CLEARFIELD, INC.

ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

PART I

Cautionary Note Regarding Forward-Looking Statements

Clearfield, Inc., together with its subsidiaries, is referred to in this report as “we,” “us,” “our,” and the “Company.” We make statements from time to time regarding our business and prospects, such as projections of future performance, statements of management’s plans and objectives, forecasts of market trends, and other matters that are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements containing the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimates,” “projects,” “believes,” “expects,” “anticipates,” “intends,” “target,” “goal,” “outlook,” “may,” “will,” “plans,” “objective,” “aims,” “should,” “could” or similar expressions identify forward-looking statements. Forward-looking statements may appear in documents, reports, filings with the Securities and Exchange Commission (SEC), news releases, written or oral presentations made by our authorized officers or other representatives. For such statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Our future results, including results expressed in or implied by forward-looking statements, involve a number of risks and uncertainties. Forward-looking statements are not guarantees of future actions, outcomes, results, or performance. Any forward-looking statement made by us or on our behalf speaks only as of the date on which such statement is made. We do not undertake any obligation to update or keep current any forward-looking statement to reflect events or circumstances arising after the date of such statement, except as required by law.

In addition to the factors identified or described by us from time to time in filings with the SEC, there are many important factors that could cause our future results to differ materially from historical results or trends, results anticipated or planned by us, or the results expressed in or implied by any forward-looking statements. These important factors are described below under Part I, Item 1A. “Risk Factors.”

ITEM 1.            BUSINESS

Company Overview

We design, manufacture, and distribute fiber protection, fiber management, and fiber delivery solutions to enable rapid and cost-effective fiber-fed deployment throughout the broadband service provider space primarily across North America. Our “fiber to anywhere” platform serves the unique requirements of 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).

Our mission is to enable the lifestyle that better broadband provides through innovative product design that accelerates fiber-based deployment, making communications simpler and more affordable for people everywhere. We believe our products offer broadband service providers a competitive advantage at a crucial time when demand for fiber-based services is increasing to historic levels as providers focus on passing and connecting more homes. We are driven to help broadband service providers reduce the cost - and increase the speed of fiber deployment.

Segment Information

We are engaged in global operations. Our operations currently comprise 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.

Clearfield is focused on providing fiber management, fiber protection, and fiber delivery products that accelerate the turn-up of fiber-based networks in residential homes, businesses, and network infrastructure in the wireline and wireless access network. We offer a broad portfolio of fiber products that allow service providers to build fiber networks faster, meet service delivery demands, and align build costs with take rates.

Clearfield’s products allow its customers to connect twice as many homes in their Fiber to the Home (“FTTH”) builds by using fewer resources in less time. Our products speed up the time to revenue for our service provider customers in Multiple Dwelling Units (“MDUs”) and Multiple Tenant Units (“MTUs”) by reducing the amount of labor and materials needed to provide gigabit service. Our products help make business services more profitable through faster building access, easier reconfiguration, and quicker services turn-up. Finally, Clearfield is removing barriers to wireless 4G/5G deployments in backhaul from the tower to the cloud and fiber fronthaul from the tower to the antenna at the cell site through better fiber management, test access, and fiber protection.

Substantially all of the final build and assembly is completed at Clearfield’s plants in Brooklyn Park, Minnesota and Tijuana, Mexico, with manufacturing support from a network of domestic and global manufacturing partners. Clearfield specializes in producing these products on both a quick-turn and scheduled delivery basis.

Products

Our product strategy involves analyzing the broadband communications industry environment and technology, with a particular focus on simplifying our customers’ business, and developing innovative, high-quality products utilizing modular designs wherever possible. We are committed to make fiber deployment success easier by providing craft-friendly, pre-connectorized plug-and-play fiber assemblies, fiber management and pathway products to speed deployments and provide the lowest total cost of ownership for our customer’s networks. With the innovation of forward-thinking products, a 100 percent plug-and-play platform and creative deployment methods, we are fulfilling our mission of enabling the lifestyle of better broadband and beyond. 

Throughout the fiber deployment journey from the Inside Plant (ISP) to the Outside Plant (OSP), into the Access Network and all the way to the fiber connection at the home, our labor lite solutions solve service provider fiber network design and installation challenges. Our methodologies provide easy to engineer and easy to install solutions that take the mystery out of deploying fiber networks.  

Leveraging factory terminated single-fiber and multi-fiber plug-and-play connectors, homes passed, and homes connected metrics can be greatly increased. The speed to turn up the entire network is maximized, while helping ensure superior optical performance achieved by using low-loss connectors, terminated in the factory.  

Whether inside a cabinet or at the home, innovative slack storage spools and deploy reels reduce the dependence on making exact cable measurements. This enables the deployment of double-ended, standard cable lengths rather than relying on highly engineered, built-to-order cable assemblies or multiple field splicing events.  

Product development for the Company’s product line program has mainly been conducted internally. We believe that the communication industry environment is constantly evolving, and our success depends on our ability to anticipate and respond to these changes. Research and development are reflected in Selling, General, & Administrative expenses. 

Some of our products currently offered are described below. 

FieldSmart® is a series of panels, cabinets, wall boxes and other enclosures that provide a consistent design from the inside plant of the telco’s “central office” or cable television’s head-end, all the way through the outside plant to the access network to within the home or business. The Clearview® Cassette is the core building block of every product within the FieldSmart fiber management system. Clearview configuration options support tool-less installation, in-cassette buffer tube/ribbon slack storage as well as front access-only designs. The small footprint reduces real estate costs and improves density without compromising critical design elements of access, bend-radius protection, physical fiber protection and route path diversity. All types of fiber cable construction can be integrated within the cassette to support all patch only, patch and splice (in-cassette splicing), passive optical component hardware and plug-and-play scenarios.

WaveSmart® optical components are integrated for signal coupling, splitting, termination, multiplexing, demultiplexing and attenuation for a seamless integration within our fiber management platform. The products are built and tested for harsh environments to meet the strictest industry standards ensuring customers trouble-free performance in extreme outside plant conditions. 

Active Cabinets using our FiberFlex™ product lines feature either fully integrated, fully engineered cabinets equipped with specific active electronics configurations or universal cabinets ready for mounting other electronic equipment. This product line features Clearfield’s fiber management solutions housing the Clearview Cassette. The FieldSmart FiberFlex product line of outdoor active cabinets feature multiple sizes for universal configurations of electronic equipment.  

CraftSmart® FiberFirst™ pedestals are designed to support fiber-only networks. Purpose-built to support a wide variety of service network designs, the pedestal eliminates the need for multiple, specialty pedestals and can support a passive optical network (PON) option, a splice-only option, or an access terminal option. The FiberFirst Pedestal Access Terminal options provide a cable management and mounting bracket kit that supports the deployment of all Clearfield access terminals. 

Access Terminals from Clearfield are designed to ensure every service provider has the freedom of choice to match drop cable configuration and technology with the needs of their environment and first-cost priorities. The YOURx® access terminals also offer flexibility with cable mid-span and internal splicing options. The TetherSmart Multi-Fiber Terminal is Clearfield’s smallest carrier-grade, plug-and-play access terminal. Its small size makes it an attractive choice to deliver fiber to cell towers and inside cellular concealment poles. Clearfield access terminals can be deployed in a variety of locations including pedestals, vault, flowerpot, pole-mount, smart-pole, or strand mounted options.

