Q3 2023 Optical Cable Corporation Earnings Call
Okay.
Speaker 1: Please stand by. Your program is about to begin. If you need assistance during your conference today, please press star zero.
Please standby your program is about to begin if you need assistance during your conference today. Please press Star zero.
Good morning, My name is Angela and I will be your conference operator today at this time I would like to welcome you to the optical cable Corporation third quarter of fiscal year 2023 earnings conference call.
Speaker 1: Good morning. My name is Angela and I will be your conference operator today. At this time, I would like to welcome you to the Optical Cable Corporation third quarter of fiscal year 2023 earnings conference call. All lines have been placed on mute to prevent any technical difficulties.
All lines have been placed on mute to prevent any background noise.
Speaker 1: After the speaker's remarks, there will be a question and answer period.
After the Speakers' remarks, there will be a question and answer period.
Speaker 1: If you would like to ask a question at that time, please press star 1 on your telephone keypad. If you wish to remove yourself from the queue, please press star 2. Mr. Palush, you may begin your call.
If you would like to ask a question at that time. Please press star one on your telephone keypad if.
If you wish to remove yourself from the queue. Please press star two.
Mr. Palash, you may begin your conference.
Thank you Angela.
Speaker 2: Good morning and thank you all for joining us for obstacle table corporations third quarter fiscal year 2023 conference
Good morning, and thank you all for joining us for optical cable Corporation third quarter fiscal year 2023 conference call.
Speaker 2: By this time, everyone should have a copy of the earnings press release issued earlier today. You can also visit www.occfiber.com for a copy.
At this time, everyone should have a copy of the earnings press release issued earlier today. You can also visit www Dot O 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.
Speaker 2: 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.
Speaker 2: 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 statement section of this morning's press release.
Before we begin I'd like to remind everyone that this call may contain forward looking statements that involve risks and uncertainties <unk> 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.
Speaker 2: These cautionary statements apply to the contents of the Internet webcast on www.occfiber.com 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.
These cautionary statements apply to the contents of the Internet webcast on www Dot occ's 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 will begin the call today with a few opening remarks.
Speaker 3: Tracy will then review the third quarter results for the 3 month and 9 month periods ended July 31st, 2023 in some additional detail.
Tracy will then review the third quarter results for the three month and nine month periods ended July 31, 2023, and some additional detail.
Speaker 3: After Tracy's remarks, we will answer as many questions as we can. As is our normal practice, we will only take questions from analysts and institutional investors during the Q&A session.
After Tracy's remarks, we will answer as many questions as we can.
As is our normal practice, we will only take questions from analysts and institutional investors starting the Q&A session.
Speaker 3: 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.
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.
Before we discuss the third quarter I want to note that yesterday was of course the anniversary of the September 11th attacks on our homeland.
Speaker 3: Before we discuss the third quarter, I want to note that yesterday was, of course, the anniversary of the September 11th attacks on our homeland.
We are incredibly grateful for all of those who have served and those who continue to serve for their sacrifices for our country.
Speaker 3: We are incredibly grateful for all of those who have served and those who continue to serve for their sacrifices for our country and our freedom.
And our freedom.
The OCC team is proud of the work, we do to support our armed services and first responders.
Speaker 3: The OCC team is proud of the work we do to support our armed services and first responders.
OCC is honored to be trusted with the responsibility of manufacturing and supply our mission critical products to our country's military.
Speaker 3: OCC is honored to be trusted with the responsibility of manufacturing and supplying our mission critical products to our country's military, first responders, and other essential workers, including healthcare facilities and hospitals.
First responders and other essential workers, including health care facilities and hospitals.
Speaker 3: And now turning to the third quarter fiscal year, 2023.
And now turning to the third quarter of fiscal year 2023.
Speaker 3: With year over year increases in key metrics during the first 9 months of fiscal year 2023, including net sales, gross profit, gross profit margin, operating income, and net income.
With year over year increases in key metrics during the first nine months of fiscal year 2023, including net sales gross profit gross profit margin operating income and net income.
Speaker 3: Our results so far this year reflect the OCC team's hard work and success.
Our results so far this year reflected the OCC team's hard work and success.
Speaker 3: executing our strategy in a dynamic market.
