Nubeva announces first sale of a reverse ransomware solution to the higher education market

CLEARFIELD, INC. Management Discussions and Analysis of Financial Condition and Results of Operations (Form 10-K)

Cautionary assertion relating to forward-looking data



Statements made on this Annual Report on Type 10-Okay, within the Firm's different SEC
filings, in press releases and in oral statements, that aren't statements of
historic truth are "forward-looking statements." Such forward-looking
statements contain recognized and unknown dangers, uncertainties and different elements
which can trigger the precise outcomes or efficiency of the Firm to be
materially completely different from the outcomes or efficiency expressed or implied by
such forward-looking statements. The phrases "believes," "expects," "anticipates,"
"seeks," "could," "will," and comparable expressions establish forward-looking
statements. Readers are cautioned to not place undue reliance on these
forward-looking statements, which converse solely as of the date the assertion was
made. The dangers and uncertainties that might trigger precise outcomes to vary
materially and adversely from these expressed or implied by the forward-looking
statements embody these dangers described in Half I, Merchandise 1A "Threat Components."



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Overview of Enterprise: The Clearfield working phase designs, manufactures and
distributes fiber optic administration, safety and supply merchandise for
communications networks. Its "fiber to the wherever" platform serves the distinctive
necessities of main broadband service suppliers in the US, which
embody Group Broadband, Nationwide Carriers, and A number of System Operators
("MSO's" or "cable TV"), whereas additionally serving the broadband wants of the
Worldwide markets, primarily within the Caribbean, in Canada, and Central and
South America. These prospects are collectively included within the class of
Broadband Service Suppliers. The Clearfield working phase additionally offers
contract manufacturing companies to its Legacy prospects for build-to-print
companies which embody OEM requiring copper and fiber cable assemblies constructed to
their specs. The Firm's gross sales channels embody direct to buyer,
via distribution companions, and to unique tools suppliers who non-public
label its merchandise. The Firm's merchandise are bought by its gross sales staff and
impartial gross sales representatives.



The Nestor Cables working phase manufactures fiber optic and copper
telecommunication cables and tools which it distributes to telecommunication
operators, community house owners, electrical corporations, constructing contractors, and
industrial corporations. Nestor Cables has been a provider to Clearfield for over a
decade. Nestor has two varieties of manufacturing processes, the method of
manufacturing cable in its Finland facility and the completed meeting portion of
its enterprise carried out in Estonia. Nestor Cables sells its merchandise
predominantly to prospects in Europe.



Crucial Accounting Insurance policies: In making ready our monetary statements, we make
estimates, assumptions and judgments that may have a major impression on our
gross sales, revenue from operations and internet revenue, in addition to on the worth of sure
property and liabilities on our consolidated stability sheets.  We imagine that
there are a number of accounting insurance policies which can be crucial to an understanding of
our historic and future efficiency, as these insurance policies have an effect on the reported
quantities of gross sales, bills and vital estimates and judgments utilized by
administration.  Whereas there are a selection of accounting insurance policies, strategies and
estimates affecting our monetary statements, areas which can be significantly
vital embody:



  ? Income recognition


  ? Accounting for stock-based compensation


  ? Revenue taxes

? Valuation of stock, long-lived property, and intangible property with restricted lives

    goodwill


  ? Valuation in enterprise mixtures




Income Recognition Our income is comprised of the sale of our merchandise to
prospects and is acknowledged when the Firm satisfies its efficiency
obligations below the contract. A efficiency obligation is a promise in a
contract to switch a definite services or products to a buyer. The bulk
of our contracts have a single efficiency obligation and are brief time period in
nature. We acknowledge income by transferring the promised merchandise to the
buyer, with considerably all income acknowledged on the cut-off date the
buyer obtains management of the merchandise. Delivery and dealing with prices charged to
our prospects are included in internet gross sales, whereas the corresponding transport
bills are included in price of gross sales. Gross sales, worth add, and different taxes
collected from prospects and remitted to governmental authorities are accounted
for on a internet (excluded from income) foundation.



Inventory-Primarily based Compensation We measure and acknowledge compensation expense for all
stock-based awards at truthful worth over the requisite service interval. We use the
Black-Scholes possibility pricing mannequin to find out the truthful worth of choices. For
restricted inventory grants, truthful worth is set as the typical value of the
Firm's inventory on the date of grant. Fairness-based compensation expense is
damaged out between price of gross sales and promoting, normal and administrative
bills based mostly on the classification of the worker. The dedication of truthful
worth of stock-based awards on the date of grant utilizing an option-pricing mannequin
is affected by our inventory value in addition to by assumptions relating to quite a few
subjective variables. These variables embody, however usually are not restricted to, the
anticipated inventory value volatility over the time period of the awards, and precise and
projected worker inventory possibility train behaviors.