FieldShield® platform is a patented fiber pathway and protection method aimed at reducing the cost of broadband deployment. Our FieldShield fiber drop cable assemblies are designed to connect the fiber access point (hand hole, pedestal or aerial) to the optical network terminal (ONT), on the home, in a fiber to the home (FTTH) network. FieldShield starts with a ruggedized microduct designed to support all aerial, direct bury, and inside plant “last mile” needs. FieldShield microduct is strong enough to be placed using traditional methods of boring and plowing, leveraging existing conduit placement equipment, as well as newer, less disruptive technologies such as micro trenching or saw cutting. 

Fiber Assemblies - Clearfield manufactures high quality fiber assemblies with an industry-standard or customer-specified configuration.  In addition, Clearfield’s engineering services team works alongside the engineering design departments of our original equipment manufacturer (“OEM”) customers to design and manufacture custom solutions for both in-the-box as well as network connectivity assemblies specific to that customer’s product line. 

ClearPass™ Connector Cleaning Dust Cap is a game-changing innovation that simplifies fiber connector cleaning while enhancing network performance. With built-in cleaning functionality and 94.5% effectiveness, the ClearPass Dust Cap ensures faster installation, fewer errors and a more reliable broadband experience.

Markets and Customers 

The Company’s products are sold across broadband service providers, which we categorize as National Carrier (wireline/wireless national telco carriers (Tier 1)), Community Broadband (Tier 2 and 3 telco carriers, utilities, municipalities, and alternative carriers), Large Regional Service Providers (ILEC operating a multi-state network with more than 500,000 subscribers), Multiple System Operators (cable television), and International (primarily Canada, the Caribbean, Central/South America and Mexico), and Legacy build-to-print copper and fiber assemblies (primarily contract manufacturing).

The Company’s products are sold direct to customers through the Company’s sales force as well as through authorized distributors. In addition, the Company uses manufacturing sales representatives and sales agents for customer and geography specific needs. 

The Company considers the primary markets for its products to be as follows.

Commercial Fiber Broadband Connectivity

FTTP 

Fiber to the Premise (also called Fiber to the Home) is a means of delivering the highest possible level of bandwidth directly to the user. The Company’s sales and marketing efforts have principally been focused on the U.S., with additional efforts in Canada and Central/Latin America.

FTTB 

Fiber to the Business is principally for Multiple System Operators (cable television) and wireline/wireless national telco carriers (Tier 1) to penetrate the business marketplace. 

Broadband Service Provider Data Center Infrastructure

DC Interconnect/Campus Network

Fiber entry pathways supporting carrier access, campus links, and data center interconnection.

Meet-Me Room

Cross-connect environment where carriers, ISPs and cloud providers interconnect securely.

Main Distribution Area

Core switching and routing layer distributing connectivity between MMR and data halls.

White Space

Primary data hall for customer racks, servers and storage infrastructure.

Wireless Deployments

Metro Core

Aggregates traffic to and from national/international networks.

Backhaul

Connects Core to RAN; high-capacity data transport.

Indoor/Outdoor DAS

Connects centralized baseband units (BBUs) to remote radio heads (RRHs).

Small Cells

Links centralized or virtualized RAN hubs to small cell radios on poles and rooftops.

FTT-Cell site 

Fiber to the cell site is the trend in which wireless service providers enhance their coverage for bandwidth. Currently, the majority of these cell sites are served by fiber backhaul and fronthaul. 

Competition

The market for the fiber management, fiber protection, and fiber delivery products is highly competitive. Competition is largely based on any one or a combination of the following factors: functionality and features, price, product quality, product availability and lead times, cost and ease of installation, service and support, long-term returns to customers, scalability, product innovation, and manufacturing capability.

Competitors to the FieldSmart product lines include, but are not limited to, 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. In various geographic or vertical markets, there are also several smaller companies with which we compete. Clearfield believes that 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.

Many of our competitors have greater resources than we do, including greater sales, product development, marketing, financial, technical, or engineering resources. As a result, our competitors may be able to procure necessary components and labor at much lower prices than we can or may offer competitive products at below market prices, which could prevent us from competing effectively.

Sources of Materials and Supply Chain

Numerous purchased materials and components and sources of labor are used in the manufacturing of the Company’s products. Most of these are available from multiple suppliers. However, some components and third-party contract manufacturing services are purchased from a single or limited number of suppliers. The loss of access to some components and third-party contract manufacturing services could have an adverse effect on our ability to deliver products on a timely basis and on our financial performance.

Clearfield’s Mexico facility operates under a Maquiladora arrangement. Under this arrangement, we contract with a company to provide certain personnel and other services at the production facilities in Mexico that complete final build and assembly of a significant portion of Clearfield’s products. Maquiladora status also allows us to import certain items from the United States into Mexico duty-free, provided that such items, after processing, are exported from Mexico within a stipulated time frame.

Our supply chain management team oversees our suppliers to source and procure materials, manufacture and deliver our products to customers from the site of manufacture, whether at Clearfield’s facilities in Brooklyn Park, Minnesota or the facility in Tijuana, Mexico that operates as a Maquiladora. Our supply chain management team consists of planning, sourcing, and logistics personnel. We tightly integrate our supply chain management, our product innovation activities, and our manufacturing operations. Our supply chain team also manages the critical logistics and transport services for our materials, components and finished products in and out of Mexico to ensure sufficient materials to timely produce products and to ensure timely export of products in order to qualify as duty-free.

Over the last several years, we have taken steps to improve our supply chain operations, enhance resiliency, and mitigate risk of disruption.

Major Customers and Financial Information about Geographic Areas

For the fiscal year ended September 30, 2025, the Company had two customers, Customer A and Customer B, which accounted for approximately 18% and 13% of net sales, respectively. These customers are distributors. For the fiscal year ended September 30, 2024, Customer A and Customer B accounted for approximately 20% and 15% of net sales, respectively. For the fiscal year ended September 30, 2023, Customer A and Customer B accounted for approximately 19% and 10% of net sales, respectively. These major customers, like our other customers, purchase our products from time to time through purchase orders and we do not have any agreements that obligate these major customers to purchase products in the future from us.

As of September 30, 2025, the Company had two customers, Customer B and Customer A, which accounted for approximately 17% and 11% of accounts receivable, respectively. As of September 30, 2024, Customer B accounted for 16% of accounts receivable.

The Company allocates sales from external customers to geographic areas based on the location to which the product is transported. Sales outside the United States are principally to customers in Canada as well as countries in the Caribbean, Central/South America, and Mexico.

Patents and Trademarks

As of September 30, 2025, Clearfield has 63 patents granted and multiple patent applications pending both inside and outside the United States. These patents begin to expire in 2028. We have also developed and are using multiple trademarks and logos to market and promote our products.         

Seasonality

We are affected by the seasonal trends in the industries we serve. We typically experience sequentially lower sales in our first and second fiscal year quarters, primarily due to customer budget cycles, deployment schedules of outdoor products, some customer geographical concentrations, as well as standard vacation and holiday calendars. Sales have usually reached a seasonal peak in our third and fourth fiscal quarters.

