Q2 2025 Optical Cable Corp Earnings Call
Operator: Please stand by, your program is about to begin.
By your program is about to begin.
[music].
Speaker Change: Good morning, My name is not a fun and I will be your conference operator today at.
Madison: My name is Madison, and I will be your conference operator today.
Madison: At this time, I would like to welcome you to Optical Cable Corporation's second quarter of fiscal year 2025 earnings conference call. All lines have been placed on mute to prevent any background noise.
Speaker Change: At this time I would like to welcome you to optical cable Corporation's second quarter of fiscal year 2025 earnings Conference call.
Speaker Change: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period.
Madison: 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 1 on your telephone keypad. If you wish to remove yourself from the queue, please press star 2.
Speaker Change: I 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 Mr. Hoffman you may begin your conference.
Madison: Mr. Hoffman, you may begin your conference.
Neil Wilkin: Good morning, and thank you for joining us for Optical Cable Corporation's second quarter of fiscal year 2025 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.
Hoffman: Good morning, and thank you for joining us for optical cable Corporation's second quarter fiscal year 2025 conference call.
Speaker Change: By this time, everyone should have a copy of the earnings press release issued earlier today.
You can also visit www dot cause you see fiber dot com for a copy.
Neil Wilkin: 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 uncertainty. 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.ocgfiber.com as well as today's call.
Speaker Change: 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 Change: Before we begin I'd like to remind everyone that this call may contain forward looking statements that involve.
Speaker Change: Risks and uncertainties the actual future results of optical cable Corporation may drift.
Speaker Change: Or materially due to a number.
Speaker Change: Factors and risks, including but not limited to those factors referenced in the forward looking statements section of this morning's press release.
Speaker Change: These cautionary statements apply to the contents of the Internet webcast on www dot fiber dot com as well as today's call.
Neil Wilkin: With that, I'll turn the call over to Neal Wilkin. Neal, please begin.
Neil Wilkin: With that I'll turn the call over to Neil Wilkin Neil Please begin.
Neil Wilkin: Thank you, Spencer, and good morning, everyone. I will begin the call today with a few opening remarks.
Neil Wilkin: Thank you Spencer and good morning, everyone.
Speaker Change: I will begin the call today with a few opening remarks Tracy will then review the second quarter results for the three months and six month periods.
Neil Wilkin: Tracy will then review the second quarter results for the three-month and six-month periods ended April 30, 2025, and some additional details. 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. During the second quarter, the OCC team delivered net sales growth and gross profit growth on both a year-over-year and a sequential basis.
Speaker Change: At April 32025, and some additional detail.
Speaker Change: After Tracy's remarks, we will answer as many of your questions as we can.
Speaker Change: As is our normal practice, we will only take questions from analysts and institutional investors during the Q&A session.
Speaker Change: We also offer other shareholders the opportunity to submit questions in advance of our earnings call.
Speaker Change: Instructions regarding such submissions are included in our press release announcing the date and time of our call.
Speaker Change: During the second quarter. The OCC team delivered sales net sales growth and gross profit growth on both a year over year and sequential basis.
Neil Wilkin: Strong execution by the OCC team coupled with our significant operating leverage also enabled us to deliver improved gross profit margins as we realized improved manufacturing efficiencies over higher production volumes. We continue to see positive industry trends from which we believe OCC will continue to benefit as the year progresses. At the end of our second quarter of fiscal 2025, our sales backlog and forward load had increased to $7.2 million compared to $6.6 million as of January 31st, 2025. $5.7 million as of October 31, 2024. We are confident our focus on executing our growth strategies and capitalizing on operating efficiencies will drive positive results this year, including opportunities for gross profit margin expansion with increased production volume as we benefit from OCC's significant operating leverage.
Speaker Change: <unk> execution by the OCC team, coupled with our significant operating leverage also enabled us to deliver improved gross profit margins as we realized improved manufacturing efficiencies over higher production volumes.
Speaker Change: We continue to see positive industry trends for which we believe OCC will continue to benefit as the year progresses.
Speaker Change: At the end of our second quarter of fiscal 2025, our sales backlog and forward load had increased to $7 2 million compared to $6 $6 million as of January 31, 2025.
Speaker Change: $5 7 million as of October 31.