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The anticipated phrases of the choices are based mostly on evaluations of historic and
anticipated future worker train habits. The chance-free rate of interest relies
on the U.S. Treasury charges on the date of grant with maturity dates
roughly equal to the anticipated life at grant date. Volatility relies on
historic and anticipated future volatility of the Firm's inventory. The Firm
has not traditionally issued any dividends and doesn't anticipate to sooner or later.
Forfeitures for each possibility and restricted inventory grants are estimated on the
time of the grant and revised in subsequent durations if precise forfeitures differ
from estimates.



If elements change and we make use of completely different assumptions within the dedication of
the truthful worth of grants in future durations, the associated compensation expense
that we file could differ considerably from what now we have recorded within the
present durations.



Revenue Taxes We account for revenue taxes in accordance with ASC 740, Revenue
Taxes, below which deferred revenue taxes are acknowledged based mostly on the estimated
future tax results of variations between the monetary assertion and tax bases
of property and liabilities given the provisions of enacted tax legal guidelines.  Deferred
revenue tax provisions and advantages are based mostly on modifications to the property or
liabilities from yr to yr.  In offering for deferred taxes, we take into account tax
rules of the jurisdictions through which we function, estimates of future
taxable revenue, and accessible tax planning methods. If tax rules,
working outcomes, or the flexibility to implement tax-planning methods fluctuate,
changes to the carrying worth of deferred tax property and liabilities could also be
required.  A valuation allowance is recorded when it's extra seemingly than not
{that a} deferred tax asset won't be realized.  The recorded valuation
allowance relies on vital estimates and judgments and if the details and
circumstances change, the valuation allowance might materially change.



In accounting for uncertainty in revenue taxes, we acknowledge the monetary
assertion good thing about a tax place solely after figuring out that the related tax
authority would extra seemingly than not maintain the place following an audit.
For tax positions assembly the extra seemingly than not threshold, the quantity
acknowledged within the monetary statements is the most important profit that has a higher
than 50 % chance of being realized upon final settlement with the
related tax authority. The Firm acknowledges curiosity and penalties accrued on
any unrecognized tax advantages as a part of revenue tax expense.



From September 30, 2022 And 2021, the corporate didn’t have we Federal, State, or Finnish Web Working Loss (“NOL”) carried ahead.



As a part of the method of making ready our monetary statements, we're required to
estimate our revenue tax legal responsibility in every of the jurisdictions through which we do
enterprise. This course of includes estimating our precise present tax expense
along with assessing non permanent variations ensuing from differing remedy
of things for tax and accounting functions. These variations end in deferred
tax property and liabilities. We should then assess the chance that these
deferred tax property might be recovered from future taxable revenue and, to the
extent we imagine that restoration will not be extra seemingly than not or unknown, we should
set up a valuation allowance. If the valuation allowance is lowered, the
Firm would file an revenue tax profit within the interval through which that
dedication is made. If the valuation allowance is elevated, the Firm
would file extra revenue tax expense.



The Firm information revenue tax returns within the U.S. Federal jurisdiction and
varied state and international jurisdictions.  Primarily based on its analysis, the Firm
has concluded that it has no vital unrecognized tax advantages. The Firm
is mostly topic to U.S. federal examination for all tax years after 2017.
The Firm is topic to state examinations for all tax years after 2013 as a result of
unexpired analysis and growth credit score carryforwards nonetheless open below
statute. Nestor is mostly topic to Finland examination for all tax years
after 2018.



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Impairment of Lengthy-Lived Belongings, Intangible Belongings and Goodwill The Firm's
long-lived property as of September 30, 2022 consisted primarily of property,
plant and tools, proper of use lease property, patents, intangibles, and
goodwill. The Firm evaluations the carrying quantity of its property, plant and
tools, proper of use lease property, and intangible property if occasions or modifications
in circumstances point out that the carrying quantity of the property might not be
recoverable. When this evaluation signifies the carrying quantity of an asset or asset
group exceeds the sum of the long run undiscounted money flows anticipated to be
generated by the property, the Firm acknowledges an asset impairment cost
in opposition to operations for the quantity by which the carrying quantity of the impaired
asset exceeds its truthful worth.



Figuring out truthful values of property, plant and tools, proper of use lease
property, and intangible property utilizing a reduced money circulate technique includes
vital judgment and requires the Firm to make vital estimates and
assumptions, together with long-term projections of money flows, market situations
and applicable low cost charges. Judgments are based mostly on historic expertise,
present market traits, consultations with exterior valuation specialists and
different data. If details and circumstances change, using completely different
estimates and assumptions might end in a materially completely different final result. The
Firm typically develops these forecasts based mostly on latest gross sales knowledge for
current merchandise, deliberate timing of recent product launches or acquisitions, and
estimated future progress of the FTTP market.



