Q4 2021 Optical Cable Corp Earnings Call
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About to begin you need audio system. They stayed program. Please press star zero.
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Good morning, My name is Emma and I'll be your conference operator today at this time I would like to welcome everyone to the optical cable Corporation fourth quarter 2021 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period when you registered.
Ask a question at any time by pressing star one on your Touchtone phone. It's now my pleasure to turn the conference over to Mr. Pay offs you may begin.
Thank you.
Good morning, and thank you all for participating on optical cable corporation's fourth quarter and fiscal year, 2020 One conference call.
By this time, everyone should have a copy of the earnings press release issued earlier today you can also visit www dot OCC fiber dot com for a copy.
On the call with US today are Neil Wilkin, President and Chief Executive Officer of OCC, and Tracy Smith, Senior Vice President and Chief Financial Officer.
Before we begin I'd like to remind everyone that this call may contain forward looking statements that involve risks and uncertainties. The actual future results of optical cable corporation may differ materially due to a number of factors and risks, including but not limited to those factors referenced in the forward looking statements section of this morning's press release.
Cautionary statements apply to the contents of the Internet webcast on www Dot OCC fiber dotcom as well as today's call.
With that I'll turn the call over to Neil Wilkin Neil Please begin.
Thank you Aaron and good morning, everyone I'll begin the call today with a few opening remarks.
He will then review the fourth quarter and full year results for the three month period and 12 month period ended October 31, 2021, and some additional detail.
After Tracy's remarks, we will answer as many of your questions. As we can as is our normal practice, we will only take questions from analysts and institutional investors during the Q&A session.
However, we also offer other shareholders the opportunity to submit questions in advance of our earnings call instructions regarding such submissions are included in our press release announcing the date and time of our call today.
Yeah.
In 2021, our team successfully executed ongoing initiatives to strengthen OCC during the pandemic and for the long term positioning us to capture current and future growth opportunities realize improved operating efficiencies and control and reduce costs.
The COVID-19 pandemic continued to significantly impact the global economy during much of 2021.
And it impacted as you see as well.
We began the fiscal year with demand for our products impacted by the pandemic.
While demand began to grow during our second quarter, new macroeconomic pandemic related challenges arose.
In particular supply chain disruption.
And tight labor markets.
Impacted our operations in our results.
The OCC team met these emerging challenges with creative problem solving and a focus on serving our customers, while protecting and strengthening our operational effectiveness and efficiency.
Incredibly incredibly grateful to the OCC team Andrew.
And their dedication and tireless efforts this past year.
It is their resilience perseverance and hard work that has enabled OCC to navigate these turbulent times and to well position OCC for fiscal year 2022.
My sincere and continued thank you to every member of the OCC team and their families.
Our results this year and in the fourth quarter reflect these efforts.
Net sales for fiscal year, 2021 increased 7% to $59 $1 million.
Our net sales growth accelerated mid second quarter of fiscal year 2021.
Great OCC second third and fourth quarters of fiscal year 2021, our net sales increased five 9% 14, 6% and a 14, 4% respect respect.
I fully in each case compared to the same periods in fiscal year 2020.
Our sales growth was.
It was driven by our ongoing sales business development and marketing initiatives, creating opportunities as well as the easing of pandemic pressures on demand for our products beginning in the second quarter of fiscal 2021.
Our sales order backlog forward load more than double by the end of fiscal 2021 compared to the beginning of the year as our sales orders and opportunities outpaced our material availability and labor capacity.
Direct and indirect impacts of the COVID-19 pandemic created these production capacity challenges, particularly beginning in the third fiscal quarter, which.
Which we believe prevented us from capturing even bigger increases in sales.
These challenges, which affected many other customer companies as well as OCC.
Included supply chain disruption that resulted in longer lead times and increased costs for certain raw materials.
They also included a tight labor market for additional personnel needed to increase production volumes.
Finally, we experienced increases in other production costs.
Despite these challenges we remain encouraged by the continued demand for our products and the effectiveness of our growth strategies. We believe our top line results will continue to improve as the impact of the pandemic continue to receive.
We also realized operating efficiencies this past year.
We achieved a gross profit increase of 15, 5% to.
To $16 3 million for fiscal year 2021, compared to fiscal year 2020.
And a 20% increase during the fourth quarter.
Gross profit margin or gross profit as a percentage of net sales was 27, 5% during fiscal year 2021, compared to 2020 to 25, 5% for fiscal year 2020.
Gross profit margin was 30, 36%.
Six 2%.
31, 8% during the second third and fourth quarters of fiscal year 2021 respectfully.
In fiscal year 2021, our gross profit improved as we realized benefits from prior and ongoing manufacturing initiatives to improve manufacturing throughput efficiency and flexibility and from our improved sales performance and operating leverages fixed product.