Speaker Change: Before.
Speaker Change: We are confident our focus on executing our growth strategies and capitalize on operating efficiencies will drive positive results this year, including opportunities for gross profit margin expansion with increased production volume.
Speaker Change: As we benefit from OCC significant operating leverage.
Neil Wilkin: I'm proud of the OCC team whose hard work allowed us to deliver a strong start to the first half of fiscal 2025 in a dynamic market environment.
Speaker Change: I'm proud of the OCC team, whose hard work allowed us to deliver a strong start to the first half of fiscal 2025.
Speaker Change: NAMIC market environment.
Neil Wilkin: As we look ahead to the second half of the year, we remain focused on disciplined execution and capitalizing on growth opportunities to drive shareholder value.
Speaker Change: As we look ahead to the second half of the year, we remain focused and disciplined.
Speaker Change: Disciplined execution and capitalizing on growth opportunities to drive shareholder value.
Speaker Change: Yes.
Neil Wilkin: And with that, I'll turn the call over to Tracy, who will review in additional detail our second quarter of fiscal year 2025 financial...
Speaker Change: And with that I'll turn the call over to Tracy, who will review and additional detail our second quarter of fiscal year 2025 financials.
Tracy Smith: Thank you, Neal. Consolidated net sales for the second quarter of fiscal 2025 increased 8.9% to $17.5 million compared to net sales of $16.1 million for the same period last year, resulting from increases in net sales in our specialty markets while our enterprise markets were relatively stable. Sequentially, net sales increased 11.5% during the second quarter of fiscal year 2025 compared to net sales of $15.7 million for the first quarter of fiscal 2025. We experienced sequential increases in both our enterprise and specialty markets during the second quarter compared to the first quarter of fiscal year 2025. Consolidated net sales for the first half of fiscal 2025 were $33.3 million, an increase of 7.5%, as compared to net sales of $31 million for the first half of fiscal 2024, with sales increases in both our enterprise and specialty markets.
Tracy Smith: Thank you Neil.
Tracy Smith: Consolidated net sales for the second quarter of fiscal 2025 increased eight 9% to $17 $5 million.
Speaker Change: <unk> net sales of $16 $1 million for the same period last year, resulting from increases in net sales in our specialty markets fall our enterprise markets were relatively stable.
Speaker Change: Yeah.
Speaker Change: Sequentially net sales increased 11, 5% during the second quarter of fiscal year 2025, compared to net sales of $15 $7 million for the first quarter of fiscal 2025.
Speaker Change: We experienced sequential increases in both our enterprise and specialty markets during the second quarter compared to the first quarter of fiscal year 2025.
Speaker Change: Consolidated net sales for the first half of fiscal 2025 or $33 $3 million, an increase of seven 5% as compared to net sales of $31 million for the first half of fiscal 2024 with sales increases in both our enterprise and specialty markets.
Tracy Smith: As Neil mentioned, at the end of our second fiscal quarter of 2025, our sales order backlog and forward load increased to $7.2 million compared to $6.6 million as of January 31, 2025, and $5.7 million as of October 31, 2024. Turning to gross profit, our gross profit increased 32.1% or $1.3 million to $5.3 million in the second quarter of fiscal 2025, compared to $4 million for the same period last year. Gross profit margin or gross profit as a percentage of net sales increased to 30.4% in the second quarter of fiscal 2025, up from 25.1% in the second quarter of fiscal 2024 and 29.4% for the first quarter of fiscal year 2025.
Speaker Change: As Neil mentioned at the end of our second fiscal quarter of 2025, our sales order backlog and forward load increased to $7.2 million compared to $6 $6 million as of January 31st 2025, and $5 $7 million as of October 31, 2024.
Speaker Change: Turning to gross profit, our gross profit increased 32.1% or $1 $3 million to $5 $3 million in the second quarter of fiscal 2025 compared to $4 million for the same period last year.
Speaker Change: Gross profit margin or gross profit as a percentage of net sales increased to 34% in the second quarter of fiscal 2025 up from 25, 1% in the second quarter of fiscal 2024, and 29, 4% for the first quarter of fiscal year 2025.