Starting in fiscal yr 2022, the Firm operates as two reporting models, the
Clearfield working phase performed via Clearfield, Inc. in the United
States, and the Nestor Cables working phase performed via Clearfield
Finland Ltd and its subsidiaries in Finland and Estonia. The Firm evaluations the
carrying quantity of goodwill yearly within the fourth quarter of every fiscal yr
and extra incessantly if occasions or modifications in circumstances point out that the
carrying quantity of the property might not be recoverable.  The Firm carried out
step zero of the impairment check to find out whether or not there are any qualitative
elements which can point out a possible impairment. Throughout the yr ended
September 30, 2022, there have been no triggering occasions that indicated goodwill
might be impaired. Previous to fiscal yr 2022, when the Firm operated as one
reporting unit, the Firm decided its truthful worth for goodwill impairment
testing functions by calculating its market capitalization and evaluating that to
the Firm's carrying worth.  The Firm's goodwill impairment check for the
yr ended September 30, 2021 resulted in extra truthful worth over carrying worth
and subsequently, no changes have been made to goodwill.



A big discount in our market capitalization or within the carrying quantity
of internet property of a reporting unit might end in an impairment cost. If the
carrying quantity of a reporting unit exceeds its truthful worth, the Firm would
measure the doable goodwill impairment loss based mostly on an allocation of the
estimate of truthful worth of the reporting unit to all the underlying property and
liabilities of the reporting unit, together with any beforehand unrecognized
intangible property. The surplus of the truthful worth of a reporting unit over the
quantities assigned to its property and liabilities is the implied truthful worth of
goodwill. An impairment loss is acknowledged to the extent {that a} reporting unit's
recorded goodwill exceeds the implied truthful worth of goodwill. An impairment loss
could be based mostly on vital estimates and judgments, and if the details and
circumstances change, a possible impairment might have a cloth impression on the
Firm's monetary statements.



There was no impairment of long-lived property, intangible property or goodwill through the years ended September 30, 2022and 2021 and 2020, respectively.



Valuation of Stock The Firm maintains a cloth quantity of stock to
help its manufacturing operations and buyer demand. This stock is
acknowledged on the decrease of price or internet realizable worth. Frequently, the
Firm evaluations its stock and identifies that which is extra, sluggish shifting
and out of date by contemplating elements equivalent to stock ranges, anticipated product
life and forecasted gross sales demand. Any recognized extra, sluggish shifting and
out of date stock is written all the way down to its market worth via a cost to price
of gross sales. It's doable that extra stock write-down prices could also be
required sooner or later if there's a vital decline in demand for the
Firm's merchandise and the Firm doesn't regulate its stock procurement
accordingly.



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Valuation in Enterprise Mixtures We file tangible and intangible property
acquired and liabilities assumed in enterprise mixtures below the acquisition
technique of accounting below ASC 805- Enterprise mixtures. Quantities paid for every
acquisition are allotted to the property acquired and liabilities assumed based mostly
on their truthful values on the dates of acquisition. The worth recorded relies on
estimates of future monetary projections. These money circulate projections are
discounted with a danger adjusted fee. The truthful worth of identifiable intangible
property relies on detailed valuations that use data and assumptions
offered by administration, which take into account administration's finest estimate of inputs and
assumptions {that a} market participant would use. We allocate any extra buy
value over the truthful worth of the web tangible and intangible property acquired and
liabilities assumed to goodwill.



Outcomes of Operations


The yr is over September 30, 2022 in comparison with the yr ended September 30, 2021



The Firm's internet gross sales for fiscal yr 2022 elevated 92%, or $130,128,000, to
$270,883,000 from internet gross sales of $140,755,000 in fiscal yr 2021. The Firm
allocates gross sales from exterior prospects to geographic areas based mostly on the
location to which the product is transported. Accordingly, worldwide gross sales
represented 6% and seven% of internet gross sales for the years ended September 30, 2022 and
2021, respectively.



The rise in internet gross sales for fiscal yr 2022 of $130,128,000 in comparison with
fiscal yr 2021 is attributable to elevated demand throughout Clearfield's core
markets. Gross sales to the Group Broadband market elevated 84% or $82,651,000
from $97,978,000 in fiscal yr 2021 to $180,629,000 fiscal yr 2022. Gross sales to
Clearfield's MSO/Cable TV market elevated 164% or $30,379,000 from $18,490,000
in fiscal yr 2021 to $48,868,000 in fiscal yr 2022. Gross sales to Nationwide
Carriers elevated 96% or $11,499,000 from $11,956,000 in fiscal yr 2021 to
$23,456,000 in fiscal yr 2022. The rise in gross sales to those prospects was
as a result of persevering with elevated demand for fiber connectivity merchandise in response
to COVID-19 pushed by prospects accelerating their buying selections and
deployment schedules of our fiber optic options and the necessity for high-speed
broadband required within the work from wherever surroundings.  Web gross sales to
Worldwide prospects elevated 62% or $5,846,000 from $9,470,000 in fiscal
yr 2021 to $15,276,000 in fiscal yr 2022, partially pushed by the Firm's
acquisition of Nestor Cables on July 26, 2022.



Income from all prospects is obtained from buy orders submitted from time
to time. Accordingly, the Firm's skill to foretell orders in future durations
or traits affecting orders in future durations is proscribed. The Firm's skill
to foretell income has grow to be additional restricted by potential disruption to its
provide chains or modifications in buyer ordering patterns as a result of COVID-19. The
Firm's skill to acknowledge income sooner or later for its backlog of buyer
orders will rely on the Firm's skill to fabricate and ship merchandise
to the shoppers and fulfill its different contractual obligations.



