CLFD 10-K & 10-Q changes, risk factors and insider trading
Clearfield, Inc. · Nasdaq · Telephone & Telegraph Apparatus · CIK 796505 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Changes in trade policy in the U.S. and other countries may adversely affect our business and results of operations.”
New heading “Our business is dependent upon capital spending by broadband service providers, and any delay, reduction or cancellation in capital spending by broadband service providers could adversely affect our business.”
Removed heading “We have exposure to movements in foreign currency exchange rates.”
Removed heading “Growth may strain our business infrastructure, which could adversely affect our operations and financial condition.”
Removed heading “Pandemics and other health crises could have a material adverse effect on our business, financial condition, and operating results.”
Removed heading “Expectations relating to environmental, social and governance matters may increase our cost of doing business and expose us to reputational harm and potential liability.”
Largest changes
“Our business is dependent upon capital spending by broadband service providers for constructing, expanding, upgrading, rebuilding, and maintaining fiber-based networks for residential homes, businesses, and network infrastructure in the wireline and wireless access network. Capital spending in the broadband communications industry is cyclical, sporadic among individual broadband service providers, and can be delayed, reduced or cancelled on short notice, giving us limited visibility into changes in spending behavior in any particular period. …”see in full comparison
Our business, including global supply chain, is affected by global economic conditions and geopolitical issues. Geopolitical issues, such as the Russian invasion ofsee in full comparisonUkraineUkraine,andtherelatedIsrael-Hamas war, the U.S.-China rivalry, rising trade protectionism, economic sanctions andtensionsotherbetweenglobalRussiaconflicts,and NATO countries, hashave resulted in increasing global tensions, rising energy costs and creates uncertainty for our global supply chain. Sustained or worsening global economic conditions and geopolitical issues may disrupt or increase our cost of doing business and otherwise disrupt and delay our supply chain operations. These factors could negatively affect the cost and supply of components needed for our products, our ability to ship products to customers and ultimately impact our business, financial condition, and result of operations.
“Pandemics and other health crises could have a material adverse effect on our business, financial condition, and operating results.”see in full comparison
“Changes in trade policy, including the imposition of new, increased, or retaliatory tariffs by the U.S. …”see in full comparison
We monitor our product portfolio and business and customer trends. In response, we have made and may continue to make acquisitions. The success of our acquisitions will depend on our ability to successfully identify and properly value suitable acquisition candidates, negotiate appropriate acquisition terms, obtain financing at a reasonable cost, prevail against competing acquirers, complete the acquisitions, and integrate the acquired businesses into our existing business. We cannot ensure that the expected benefits of any acquisition will be realized or will be realized within the time frames we expect. Costs could be incurred on pursuits or proposed acquisitions that have not yet or may not close which could impact our operating results, financial condition, or cash flows. Additionally, after the acquisition, unforeseen issues could arise which adversely affect the anticipated returns, or which are otherwise not recoverable as an adjustment to the purchase price. The price we pay for a business or product line may exceed the value we realize, and we cannot provide assurance that we will obtain the expected revenues, anticipated synergies, and strategic benefits of any acquisition within the time we expect or at all. Acquisitions may result in the recording of goodwill and other intangible assets which are subject to potential impairments in the future that could negatively impact our financial results. For the year ended September 30, 2025, we recorded an impairment charge of $2,022,000 related to the impairment of goodwill and $13,078,000 related to the impairment of the long-lived assets of the Nestor Cables business, which we acquired in July 2022 and disposed of on November 11, 2025. The total impairment charge, inclusive of estimated transaction costs, is reflected within Loss from impairment of discontinued operations before income taxes in the consolidated statements of earnings for the year ended September 30, 2025.see in full comparison
“Many regulators, investors, employees, vendors, customers, community members and other stakeholders are increasingly focused on environmental, social and governance matters relating to businesses, including climate change, greenhouse gas emissions, human capital, civil rights, and diversity, equity, and inclusion. We may make public statements about various environmental, social and governance matters and initiatives from time to time through our website, press releases and other communications. …”see in full comparison
Full comparison: every changed paragraph (27)
We rely on effective management information systems, including our enterprise resource planning (“ERP”) software, for critical business operations and to support strategic business decisions. We rely on our ERP system to support such important business operations as processing sales orders and invoicing, manufacturing, shipping, inventory control, purchasing and supply chain management, human resources, and financial reporting. Some of these systems are made up of multiple software and system providers. The interdependence of these solutions and systems is a risk, and the failure of any one system could have a material adverse effect on our overall information technology infrastructure. We are in the process of consolidating several of these solutions and systems into one integrated ERP system for our North American operations. Failure to successfully consolidate and integrate these solutions and systems could result in disruptions to our operations and adversely impact our business. Failure or abandonment of all or any part of the ERP system consolidation and integration project could result in a write-off of all or part of the costs that have been capitalized in connection with the project, which may negatively impact our financial results. We also rely on management information systems to produce information for business decision-making and planning. If we are unable to maintain our management information systems, including our IT infrastructure, to support critical business operations and to produce information for business decision-making activities, we could experience a material adverse impact on our business or an inability to timely and accurately report our financial results.
Our IT systems may also be vulnerable to disruptions from human error, outdated applications, computer viruses, natural disasters, unauthorized access, cyber-attack, and other similar disruptions. Any system failure, accident or security breach could result in disruptions to our operations. To the extent that any disruptions, cyber-attack or other security breach results in a loss or damage to our data, or inappropriate disclosure of confidential information, it could harm our business. In addition, we may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future.
Increases in the price of raw materials, labor and other components utilized in the production of our products, along with logistics and other related costs, may lead to higher production and shipping costs for our products. Additionally, increasing global demand for, and uncertain supply of, such materials could disrupt our ability to obtain such materials in a timely manner to meet our supply needs and could lead to increased costs. An increase in the cost of inputs needed to produce our products could lead to higher costs and could negatively impact our results of operation, future profitability, and ability to meet customer demand. Passing along these increased prices to our customers to offset the impact of higher costs may cause certain customers to cancel, push out, or refrain from purchasing our products, which could negatively impact demand for our products, and therefore also negatively impact our results of operations and future profitability.
Further, the costs to obtain certain raw materials and supplies, such as fiber and copper cabling, are subject to price fluctuations, which may be substantial, because of global market demands. Many companies utilize the same raw materials and supplies in the production of their products as we use in our products. Companies with more resources than us may have a competitive advantage in obtaining raw materials and supplies due to greater purchasing power. Some raw materials or supplies may be subject to regulatory actions, which may affect available supplies. Further, new or increased tariffs may be imposed by governments on imports from other countries that are the single- or limited-source of our materials and components. Tariffs increase the cost of the materials and components that go into making our products, but we are generally unable to pass some or all of these increased costs to our customers. Accordingly, these increased costs adversely impact the gross margin that we earn on our products. Furthermore, due to general economic conditions in the U.S. and globally, our suppliers may experience financial difficulties, which could result in increased delays, additional costs, or loss of a supplier.
Further, the costs to obtain certain raw materials and supplies, such as fiber, are subject to price fluctuations, which may be substantial, because of global market demands. Many companies utilize the same raw materials and supplies in the production of their products as we use in our products. Companies with more resources than us may have a competitive advantage in obtaining raw materials and supplies due to greater purchasing power. Some raw materials or supplies may be subject to regulatory actions, which may affect available supplies. Further, new or increased tariffs may be imposed by governments on imports from other countries that are the single- or limited-source of our materials and components. Tariffs increase the cost of the materials and components that go into making our products, but we are generally unable to pass some or all of these increased costs to our customers. Accordingly, these increased costs adversely impact the gross margin that we earn on our products. Furthermore, due to general economic conditions in the U.S. and globally, our suppliers may experience financial difficulties, which could result in increased delays, additional costs, or loss of a supplier.
Changes in trade policy in the U.S. and other countries may adversely affect our business and results of operations.
Changes in trade policy, including the imposition of new, increased, or retaliatory tariffs by the U.S. or foreign governments, 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 products 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. While the changes in trade policy and tariffs introduced by the U.S. and foreign governments in 2025 did not materially adversely impact our fiscal year 2025 results, the extent to which new, increased, or retaliatory tariffs may adversely affect our business and results of operations 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, and our ability to successfully implement measures to mitigate the impact of the tariffs.
Increases in the price of raw materials, labor and other components utilized in the production of our products, along with logistics and other related costs, may lead to higher production and shipping costs for our products. Additionally, increasing global demand for, and uncertain supply of, such materials could disrupt our ability to obtain such materials in a timely manner to meet our supply needs and could lead to increased costs. An increase in the cost of inputs needed to produce our products could lead to higher costs and could negatively impact our results of operation, future profitability, and ability to meet customer demand. Passing along these increased prices to our customers, where possible, to offset the impact of higher costs may cause certain customers to cancel, push out, or refrain from purchasing our products, which could negatively impact demand for our products, and therefore also negatively impact our results of operations and future profitability.
Our customer base includes direct customers, OEMs, and distributors. For fiscal year 2024,2025, the Company had two customerscustomers, thatCustomer comprisedA 26%and ofCustomer netB, sales.which Foraccounted fiscalfor yearapproximately 2023,18% theand Company had one customer that comprised 16%13% of net sales, andrespectively. for fiscal year 2022 the Company had one customer that comprised 14%,Both of net sales. Thesethese customers are all distributors.
We rely on effective management information systems, including our enterprise resource planning (“ERP”) software, for critical business operations and to support strategic business decisions. We rely on our ERP system to support such important business operations such as processing sales orders and invoicing, manufacturing, shipping, inventory control, purchasing and supply chain management, human resources, and financial reporting. We also rely on management information systems to produce information for business decision-making and planning. If we are unable to maintain our management information systems, including our IT infrastructure, to support critical business operations and to produce information for business decision-making activities, we could experience a material adverse impact on our business or an inability to timely and accurately report our financial results.
