Optical Cable Corporation (OCC) Earnings

Management highlights

- Overall Financial and Growth Momentum * OCC delivered strong year-over-year growth of 26.6% in net sales and 42.4% in gross profit in Q2 FY2026, building on solid growth momentum from the start of the fiscal year * Sales order backlog and forward load reached $13.3 million at the end of Q2 FY2026, a 27% increase from January 31, 2026, and an 82% increase from October 31, 2025; backlog remained strong through the end of May 2026 * Gross margin expanded to 34.2% in Q2, driven by higher sales volumes and manufacturing operating leverage - Market Focus and Strength * The strongest growth is coming from the enterprise, data center, and severe duty market segments; OCC's core data center focus is on multi-tenant (Tier 2) and enterprise data centers * Growth in Tier 1 hyperscale data centers creates positive spillover demand for OCC's target data center sub-segments, and has already positively impacted Q2 revenue * OCC benefits from broad diversification across its product offerings, customer base, and targeted market sectors * The company saw military market sales growth in the prior fiscal year, and may see additional growth from increased U.S. military spending and sales to allied nations * OCC manufactures specialized products for power grid applications (but not main power cables) and expects to benefit from increased grid CapEx investment - Operational Strategy * OCC is actively evaluating expansions to manufacturing capacity, including adding manufacturing staff and new machine equipment, to support expected long-term future growth; current capacity still has room to support additional near-term revenue growth * Most OCC sales go through distributor channels, so the company does not always have full visibility into end customers; growth is occurring in both new and existing customer accounts * Expansion into installation or other third-party services is not part of OCC's current business strategy - Pricing and Margin Management * The company proactively mitigates the impact of rising raw material (fiber and copper) prices by adjusting selling prices; gross margin can still vary quarter-to-quarter based on product mix

Guidance

Management did not issue formal numerical revenue or earnings guidance for full fiscal year 2026 in this call. Key forward-looking statements include: * Management confirmed continued confidence in OCC's ability to capitalize on current growth momentum and widespread growth opportunities across its target market sectors, particularly in data centers * Management expects continued positive revenue growth from data center market sales in the second half of fiscal 2026 * Management stated that industry-wide optical fiber shortages and extended lead times will not prevent OCC from growing revenue in the second half of fiscal 2026 * No upward or downward revisions to prior formal guidance were discussed, as no prior formal targets were referenced in the call

Segment performance

Optical Cable Corporation (OCC) splits its business into two core product/ market segments: Enterprise and Specialty Markets. Both segments achieved year-over-year net sales growth in the second quarter of fiscal 2026 and the first half of fiscal 2026. Specific absolute financial results and revenue contribution percentages for each individual segment were not disclosed in the call. Consolidated results for the full company are as follows: Q2 FY2026 consolidated net sales = $22.2 million (26.6% year-over-year increase, 35.2% quarter-over-quarter sequential increase); H1 FY2026 consolidated net sales = $38.6 million (16.1% year-over-year increase). Q2 FY2026 gross profit = $7.6 million (42.4% year-over-year increase) with a 34.2% gross margin; H1 FY2026 gross profit = $13 million (30.1% year-over-year increase) with a 33.5% gross margin. Q2 FY2026 SG&A expenses = $6.3 million (28.2% of net sales, down from 32.7% year-over-year); H1 FY2026 SG&A expenses = $11.8 million (30.6% of net sales, down from 33.6% year-over-year). Q2 FY2026 net income = $1.1 million ($0.12 per diluted share), compared to a net loss of $698,000 ($0.09 per share) in the prior year quarter. H1 FY2026 net income = $657,000 ($0.07 per diluted share), compared to a net loss of $1.8 million ($0.23 per share) in the prior year first half.

Risks & headwinds

* Industry-wide optical fiber shortages driven by excessive global product demand for data center and other applications have led to increased lead times across the sector, with occasional isolated impacts to some OCC customers * Gross margin can fluctuate quarter-to-quarter due to changes in product mix, and rising raw material prices create inherent downward pressure on margins if pricing adjustments do not fully offset cost increases * Capacity utilization and maximum achievable revenue are dependent on variable factors including current product mix, staffing levels, and raw material availability * Increases in U.S. military expenditure do not guarantee increases in OCC military sales, as higher spending may not be allocated to OCC's product categories * Occasional individual project delays are standard in OCC's end markets, though no unusual levels of project delay have been observed in the current quarter

Analyst Q&A

• Q: Do recent large raw material supply deals between Corning and major hyperscalers like Meta and Amazon reduce opportunities for OCC to provide customization, engineering, or other additional services? /

  A: OCC does not typically offer these types of external services, and these deals have not impacted OCC's ability to grow in its core target markets, particularly the data center segment. The large hyperscale supply agreements do not create a material barrier to OCC's current growth trajectory. (217 characters)

• Q: What issues does OCC expect to face when ramping up capacity, particularly related to labor availability, labor costs, or other constraints? /

  A: While ramping capacity always brings some potential challenges, OCC is not currently experiencing issues with ramping and does not anticipate major near-term challenges. The company already holds some excess capacity (utilization depends on product mix), and is evaluating targeted capacity increases via additional personnel and equipment as needed. (301 characters)

• Q: How is OCC's partnership with Lightera Furukawa working amid the current fiber shortage, and is the partnership helping OCC secure raw fiber supplies? /

  A: OCC is very pleased with the Lightera partnership, which creates strong complementary opportunities for both companies. OCC has worked with Lightera and other fiber suppliers for decades, and as a general rule, has not faced significant fiber or raw material supply issues during the current shortage, with only rare, isolated exceptions impacting certain customers. (342 characters)

• Q: Is OCC evaluating capacity expansions to meet growing demand, and is it planning investments to increase available capacity? /

  A: OCC regularly assesses needs for machinery, equipment, and human resource investments to expand capacity for general growth and specific opportunities. The company is currently actively pursuing opportunities to increase its production capacity to match growing demand. (213 characters)