Price of gross sales for fiscal yr 2022 was $157,936,000, a rise of $78,358,000,
or 98%, from the $79,578,000 in fiscal yr 2021. Gross revenue elevated 85%, or
$51,770,000 from $61,177,000 for fiscal yr 2021 to $112,947,000 for fiscal
yr 2022.



Gross revenue % was 41.7% in fiscal yr 2022 in comparison with 43.5% for fiscal
yr 2021. The lower in gross revenue margin for the interval was primarily due
to part price will increase absorbed by the Firm as a result of inflationary
financial surroundings, elevated facility prices from our expanded Mexico
manufacturing and Minnesota distribution heart operations, and elevated
freight and transportation prices. Regardless of the lower in gross revenue
share, gross revenue {dollars} elevated as a result of improve internet gross sales.



Promoting, normal and administrative expense for fiscal yr 2022 was
$49,130,000, a rise of $13,187,000, or 37%, in comparison with $35,943,000 for
fiscal yr 2021. This improve is primarily comprised of a rise of
$6,976,000 in Clearfield's compensation prices as a result of extra personnel this
yr over final, increased performance-based compensation accruals in addition to gross sales
commissions as a result of considerably increased gross sales volumes, bills and costs associated
to the acquisition of Nestor Cables of $1,647,000, elevated journey,
leisure, and tradeshows price of $1,382,000 as a result of lowered COVID-19 journey
restrictions as in comparison with the prior yr, and elevated inventory compensation
bills of $990,000 as a result of issuances of fairness awards in fiscal 2022.



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Revenue from operations for fiscal yr 2022 was $63,817,000 In comparison with
$25,234,000 For fiscal yr 2021. This improve is attributable to elevated gross sales and gross revenue, which was partially offset by elevated gross sales and normal and administrative bills as described above.



Web funding revenue in fiscal yr 2022 was $328,000 in comparison with $500,000 for
fiscal yr 2021. The lower is because of decrease rates of interest earned on
decreased funding balances in fiscal 2022. The Firm invests its extra
money primarily in FDIC-backed financial institution certificates of deposit, treasury securities,
and cash market accounts. We anticipate internet funding revenue to say no as we do
not plan to reinvest the vast majority of funds from these securities upon maturity
however quite use the funds to proceed to spend money on our operations.



Curiosity expense in fiscal yr 2022 was $311,000. The rise is because of
$141,000 in curiosity on account of $16,700,000 borrowed on the Firm's line
of credit score drawn on within the fourth quarter of fiscal 2022 to fund the acquisition
of Nestor Cables, and $170,000 in curiosity on debt held with Nestor Cables. The
Firm didn't have any curiosity expense for fiscal yr 2021.



Revenue tax expense for fiscal yr 2022 was $14,472,000 in comparison with $5,407,000
for fiscal yr 2021.  The rise in tax expense of $9,065,000 from the yr
ended September 30, 2021 is primarily as a result of improve in taxable revenue for
fiscal yr 2022. The rise within the revenue tax expense fee to 22.7% for
fiscal yr 2022 from 21.0% for fiscal yr 2021 is because of elevated everlasting
addback objects together with nondeductible compensation and transaction prices. Our
provision for revenue taxes consists of present U.S. federal tax expense and state
tax expense, Finland taxes and deferred tax expense.



Web revenue for fiscal yr 2022 was $49,362,000 or $3.58 per primary and $3.55 per
diluted share in comparison with $20,327,000 or $1.48 per primary and $1.47 per diluted
share for the fiscal yr 2021.



The yr is over September 30, 2021 in comparison with the yr ended September 30, 2020



Web gross sales for fiscal yr 2021 elevated 51%, or $47,681,000, to $140,755,000
from internet gross sales of $93,075,000 in 2020. The Firm allocates gross sales from exterior
prospects to geographic areas based mostly on the placement to which the product is
transported. Accordingly, worldwide gross sales represented 7% and 4% of internet gross sales
for the years ended September 30, 2021 and 2020, respectively.



Gross sales in fiscal yr 2021 to broadband service suppliers have been 98% of internet gross sales,
or $138,021,000 in comparison with $89,571,000, or 96%, of internet gross sales in fiscal 2020.
Amongst this group, the Firm recorded $9,470,000 in worldwide gross sales in
fiscal yr 2021 versus $4,054,000 in fiscal yr 2020. Gross sales to Legacy
prospects in 2021 have been 2% of internet gross sales, or $2,734,000 in comparison with $3,503,000, or
4%, of internet gross sales in fiscal yr 2020.