<unk> costs are spread over higher production volumes.
Notably OCC gross profit increased at a faster rate than our increase in net sales during fiscal year 2021 positively impacted by our operating leverage even as we experienced material availability challenges and cost increases both of which impacted operating efficiency during the second half of <unk>.
Fiscal year 2021.
Sure.
Again this year, we also controlled and reduce cost.
Throughout 2021, we continue to focus on operating as efficiently as possible.
Selling general and administrative expenses decreased five 2% or $1 million to $18 $2 million during fiscal year 2021.
Our decrease in SG&A expenses. This year, followed a significantly a significant decrease of 17, 9% or $4 $2 million.
To $19 $2 million in fiscal year, 2020, compared to $23 4 million in fiscal year 2019.
SG&A expenses as a percentage of net sales were 38% during fiscal year 2021 down from 34, 8% during fiscal year 2020.
OCC also benefit from a small business administration payroll protection program loan received in April of 2020.
And forgiven in full in July 2021, and from employee retention tax credits during calendar 2021.
During critical periods. The COVID-19 pandemic in fiscal years, 2020, and 2021, the PPP loan and tax credits enabled OCC to preserve employee jobs and maintain our operational readiness, including our ability to service critical infrastructure customers such as the U S military.
And health care providers.
Looking ahead at the bigger picture optics.
Optical cable corporation remains uniquely positioned in the fiber optic and copper cabling and connectivity industry.
We are we have differentiated core strengths and capabilities that enable OCC to offer top tier products and application solutions and to successfully compete against much larger competitors.
Occ's core strengths and capabilities include our wide range of fiber optic and copper cabling and connectivity products and solutions that enable OCC to deliver products and solutions that meet our customers' unique needs and that are well positioned for applications in our targeted markets.
The range of Occ's products product offerings is extensive with OCC, often competing with different competitors in OCC different targeted markets.
We have also built enviable market positions brand recognition as well as the loyalty of and our relationships with customers decision makers and end users across a broad range of targeted markets, including the enterprise industrial broadcast mining oil and gas alternative energy millet.
Terry and other harsh environment and specialty markets as well as the wireless carrier market.
We have a broad and diverse geographic footprint with OCC selling into approximately 50 countries. This year.
Yeah.
OCC has extensive industry experience and expertise our engineering sales and business development teams are well respected for their product and application experience and the expertise that enables OCC to create a portfolio of innovative high performance products and associated intellectual property.
Finally, we have impressive manufacturing knowledge and experience in our manufacturing quality and engineering teams and significant production capacity at our facilities.
Many of the cost OCC incurs to maintain and build upon our strengths and capabilities along with our public company costs are fixed.
As a result, as we see growth net sales gross profitability and profitability tend to increase it faster at a faster rate than the rate of increase of net sales. This creates operating leverage for OCC as fixed production costs and fixed SG&A expenses remain relatively stable and are spread over higher net sales levels.
We are confident leveraging occ's core strengths and capabilities enables us to deliver long term value for shareholders as.
As we begin fiscal year 2022, we are optimistic and excited about the opportunities before us.
<unk> demand in Occ's markets has significantly improved and we are beginning to see other impacts of the $20 million to the COVID-19 pandemic recede with some improvement in the availability of certain raw materials, and our supply chain and some improvements in recruiting additional members to our manufacturing team.
OCC is well positioned to capitalize on existing and new revenue opportunities as impacts of the pandemic on supply chain labor ability and global economy receipt.
We are hopeful that these trends will continue.
And we will continue to monitor potential in developing impacts of COVID-19, including new emerging variance on OCC business and global economy.
We appreciate the opportunity to meet the evolving needs of our customers installers specifier and end users and are proud to provide occ's top tier solutions products and application and technical expertise.
OCC remains committed to leveraging our core strengths and capabilities and executing our strategies and initiatives to create long term value for shareholders.
With that I'll turn the call over to Tracy, who will review and additional detail our fourth quarter and fiscal year 2021 financial results. Thank you Neil.
Consolidated net sales for fiscal 2021 increased 7% to $59 $1 million compared to net sales of $65 $3 million at fiscal year 2020.
Consolidated net sales for the fourth quarter of fiscal 2021 increased 14, 4% protecting $9 million compared to net sales of $13 $9 million for the same period last year.
During the fourth quarter and fiscal year 2021, we experienced an increase in net sales in the wireless carrier and enterprise market.
And at the same period last year.
We believe net sales during fiscal year 2021, specifically beginning in the second fiscal quarter were positively impacted by the continued vesting of some restrictions and the reopening of certain markets that had been negatively impacted by the COVID-19 pandemic.
Additionally, we believe that we will continue to see a trend of improving demand for our products and an increase in net sales to the extent there are declines in the direct and indirect impacts of the COVID-19 pandemic on our customers suppliers workforce in any either.