Tracy Smith: Gross profit was $10 million in the first half of fiscal 2025, an increase of 28.5% compared to $7.8 million in the first half of fiscal 2024. Gross profit margin was 29.9% in the first half of fiscal 2025 compared to 25% in the first half of fiscal 2024. Gross profit margin for the second quarter and first half of fiscal 2025 was positively impacted by production efficiencies created by higher volumes and the resulting positive impact of our operating leverage. Additionally, our gross profit margin percentages are heavily dependent upon product mix on a quarterly basis and may vary based on changes in product mix.
Speaker Change: Gross profit was $10 million in the first half of fiscal 2025, an increase of 28, 5% compared to $7 $8 million in the first half of fiscal 2024.
Speaker Change: Gross profit margin was 29, 9% in the first half of fiscal 2025 compared to 25% in the first half of fiscal 2024.
Speaker Change: Gross profit margin for the second quarter and first half of fiscal 2025 was positively impacted by production efficiencies created by higher volumes and the resulting positive impact of our operating leverage.
Speaker Change: Additionally, our gross profit margin percentages are heavily dependent upon product mix on a quarterly basis and may vary based on changes in product mix.
Tracy Smith: SG&A expenses increased to $5.7 million in the second quarter of fiscal year 2025, compared to $5.3 million for the same period last year. SG&A expenses as a percentage of net sales were 32.7% in the second quarter of fiscal 2025 compared to 33% in the prior year period. By comparison, SG&A expenses as a percentage of net sales were 34.7% during the first quarter of fiscal year 2025. The increase in SG&A expenses during the second quarter and first half of fiscal year 2025, compared to the same periods last year, was primarily the result of increases in employee and contracted sales personnel related costs and shipping costs.
Speaker Change: SG&A expenses increased to $5 $7 million in the second quarter of fiscal year 2025, compared to $5 $3 million for the same period last year.
Speaker Change: SG&A expenses as a percentage of net sales were 32, 7% in the second quarter of fiscal 2025 compared to 33% in the prior year period.
Speaker Change: By comparison SG&A expenses as a percentage of net sales were 34, 7% during the first quarter of fiscal year 2025.
Speaker Change: The increase in SG&A expenses during the second quarter and first half of fiscal year 2025, compared to the same periods last year was primarily the result of increases in employee and contracted sales personnel related costs and shipping costs.
Tracy Smith: Included in employee and contracted sales personnel related costs are compensation costs and sales incentives.
Speaker Change: Included in employee and contracted sales personnel related costs, our compensation costs and sales incentives.
Tracy Smith: OCC recorded a net loss of $698,000 or $0.09 per basic and diluted share for the second quarter of fiscal 2025 compared to a net loss of $1.6 million or $0.21 per basic and diluted share for the second quarter of fiscal 2024.
Speaker Change: OCC recorded a net loss of $698000 or nine cents per basic and diluted share for the second quarter of fiscal 2025 compared to a net loss of $1 $6 million or 21 cents per basic and diluted share for the second quarter of fiscal 2024.
Tracy Smith: OCC recorded a net loss of $1.8 million or 23 cents per basic and diluted share for the first half of fiscal year 2025 compared to $3 million or 39 cents per basic and diluted share for the first half of fiscal year 2024.
Speaker Change: OCC recorded a net loss of $1 $8 million or 23 per basic and diluted share for the first half of fiscal year 2025, compared to $3 million or <unk> 39 per basic and diluted share for the first half of fiscal year 2024.
Neil Wilkin: With that, I'll turn the call back over to you, Neal.
Neil Wilkin: With that I'll turn the call back over to Neil.
Neil Wilkin: Thank you, Tracy. And now, if any analysts or institutional investors have questions, we are happy to answer them.
Speaker Change: Thank you Tracy.
Neil Wilkin: And now if any analysts or institutional investors have questions. We are happy to answer them.
Speaker Change: Madison, If you could please and safety instructions for participants to call in any questions. They may have I appreciate it.
Madison: Madison, if you could please indicate the instructions for our participants to call in any questions they may have, I'd appreciate it. And again, we are only taking live questions from analysts and institutional investors. Thank you. And at this time, if you'd like to ask a question, press star 1 on your keypad. To leave the queue at any time, press star 2. Once again, that is star and 1 to ask a question. Please limit your questions to one question and one follow-up. And we'll pause for just a moment to allow everyone a chance to join the queue.