The rise in internet gross sales for fiscal yr 2021 of $47,681,000 in comparison with fiscal
yr 2020 was primarily attributable to a rise in gross sales to Group
Broadband, MSO and Worldwide prospects of $38,920,000, $6,245,000 and
$5,396,000 respectively. This was offset by decreased gross sales to Tier 1 and Legacy
prospects of $2,172,000, and $708,000, respectively. The rise to Group
Broadband and MSO prospects was as a result of elevated demand in response to COVID-19
pushed by prospects accelerating their buying selections and deployment
schedules of our fiber optic options and the necessity for high-speed broadband
required within the work from wherever surroundings, in addition to market share beneficial properties
amongst prospects in these markets. The rise in Worldwide gross sales was a
results of elevated demand as purchases within the prior yr have been negatively
affected by COVID-19. The lower in gross sales to Tier 1 prospects was as a result of a
discount in capital spending within the shopper markets for fiber to the house at
one in all our Tier 1 prospects leading to a slower tempo of their spend with us.



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Income from all prospects was obtained from buy orders submitted from time
to time. Accordingly, the Firm's skill to foretell orders in future durations
or traits affecting orders in future durations is proscribed. The Firm's skill
to foretell income has grow to be additional restricted by potential disruption to its
provide chains or modifications in buyer ordering patterns as a result of COVID-19. The
Firm's skill to acknowledge income sooner or later for its backlog of buyer
orders will rely on the Firm's skill to fabricate and ship merchandise
to the shoppers and fulfill its different contractual obligations.



Price of gross sales for fiscal yr 2021 was $79,578,000, a rise of $24,418,000,
or 44%, from the $55,160,000 in fiscal yr 2020.  Gross revenue elevated 61%,
or $23,264,000, from $37,914,000 for fiscal yr 2020 to $61,178,000 for fiscal
yr 2021. Gross revenue % was 43.5% in fiscal yr 2021 in comparison with 40.7%
for fiscal yr 2020. The year-over-year improve in gross revenue was as a result of
elevated gross sales quantity.  The rise in gross revenue % was primarily due
to favorable product combine related to increased internet gross sales within the Firm's
Group Broadband markets, improved overhead absorption gained from elevated
gross sales volumes, and higher use of its Mexico manufacturing crops in fiscal 2021
in comparison with fiscal yr 2020. In fiscal yr 2021, the Firm did expertise
elevated materials and provide chain transportation prices in its price of gross sales
as a result of substantial materials demand and strained provide chain and transportation
programs attributable to COVID-19 and expects that increased degree of expense to proceed
in fiscal yr 2022.



Promoting, normal and administrative expense for fiscal yr 2021 was
$35,943,000, a rise of $6,412,000, or 22%, in comparison with $29,531,000 for
fiscal yr 2020.  This improve is primarily composed of a rise of
$6,146,000 in compensation prices as a result of extra personnel and better
performance-based compensation accruals in addition to gross sales commissions as a result of
increased gross sales volumes. As well as, inventory compensation bills elevated
$471,000 as a result of issuances of fairness awards in fiscal 2021. These have been partially
offset by decrease journey and leisure prices in fiscal yr 2021 of $263,000
as a result of a full yr of COVID-19 restrictions, and a restoration of dangerous debt expense
of $210,000.


Revenue from operations for fiscal yr 2021 was $25,234,000 In comparison with
$8,384,000 For the fiscal yr 2020. This improve was attributable to elevated gross sales and gross revenue, which was partially offset by elevated gross sales and normal and administrative bills as described above.



Curiosity revenue in fiscal yr 2021 was $500,000 in comparison with $771,000 for fiscal
yr 2020. The lower is because of decrease rates of interest earned on elevated
funding balances in fiscal 2021. The Firm invests its extra money
primarily in FDIC-backed financial institution certificates of deposit, treasury securities, and
cash market accounts. We anticipate curiosity revenue to say no as a result of
prevailing decrease rates of interest within the present financial surroundings.



Revenue tax expense for fiscal yr 2021 was $5,407,000 in comparison with $1,862,000
for fiscal yr 2020. The rise in tax expense of $3,545,000 from the yr
ended September 30, 2020 is primarily as a result of improve in taxable revenue for
fiscal yr 2021. The rise within the revenue tax expense fee to 21.0% for
fiscal yr 2021 from 20.3% for fiscal yr 2020 is because of dilution of the
everlasting variations between tax and e book revenue on account of considerably
increased taxable revenue in fiscal yr 2021. Our provision for revenue taxes
consists of present federal tax expense, state revenue tax expense, and deferred tax
expense.



Web revenue for fiscal yr 2021 was $20,327,000 or $1.48 per primary and $1.47 per
diluted share in comparison with $7,293,000 or $0.53 per primary and diluted share for
the fiscal yr 2020.



Reportable Segments



The Firm's reportable segments are based mostly on the Firm's technique of inside
reporting. These outcomes usually are not essentially indicative of the outcomes of
operations that might have occurred had every phase been an impartial,
stand-alone entity through the durations introduced. The interior reporting of those
working segments is outlined based mostly, partly, on the reporting and evaluation
course of utilized by the Firm's Chief Government Officer.



