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 months ended December 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, 2025.

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, 2026, and 2025 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, 2025.

Previous wording

Clearfield’s products allow its customers to connect more 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 allow its customers to connect more 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 broadband service. Our products help make our customers’ 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, 2025, were $34,341,000, an increase of approximately 16%, or $4,643,000 from net sales of $29,698,000 for the three months ended December 31, 2024. Net sales to Broadband Service Providers were $16,408,000 and $13,213,000 in the three months ended December 31, 2025 and 2024, respectively. In addition, the Company recorded $1,936,000 in international sales for the three months ended December 31, 2025 versus $366,000 for the three months ended December 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 6% and 1% of total net sales for the three months ended December 31, 2025 and 2024, respectively.

Current wording

Net sales for the three months ended March 31, 2026, were $34,391,000, a decrease of approximately 15%, or $6,230,000 from net sales of $40,621,000 for the three months ended March 31, 2025. Net sales to Broadband Service Providers were $16,461,000 and $18,002,000 in the three months ended March 31, 2026 and 2025, respectively. In addition, the Company recorded $499,000 in international sales for the three months ended March 31, 2026 versus $777,000 for the three months ended March 31, 2025. The Company allocates sales from external customers to geographic areas based on the location to which the product is transported. International sales represented 1% and 2% of total net sales for the three months ended March 31, 2026 and 2025, respectively. Net sales to Legacy customers were $0 in the three months ended March 31, 2026 versus $710,000 in the three months ended March 31, 2025.

Previous wording

The increase in net sales for the three months ended December 31, 2025, of $4,643,000 compared to the three months ended December 31, 2024, was driven by increased sales to Community Broadband customers of $3,196,000, up 24%, International customers of $1,571,000, up 429%, Large Regional Service Provider customers of $413,000, up 6%, and MSO customers of $662,000, up 12%, partially offset by decreased sales to National Carrier customers of $710,000, down 26%. The increase in sales in the Community Broadband and International customer markets for the three months ended December 31, 2025, as compared to the three months ended December 31, 2024, is due to increased demand in the quarter to customers in these segments.

Current wording

The decrease in net sales for the three months ended March 31, 2026, of $6,230,000 compared to the three months ended March 31, 2025, was primarily driven by decreased sales to MSO customers of $2,905,000, down 38%, Community Broadband customers of $1,541,000, down 9%, Large Regional Service Provider customers of $1,077,000, down 10%, and International customers of $278,000, down 36%, partially offset by increased sales to National Carrier customers of $281,000, up 13%. The decrease in sales in the MSO, Community Broadband and Large Regional customer markets for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, is due to decreased demand in the quarter to customers in these segments and the effect on customers of delays in the BEAD program.

Previous wording

Order backlog as of December 31, 2025, was $22,763,000, a decrease of 8% compared to $24,651,000 as of September 30, 2025, and a decrease of $1,045,000, or 4%, from December 31, 2024. The decrease in backlog is due to normal winter seasonality and improved lead times.

Current wording

Order backlog as of March 31, 2026, was $31,647,000, an increase of 39% compared to $22,763,000 as of December 31, 2025, and an increase of $3,463,000, or 12%, from March 31, 2025. The increase in backlog is due to normal seasonality.

Previous wording

Selling, general and administrative expenses for the three months ended December 31, 2025, were $13,212,000 in comparison to $10,721,000 for the three months ended December 31, 2024, an increase of $2,491,000, or 23%. The increase is due to higher wages and benefit related expense of $1,512,000, increased professional services of $252,000, and increased stock-based compensation of $207,000.

Current wording

Selling, general and administrative expenses for the three months ended March 31, 2026, were $13,230,000 in comparison to $12,279,000 for the three months ended March 31, 2025, an increase of $951,000, or 8%. The increase is due to higher wages and benefit related expense of $236,000, increased software costs of $360,000, and increased stock-based compensation of $167,000.

Previous wording

Loss from continuing operations for the three months ended December 31, 2025, was $1,824,000 compared to loss from continuing operations of $2,046,000 for the three months ended December 31, 2024, a decrease of approximately 11%. The decreased loss from continuing operations is the result of increased net sales and gross profit margin as explained above.

Current wording

Loss from continuing operations for the three months ended March 31, 2026, was $2,069,000 compared to income from continuing operations of $1,682,000 for the three months ended March 31, 2025, a decrease of approximately 223%. The loss from continuing operations is the result of decreased net sales and gross profit margin and increased selling, general and administrative expenses as explained above.