Executing our strategy in a dynamic market.
Yeah.
Speaker 3: Looking at the 3rd quarter of fiscal year 2023. Our gross profit increased 6.4%. Our gross profit margins also increased.
Looking at the third quarter of fiscal year 2023, our gross profit increased six 4%.
Gross profit margins also increased.
Speaker 3: even while our net sales decreased 2.5%.
Even while our net sales decreased two 5%.
Speaker 3: All when compared to the 3rd quarter fiscal year 2022.
All when compared to the third quarter of fiscal year 2022.
And certain of our specialty markets, we continue to see robust demand for our diversified suite of mission critical cabling and connectivity products and solutions, even while certain of our other targeted markets.
Speaker 3: In certain of our specialty markets, we continue to see robust demand for our diversified suite of mission critical cabling, connectivity products, and solutions, even while certain of our other targeted markets, like the Enterprise and wireless...
The enterprise and wireless carrier markets.
Speaker 3: are softening at this time consistent with the industry crown.
Softening at this time consistent with the industry trends.
One of Occ's core strengths is and continues to be our diversified revenue base with a broad range of industries and markets served and we benefited from this diversification during the third quarter of fiscal 2023.
Speaker 3: One of OCC's core strengths is and continues to be our diversified revenue base with a broad range of industries and markets served. And we benefited from this diversification during the third quarter of fiscal 2023.
Our sales order backlog and forward load remains at higher than typical levels.
Speaker 3: Our sales order backlog and forward load remains at higher than typical levels.
Speaker 3: But had decreased by the end of the 3rd quarter of fiscal year 2023 compared to the end of the 2nd quarter of fiscal year 2023.
Had decreased by the end of the third quarter of fiscal year 2023, compared to the end of the second quarter of fiscal year 2023.
Looking forward.
Speaker 3: Looking forward, while certain of our markets are showing signs of continued softness, including our enterprise and wireless carrier market.
While certain of our markets are showing signs of continued softness, including our enterprise and wireless carrier markets. We believe certain of our other markets are showing signs of continued strength.
Speaker 3: We believe certain of our other markets are showing signs of continued strength.
We are continuing to monitor the evolving macroeconomic trends industry trends and potential risks that could impact our business.
Speaker 3: We are continuing to monitor the evolving macroeconomic trends. Industry trends and potential risks that could impact our business.
We are continuing to execute our strategic initiatives and are committed to capturing demand and driving growth.
Speaker 3: We are continuing to execute our strategic initiatives. And are committed to capturing demand, driving growth. Working safely and operating efficiently.
<unk> safely and operating efficiently.
Speaker 3: As we move into the fourth quarter of fiscal year 2023 and beyond, we are focused as ever on finishing the fiscal year strong, serving our valued customers and end users and driving enhanced value for shareholders.
As we move into the fourth quarter of fiscal year 2023, and beyond we are focused as ever on finishing the fiscal year strong serving our valued customers and end users and driving enhanced value for shareholders.
Speaker 3: And with that, I will turn the call over to Tracy, who will review in additional detail our third quarter of fiscal year, twenty, twenty three financial results.
And with that I'll turn the call over to Tracy, who will review and additional detail our third quarter of fiscal year 2023 financial results.
Thank you Neil.
Consolidated net sales for the third quarter of fiscal year, 2023 decreased two 5% to $16 $9 million compared to net sales of $17 $4 million for the same period last year.
Speaker 4: Consolidated net sales for the 3rd quarter of fiscal year 2023 decreased 2.5% to 16.9 million dollars compared to net sales of 17.4 million dollars for the same period last year.
Consolidated net sales for the first nine months of fiscal 2023 or $54.8 million, an increase of 11, 9% compared to net sales of $49 million for the same period last year.
Speaker 4: Consolidated net sales for the first nine months of fiscal 2023 were $54.8 million, an increase of 11.9% compared to net sales of $49 million for the same period last year.
Speaker 4: During the third quarter and first nine months of fiscal 2023, we experienced an increase in net sales in our specialty markets compared to the same periods last year, but this increase was partially offset by decreases in our enterprise market.