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On July 26, 2022, Clearfield via its newly created Finnish subsidiary,
Clearfield Finland Ltd, acquired all the fairness of Nestor Cables Ltd, which
has a wholly-owned Estonian subsidiary. Nestor Cables Baltics OÜ. Following the
closing of the acquisition of Nestor Cables on July 26, 2022, the Firm
reassessed its working segments as outlined below Accounting Requirements
Codification ("ASC") 280, Phase Reporting. Beneath ASC 280, working segments
are outlined as parts of an enterprise the place discrete monetary data
is obtainable that's evaluated commonly by the chief working resolution -maker
("CODM"), in deciding how one can allocate sources and in assessing efficiency.
Previous to July 26, 2022, we have been thought-about to be in a single reporting phase
and working unit construction. Primarily based upon the Firm's evaluation following the
acquisition of Nestor Cables, the Firm decided that the enterprise of Nestor
Cables was thought-about a second reportable phase as of July 26, 2022.
Accordingly, for the yr ended September 30, 2022, the Firm has two
reportable segments: (1) Clearfield and (2) Nestor Cables.  The entities that
comprise the Nestor Cables phase are Clearfield Finland Ltd, Nestor Cables Ltd
and Nestor Cables Baltics Ltd.



The sectors to be reported are as follows:


  - Clearfield Phase- Clearfield designs, manufactures and sells fiber
    administration, safety, and supply options.



– Nestor Cables Division – Nestor Cables designs, manufactures and sells fibers

    optic and copper telecommunication cables and tools.




Clearfield Phase



The next desk offers internet gross sales and internet revenue for the Clearfield Phase
for the fiscal years ended:



                                               September 30,     September 30,     September 30,
(In hundreds)                                     2022              2021              2020
Phase internet gross sales                              $     263,822     $     140,755     $      93,075
Phase internet revenue                                    49,771            20,327             7,293






Web gross sales within the Clearfield phase elevated 87% or $123,067,000 for the fiscal
yr ended September 30, 2022, leading to elevated gross sales to its Group
Broadband, MSO/Cable TV, and Tier 1 prospects as a result of persevering with demand for fiber
connectivity merchandise in response to COVID-19, pushed by these prospects to
speed up their buying selections and deployment schedules of our fiber
optic options and the necessity for high-speed broadband.



Web revenue within the Clearfield phase for the fiscal yr ended September 30,
2022 elevated 145% or $29,444,000 for the fiscal yr ended September 30, 2022,
pushed by the modifications in gross sales outlined above.



Nestor Cables Phase


The next desk reveals the web gross sales and internet revenue of the Nestor Cables sector for the fiscal yr ended:



                                               September 30,
(In hundreds)                                     2022          September 30, 2021      September 30, 2020
Phase internet gross sales                              $       7,061     $                 -     $                 -
Phase internet revenue (loss)                               (409 )                     -                       -






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Nestor Cables has been acquired July 26, 2022. Previous to the acquisition, the corporate operated as a single reporting phase.

Web gross sales within the Nestor Cables phase for the fiscal yr ended September 30, 2022 they have been $7,061,000.



Web loss within the Nestor Cables phase for the fiscal yr ended September 30,
2022 was $409,000, pushed by one time acquisition associated transaction bills
of roughly $527,000.


Liquidity and capital sources



As of September 30, 2022, the Firm had mixed consolidated balances of
money, money equivalents, brief time period and long-term investments of $45,199,000
in comparison with $60,503,000 as of September 30, 2021.  As of September 30, 2022, our
principal sources of liquidity have been our money and money equivalents and short-term
investments. These sources complete $22,452,000 as of September 30, 2022 in contrast
to $23,590,000 as of September 30, 2021. Investments thought-about long-term have been
$22,747,000 as of September 30, 2022 in comparison with $36,913,000 as of September 30,
2021.  Our extra money is invested primarily in certificates of deposit backed by
the FDIC, U.S. Treasury securities and cash market accounts. On April 27, 2022,
Clearfield entered right into a mortgage settlement and a safety settlement with a financial institution
that gives the Firm with a $40 million revolving line of credit score that's
secured by sure of the Firm's U.S. property. The road of credit score matures on
April 27, 2025 and borrowed quantities will bear curiosity at a variable fee of the
CME Group one-month time period Secured In a single day Financing Price ("SOFR") plus 1.85%,
however not lower than 1.80% each year.  As of September 30, 2022, the rate of interest
was 4.36%. The mortgage settlement and the safety settlement incorporates customary
affirmative and adverse covenants and necessities regarding the Firm and
its operations, together with a requirement that the Firm keep a debt service
protection ratio of not lower than 1.20 to 1 as of the top of every fiscal yr for
the fiscal yr then ended and keep a debt to money circulate ratio of not higher
than 2 to 1 measured as of the top of every of the Firm's fiscal quarters for
the trailing twelve (12) month interval. Debt service protection ratio is the ratio
of Money Accessible for Debt Service to Debt Service, every as outlined within the mortgage
settlement.  Debt and Money Circulate are additionally as outlined within the mortgage settlement for the
functions of the debt to money circulate ratio covenant. As of September 30, 2022, the
Firm has borrowed $16,700,000 in opposition to this line of credit score. As of September
30, 2022, the Firm was in compliance with all covenants. We had long-term
debt obligations of $18,666,000 as of September 30, 2022 and no long-term debt
obligations as of September 30, 2021. We imagine the mixed balances of
short-term money and investments, together with long-term investments and accessible
financial institution traces of credit score present a extra correct indication of our accessible
liquidity.