Previous wording

Net investment income for the three months ended December 31, 2025, was $1,546,000 compared to $1,744,000 for the three months ended December 31, 2024. The decrease in net investment income is due to decreased interest income driven by lower interest rates earned on investments during the quarter.

Current wording

Net investment income for the three months ended March 31, 2026, was $1,365,000 compared to $1,588,000 for the three months ended March 31, 2025. 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

The Company recorded an income tax benefit of $1,000 and income tax expense of $53,000 for the three months ended December 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 income tax rate for the three months ended December 31, 2025, increased to 0.4% from (17.6%) recorded for the three months ended December 31, 2024, due to higher percentage impact of discrete items and a lower level of pre-tax book loss for the three months ended December 31, 2025.

Current wording

The Company recorded an income tax benefit of $176,000 and income tax expense of $722,000 for the three months ended March 31, 2026, and 2025, respectively. We record our quarterly provision for income taxes based on our estimated annual effective tax rate for the year. The income tax rate for the three months ended March 31, 2026, was 25.0% compared to 22.1% for the three months ended March 31, 2025. The income tax rate for the three months ended March 31, 2026, approximated the Company's estimated annual effective tax rate, reflecting the nondeductibility of certain executive compensation under Section 162(m) of the Internal Revenue Code being partially offset by excess tax benefits from the vesting of restricted stock. The income tax rate for the three months ended March 31, 2025, was lower than the statutory rate primarily due to the impact of discrete tax items, including excess tax shortfall from the vesting of restricted stock.

Previous wording

The Company’s net loss from discontinued operations for the three months ended December 31, 2025, was $337,000, or $(0.02) per basic and diluted share compared to net loss from discontinued operations for the three months ended December 31, 2024, of $1,551,000, or $(0.11) per basic and diluted share.

Current wording

The Company’s net loss from discontinued operations for the six months ended March 31, 2026, was $337,000, or $(0.02) per basic and diluted share compared to net loss from discontinued operations for the six months ended March 31, 2025, of $2,772,000, or $(0.20) per basic and diluted share. The decrease in net loss from discontinued operations is due to the sale of the Nestor Cables business in the first quarter of fiscal 2026.

Previous wording

As of December 31, 2025, our principal source of liquidity was our cash, cash equivalents, short-term investments and long-term investments. These sources total $156,726,000 as of December 31, 2025, compared to $165,799,000 as of September 30, 2025. Additionally, we have a line of credit for $40 million that has no outstanding borrowing as of December 31, 2025. The line of credit is secured by certain of the Company’s U.S. assets and matures April 25, 2026. We are in compliance with the debt covenants related to the line of credit. Our excess cash is invested mainly in CDs backed by the FDIC, Treasuries, and money market funds. We believe the combined balances of short-term cash and investments, along with long-term investments and available bank lines of credit, provide a more accurate indication of our available liquidity.

Current wording

As of March 31, 2026, our principal source of liquidity was our cash, cash equivalents, short-term investments and long-term investments. These sources total $147,073,000 as of March 31, 2026, compared to $165,799,000 as of September 30, 2025. Additionally, we have a line of credit for $40 million that has no outstanding borrowing as of March 31, 2026. The line of credit is secured by certain of the Company’s assets and matures July 24, 2026. We are in compliance with the debt covenants related to the line of credit. Our excess cash is invested mainly in CDs backed by the FDIC, Treasuries, and money market funds. We believe the combined balances of short-term cash and investments, along with long-term investments and available bank lines of credit, provide a more accurate indication of our available liquidity.

Previous wording

Net cash used in operating activities totaled $1,440,000 for the three months ended December 31, 2025. This consisted of net loss from continuing operations of $277,000, non-cash expenses for depreciation and amortization of $1,615,000, stock-based compensation of $1,271,000, amortization of premium and discounts on investments of $117,000, and increased deferred income taxes of $375,000, in addition to changes in operating assets and liabilities providing and using cash. Changes in operating assets and liabilities providing cash include a decrease in inventories of $1,830,000 and a decrease in accounts receivable of $3,020,000. The decrease in inventory is due to the Company utilizing existing inventory on hand to fulfill customer orders to support sales demand. The decrease in accounts receivable is due to lower sales during the three months ended December 31, 2025, compared to the prior quarter. Days sales outstanding, which measures how quickly receivables are collected, increased eight days from 32 to 40 from December 31, 2024 to December 31, 2025. Changes in operating assets and liabilities using cash include an increase in other assets of $2,905,000 and a decrease in accounts payable and accrued expenses of $5,502,000, due to timing of payments and the payment of fiscal year 2025 incentive compensation accruals during the three months ended December 31, 2025.

