UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
For the transition period from __________________ to ___________________
Commission File Number
(Exact name of Registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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(Address of principal executive office) |
(Zip Code) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol |
Name of each exchange on which registered |
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The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Non-accelerated filer ☐ |
Accelerated filer ☐ Smaller reporting company Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
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Class: |
Outstanding as of July 26, 2024 |
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Common stock, par value $.01 |
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CLEARFIELD, INC.
FORM 10-Q
TABLE OF CONTENTS
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CLEARFIELD, INC. |
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CONDENSED CONSOLIDATED BALANCE SHEETS |
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(IN THOUSANDS, EXCEPT SHARE DATA) |
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June 30, |
September 30, |
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Assets |
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Current Assets |
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Cash and cash equivalents |
$ | $ | ||||||
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Short-term investments |
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Accounts receivables, net |
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Inventories, net |
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Other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Other Assets |
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Long-term investments |
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Goodwill |
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Intangible assets, net |
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Right-of-use lease assets |
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Deferred tax asset |
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Other |
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Total other assets |
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Total Assets |
$ | $ | ||||||
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Liabilities and Shareholders’ Equity |
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Current Liabilities |
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Current portion of lease liability |
$ | $ | ||||||
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Current maturities of long-term debt |
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Accounts payable |
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Accrued compensation |
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Accrued expenses |
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Factoring liability |
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Total current liabilities |
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Other Liabilities |
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Long-term debt, net of current maturities |
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Long-term portion of lease liability |
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Deferred tax liability |
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Total liabilities |
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Shareholders’ Equity |
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Preferred stock, $ par value; |
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Common stock, authorized |
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Additional paid-in capital |
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Accumulated other comprehensive income (loss) |
( |
) | ||||||
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Retained earnings |
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Total shareholders’ equity |
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Total Liabilities and Shareholders’ Equity |
$ | $ | ||||||
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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CLEARFIELD, INC. |
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CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS |
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(UNAUDITED) |
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(IN THOUSANDS, EXCEPT SHARE DATA) |
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Three Months Ended |
Nine Months Ended |
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June 30, |
June 30, |
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2024 |
2023 |
2024 |
2023 |
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Net sales |
$ | $ | $ | $ | ||||||||||||
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Cost of sales |
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Gross profit |
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Operating expenses |
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Selling, general and administrative |
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(Loss) Income from operations |
( |
) | ( |
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Net investment income |
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Interest expense |
( |
) | ( |
) | ( |
) | ( |
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(Loss) Income before income taxes |
( |
) | ( |
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Income tax (benefit) expense |
( |
) | ( |
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Net (loss) income |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
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Net (loss) income per share Basic |
( |
) | ( |
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Net (loss) income per share Diluted |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
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Weighted average shares outstanding: |
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Basic |
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Diluted |
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SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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CLEARFIELD, INC. |
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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME |
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(UNAUDITED) |
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(IN THOUSANDS) |
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Three Months Ended |
Nine Months Ended |
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June 30, |
June 30, |
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2024 |
2023 |
2024 |
2023 |
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Comprehensive (loss) income: |
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Net (loss) income |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
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Other comprehensive (loss) income, net of tax |
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Unrealized gain on available-for-sale investments |
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Unrealized (loss) gain on foreign currency translation |
( |
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Total other comprehensive (loss) income |
( |
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Total comprehensive (loss) income |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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CLEARFIELD, INC. |
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CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY |
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(UNAUDITED) |
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(IN THOUSANDS) |
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For the three months ended June 30, 2024 |
Accumulated other |
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Common Stock |
Additional |
comprehensive |
Retained |
Total share- |
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Shares |
Amount |
paid-in capital |
income (loss) |
earnings |
holders’ equity |
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Balance at March 31, 2024 |
$ | $ | $ | $ | $ | |||||||||||||||||||
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Stock-based compensation expense |
- | |||||||||||||||||||||||
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Issuance of common stock under employee stock purchase plan |
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Repurchase of common stock |
( |
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Other comprehensive loss |
- | ( |
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| Net loss | - | ( |
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Balance at June 30, 2024 |
$ | 142 | $ | $ | $ | $ | ||||||||||||||||||
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For the three months ended June 30, 2023 |
Accumulated other |
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Common Stock |