We imagine our current money equivalents and short-term investments, together with
money circulate from operations and line of credit score, might be adequate to fulfill our
working capital and funding necessities past the following 12 months.  The
Firm intends on using its accessible money and property primarily for its
continued natural progress and potential future strategic transactions, in addition to
execution of the share repurchase program adopted by our Board of Administrators.
The share repurchase program was initially adopted on November 13, 2014 with
$8,000,000 licensed for widespread inventory repurchases.  Efficient January 27, 2022,
the Firm reinstated its inventory repurchase program that had been suspended in
April 2020 as a result of COVID-19 uncertainty. As well as, efficient January 27, 2022,
the Firm's board of administrators elevated the share repurchase program by an
extra $10 million to an mixture of $22 million, from the earlier $12
million. As of September 30, 2022, now we have repurchased an mixture of 565,590
shares for roughly $7,019,000, leaving roughly $14,981,000 accessible
inside our $22,000,000 inventory repurchase program. The repurchase program doesn't
obligate the Firm to repurchase any specific quantity of widespread inventory throughout
any interval.  The repurchase might be funded by money available. Throughout the yr
ended September 30, 2022, the Firm didn't repurchase any shares below the
inventory repurchase program.



Working Actions



Web money generated from operations for the fiscal yr ended September 30, 2022
totaled $1,001,000. Money offered by operations included internet revenue of
$49,362,000 for the fiscal yr ended September 30, 2022, non-cash bills for
depreciation and amortization of $3,413,000, stock-based compensation of
$2,339,000, along with modifications in working property and liabilities utilizing
money.  Adjustments in working property and liabilities utilizing money embody an
improve in internet inventories of $43,744,000 and accounts receivables of
$24,234,000. The rise in stock is a results of extra stocking ranges
to help the Firm's elevated gross sales backlog and better demand, and stocking
of excessive flip and lengthy lead time parts to restrict manufacturing delays as a result of
uncooked materials part shortages and delays. The rise in accounts receivable
was as a result of increased internet gross sales in addition to elevated days gross sales excellent ("DSO")
as a result of increased gross sales to sure prospects with longer fee phrases. DSO, which
measures how rapidly receivables are collected, elevated 13 days from 39 to 52
from September 30, 2021 to September 30, 2022. Additionally, modifications in working property
and liabilities offering money embody a rise in accounts payable and
accrued bills of $14,502,000, as a result of timing of accounts payable and
$8,738,000 in fiscal yr 2022 incentive compensation accruals to be paid after
yr finish.



Web money generated from operations for the fiscal yr ended September 30, 2021
totaled $10,903,000. Money offered by operations included internet revenue of
$20,327,000 for the fiscal yr ended September 30, 2021, non-cash bills for
depreciation and amortization of $2,302,000, stock-based compensation of
$1,280,000, and reduce in allowance for uncertain accounts of $210,000, in
addition to modifications in working property and liabilities utilizing money.  Adjustments in
working property and liabilities utilizing money embody a rise in internet
inventories of $13,116,000 and accounts receivables of $9,151,000. The rise
in stock is a results of extra stocking ranges to help the Firm's
elevated gross sales backlog and better demand, and stocking of excessive flip and lengthy
lead time parts to restrict manufacturing delays as a result of uncooked materials part
shortages and delays. The rise in accounts receivable was as a result of increased internet
gross sales. The Firm's DSO, which measures how rapidly receivables are collected,
elevated 1 day from 38 to 39 from September 30, 2020 to September 30, 2021.
Additionally, modifications in working property and liabilities offering money embody an
improve in accounts payable and accrued bills of $9,776,000, as a result of timing
of accounts payable and $6,513,000 in fiscal yr 2021 incentive compensation
accruals to be paid after yr finish.



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Web money generated from operations for the fiscal yr ended September 30, 2020
totaled $6,656,000.  Money offered by operations included internet revenue of
$7,293,000 for the fiscal yr ended September 30, 2020, non-cash bills for
depreciation and amortization of $2,422,000, stock-based compensation of
$774,000, barely offset by a non-cash amortization of reductions on investments
of $64,000, along with modifications in working property and liabilities utilizing
money.  Adjustments in working property and liabilities utilizing money embody an
improve in internet inventories of $5,396,000 and accounts receivables of
$1,378,000.  The rise in stock is a results of extra stocking ranges
to help the Firm's elevated backlog and better demand, and extra
security inventory throughout the Firm's a number of areas as a result of uncertainty of
COVID-19 on the Firm's provide chain and manufacturing areas. The rise
in accounts receivable was as a result of increased internet gross sales offset by improved DSO within the
present yr. The Firm's DSO, which measures how rapidly receivables are
collected, decreased 9 days from 47 to 38 from September 30, 2019 to September
30, 2020.  Additionally, modifications in working property and liabilities offering money
embody a rise in accounts payable and accrued bills of $3,152,000.