Our IT systems may also be vulnerable to disruptions from human error, outdated applications, computer viruses, natural disasters, unauthorized access, cyber-attack, and other similar disruptions. Any system failure, accident or security breach could result in disruptions to our operations. To the extent that any disruptions, cyber-attack or other security breach results in a loss or damage to our data, or inappropriate use or disclosure of confidential information, it could harm our business. In addition, we may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future.
We monitor our product portfolio and business and customer trends. In response, we have made and may continue to make acquisitions. The success of our acquisitions will depend on our ability to successfully identify and properly value suitable acquisition candidates, negotiate appropriate acquisition terms, obtain financing at a reasonable cost, prevail against competing acquirers, complete the acquisitions, and integrate the acquired businesses into our existing business. We cannot ensure that the expected benefits of any acquisition will be realized or will be realized within the time frames we expect. Costs could be incurred on pursuits or proposed acquisitions that have not yet or may not close which could impact our operating results, financial condition, or cash flows. Additionally, after the acquisition, unforeseen issues could arise which adversely affect the anticipated returns, or which are otherwise not recoverable as an adjustment to the purchase price. The price we pay for a business or product line may exceed the value we realize, and we cannot provide assurance that we will obtain the expected revenues, anticipated synergies, and strategic benefits of any acquisition within the time we expect or at all. Acquisitions may result in the recording of goodwill and other intangible assets which are subject to potential impairments in the future that could negatively impact our financial results. For the year ended September 30, 2025, we recorded an impairment charge of $2,022,000 related to the impairment of goodwill and $13,078,000 related to the impairment of the long-lived assets of the Nestor Cables business, which we acquired in July 2022 and disposed of on November 11, 2025. The total impairment charge, inclusive of estimated transaction costs, is reflected within Loss from impairment of discontinued operations before income taxes in the consolidated statements of earnings for the year ended September 30, 2025.
If we are unable to complete acquisitions or successfully integrate and develop acquired businesses, or if acquired businesses do not perform as anticipated, our financial results could be materially and adversely affected. The risks inherent in pursuing or completing an acquisition include:
We have exposure to movements in foreign currency exchange rates.
Nestor Cables’ functional currency is the Euro, which is translated to the Company’s reporting currency of the U.S. dollar. Fluctuations in exchange rates between the Euro and U.S. dollar may impact our results of operations, financial position and cashflows. The Company expects to continue to experience fluctuations in the value of the U.S. dollar against the Euro and other currencies if it is not possible, cost-effective or should we not elect to hedge certain currency exposure. These factors, which are variable and generally outside of our control, could materially impact our results of operations, anticipated future results, financial position, and cash flows.
Our business, including global supply chain, is affected by global economic conditions and geopolitical issues. Geopolitical issues, such as the Russian invasion of UkraineUkraine, andthe relatedIsrael-Hamas war, the U.S.-China rivalry, rising trade protectionism, economic sanctions and tensionsother betweenglobal Russiaconflicts, and NATO countries, hashave resulted in increasing global tensions, rising energy costs and creates uncertainty for our global supply chain. Sustained or worsening global economic conditions and geopolitical issues may disrupt or increase our cost of doing business and otherwise disrupt and delay our supply chain operations. These factors could negatively affect the cost and supply of components needed for our products, our ability to ship products to customers and ultimately impact our business, financial condition, and result of operations.
Growth may strain our business infrastructure, which could adversely affect our operations and financial condition.
As we grow, we will face the risk that our existing resources and systems, including management resources, enterprise technology and operating systems, may be inadequate to support our growth. There can be no assurance that we will be able to retain the personnel or make the changes in our systems that may be required to support our growth. Failure to secure these resources and implement these systems on a timely basis could have a material adverse effect on our operating results. In addition, hiring additional personnel and implementing changes and enhancements to our systems will require capital expenditures and other increased costs that could also have a material adverse impact on our operating results.
Natural disasters, extreme weather events and other catastrophic events such as flooding, tornadoes, hurricanes, unusually heavy precipitation, earthquakes, tsunamis, fires, explosions, acts of war, terrorism, civil unrest, pandemics or pandemicsother health crises could increase the cost of doing business or otherwise harm our operations, our suppliers and our customers. Such events could reduce demand for our products or make it difficult or impossible for us to receive raw materials from suppliers and deliver products to our customers.
Pandemics and other health crises could have a material adverse effect on our business, financial condition, and operating results.
Pandemics and other health crises, and governmental, business, and societal responses to pandemics or other health crises, have had, and in the future may have, an adverse effect on our operations, work force, supply chains, distribution channels, and customers. Constraints and limits imposed on our operations due to pandemics or other health crises may slow or diminish our sales and marketing programs, product development activities and qualification activities with our customers. Restrictions on our manufacturing, support operations or workforce, or similar limitations for our suppliers, could limit our ability to meet customer demand. Restrictions or disruptions of transportation, such as reduced availability of air transport, port closures and increased border controls or closures, resulting in higher costs and delays, could harm our profitability, make our products less competitive, or cause our customers to seek alternative suppliers. Employee health, availability, productivity, and efficiency may be adversely impacted.
Our business is dependent upon capital spending by broadband service providers, and any delay, reduction or cancellation in capital spending by broadband service providers could adversely affect our business.
Our business is dependent upon capital spending by broadband service providers for constructing, expanding, upgrading, rebuilding, and maintaining fiber-based networks for residential homes, businesses, and network infrastructure in the wireline and wireless access network. Capital spending in the broadband communications industry is cyclical, sporadic among individual broadband service providers, and can be delayed, reduced or cancelled on short notice, giving us limited visibility into changes in spending behavior in any particular period. We have experienced significant reductions in capital spending by broadband service providers in the past, which negatively impacted our results of operations, and we may experience significant fluctuations in capital spending by broadband service providers in the future. The timing and amount of capital spending in the broadband communications industry may be affected by a variety of factors, including but not limited to general economic and market conditions, customer-specific financial conditions or budget allocation decisions, seasonality of outdoor deployments, access to and timing of government funding programs, changes in consumer spending, the timing and adoption of new technologies, consumer and commercial demand for broadband services, competing technologies, competitive pressures, government regulations, industry consolidation, and changes in customer preferences or requirements. Unfavorable changes in economic conditions, including recession, inflation, lack of access to capital, lack of consumer confidence or other changes have resulted and may continue to result in lower spending among our customers and target customers in the broadband service provider industry. Within the broadband service provider industry, our customer segments may be more or less affected by these factors in any given period. Our ability to maintain or increase revenues in the future will depend on the financial health and continued growth of the broadband communications industry. If the broadband service providers do not maintain or increase spending or do not select our products for their fiber-based deployments, the market for our products may not grow or may grow more slowly than we expect, either of which would significantly adversely affect our business, results of operations, or financial condition.
For example, programs like the Connect America Fund (CAF), which provides a capital expenditure subsidy for the build-out of the country’s broadband network, the Rural Digital Opportunity Fund (RDOF), which provides a capital expenditure subsidy for the support of high-speed broadband networks in rural America, and the Broadband Equity, Access and Deployment (BEAD) program, among others, which will provide funding for broadband deployment, mapping and adoption projects in unserved and underserved areas in the United States, its territories, and the District of Columbia, may subsidize or encourage spending by our customers or prospective customers on capital spending projects that utilize our products. Customers may seek to time or otherwise adjust their technology or network expansion projects to the availability of subsidies under these or other programs, which will affect the timing and size of orders for our products. Additionally, these government programs may be subject to significant timing, funding and other uncertainties, which also may change with different state and federal administrations, that make it challenging for us to accurately forecast the subsidies or other supports to our customers or the degree to which customers may undertake capital spending on projects that utilize our products. In addition, other universal service reforms scheduled to begin in the coming years will eliminate subsidies that carriers have traditionally relied upon to support service in high-cost, rural areas. Changes in government programs in our industry or uncertainty regarding future changes could adversely impact our customers’ or prospective customers’ decisions regarding timing and amounts of capital spending, which could decrease demand for our products, delay orders or result in pricing pressure from these customers.
We believe that our future growth depends in part upon our ability to manage our international operations and increase sales in international markets. These sales are subject to a variety of risks, including fluctuations in currency exchange rates, tariffs, import restrictions and other trade barriers, unexpected changes in legal and regulatory requirements, longer accounts receivable payment cycles, potentially adverse tax consequences, and export license requirements. In addition, we are subject to the risks inherent in conducting business internationally, including political and economic instability, unexpected changes in diplomatic and trade relationships, and a complex system of commercial and trade laws, regulations, and policies, including those related to tariffs, data privacy, trade compliance, anti-corruption, and anti-bribery. Currency fluctuations may also increase the cost of our international operations and increase the relative price of our product in international markets and thereby cause our products to become less affordable or less price competitive than those of international manufacturers. These risks associated with international operations may have a material adverse effect on our revenue from or costs associated with international operations or sales.
Expectations relating to environmental, social and governance matters may increase our cost of doing business and expose us to reputational harm and potential liability.