Neil Wilkin: Again, we only taking live questions from analysts and institutional investors.
Speaker Change: Thank you and at this time, if you'd like to ask a question press star one on your keypad to leave the queue at any time press star to you. Once again that is star and wanted to ask a question. Please limit your questions to one question and one follow up and we'll pause for just a moment to allow everyone a chance to join the queue.
Madison: And once again, if you would like to ask a question, please press star and 1 on your telephone keypad now.
Neil Wilkin: And once again, if you would like to ask a question. Please press star and one on your telephone keypad now.
Manny Stukakis: And we will take our first question from Manny Stukakis with GEO Investing. Please go ahead. Hi, how are you guys doing? On your last call, you guys talked about the significant demand from data centers. I wanted to know if you can tell us about, it seems like the focus is not there to grow in that area, especially given that you guys do have an operating facility in Dallas. There's tremendous infrastructure spend kind of booked out through 2029. I know there's other, you got the U.S. manufacturing advantage in case it becomes all domestic, NVIDIA, TSSI, Dell are all in that Round Rock, Texas area.
Manny Dukakis: And we will take our first question from Manny Dukakis with G. O investing please go ahead.
Manny Dukakis: Hi, how are you guys doing.
Manny Dukakis: On your last call you guys talked about the significant demand from data centers I wanted to know.
Manny Dukakis: If you could tell us about it seems like the focus is not there to grow in that area, especially given that you guys do have been operating facility in Dallas.
Manny Dukakis: Tremendous infrastructure spend kind of booked out through 2029, I know, there's other manufacturer U S manufacturing advantage.
Manny Dukakis: It becomes all domestic.
Speaker Change: Video <unk> were all in that round rock, Texas area, what am I missing why are we taking.
Manny Stukakis: What am I missing? Why aren't we taking more advantage of this opportunity?
Manny Dukakis: More advantage of this opportunity.
Neil Wilkin: Well, I mean, the data center markets divided into several different categories and what's getting the most press and what's getting you know, what you're hearing about NVIDIA and others, those are really at the hyperscale level. And so that is different type of products that the 10CC provides. We have...
Manny Dukakis: Well I mean that.
Manny Dukakis: Data center market is divided into several different.
Manny Dukakis: Category, and what's getting the most price and what's getting.
Manny Dukakis: What you are hearing about in the video and others is a really it's a hyper scale level.
Manny Dukakis: And so that is different type of product set that one OCC provide.
Manny Dukakis: We have.
Neil Wilkin: don't really, haven't really targeted hyperscale data centers. We do have sales in the data center market. for Tier 2 and Tier 3. which is really the multi-tenant data centers and also in enterprise. And we're also looking to see how we can better address those markets. One of the things we did this year is we've added loose-tube product offering to our product and some of those are used in data centers, in some cases, in addition to tight buffering. So we're seeing some benefit of that. I think that there's more opportunity that we haven't taken advantage of yet.
Manny Dukakis: Don't really haven't really targeted hyperscale data centers, we do have sales in the data center markets.
Manny Dukakis: For tier two and tier three.
Manny Dukakis: Which is really the multi tenant data centers and also in enterprise and we're also looking to see how we can better address those markets. One of the things. We did this year is we've added loose to product offering to our.
Manny Dukakis: Through our product and some of those are used in data centers in some cases in addition to tight suffer.
Manny Dukakis: So we're seeing some benefit of that.
Greg: I think that there is more opportunity that we haven't taken advantage of yet, but a lot would sure Greg.
Manny Stukakis: But a lot of what you're hearing is really at that hyperscale level.
Manny Dukakis: Hyperscale level.
Manny Stukakis: Well, I hear what you're saying on the hyperscale, but there are many small players who have a niche contribution to the data center market, and they're really, you know, focusing in that area and starting to see extreme benefits. Like I said, that you can look at, you know, TSSIs in the rack integration, there's other ones in the, in the colon like TGIN. So, you know, I just, just was wondering, I know you touched on it on the last comments call, and I just wanted to see, you know, if the focus and the growth opportunity is still there.
Speaker Change: I hear what you're saying on the Hyperscale, but there are many small players who have.