Human Capital Resources

As of September 30, 2025, Clearfield had approximately 243 full-time employees, all of which were based in the United States, excluding employees associated with the discontinued operations of the Nestor Cables business. We also employ seasonal, part-time employees and independent contractors. None of our employees are covered by any collective bargaining agreements.

Our employees include approximately 160 office personnel and 83 manufacturing personnel as of September 30, 2025. The substantial majority of these employees work out of our Brooklyn Park, Minnesota headquarters. The Company’s office personnel are comprised of sales, marketing, engineering, and administrative personnel. The manufacturing personnel include both individuals directly involved in the manufacturing of our products, as well as warehouse and operations supervisory personnel. Certain positions within our organization require industry specific technical knowledge. Our manufacturing personnel currently work in one shift as needed at our Brooklyn Park facility.

We invest significant management attention, time, and resources to attract, engage, develop, and retain our employees, particularly for positions that require technical knowledge or expertise. For this reason, we offer rigorous training programs for manufacturing and other technical employees to allow them to develop the necessary skillset for their roles and promote career development. To date, our training programs and overall collaborative working environment have allowed us to be successful in attracting and retaining qualified technical personnel for these positions.

As of September 30, 2025, we had contracted for approximately 375 personnel in the Mexico facility through a Maquiladora agreement. The manufacturing personnel contracted through the Maquiladora are covered by a customary local collective bargaining agreement with the company that provides the personnel and other services to the Mexico facility.

In our manufacturing operations, we monitor key metrics and goals based on quality, productivity, and ability to meet shipping promise dates. As a measure of quality, we focus on First Pass Yield (“FPY”), which is calculated as the percentage of product that meets all performance criteria upon first completion from our manufacturing floor and requires no rework. The Company’s target for FPY ranges from 92-99%, depending on key manufacturing steps and the product line being produced. We also measure our On-Time Delivery (“OTD”) which is determined by the Company’s ability to ship product on the date necessary, accounting for standard shipping times, in order to meet the agreed upon delivery date with our customers. The Company’s OTD target is a minimum of 95%. This metric is important as the Company has taken a strategic approach to be able to offer low industry lead times for our customers. The Company incentivizes certain of its personnel based on these metrics.

Corporate Information

Clearfield, Inc. was incorporated under the laws of Minnesota in 1979. Our corporate headquarters are located at 7050 Winnetka Avenue North, Suite 100, Brooklyn Park, Minnesota, 55428, and our corporate website is www.seeclearfield.com. We do not incorporate the information on or accessible through our website into this annual report on Form 10-K, and you should not consider any information on, or that can be accessed through, our website as part of this annual report on Form 10-K.

Our annual report on Form 10-K, our quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available free of charge at our website as soon as reasonably practicable after we file such material with, or furnish it to, the SEC. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers, like Clearfield, that file electronically with the SEC and that internet site is http://www.sec.gov.

We use various trademarks and trade names in our business, including without limitation our corporate name and logo. Solely for convenience, the trademarks and trade names in this annual report may be referred to without the ® and ™ symbols, but such references should not be construed as any indicator that we will not assert, to the fullest extent under applicable law, our rights thereto.

ITEM 1A.         RISK FACTORS

Risks Relating to Our Operations

We depend on the availability of sufficient supply of certain materials. Global disruptions in the supply chain for these materials could prevent us from meeting customer demand for our products.

We purchase critical components for our products, including injected molded parts, various cabling, optical components, components for active cabinets, and connectors from third parties, some of which are single- or limited-source suppliers. We depend on the ability of these third-party suppliers to secure a sufficient supply of raw materials and maintain sufficient manufacturing and shipping capacity. The global supply chain for raw materials critical to our products has in the past, and may again in the future, suffer shortages, shipping delays and shipping shortages. This may lead some manufacturers who depend on these raw materials to experience shortages, delivery delays and price increases for both the raw materials and shipping, with the corresponding consequence that these manufacturers may be delayed in delivering products to us or may charge higher prices for these products, or there may be increased shipping costs associated with the products. Some manufacturers may also allocate short supply of products among Clearfield and their other customers.

Increased demand for the Company’s products from its customers may put pressure on the Company’s supply chain, particularly during periods of disruption in the global supply chain and may lead to increases in costs or delays in obtaining the materials and components for our products from our suppliers. The Company’s ability to recognize revenue in the future for customer orders will depend on our ability to manufacture and deliver products to the customers and fulfill other contractual obligations. Our ability to meet future customer demand for our products will in turn depend upon our suppliers receiving timely and adequate supplies of raw materials to be able to produce the critical materials and components they supply to us. Although we place a high value on long-term relationships with our suppliers, generally we do not have long-term supply contracts but instead conduct business on an order-by-order basis. Therefore, we also compete with other companies for the production capacity of manufacturers of the materials and components we need for our products. We also are exposed to potentially increasing costs associated with the materials and components we purchase from suppliers or increased costs associated with shipping generally. We may attempt to mitigate the effect of increases in our cost of goods sold through sourcing or stocking initiatives and by selectively increasing the prices of our products. However, we may be unable to fully pass on these costs to our customers. Long lead times for certain components and changes in demand for our products may impact our ability to accurately forecast our production requirements. As a result, certain component inventory purchases may become excess or obsolete, which could have an adverse effect on our financial condition and results of operations.

The reduction of available production capacity among our suppliers, their failures to meet production deadlines or increases to us in their manufacturing or shipping costs may impact our ability to deliver quality products to our customers on a timely basis, make our products less competitive due to extended delivery times or increased price, negatively impact our customer or distributor relationships, and result in lower net sales and profit. Any delays or inabilities in meeting customer required shipping dates may also expose us to order cancellations in our sales order backlog by customers, which could have an adverse effect on our results of operations.

We rely on single-source suppliers, which could cause delays, increases in costs, or prevent us from completing customer orders, all of which could materially harm our business.

We assemble our products using materials and components supplied by various subcontractors and suppliers. We purchase critical components for our products, including injected molded parts, various cabling, optical components, and connectors from third parties, some of whom are single- or limited-source suppliers. If any of our suppliers are unable to ship critical components, we may be unable to manufacture and ship products to our distributors or customers. If the price of these components increases for any reason, or if these suppliers are unable or unwilling to deliver, we may have to find another source, which could result in interruptions, increased costs, delays, lost sales, and quality control problems.

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.

The termination or interruption of any of these relationships, or the failure of these manufacturers or suppliers to supply components or raw materials to us on a timely basis or in sufficient quantities, likely would cause us to be unable to meet orders for our products and harm our reputation and our business. Identifying and qualifying alternative suppliers would take time, involve significant additional costs, and may delay the production of our products. If we fail to forecast our manufacturing requirements accurately or fail to properly manage our inventory with our contract manufacturers, we could incur additional costs, experience manufacturing delays, and lose sales. Further, if we obtain a new supplier or assemble our product using an alternative source of supply, we may need to conduct additional testing of our products to ensure they meet our quality and performance standards. Any delays in delivery of our product to distributors or customers could be extended, and our costs associated with the change in product manufacturing could increase.