Turning to gross profit.
Gross profit increased 15, 5% to $16 $3 million in fiscal 2021 compared to gross profit of $14 $1 million in fiscal 2020.
Gross profit margin increased to 27, 5% in fiscal 2021 compared to 25, 5% in fiscal 2020.
Gross profit increased 20% to $5 1 million in the fourth quarter of fiscal 2021 compared to gross profit of $4 $2 million from same period last year.
Gross profit margin increased to 31, 8% in the fourth quarter of fiscal 2021 compared to 33% in the fourth quarter of fiscal 2020.
Our gross profit margin tend to be higher when the company achieved higher net payout level.
As certain fixed manufacturing costs are spread over higher sales with.
This operating leverage which is beneficial a higher sales level positively impacted our gross profit margins in both the fourth quarter and fiscal year 2021.
Additionally actions that we took in fiscal year 2020 in 2019 contributed to the increase in our gross profit margin in the fourth quarter and fiscal year 2021.
Our gross profit margin percentages are heavily dependent upon product mix on a quarterly basis and may vary based on changes in product mix from quarter to quarter.
SG&A expenses decreased $1 million or five 2% to $18 $2 million during fiscal 2021 compared to $19 2 million for fiscal 2020.
SG&A expenses as a percentage of net sales were 38% in fiscal 2021 compared to 34, 8% in fiscal 2020.
The decrease in SG&A expenses during fiscal 2021 compared to fiscal 2020, primarily the result of decreases in employee and contracted sales personnel related costs bad debt expense and certain other costs impacted by the COVID-19 pandemic.
The decrease in employee and contracted sales personnel related costs and other costs also were positively impacted by atc's ongoing cost control initiatives.
SG&A expenses increased to $4 $8 million during the fourth quarter of fiscal 2021 compared to $4 $3 million from the same period last year.
SG&A expenses as a percentage of net sales were 33% in the fourth quarter of fiscal 2021 compared to 31% in the fourth quarter fiscal 2020.
Yes.
The increase in SG&A expenses in the fourth quarter of fiscal year 2021, compared to the same period last year was primarily the result of net increases in employee and contracted sales personnel related costs as well as increases in shipping cost.
Included in employee and contracted sales personnel related costs, our commissions, which increased due to the increase in net sales when comparing the fourth quarter of fiscal year 2021 for the same period last year.
Shipping cost also increased due to the increase in sales when comparing the two periods.
OCC recorded net income of $6 $6 million or <unk> 87 per basic and diluted share for fiscal 2021 <unk>.
Compared to a net loss of $6 $1 million or 83 per basic and diluted share for fiscal 2020.
<unk> recorded a net loss of $6000 or no cents per basic and diluted share for the fourth quarter fiscal 2021.
Parents of $406000 or six per basic and diluted share for the fourth quarter of fiscal 2020.
On July one 2021, the small business administration for gave the entire balance of our PPP loan including accrued interest.
As a result, we recognized a gain on extinguishment of debt of approximately $5 million in fiscal year 2021.
Also during fiscal year 2021, we recognized a refundable payroll tax credit totaling $4 $3 million under the <unk> program.
SEC with an eligible small employer under the credits received declined tapped which qualified the company disclaims RTC in the first two calendar quarters of 2021 under the amended ERP suite program.
As of October 31, 2021, we had a $2 2 million receivable for ERP fee tends to be refunded.
As of October 31, 2021, we had outstanding borrowings of $3 $5 million on our revolver and $4 $4 million in available credit.
We also had outstanding loan balances of $4 9 million under our real estate term loan.
With that I'll turn the call back over to you.
Thank you Tracy.
And now if any analysts or institutional investors have any questions. We are happy to answer them.
Emma if you could please indicate the instructions for our participants to call in any questions. They may have I'd. Appreciate it again, we are only taking live questions from analysts and institutional investors.
We would like to ask a question. Please press star one on your Touchtone phone.
Once again that is star and wanted to ask a question over the phone we will pause a moment.
And I will turn the program over to Neil.
Thank you Emma.
Aaron I know there were some questions submitted by some individual investors in advance of today's call. If you could go through those we will answer those questions.
Sure.
First who are your main competitors for military grade solutions, and what positions us favorably against them.
You expect the joint Warfighting cloud capability program to have an impact on OCC business.
Okay.
OCC does have a number of different competitors in different targeted markets.
<unk>.
That OCC addresses with our military grade products and solutions.
We compete against our competitors on product performance customer service and importantly, the expertise and knowledge occ's customers have come to rely on to address their varied and unique application requirements.
As the second part of the question.
As I'm sure the.
The <unk>.
Individual investor knows the J WCC is intended to increase security from threats, both inside and outside of existing cloud solutions used by the U S military.