Current wording

Net cash used in operating activities totaled $2,512,000 for the six months ended March 31, 2026. This consisted of net loss from continuing operations of $805,000, non-cash expenses for depreciation and amortization of $3,190,000, stock-based compensation of $2,589,000, amortization of premium and discounts on investments of $270,000, and increased deferred income taxes of $536,000, in addition to changes in operating assets and liabilities providing and using cash. Changes in operating assets and liabilities providing cash include a decrease in inventories of $5,111,000. The decrease in inventory is due to the Company utilizing existing inventory on hand to fulfill customer orders to support sales demand. Changes in operating assets and liabilities using cash include an increase in accounts receivable of $2,874,000, other assets of $2,876,000, and a decrease in accounts payable and accrued expenses of $6,041,000, due to timing of payments and the payment of fiscal year 2025 incentive compensation accruals during the six months ended March 31, 2026. The increase in accounts receivable is due to the timing of sales, which were concentrated near the end of the reporting period during the six months ended March 31, 2026. The increase in other assets is due to overpayment of income taxes and increase in prepaid expenses. Days sales outstanding, which measures how quickly receivables are collected, increased 12 days from 39 to 51 from March 31, 2025 to March 31, 2026.

Previous wording

Net cash provided by operating activities totaled $8,039,000 for the three months ended December 31, 2024. This consisted of a net loss from continuing operations of $355,000, non-cash expenses for depreciation and amortization of $1,513,000, stock-based compensation of $1,050,000, amortization of discounts on investments of $766,000 and increased deferred income taxes of $135,000, in addition to changes in operating assets and liabilities providing and using cash. The change in operating assets and liabilities providing cash was due to a decrease in inventory of $6,279,000 and a decrease in accounts receivable of $3,577,000. The decrease in inventory was due to decreased inventory purchases during the three months ending December 31, 2024, as the Company utilized 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 decreased 11 days to 32 days as of December 31, 2024, compared to 43 days from December 31, 2023. The change in operating assets and liabilities using cash was due to a decrease in accounts payable and accrued expenses of $2,221,000 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 $903,000 related to increases in prepaid taxes and prepaid expenses.

Current wording

Net cash provided by operating activities totaled $12,450,000 for the six months ended March 31, 2025. This consisted of a net income from continuing operations of $2,193,000, non-cash expenses for depreciation and amortization of $3,061,000, stock-based compensation of $2,221,000, amortization of discounts on investments of $1,202,000 and increased deferred income taxes of $188,000, in addition to changes in operating assets and liabilities providing and using cash. The change in operating assets and liabilities providing cash include a decrease in inventory of $11,980,000 and an increase in accounts payable and accrued expenses of $2,168,000 due to timing of payments. The decrease in inventory was due to decreased inventory purchases during the six months ending March 31, 2025, as the Company utilized inventory on hand to fulfill customer orders and achieve lower stocking levels. The change in operating assets and liabilities using cash was due to an increase in accounts receivable of $4,543,000 and other assets of $3,240,000. The increase in accounts receivable is due to the timing of sales, which were concentrated near the end of the reporting period during the six months ended March 31, 2025. The increase in other assets is due to the recognition of a deferred tax asset and increase in prepaid expenses. Days sales outstanding decreased two days from 41 to 39 from March 31, 2024 to March 31, 2025.

Previous wording

Net cash provided by operating activities of discontinued operations for the three months ended December 31, 2025, totaled $1,380,000. Cash provided by operations included net loss from discontinued operations of $337,000 and non-cash expenses for depreciation and amortization of $137,000, in addition to changes in operating assets and liabilities providing cash of $1,580,000.

Current wording

Net cash provided by operating activities of discontinued operations for the six months ended March 31, 2026, totaled $1,380,000. Cash provided by operations included net loss from discontinued operations of $337,000 and non-cash expenses for depreciation and amortization of $136,000, in addition to changes in operating assets and liabilities providing cash of $1,580,000.