During the third quarter and first nine months of fiscal 2023, we experienced an increase in net sales in our specialty markets compared to the same period last year, but this increase was partially offset by decreases in our enterprise market.
Net sales for the third quarter of fiscal year 2023 were negatively impacted by various macroeconomic pressures risks and uncertainties as well as a brief shutdown in our manufacturing operations, resulting from the cyber incident that occurred in June 2023.
Speaker 4: Net sales for the third quarter of fiscal year 2023 were negatively impacted by various macroeconomic pressures, risks and uncertainties, as well as a brief shutdown in our manufacturing operations, resulting from a cyber incident that occurred in June 2023.
Speaker 4: While certain of our markets are showing signs of continued softening, including our enterprise and wireless carrier markets, we believe there are positive indicators in certain of our other markets.
While certain of our markets are showing signs of continued softening in creating our enterprise and wireless carrier market. We believe there are positive indicators in certain of our other markets. Additionally.
Speaker 4: Additionally, our manufacturing operations have returned to normal functionality after being impacted by the cyber incident that occurred in June 2023.
Additionally, our manufacturing operations have returned to normal functionality after being impacted by the cyber incident that occurred in June 2023.
As Neil mentioned, our sales order backlog and for Atlanta continues to remain at higher higher than typical levels at approximately $6 $8 million at the end of the third quarter of fiscal year 2023.
Speaker 4: As Neil mentioned, our sales order backlog and forward low continues to remain at higher tip higher than typical levels at approximately 6.8M dollars at the end of the 3rd quarter of fiscal year 2023. Compared to approximately 8M dollars at the end of the 2nd quarter of fiscal 2023. And more than 12M dollars at the end of the 4th quarter of fiscal year 2022.
Compared to approximately $8 million at the end of the second quarter of fiscal 2023 and more than $12 million at the end of the fourth quarter of fiscal year 2022.
Speaker 4: Turning to gross profit gross profit increased 6.4% to 5.1Million dollars in the 3rd quarter of fiscal 2023 compared to gross profit of 4.8Million dollars for the same period last year.
Turning to gross profit gross profit increased six 4% to $5 $1 million in the third quarter of fiscal 2023 compared to gross profit of $4 $8 million for the same period last year.
Speaker 4: Gross profit margin or gross profit as a percentage of net sales increased to 30.2% in the 3rd quarter of fiscal 2023. Compared to 27.7% in the 3rd quarter of fiscal 2022.
Gross profit margin or gross profit as a percentage of net sales increased to 32% in the third quarter of fiscal 2023 compared to 27, 7% in the third quarter of fiscal 2022.
OCC realized improved gross profit margins compared to the third quarter of fiscal year 2022, Despite the comparable decrease in net sales level. We attribute this margin improvement gains in production efficiency as well as the impact of a more fully trained workforce.
Speaker 4: OCC realized improved gross profit margins compared to the third quarter of fiscal year 2022, despite a comparable decrease in net sales.
Speaker 4: We attribute this margin improvement to gains in production efficiency as well as the impact of a more fully trained workforce.
Okay.
Gross profit increased 32.6% to $18 $4 million in the first nine months of fiscal 2023 compared to $13 $9 million in the first nine months of fiscal 2022.
Speaker 4: Gross profit increased 32.6% to 18.4 million dollars in the first 9 months of fiscal 2023. Compared to 13.9 million dollars in the first 9 months of fiscal 2022.
Gross profit margin increased to 33, 6% in the first nine months of fiscal 2023 compared to 28, 3% in the first nine months of fiscal 2022.
Speaker 4: Gross profit margin increased to 33.6% in the first nine months of fiscal 2023 compared to 28.3% in the first nine months of fiscal 2022.
Speaker 4: Our gross profit margins tend to be higher when we achieve higher net sales levels due to our operating leverage. Certain fixed manufacturing costs are spread over higher sales.
Our gross profit margins tend to be higher when we achieve higher net sales levels due to our operating leverage as certain fixed manufacturing costs are spread over higher sales.
We experienced improved gross profit margins when comparing the first nine months of fiscal year 2023 to the same period in 2022.
Speaker 4: We experienced improved gross profit margins when comparing the first nine months of fiscal year 2023 to the same period in 2022.