The failure of our third-party manufacturers to manufacture the products for us or the failure of our suppliers of components and raw materials to supply us these items consistent with our requirements as to quality, quantity and timeliness could materially harm our business by causing delays, lost sales, increases in costs and lower gross profit margins.

A number of products manufactured by the Company are produced outside the U.S., including in our Mexico facility. The Company’s manufacturing facility in Mexico is authorized to operate as a Maquiladora by the Ministry of Economy of Mexico. Maquiladora status allows the Company to import certain items from the U.S. into Mexico duty-free, provided that such items, after processing, are exported from Mexico within a stipulated time frame. Maquiladora status, which is renewed periodically, is subject to various restrictions and requirements, including compliance with the terms of the Maquiladora program and other local regulations. Failure to comply with these regulations or other disruptions within the program could adversely affect the Company’s financial position, results of operations, and cash flows.

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.

Inflationary price pressures and uncertain availability of components, raw materials, labor and logistics used by us, and our suppliers could negatively impact our profitability.

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.

A significant percentage of our sales in the last three fiscal years have been made to a small number of customers, and the loss of these major customers could adversely affect us.

Our customer base includes direct customers, OEMs, and distributors. For fiscal year 2025, the Company had two customers, Customer A and Customer B, which accounted for approximately 18% and 13% of net sales, respectively. Both of these customers are distributors.

These customers, like our other customers, purchase our products from time to time through purchase orders. We do not have any agreements that obligate our customers to purchase products in the future from us. Our agreements with our distributor customers do not prohibit them from purchasing or offering products or services that compete with ours.

We believe that the loss of our major distributor customers would likely result in purchases being re-directed through other sales channels, for example our other distributors, independent sales representatives, or through direct sales by the Company to customers. However, there can be no assurance that the loss of a distributor customer would not have an adverse effect on our sales or gross margins in this event.

The loss of any one or more of our key customers, the substantial reduction, delay, or cancellation of orders received from any of our customers in our sales backlog or our inability to collect the accounts receivable from these customers, could have a material adverse effect on our business, financial position and results of operations.

Further consolidation among our customers may result in the loss of some customers and may reduce sales during the pendency of business combinations and related integration activities.

We believe consolidation among our customers in the future will continue in order for them to increase market share and achieve greater economies of scale. In connection with this merger and acquisition activity, our customers may postpone or cancel orders for our product based on revised plans for technology or network expansion pending consolidation activity. Customers integrating large-scale mergers or acquisitions may also reduce their purchases of equipment during the integration period or postpone or cancel orders.

The impact of significant mergers and acquisitions among our customers on our business is likely to be unclear until sometime after such transactions are completed, which may take a year or more. After a consolidation occurs, a customer may choose to reduce the number of vendors from which it purchases equipment and may choose one of our competitors as its preferred vendor. There can be no assurance that we will continue to supply equipment to the surviving company after a business combination is completed.

Our business is dependent on interdependent management information systems.

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 may be subject to risks associated with acquisitions, and the risks could adversely affect future operating results.

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:

These risks associated with acquisition, integration of acquired businesses and management of our expanded operations may have a material adverse effect on our sales, financial condition, and results of operations.

Adverse global economic conditions and geopolitical issues could have a negative effect on our business, and results of operations and financial condition.

Our business, including global supply chain, is affected by global economic conditions and geopolitical issues. Geopolitical issues, such as the Russian invasion of Ukraine, the Israel-Hamas war, the U.S.-China rivalry, rising trade protectionism, economic sanctions and other global conflicts, have 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.

Product defects or the failure of our products to meet specifications or domestic content requirements could cause us to lose customers and sales or to incur unexpected expenses.

If our products do not meet our customers’ performance requirements, our customer relationships may suffer. Also, our products may contain defects or fail to meet product specifications. Any failure or poor performance of our products could result in:

In addition, certain of our products will be required to meet Build America, Buy America (BABA) Act domestic content requirements to enable certain customers to qualify for grant funding under the Broadband Equity, Access, and Deployment (BEAD) program. Any failure of such products to meet BABA domestic content requirements would result in those products being ineligible for purchase and use by certain customers under the BEAD program, and could result in lost sales, lost business opportunity, breach of warranty claims, and damage to our reputation and customer relationships.

Our products are often critical to the performance of telecommunications systems. We offer customers limited warranty provisions. If the limitations on the product warranties are unenforceable in a particular jurisdiction or if we are exposed to product liability claims that are not covered by insurance, a claim could harm our business.

We are dependent on key personnel.

Our failure to attract, develop and retain skilled personnel could hinder the management and growth of our business, our research and development, our sales and marketing efforts and our manufacturing capabilities. Our future success depends to a significant degree upon the continued services of key senior management personnel, including Cheryl Beranek, our Chief Executive Officer, and John P. Hill, our Chief Operating Officer. We have employment agreements with Ms. Beranek and Mr. Hill that provide that if we terminate the employment of either executive without cause or if the executive terminates her or his employment for good reason, we would be required to make specified payments to them as described in their employment agreements. We have key person life insurance on Ms. Beranek and Mr. Hill. We also have employment agreements with other key management. Further, our future success also depends on our continuing ability to attract, develop, retain, and motivate highly qualified managerial, technical and sales personnel. Our inability to attract, develop and retain qualified personnel could have a significant negative effect and thereby materially harm our business and financial condition.

Cyber-security incidents, including ransomware, data breaches or computer viruses, could disrupt our business operations, damage our reputation, result in increased expense and potentially lead to legal proceedings.

Cybersecurity threats continue to expand and evolve, making it difficult to detect and prevent such threats from impacting the Company. While we monitor our networks and continue to enhance our network security measures, cyber-attacks have increased in frequency and sophistication, and our efforts may not be adequate to prevent all cybersecurity incidents. Cybersecurity threats to the Company could lead to unauthorized access to the Company’s information technology systems, customers, suppliers, and third-party service providers. Cybersecurity incidents could potentially result in the disruption of our business operations and/or the theft, destruction, publication, or corruption of critical data and confidential or proprietary information. Cybersecurity events could also result in the Company being unable to access critical data in a timely manner, or at all. Cybersecurity incidents could also result from unauthorized parties gaining access to our systems or information through fraudulent or other means of deceiving our employees, suppliers, customers, or third-party service providers. Despite the Company’s implementation of preventative security measures and controls to prevent, detect, and mitigate these threats, our infrastructure may still be susceptible to disruptions from cybersecurity incidents including ransomware attacks, security breaches, computer viruses, outages, and systems failures, any of which could include the inability to access critical data, reputational damage, loss of our intellectual property, release of highly sensitive confidential information, litigation with third parties and/or governmental investigations and fines, which could have a material adverse effect on our financial condition and results of operations. Additionally, as cybersecurity threats continue to evolve, we may be required to devote additional resources to continue to enhance our information security measures and controls to mitigate these new and emerging threats.

Natural disasters, extreme weather conditions or other catastrophic events could negatively affect our business, financial condition, and 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 other 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.

Risks Relating to Our Markets and Industry

To compete effectively, we must continually improve existing products and introduce new products that achieve market acceptance.

The telecommunications equipment industry is characterized by rapid technological changes, evolving industry standards, changing market conditions and frequent new product and service introductions and enhancements. The introduction of products using new technologies, or the adoption of new industry standards can make our existing products, or products under development, obsolete or unmarketable. In order to remain competitive and increase sales, we will need to anticipate and adapt to these rapidly changing technologies, enhance our existing products and introduce new products to address the changing demands of our customers.