Speaker Change: Our niche.
Speaker Change: <unk> contribution to the data center market and Theyre really.
Speaker Change: Focusing in that area and starting to see extreme benefit like I said, you can look at it.
Speaker Change: The size in Iraq integration Theres other ones in the colon like T. Jim.
Speaker Change: Just was wondering I know you touched on the on the last conference call and I just wanted to see if the folks in the growth opportunity is still there.
Neil Wilkin: And, you know, if this is something you're starting to see a little movement, I mean, but it sounds like it's a little bit more slow go then. Maybe it was anticipated, or. We are starting to see some movement in that area, but it hasn't been a major part of our... of our sales at the moment.
Speaker Change:
Speaker Change: If this is something you are starting to see a little momentum, but it sounds like it's a little bit more slow go then.
Speaker Change: Maybe it was anticipated or.
Speaker Change: We are starting to see some movement in that area.
Speaker Change: But it hasnt been a major part of our.
Speaker Change: Of our sales at the moment, we're seeing more growth in the areas like military.
Neil Wilkin: We're seeing more growth in the areas like military.
Manny Stukakis: which is more squarely in our wheelhouse, but we are seeing opportunities in data centers and believe that we will benefit. Okay, appreciate your time. Thank you very much. We appreciate your question. Thank you.
Speaker Change: Which has four squarely in our wheelhouse, but we are seeing opportunities in data centers and believes that we will benefit from that.
Speaker Change: Okay. I appreciate your time, thank you very much lumpiness smaller data centers.
Speaker Change: We appreciate your questions. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you.
Madison: And it appears that there are no further questions at this time.
Speaker Change: And it appears that there are no further questions at this time I will now turn the call back to Mr. Wilson for closing remarks.
Neil Wilkin: I will now turn the call back to Mr. Wilkin for closing remarks.
Neil Wilkin: Well, before that, Madison, what we will do is we've had some individual investors submit questions in advance.
Speaker Change: Well before that Madison, what we will do is.
Speaker Change: We've had some individual investors to make questions in advance.
Spencer Hoffman: And Spencer, if you'd read the questions, Tracy and I will address those.
Speaker Change: And Spencer if you had read the questions Tracey and I will address this.
Neil Wilkin: Sure. So the first question, can you give a sense of potential operational leverage? For example, what's your upside scenario or what your upside scenario can look like if revenue begins to jump while costs remain fixed? What could that look like?
Spencer: Sure. So the first question.
Spencer: Can you give a sense of potential operational leverage for example.
Spencer: What's your upside scenario what are your upside scenario can look like if revenue begins job while costs remain fixed what could that look like.
Neil Wilkin: I'll take that one. The best sense of operational leverage can be seen in our historic quarterly results. Because product mix also plays a significant role in our gross profit margin, it is difficult to predict or forecast how operational leverage will impact a specific quarter. However, we know that when certain fixed costs are spread over larger volumes, we benefit from that. Additionally, while we're a smaller reporting company that requires significant fixed costs related to being a public company, we also believe that we can increase sales to much higher levels without increasing those types of fixed costs at a similar level.
Spencer: I'll take that one the.
Spencer: The best sense of operational leverage can be seen in our historic quarterly results.
Spencer: Because product mix also plays a significant role in our gross profit margin is difficult to predict or forecast, how operational leverage will impact a specific quarter. However, we know that when we when certain fixed costs are spread over a larger volumes we benefit from that.
Spencer: Additionally, while we're a smaller reporting company that requires significant fixed costs related to being a public company. We also believe that we can increase sales to much higher levels without increasing those types of fixed costs at a similar level.
Neil Wilkin: Hopefully that gives some indication of how operational leverage can impact our results at higher cells.
Spencer: Hopefully that gives some indication of how operational leverage can impact our results at higher sales levels.
Neil Wilkin: Also, if you review Neal's letter to the shareholders in our 2024 annual report, you'll see some descriptions, graphs and data regarding OCC's operating leverage over varying sales levels.
Neil Wilkin: Also if you review Neil's letter to the shareholders and our 2024 annual report, you'll see some descriptions Ah graph and data regarding occ's operating leverage ever bearing sales levels.
Neil Wilkin: Yes.
Spencer: Thank you the next question what.
