Press release·03/01/2025 08:55:46

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.

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. Selling, general, and administrative expenses decreased 6% to $12.2 million as the company implemented cost management efforts.

As a result of the higher sales, improved gross margin, and lower expenses, Clearfield’s operating loss decreased by 51% to $4.0 million, compared to an $8.2 million loss in the prior year period. The company’s net loss for the quarter was $1.9 million, or $0.13 per share, an improvement from the $5.3 million, or $0.35 per share, net loss in the same quarter of 2023.

Segment Performance

Clearfield has two reportable segments: Clearfield and Nestor Cables.

Clearfield Segment 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. This was driven by higher demand from National Carrier and Community Broadband customers. The segment’s net loss decreased 89% to $355,000, due to the increased sales and improved gross margin.

Nestor Cables Segment The Nestor Cables segment, which designs, manufactures, and sells fiber optic and copper telecommunication cables and equipment, reported a 6% decrease in net external sales to $5.8 million due to lower demand in the quarter. The segment’s net loss improved 21% to $1.6 million.

Liquidity and Capital Resources

As of December 31, 2024, Clearfield had $113.0 million in cash, cash equivalents, and short-term investments, down from $131.0 million as of September 30, 2024. 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, compared to $10.8 million in the prior year period. The decrease was primarily due to changes in working capital, including a $6.9 million decrease in accounts receivable and a $6.9 million decrease in inventory, partially offset by a $5.3 million decrease in accounts payable and accrued expenses.

Investing activities used $13.4 million in cash, as the company received $54.5 million from maturing investments and used $39.0 million to purchase new investment securities. Clearfield also spent $2.1 million on capital expenditures and intangible assets.

In financing activities, the company used $6.3 million to repurchase its common stock and made $0.5 million in payments related to employee stock-based compensation.

Outlook and Risk Factors

Clearfield’s ability to predict future orders and revenue is limited due to factors such as customer deployment schedules, inventory digestion, and the dynamic nature of tariffs and trade policies. The company’s financial results could be negatively impacted by any new tariffs imposed on imports from Mexico, where it has substantial manufacturing operations, or other countries.

The company’s critical accounting estimates include the fair value of investments, stock-based compensation, and the valuation of inventory, long-lived assets, intangible assets, and goodwill. Management made no changes to these estimates during the quarter.

Clearfield is exposed to market risks related to changes in interest rates, foreign currency exchange rates, and commodity prices. A 10% change in the Euro to U.S. Dollar exchange rate would impact the company’s operating expenses by approximately 1%. Rising costs, including wages, logistics, components, and commodity prices, are also negatively impacting Clearfield’s profitability.

Analysis and Outlook

Clearfield delivered a solid performance in the first quarter of fiscal 2025, with improved financial results compared to the prior year period. The company was able to grow sales, expand gross margins, and reduce operating expenses, leading to a significant reduction in its net loss.

The Clearfield segment was the primary driver of the company’s improved results, with higher sales to key customer groups and better inventory management contributing to the segment’s profitability. The Nestor Cables segment continued to face headwinds, with lower sales and ongoing losses, but the company was able to reduce the segment’s net loss.

Clearfield’s liquidity position remains strong, with a substantial cash and investment balance and an undrawn credit facility. The company is using its cash resources to fund organic growth, potential strategic transactions, and its share repurchase program, which should benefit shareholders.

However, the company faces several risks and uncertainties that could impact its future performance. The ability to predict customer orders and revenue remains limited, and Clearfield is exposed to potential tariffs and rising costs that could pressure its margins. The company’s reliance on its Nestor Cables segment also introduces foreign exchange and other risks that require careful management.

Overall, Clearfield’s first-quarter results demonstrate the company’s ability to navigate a challenging environment and improve its financial position. If the company can continue to execute on its operational initiatives, manage its risks effectively, and capitalize on the growing demand for its fiber optic solutions, it should be well-positioned to deliver stronger financial performance in the coming quarters and years.