The focus of the program its own cloud capabilities. So I'd expect cloud service providers will be the types of companies involved in this product project primarily.
Of course, OCC tends to benefit from expanded military spending and data communication infrastructure.
That requires cabling and connectivity products.
At this time, we have not estimated any possible impact to OCC from this program.
Got it.
Next question.
Over the past decade.
Revenue streams seems to have been rather stable with the added cyclicality of carrier and other large contracts speak.
Speaking about OCC has growth potential do you see that coming from further expansion of your product offerings, where growth and demand for existing lines can you outline the training what gives you confidence in OCC has growth potential and headwinds OCC might be facing in the mid to long term.
Thanks Aaron.
<unk>.
So.
To answer the first part of the question.
We see growth potential coming from both future expansion of our product offerings as well as growth in demand for our existing cable and connectivity products.
Solutions.
Even during the pandemic Occ's new product development has continued.
At this time the state of the global macroeconomic environment and the pandemic, both of which are difficult to predict or really the biggest factors that.
Would be headwinds facing NCC in the mid to longer term where we.
Well positioned in our markets and we've been effectively competing against much larger competitors and we believe that will continue.
Great.
OCC is existing capacity potential and assuming no outlandish growth could you walk us through where you see opportunities to deploy incremental capital.
Okay, Eric Thank you.
We do believe as the impact of the pandemic.
On the global economy.
Proceeds that we will see additional cash flow growth and availability of additional capital.
To date, our first priority of any investments has been to focus on continuing to improve our efficiency.
And we've made some investments more recently in fact.
However, we also evaluate potential investment in production of new products and increased production capacity when an appropriate business case to justify those investments.
Great.
You have any difficulty finding qualified employees.
We've touched on this issue and some of the comments that I've made and Tracy has made earlier in the call.
What I'd also say is that OCC is very fortunate that in the regions of the country in which our facilities are located.
We're normally able to find qualified employees to meet our needs.
But like other companies the pandemic has impacted labor availability, particularly recently, making it more difficult for us to add personnel in order to increase our production capacity.
We have seen some recent improvement in our recruiting results and we believe that will continue as the impact of the pandemic.
Continues to recede.
Okay are you experiencing any supply chain issues, you're having difficulty getting materials.
We have touched on that previously in the call, but we'll expand briefly.
We have experienced.
Impacts on our supply chain because of the pandemic like many others and this creates challenges in obtaining some materials.
Our team has been actively managing these challenges in order to minimize the impact on OCC and.
Has largely been successful, which we are very appreciative of their efforts.
The supply chain issues have impacted our revenue, though I'm, having some availability with supplies.
Being volatile.
But despite these challenges we grew revenues this year.
Including growing revenues.
<unk> thousand 14, 4% during the fourth quarter of fiscal year 2021.
Okay. So are you experiencing significant price increases from suppliers.
If so are you able to pass the costs along to customers.
And because of the supply chain disruption.
Many including OCC are experiencing.
Pressures on prices.
We have seen increased costs from certain suppliers of certain moments raw materials.
Longer lead times and increased shipping costs.
And while we.
Do not like the increased prices to our customers we have made.
Adjustments for particular products that we have been forced to do.
By the actions of our suppliers.
Okay.
What is your current backlog.
We haven't and typically don't provide a specific dollar amount of Occ's current sales order backlog of our forward load.
We do the split we have talked about on this call and we will disclose in our filings in the coming either later today or the next couple of days.
But our backlog has more than doubled since the beginning of this year.
And so we're seeing that is very strong.
Do you plan on reinstating your share repurchase program in 2022.
No at this time, we have no plans to reinstate the share repurchase program, we've had in place for a while but suspended it.
And previously and have don't anticipate reinstating amount at this time.
Do you expect to generate significant royalty income from your licensing agreement with Commscope.
We're not providing any estimates of OCC as expense or income related to our cross licensing.
Licensing agreements, which includes the Commscope cross licensing agreement.
The Commscope Cross license agreement was announced in May 2021, and we're very proud of the fact that we think this is another example of the capabilities OCC as demonstrated in various market categories and occ's strong technological position in our industry.
Okay.
Last question can.
Can you elaborate on how your sales Commission program is structured.
We don't talk about the specifics of that although.
We do have both employees and contracted.
Personnel.
That that are part of our sales team.
Across the country and across the globe.
The actual terms can vary but all the arrangements are typical as used by others in our industry.
Okay.
That was the last question.
Back to you Aneel.
Okay. Thank you Aaron and thank you all for your questions.
I'd like to thank everyone for listening to our fourth quarter and fiscal year 2021 conference call today as always we appreciate your time and interest in optical cable Corporation.
I hope everyone continues to be safe.
Have a happy holiday season.
Both for you and for your families.
Thank you very much.