Many regulators, investors, employees, vendors, customers, community members and other stakeholders are increasingly focused on environmental, social and governance matters relating to businesses, including climate change, greenhouse gas emissions, human capital, civil rights, and diversity, equity, and inclusion. We may make public statements about various environmental, social and governance matters and initiatives from time to time through our website, press releases and other communications. Addressing stakeholder expectations relating to environmental, social and governance matters requires an investment of time, money and other resources, and depends in part on third-party performance or data that is outside of our control, any or all of which may increase our cost of doing business. In addition, as investor and other stakeholder expectations relating to environmental, social and governance matters change and evolve over time, any failure or perceived failure by us to adequately address those expectations may damage our reputation and adversely affect our business and results of operations. Similarly, public statements we make about environmental, social and governance matters and initiatives may result in increased scrutiny by our stakeholders and require additional attention relating to these issues. Federal, state or international government bodies or agencies have in the past adopted, and may in the future adopt, laws and regulations relating to environmental, social or governance matters. These laws or regulations could require us to modify our business practices to comply and could result in increased costs. Additionally, any failure to comply with federal, state, or international environmental, social and governance laws and regulations, could adversely affect our business and results of operations.
Management's Discussion & Analysis (MD&A)
New heading “Year ended September 30, 2025, compared to year ended September 30, 2024”
New heading “Quarterly Information”
Removed heading “Year ended September 30, 2023, compared to year ended September 30, 2022”
Removed heading “Reportable Segments”
Removed heading “Clearfield Segment”
Removed heading “Nestor Cables Segment”
Removed heading “Valuation in Business Combinations”
Largest changes
“On April 27, 2022, Clearfield entered into a loan agreement and a security agreement to provide the Company with a $40 million revolving line of credit that is secured by certain of the Company’s U.S. assets. The line of credit matures on April 27, 2025, and borrowed amounts will bear interest at a variable rate of the CME Group one-month term Secured Overnight Financing Rate (“SOFR”) plus 1.85%, but not less than 1.80% per annum. As of September 30, 2024, the interest rate was 7.05%. …”see in full comparison
“As of September 30, 2024, the Company had no borrowings against this line of credit and was in compliance with all applicable covenants. As of September 30, 2024, and 2023, the Company had a loan for €2,000,000, which equates to $2,228,000 and $2,112,000, as of September 30, 2024 and 2023, respectively. 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.”see in full comparison
As of September 30,see in full comparison2024,2025, the Company had combined consolidated balances of cash, cash equivalents, short-term and long-term investments of$155,497,000$165,799,000 compared to$174,456,000$153,478,000 as of September 30,2023.2024. Additionally, we have a line of credit for $40 million that has no outstanding borrowing as of September 30,2024.2025. 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 certificates of deposit backed by the FDIC, U.S. Treasury securities, 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.
Net cash provided by operations for the fiscal year ended September 30,see in full comparison2023,2024, totaled$18,423,000.$17,770,000. Cash provided by operations included netincomeloss from continuing operations of$32,533,000$8,514,000 for the fiscal year ended September 30,2023,2024, non-cash income and expenses for depreciation and amortization of$6,054,000,$5,924,000, stock-based compensation of$3,578,000,$4,375,000, amortization of discount on investments of$3,512,000,$4,406,000, in addition to changes in operating assets and liabilities using cash. Changes in operating assets and liabilitiesusingproviding cash includeanaincreasedecrease in net inventories of$15,083,000 and$26,458,000, a decrease in accounts receivable of $6,473,000, and an increase in accounts payable and accrued expenses of$27,843,000.$264,000. Theincreasedecrease in inventory isadueresulttoofloweradditionalinventorystockingpurchaseslevelsduring fiscal year 2024 as the Company utilized inventory on hand to fulfill customer orders to supportthe Company’s anticipated customersales demand, as well asstockinghigherofexcesslonginventoryleadchargestimetakencomponentsintofiscallimityearmanufacturing delays due to raw material component shortages and supply chain delays experienced during the pandemic.2024. The decrease in accountspayablereceivable isdue to lower purchasing activity of inventory near the end of the period in response to lower demand from customers, as well as lower performance-based compensation accruals as of September 30, 2023. Also, changes in operating assets and liabilities providing cash include a decrease in accounts receivable of $26,277,000,due to lower net sales inthe Company’s fourth quarter offiscal20232024 compared to the prior year. DSOremaineddecreasedconsistent12as it increased 1 daydays from5247 to5335 from September 30,2022,2023 to September 30,2023.2024. Changes in operating assets and liabilities using cash include an increase in other assets of $9,456,000. The increase in other assets is related to prepaid expenses including value added taxes related to cross border inventory transfers.
“Year ended September 30, 2025, compared to year ended September 30, 2024”see in full comparison
“Year ended September 30, 2023, compared to year ended September 30, 2022”see in full comparison
Full comparison: every changed paragraph (100)
Statements made in this Annual Report on Form 10-K, in the Company’s other SEC filings, in press releases and in oral statements, that are not statements of historical fact are “forward-looking statements.” Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results or performance of the Company to be materially different from the results or performance expressed or implied by such forward-looking statements. The words “believes,” “expects,” “anticipates,” “seeks,” “may,” “will,” “plan,” “aim,” “project,” “target,” “intend,” “estimate,” “should,” “could,” “outlook,” “continue,” and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. The risks and uncertainties that could cause actual results to differ materially and adversely from those expressed or implied by the forward-looking statements include those risks described in Part I, Item 1A “Risk Factors.”
Overview of Business: The Clearfield operating segment designs, manufactures, and distributes fiber optic management, protection, and delivery products for communications networks. Its “fiber to the anywhere” platform serves the unique requirements of leading broadband service providers in the United States, which include Community Broadband, Large Regional Service Providers, National Carriers, and Multiple System Operators (“MSOs” or “cable TV”), while also serving the broadband needs of the International markets, primarily in Europe,Canada, the Caribbean, Canada,Central/South America and Mexico. These customers are collectively included in the category of Broadband Service Providers. The Clearfield operating segment also provides contract manufacturing services to its Legacy customers for build-to-print services which include OEM requiring copper and fiber cable assemblies built to their specifications. The Company’s sales channels include direct to customer,customer and through distribution partners, and to original equipment suppliers who private label its products.partners. The Company’s products are sold by its sales employees and independent sales representatives.
The Nestor Cables operating segment manufactures fiber optic and copper telecommunication cables and equipment which it distributes to telecommunication operators, network owners, electric companies, building contractors, and industrial companies. Nestor Cables has been a supplier to Clearfield for over a decade. Nestor has two types of production processes, the process of manufacturing cable in its Finland facility and the finished assembly portion of its business performed in Estonia. Nestor Cables sells its products predominantly to customers in Europe.
The Company’s reportable segment is based on the Company’s method of internal reporting. The internal reporting of the operating segment is defined based, in part, on the reporting and review process used by the Company’s Chief Executive Officer, also known as the Chief Operating Decision Maker (“CODM”). The CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources and evaluating financial performance. As such, the Company has determined that it operates as one reportable segment.
On November 11, 2025, the Company completed the sale of its Nestor Cables business, which was previously reported as the Nestor Cables Operating Segment. In connection with this sale, the historical results of the Nestor Cables business and certain assets and liabilities of the Nestor Cables business are reported in our consolidated financial statements as discontinued operations. Following the sale of the Nestor Cables business, the continuing operations of the Company comprise one operating segment and one reportable segment.
Reported below are the results of operations for the Company’s continuing operations unless otherwise stated.
Year ended September 30, 2025, compared to year ended September 30, 2024
The Company’s net sales for fiscal year 2025 increased 20%, or $24,566,000, to $150,134,000 from net sales of $125,568,000 in fiscal year 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 3% and 2% of net sales for the years ended September 30, 2025, and 2024, respectively.
The increase in net sales for fiscal year 2025 of $24,566,000 compared to fiscal year 2024 is attributable to increased demand across the Company’s core markets. Sales to the Community Broadband market increased 1%, or $767,000, from $66,005,000 in fiscal year 2024 to $66,772,000 in fiscal year 2025. Sales to Clearfield’s MSO/Cable TV market increased 38%, or $8,864,000 from $23,487,000 in fiscal year 2024 to $32,351,000 in fiscal year 2025. Sales to the Large Regional market increased 58% to $33,706,000 from $21,293,000 in fiscal year 2024. Sales to National Carriers increased 11%, or $976,000, from $8,767,000 in fiscal year 2024 to $9,743,000 in fiscal year 2025.
Cost of sales for fiscal year 2025 was $99,597,000 compared to $99,721,000 in fiscal year 2024. Gross profit increased 96%, or $24,690,000, from $25,847,000 for fiscal year 2024 to $50,537,000 for fiscal year 2025. Gross profit percent was 33.7% in fiscal year 2025 compared to 20.6% for fiscal year 2024. The improvement in gross margin was due to increased volumes resulting in improved absorption of manufacturing overhead, as well as lower excess inventory charges of $10,074,000 in fiscal year 2025, reflecting improved inventory utilization and beneficial recoveries from inventory previously written down.
Selling, general and administrative expenses for fiscal year 2025 was $48,419,000, an increase of $3,338,000, or 7%, compared to $45,081,000 for fiscal year 2024. The increase was due to higher wages and performance-based compensation of $3,164,000.
Income from continuing operations for fiscal year 2025 was $2,118,000 compared to a loss from continuing operations of $19,234,000 for fiscal year 2024. The increase in income is attributable to increased sales and gross profit from higher customer demand and improved gross profit margin, partially offset by higher selling, general and administrative expenses as described above.
Net investment income in fiscal year 2025 was $6,549,000 compared to $7,472,000 for fiscal year 2024. The decrease in interest income is due to lower interest rates earned, partially offset by a higher average investments balance for the year ended September 30, 2025. The Company invests its excess cash primarily in Federal Deposit Insurance Company (“FDIC”) backed bank certificates of deposit, United States (“U.S.”) treasury securities, and money market funds and accounts. We expect interest income to decrease slightly in fiscal year 2026 due to lower expected market interest rates.