Many of our competitors have greater engineering and product development resources than we have. Although we expect to continue to invest resources in product development activities, our efforts to achieve and maintain profitability will require us to be selective and focused with our research and development expenditures. In addition, sales to certain broadband service providers may require third-party independent laboratory testing in order to obtain industry certifications to be able to sell to those customers. Further, our existing and development-stage products may become obsolete if our competitors introduce newer or more appealing technologies. If these technologies are patented or proprietary to our competitors, we may not be able to access these technologies.

If we fail to anticipate or respond in a cost-effective and timely manner to technological developments, changes in industry standards or customer requirements, or if we experience any significant delays in product development or introduction, our business, operating results, and financial condition could be affected adversely.

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.

If the telecommunications market does not continue to expand, our business may not grow as fast as we expect, which could adversely impact our business, financial condition, and operating results.

Our future success as a provider of fiber management, fiber protection and fiber delivery products depends on the continued growth of demand for fiber broadband and, in particular, the continued expansion in the United States and in our other markets of information networks, particularly those directly or indirectly dependent upon a fiber optic infrastructure. As part of that growth, we anticipate that demand for voice, video, and other data services delivered over high-speed connections (both wired and wireless) will continue to increase. If this demand does not increase, the need for enhanced high-speed bandwidth using fiber connections may not increase. Currently, demand for high-speed broadband capabilities and access is increasing, but future growth may be limited by several factors, including, among others: (1) relative strength or weakness of the global economy or certain countries or regions, (2) an uncertain regulatory environment, (3) uncertainty regarding long-term sustainable business models as multiple industries, such as the cable, traditional telecommunications, wireless and satellite industries, offer competing content delivery solutions, (4) excess product inventory in the marketplace, (5) lack of available skilled labor to install product; and (6) delays in the permitting process for fiber optic network installations. If the factors described above were to occur and cause the demand for fiber broadband capabilities or access to slow, stop or reverse, our business, financial condition and operating results would be negatively affected.

Changes in U.S. government funding programs may cause our customers and prospective customers to delay, reduce, or accelerate purchases, leading to unpredictable and irregular purchase cycles.

The telecommunications and cable television industries are subject to significant and changing U.S. federal and state regulation, some of which subsidizes or encourages spending on initiatives that utilize our products.

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.

Intense competition in our industry may result in price reductions, lower gross profits, and loss of market share.

Competition in the telecommunications equipment and services industry is intense. Our competitors may have or could develop or acquire marketing, financial, development and personnel resources that exceed ours. Our ability to compete successfully will depend on whether we can continue to advance the technology of our products and develop new products, the acceptance of our products among our customers and prospective customers, and our ability to anticipate customer needs in product development, as well as the price, quality and reliability of our products, our delivery and service capabilities and our control of production capacity and operating expenses.

There can be no assurance that we will be able to compete successfully against our current or future competitors. Competition from manufacturers of telecommunications equipment such as ours may result in price reductions, lower gross profit margins, increased discounts to customers, and loss of market share, which could require increased spending by us on research and development, sales and marketing, and customer support.

Our success depends upon adequate protection of our patent and other intellectual property rights.

Our future success depends in part upon our proprietary technology. We attempt to protect our proprietary technology through patents, trademarks, copyrights, and trade secrets. However, these legal means afford us only limited protection and may not adequately protect our rights or remedies to gain or keep any advantages we may have over our competitors. Accordingly, we cannot predict whether these protections will be adequate, or whether our competitors will develop similar technology independently, without violating our proprietary rights.

Our competitors, many of which have significant resources, may make substantial investments in competing products and technologies, or may apply for and obtain patents that will prevent, limit, or interfere with our ability to manufacture or market our products. We may litigate to enforce patents issued to us and to defend against claimed infringement of the rights of others or to determine the ownership, scope, or validity of our proprietary rights and the rights of others.

Litigation has been necessary in the past and may be necessary in the future to defend or enforce our intellectual property rights, to protect our patents and trade secrets, and to determine the validity and scope of our proprietary rights. Any litigation also may involve substantial costs and diversion of the attention of Company management away from operational activities. Any claim of infringement against us could involve significant liabilities to third parties, could require us to seek licenses from third parties, and could prevent us from manufacturing, selling or using our products. The occurrence of litigation or the effect of any settlement or an adverse determination in litigation could have a material adverse effect on our business, financial condition, and results of operations.

We face risks associated with expanding our sales outside of the United States.

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.

Risks Relating to Our Common Stock

Our operating results may fluctuate significantly from quarter to quarter, which may make budgeting for expenses difficult and may negatively affect the market price of our common stock.

Because many purchases by customers of our products relate to a specific customer project and are procured by the customer from time to time through purchase orders, the short-term demand for our products can fluctuate significantly. This fluctuation can be further affected by the long sales cycles necessary to obtain contracts to supply equipment for these projects, the availability of capital to fund our customers’ projects, changes or delays in customer deployment schedules, and the impact of government programs to encourage service to unserved or underserved communities, rural areas or other high-cost areas on customer buying patterns. These long sales cycles may result in significant effort expended with no resulting sales or sales that are not made in the anticipated quarter or fiscal year. Certain customers and prospective customers, typically larger broadband service providers, are conducive to these long sales cycles which may be multi-year efforts. Demand for our products will also depend upon the extent to which our customers and prospective customers initiate these projects and the extent to which we are selected to provide our equipment in these projects, neither of which can be assured. In addition, a sharp increase in demand could result in actual lead times longer than quoted, and a sharp decrease in demand could result in excess stock. These factors generally result in fluctuations, sometimes significant, in our operating results. Other factors that may affect our quarterly operating results include:

Further, we budget our expenses based in part on expectations of future sales. If sales levels in a particular quarter are lower than expected, our operating results will be affected adversely.

Because of these factors, our quarterly operating results are difficult to predict and are likely to vary in the future. If our operating results are below financial analysts’ or investors’ expectations, the market price of our common stock may fall abruptly and significantly.

Our stock price has been volatile historically and may continue to be volatile. The price of our common stock may fluctuate significantly.

The trading price of our common stock has been and may continue to be subject to wide fluctuations. Our stock price may fluctuate in response to a number of events and factors, such as quarterly variations in operating results, announcements of technological innovations or new products by us or our competitors, changes in financial estimates and recommendations by securities analysts, the operating and stock price performance of other companies that investors may deem comparable to us, and new reports relating to trends in our markets or general economic conditions.

In addition, the stock market is subject to price and volume fluctuations that affect the market prices for companies in general, and small-capitalization, high-technology companies like us in particular. These broad market and industry fluctuations may adversely affect the price of our common stock, regardless of our operating performance. Further, any failure by us to meet or exceed the expectations of financial analysts or investors is likely to cause a decline in our common stock price. Further, recent industry and economic conditions have resulted in significant fluctuations in stock prices for many companies, including Clearfield. We cannot predict when the stock markets and the market for our common stock may stabilize. In addition, although our common stock is listed on the Nasdaq Stock Market, our common stock has at times experienced low trading volume in the past. Limited trading volume subjects our common stock to greater price volatility and may make it difficult for our shareholders to sell shares at an attractive price.