Additional |
comprehensive |
Retained |
Total share- |
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Shares |
Amount |
paid-in capital |
income (loss) |
earnings |
holders’ equity |
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Balance at March 31, 2023 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
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Stock-based compensation expense |
- | |||||||||||||||||||||||
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Issuance of common stock under equity compensation plans, net |
( |
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Exercise of stock options, net of shares exchanged for payment |
( |
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Issuance of common stock under equity compensation plans, net |
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Other comprehensive loss |
- | ( |
) | ( |
) | |||||||||||||||||||
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Net income |
- | |||||||||||||||||||||||
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Balance at June 30, 2023 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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CLEARFIELD, INC. |
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CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY |
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(UNAUDITED) |
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(IN THOUSANDS) |
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For the nine months ended June 30, 2024 |
Accumulated other |
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Common Stock |
Additional |
comprehensive |
Retained |
Total share- |
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Shares |
Amount |
paid-in capital |
income (loss) |
earnings |
holders’ equity |
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Balance as of September 30, 2023 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
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Stock-based compensation expense |
- | |||||||||||||||||||||||
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Issuance of common stock under employee stock purchase plan |
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Issuance of common stock under equity compensation plans, net |
( |
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Repurchase of shares for payment of withholding taxes for vested restricted stock grants |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
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Exercise of stock options, net of shares exchanged for payment |
( |
) | ( |
) | ||||||||||||||||||||
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Repurchase of common stock |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
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Adoption of new accounting pronouncement |
- | |||||||||||||||||||||||
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Other comprehensive income |
- | - | ||||||||||||||||||||||
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Net loss |
- | ( |
) | ( |
) | |||||||||||||||||||
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Balance at June 30, 2024 |
$ | $ | $ | $ | $ | |||||||||||||||||||
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For the nine months ended June 30, 2023 |
Accumulated other |
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Common Stock |
Additional |
comprehensive |
Retained |
Total share- |
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Shares |
Amount |
paid-in capital |
income (loss) |
earnings |
holders’ equity |
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Balance as of September 30, 2022 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
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Stock-based compensation expense |
- | |||||||||||||||||||||||
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Issuance of common stock under employee stock purchase plan |
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Issuance of common stock under equity compensation plans, net |
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Exercise of stock options, net of shares exchanged for payment |
( |
) | ( |
) | ||||||||||||||||||||
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Repurchase of shares for payment of withholding taxes for stock grants |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
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Issuance of common stock, net |
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Other comprehensive income |
- | |||||||||||||||||||||||
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Net income |
- | - | ||||||||||||||||||||||
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Balance at June 30, 2023 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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CLEARFIELD, INC. |
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
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(UNAUDITED) |
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(IN THOUSANDS) |
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Nine Months |
Nine Months |
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Ended |
Ended |
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June 30, |
June 30, |
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2024 |
2023 |
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Cash flows from operating activities |
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Net (loss) income |
$ | ( |
) | $ | ||||
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Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
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Amortization of discount on investments |
( |
) | ( |
) | ||||
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Deferred taxes |
( |
) | ||||||
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Stock-based compensation |
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Changes in operating assets and liabilities, net of acquired amounts: |
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Accounts receivable |
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Inventories, net |
( |
) | ||||||
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Other assets |
( |
) | ( |
) | ||||
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Accounts payable and accrued expenses |
( |
) | ||||||
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Net cash provided by operating activities |
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Cash flows from investing activities |
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Purchases of property, plant and equipment, and intangible assets |
( |
) | ( |
) | ||||
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Purchases of investments |
( |
) | ( |
) | ||||
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Proceeds from maturities of investments |
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Net cash provided by (used in) investing activities |
( |
) | ||||||
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Cash flows from financing activities |
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Issuance of long-term debt |
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Repayment of long-term debt |
( |
) | ( |
) | ||||
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Proceeds from issuance of common stock under employee stock purchase plan |
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Repurchase of shares for payment of withholding taxes for stock grants |
( |
) | ( |
) | ||||
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Tax withholding and proceeds related to exercise of stock options |
( |
) | ( |
) | ||||
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Issuance of stock under equity compensation plans |
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Net proceeds from issuance of common stock |
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Repurchase of common stock |
( |
) | ||||||
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Net cash (used in) provided by financing activities |
( |
) | ||||||
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Effect of exchange rates on cash |
( |
) | ||||||
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(Decrease) increase in cash and cash equivalents |
( |
) | ||||||
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period |
$ | $ | ||||||
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Supplemental disclosures for cash flow information |
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Cash paid for income taxes |
$ | $ | ||||||
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Cash paid for interest expense |
$ | $ | ||||||
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Right of use assets obtained through lease liabilities |
$ | $ | ||||||
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Non-cash financing activities |
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Cashless exercise of stock options |
$ | $ | ||||||
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Unless the context otherwise requires, for purposes of this Quarterly Report on Form 10-Q, the words “we,” “us,” “our,” the “Company,” and “Clearfield,” refer to Clearfield, Inc. and subsidiaries.
Basis of Presentation
The accompanying (a) condensed consolidated balance sheet as of September 30, 2023, which has been derived from audited financial statements, and (b) unaudited interim condensed consolidated financial statements as of and for the three and nine months ended June 30, 2024 have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America for interim financial information, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the condensed consolidated financial statements include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the financial position, results of operations, and cash flows of the interim periods presented. Operating results for the interim periods presented are not necessarily indicative of results to be expected for the full year or for any other interim period, due to variability in customer purchasing patterns, seasonality, and other factors. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2023.
In preparation of the Company’s condensed consolidated financial statements, management is required to make estimates and assumptions that affect reported amounts of assets and liabilities and related revenues and expenses during the reporting periods. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of Clearfield, Inc. and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
Recently Adopted Accounting Pronouncements
On October 1, 2023, the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standard Update (“ASU”) No. 2016-13, Measurement of Credit Losses on Financial Instruments, and subsequent amendments to the initial guidance: ASU No. 2018-19, ASU No. 2019-04, ASU No. 2019-05, and ASU No. 2020-02 (collectively, Topic 326). This guidance introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses (CECL). The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost. The Company adopted Topic 326 using the modified retrospective method for all financial assets measured at amortized cost, which are primarily trade accounts receivable for the Company. Results for reporting periods beginning after October 1, 2023, are presented under Topic 326 while prior period amounts continue to be reported in accordance with previously applicable U.S. GAAP. The impact of adopting Topic 326 as of October 1, 2023, was not material to the consolidated financial statements.
New Accounting Pronouncements Not Yet Adopted
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 is intended to enhance financial reporting by requiring incremental disclosures for significant segment expenses on an annual and interim basis by public entities required to report segment information in accordance with Accounting Standards Codification Topic 280. The amendments in ASU 2023-07 are to be applied retrospectively to all periods presented in the financial statements and early adoption is permitted. This standard will be applicable to the Company for the 2025 annual period and quarterly periods thereafter. The Company is evaluating its disclosure approach for ASU 2023-07 and anticipates adopting the standard for the year ended September 30, 2025 and filings thereafter.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The new guidance is expected to improve income tax disclosures primarily related to the rate reconciliation and income taxes paid information by requiring 1) consistent categories and greater disaggregation of information in the rate reconciliation and 2) income taxes paid disaggregated by jurisdiction. The guidance is effective on a prospective basis, although retrospective application and early adoption is permitted. The Company is evaluating its disclosure approach for ASU 2023-09 and anticipates adopting the standard for the annual period starting October 1, 2025.
In March 2024, the SEC adopted rules under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors, which requires the disclosure of material Scope 1 and Scope 2 greenhouse gas emissions and other climate-related topics in annual reports and registration statements. For large-accelerated filers and accelerated filers, disclosure requirements will begin phasing in for fiscal years beginning on or after January 1, 2025, and January 1, 2026, respectively, subject to legal challenges and the SEC’s voluntary stay of the disclosure requirements. The Company is currently evaluating the impact these rules will have on its consolidated financial statements and related disclosures.
Note 2. Net Income (Loss) Per Share
Basic net income (loss) per common share (“EPS”) is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the reporting period. Diluted EPS equals net income (loss) divided by the sum of the weighted average number of shares of common stock outstanding plus all additional common stock equivalents, such as stock options, when dilutive.
The following is a reconciliation of the numerator and denominator of the net income (loss) per common share computations for the three and nine months ended June 30, 2024, and 2023:
|
Three Months Ended June 30, |
Nine months Ended June 30, |
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(In thousands, except for share data) |
2024 |
2023 |
2024 |
2023 |
||||||||||||
|
Net (loss) income |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
|
Weighted average common shares |
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Dilutive potential common shares |
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Weighted average dilutive common shares outstanding |
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Net (loss) income per common share: |
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Basic |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
|
Diluted |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
Note 3. Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The following table presents the Company’s cash and cash equivalents balances:
|
(In thousands) |
June 30, 2024 |
September 30, 2023 |
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Cash and cash equivalents: |
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|
Cash, including money market accounts |
$ | $ | ||||||
|
Money market funds |
||||||||
|
Total cash and cash equivalents |
$ | $ | ||||||
Note 4. Investments
The Company invests in certificates of deposit that are fully insured by the Federal Deposit Insurance Corporation (“FDIC”) and United States Treasury securities with terms of not more than five years, as well as money market funds. The Company’s investment portfolio is classified as available-for-sale, which is reported at fair value. The unrealized gain or loss on investment securities is recorded in other comprehensive income (loss), net of tax. Realized gains and losses on available-for-sale securities are recognized upon sale and are included in net investment income in the condensed consolidated statement of earnings.
As of June 30, 2024, available-for-sale investments consisted of the following:
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June 30, 2024 |
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(In thousands) |
Amortized Cost |
Unrealized Gains |
Unrealized Losses |
Fair Value |
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Short-Term |
||||||||||||||||
|
U.S. Treasury securities |
$ | $ | $ | ( |
) | $ | ||||||||||
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Certificates of deposit |
( |
) | ||||||||||||||
|
Investment securities – short-term |
$ | $ | $ | ( |
) | $ | ||||||||||
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Long-Term |
||||||||||||||||
|
U.S Treasury securities |
$ | $ | $ | ( |
) | $ | ||||||||||
|
Certificates of deposit |
( |
) | ||||||||||||||
|
Investment securities – long-term |
$ | $ | $ | ( |
) | $ | ||||||||||
As of September 30, 2023, available-for-sale investments consist of the following:
|
September 30, 2023 |
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|
(In thousands) |
Amortized Cost |
Unrealized Gains |
Unrealized Losses |
Fair Value |
||||||||||||
|
Short-Term |
||||||||||||||||
|
U.S treasury securities |
$ | $ | $ | ( |
) | $ | ||||||||||
|
Certificates of deposit |
( |
) | ||||||||||||||
|
Investment securities – short-term |
$ | $ | $ | ( |
) | $ | ||||||||||
|
Long-Term |
||||||||||||||||
|
U.S treasury securities |
$ | $ | $ | ( |
) | $ | ||||||||||
|
Certificates of deposit |
( |
) | ||||||||||||||
|
Investment securities – long-term |
$ | $ | $ | ( |
) | $ | ||||||||||
As of June 30, 2024, investments in debt securities in an unrealized loss position were as follows:
|
In Unrealized Loss Position For Less Than 12 Months |
In Unrealized Loss Position For Greater Than 12 Months |
|||||||||||||||
|
(In thousands) |
Fair Value |
Gross Unrealized Losses |
Fair Value |
Gross Unrealized Losses |
||||||||||||
|
U.S treasury securities |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
|
Certificates of deposit |
( |
) | ||||||||||||||
|
Investment securities |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
As of September 30, 2023, investments in debt securities in an unrealized loss position were as follows:
|
In Unrealized Loss Position For Less Than 12 Months |
In Unrealized Loss Position For Greater Than 12 Months |
|||||||||||||||
|
(In thousands) |
Fair Value |
Gross Unrealized Losses |
Fair Value |
Gross Unrealized Losses |
||||||||||||
|
U.S treasury securities |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
|
Certificates of deposit |
( |
) | ||||||||||||||
|
Investment securities |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
As of June 30, 2024, there were
Note 5. Fair Value Measurements
The Company determines the fair value of its assets and liabilities based on the market price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company determines the fair value of U.S. treasury securities and certificates of deposit based on valuations provided by an external pricing service, which obtains them from a variety of industry standard data providers.
The Company’s investments are categorized according to the three-level fair value hierarchy which distinguishes between observable and unobservable inputs, in one of the following levels:
Level 1- Quoted prices in active markets for identical assets or liabilities.
Level 2- Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3- Unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those with fair value measurements that are determined using pricing models, discounted cash flow valuation or similar techniques, as well as significant management judgment or estimation.
The following provides information regarding fair value measurements for the Company’s investment securities as of June 30, 2024, according to the three-level fair value hierarchy:
|
Fair Value Measurements as of June 30, 2024 |
||||||||||||||||
|
(In thousands) |
Total |
Level 1 |
Level 2 |
Level 3 |
||||||||||||
|
Cash equivalents: |
||||||||||||||||
|
Money market funds |
$ | $ | $ | $ | ||||||||||||
|
Total cash equivalents |
$ | $ | $ | $ | ||||||||||||
|
Investment securities: |
||||||||||||||||
|
Certificates of deposit |
$ | $ | $ | $ | ||||||||||||
|
U.S. Treasury securities |
||||||||||||||||
|
Total investment securities |
$ | $ | $ | $ | ||||||||||||
The following provides information regarding fair value measurements for the Company’s investment securities as of September 30, 2023, according to the three-level fair value hierarchy:
|
Fair Value Measurements as of September 30, 2023 |
||||||||||||||||
|
(In thousands) |
Total |
Level 1 |
Level 2 |
Level 3 |
||||||||||||
|
Cash equivalents: |
||||||||||||||||
|
Money market funds |
$ | $ | $ | $ | ||||||||||||
|
Total cash equivalents |
$ | $ | $ | $ | ||||||||||||
|
Investment securities: |
||||||||||||||||
|
Certificates of deposit |
$ | $ | $ | $ | ||||||||||||
|
U.S. Treasury securities |
||||||||||||||||
|
Total investment securities |
$ | $ | $ | $ | ||||||||||||
During the three and nine months ended June 30, 2024, and the year ended September 30, 2023, the Company owned Level 3 securities and there were no transfers within the fair value level hierarchy.
Non-financial assets such as equipment and leasehold improvements, goodwill and intangible assets, and right-of-use assets for operating leases are subject to non-recurring fair value measurements if they are deemed impaired. The Company had no re-measurements of non-financial assets to fair value in the three or nine months ended June 30, 2024, and the year ended September 30, 2023.
Note 6. Other Comprehensive Income (Loss)
Changes in components of other comprehensive income (loss), net of tax, are as follows:
|
(In thousands) |
Available-for-Sale Securities |
Foreign Currency Translation |
Accumulated Other Comprehensive Income (Loss)
|
|||||||||
|
Balances at September 30, 2023 |
$ | ( |
) | $ | $ | ( |
) | |||||
|
Other comprehensive income for the three months ended December 31, 2023 |
||||||||||||
|
Balances at December 31, 2023 |
$ | ( |
) | $ | $ | |||||||
|
Other comprehensive (loss) for the three months ended March 31, 2024 |
( |
) | ( |
) | ( |
) | ||||||
|
Balances at March 31, 2024 |
$ | ( |
) | $ | $ | |||||||
|
Other comprehensive (loss) for the three months ended June 30, 2024 |
( |
) | ( |
) | ||||||||
|
Balances at June 30, 2024 |
$ | ( |
) | $ | $ | |||||||
Note 7. Stock-Based Compensation
The Company recorded $
The Company recorded $
As of June 30, 2024, $
Stock Options
The Company uses the Black-Scholes option pricing model to determine the fair value of stock options granted. During the nine months ended June 30, 2024, the Company granted employees non-qualified stock options to purchase an aggregate of
The fair value of stock option awards during the nine months ended June 30, 2024, was estimated as of the respective grant dates using the assumptions listed below:
|
Nine months ended June 30, 2024 |
|
|
Dividend yield |
|
|
Expected volatility |
|
|
Risk-free interest rate |
|
|
Expected life (years) |
|
|
Vesting period (years) |
|
The expected stock price volatility is based on the historical volatility of the Company’s stock for a period approximating the expected life. The expected life represents the period of time that options are expected to be outstanding after their grant date. The risk-free interest rate reflects the interest rate as of the grant date on zero-coupon U.S. governmental bonds with a remaining life similar to the expected option term.
Options are granted with exercise prices at fair market values determined on the date of grant and vesting normally occurs over a to -year period. Shares issued upon exercise of a stock option are issued from the Company’s authorized but unissued shares.
The following is a summary of stock option activity during the nine months ended June 30, 2024:
|
Number of options |
Weighted average exercise price |
|||||||
|
Outstanding as of September 30, 2023 |
$ | |||||||
|
Granted |
||||||||
|
Exercised |
( |
) | ||||||
|
Forfeited or expired |
( |
) | ||||||
|
Outstanding as of June 30, 2024 |
$ | |||||||
The intrinsic value of an option is the amount by which the fair value of the underlying stock exceeds its exercise price. As of June 30, 2024, the weighted average remaining contractual term for all outstanding and exercisable stock options was
Restricted Stock
During the nine months ended June 30, 2024, the Company granted employees restricted stock awards totaling
During the nine months ended June 30, 2023, the Company granted the non-employee directors restricted stock awards totaling
Restricted stock transactions during the nine months ended June 30, 2024, are summarized as follows:
|
Number of shares |
Weighted average grant date fair value |
|||||||
|
Unvested shares as of September 30, 2023 |
$ | |||||||
|
Granted |
||||||||
|
Vested |
( |
) | ||||||
|
Forfeited |
( |
) | ||||||
|
Unvested as of June 30, 2024 |
$ | |||||||
Performance Stock
During the nine months ended June 30, 2024, the Company granted
Compensation expense for the performance stock units is measured using the fair value of our common stock at the grant date. As of June 30, 2024, the Company does not believe it is probable that these performance stock unit awards will vest based on achievement of established performance criteria, and previously recognized compensation expense related to these awards has been reversed to $
Bonus Stock
The Company did issue any bonus stock in the nine months ended June 30, 2024. During the nine months ended June 30, 2023, the Company granted employees an aggregate of
Employee Stock Purchase Plan
The Company’s ESPP allows participating employees to purchase shares of the Company’s common stock at a discount through payroll deductions. The ESPP is available to all employees subject to certain eligibility requirements. Terms of the ESPP provide those participating employees the ability to purchase the Company’s common stock on a voluntary after-tax basis. Employees may purchase the Company’s common stock at a price that is no less than the lower of
Note 8. Revenue
Revenue Recognition
Net sales include products and shipping and handling charges. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products. All revenue is recognized when the Company satisfies its performance obligations under the contract. The Company recognizes revenue by transferring the promised products to the customer, with substantially all revenue recognized at the point in time the customer obtains control of the products. The Company recognizes revenue, including shipping and handling charges, at the time the products are delivered to or picked up by the customer. The majority of the Company’s contracts have a single performance obligation and are short term in nature. Sales taxes and value added taxes in foreign jurisdictions that are collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from net sales.
Disaggregation of Revenue
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 Europe, the Caribbean, Canada, Central and South America.
Revenues related to the following geographic areas were as follows for the three and nine months ended:
|
Three Months Ended June 30, |
Nine months Ended June 30, |
|||||||||||||||
|
(In thousands) |
2024 |
2023 |
2024 |
2023 |
||||||||||||
|
United States |
$ | $ | $ | $ | ||||||||||||
|
All other countries |
||||||||||||||||
|
Total Net Sales |
$ | $ | $ | $ | ||||||||||||
The Company sells its products to the Broadband Service Provider marketplace. In addition, the Company provides Legacy services for original equipment manufacturers requiring copper and fiber cable assemblies built to their specification.
The percentages of our sales by markets were as follows for the three and nine months ended:
|
Three Months Ended June 30, |
Nine months Ended June 30, |
|||||||||||||||
|
(In thousands) |
2024 |
2023 |
2024 |
2023 |
||||||||||||
|
Broadband service providers |
% | % | % | % | ||||||||||||
|
Other customers |
% | % | % | % | ||||||||||||
|
Total Net Sales |
% | % | % | % | ||||||||||||
Broadband Service Providers are made up of Community Broadband, which includes local and regional telecom companies, utilities, municipalities and alternative carriers, also referred to as Tier 2 and Tier 3 customers; National Carriers, which includes large national and global wireline and wireless providers, also referred to as Tier 1 customers; Large Regional Service Providers with a national footprint; Multiple System Operators (“MSO’s”), which include cable television companies; and International customers.
Accounts Receivable
Credit is extended based on the evaluation of a customer’s financial condition, and collateral is generally not required. Accounts that are outstanding longer than the contractual payment terms are considered past due. On October 1, 2023, the Company adopted the cumulative expected credit loss model (“CECL”). Upon adoption of the CECL, the Company measures the allowance for credit losses using an expected credit loss model, which uses a lifetime expected credit loss allowance for all accounts receivable. To measure the expected credit losses, accounts receivable are grouped based on shared credit risk characteristics and the days past due. In calculating an allowance for credit losses, the Company uses its historical experience, external indicators, and forward-looking information to calculate expected credit losses using an aging method. The Company assesses impairment of accounts receivable on a collective basis as they possess shared credit risk characteristics which have been grouped based on the days past due. The expected loss rates are based on the Company’s historical credit losses experience. The historical loss rates are adjusted to reflect current and forward-looking information. As of June 30, 2024, the Company’s allowance for credit losses was $
As of September 30, 2023, prior to the adoption of CECL, the Company’s allowance for doubtful accounts was $
See Note 9 “Major Customer Concentration” for further information regarding accounts receivable and net sales.
Note 9. Major Customer Concentration
For the three months ended June 30, 2024, the Company had customer that comprised
For the three months ended June 30, 2023, the Company had customer that comprised