Clearfield, Inc.

Clearfield, Inc. designs, manufactures, and distributes fiber protection, fiber management, and fiber delivery solutions for the broadband service provider space primarily across North America. The company's "fiber to anywhere" platform serves Community Broadband customers (Tier 2 and 3 telco carriers, utilities, municipalities, and alternative carriers), Multiple System Operators (cable television), Large Regional Service Providers (ILEC operating a multi-state network with more than 500,000 subscribers), National Carriers (wireline/wireless national telco carriers (Tier 1)), and International customers (primarily Europe, Canada, Mexico, and Caribbean Markets). The market for fiber management, fiber protection, and fiber delivery products is highly competitive, with competition based on functionality, price, product quality, availability, ease of installation, service, scalability, and innovation.

Competitors to the FieldSmart product lines include products offered by Corning Cabling Systems, Inc., OFS (Furukawa Electric North America, Inc.), AFL Telecommunications (a subsidiary of Fujikura Ltd.), Fujikura Ltd., Nokia, Hexatronics Group, Amphenol and CommScope, Inc. Competitors to the CraftSmart and FiberFlex active cabinet product lines include products offered by Emerson Network Power, a subsidiary of Vertiv Co., and Charles Industries, Ltd., a subsidiary of Amphenol. Competitors to FieldShield product lines include products offered by PPC Broadband, a subsidiary of Belden, Inc. and Emtelle UK Limited. Clearfield believes it has a competitive advantage with customers who can leverage the cost savings the Clearview Cassette can provide and those who require quick-turn, high-performance customized products, and that it is at a competitive disadvantage with customers who principally seek large volume commodity products.

Clearfield generates revenue through the sale of its fiber management, fiber protection, and fiber delivery products to broadband service providers. Substantially all revenue is recognized at the point in time when the customer obtains control of the products upon shipment. The company's sales channels include direct to customer and through distribution partners, with products sold by its sales employees and independent sales representatives. The company's customer base includes direct customers, OEMs, and distributors, and purchases are made through purchase orders with no long-term agreements obligating future purchases.

Clearfield's product portfolio includes the FieldSmart series of panels, cabinets, wall boxes and enclosures that provide a consistent design from the inside plant through the outside plant to the access network. The Clearview Cassette is the core building block of every product within the FieldSmart fiber management system. WaveSmart optical components are integrated for signal coupling, splitting, termination, multiplexing, demultiplexing and attenuation. Active Cabinets using FiberFlex product lines feature either fully integrated cabinets with active electronics configurations or universal cabinets. CraftSmart FiberFirst pedestals are designed to support fiber-only networks. Access Terminals include the YOURx access terminals and the TetherSmart Multi-Fiber Terminal. The FieldShield platform is a patented fiber pathway and protection method using ruggedized microduct. Fiber Assemblies are manufactured with industry-standard or customer-specified configurations. The ClearPass Connector Cleaning Dust Cap features built-in cleaning functionality with 94.5% effectiveness ¹.

For the fiscal year ended September 30, 2025, sales to the Community Broadband market increased 1%, or $767,000 ², from $66,005,000 ³ in fiscal year 2024 to $66,772,000 ⁴ in fiscal year 2025. Sales to the MSO/Cable TV market increased 38%, or $8,864,000 ⁵, from $23,487,000 ⁶ in fiscal year 2024 to $32,351,000 ⁷ in fiscal year 2025. Sales to the Large Regional market increased 58% to $33,706,000 ⁸ from $21,293,000 ⁹ in fiscal year 2024. Sales to National Carriers increased 11%, or $976,000 ¹⁰, from $8,767,000 ¹¹ in fiscal year 2024 to $9,743,000 ¹² in fiscal year 2025. International sales represented 3% ¹³ of net sales for the year ended September 30, 2025.