Anti-takeover provisions in our organizational documents, Minnesota law, and other agreements could prevent or delay a change in control of our Company.

Certain provisions of our articles of incorporation and bylaws, Minnesota law, and other agreements may make it more difficult for a third-party to acquire, or discourage a third-party from attempting to acquire, control of our Company, including:

These measures could discourage or prevent a takeover of us or changes in our management, even if an acquisition or such changes would be beneficial to our shareholders. This may have a negative effect on the price of our common stock.

ITEM 1B.         UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 1C.         CYBERSECURITY

ITEM 2.            PROPERTIES

Clearfield leases an 85,000 square foot facility at 7050 Winnetka Avenue North, Brooklyn Park, Minnesota, consisting of corporate offices, manufacturing, and warehouse space.

The Company indirectly leases an approximately 318,000 square foot office, manufacturing and warehouse facility in Tijuana, Mexico that operates as a Maquiladora.

Clearfield leases a 105,000 square foot warehouse and manufacturing facility in Brooklyn Park, Minnesota.

We believe our facilities are in satisfactory condition, suitable for their respective uses, and generally adequate to meet current needs.

Please see Note 9. Leases in the consolidated financial statements for further details regarding the terms of our leases.

ITEM 3.            LEGAL PROCEEDINGS

There are no pending legal proceedings against or involving the Company for which the outcome is likely to have a material adverse effect upon its financial position or results of operations.

ITEM 4.            MINE SAFETY DISCLOSURES

Not applicable.

PART II.

ITEM 5.            MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the Nasdaq Global Market under the symbol “CLFD.”

Number of Holders of Common Stock

There were 284 holders of record of our common stock as of September 30, 2025.

Dividends

We have never paid cash dividends on our common stock. We currently intend to retain any earnings for use in our operations, continued organic growth, and potential future strategic transactions, as well as execution of the repurchase program described below, and do not intend in the foreseeable future to pay cash dividends on our common stock.

Stock Performance Graph

The following graph shows a comparison of the 5-year cumulative total return on Clearfield, Inc.’s common stock relative to the Standard & Poor’s 500 Stock Index (S&P500 Index), which the Company has selected as a broad market index, and The Standard & Poor’s 1500 Communications Equipment Index (S&P 1500 Communications Equipment Index), which the Company has selected as a published industry index. The graph assumes an investment of $100 (with reinvestment of all dividends) is made in the Company’s common stock and in each index on September 30, 2020, and its relative performance is tracked through September 30, 2025. The returns shown are based on historical results and are not intended to suggest future performance.

Issuer Repurchases

On April 30, 2024, the Company’s board of directors increased the Company’s share repurchase program from $40,000,000 to $65,000,000 commencing May 7, 2024, and continuing for an indefinite period or until terminated by the board of directors. During the year ended September 30, 2025, the Company repurchased 550,766 shares for approximately $16,530,000. As of September 30, 2025, we have repurchased an aggregate of 2,280,546 shares for approximately $56,607,000 leaving approximately $8,393,000 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.

The following table presents the total number of shares repurchased during the fourth quarter of fiscal 2025 by month and the average price paid per share:

Equity compensation plans information is incorporated by reference from Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” of this Annual Report, and should be considered an integral part of Item 5.

ITEM 6.            [RESERVED]

ITEM 7.            MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward-Looking Information

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: Clearfield 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 Canada, the Caribbean, Central/South America and Mexico. These customers are collectively included in the category of Broadband Service Providers. The Company’s sales channels include direct to customer and through distribution partners. The Company’s products are sold by its sales employees and independent sales representatives.

Results of Operations

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.

Year ended September 30, 2024, compared to year ended September 30, 2023

The Company’s net sales for fiscal year 2024 decreased 44%, or $100,154,000, to $125,568,000 from net sales of $225,722,000 in fiscal year 2023. The Company allocates sales from external customers to geographic areas based on the location to which the product is transported. Accordingly, international sales represented 2% and 3% of net sales for the years ended September 30, 2024, and 2023, respectively.

The decrease in net sales for fiscal year 2024 of $100,154,000 compared to fiscal year 2023 is attributable to decreased demand across the Company’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.

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 20.6% in fiscal year 2024 compared to 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 write-downs of $4,748,000 during the fiscal year ended September 30, 2024. Inventory write-downs are primarily due to excess inventory due to the lull in demand 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 $45,081,000, an increase of $2,801,000, or 7%, compared to $42,280,000 for fiscal year 2023. The increase was due to increased performance-based compensation of $1,395,000, increased stock-based compensation of $819,000, and increased professional fees of $1,086,000.

Loss from continuing operations for fiscal year 2024 was $19,234,000 compared to income from continuing operations of $37,577,000 for fiscal year 2023. The decrease is attributable to lower sales and gross profit due to excess supply of fiber products and also higher unabsorbed overhead related to expanded manufacturing capacities.

Net investment income in fiscal year 2024 was $7,472,000 compared to $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.

Income tax benefit for fiscal year 2024 was $3,248,000 compared to income tax expense of $8,883,000 for fiscal year 2023. The decrease in tax expense of $12,131,000 from the year ended September 30, 2023, is due to the decrease in pretax book income for fiscal year 2024. The increase in the income tax expense rate to 27.6% for fiscal year 2024 from 20.9% for fiscal year 2023 is 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. 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 $8,514,000 or $(0.58) per basic and diluted share compared to net income of $33,723,000 or $2.25 per basic and diluted share for fiscal year 2023.

Net loss from discontinued operations for fiscal year 2024 was $3,939,000 or $(0.27) per basic and diluted share compared to net loss of $1,190,000 or $(0.08) per basic and diluted share for fiscal year 2023.

Liquidity and Capital Resources

As of September 30, 2025, the Company had combined consolidated balances of cash, cash equivalents, short-term and long-term investments of $165,799,000 compared to $153,478,000 as of September 30, 2024. Additionally, we have a line of credit for $40 million that has no outstanding borrowing as of September 30, 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.

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, as detailed above.

Operating Activities

Net cash provided by operations for the fiscal year ended September 30, 2025, totaled $26,553,000. Cash provided by operations included net income from continuing operations of $6,310,000 for the fiscal year ended September 30, 2025, non-cash income and expenses for depreciation and amortization of $6,121,000, stock-based compensation of $4,597,000, increase of $4,244,000 in deferred tax assets, amortization of discount on investments of $1,777,000 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 net inventories of $13,643,000, a decrease in other assets of $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 2025 as the Company utilized 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 $3,548,000. The increase in accounts receivable is due to higher net sales in fiscal 2025 compared to the prior year. Days sales outstanding (“DSO”), which measures how quickly receivables are collected, increased five days from 35 to 40 from September 30, 2024, to September 30, 2025.