Income tax expense for fiscal year 2025 was $2,357,000 compared to income tax benefit of $3,248,000 for fiscal year 2024. The increase in tax expense of $5,605,000 from the year ended September 30, 2024, is due to the increase in pretax book income for fiscal year 2025. The income tax expense rate decreased to 27.2% for fiscal year 2025 from 27.6% for fiscal year 2024 due to changes in state tax, foreign tax and increased section 162(m) deduction. Our provision for income taxes includes current U.S. federal and state current and deferred tax expense.
Net income from continuing operations for fiscal year 2025 was $6,310,000 or $0.45 per basic and diluted share compared to net loss of $8,514,000 or $(0.58) per basic and diluted share for fiscal year 2024.
Net loss from discontinued operations for fiscal year 2025 was $3,947,000 or $(1.03) per basic and diluted share compared to net loss of $3,939,000 or $(0.27) per basic and diluted share for fiscal year 2024. Net loss from impairment of discontinued operations for fiscal year 2025 was $10,413,000. See Note 11 for further details regarding the impairment charges related to the Nestor Cables business.
The decrease in net sales for fiscal year 2024 of $102,015,000$100,154,000 compared to fiscal year 2023 is attributable to decreased demand across the Clearfield segment’sCompany’s core markets. Sales to the Community Broadband market decreased 41%, or $45,703,000, from $111,708,000 in fiscal year 2023 to $66,005,000 in fiscal year 2024. Sales to Clearfield’s MSO/Cable TV market decreased 49%, or $22,182,000, from $45,669,000 in fiscal year 2023 to $23,487,000 in fiscal year 2024. Sales to the Large Regional market decreased 57% or $28,596,000, to $21,293,000 in fiscal 2024 from $49,889,000 in fiscal 2023. Sales to National Carriers decreased 2%, or $187,000, from $8,954,000 in fiscal year 2023 to $8,767,000 in fiscal year 2024. The decrease in sales to these customers was due to a lull in demand for fiber connectivity products as customers digest their larger than normal inventory levels built up during the pandemic which were purchased over the previous years.
Revenue from customers is obtained from purchase orders submitted from time to time, with a limited number of customers recently issuing purchase orders for longer time frames. The Company’s ability to predict orders in future periods or trends affecting orders in future periods is limited. The Company’s ability to predict revenue can be further limited by global supply chain issues and customer deployment schedules and factors affecting customer ordering patterns, which may result in changes in customer ordering trends in a relatively short period of time. 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.
Cost of sales for fiscal year 2024 was $137,816,000, a decrease of $45,625,000, or 25%, from $183,441,000 in fiscal year 2023. Gross profit decreased 66%, or $56,389,000, from $85,278,000 for fiscal year 2023 to $28,889,000 for fiscal year 2024. The decrease in gross profit was primarily due to lower net sales and lower gross profit margin in fiscal year 2024 in the Clearfield segment.
Cost of sales for fiscal year 2024 was $99,721,000, a decrease of $46,144,000, or 32%, from $145,865,000 in fiscal year 2023. Gross profit decreased 68%, or $54,010,000, from $79,857,000 for fiscal year 2023 to $25,847,000 for fiscal year 2024. The decrease in gross profit was due to lower net sales and lower gross profit margin in fiscal year 2024. Gross profit percent was 17.3%20.6% in fiscal year 2024 compared to 31.7%35.4% for fiscal year 2023. Gross profit margin was negatively affected by unabsorbed overhead in our manufacturing facilities due to lower levels of demand. The Company’s gross profit was also negatively impacted by an increase in inventory reserveswrite-downs of $9,841,000$4,748,000 during the fiscal year ended September 30, 2024. Inventory reserveswrite-downs are primarily due to excess inventory due to the lull in demand in the Clearfield Segment while customers draw down their existing products previously purchased during the period of long lead time supply chain created by the pandemic. The Company expects to operate at gross profit percentage levels at or below these levels for several quarters until revenue levels increase, which is expected to bring improved margins.
Selling, general and administrative expense for fiscal year 2024 was $52,111,000,$45,081,000, an increase of $4,119,000,$2,801,000, or 9%,7%, compared to $47,992,000$42,280,000 for fiscal year 2023. The increase was primarily due to increased performance-based compensation of $1,307,000,$1,395,000, increased stock-based compensation of $1,034,000,$819,000, and increased professional fees of $1,970,000.$1,086,000.
Loss from continuing operations for fiscal year 2024 was $23,222,000$19,234,000 compared to income from continuing operations of $37,286,000$37,577,000 for fiscal year 2023. The decrease is attributable to lower sales and gross profit due to excess supply of fiber products in the Clearfield segment as described above and also higher unabsorbed overhead related to expanded manufacturing capacities in the Clearfield segment.capacities.
Net investment income in fiscal year 2024 was $7,472,000 compared to $5,206,000$5,199,000 for fiscal year 2023. The increase in interest income is due to a higher average investments balance and higher interest rates earned for the year ended September 30, 2024. The higher overall investments balance is a result of the Company’s capital raise of approximately $130,000,000 completed late in the first fiscal quarter of 2023 and cash generated from operations in fiscal 2024. The Company invests its excess cash primarily in Federal Deposit Insurance Company (“FDIC”) backed bank certificates of deposit, United States (“U.S.”) treasury securities, and money market funds and accounts. We expect interest income to remain at these levels through fiscal year 2025, subject to changes in market interest rates and changes in the average investments balance.
Interest expense in fiscal year 2024 was $506,000 compared to $881,000 for fiscal year 2023. The decrease is primarily due to the decrease in the average factoring liability held by Nestor Cables during fiscal year 2024.
Income tax benefit for fiscal year 2024 was $3,803,000$3,248,000 compared to income tax expense of $9,079,000$8,883,000 for fiscal year 2023. The decrease in tax expense of $12,882,000$12,131,000 from the year ended September 30, 2023, is primarily due to the decrease in pretax book income for fiscal year 2024. The increase in the income tax expense rate to 23.4%27.6% for fiscal year 2024 from 21.8%20.9% for fiscal year 2023 is primarily due to changes in state tax, foreign tax and decreased excess tax benefits from stock option exercises and restricted stock vesting, resulting in a shortfall in the current period. decreased excess tax benefits related to stock option exercises and restricted stock vesting, resulting in a shortfall in the current period. Our provision for income taxes includes current U.S. federal, state and foreign current and deferred tax expense.
Net loss from continuing operations for fiscal year 2024 was $12,453,000$8,514,000 or $(0.850.58) per basic and diluted share compared to net income of $32,533,000$33,723,000 or $2.17$2.25 per basic and diluted share for fiscal year 2023.
Year ended September 30, 2023, compared to year ended September 30, 2022
The Company’s net sales for fiscal year 2023 decreased 1%, or $2,163,000, to $268,720,000 from net sales of $270,883,000 in fiscal year 2022. The Company allocates sales from external customers to geographic areas based on the location to which the product is transported. Accordingly, international sales represented 19% and 6% of net sales for the years ended September 30, 2023, and 2022, respectively.
The decrease in net sales for fiscal year 2023 of $2,163,000 compared to fiscal year 2022 is attributable to decreased demand across the Clearfield’s segment core markets. Sales to the Community Broadband market decreased 12%, or $15,312,000, from $127,478,000 in fiscal year 2022 to $112,166,000 in fiscal year 2023. Sales to Clearfield’s MSO/Cable TV market decreased 5%, or $2,252,000, from $47,921,000 in fiscal year 2022 to $45,669,000 in fiscal year 2023. Sales to National Carriers decreased 17%, or $1,817,000, from $10,772,000 in fiscal year 2022 to $8,954,000 in fiscal year 2023. The decrease in sales to these customers was due to a lull in demand for fiber connectivity products as customers digest their larger than normal inventory levels built up during the pandemic which were purchased over the previous years. Net sales to International customers increased 226% or $34,570,000 from $15,316,000 in fiscal year 2022 to $49,885,000 in fiscal year 2023, primarily driven by the Company’s acquisition of Nestor Cables in July 2022.
Revenue from customers is obtained from purchase orders submitted from time to time, with a limited number of customers recently issuing purchase orders for longer time frames. The Company’s ability to predict orders in future periods or trends affecting orders in future periods is limited. The Company’s ability to predict revenue is further limited by global supply chain issues, customer deployment schedules and factors affecting customer ordering patterns, which may result in changes in customer ordering trends in a relatively short period of time. 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.
Cost of sales for fiscal year 2023 was $183,441,000, an increase of $25,505,000, or 16%, from the $157,936,000 in fiscal year 2022. Gross profit decreased 25%, or $27,669,000, from $112,947,000 for fiscal year 2022 to $85,278,000 for fiscal year 2023. The decrease in gross profit was primarily due to lower net sales and lower gross profit margin in fiscal year 2023 in the Clearfield segment.
Gross profit percent was 31.7% in fiscal year 2023 compared to 41.7% in fiscal year 2022. Gross profit margin was negatively affected by excess overhead and production capacity in the Company’s Clearfield segment that was underutilized. The Company continues to realign capacity to current market conditions. Gross profit was also affected by lower gross profit realized in our Nestor Cables cable manufacturing business which was acquired in July 2022 and was not included in the comparable period of fiscal 2022.
Selling, general and administrative expense for fiscal year 2023 was $47,992,000, a decrease of $1,155,000, or 2%, compared to $49,130,000 for fiscal year 2022. While relatively consistent year over year, expense for the year ended September 30, 2023, decreased due to lower performance-based compensation and transaction costs, offset by additional professional and legal expenses related to the Nestor Cables business acquired in July 2022, as well as increased Clearfield employee compensation costs, stock-based compensation and travel and entertainment expenses.
Income from operations for fiscal year 2023 was $37,286,000 compared to $63,817,000 for fiscal year 2022. The decrease is attributable to lower sales and gross profit due to excess supply of fiber products in the Clearfield segment as described above, higher unabsorbed overhead related to expanded manufacturing capacities in the Clearfield segment, as well as a full year of Nestor Cables, which has a lower gross profit profile related to its bulk cable and duct product offerings.
Net investment income in fiscal year 2023 was $5,206,000 compared to $328,000 for fiscal year 2022. The increase in interest income was due to a higher average investments balance and higher interest rates earned for the year ended September 30, 2023. The higher investments balance was a result of the Company’s capital raise of approximately $130,000,000 completed in the first fiscal quarter of 2023. The Company invested its excess cash primarily in FDIC backed bank certificates of deposit, U.S. treasury securities, and money market funds and accounts.
Interest expense in fiscal year 2023 was $881,000 compared to $311,000 for fiscal year 2022. The increase was primarily due to incurring a full year of interest expense on the factoring liability held by Nestor Cables which was acquired in July 2022.
Income tax expense for fiscal year 2023 was $9,079,000 compared to $14,472,000 for fiscal year 2022. The decrease in tax expense of $5,393,000 from the year ended September 30, 2022, was primarily due to the decrease in taxable income for fiscal year 2023. The decrease in the income tax expense rate to 21.8% for fiscal year 2023 from 22.7% for fiscal year 2022 was due to decreased permanent addback items including nondeductible compensation and transaction costs. Our provision for income taxes included current U.S. federal tax expense and state tax expense, Finland taxes and deferred tax expense.
Net incomeloss from discontinued operations for fiscal year 20232024 was $32,533,000,$3,939,000 or $2.17$(0.27) per basic and diluted share,share compared to $49,362,000,net loss of $1,190,000 or $3.58$(0.08) per basic and $3.55 per diluted share,share for fiscal year 2022.2023.
Reportable Segments
The Company’s reportable segments are based on the Company’s method of internal reporting. These results are not necessarily indicative of the results of operations that would have occurred had each segment been an independent, stand-alone entity during the periods presented. The internal reporting of these operating segments is defined based, in part, on the reporting and review process used by the Company’s Chief Executive Officer.
On July 26, 2022, Clearfield, through its newly created Finnish subsidiary, Clearfield Finland Oy, acquired all of the equity of Nestor Cables Oy, which has a wholly owned Estonian subsidiary Nestor Cables Baltics OÜ. Following the closing of the acquisition of Nestor Cables on July 26, 2022, the Company reassessed its operating segments as defined under ASC 280, Segment Reporting. Under ASC 280, operating segments are defined as components of an enterprise where discrete financial information is available that is evaluated regularly by the chief operating decision-maker (“CODM”), in deciding how to allocate resources and in assessing performance. Prior to July 26, 2022, we were considered to be a single operating segment structure. Based upon the Company’s assessment following the acquisition of Nestor Cables, the Company determined that the business of Nestor Cables was considered a second reportable segment as of July 26, 2022. Accordingly, beginning with the year ended September 30, 2022, the Company has two reportable segments: (1) Clearfield; and (2) Nestor Cables. The entities that comprise the Nestor Cables segment are Clearfield Finland Oy, Nestor Cables Oy and Nestor Cables Baltics OÜ.
Reportable segments are as follows:
Clearfield Segment
The following table provides net sales and net (loss) income for the Clearfield segment for the fiscal years ended:
Net sales in the Clearfield segment decreased 44%, or $100,154,000, for the fiscal year ended September 30, 2024, resulting from decreased sales to its Community Broadband, MSO/Cable TV, and Large Regional customers as these customers work to digest inventory that was purchased previously during the period of long lead time supply chain created by the pandemic.
Net loss in the Clearfield segment for the fiscal year ended September 30, 2024 increased 128%, or $41,348,000, from net income of $32,834,000 for the fiscal year ended September 30, 2023, driven by the changes in sales outlined above, as well as lower gross profit margin which was negatively affected by the buildup in capacity that was not utilized, as well as reserves for inventory.
Nestor Cables Segment
The following table provides net sales and net loss for the Nestor Cables segment for the fiscal year ended:
Net sales in the Nestor Cables segment decreased 4%, or $1,861,000, for the fiscal year ended September 30, 2024, as compared to the fiscal year ended September 30, 2023, excluding sales to the Clearfield segment.
Net loss in the Nestor Cables segment for the fiscal year ended September 30, 2024, increased 112%, or $3,638,000, from the fiscal year ended September 30, 2023, driven by lower gross profit margin as well as increased operating expenses.
Sales Backlog
Sales backlog reflects purchase order commitments for our products received from customers that have yet to be fulfilled. The Company had a backlog of $25,133,000 and $57,285,000 as of September 30, 2024, and 2023, respectively. The decrease in backlog was primarily due to a lull in demand for fiber connectivity products at our Clearfield segment as customers digest their larger than normal inventory levels built up during the pandemic which were purchased over the previous years. We believe that the Nestor Cables segment generally experiences the same seasonality as the Clearfield segment.
As of September 30, 2024,2025, the Company had combined consolidated balances of cash, cash equivalents, short-term and long-term investments of $155,497,000$165,799,000 compared to $174,456,000$153,478,000 as of September 30, 2023.2024. Additionally, we have a line of credit for $40 million that has no outstanding borrowing as of September 30, 2024.2025. 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 certificates of deposit backed by the FDIC, U.S. Treasury securities, 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.
On April 27, 2022, Clearfield entered into a loan agreement and a security agreement to provide the Company with a $40 million revolving line of credit that is secured by certain of the Company’s U.S. assets. The line of credit matures on April 27, 2025, and borrowed amounts will bear interest at a variable rate of the CME Group one-month term Secured Overnight Financing Rate (“SOFR”) plus 1.85%, but not less than 1.80% per annum. As of September 30, 2024, the interest rate was 7.05%. The loan agreement and the security agreement contained customary affirmative and negative covenants and requirements relating to the Company and its operations, including a requirement that the Company maintain a debt service coverage ratio of not less than 1.20 to 1 as of the end of each fiscal year for the fiscal year then ended and maintain a debt to cash flow ratio of not greater than 2 to 1 measured as of the end of each of the Company’s fiscal quarters for the trailing twelve (12) month period. Debt service coverage ratio is the ratio of Cash Available for Debt Service to Debt Service, each as defined in the loan agreement. Debt and Cash Flow are also as defined in the loan agreement for the purposes of the debt to cash flow ratio covenant.
On August 5, 2024, the Company entered into an amendment to the loan agreement that, among other things, (i) eliminated the requirement that the Company maintain a debt service coverage ratio of not less than 1.20 to 1 as of the end of each fiscal year for the fiscal year then ended and that the Company maintain a debt to cash flow ratio of not greater than 2 to 1 measured as of the end of each of the Company’s fiscal quarters for the trailing 12 month period; (ii) added a requirement that the Company maintain accounts with the lender with a minimum aggregate liquidity of unrestricted and unencumbered cash and cash equivalents at all times of not less than the outstanding principal balance of the Company’s revolving credit promissory note payable to the lender; and (iii) waived the Company’s compliance with the debt to cash flow ratio for the fiscal quarter ended June 30, 2024. As of the date of the amendment, there was not an outstanding principal balance on the Company’s revolving credit promissory note with the lender.
As of September 30, 2024, the Company had no borrowings against this line of credit and was in compliance with all applicable covenants. As of September 30, 2024, and 2023, the Company had a loan for €2,000,000, which equates to $2,228,000 and $2,112,000, as of September 30, 2024 and 2023, respectively. 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.
We believe our existing cash equivalents and short-term investments, along with cash flow from operations and line of credit, will be sufficient to meet our working capital and investment requirements beyond the next 12 months. The Company intends on utilizing its available cash and assets primarily for its continued organic growth and potential future strategic transactions, as well as execution of the share repurchase program adopted by our board of directors.directors, Effectiveas Januarydetailed 27, 2022, the Company reinstated its stock repurchase program that had been suspended due to COVID uncertainty in April 2020. The Company’s board of directors increased the share repurchase program $18,000,000 effective November 7, 2023, and an additional $25,000,000 effective April 30, 2024, to an aggregate of $65,000,000. During the year ended September 30, 2024, the Company repurchased 1,164,190 shares for approximately $33,058,000. As of September 30, 2024, we have repurchased an aggregate of 1,729,780 shares for $40,077,000 leaving approximately $24,923,000 available within our $65,000,000 stock repurchase program. The repurchase program does not obligate Clearfield to repurchase any particular amount of common stock during any period. The repurchases will be funded by cash on hand. During the year ended September 30, 2023, the Company did not repurchase any shares under the stock repurchase program.above.
Net cash provided by operations for the fiscal year ended September 30, 2024,2025, totaled $22,223,000.$26,553,000. Cash provided by operations included net lossincome from continuing operations of $12,453,000$6,310,000 for the fiscal year ended September 30, 2024,2025, non-cash income and expenses for depreciation and amortization of $7,411,000,$6,121,000, stock-based compensation of $4,641,000,$4,597,000, increase of $4,244,000 in deferred tax assets, amortization of discount on investments of $4,406,000,$1,777,000 in addition to changes in operating assets and liabilities providing and using cash. Changes in operating assets and liabilities usingproviding cash include a decrease in net inventories of $31,990,000 and$13,643,000, a decrease in accountsother receivableassets of $7,799,000.$173,000, and an increase in accounts payable and accrued expenses of $5,562,000, due to timing of payments. The decrease in inventory is due to lower inventory purchases during fiscal year 20242025 as the Company utilized inventory on hand to fulfill customer orders to support sales demand,demand. as well as higher excess inventory charges takenChanges in fiscaloperating yearassets 2024.and liabilities using cash include an increase in accounts receivable of $3,548,000. The decreaseincrease in accounts receivable is due to lowerhigher net sales in the fiscal 20242025 compared to the prior year. Days sales outstanding (“DSO”), which measures how quickly receivables are collected, decreasedincreased 11five days from 5335 to 4240 from September 30, 2023,2024, to September 30, 2024. Changes in operating assets and liabilities using cash include an increase in other assets of $9,225,000 and receiving cash due to an increase in accounts payable and accrued expenses of $544,000. The increase in other assets is related to prepaid expenses including value added taxes related to cross border inventory transfers.2025.
Net cash provided by operations for the fiscal year ended September 30, 2023,2024, totaled $18,423,000.$17,770,000. Cash provided by operations included net incomeloss from continuing operations of $32,533,000$8,514,000 for the fiscal year ended September 30, 2023,2024, non-cash income and expenses for depreciation and amortization of $6,054,000,$5,924,000, stock-based compensation of $3,578,000,$4,375,000, amortization of discount on investments of $3,512,000,$4,406,000, in addition to changes in operating assets and liabilities using cash. Changes in operating assets and liabilities usingproviding cash include ana increasedecrease in net inventories of $15,083,000 and$26,458,000, a decrease in accounts receivable of $6,473,000, and an increase in accounts payable and accrued expenses of $27,843,000.$264,000. The increasedecrease in inventory is adue resultto oflower additionalinventory stockingpurchases levelsduring fiscal year 2024 as the Company utilized inventory on hand to fulfill customer orders to support the Company’s anticipated customersales demand, as well as stockinghigher ofexcess longinventory leadcharges timetaken componentsin tofiscal limityear manufacturing delays due to raw material component shortages and supply chain delays experienced during the pandemic.2024. The decrease in accounts payablereceivable is due to lower purchasing activity of inventory near the end of the period in response to lower demand from customers, as well as lower performance-based compensation accruals as of September 30, 2023. Also, changes in operating assets and liabilities providing cash include a decrease in accounts receivable of $26,277,000, due to lower net sales in the Company’s fourth quarter of fiscal 20232024 compared to the prior year. DSO remaineddecreased consistent12 as it increased 1 daydays from 5247 to 5335 from September 30, 2022,2023 to September 30, 2023.2024. Changes in operating assets and liabilities using cash include an increase in other assets of $9,456,000. The increase in other assets is related to prepaid expenses including value added taxes related to cross border inventory transfers.
Net cash provided by operations for the fiscal year ended September 30, 2022,2023, totaled $2,258,000.$24,596,000. Cash provided by operations included net income from continuing operations of $49,362,000$33,723,000 for the fiscal year ended September 30, 2022,2023, non-cash expenses for depreciation and amortization of $3,426,000,$4,595,000, stock-based compensation of $2,339,000,$3,578,000, amortization of discount on investments of $3,512,000, in addition to changes in operating assets and liabilities using and providing cash. Changes in operating assets and liabilities using cash include an increase in net inventories of $43,744,000$11,145,000 and a decrease in accounts receivablespayable and accrued expenses of $24,234,000.$27,425,000. The increase in inventory is a result of additional stocking levels to support the Company’s increasedanticipated sales backlog and highercustomer demand, andas well as stocking of high turn and long lead time components to limit manufacturing delays due to raw material component shortages and supply chain delays.delays experienced during the pandemic. The increasedecrease in accounts receivablepayable wasis due to higherlower netpurchasing salesactivity of inventory near the end of the period in response to lower demand from customers, as well as increasedlower DSOperformance-based duecompensation toaccruals higheras sales to certain customers with longer payment terms. DSO increased 13 days from 39 to 52 fromof September 30, 2021, to September 30, 2022.2023. Also, changes in operating assets and liabilities providing cash include ana increasedecrease in accounts payable and accrued expensesreceivable of $15,760,000,$27,090,000, due to timinglower net sales in the Company’s fourth quarter of accounts payable and $8,738,000 in fiscal year2023 2022 incentive compensation accrualscompared to bethe paidprior afteryear. yearDSO end.remained consistent as it decreased two days from 49 to 47 from September 30, 2022, to September 30, 2023.
What changed in the latest 10-Q
Risk Factors
The most significant risk factors applicable to the Company are described in Part II, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended September 30, 2025. There have been no material changes from the risk factors previously disclosed.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “NINE MONTHS ENDED JUNE 30, 2026 VS. NINE MONTHS ENDED JUNE 30, 2025”
Removed heading “SIX MONTHS ENDED MARCH 31, 2026 VS. SIX MONTHS ENDED MARCH 31, 2025”
Largest changes
“Cost of sales for the nine months ended June 30, 2026, was $76,103,000, an increase of $3,341,000, or 5%, from $72,762,000 for the nine months ended June 30, 2025. Gross profit percent decreased slightly at 32.4% of net sales for the nine months ended June 30, 2026, when compared to 33.3% of net sales for the nine months ended June 30, 2025. Gross profit increased $181,000, or 0.5%, to $36,493,000 for the nine months ended June 30, 2026, from $36,312,000 for the nine months ended June 30, 2025. …”see in full comparison
“Cost of sales for the three months ended June 30, 2026, was $29,920,000, an increase of $4,841,000, or 19%, from $25,079,000, for the three months ended June 30, 2025. Gross profit percent was 31.8% of net sales for the three months ended June 30, 2026, a decrease from 35.3% of net sales for the three months ended June 30, 2025. Gross profit increased $268,000, or 2%, to $13,944,000 for the three months ended June 30, 2026, from $13,676,000 for the three months ended June 30, 2025. …”see in full comparison
“SIX MONTHS ENDED MARCH 31, 2026 VS. SIX MONTHS ENDED MARCH 31, 2025”see in full comparison
“NINE MONTHS ENDED JUNE 30, 2026 VS. NINE MONTHS ENDED JUNE 30, 2025”see in full comparison
“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.”see in full comparison
“Net investment income for the nine months ended June 30, 2026, was $4,274,000 compared to $4,920,000 for the nine months ended June 30, 2025. The decrease in interest income is due to lower interest rates on investments during the nine months ended June 30, 2026.”see in full comparison
Full comparison: every changed paragraph (49)
The following discussion and analysis of the Company’s financial condition and results of operations as of and for the three and sixnine months ended MarchJune 31,30, 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.
THREE MONTHS ENDED MARCHJUNE 31,30, 2026 VS. THREE MONTHS ENDED MARCHJUNE 31,30, 2025
Net sales for the three months ended MarchJune 31,30, 2026, all of which were $34,391,000,to aBroadband decreaseService Providers, were $43,864,000, an increase of approximately 15%,13%, or $6,230,000$5,109,000 from net sales of $40,621,000$38,755,000 for the three months ended MarchJune 31,30, 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, theThe Company recorded $499,000$999,000 in international sales for the three months ended MarchJune 31,30, 2026 versus $777,000$1,341,000 for the three months ended MarchJune 31,30, 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%2% and 2%3% of total net sales for the three months ended MarchJune 31,30, 2026 and 2025, respectively. Net sales to Legacy customers were $0 in the three months ended MarchJune 31,30, 2026 versus $710,000$570,000 in the three months ended MarchJune 31,30, 2025.
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.
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.
Cost of sales for the three months ended March 31, 2026, was $23,230,000, a decrease of $3,430,000, or 13%, from $26,660,000, for the three months ended March 31, 2025. Gross profit percent was 32.5% of net sales for the three months ended March 31, 2026, a decrease from 34.4% of net sales for the three months ended March 31, 2025. Gross profit decreased $2,800,000, or 20%, to $11,161,000 for the three months ended March 31, 2026, from $13,961,000 for the three months ended March 31, 2025. Gross margin as a percentage of net sales decreased compared to the prior period, primarily driven by lower overhead absorption resulting from reduced sales volumes, as fixed manufacturing costs were spread over a smaller revenue base.
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.
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.
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.
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.
The Company’s net loss from continuing operations for the three months ended March 31, 2026, was $528,000, or $(0.04) per basic and diluted share compared to net income from continuing operations for the three months ended March 31, 2025, of $2,548,000, or $0.18 per basic and diluted share.
The Company’s net loss from discontinued operations for the three months ended March 31, 2026, was $0, or $0.00 per basic and diluted share compared to net loss from discontinued operations for the three months ended March 31, 2025, of $1,221,000, or $(0.09) 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.
SIX MONTHS ENDED MARCH 31, 2026 VS. SIX MONTHS ENDED MARCH 31, 2025
Net sales for the six months ended March 31, 2026, were $68,732,000, a decrease of approximately 2%, or $1,587,000, from net sales of $70,319,000 for the six months ended March 31, 2025. Net sales to Broadband Service Providers were $32,869,000 and $31,214,000 in the six months ended March 31, 2026 and 2025, respectively. In addition, the Company recorded $2,436,000 in international sales for the six months ended March 31, 2026 versus $1,143,000 for the six 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. Accordingly, international sales represented 4% and 2% of total net sales for the six months ended March 31, 2026 and March 31, 2025, respectively. Net sales to Legacy customers were $0 in the six months ended March 31, 2026 versus $1,199,000 in the six months ended March 31, 2025.