This does conclude today's program. Thank you for your participation you may disconnect at any time.
Okay.
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Good morning, My name is <unk>, and then I'll be a conference operator today at this time I would like to welcome everyone to the optical cable Corporation fourth quarter 2021 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period, maybe registered to ask a question at any time by pressing the star and <unk>.
One on your Touchtone phone.
Now my pleasure to turn the conference over to Mr. Payless, you may begin.
Thank you.
Good morning, and thank you all for participating on optical cable Corporation's fourth quarter and fiscal year 2021 conference call by.
By this time, everyone should have a copy of the earnings press release issued earlier today. You can also visit www Dot O T C fibers dot com for a copy.
On the call with US today are Neil Wilkin, President and Chief Executive Officer of OCC, and Tracy Smith, Senior Vice President and Chief Financial Officer.
Before we begin I'd like to remind everyone. This call may contain forward looking statements that involve risks and uncertainties. The actual future results of optical cable corporation may differ materially due to a number of factors and risks, including but not limited to those factors referenced in the forward looking statements section of this morning's press release.
These cautionary statements apply to the contents of the Internet webcast on www Dot OCC fiber dotcom as well as today's call.
With that I'll turn the call over to Neil Wilkin Neil Please begin.
Thank you Aaron and good morning, everyone I'll begin the call today with a few opening remarks.
He will then review the fourth quarter and full year results for the three month period and 12 month period ended October 31, 2021, and some additional detail.
After Tracy's remarks, we will answer as many of your questions. As we can as is our normal practice, we will only take questions from analysts and institutional investors during the Q&A session.
However, we also offer other shareholders the opportunity to submit questions in advance of our earnings call instructions regarding such submissions are included in our press release announcing the date and time of our call today.
Okay.
In 2021, our team successfully executed ongoing initiatives to strengthen OCC during the pandemic and for the long term positioning us to capture current and future growth opportunities realize improved operating efficiencies and control and reduce costs.
The COVID-19 pandemic continued to significantly impact the global economy during much of 2021.
And it impacted as you see as well.
We began the fiscal year with demand for our products impacted by the pandemic.
While demand began to grow during our second quarter, new macroeconomic pandemic related challenges arose.
In particular supply chain disruption.
And tight labor markets.
Impacted our operations in our results.
The OCC team met these emerging challenges with creative problem solving and a focus on serving our customers, while protecting and strengthening our operational effectiveness and efficiency.
Incredibly incredibly grateful to the OCC team Andrew.
And their dedication and tireless efforts this past year.
It is their resilience perseverance and hard work that has enabled OCC to navigate these turbulent times and to well position OCC for fiscal year 2022.
My sincere and continued thank you to every member of the OCC team and their families.
Our results this year and in the fourth quarter reflect these efforts.
Net sales for fiscal year, 2021 increased 7% to $59 $1 million.
Our net sales growth accelerated mid second quarter of fiscal year 2021.
During OCC second third and fourth quarters of fiscal year 2021, our net sales increased five 9% 14, 6% and a 14, 4% respect respect.
Falling in each case compared to the same periods in fiscal year 2020.
Our sales growth.
It was driven by our ongoing sales business development and marketing initiatives, creating opportunities as well as the easing of pandemic pressures on demand for our products beginning in the second quarter of fiscal 2021.
Our sales order backlog forward load more than double by the end of fiscal 2021 compared to the beginning of the year as our sales orders and opportunities outpaced our material availability and labor capacity.
Direct and indirect impacts of the COVID-19 pandemic created these production capacity challenges, particularly beginning in the third fiscal quarter, which.
Which we believe prevented us from capturing even bigger increases in sales.
These challenges, which affected many other customer companies as well as OCC.
Included supply chain disruptions that resulted in longer lead times and increased costs for certain raw materials.
They also included a tight labor market for additional personnel needed to increase production volumes.
Finally, we experienced increases in other production costs.
Despite these challenges we remain encouraged by the continued demand for our products and the effectiveness of our growth strategies. We believe our top line results will continue to improve as the impact of the pandemic continue to receive.
We also realized operating efficiencies this past year.
We achieved a gross profit increase of 15, 5% to.
To $16 3 million for fiscal year 2021, compared to fiscal year 2020.
And a 20% increase during the fourth quarter.
Gross profit margin or gross profit as a percentage of net sales was 27, 5% during fiscal year 2021, compared to 2020 to 25, 5% for fiscal year 2020.
Gross profit margin was 30, 36%.
Six 2% and 31, 8% during the second third and fourth quarters of fiscal year 2021 respectfully.
In fiscal year 2021, our gross profit improved as we realized benefits from prior and ongoing manufacturing initiatives to improve manufacturing throughput efficiency and flexibility and from our improved sales performance and operating leverages fixed product.
<unk> costs are spread over higher production volumes.
Notably OCC gross profit increased at a faster rate than our increase in net sales during fiscal year 2021 positively impacted by our operating leverage even as we experienced material availability challenges and cost increases both of which impacted operating efficiency during the second half of <unk>.
Fiscal year 2021.
Sure.
Again this year, we also controlled and reduce costs.
Throughout 2021, we continue to focus on operating as efficiently as possible.
Selling general and administrative expenses decreased five 2% or $1 million to $18 $2 million during fiscal year 2021.
Our decrease in SG&A expenses. This year following a significant peak in a significant decrease of 17, 9% or $4 $2 million.
To $19 2 million in fiscal year, 2020, compared to $23 4 million in fiscal year 2019.
SG&A expenses as a percentage of net sales were 38% during fiscal year 2021 down from 34, 8% during fiscal year 2020.
OCC also benefit from a small business administration payroll protection program loan received in April of 2020.
And forgiven in full in July 2021, and from employee retention tax credits during calendar 2021.
During critical periods. The COVID-19 pandemic in fiscal years, 2020, and 2021, the PPP loan and tax credits enabled OCC to preserve employee jobs and maintain our operational readiness, including our ability to service critical infrastructure customers such as the U S military.
Our health care providers.
Looking ahead at the bigger picture optics.
Optical cable corporation remains uniquely positioned in the fiber optic and copper cabling and connectivity industry. We.
We are we have differentiated core strengths and capabilities that enable OCC to offer top tier products and application solutions and to successfully compete against much larger competitors.
Occ's core strengths and capabilities include a wide range of fiber optic and copper cabling and connectivity products and solutions that enable OCC to deliver products and solutions that meet our customers' unique needs and that are well positioned for applications in our targeted markets.
The range of Occ's products product offerings is extensive with OCC, often competing with different competitors in OCC different targeted markets.
We have also built enviable market positions brand recognition as well as the loyalty of and our relationships with customers and decision makers and end users across a broad range of targeted markets, including the enterprise industrial broadcast mining oil and gas alternative energy Miller.
Terry and other harsh environment in specialty markets as well as the wireless carrier market.
We have a broad and diverse geographic footprint with OCC selling into approximately 50 countries. This year.
OCC has extensive industry experience and expertise our engineering sales and business development teams are well respected for their product and application experience and the expertise that enables OCC to create a portfolio of innovative high performance products and associated.
Intellectual property.
Finally, we have impressive manufacturing knowledge and experience in our manufacturing quality and engineering teams and significant production capacity at our facilities.
Many of the cost OCC incurs to maintain and build upon our strengths and capabilities along with our public company costs are fixed.
As a result as OCC gross net sales gross profitability and profitability tend to increase it faster at a faster rate than the rate of increase of net sales. This creates operating leverage for OCC as fixed production costs and fixed SG&A expenses remain relatively stable and are spread over higher net sales levels.
We are confident leveraging occ's core strengths and capabilities enables us to deliver long term value for shareholders.
As we begin fiscal year 2022, we are optimistic and excited about the opportunities before us.
Our demand in Occ's markets has significantly improved and we are beginning to see other impacts of the $20 million of the COVID-19 pandemic recede with some improvement in the availability of certain raw materials, and our supply chain and some improvements in recruiting additional members to our manufacturing team.
OCC is well positioned to capitalize on existing and new revenue opportunities as impacts of the pandemic on supply chain labor ability and global economy receipt.
We are hopeful that these trends will continue.
And we will continue to monitor potential in developing impacts of COVID-19, including new emerging variance on OCC business and global economy.
We appreciate the opportunity to meet the evolving needs of our customers installers specifier and end users and are proud to provide occ's top tier solutions products and application and technical expertise.
OCC remains committed to leveraging our core strengths and capabilities and executing our strategies and initiatives to create long term value for shareholders.
With that I'll turn the call over to Tracy, who will review and additional detail our fourth quarter and fiscal year 2021 financial results. Thank you Neil.
Consolidated net sales for fiscal 2021 increased 7% to $59 $1 million compared to net sales of $65 3 million for fiscal year 2020.
Consolidated net sales for the fourth quarter of fiscal 2021 increased 14, 4% to $15 $9 million compared to net sales of $13 9 million for the same period last year.
During the fourth quarter and fiscal year 2021, we experienced an increase in net sales in the wireless carrier and enterprise market.
There to the same period last year.
We believe net sales during fiscal year 2021, specifically beginning in the second fiscal quarter were positively impacted by the continued vesting of some restrictions and the reopening of certain markets that had been negatively impacted by the COVID-19 pandemic.
Additionally, we believe that we will continue to see a trend of improving demand for our products and an increase in net sales to the extent there are declines in the direct and indirect impacts of the COVID-19 pandemic on our customer supplier workforce and end users.
Turning to gross profit.
Gross profit increased 15, 5% to $16 $3 million in fiscal 2021 compared to gross profit of $14 $1 million in fiscal 2020.
Gross profit margin increased to 27, 5% in fiscal 2021 compared to 25, 5% in fiscal 2020.
Gross profit increased 20% to $5 1 million in the fourth quarter of fiscal 2021 compared to gross profit of $4 $2 million from same period last year.
Gross profit margin increased to 31, 8% in the fourth quarter of fiscal 2021 compared to 33% in the fourth quarter of fiscal 2020.
Our gross profit margins tend to be higher when the company achieved higher net sales level.
As certain fixed manufacturing costs are spread over higher sales.
Operating leverage which is beneficial a higher sales level positively impacted our gross profit margins in both the fourth quarter and fiscal year 2021.
Additionally actions that we took in fiscal year 2020 in 2019 contributed to the increase in our gross profit margin in the fourth quarter and fiscal year 2021.
Our gross profit margin percentages are also heavily dependent upon product mix on a quarterly basis.
And may vary based on changes in product mix from quarter to quarter.
SG&A expenses decreased $1 million or five 2% to $18 $2 million during fiscal 2021 compared to $19 2 million for fiscal 2020.
SG&A expenses as a percentage of net sales were 38% in fiscal 2021 compared to 34, 8% in fiscal 2020.
The decrease in SG&A expenses during fiscal 2021 compared to fiscal 2020 was primarily the result of decreases in employee and contracted sales personnel related costs bad debt expense and certain other costs impacted by the COVID-19 pandemic.
The decrease in employee and contracted sales personnel related costs and other costs also were positively impacted by itc's ongoing cost control initiatives.
SG&A expenses increased to $4 $8 million during the fourth quarter of fiscal 2021 compared to $4 $3 million from the same period last year.
SG&A expenses as a percentage of net sales were 33% in the fourth quarter of fiscal 2021 compared to 31% in the fourth quarter fiscal 2020.
The increase in SG&A expenses in the fourth quarter of fiscal year 2021, compared to the same period last year was primarily the result of net increases in employee and contracted sales personnel related costs as well as increases in shipping cost.
Included in employee and contracted sales personnel related costs, our commissions, which increased due to the increase in net sales when comparing the fourth quarter of fiscal year 2021 for the same period last year.
Shipping cost also increased due to the increase in sales when comparing the two periods.
OCC recorded net income of $6 $6 million or <unk> 87 per basic and diluted share for fiscal 2021.
Compared to a net loss of $6 $1 million or 83 cents per basic and diluted share for fiscal 2020.
LTC recorded a net loss of $6000 net per basic and diluted share for the fourth quarter of fiscal 2021.
Parents of $406000 or six per basic and diluted share for the fourth quarter of fiscal 2020.
On July one 2021, the small business administration for Dave the entire balance of our PPP loan, including accrued interest.
As a result, we recognized a gain on extinguishment of debt of approximately $5 million in fiscal year 2021.
Also during fiscal year 2021, we recognized a refundable payroll tax credit totaling $4 $3 million under the <unk> program.
ACC was in eligible small employer under the credits received declined tapped which qualified the company disclaims RTC in the first two calendar quarters of 2021 under the amended <unk> program.
As of October 31, 2021, we had a $2 2 million receivable for ERP fee to be refunded.
As of October 31, 2021, we had outstanding borrowings of $3 $5 million on our revolver and $4 $4 million in available credit.
We also had outstanding loan balances of $4 9 million under our real estate term loan.
With that I'll turn the call back over to Neil.
Thank you Tracy.
And now if any analysts or institutional investors have any questions. We are happy to answer them.
Emma if you could please indicate the instructions for our participants to call in any questions. They may have I'd. Appreciate it again, we are only taking live questions from analysts and institutional investors.
You'd like to ask a question. Please press star one on your Touchtone phone.
Once again.
Again that is star and wanted to ask a question over the phone we will pause a moment.
And I will turn the program over to Neil.
Thank you Emma.
Aaron I know there were some questions submitted some individual investors in advance of today's call. If you could.
So through those we will.
Answer those questions.
Sure.
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First who are your main competitors for military grade solutions, and what positions us favorably against them do you expect the joint Warfighting cloud capability program to have an impact on OCC business.
Okay.
OCC does have a number of different competitors in different targeted markets.
<unk>.
That OCC addresses with our military grade products and solutions.
We compete against our competitors on product performance customer service and importantly, the expertise and knowledge occ's customers have come to rely on to address their varied and unique application requirements.
As the second part of the question.
As I'm sure the.
The <unk>.
Individual investor knows the Jacobs OCC is intended to increase security from threats, both inside and outside of existing cloud solutions used by the U S military.
The focus of the program its own cloud capabilities. So I'd expect cloud service providers will be the types of companies involved in this product project primarily.