We attribute this improvement to the positive impact of our operating leverage of sales level increased.
Speaker 4: We attribute this improvement to the positive impact of our operating leverage of sales levels increased, gains in production efficiencies, as well as the impact of more fully trained work...
And production efficiencies as well as the impact of the more fully trained workforce.
Speaker 4: Our gross profit margin percentages are also heavily dependent upon product mix on a quarterly basis and may vary based on changes in product.
Our gross profit margin percentages are also heavily dependent upon product mix on a quarterly basis and may vary based on changes in product.
Okay.
Yes.
Speaker 4: S. G. N. A. Expenses were 5M dollars in both the 3rd quarters of fiscal year 2023 and 2022. S. G. N. A. Expenses as a percentage of net sales were 29.3% in the 3rd quarter of fiscal 2023. Compared to 28.5% in the 3rd quarter of fiscal 2022.
SG&A expenses were $5 million in both the third quarters of fiscal year 2023 and 2022.
SG&A expenses as a percentage of net sales were 29, 3% in the third quarter of fiscal 2023 compared to 28, 5% in the third quarter of fiscal 2020.
Speaker 4: SG&A expenses increased to $16.1 million during the first nine months of fiscal year 2023 from $14.8 million for the first nine months of fiscal year 2022.
SG&A expenses increased to $16 $916 $1 million during the first nine months of fiscal year, 2023, and $14 $8 million for the first nine months of fiscal year 2022.
Speaker 4: In the 1st, 9 months of fiscal year, 2023 as expenses as a percentage of net sales were 29.3% compared to 30.1% for the same period of fiscal year 2022.
And the first nine months of fiscal year 2023, SG&A expenses as a percentage of net sales were 29, 3% compared to 31% for the same period of fiscal year 2022.
Speaker 4: The increase in expenses during the 1st, 9 months of fiscal year 2023 compared to the same period last year. What's primarily the result of increases in employee and contracted sales personnel related costs.
The increase in SG&A expenses during the first nine months of fiscal year 2023, compared to the same period last year was primarily the result of increases in employee and contracted sales personnel related costs.
Speaker 4: Included in employee and contracted sales personnel related costs are employee incentives and commissions which increase due to increased net sales and the improved financial results during the first nine months of fiscal 2020.
Employ in contracted sales personnel related costs higher employee incentives and commissions, which increased due to increased net sales and the improved financial results. During the first nine months of fiscal 2023.
OCC recorded net income of $101000 or one per basic and diluted share for the third quarter of fiscal 2023 compared to a net loss of 37.
Speaker 4: OCC recorded net income of 101,000 dollars or 1 cent per basic and deleted share for the 3rd quarter of fiscal 2023 compared to a net loss of 372,000 dollars or 5 cents per basic and deleted share for the 3rd quarter of fiscal 2022.
$372000 or five cents per basic and diluted share for the third quarter of fiscal 2022.
OCC recorded net income of $3 $3 million or 42 cents per basic and diluted share for the first nine months of fiscal year 2023, compared to a net loss of $1 $5 million or <unk> 20 per basic and diluted share for the first nine months of fiscal year 2022.
Speaker 4: OCC recorded net income of 3.3Million dollars or 42 cents per basic and diluted share for the 1st, 9 months of fiscal year 2023 compared to a net loss of 1.5Million dollars or 20 cents per basic and diluted share for the 1st, 9 months of fiscal year 2022.
Speaker 4: In addition to improve sales and gross profits, the company's results benefited from the gain on insurance proceeds received for damage to property and equipment, totaling 2M dollars. This was recorded as other income net on the company's statement of operations during the first nine months of fiscal year 2023.
In addition to improved sales and gross profit. The company's result benefited from the gain on insurance proceeds received for damage to property and equipment totaling $2 million, which was recorded as other income net on the company's statement of operations. During the first nine months of fiscal year 2023.
During the second and third quarters of fiscal year 2023, we received insurance proceeds in connection with our office building and its contents that are asphalt facilities sustaining water damage from a burst pipe in a sprinkler system at the end of December 2022.
Speaker 4: During the second and third quarters of fiscal year 2023, we received insurance proceeds in connection with our office building and its contents at our Asheville facilities, sustaining water damage from a burst pipe and a sprinkler system at the end of December 2022.
Speaker 4: In connection with this event, we recognize the gain on insurance proceeds received for damage to property and equipment during the first nine months of fiscal year 2023 totaling $2 million.
In connection with this event, we recognized a gain on insurance proceeds received for damage to property and equipment. During the first nine months of fiscal year 2023 totaling $2 million.
To the extent, we incur expenses in future periods to restore repair or replace damaged assets, we may recognize offsetting losses in the future period.
Speaker 4: To the extent we incur expenses in future periods to restore, repair, or replace damaged assets, we may recognize offsetting losses in those future periods.
Speaker 4: At this time, we do not expect future restoration and repair costs to exceed any insurance process.
At this time, we do not expect future restoration and repair cost to exceed any insurance proceeds.
Speaker 4: As of July 31st, 2023, we had outstanding borrowings of 7.3M dollars on our revolver. And 3.9M dollars in available credit. We also had outstanding loan balances of 4.3M dollars under our real estate term loan. And with that, I will turn the call back over to the next speaker.
As of July 31, 2023, we had outstanding borrowings of $7 $3 million on our revolver and $3 $9 million in available credit. We also had outstanding loan balances of $4 $3 million under our real estate term loan.
And with that I will turn the call back over to you.
Thank you Tracy.
And now if analysts or institutional investors have questions. We are happy to answer them.
Speaker 3: And now, if analysts or institutional investors have questions, we are happy to answer them. Angela, 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.
Angela 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.
Analysts and institutional investors.
Speaker 1: At this time, if you would like to ask a question, please press star 1 on your telephone keypad.
At this time, if you would like to ask a question. Please press star one on your telephone keypad.
Speaker 1: You may remove yourself from the queue at any time by pressing star 2.
You may remove yourself from the queue at any time by pressing star two.
Speaker 1: Once again, that is star 1 to ask a question. We will pause for a moment to allow questions to queue.
Once again that is star one to ask a question.
We will pause for a moment to allow questions to queue.
It appears there are no questions at this time I will now turn the program back over to our presenters for additional remarks.
Speaker 1: It appears there are no questions at this time. I will now turn the program back over to our presenters for additional remarks.
Thank you Angela.
Speaker 3: Erin, I know we have some questions that have been submitted by individual investors if you can walk us through those. I'd appreciate it.
Aaron I know, we have some questions that have been submitted by individual investors if you could.
Walk us through those I'd appreciate it.
Sure.
Speaker 2: Here's the first. There was a recent article in The Wall Street Journal about the building out of broadband to all types of rural areas in the USA.
Here's the first there was a recent article in the Wall Street Journal about the building out of broadband to all types of rural areas in the USA.
Speaker 2: Might OCC be a beneficiary of this build out? And also, might the increasing tension with China work to OCC's advantage in any way?
Might OCC be a beneficiary of this build out.
Yes, and also might be increasing tension with China work to Occ's advantage in any way.
Okay, well first first part of the question OCC does have products that are used in broadband related applications.
Speaker 3: Well, first part of the question, OCC does have products that are used in broadband related applications. Generally, the broadband market has not been one of OCC's targeted markets for a number of reasons. However, we are following the developments and the potential opportunities in the broadband market.
Generally the broadband market has not been one of Occ's targeted markets for a number of reasons. However, we felt we are following the developments and the potential opportunities in the broadband markets.
Speaker 3: With respect to the second part of the question as.
With respect to the second part of the question as.
Speaker 3: As you all as listeners know for sure, there's been more onshore manufacturing in the US.
As you all.
Theres no for sure.
It's been more onshoring of manufacturing in the U S.
Speaker 3: And as a US manufacturer, we believe this trend provides us with additional opportunities.
And as a U S manufacturer. We believe this trend provides us with additional opportunities.
Next question.
The cash balance is always low at quarter end is it low throughout the quarter and does this cause any issues in regards to running the company.
Speaker 2: The cash balance is always low at quarter end. Is it low throughout the quarter? And does this cause any issues in regards to running the company?
I'm going to ask Tracy to.
Speaker 3: I'm going to ask Tracy to answer that question. Sure.
Answer that question Yeah sure.
Speaker 4: The cash balance reflects the way advances on and payments on our revolver works. Our accounts receivable collections pay down our revolver on a daily basis, which is not unusual. So we believe our revolver provides sufficient capital to meet our business needs.
The cash balance reflects the way advances on and payments on our revolver works.
Accounts receivable collections pay down our revolver on a daily basis, which is not unusual.
So we believe our revolver provides sufficient capital to meet our business needs.
Unknown Attendee: Please stand by. Your program is about to begin. If you need assistance during your conference today, please press star zero.
Speaker 4: As you know, OCC benefits from a strong balance sheet with a current ratio of 3 to 1 at the end of the third quarter, even when excluding our restricted cash.
As you know ACC benefits from a strong balance sheet with a current ratio of three to one at the end of the third quarter, even when excluding our restricted cash balance.
Unknown Attendee: Good morning.
Angela: My name is Angela and I will be your conference operator today.
Okay.
Angela: At this time, I would like to welcome you to the Optical Cable Corporation, third quarter of fiscal year 2023 earnings conference call. All lines have been placed on mute to prevent any background noise.
Speaker 2: Okay, that was the last question supported before the deadline.
Okay that any what was the last question supported before the deadline.
Okay. Thank you. Thank you Sir.
Angela: After the speaker's remarks, there will be a question and answer period. If you would like to ask a question at that time, please press star one on your telephone keypad. If you wish to remove yourself from the queue, please press star two.
Speaker 3: We'd like to thank everyone for listening to our third quarter of fiscal year 2023 conference call today. As always, we appreciate your time and your investment in optical key of the corporation. Thank you.
We'd like to thank everyone for listening to our third quarter of fiscal year 2023 conference call today as always we appreciate your time and your investment in optical cable Corporation. Thank you.
Aaron Palash: Mr. Palash, you may begin your conference. Thank you, Angela.
This does.
Speaker 1: This does conclude today's program. Thank you for your participation. You may disconnect at any time.
Conclude today's program. Thank you for your participation you may disconnect at any time.
Neil Wilkins: Good morning and thank you all for joining us for Optical Cable Corporation's third quarter of fiscal year 2023 conference call. By this time, everyone should have a copy of the earnings press release issued earlier today. You can also visit www.occfiber.com for a copy. On the call of us today are Neil Wilkins, President and Chief Executive Officer of OCC and Tracy Smith, Senior Vice President and Chief Financial Officer.
Okay.
Hum.
Mhm mhm.
Neil Wilkins: Before you begin, I'd like to remind everyone that this call may contain store-looking statements that involve risks and uncertainties. The actual future results of Optical Cable Corporation made different materially due to a number of factors and risks, including but not limited to those factors referenced in the store-looking statement section of this morning's press release. These cautionary statements apply to the contents of the Internet webcast on www.occfiber.com as well as today's call.
Neil Wilkins: With that, I'll turn the call over to Neil Wilkins. Neil, please begin. Thank you, Aaron and good morning, everyone.
Neil Wilkins: I will begin the call today with a few opening remarks. Tracy will then review the third quarter results for the three-month and nine-month periods ended July 31, 2023 in some additional detail. After Tracy's remarks, we will answer as many questions as we can. As is our novel practice, we will only take questions from analysts and institutional investors starting 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.
Neil Wilkins: Before we discuss the third quarter, I want to note that yesterday was of course the anniversary of the September 11 attacks on our homeland. We are incredibly grateful for all of those who have served and those who continue to serve for their sacrifices for our country and our freedom. The OCC team is proud of the work we do to support our armed services and first responders.
Neil Wilkins: OCC is honored to be trusted with the responsibility of manufacturing and supplying our mission-critical products to our country's military, first responders and other essential workers, including healthcare facilities and hospitals, and now, turning to the third quarter of fiscal year 2023. With year-over-year increases in key metrics during the first nine months of fiscal year 2023, including net sales, gross profit, gross profit margin, operating income, and net income, our results so far that she reflect the OCC, teams, hard work, and success, executing our strategy and the dynamic market.
Neil Wilkins: Looking at the third quarter of fiscal year 2023, our gross profit increased 6.4 percent, and our gross profit margins also increased. Even while our net sales decreased to 0.5 percent, all compared to the third quarter of fiscal year 2022. In certain of our specialty markets, we continue to see robust demand for our diversified suite of mission-critical, cabling, connectivity products, and solutions, even while certain of our other targeted markets, like the enterprise and wireless carrier markets, are softening at this time, consisting of the industry crowds.
Neil Wilkins: One of those OCC's core strengths is, and continues to be, our diversified revenue base with a broad range of industries and markets served, and we benefited from this diversification during the third quarter of fiscal 2023. Our sales order backlog and forward load remains at higher than typical levels, but had decreased by the end of the third quarter of fiscal year 2023, compared to the end of the second quarter of fiscal year 2023.
Neil Wilkins: Looking forward, while certain of our markets are showing signs of continued softness, including our enterprise and wireless carrier markets, we believe certain of our other markets are showing signs of continued strength. We are continuing to monitor the evolving macro economic trends, industry trends, and potential risks that could impact our business. We are continuing to execute our strategic initiatives and are committed to capturing demand, driving growth, working safely, and operating efficiently. As we move into the fourth quarter of fiscal year 2023 and beyond, we are focused, as ever, on finishing the fiscal year strong, serving our valued customers and end users, and driving enhanced value for shareholders.
Tracy Smith: And with that, I will turn the call over to Tracy, who will review, in additional detail, our third quarter of fiscal year 2023 financial results. Thank you, Neil. Consolidated net sales for the third quarter of fiscal year 2023 decreased 2.5% to $16.9 million compared to net sales of $17.4 million for the same period last year. Consolidated net sales for the first nine months of fiscal 2023 were $54.8 million, an increase of 11.9% compared to net sales of $49 million for the same period last year.
Tracy Smith: During the third quarter and first nine months of fiscal 2023, we experienced an increase in net sales in our specialty markets compared to the same period last year, but this increase was partially offset by decreases in our enterprise market. Net sales for the third quarter of fiscal year 2023 were negatively impacted by various macroeconomic pressures, risks, and uncertainties, as well as a brief shutdown in our manufacturing operations, resulting from a cyber incident that occurred in June 2023.
Tracy Smith: While certain of our markets are showing signs of continued softening, including our enterprise and wireless carrier markets, we believe there are positives, indicators, and certain of our other markets. Additionally, our manufacturing operations have returned to normal functionality after being impacted by the cyber incidents that occurred in June 2023. As Neil mentioned, our sales order backlog and forward load continues to remain at higher tips higher than typical levels at approximately $6.8 million at the end of the third quarter of fiscal year 2023, compared to approximately $8 million at the end of the second quarter of fiscal 2023, and more than $12 million at the end of the fourth quarter of fiscal year 2022.
Tracy Smith: Turning to gross profit, gross profit increased 6.4% to $5.1 million in the third quarter of fiscal 2023, compared to gross profit of $4.8 million for the same period last year. Gross profit margin or gross profit as a percentage of net sales increased to 30.2% in the third quarter of fiscal 2023, compared to 27.7% in the third quarter of fiscal 2022. OCC realized improved gross profit margins compared to the third quarter of fiscal year 2022, despite a comparable decrease in net sales levels.
Tracy Smith: We attribute this margin improvement to gains in production and efficiency as well as the impact of a more fully trained workforce. Gross profit increased 32.6% to $18.4 million in the first nine months of fiscal 2023, compared to $13.9 million in the first nine months of fiscal 2022. Gross profit margin increased to 33.6% in the first nine months of fiscal 2023, compared to 28.3% in the first nine months of fiscal 2022. Our gross profit margins tend to be higher when we achieve higher net sales levels due to our operating leverage of certain fixed manufacturing costs or spread over higher sales.
Tracy Smith: We experienced improved gross profit margins when comparing the first nine months of fiscal year 2023 to the same period in 2022. We attribute this improvement to the positive impact of our operating leverage of sales levels increased, gains in production efficiencies as well as the impact of a more fully trained workforce. Our gross profit margin percentages are also heavily dependent upon product mix on a relatively basis and may vary based on changes in product mix.