Net cash provided by operations for the fiscal year ended September 30, 2024, totaled $17,770,000. Cash provided by operations included net loss from continuing operations of $8,514,000 for the fiscal year ended September 30, 2024, non-cash income and expenses for depreciation and amortization of $5,924,000, stock-based compensation of $4,375,000, amortization of discount on investments of $4,406,000, in addition to changes in operating assets and liabilities using cash. Changes in operating assets and liabilities providing cash include a decrease in net inventories of $26,458,000, a decrease in accounts receivable of $6,473,000, and an increase in accounts payable and accrued expenses of $264,000. The decrease in inventory is due to lower inventory purchases during fiscal year 2024 as the Company utilized inventory on hand to fulfill customer orders to support sales demand, as well as higher excess inventory charges taken in fiscal year 2024. The decrease in accounts receivable is due to lower net sales in fiscal 2024 compared to the prior year. DSO decreased 12 days from 47 to 35 from September 30, 2023 to September 30, 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, 2023, totaled $24,596,000. Cash provided by operations included net income from continuing operations of $33,723,000 for the fiscal year ended September 30, 2023, non-cash expenses for depreciation and amortization of $4,595,000, stock-based compensation of $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 $11,145,000 and a decrease in accounts payable and accrued expenses of $27,425,000. The increase in inventory is a result of additional stocking levels to support the Company’s anticipated customer demand, as well as stocking of long lead time components to limit manufacturing delays due to raw material component shortages and supply chain delays experienced during the pandemic. The decrease in accounts payable 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 $27,090,000, due to lower net sales in the Company’s fourth quarter of fiscal 2023 compared to the prior year. DSO remained consistent as it decreased two days from 49 to 47 from September 30, 2022, to September 30, 2023.

Net cash provided by operating activities of discontinued operations for the fiscal year ended September 30, 2025, totaled $2,897,000. Cash provided by operations included net loss from discontinued operations of $3,947,000, non-cash income and expenses for depreciation and amortization of $1,351,000, deferred tax assets of $5,788,000, and stock-based compensation of $451,000, in addition to changes in operating assets and liabilities using cash of $746,000. Net cash provided by operating activities of discontinued operations for the fiscal year ended September 30, 2024, totaled $4,453,000. Cash provided by operations included net loss from discontinued operations of $3,939,000, non-cash income and expenses for depreciation and amortization of $1,478,000, deferred tax assets of $721,000, and stock-based compensation of $267,000, in addition to changes in operating assets and liabilities providing cash of $7,369,000. Net cash used in operating activities of discontinued operations for the fiscal year ended September 30, 2023, totaled $6,172,000. Cash used in operations included net loss from discontinued operations of $1,190,000 and non-cash expenses for depreciation and amortization of $1,456,000, in addition to changes in operating assets and liabilities using cash of $6,328,000.

Investing Activities

We invest our excess cash in money market accounts, U.S. Treasury securities, money market funds, and bank certificates of deposit in denominations across numerous banks. We believe we obtain a competitive rate of return given the economic climate and relative risk profile of these investments. For the fiscal year ended September 30, 2025, the Company received proceeds from maturities of investments of $115,866,000 and used cash to purchase $119,074,000 of investments in certificates of deposit below FDIC insured levels and U.S. Treasuries. The Company used $4,743,000 in cash to purchase fixed and intangible assets. The Company received proceeds from the sale of inventory and property, plant and equipment of $900,000 related to the Company’s former build-to-print copper cable assemblies business. The result is cash used in investing activities of $7,048,000 in fiscal year 2025. In fiscal year 2026, the Company intends to continue investing in necessary information technology, manufacturing equipment, and facility needs.

For the fiscal year ended September 30, 2024, the Company received proceeds from maturities of investments of $162,064,000 and used cash to purchase $159,393,000 of investments in certificates of deposit below FDIC insured levels and U.S. Treasuries. The Company used $7,985,000 in cash to purchase fixed and intangible assets. The result is cash used in investing activities of $5,269,000 in fiscal year 2024.

For the fiscal year ended September 30, 2023, the Company received proceeds from maturities of investments of $107,060,000 and used cash to purchase $210,923,000 of investments in certificates of deposit below FDIC insured levels and U.S. Treasuries. The Company used $7,439,000 in cash to purchase fixed and intangible assets. The result is cash used in investing activities of $111,302,000 in fiscal year 2023.

Net cash used in investing activities of discontinued operations for the fiscal years ended September 30, 2025, 2024, and 2023 totaled $1,796,000, $1,627,000, and $945,000, respectively, driven by cash used to purchase fixed and intangible assets.

Financing Activities

For the fiscal year ended September 30, 2025, the Company used cash to repurchase $16,530,000 of our common stock on the open market under our stock repurchase program. In connection with the stock repurchase, the Company paid $123,000 of U.S. Federal excise taxes during fiscal year 2025. We received $595,000 from employees’ purchase of stock through our Employee Stock Purchase Plan (“ESPP”). The Company used $689,000 related to share withholding for exercise and taxes associated with the issuance of common stock upon cashless exercise of stock options. The Company also used cash of $494,000 to pay for taxes as a result of employees’ vesting of restricted shares using share withholding. As a result, the net cash used for financing activities during fiscal year 2025 was $17,241,000.

For the fiscal year ended September 30, 2024, the Company used cash to repurchase $33,374,000 of our common stock on the open market under our stock repurchase program. In connection with the stock repurchase, the Company accrued $316,000 of U.S. Federal excise taxes to be paid during fiscal year 2025. We received $586,000 from employees’ purchase of stock through our Employee Stock Purchase Plan (“ESPP”). The Company also used cash of $493,000 to pay for taxes as a result of employees’ vesting of restricted shares using share withholding. As a result, the net cash used for financing activities during fiscal year 2024 was $33,289,000.

For the fiscal year ended September 30, 2023, the Company received $130,262,000 of net proceeds through the issuance of common stock in the first quarter of fiscal 2023. The Company also received $611,000 from employees’ purchase of stock through our ESPP and $954,000 related to issuance of stock as payment for incentive compensation. The Company used $16,700,000 to pay down in full the then-outstanding principal on our line of credit, which was originally drawn in the fourth quarter of fiscal 2022 to fund the acquisition of Nestor Cables. The Company also used $491,000 related to share withholding for exercise and taxes associated with the issuance of common stock upon cashless exercise of stock options and used $1,220,000 to pay for taxes as a result of employees’ vesting of restricted shares using share withholding. As a result, the net cash provided by financing activities during fiscal year 2023 was $113,416,000.

Net cash provided by financing activities of discontinued operations for the fiscal year ended September 30, 2025, totaled $3,000,000, driven by net borrowings and repayments from the factoring liability held by Nestor Cables. Net cash used in financing activities of discontinued operations for the fiscal year ended September 30, 2024, totaled $3,617,000, 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 fiscal year ended September 30, 2023, totaled $1,586,000, driven by net borrowings and repayments from the factoring liability held by Nestor Cables.

Operating Leases

We have entered into various non-cancelable operating lease agreements for office equipment at our office and manufacturing spaces in Minnesota and Mexico expiring at various dates through April 2029. Certain of these leases have escalating rent payment provisions. We recognize rent expense under such leases on a straight-line basis over the term of the lease. Please see Note 9. Leases in the consolidated financial statements for further details regarding the terms of our leases.