Of course, OCC tends to benefit from expanded military spending and data communication infrastructure.
That requires cabling and connectivity products.
At this time, we have not estimated any possible impact to OCC from this program.
Got it.
Next question.
Over the past decade.
Revenue streams seems to have been rather stable with the added cyclicality of carrier and other large contracts.
Speaking about OCC has growth potential do you see that coming from further expansion of your product offerings, where growth and demand for existing lines can you outline the trends that give you confidence in OCC has growth potential.
Headwinds OCC might be safely in the mid to long term.
Thanks Aaron.
<unk>.
So.
Answer the first part of the question.
We see growth potential coming from both future expansion of our product offerings as well as growth in demand for our existing cable and connectivity products and solutions.
Even during the pandemic Occ's new product development has continued.
At this time the state of the global macroeconomic environment and the pandemic, both of which are difficult to predict or really the biggest factors that.
Would be headwinds facing NCC in the mid to longer term.
We are well positioned in our markets and we've been effectively competing against much larger competitors and we believe that will continue.
Great.
Given OCC as existing capacity potential and assuming no outlandish growth could you walk us through where you see opportunities to deploy incremental capital.
Okay, Eric Thank you.
We do believe as the impact of the pandemic on global on the global economy.
Proceeds that we will see additional cash flow growth and availability of additional capital.
Good day, our first priority of any investments has been to focus on continuing to improve our efficiency.
And we've made some investments more recently in fact.
However, we also evaluate potential investment in production of new products and increased production capacity when an appropriate business case to justify those investments.
Great.
Do you have any difficulty finding qualified employees.
We've touched on this issue and some of the comments that I've made and Tracy has made earlier in the call.
What I'd also say is that OCC is very fortunate that in the regions of the country in which our facilities are located.
We're normally able to find qualified employees to meet our needs.
But like other companies the pandemic has impacted labor availability, particularly recently, making it more difficult for us to add personnel in order to increase our production capacity.
We have seen some recent improvement.
Our recruiting results and we believe that will continue as the impact of the pandemic.
Continues to receive.
Okay are you experiencing any supply chain issues, you're having difficulty getting materials.
We have touched on that previously in the call, but we'll expand briefly.
We have experienced.
Impacts on our supply chain because of the pandemic like many others and this creates challenges in obtaining some materials.
Our team has been actively managing these challenges in order to minimize the impact on OCC and has largely been successful, which we are very appreciative of their efforts.
The supply chain issues have impacted our revenue, though I'm, having some availability with supplies.
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Being volatile.
But despite these challenges we grew revenues this year.
Including growing revenues.
<unk> thousand 14, 4% during the fourth quarter of fiscal year 2021.
Okay sorry.
Are you experiencing significant price increases from suppliers.
If so are you able to pass the costs along to customers.
And because of the supply chain disruption.
Many including OCC are experiencing.
Pressures on prices.
We have seen increased costs from certain suppliers of certain moments raw materials.
Longer lead times and increased shipping costs.
And while we.
Do not like the increased prices to our customers we have made.
Adjustments for particular products that we have been forced to do.
By the actions of our suppliers.
What is your current backlog.
We haven't and typically don't provide a specific dollar amount of Occ's current sales order backlog and forward load.
We do the split we have talked about on this call and we will disclose in our filings in the coming either later today or the next couple of days.
But our backlog has more than doubled since the beginning of this year.
And so we're seeing that is very strong.
Do you plan on reinstating your share repurchase program in 2022.
No at this at this time, we have no plans to reinstate the share repurchase program, we've had in place for a while but suspended it.
And previously and have don't anticipate reinstating amount at this time.
Do you expect to generate significant royalty income from your licensing agreement with Commscope.
We're not providing any estimates of OCC as expense or income related to our cross licensing.
Licensing agreements, which includes the Commscope cross licensing agreement.
The Commscope Cross license agreement was announced in May 2021, and we're very proud of the fact that we think this is another example of the capabilities OCC as demonstrated in various market categories and occ's strong technological position in our industry.
Okay.
Last question can.
Can you elaborate on how your sales Commission program is structured.
We don't talk about the specifics of that although.
We do have both employees and contracted.
Personnel.
That that are part of our sales team.
Across the country and across the globe.
<unk>.
The actual terms can vary but all the arrangements are typical as used by others in our industry.
Okay.
That was the last question so back to you Aneel.
Okay. Thank you Aaron and thank you all for your questions.
I'd like to thank everyone for listening to our fourth quarter and fiscal year 2021 conference call today as always we appreciate your time and interest in optical cable Corporation.
I hope everyone continues to be safe.
Have a happy holiday season.
Both for you and for your families.
You very much.
This does conclude today's program. Thank you for your participation you may disconnect at any time.