The decreaseincrease in net sales for the sixthree months ended MarchJune 31,30, 2026, of $1,587,000$5,109,000 compared to the sixthree months ended MarchJune 31,30, 2025, was primarily driven by increased sales to Large Regional Service Provider customers of $4,025,000, up 58%, Community Broadband customers of $2,379,000, up 13%, and National Carrier customers of $1,157,000, up 54%, partially offset by decreased sales to MSO customers of $2,243,000,$1,540,000, down 17%, Large Regional Service ProviderLegacy customers of $664,000,$570,000, down 4%, and National Carrier customers of $429,000, down 9%, partially offset by increased sales to Community Broadband customers of $1,654,000, up 5%,100%, and International customers of $1,293,000,$343,000, updown 113%.26%. The decreaseincrease in sales acrossin thesethe Large Regional, Community Broadband, and National Carrier customer markets for the sixthree months ended MarchJune 31,30, 2026, as compared to the sixthree months ended MarchJune 31,30, 2025, is due to seasonalityincreased and lumpiness in early build season orders and the effect on customers of delaysdemand in the BEADquarter program.to Incustomers addition,in thethese reductionsegments. The decrease in sales of theto Legacy marketcustomers is due to the saledivestiture of thisthe productCompany’s lineformer build-to-print copper cable assemblies business in September,September 2025.
Order backlog as of June 30, 2026, was $20,988,000, a decrease of 34% compared to $31,647,000 as of March 31, 2026, and a decrease of $9,747,000, or 32%, from June 30, 2025. The decrease in backlog is due to slower demand during the quarter, as well as the exclusion of the remaining portion of a previously booked customer order in the amount of $4,624,000 which we no longer believe will be fulfilled.
Cost of sales for the three months ended June 30, 2026, was $29,920,000, an increase of $4,841,000, or 19%, from $25,079,000, for the three months ended June 30, 2025. Gross profit percent was 31.8% of net sales for the three months ended June 30, 2026, a decrease from 35.3% of net sales for the three months ended June 30, 2025. Gross profit increased $268,000, or 2%, to $13,944,000 for the three months ended June 30, 2026, from $13,676,000 for the three months ended June 30, 2025. Gross margin as a percentage of net sales decreased compared to the prior period, driven by product mix, as well as higher excess and obsolete inventory charges specifically driven by $2,560,000 in charges related to the remaining finished good portion of a customer order which we no longer believe will be fulfilled. This was offset by recoveries on sales of previously reserved inventory of $1,407,000 as well as $655,000 in tariff refunds related to previously paid tariffs that have been refunded following a change in tariff regulations.
Selling, general and administrative expenses for the three months ended June 30, 2026, were $11,373,000 in comparison to $12,149,000 for the three months ended June 30, 2025, a decrease of $776,000, or 6%. The decrease is due to a reduction of $1,710,000 of performance-based compensation accruals during the quarter, reflecting lower projected expense under the Company's incentive compensation programs. This was partially offset by higher wages and benefit related expense of $755,000.
Cost of sales for the six months ended March 31, 2026, was $46,183,000, a decrease of $1,500,000, or 3%, from $47,683,000 for the six months ended March 31, 2025. Gross profit percent remained consistent at 32.8% of net sales for the six months ended March 31, 2026, when compared to 32.2% of net sales for the six months ended March 31, 2025. Gross profit decreased $87,000, or 0.4%, to $22,549,000 for the six months ended March 31, 2026, from $22,636,000 for the six months ended March 31, 2025.
Selling, general and administrative expenses increased $3,442,000, or 15%, to $26,442,000 for the six months ended March 31, 2026, from $23,000,000 for the six months ended March 31, 2025. The increase is due to higher wages and performance-based compensation accruals of $1,748,000, increased IT maintenance and services of $540,000, increased professional services of $247,000, and increased stock-based compensation of $382,000.
LossIncome from continuing operations for the sixthree months ended MarchJune 31,30, 20262026, was $3,893,000$2,571,000 compared to lossincome from continuing operations of $364,000$1,527,000 for the sixthree months ended MarchJune 31,30, 2025, an increase of approximately 970%.68%. The increase in income from continuing operations is the result of decreasedincreased netgross salesprofit and increaseddecreased selling, general and administrative expenses as explained above.
Net investment income for the sixthree months ended MarchJune 31,30, 2026, was $2,911,000$1,363,000 compared to $3,332,000$1,588,000 for the sixthree months ended MarchJune 31,30, 2025. The decrease in interestnet investment income is due to decreased interest income driven by lower interest rates earned on investments during the six months ended March 31, 2026.quarter.
The Company recorded an income tax benefit of $177,000 and income tax expense of $775,000$934,000 and $787,000 for the sixthree months ended MarchJune 31,30, 2026, and 2025, respectively. We record our quarterly provision for income taxes based on our estimated annual effective tax rate for the year. The decrease in tax expense of $952,000 for the six months ended March 31, 2026, compared to six months ended March 31, 2025, is primarily due to increased loss from continuing operations. The income tax rate for the sixthree months ended MarchJune 31,30, 2026, was 18.0%23.7% compared to 26.1%25.3% for the sixthree months ended MarchJune 31,30, 2025. The income tax rate for the sixthree months ended MarchJune 31,30, 2026, was lower thanapproximated the statutoryCompany's rateestimated primarilyannual due to discreteeffective tax benefitsrate, recognizedreflecting duringstate income taxes and the period,nondeductibility includingof excesscertain executive compensation under Section 162(m) of the Internal Revenue Code being partially offset by the impact of research and development tax benefits from the vesting of restricted stock, which reduced the income tax benefit recognized.credits. The income tax rate for the sixthree months ended MarchJune 31,30, 2025, was higher than the statutory rate primarily due to the nondeductibility of certain executive compensation under Section 162(m) of the Internal Revenue Code and discrete tax items, including excess tax shortfall from the vesting of restricted stock.
The Company’s net loss from continuing operations for the six months ended March 31, 2026, was $805,000 or $(0.06) per basic share and diluted share. The Company’s net income for the six months ended March 31, 2025, was $2,193,000, or $0.16 per basic share and diluted share. The basic and diluted loss per share for the six months ended March 31, 2026, as compared to the net income for the six months ended March 31, 2025, was due to decreased sales and increased selling, general and administrative expenses as detailed above.
The Company’s net lossincome from discontinuedcontinuing operations for the sixthree months ended MarchJune 31,30, 2026, was $337,000,$3,000,000, or $(0.02)$0.22 per basic and diluted share compared to net lossincome from discontinuedcontinuing operations for the sixthree months ended MarchJune 31,30, 2025, of $2,772,000,$2,328,000, or $(0.20)$0.16 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.
The Company’s net loss from discontinued operations for the three months ended June 30, 2026, was $0, or $0.00 per basic and diluted share compared to net loss from discontinued operations for the three months ended June 30, 2025, of $722,000, or $(0.05) 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.
NINE MONTHS ENDED JUNE 30, 2026 VS. NINE MONTHS ENDED JUNE 30, 2025
Net sales for the nine months ended June 30, 2026, all of which were to Broadband Service Providers, were $112,596,000, an increase of approximately 3%, or $3,522,000, from net sales of $109,074,000 for the nine months ended June 30, 2025. The Company recorded $3,435,000 in international sales for the nine months ended June 30, 2026 versus $2,484,000 for the nine months ended June 30, 2025. The Company allocates sales from external customers to geographic areas based on the location to which the product is transported. Accordingly, international sales represented 3% and 2% of total net sales for the nine months ended June 30, 2026 and June 30, 2025, respectively. Net sales to Legacy customers were $0 in the nine months ended June 30, 2026 versus $1,769,000 in the nine months ended June 30, 2025.
The increase in net sales for the nine months ended June 30, 2026, of $3,522,000 compared to the nine months ended June 30, 2025, was primarily driven by increased sales to Community Broadband customers of $4,034,000, up 8%, Large Regional Service Provider customers of $3,361,000, up 13%, International customers of $950,000, up 38%, and National Carrier customers of $728,000, up 10%, partially offset by decreased sales to MSO customers of $3,783,000, down 17%, and Legacy customers of $1,769,000, down 100%. The increase in sales to Community Broadband, Large Regional, International, and National Carrier customer markets for the nine months ended June 30, 2026, as compared to the nine months ended June 30, 2025, was due to increased demand to customers in these segments. In addition, the decrease in sales to Legacy customers is due to the divestiture of the Company’s former build-to-print copper cable assemblies business in September 2025.
Cost of sales for the nine months ended June 30, 2026, was $76,103,000, an increase of $3,341,000, or 5%, from $72,762,000 for the nine months ended June 30, 2025. Gross profit percent decreased slightly at 32.4% of net sales for the nine months ended June 30, 2026, when compared to 33.3% of net sales for the nine months ended June 30, 2025. Gross profit increased $181,000, or 0.5%, to $36,493,000 for the nine months ended June 30, 2026, from $36,312,000 for the nine months ended June 30, 2025. Gross margin as a percentage of net sales decreased compared to the prior period, driven by product mix, as well as higher excess and obsolete inventory charges specifically driven by $2,560,000 in charges related to the remaining finished good portion of a customer order which we no longer believe will be fulfilled. This was offset by recoveries on sales of previously reserved inventory of $2,781,000 as well as $1,002,000 in tariff refunds related to previously paid tariffs that have been refunded following a change in tariff regulations.
Selling, general and administrative expenses increased $2,667,000, or 8%, to $37,815,000 for the nine months ended June 30, 2026, from $35,148,000 for the nine months ended June 30, 2025. The increase is due to higher wages and benefit related expense of $2,151,000, increased IT maintenance and services of $558,000, increased employee travel related expense of $359,000, and increased stock-based compensation of $227,000, partially offset by lower performance-based compensation accruals of $1,204,000. The lower performance-based compensation accruals reflect lower projected expense under the Company's incentive compensation programs.