Previous wording

Net cash used in operating activities of discontinued operations for the three months ended December 31, 2024, totaled $889,000. Cash used in operations included net loss from discontinued operations of $1,551,000, non-cash income and expenses for depreciation and amortization of $324,000, deferred tax assets of $771,000, and stock-based compensation of $89,000, in addition to changes in operating assets and liabilities providing cash of $1,018,000.

Current wording

Net cash used in operating activities of discontinued operations for the six months ended March 31, 2025, totaled $2,252,000. Cash used in operations included net loss from discontinued operations of $2,772,000, non-cash income and expenses for depreciation and amortization of $650,000, deferred tax assets of $703,000, and stock-based compensation of $206,000, in addition to changes in operating assets and liabilities providing cash of $367,000.

Previous wording

We invest our excess cash in money market accounts, Treasuries, money market funds, and bank CDs. 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, 2025, we received proceeds from the maturity of investment securities of $21,660,000 and used cash to purchase $19,953,000 of investment securities. Purchases of property, plant, and equipment, mainly related to manufacturing equipment and intangible assets, consumed $988,000 of cash during the three months ended December 31, 2025. Cash used of $1,012,000 during the three months ended December 31, 2025, was attributable to the disposition of the Nestor Cables business and reflects cash paid for transaction-related costs directly associated with the sale.

Current wording

We invest our excess cash in money market accounts, Treasuries, money market funds, and bank CDs. 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, 2026, we received proceeds from the maturity of investment securities of $58,660,000 and used cash to purchase $52,009,000 of investment securities. Purchases of property, plant, and equipment, mainly related to manufacturing equipment and intangible assets, consumed $2,007,000 of cash during the six months ended March 31, 2026. Cash used of $1,012,000 during the six months ended March 31, 2026, was attributable to the disposition of the Nestor Cables business and reflects cash paid for transaction-related costs directly associated with the sale.

Previous wording

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 $1,751,000 of cash during the three months ended December 31, 2024.

Current wording

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 $3,074,000 of cash during the six months ended March 31, 2025.

Previous wording

Net cash for investing activities of discontinued operations was zero for the three months ended December 31, 2025. Net cash used in investing activities of discontinued operations for the three months ended December 31, 2024, totaled $318,000 driven by cash used to purchase fixed and intangible assets.

Current wording

Net cash for investing activities of discontinued operations was zero for the six months ended March 31, 2026. Net cash used in investing activities of discontinued operations for the six months ended March 31, 2025, totaled $1,648,000, driven by cash used to purchase fixed and intangible assets.

Previous wording

For the three months ended December 31, 2025, we used cash to repurchase $5,279,000 of our common stock on the open market under our stock repurchase program, which includes U.S. Federal excise taxes. We received $239,000 from employees’ participation and purchase of stock through our ESPP and used $997,000 for payment of withholding taxes for vesting of restricted stock grants. The Company used $57,000 related to payment of taxes associated with the issuance of common stock upon cashless exercise of stock options.

Current wording

For the six months ended March 31, 2026, we used cash to repurchase $12,597,000 of our common stock on the open market under our stock repurchase program, which includes U.S. Federal excise taxes. We received $239,000 from employees’ participation and purchase of stock through our ESPP and used $1,001,000 for payment of withholding taxes for vesting of restricted stock grants. The Company used $63,000 related to payment of taxes associated with the issuance of common stock upon cashless exercise of stock options.

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.

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 used $12,000 related to payment of taxes associated with the issuance of common stock upon cashless exercise of stock options.

Previous wording

Net cash used in financing activities of discontinued operations for the three months ended December 31, 2025, totaled $1,196,000, driven by net borrowings and repayments from the factoring liability held by Nestor Cables. Net cash provided by financing activities of discontinued operations for the three months ended December 31, 2024, totaled $77,000, driven by net borrowings and repayments from the factoring liability held by Nestor Cables.

Current wording

Net cash used in financing activities of discontinued operations for the six months ended March 31, 2026, totaled $1,196,000, driven by net borrowings and repayments from the factoring liability held by Nestor Cables. Net cash provided by financing activities of discontinued operations for the six months ended March 31, 2025, totaled $2,465,000, driven by net borrowings and repayments from the factoring liability held by Nestor Cables.

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, 2025. Management made no changes to the Company’s critical accounting estimates during the three months ended December 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, 2025. Management made no changes to the Company’s critical accounting estimates during the three and six months ended March 31, 2026.

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, 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 six months ended March 31, 2026.