On November 11, 2025, the Company completed the sale of its Nestor Cables business for $1 ¹⁴ in cash and the contribution from the Company to Clearfield Finland Oy of $5,785,000 ¹⁵ of inter-company receivables. During the year ended September 30, 2025, the Company repurchased 550,766 ¹⁶ shares for approximately $16,530,000 ¹⁷. As of September 30, 2025, the Company had repurchased an aggregate of 2,280,546 ¹⁸ shares for approximately $56,607,000 ¹⁹ leaving approximately $8,393,000 ²⁰ available within its $65,000,000 ²¹ stock repurchase program. On November 20, 2025, the board of directors increased the share repurchase program from $65,000,000 ²² to $85,000,000 ²³. The Company recorded an impairment charge of $2,022,000 ²⁴ related to the impairment of goodwill and $13,078,000 ²⁵ related to the impairment of the long-lived assets of the Nestor Cables business. The total impairment charge, inclusive of estimated transaction costs, was $16,589,000 ²⁶.

Net sales for fiscal year 2025 increased 20%, or $24,566,000 ²⁷, to $150,134,000 ²⁸ from net sales of $125,568,000 ²⁹ in fiscal year 2024. Gross profit increased 96%, or $24,690,000 ³⁰, from $25,847,000 ³¹ for fiscal year 2024 to $50,537,000 ³² for fiscal year 2025. Gross profit percent was 33.7% ³³ in fiscal year 2025 compared to 20.6% ³⁴ for fiscal year 2024. Income from continuing operations for fiscal year 2025 was $2,118,000 ³⁵ compared to a loss from continuing operations of $19,234,000 ³⁶ for fiscal year 2024. Net income from continuing operations for fiscal year 2025 was $6,310,000 ³⁷ or $0.45 ³⁸ per basic and diluted share compared to net loss of $8,514,000 ³⁹ or $(0.58) ⁴⁰ per basic and diluted share for fiscal year 2024. Net loss from discontinued operations for fiscal year 2025 was $3,947,000 ⁴¹ or $(1.03) ⁴² per basic and diluted share. Net loss from impairment of discontinued operations for fiscal year 2025 was $10,413,000 ⁴³.

Clearfield's growth strategy is centered on enabling rapid and cost-effective fiber-fed deployment for broadband service providers. The company's products allow customers to connect twice as many homes in their Fiber to the Home (FTTH) builds by using fewer resources in less time. The company is focused on removing barriers to wireless 4G/5G deployments in backhaul from the tower to the cloud and fiber fronthaul from the tower to the antenna at the cell site. The company anticipates that demand for voice, video, and other data services delivered over high-speed connections will continue to increase, driving the need for enhanced high-speed bandwidth using fiber connections. Government programs like the Connect America Fund (CAF), the Rural Digital Opportunity Fund (RDOF), and the Broadband Equity, Access and Deployment (BEAD) program may subsidize or encourage spending by customers on capital spending projects that utilize Clearfield's products.

Clearfield's international expansion is focused on increasing sales in international markets, primarily Canada, the Caribbean, Central/South America and Mexico. International sales represented 3% ⁴⁴ of net sales for the year ended September 30, 2025. The company believes future growth depends in part upon its ability to manage international operations and increase sales in these markets, which are subject to risks including fluctuations in currency exchange rates, tariffs, import restrictions, and other trade barriers.

The improvement in gross margin in fiscal year 2025 was due to increased volumes resulting in improved absorption of manufacturing overhead, as well as lower excess inventory charges of $10,074,000 ⁴⁵ in fiscal year 2025, reflecting improved inventory utilization and beneficial recoveries from inventory previously written down. The company expects to operate at gross profit percentage levels at or below the 20.6% ⁴⁶ level for several quarters until revenue levels increase, which is expected to bring improved margins.

Clearfield's manufacturing operations are conducted at its plants in Brooklyn Park, Minnesota and Tijuana, Mexico, with manufacturing support from a network of domestic and global manufacturing partners. The Mexico facility operates under a Maquiladora arrangement, which allows duty-free import of certain items from the United States into Mexico provided they are exported within a stipulated time frame. The company has taken steps over the last several years to improve supply chain operations, enhance resiliency, and mitigate risk of disruption. As of September 30, 2025, Clearfield had approximately 243 ⁴⁷ full-time employees in the United States, excluding discontinued operations, and had contracted for approximately 375 ⁴⁸ personnel in the Mexico facility through a Maquiladora agreement.

Research and development costs amounted to $2,422,000 ⁴⁹ for the year ended September 30, 2025. The Company used $4,743,000 ⁵⁰ in cash to purchase fixed and intangible assets in fiscal year 2025. In fiscal year 2026, the Company intends to continue investing in necessary information technology, manufacturing equipment, and facility needs. The Company has a $40,000,000 ⁵¹ revolving line of credit that had no outstanding borrowing as of September 30, 2025. The Company's board of directors increased the share repurchase program from $65,000,000 ⁵² to $85,000,000 ⁵³ on November 20, 2025. The Company has never paid cash dividends on its common stock and does not intend to pay cash dividends in the foreseeable future.

The company faces headwinds from changes in trade policy, including the imposition of new, increased, or retaliatory tariffs by the U.S. or foreign governments, which may increase the cost of raw materials and components. While changes in trade policy and tariffs introduced in 2025 did not materially adversely impact fiscal year 2025 results, the extent to which new tariffs may adversely affect the business is uncertain. Inflationary price pressures and uncertain availability of components, raw materials, labor and logistics could negatively impact profitability. The company is also subject to risks associated with expanding sales outside of the United States, including fluctuations in currency exchange rates, tariffs, import restrictions, and other trade barriers.

The company's business is dependent upon capital spending by broadband service providers, which is cyclical and can be delayed, reduced or cancelled on short notice. The timing and amount of capital spending may be affected by general economic conditions, customer-specific financial conditions, access to government funding programs, changes in consumer spending, and other factors. Changes in U.S. government funding programs, such as the BEAD program, may cause customers to delay, reduce, or accelerate purchases, leading to unpredictable purchase cycles. The company also faces risks from intense competition in the telecommunications equipment industry, which may result in price reductions, lower gross profit margins, and loss of market share.

The company depends on single- or limited-source suppliers for critical components including injected molded parts, various cabling, optical components, and connectors. If any supplier is unable to ship critical components, the company may be unable to manufacture and ship products, resulting in interruptions, increased costs, delays, lost sales, and quality control problems. For fiscal year 2025, two distributor customers, Customer A and Customer B, accounted for approximately 18% ⁵⁴ and 13% ⁵⁵ of net sales, respectively, and the loss of either could have a material adverse effect. The company's business is dependent upon capital spending by broadband service providers, which is cyclical and can be delayed, reduced or cancelled on short notice. The company recorded a total impairment charge of $16,589,000 ⁵⁶ related to the Nestor Cables business, including $2,022,000 ⁵⁷ of goodwill impairment and $13,078,000 ⁵⁸ of long-lived asset impairment, highlighting risks associated with acquisitions. Changes in trade policy, including new or increased tariffs, may increase the cost of raw materials and components, and while such changes did not materially impact fiscal year 2025 results, the extent of future impact is uncertain and difficult to predict.

Management's message emphasizes the company's mission to enable the lifestyle that better broadband provides through innovative product design that accelerates fiber-based deployment. The strategic priorities emphasized include serving the unique requirements of Community Broadband customers, Multiple System Operators, Large Regional Service Providers, National Carriers, and International customers. Management highlights that the company's products offer broadband service providers a competitive advantage at a time when demand for fiber-based services is increasing to historic levels as providers focus on passing and connecting more homes. The company is driven to help broadband service providers reduce the cost and increase the speed of fiber deployment. Management notes that the company expects to operate at gross profit percentage levels at or below the 20.6% ⁵⁹ level for several quarters until revenue levels increase, which is expected to bring improved margins. The company intends to utilize its available cash and assets primarily for continued organic growth, potential future strategic transactions, and execution of the share repurchase program.