Press release·02/07/2025 23:57:43

Financial Performance Overview

Clearfield, Inc. reported its financial results for the three months ended December 31, 2024. The company saw a 4% increase in net sales to $35.5 million, up from $34.2 million in the same period the prior year. This growth was driven by higher sales to National Carrier, Community Broadband, and MSO customers, partially offset by declines in sales to Large Regional Service Providers, International customers, and Legacy customers.

The company’s order backlog as of December 31, 2024 was $26 million, up 3.6% from the prior quarter but down 40% year-over-year, reflecting typical seasonal ordering patterns from service providers.

Profitability and Cost Management

Clearfield’s gross profit increased 74% to $8.2 million, with the gross margin improving to 23.1% from 13.7% in the prior year quarter. This was primarily due to lower excess inventory charges, reflecting better inventory utilization and recoveries from previously reserved inventory. Selling, general, and administrative expenses decreased 6% to $12.2 million as a result of cost management efforts.

The company reported an operating loss of $4.0 million, a 51% improvement from the $8.2 million loss in the prior year quarter. This was driven by the higher sales and gross profit, as well as the lower SG&A expenses.

Segment Performance

Clearfield has two reportable segments: Clearfield and Nestor Cables.

The Clearfield segment, which designs, manufactures, and sells fiber management, protection, and delivery solutions, saw a 6% increase in net sales to $29.7 million. Segment net loss improved 89% to $355,000, benefiting from the higher sales and gross margin.

The Nestor Cables segment, which designs, manufactures, and sells fiber optic and copper telecommunication cables and equipment, had a 6% decrease in net external sales to $5.8 million. Segment net loss improved 21% to $1.6 million.

Liquidity and Capital Resources

As of December 31, 2024, Clearfield had $113 million in cash, cash equivalents, and short-term investments, down from $131 million at the end of the prior quarter. The company also has a $40 million line of credit with no outstanding borrowings.

Net cash provided by operating activities was $7.2 million for the quarter, driven by a decrease in inventory and accounts receivable, partially offset by a decrease in accounts payable and accrued expenses. The company used $2.1 million for capital expenditures and $6.3 million to repurchase common stock.

Clearfield believes its existing cash, investments, and credit facility, along with cash flow from operations, will be sufficient to meet its working capital and investment requirements beyond the next 12 months. The company intends to use its available resources primarily for organic growth, potential strategic transactions, and its share repurchase program.

Key Risks and Outlook

Clearfield faces several key risks, including:

• Uncertainty around future customer orders and deployment schedules
• Potential negative impact from tariffs on imports from Mexico or other countries
• Exposure to fluctuations in foreign exchange rates, particularly the Euro to U.S. Dollar
• Rising costs for wages, logistics, components, and commodities that could impact profitability

Despite these challenges, the company remains focused on driving growth in its core Clearfield segment by capitalizing on increasing demand from National Carrier and Community Broadband customers. Clearfield will also continue its cost management efforts to improve profitability. The company’s strong liquidity position provides flexibility to navigate the current environment and pursue strategic opportunities.

Overall, Clearfield delivered improved financial performance in the quarter compared to the prior year, though it continues to face headwinds from macroeconomic factors. The company’s ability to manage costs, optimize its inventory, and capitalize on market demand will be critical to its future success.