Tracy Smith: SGNA expenses were $5 million in base of third quarters of fiscal year 2023 and 2022. SGNA expenses as a percentage of net sales were 29.3% in the third quarter of fiscal 2023, compared to 28.5% in the third quarter of fiscal 2022. SGNA expenses increased to $16.1 million during the first nine months of fiscal year 2023 from $14.8 million for the first nine months of fiscal year 2022. In the first nine months of fiscal year 2023, SGNA expenses is a percentage of net sales or 29.3% compared to 30.1% for the same period of fiscal year 2022.
Tracy Smith: The increase in SGNA expenses during the first nine months of fiscal year 2023 compared to the same period last year was primarily the result of increases in employee and contracted sales personnel related costs. Included in employee and contracted sales personnel related costs are employee incentives and commissions which increase due to increased net sales and the improved financial results during the first nine months of fiscal 2023. OCC recorded net income of $101,000 or $1 cents per basic and deleted share for the third quarter of fiscal 2023 compared to a net loss of $372,000 or $5 cents per basic and deleted share for the third quarter of fiscal 2022. OCC recorded net income of $3.3 million or $42 cents per basic and deleted share for the first nine months of fiscal year 2022.
Tracy Smith: [inaudible] In second and third quarters of fiscal year 2023, we received insurance proceeds in connection with our office building and its contents at our Asheville facilities, sustaining water damage from a burst pipe and a sprinkler system at the end of December 2022. In connection with this event, we recognized the gain on insurance proceeds received for damage to property and equipment during the first nine months of fiscal year 2023, totaling $2 million.
Tracy Smith: To the extent we incur expenses and future periods to restore repair or replace damaged assets, we may recognize offsetting losses in those future periods. At this time, we do not expect future restoration and repair costs to exceed any insurance proceeds. As of July 31, 2023, we had outstanding borrowing of $7.3 million on our revolver and $3.9 million in available credit. We also had outstanding loan balances of $4.3 million under our real estate term line.
Neil Wilkins: And with that, I will turn the call back over to you, Neil. Thank you, Tracy. And now, if analysts or institutional investors have questions, we are happy to answer them.
Angela: Angela, if you could please indicate the instructions for our participants to call in any questions they may have. I appreciate it. Again, we are only taking live questions from analysts and institutional investors. At this time, if you would like to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, that is star one to ask a question. We will pause for a moment to allow questions to queue. It appears there are no questions at this time.
Aaron Palash: I will now turn the program back over to our presenters for additional remarks. Thank you, Angela. Aaron, I know we have some questions that have been submitted by individual investors if you can walk us through those. I'd appreciate it. Sure. Here's the first. There was a recent article in the Wall Street Journal about the building out of broadband to all types of rural areas in the USA. Might OCC be a beneficiary of this build out.
Aaron Palash: And also might the increasing attention with China work to OCC's advantage in any way. Well, first part of the question. OCC does have products that are used in broadband related applications. Generally, the broadband market has not been one of OCC's targeted markets for a number of reasons. However, we are following the developments and potential opportunities in broadband markets. With respect to the second part of the question, as you all, as listeners know, for sure, there's been more ensuring the manufacturing of the U.S. And as a U.S, manufacturer, we believe this trend provides us with additional opportunities.
Unknown Attendee: Trevor, next question. The cash balance is always low at quarter end. Is it low throughout the quarter? And does this cause any issues in regards to running the company?
Tracy Smith: I'm going to ask Tracy to answer that question, then. Sure. The cash balance reflects the way advances on and payments on our revolver work. Our accounts receivable collections pay down our revolver on a daily basis, which is not unusual. So we believe our revolver provides sufficient capital to meet our business needs. As you know, OCC benefits from a strong balance sheet with the current ratio of three to one at the end of the third quarter, even when excluding our restricted cash balance.
Unknown Attendee: Okay, that's the last question. Supported before the deadline. Okay, thank you. Thank you, Aaron.
Neil Wilkins: I'd like to thank everyone for listening to our third quarter of fiscal year 2023 conference call today. As always, we appreciate your time and your investment in optical key to cooperation. Thank you.
Unknown Attendee: This does conclude today's program. Thank you for your participation. You made this connect at any time.