Loss from continuing operations for the nine months ended June 30, 2026 was $1,322,000 compared to income from continuing operations of $1,164,000 for the nine months ended June 30, 2025, a decrease of approximately 214%. The decrease is the result of decreased gross profit margin and increased selling, general and administrative expenses as explained above.
Net investment income for the nine months ended June 30, 2026, was $4,274,000 compared to $4,920,000 for the nine months ended June 30, 2025. The decrease in interest income is due to lower interest rates on investments during the nine months ended June 30, 2026.
The Company recorded an income tax expense of $757,000 and $1,562, 000 for the nine months ended June 30, 2026, and 2025, respectively. We record our quarterly provision for income taxes based on our estimated annual effective tax rate for the year. The decrease in tax expense of $805,000 for the nine months ended June 30, 2026, compared to nine months ended June 30, 2025, is primarily due to lower pre-tax income from continuing operations. The income tax rate for the nine months ended June 30, 2026, was 25.6% compared to 25.7% for the nine months ended June 30, 2025. The income tax rate for the nine months ended June 30, 2026, was higher than the statutory rate primarily due to state income taxes and the nondeductibility of certain executive compensation under Section 162(m) of the Internal Revenue Code, both of which increased the effective tax rate, partially offset by the impact of research and development tax credits, which decreased the income tax expense recognized during the period. The income tax rate for the nine months ended June 30, 2025, was higher than the statutory rate primarily due to discrete tax items, including excess tax shortfall from the vesting of restricted stock.
The Company’s net income from continuing operations for the nine months ended June 30, 2026, was $2,195,000 or $0.16 per basic share and diluted share. The Company’s net income from continuing operations for the nine months ended June 30, 2025, was $4,522,000, or $0.32 per basic share and diluted share. The lower basic and diluted income per share for the nine months ended June 30, 2026, as compared to the nine months ended June 30, 2025, was due to decreased gross profit margin, decreased investment income, and increased selling, general and administrative expenses as detailed above.
The Company’s net loss from discontinued operations for the nine months ended June 30, 2026, was $337,000, or $(0.02) per basic and diluted share compared to net loss from discontinued operations for the nine months ended June 30, 2025, of $3,494,000, or $(0.25) 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.
As of MarchJune 31,30, 2026, our principal source of liquidity was our cash, cash equivalents, short-term investments and long-term investments. These sources total $147,073,000$155,119,000 as of MarchJune 31,30, 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 MarchJune 31,30, 2026. The line of credit is secured by certain of the Company’s assets and matures JulyNovember 24,21, 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.
Net cash usedprovided inby operating activities totaled $2,512,000$7,345,000 for the sixnine months ended MarchJune 31,30, 2026. This consisted of net lossincome from continuing operations of $805,000,$2,195,000, non-cash expenses for depreciation and amortization of $3,190,000,$4,743,000, stock-based compensation of $2,589,000,$3,616,000, amortization of premium and discounts on investments of $270,000,$334,000, and increaseddecreased deferred income taxes of $536,000,$398,000, 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.$8,640,000. 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,$4,064,000, other assets of $2,876,000,$2,910,000, and a decrease in accounts payable and accrued expenses of $6,041,000,$4,939,000, due to timing of payments and the payment of fiscal year 2025 incentive compensation accruals during the sixnine months ended MarchJune 31,30, 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 sixnine months ended MarchJune 31,30, 2026. The increase in other assets is due to overpayment of income taxestax payments and increase in prepaid expenses. Days sales outstanding, which measures how quickly receivables are collected, increased 12seven days from 3937 to 5144 from MarchJune 31,30, 2025 to MarchJune 31,30, 2026.
Net cash provided by operating activities totaled $12,450,000$22,423,000 for the sixnine months ended MarchJune 31,30, 2025. This consisted of a net income from continuing operations of $2,193,000,$4,522,000, non-cash expenses for depreciation and amortization of $3,061,000,$4,763,000, stock-based compensation of $2,221,000,$3,417,000 and amortization of premium and discounts on investments of $1,202,000 and increased deferred income taxes of $188,000,$1,556,000, 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$15,070,000 and an increase in accounts payable and accrued expenses of $2,168,000$2,493,000 due to timing of payments. The decrease in inventory was due to decreased inventory purchases during the sixnine months ending MarchJune 31,30, 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$2,501,000 and other assets of $3,240,000.$3,785,000. The increase in accounts receivable is due to the timing of sales, which were concentrated near the end of the reporting period during the sixnine months ended MarchJune 31,30, 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 twoone daysday from 4138 to 3937 from MarchJune 31,30, 2024 to MarchJune 31,30, 2025.
Net cash provided by operating activities of discontinued operations for the sixnine months ended MarchJune 31,30, 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.
Net cash used in operating activities of discontinued operations for the sixnine months ended MarchJune 31,30, 2025, totaled $2,252,000.$4,307,000. Cash used in operations included net loss from discontinued operations of $2,772,000,$3,494,000, non-cash income and expenses for depreciation and amortization of $650,000,$1,003,000, deferred tax assets of $703,000,$157,000, and stock-based compensation of $206,000,$328,000, in addition to changes in operating assets and liabilities providingusing cash of $367,000.$1,987,000.
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 sixnine months ended MarchJune 31,30, 2026, we received proceeds from the maturity of investment securities of $58,660,000$79,710,000 and used cash to purchase $52,009,000$70,241,000 of investment securities. Purchases of property, plant, and equipment, mainly related to manufacturing equipment and intangible assets, consumed $2,007,000$2,917,000 of cash during the sixnine months ended MarchJune 31,30, 2026. Cash used of $1,012,000 during the sixnine months ended MarchJune 31,30, 2026, was attributable to the disposition of the Nestor Cables business and reflects cash paid for transaction-related costs directly associated with the sale.
During the sixnine months ended MarchJune 31,30, 2025, we received proceeds from the maturity of investment securities of $75,176,000$95,976,000 and used cash to purchase $59,234,000$78,697,000 of investment securities. Purchases of property, plant, and equipment, mainly related to manufacturing equipment and intangible assets, consumed $3,074,000$3,529,000 of cash during the sixnine months ended MarchJune 31,30, 2025.
Net cash for investing activities of discontinued operations was zero for the sixnine months ended MarchJune 31,30, 2026. Net cash used in investing activities of discontinued operations for the sixnine months ended MarchJune 31,30, 2025, totaled $1,648,000,$1,692,000, driven by cash used to purchase fixed and intangible assets.
For the sixnine months ended MarchJune 31,30, 2026, we used cash to repurchase $12,597,000$13,494,000 of our common stock on the open market under our stock repurchase program, which includes U.S. Federal excise taxes. We received $239,000$513,000 from employees’ participation and purchase of stock through our ESPP and used $1,001,000$1,019,000 for payment of withholding taxes for vesting of restricted stock grants. The Company used $63,000$142,000 related to payment of taxes associated with the issuance of common stock upon cashless exercise of stock options.
For the sixnine months ended MarchJune 31,30, 2025, we used cash to repurchase $11,015,000$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 $301,000$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 used $12,000$133,000 related to payment of taxes associated with the issuance of common stock upon cashless exercise of stock options.
Net cash used in financing activities of discontinued operations for the sixnine months ended MarchJune 31,30, 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 sixnine months ended MarchJune 31,30, 2025, totaled $2,465,000,$4,337,000, driven by net borrowings and repayments from the factoring liability held by Nestor Cables.
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 sixnine months ended MarchJune 31,30, 2026.
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 sixnine months ended MarchJune 31,30, 2026.
CLFD insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 6 filings (3 insiders, 6 trade dates, 23,353 shares, about $1.0M; 4 of these filings say the sales were made under a Rule 10b5-1 trading plan). Net open-market shares: -23,353 (purchases minus sales); net value about -$1.0M.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-07-01 | Beranek Cheryl |
Open-market sale |
1,778 | $40.06 | $71.2K |
| 2026-06-30 | Herzog Daniel R |
Grant/award | 752 | $24.78 | $18.6K |
| 2026-06-30 | Khemakhem Anis |
Grant/award | 158 | $24.78 | $3.9K |
| 2026-06-30 | Hill John P |
Grant/award | 459 | $24.78 | $11.4K |
| 2026-06-30 | Beranek Cheryl |
Grant/award | 210 | $24.78 | $5.2K |
| 2026-06-09 | Khemakhem Anis |
Open-market sale | 1,684 | $39.90 | $67.2K |
| 2026-06-01 | Beranek Cheryl |
Open-market sale |
7,500 | $46.92 | $351.9K |
| 2026-05-27 | Beranek Cheryl |
Open-market sale |
2,500 | $50.00 | $125.0K |
| 2026-05-11 | Beranek Cheryl |
Open-market sale |
2,500 | $45.02 | $112.5K |
| 2026-05-11 | Jones Walter Louis Jr |
Open-market sale | 2,391 | $46.05 | $110.1K |
| 2026-05-08 | Beranek Cheryl |
Open-market sale |
5,000 | $40.27 | $201.3K |
| 2026-05-06 | Khemakhem Anis |
Shares withheld for tax | 635 | $30.28 | $19.2K |
Well-known investors holding CLFD (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| D. E. Shaw & Co. | 2026-06-30 | 227,722 | $9.1M | 0.01% | Added 62% |
| Millennium Management (Israel Englander) | 2026-06-30 | 142,431 | $5.7M | 0.0% | Added 197% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 131,916 | $5.2M | 0.0% | Reduced 48% |
| Renaissance Technologies | 2026-06-30 | 45,795 | $1.8M | 0.0% | Reduced 66% |