Tracy Smith: The next question... What percentage of the business is related to copper and related to fiber, or which one is bigger? Is it correct to say that copper market size declines and fiber is growing?
Spencer: What percentage of the business, it's related to copper and related to fiber.
Spencer: Or which one is bigger is it correct to say that copper market size declines in fiber is growing.
Tracy Smith: Well, we don't generally disclose information related to what percentage of our business is related to copper and what percentage is related to fiber. I can say that fiber is definitely the biggest portion of our business. However, even some of our fiber cables are what we call hybrid and include both fiber and copper. But having said that, the market for copper is still significant.
Spencer: Well, we don't generally disclose information related to what percentage of our business is related to copper and what percentages related to fiber I can say that fiber is definitely the biggest portion of our business. However, even some of our fiber cables are what we call hybrid N and include both fiber and copper.
Spencer: But having said that the market for copper is still significant.
Spencer Hoffman: Do you want to go to the next question, Spencer?
Speaker Change: Do you want to go to the next question Spencer.
Spencer: Yeah.
Tracy Smith: Thank you, Tracy.
Spencer: Thank you Tracy can you update us on that.
Neil Wilkin: Can you update us on, for the next question, can you update us on data centers and the AI opportunity? Are there any changes over the last quarter?
Spencer: The next question can you update us on data centers and yes. The opportunities are there any changes over the last quarters.
Spencer: So.
Neil Wilkin: Spencer, this is Neil, and I think I've addressed most of that question in response to the question we got previously.
Neil Wilkin: Spencer this is Neil.
Neil Wilkin: I think I've addressed most of that question is.
Neil Wilkin: To the question we got previously.
Neil Wilkin: We do. sales in the data center applications, but currently it has not been significant.
Neil Wilkin: We do.
Neil Wilkin: Steve.
Neil Wilkin: Sales in the data center applications, but currently it is not that significant but we believe there are and will be additional opportunities for OCC in the future, particularly in the tier two and tier three data centers.
Neil Wilkin: But we believe there are and will be additional opportunities for OCC in the future, particularly in the Tier 2 and Tier 3 data centers. We are evaluating our cable and connectivity offerings on an ongoing basis in order to address the needs of our customers and end users. in our targeted markets, and as I've mentioned before, we have added loose tube fiber cable products to our offering, which also opens up some additional data center opportunities.
Neil Wilkin: We are.
Speaker Change: <unk>, our cable and connectivity offerings on an ongoing basis in order to address the needs of our customers and end users.
Speaker Change: In our targeted markets and.
Speaker Change: As I've mentioned before we have had at least two fiber cable.
Speaker Change: Products to our offering which also opens up some additional.
Speaker Change: Data center opportunity.
Speaker Change: Yes.
Tracy Smith: Thanks, Neil.
Speaker Change: Thanks Neil.
Neil Wilkin: For the next question, can you update, can you provide an update on the company outlook and how it compares to the situation at the end of Q1 and Q4? Yes, as you all know, OCC does not provide any forward-looking guidance. That said, we have disclosed to our public filing links our sense of our market and industry trends and where we think the market is going.
Speaker Change: The next question.
Speaker Change: Can you update can you provide an update on our company outlook and how it compares.
Speaker Change: So the situation at the end of Q1 and Q4.
Speaker Change: Yes.
Speaker Change: As you all know OCC does not provide any forward looking guidance that said, we have disclosed in our public filings leaves our sense of our market and industry trends and where we think the market is going.
Neil Wilkin: You'll recall that in the beginning of OCC's Q2024, the industry had come out of what had been a significant slowdown for approximately five quarters. We saw the benefit of that in that market improvement in Q4 and in our results. In Q1 of 2025, we grew 6% compared to the prior year, and we saw an increase in our backlog compared to Q4. And as we announced today in Q2 2025, we grew 8.9% compared to the prior year, and we saw another increase in our backlog compared to the end of Q1.
Neil Wilkin: You'll recall that in the beginning.
Neil Wilkin: <unk> 2024, the industry had come out of what had been a significant slowdown for approximately five quarters.
Neil Wilkin: We saw the benefit of that.
Neil Wilkin: Is that market improvement in Q4 and in our results.