Critical Accounting Estimates

In preparing our financial statements, we make estimates, assumptions and judgments that can have a significant impact on our sales, income from operations and net income, as well as on the value of certain assets and liabilities on our consolidated balance sheets. We believe there are several accounting policies that are critical to an understanding of our historical and future performance, as these policies affect the reported amounts of sales, expenses and significant estimates and judgments applied by management. While there are a number of accounting policies, methods and estimates affecting our financial statements, areas that are particularly significant include:

●    Stock-based compensation

●    Impairment of long-lived assets, intangible assets and goodwill

●    Valuation of inventory

Stock-Based Compensation

We measure stock-based compensation expense for all share-based payment awards granted to employees and directors based on the fair value of those awards on the grant date. The determination of fair value includes estimates of the fair value of our common stock. These estimates impact the amount of compensation expense recognized over the requisite service period of the award. For restricted stock awards and performance stock units (PSUs), fair value is determined using the closing market price of our common stock on the grant date. For PSUs, we also make judgments regarding the probability of achieving performance targets, which can significantly affect the timing and amount of expense recognized. For stock options, we use the Black-Scholes option-pricing model to estimate fair value. The use of this model requires the input of subjective assumptions such as, expected volatility, expected term, risk-free interest rate, and expected dividend yield. The expected terms of the options are based on evaluations of historical and expected future employee exercise behavior. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at grant date. Volatility is based on historical and expected future volatility of the Company’s stock. The Company has not historically issued any dividends and does not expect to in the future. Forfeitures for both option and restricted stock grants are estimated at the time of the grant and revised in subsequent periods if actual forfeitures differ from estimates.

Changes in any of the above assumptions could materially affect the amount of stock-based compensation expense recorded in future periods. We periodically review our valuation assumptions and update them as necessary. If actual results differ significantly from our estimates or if we modify the underlying assumptions, the amount of stock-based compensation expense could differ materially from the amounts currently recognized or disclosed.

Impairment of Long-Lived Assets, Intangible Assets and Goodwill

The Company’s long-lived assets as of September 30, 2025, consisted primarily of property, plant and equipment, right of use lease assets, patents, intangibles, and goodwill. The Company reviews the carrying amount of its property, plant and equipment, right of use lease assets, and intangible assets if events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. When this review indicates the carrying amount of an asset or asset group exceeds the sum of the future undiscounted cash flows expected to be generated by the assets, the Company recognizes an asset impairment charge against operations for the amount by which the carrying amount of the impaired asset exceeds its fair value.

Determining fair values of property, plant, and equipment, right of use lease assets, and intangible assets using a discounted cash flow method involves significant judgment and requires the Company to make significant estimates and assumptions, including long-term projections of cash flows, market conditions and appropriate discount rates. Judgments are based on historical experience, current market trends, consultations with external valuation specialists and other information. If facts and circumstances change, the use of different estimates and assumptions could result in a materially different outcome. The Company generally develops these forecasts based on recent sales data for existing products, planned timing of new product launches or acquisitions, and estimated future growth of the FTTP market.

Goodwill represents the excess purchase price over the fair value of tangible net assets acquired in acquisitions after amounts have been allocated to intangible assets. Goodwill is tested for impairment annually at fiscal year-end, or more frequently when events or changes in circumstances indicate that the asset might be impaired. Examples of such events or circumstances include, but are not limited to, a significant adverse change in legal or business climate, an adverse regulatory action or unanticipated competition. The Company assesses qualitative factors to determine whether the existence of events or circumstances would indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying amount.

If after assessing the totality of events or circumstances, the Company were to determine that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then the Company would perform a quantitative test that compares the fair value to its carrying value to determine the amount of any impairment.

If the carrying amount of a reporting unit exceeds its fair value, the Company would measure the possible goodwill impairment loss based on an allocation of the estimate of fair value of the reporting unit to all of the underlying assets and liabilities of the reporting unit, including any previously unrecognized intangible assets. The excess of the fair value of a reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill. An impairment loss is recognized to the extent that a reporting unit's recorded goodwill exceeds the implied fair value of goodwill. An impairment loss would be based on significant estimates and judgments, and if the facts and circumstances change, a potential impairment could have a material impact on the Company’s financial statements.

No impairment of the goodwill or intangible assets related to continuing operations has occurred during the years ended September 30, 2025, 2024, and 2023, respectively. Refer to Note 11 for discussion of the discontinued operations and impairment of assets held for sale of the Nestor Cables business.

Valuation of Inventory

The Company maintains a material amount of inventory to support its manufacturing operations and customer demand. This inventory is stated at average cost, subject to the lower of cost or net realizable value. The determination of the valuation of inventory requires management to make significant estimates and judgments about future product demand, product life cycles, and the recoverability of inventory costs.

We evaluate inventory levels on a quarterly basis, considering factors such as historical usage, forecasted demand, production lead times, and product aging. When actual demand differs from our expectations, we may be required to record additional write-downs or, conversely, recognize a reduction in previously established write-downs once the product is sold. Because of the inherent uncertainty involved in forecasting future product demand and product life cycles, actual results could differ materially from these estimates.

Management believes the methodologies and assumptions used to estimate the valuation of inventory are appropriate and consistently applied; however, changes in product mix, customer demand, or technological obsolescence could materially impact future results of operations and financial condition.

Recently Adopted Accounting Pronouncements

Refer to Note 1 to the Company’s consolidated financial statements for a discussion of recently adopted accounting pronouncements.

New Accounting Pronouncements Not Yet Adopted

Refer to Note 1 to the Company’s consolidated financial statements for a discussion of new accounting pronouncements not yet adopted.

Quarterly Information

As a result of the retrospective changes associated with the sale of the Nestor Cables business, which are reflected as discontinued operations for all periods presented, the following table sets forth selected consolidated quarterly financial information that have been adjusted to reflect these presentation changes.

ITEM 7A.         QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company currently invests its excess cash in bank certificates of deposit that are fully insured by the Federal Deposit Insurance Corporation and United States Treasury securities with terms of not more than five years, as well as money market funds. The fair value of these investments fluctuates subject to changes in market interest rates. As of September 30, 2025, and 2024, the Company had combined consolidated balances of cash, cash equivalents, short term, and long-term investments of $165,799,000 and $153,478,000, respectively.

Foreign Exchange Rates

The Company uses the U.S. dollar as its reporting currency. We do not hedge against foreign currency fluctuations.

Inflation

Rising costs, including wages, logistics, components, and commodity prices are negatively impacting our profitability. We are subject to market risk from fluctuating market prices of certain purchased commodities and raw materials which has outpaced our ability to reduce the cost structure and manufacturability. We do not hedge commodity prices. Accordingly, inflation impacts our profitability, including cost of sales and operating expenses, and may have a material impact on the Company’s financial statements.

ITEM 8.            FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting of the Company. This system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with United States generally accepted accounting principles.

Our internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management conducted an evaluation of the effectiveness of the system of internal control over financial reporting as of September 30, 2025. In making this evaluation, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—2013 Integrated Framework. Based on management’s evaluation and those criteria, management concluded that the Company’s system of internal control over financial reporting was effective as of September 30, 2025.

Management’s internal control over financial reporting as of September 30, 2025, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing on the following page, in which they expressed an unqualified opinion thereon.  

Further discussion of our internal controls and procedures is included in Item 9A of this report, under the caption “Controls and Procedures.”

CLEARFIELD, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

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SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS