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Clearfield, Inc. (CLFD)·Q2 2025 Earnings Summary

Executive Summary

  • Clearfield returned to profitability: Q2 FY2025 net sales $47.2M (+28% y/y), diluted EPS $0.09, and gross margin 30.1% (vs 7.7% a year ago), materially aided by lower excess inventory reserve costs and improved overhead absorption .
  • Strong beat vs S&P Global consensus: revenue $47.17M vs $38.53M*, EPS $0.09 vs -$0.19*, EBITDA ~$2.14M vs -$1.80M*; management’s execution converted quoting activity into revenue faster than anticipated, and a large regional pulled forward ~$3M of orders .
  • Guidance: FY2025 revenue reiterated at $170–$185M; Q3 FY2025 net sales guided to $45–$50M and EPS $0.01–$0.08; management does not expect evolving tariff policies to materially affect operating results .
  • Strategic momentum: Clearfield segment sales +47% y/y to $40.6M, Nestor segment $6.6M (-30% y/y); backlog rose to $34.1M (+31% q/q) with connected-home products and cabinets resuming growth; product innovation continued with the new TetherSmart MFT launch .
  • Key near-term catalysts: sustained ordering normalization, connected-home kit adoption, cabinet demand recovery, and execution against BEAD/E‑ACAM program tailwinds as funding progresses; Q3 guide suggests continued profitability albeit at lower EPS .

What Went Well and What Went Wrong

What Went Well

  • Strong top-line and margin recovery: net sales $47.2M (+28% y/y) and gross margin 30.1% vs 7.7% y/y, driven by higher Clearfield segment volumes and lower excess inventory charges .
  • Return to profitability and beat vs guidance/consensus: diluted EPS $0.09, above prior guide for a loss, with execution converting quotes into revenue “at a faster pace and higher rate than anticipated” .
  • Strategic supply chain/tariff mitigation: Mexico manufacturing exempt under USMCA; diversified global sourcing; management does not expect tariffs to materially affect results in current form .

What Went Wrong

  • Nestor segment continued pressure: $6.6M revenue (-30% y/y), as European operators focused on operations over buildouts; Clearfield is rightsizing Nestor cost structure and shifting to Estonia for higher-margin microduct .
  • Segment/customer concentration and timing: a large regional pulled forward ~$3M, and one regional will be a 10% customer, creating quarter-to-quarter variability risk .
  • Active cabinet supply chain friction: tightness for battery backup/rectifiers tied to tariffs, adding timing issues at the border; management has absorbed costs and is exploring alternative suppliers .

Financial Results

Revenue and EPS vs Prior Periods and Consensus

MetricQ4 2024Q1 2025Q2 2025Q2 2025 Consensus
Net Sales ($USD Millions)$46.8 $35.5 $47.2 $38.53*
Diluted EPS ($USD)$(0.06) $(0.13) $0.09 $(0.19)*

Estimates marked with * are values retrieved from S&P Global.

Margins and Profitability

MetricQ4 2024Q1 2025Q2 2025
Gross Margin %22.8% 23.1% 30.1%
Income (Loss) from Operations ($USD Millions)$(3.01) $(3.98) $0.26
Net Income (Loss) ($USD Millions)$(0.83) $(1.91) $1.33

Segment Breakdown (Q2 2025)

SegmentNet Sales ($USD Millions)YoY Change
Clearfield$40.6 +47%
Nestor$6.6 -30%

KPIs and Operating Metrics

KPIQ4 2024Q1 2025Q2 2025
Order Backlog ($USD Millions)$25.1 $26.0 $34.1
SG&A ($USD Millions)$13.68 $12.16 $13.93
Inventories, net ($USD Millions)$66.77 $59.22 $56.08
Cash & Equivalents ($USD Millions)$16.17 $30.45 $28.85
Share Repurchases ($USD Millions, quarter)—$6.2 ~$4.7
Diluted Shares Outstanding (units)14,234,506 14,213,025 14,095,341

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net SalesFY 2025$170–$185M $170–$185M Maintained
Net SalesQ3 2025—$45–$50M New
Diluted EPSQ3 2025—$0.01–$0.08 New
Net SalesQ2 2025$37–$40M Actual $47.2M Beat
Diluted EPSQ2 2025$(0.16) to $(0.21) Actual $0.09 Beat
Tariff Impact to Operating ResultsFY/Q3 2025Uncertain impact, excluded from prior guidance Not expected to be material under current policies Clarified

Earnings Call Themes & Trends

TopicQ4 2024 (Prior)Q1 2025 (Prior)Q2 2025 (Current)Trend
Supply chain & tariffsManaging inventory; outlook cautious; cabinet adoption improving Tariffs evolving; guidance excluded tariff impact; BABA-compliant redundancy USMCA exemption for Mexico; diversified sourcing; tariffs not expected to be material Improving resilience; clearer stance on tariffs
Government programs (BEAD/E‑ACAM)Expect initial BEAD revenue late 2025 BEAD uncertainty acknowledged BEAD meaningful LT catalyst, material in FY2026; E‑ACAM near-term contributor BEAD pushed out; E‑ACAM nearer-term
Product performance (Connected home, cabinets)Active cabinet momentum; homes connected rising Increased connected-home revenue Connected-home kits save labor; cabinets sales resuming Strong adoption; labor-lite solutions
Regional/MSO trendsMSO inventory pockets; large regionals recovering Strong quoting; normalization underway Large regional $3M pull-forward; a 10% customer concentration Normalizing orders with timing variability
Nestor/EuropeFocus on improving margins internationally Revenue growth minimal internationally Shift production to Estonia for higher margins; Nestor revenue down y/y Restructuring for margin over growth
Product innovationDeploy Reel TAP Box; FiberFlex cabinets; BILT app Portfolio supplier progress Launch of TetherSmart MFT terminal Continued innovation

Management Commentary

  • CEO on execution: “We converted quoting activity into revenue at a faster pace and higher rate than anticipated… we remain confident in our ability to take market share as the industry returns to normalized demand and ordering patterns.”
  • CFO on margin drivers: “Strong bottom-line performance… driven by lower excess inventory reserve costs and higher production volumes… we do not believe the tariffs in their present form will materially affect our operating results.”
  • CEO on supply chain/tariffs: “Products manufactured in Mexico are exempt… we designed U.S. and Mexican facilities for dual sourcing… shifting production of affected components to multiple sites globally… do not believe the evolving tariff situation… will materially affect our operating results.”
  • CEO on connected-home kits: “We can pull up a house with one person rather than two… you’ll see a lot of that equipment in our customers’ trucks… connecting homes.”
  • CFO on E&O reserve dynamics: “Last year’s quarter had ~$4.9M expense; this quarter roughly ~$0.4M, and we reversed about ~$0.5M of recoveries tailwinds.”

Q&A Highlights

  • Product mix and connected-home momentum: Clearfield’s home deployment kits reduce labor and are gaining traction; cabinets sales resuming as surplus hubs clear .
  • Customer concentration and timing: a large regional pulled forward ~$3M; one regional becomes a 10% customer; normalization with timing-driven variability .
  • Gross margin drivers and inventory reserves: materially lower E&O in Q2 vs prior-year and recoveries contributed; improved overhead absorption with volume .
  • Nestor cost structure and footprint: shifting higher-margin products to Estonia; flexibility and proximity to European customers to enhance margins .
  • Supply chain tightness in active cabinets: battery backup/rectifiers challenged by tariffs and border timing; company absorbing costs, exploring alternative suppliers .

Estimates Context

  • Q2 FY2025 results vs S&P Global consensus: revenue $47.17M vs $38.53M*, EPS $0.09 vs -$0.19*, EBITDA ~$2.14M vs -$1.80M* .
  • Q3 FY2025 consensus heading into quarter: revenue $47.58M*, EPS $0.05*; management guided $45–$50M revenue and $0.01–$0.08 EPS, consistent with consensus magnitude but with execution tailwinds seen in Q2 .

Estimates marked with * are values retrieved from S&P Global.

Key Takeaways for Investors

  • Clearfield delivered a clean beat and return to profitability, with structural gross margin improvement from lower E&O and better overhead absorption .
  • The Clearfield segment’s +47% y/y growth to $40.6M underscores share gains and demand normalization across end-markets; Nestor remains under pressure but is pivoting to higher-margin output from Estonia .
  • Backlog rose to $34.1M (+31% q/q), supporting near-term visibility alongside Q3 guidance for $45–$50M revenue and $0.01–$0.08 EPS .
  • Tariff exposure appears well-managed via USMCA-exempt Mexico manufacturing and diversified sourcing; management does not expect material earnings impact under current policies .
  • Connected-home kits and cabinet sales resumption are tangible growth drivers, with labor-lite differentiation likely to sustain momentum through summer build season .
  • Capital allocation continues: ~$$4.7M repurchased in Q2 with ~$14M remaining; cash & equivalents $28.85M and short-term investments $83.14M provide flexibility .
  • Medium-term thesis: BEAD is a 2026 catalyst; E‑ACAM should contribute sooner; Clearfield’s innovation (e.g., TetherSmart MFT) and portfolio breadth position it to grow at or above industry as ordering normalizes .