Neil Wilkin: In Q1 of 2025, we grew 6% compared to the prior year and we saw an increase in our backlog compared to Q4.
Neil Wilkin: And as we announced today in Q2 2025, we grew.
Neil Wilkin: Eight 9% compared to the prior year and we saw another increase in our backlog compared to the end of 2012.
Neil Wilkin: Compared to the end of Q1.
Neil Wilkin:
Neil Wilkin: Of course, as you see, sales have long been subject to seasonality with the first half of the year typically having lower sales than the second half of the year. We believe we are seeing positive trends and at this time we are optimistic looking at the second half of fiscal year 2025.
Neil Wilkin: Of course.
Neil Wilkin: <unk> sales have long been subject to seasonality with the first half of the year typically having lower sales in the second half of the year.
Neil Wilkin: We believe we are seeing positive trends and at this time, we are optimistic looking at the second half of fiscal year 2025.
Tracy Smith: Thanks, Neil.
Speaker Change: Thanks, Neil and the next question is.
Tracy Smith: The next question is, can you provide an update on tariffs impact and also if you are benefiting at all from Build an America trend? Thank you. So like others, OCC has seen impact from tariffs. However, what we've experienced has been less of an impact in our supply chains than we believe others in our industry have experienced.
Speaker Change: Can you provide an update on <unk>.
Speaker Change: Tariffs impact and also if youre benefiting at all from built in America trends.
Tracy Smith: Thank you.
Speaker Change: So.
Speaker Change: Like others OCC has seen impact from tariffs. However, while we've experienced has been less of an impact.
Speaker Change: And our supply chain. So we believe others in our industry are experiencing.
Tracy Smith: OCC's three manufacturing facilities are all located in the U.S. and of course we benefit from that fact. We have seen impacts from Terris on certain products and also some from in our export. and Terrace, as you all know, can be further down the supply chain and it's not simply where we're who our supplier is, but who our supplier's supplier is, and so... It tends to be a little bit complicated.
Speaker Change: OCC three manufacturing facilities.
Speaker Change: Located in the U S and of course, we benefit from that fact.
Speaker Change: We have seen impacts from tariffs on certain products.
Speaker Change: And also some from.
Speaker Change: Our exports.
Speaker Change: And tariffs as you all know can be further down the supply chain and it's not simply where were.
Tracy Smith: Who are supplier is but who are suppliers supplier is so big.
Speaker Change: It ends up being a little bit complicated.
Tracy Smith: We do continue to monitor the rapidly changing tariff landscape and are making appropriate adjustments.
Speaker Change: We do continue to monitor the rapidly changing tariff landscape and are.
Speaker Change: We're making appropriate adjustments.
Neil Wilkin: Thanks, Neil next question.
Spencer Hoffman: Next question.
Tracy Smith: The backlog you report each quarter, is it more of a sign of next quarter demand or full year demand? The backlog and forward load that we report each quarter includes all confirmed orders for product, regardless of when it is expected to ship. So some orders are placed with a short lead time to ship date, and some are placed well in advance by the customer for shipment months into the future, depending on the project needs. So it can be demand for the next quarter or later.
Neil Wilkin: The backlog as you report each quarter is.
Neil Wilkin: Is it more of a sign of next quarter demand or full year demand.
Neil Wilkin: The backlog and forward load that we report each quarter includes all confirmed orders for product regardless of when it is expected to ship.
Neil Wilkin: Some orders are placed with a short lead time to ship date, and some are placed well in advance by the customer for shipment months into the future depending on the project.
Neil Wilkin: So it can be it can be demand for the next quarter or later.
Neil Wilkin: Yeah.
Tracy Smith: Thank you.
Speaker Change: Thank you.
Tracy Smith: Next question. Do you expect to see sequential revenue growth over the next few quarters? Well, we don't we don't provide revenue guidance.
Neil Wilkin: Next question.
Speaker Change: Do you expect to see sequential revenue growth over the next few quarters.
Speaker Change: Well, we don't we don't provide revenue guidance. However, as we have disclosed previously we do generally see some seasonality in our sales with sales typically heavier in the second half of the fiscal year.
