through our ESPP and used $494,000 for payment of withholding taxes for vesting of restricted stock grants. The Company received cash of $3,544,000 on net borrowings and repayments of factoring liabilities. The Company also received cash from net borrowings on bank overdrafts of $793,000.

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. The Company also used cash of $497,000 on net borrowings and repayments of factoring liabilities.

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. The Company also used cash of $667,000 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 and six months ended March 31, 2025.

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 nine months ended June 30, 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 and six months ended March 31, 2025.

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 nine months ended June 30, 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,” 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…

Excerpt shortened here; the source contains the full paragraph.

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, future goodwill analysis and other statements that are not historical facts. These statements are based upon the Company's current expectations and judgments about future developments in the Company's business. Certain important factors could have a material impact on the Company's performance, including, without limitation: our business is dependent on interdependent management information systems; inflationary price pressures and uncertain availability of components, raw materials, labor and logistics used by us and our suppliers could negatively impact our profitability; we rely on single-source suppliers, which could cause delays, increase costs or prevent us from completing customer orders; we depend on the availability of sufficient supply of certain materials and global disruptions in the supply chain for these materials could prevent us from meeting customer demand for our products; a significant percentage of our sales in the last three fiscal years have been made to a small number of customers, and the loss of these major customers could adversely affect us; further consolidation among our customers may result in the loss of some customers and may reduce sales during the pendency of business combinations and related integration activities; we may be subject to risks associated with acquisitions, and the risks could adversely affect future operati…

Excerpt shortened here; the source contains the full paragraph.