Investing Actions



For the fiscal yr ended September 30, 2022, the Firm had $17,386,000 of
FDIC-backed certificates of deposit and U.S. Treasuries mature or be bought. The
Firm used $9,148,000 in money to buy fastened and intangible property.
Moreover, the Firm used $16,187,000 in money to accumulate Nestor Cables on
July 26, 2022. The result's money utilized in investing actions of $8,197,000 in
fiscal yr 2022. In fiscal yr 2023, the Firm intends to proceed investing
within the needed data expertise, manufacturing tools and facility
wants, together with additional enlargement of producing in our Mexico facility.



For the fiscal yr ended September 30, 2021, we bought $24,809,000 of
FDIC-backed certificates of deposit and U.S. Treasuries and had $13,255,000 of
FDIC-backed certificates of deposit and U.S. Treasuries mature or be known as. The
result's money utilized in investing actions of $13,600,000 in fiscal yr 2021.
The rise in money utilized in investing actions was pushed by elevated
funding of money in extra of working wants into long-term investments.
Throughout fiscal yr 2021, we used $2,046,000 in money for the acquisition of capital
tools and software program and for acquiring patents. These purchases have been primarily
associated to manufacturing and knowledge expertise tools.



For the fiscal yr ended September 30, 2020, we used $1,806,000 in money for the
buy of capital tools and for acquiring patents. These purchases have been
primarily associated to manufacturing tools, together with the enlargement to a second
manufacturing facility in Mexico, in addition to data expertise tools.
Throughout fiscal yr 2020, we bought $34,057,000 of FDIC-backed certificates of
deposit and U.S. Treasuries and had $35,822,000 of FDIC-backed certificates of
deposit and U.S. Treasuries mature or be known as. The result's money utilized in
investing actions of $41,000 in fiscal yr 2020. The lower in money used
in investing actions was pushed by lowered purchases of long-term investments
as a result of present low rate of interest surroundings.



Financing Actions



For the fiscal yr ended September 30, 2022, the Firm borrowed $16,700,000
on its line of credit score to fund the July acquisition of Nestor Cables. The Firm
acquired $544,000 from staff' buy of inventory via our Worker Inventory
Buy Plan ("ESPP"). The Firm used $5,183,000 associated to share withholding
for train and taxes related to the issuance of widespread inventory upon
cashless train of inventory choices and used $1,406,000 to pay for taxes as a
results of staff' vesting of restricted shares utilizing share withholding. As a
consequence, the web money offered by financing actions throughout fiscal yr 2022
was $10,655,000.



For the fiscal yr ended September 30, 2021, the Firm acquired $384,000 from
staff' buy of inventory via our ESPP. The Firm used $462,000 to pay
for taxes associated to staff' workouts of inventory choices and $458,000 to pay
for taxes associated to staff' vesting of restricted shares utilizing share
withholding. Because of this, the web money utilized in financing actions throughout
fiscal yr 2021 was $536,000.



For the fiscal yr ended September 30, 2020, the Firm used $429,000 of money
to repurchase its personal widespread inventory previous to the suspension of the share
repurchase plan in April 2020. For the fiscal yr ended September 30, 2020, the
Firm acquired $349,000 from staff' buy of inventory via the ESPP.
The Firm used $176,000 to pay for taxes associated to staff' workouts of
inventory choices and vesting of restricted shares utilizing share withholding. As a
consequence, the web money utilized in financing actions throughout fiscal yr 2020 was
$247,000.



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Working Leases



We have now entered into varied non-cancelable working lease agreements for
workplace tools and our workplace and manufacturing areas in Minnesota, Mexico,
Finland and Estonia expiring at varied dates via February 2027. Sure of
these leases have escalating hire fee provisions. We acknowledge hire expense
below such leases on a straight-line foundation over the time period of the lease.



New accounting statements:



In June 2016, the FASB issued ASU 2016-13, Measurement of Credit score Losses on
Monetary Devices. In November 2018, the FASB issued replace ASU 2018-19 that
clarifies the scope of the usual within the amendments in ASU 2016-13. This
steering introduces a brand new mannequin for recognizing credit score losses on monetary
devices based mostly on an estimate of present anticipated credit score losses. Monetary
devices impacted embody accounts receivable, commerce receivables, different
monetary property measured at amortized price and different off-balance sheet credit score
exposures. The brand new steering is efficient for the Firm starting within the first
quarter of fiscal 2024, with early adoption permitted. The Firm is evaluating
the impression of the adoption of ASU 2016-13 on its consolidated monetary
statements.

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