Optical Cable Corporation Q2 FY2025 earnings call

• The OCC team delivered sales, net sales growth, and gross profit growth on a year-over-year and sequential basis.
• Strong execution and operating leverage led to improved gross profit margins due to manufacturing efficiencies from higher production volumes.
• Sales backlog and forward load increased to $7.2 million at the end of the second quarter of fiscal 2025, up from prior periods.
• Confidence in executing growth strategies and capitalizing on operating efficiencies to drive positive results for the year.

Consolidated net sales for the second quarter of fiscal 2025 increased 8.9% to $17.5 million compared to $16.1 million the prior year. Sequentially, net sales rose 11.5% from $15.7 million in the first quarter of fiscal 2025. For the first half of fiscal 2025, consolidated net sales were $33.3 million, an increase of 7.5% from $31 million in the first half of fiscal 2024. Gross profit in the second quarter of fiscal 2025 was $5.3 million, a 32.1% increase from $4 million the prior year, with a gross profit margin of 30.4%. The first half of fiscal 2025 gross profit was $10 million, up 28.5% from $7.8 million the prior year, with a margin of 29.9%. SG&A expenses in the second quarter of fiscal 2025 were $5.7 million. OCC recorded a net loss of $698,000 or $0.09 per share in the second quarter of fiscal 2025, and a net loss of $1.8 million or $0.23 per share in the first half of fiscal 2025.

OCC does not provide specific forward-looking guidance, but notes positive industry trends, sees opportunities for gross profit margin expansion with increased production volume, and remains focused on disciplined execution and capitalizing on growth opportunities to drive shareholder value.

• Factors in forward-looking statements that could materially affect future results.
• Tariff impacts on the supply chain, with complexities due to multiple tiers of suppliers.

Q: On the last call, questions about data center demand and why OCC isn't taking more advantage.

A: Data center market has hyperscale and other segments; OCC targets Tier 2 and Tier 3, added loose tube products, and sees potential but it's not a major part yet.

Q: Potential operational leverage?

A: Difficult to predict as it depends on product mix, but fixed costs spread over larger volumes provide benefit, and past results show operating leverage at higher volumes.

Q: Percentage of business related to copper vs fiber?

A: Fiber is the biggest portion, but some fiber cables are hybrid with copper; copper market is still significant but fiber is larger.

Q: Update on data centers opportunity?

A: OCC sees sales in data center applications, particularly Tier 2 and Tier 3, added loose tube products to address needs, but currently not significant.

Q: Company outlook compared to Q1 and Q4?

A: OCC doesn't provide forward-looking guidance, but noted market improvement in prior periods, growth in Q1 2025, and backlog increase, optimistic about second half 2025.

Q: Tariffs impact?

A: OCC has seen tariff impacts, less than some in the industry, monitors tariff landscape and makes adjustments.

Q: Backlog sign of next quarter or full year demand?

A: Backlog includes confirmed orders regardless of shipment time, so can be demand for next quarter or later.

Q: Sequential revenue growth next quarters?

A: No specific guidance, but sales typically heavier in second half of fiscal year due to seasonality, though other factors can affect this.

Q: Gross margin at full capacity?

A: Difficult to specify as it depends on product mix, but past results at higher volumes show gross margin performance, and OCC's product diversification helped during industry slowdowns.