Tracy Smith: However, as we have disclosed previously, we do generally see some seasonality in our sales with sales typically heavier in the second half of the fiscal year. For example, in fiscal year 2024, approximately 46% of our sales occurred during the first half of the fiscal year and approximately 54% of our sales occurred during the second half of the fiscal year, primarily due to the seasonality impact. Other factors can make a difference to that seasonality impact.
Speaker Change: For example in fiscal year 2020 for approximately 46% of our sales occurred during the first half of the fiscal year and approximately 54% of our sales occurred during the second half of the fiscal year.
Speaker Change: Primarily due to the seasonality impact.
Neil Wilkin: Other factors can.
Neil Wilkin: Make a difference to that seasonality impact that.
Tracy Smith: Thank you.
Neil Wilkin: Thank you.
Tracy Smith: And now the final question. What gross margin would the company be able to achieve at full capacity? So, not surprisingly, we can't provide specific gross profit margin that we will experience at specific sales levels or if you're looking at a production volume capacity measure, because the answer is very dependent on product mix and that makes up that additional production volume.
Neil Wilkin: Now the final question.
Neil Wilkin: What gross margin would the company be able to achieve at full capacity.
Neil Wilkin: Yeah.
Neil Wilkin: So not surprisingly we can't provide specific gross profit margin that we will experience a specific sales levels or.
Neil Wilkin: If youre looking at a production volume capacity measure.
Neil Wilkin: Because the answer is very dependent on product mix.
Neil Wilkin: And.
Neil Wilkin: That makes up that additional.
Neil Wilkin: Production volume.
Tracy Smith: However, I would point to the gross margins OCC achieved in the past at higher volumes, including Q4 2024. Q1 and Q2 2023 before the industry slowdown that impacted OCC's top-line revenues during the approximate five quarters during the industry slowdown. Also, based on what we've seen, we experienced less of a slowdown than a lot of our competitors did. And so, I think that goes to the diversification of our product offerings.
Neil Wilkin: However.
Neil Wilkin: Would point to the gross margins as <unk> achieved in the past at higher volumes, including Q4 2024 in.
Neil Wilkin: In Q1, and Q2 2023 for the industry slowdown impacted occ's topline revenues.
Neil Wilkin: During the approximately five quarters.
Neil Wilkin: Yes.
Neil Wilkin: Alright, and the industry slowdown.
Neil Wilkin: Also based on what we've seen we experienced less of a slowdown in a lot of our competitors.
Neil Wilkin: And so I think that goes to the diversification of our product offering.
Neil Wilkin: Also, Tracy previously mentioned in my letter to the shareholders that's included in your report, we talk a lot about the operating leverage and give some graphs and data that I think would be useful for Mark to look at and get a sense of where we see differences as we grow.
Tracy Smith: So Tracy previously mentioned in.
Neil Wilkin: My letter to the shareholders is included in our annual report, we talk a lot about the operating leverage and get some graphs in data that I think would be useful.
Neil Wilkin: For.
Speaker Change: Mark to look at.
Speaker Change: And get a sense of where we see differences as we as we grow.
Neil Wilkin: Well, thank you, Neal.
Neil Wilkin: Well, thank you Neil and that was the last question.
Neil Wilkin: That was the last question. We appreciate everyone. who have submitted questions and those that asked questions, and I want to thank everyone for listening to our second quarter of this Lute 2025 conference call.
Neil Wilkin: Okay.
Neil Wilkin: I appreciate everyone.
Neil Wilkin: You have submitted questions and ask questions and want to thank everyone for listening to our second quarter of fiscal year 'twenty from the past conference call.
Neil Wilkin: As always, we appreciate your time and your investment in Optical Cable Corporation. Thank you.
Neil Wilkin: As always we appreciate your time and your investment in optical cable Corporation. Thank you.
Neil Wilkin: Yes.
Neil Wilkin: Yeah.
Neil Wilkin: Thank you.
Speaker: This does conclude today's presentation. Thank you for your participation. You may disconnect at any time. No specialized tooling and supports high performance 10 gigabit networks.
Neil Wilkin: This does conclude today's presentation. Thank you for your participation you may disconnect at any time.
Speaker Change: Oh specialized tooling and supports high performance 10 gigabit networks.
Neil Wilkin: Okay.
Neil Wilkin: [music].
Neil Wilkin: Okay.