OCC earnings call analysis

NASDAQ:OCC Q2 2026 Earnings Call Transcript Generated on 10/9/2026 Madison | Conference Operator: Good morning. My name is Madison, and I will be your conference operator today. At this time, I would like to welcome you to Optical Cable Corporation's second quarter of fiscal year 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. 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. Ms. Felix, you may begin your conference.

Caroline Felix | Investor Relations

Good morning, and thank you for joining us for Optical Cable Corporation's second quarter of fiscal year 2026 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 with us today are Neil Wilkin, President and Chief Executive Officer of OCC, and Tracy Smith, Executive 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. 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.

Neil Wilkin | President and Chief Executive Officer

Thank you, Caroline, and good morning, everyone. I will begin the call today with a few opening remarks. Tracy will then review the second quarter results for the three-month and six-month periods ended April 30, 2026, in 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. Following a solid start to the year, we continued to build on OCC's strong growth and momentum in the second quarter, delivering year-over-year increases of 26.6% in net sales and 42.4% in gross profit. Our net sales increase was largely driven by strength in OCC's enterprise, data center, and severe duty markets. and contributing to the disproportionate increase in gross profit during the second quarter was OCC's manufacturing operating leverage. As we enter the second half of fiscal year 2026, we continue to see growth opportunities in a wide range of our targeted market sectors, including the multi-tenant data center and the enterprise data center market sectors. At the end of the second quarter, our sales order backlog and forward load increased to $13.3 million when compared to $10.4 million as of January 31st, 2026, an increase of more than 27%. And when compared to $7.3 million in sales order backlog and forward load as of October 31st, 2025, we saw an increase of more than 82%. We are confident in OCC's, the OCC team's ability to capitalize on our momentum and on our continuing opportunities for growth. I'm thankful and truly grateful for the OCC team's continued dedication and tenacity in providing OCC's customers and end users with the quality products and service they have come to expect from OCC. We remain focused, as always, on the disciplined execution of our strategy in delivering value to our shareholders. And with that, I will turn the call over to Tracy, who will review in additional detail our second quarter of fiscal year 2026 financial results.

Tracy Smith | Executive Vice President and Chief Financial Officer

Thank you, Neal. Consolidated net sales for the second quarter of fiscal 2026. increased 26.6% to $22.2 million compared to $17.5 million for the same period last year, and increased 35.2% compared to net sales of $16.4 million during the first quarter of fiscal year 2026. Consolidated net sales for the first half of fiscal 2026 were $38.6 million, an increase of 16.1% compared to net sales of $33.3 million for the same period last year. During the second quarter and first half of fiscal 2026, we saw an increase in net sales in both our enterprise and specialty markets compared to the same periods last year. We have noted continued General market improvements, both domestically and internationally, with strength specifically in our enterprise, data center, and severe duty markets. As Neal mentioned, our sales order backlog and forward load increased to $13.3 million at the end of the second quarter of fiscal 2026, compared to $10.4 million as of January 31, 2026, and $7.3 million as of October 31, 2025. Turning to gross profit, our gross profit increased 42.4% to $7.6 million in the second quarter of fiscal 2026, compared to $5.3 million in the second quarter of fiscal 2025, and sequentially increased 41.4% compared to $5.4 million in the first quarter of fiscal year 2026. Gross profit margin or gross profit as a percentage of net sales increased to 34.2% in the second quarter of fiscal 2026 compared to 30.4% in the prior year period. Gross profit increased 30.1% to $13 million in the first half of fiscal 2026 compared to $10 million in the first half of fiscal 2025. Gross profit margin increased to 33.5% in the first half of fiscal 2026 compared to 29.9% for the same period last year. Gross profit margin for the second quarter and first half of fiscal 2026 was positively impacted by higher volumes and the resulting positive impact of our strong manufacturing operating leverage. Our gross profit margin percentages are heavily dependent upon product mix on a quarterly basis and may vary based on changes in product mix. SG&A expenses increased to $6.3 million or 9.2% in the second quarter of fiscal year 2026 compared to $5.7 million for the same period last year. SG&A expenses as a percentage of net sales decreased to 28.2% in the second quarter of fiscal 2026 compared to 32.7% in the second quarter of fiscal 2025, the impact of our strong SG&A operating leverage. SG&A expenses increased to $11.8 million, or 5.6%, in the first half of fiscal year 2026, compared to $11.2 million for the same period last year. SG&A expenses as a percentage of net sales were 30.6% in the first half of fiscal 2026, compared to 33.6% in the prior year period. The increase in SG&A expenses was primarily due to increases in shipping costs and employee and contracted sales personnel-related costs, which include compensation costs and sales incentives. OCC recorded net income of $1.1 million or 12 cents per share for the second quarter of fiscal 2026 compared to a net loss of $698,000 or 9 cents per share for the second quarter of fiscal 2025. OCC recorded net income of $657,000 or 7 cents per share for the first half of fiscal 2026 compared to a net loss of $1.8 million, or 23 cents per share, for the first half of fiscal 2025. With that, I'll turn the call back over to you, Neil.

Neil Wilkin | President and Chief Executive Officer

Thank you, Tracy. Eva, we received a number of questions in advance of the call today that we believe would be of interest to most participants. So, we're going to go through those questions first, and then we will address any remaining live questions from analysts and institutional investors. Caroline, if you could please begin reading the questions that were provided in advance of the call at this time, and Tracy and I will answer them.

Caroline Felix | Investor Relations

Sure. Thanks, Neil. Our first question today is, with the huge Tier 1 data center demand cycle happening, can you please talk about how Tier 2 is being affected demand-wise in general?

Neil Wilkin | President and Chief Executive Officer

Yes. We continue to believe the growth in the Tier 1 hyperscale data centers positively impacts growth opportunities that we are seeing in the multi-tenant data center market sector, often referred to as tier two data centers, as well as growth opportunities we are seeing in the enterprise data center market sector. So far, we've been seeing significant opportunities in both the multi-tenant data center and enterprise data centers, which is the portion of the data center sector market that is a particular focus for OCC. As we have previously mentioned, it is noteworthy that the sales cycle tends to be longer for certain projects in the data center market space when compared to the sales cycle of certain OCCs, other targeted market sectors. However, sales into these data center markets have positively impacted OCCs revenue in the second quarter. and we believe that our revenue will continue to be positively impacted during the second half of fiscal 2026.

Caroline Felix | Investor Relations

Thanks, Neil. Next question is, can you explain how OCC expects to be impacted by the booming military expenditure by the current administration?

Neil Wilkin | President and Chief Executive Officer

The impact of overall military spending on our sales growth can be difficult to predict. Announced increases in U.S. military spending may or may not include increased spending for OCC's products. Also, we can see significant increases in military sales even when there are not active conflicts, when military product demand is driven by the need to replenish supplies outside of active conflicts. Additionally, our military sales include sales allies, which can result in increased sales. During the past fiscal year, we saw increases in our sales in the military market sector.

Caroline Felix | Investor Relations

Thanks, Neal. Next question. Can you explain how the backlog in data center demand has been evolving into Q3?

Tracy Smith | Executive Vice President and Chief Financial Officer

As noted in this morning's press release, at the end of the second quarter of fiscal year 2026, the company's sales order backlog and forward load increased to $13.3 million when compared to $10.4 million as of January 31st, 2026, an increase of more than 27%. And when compared to $7.3 million as of October 31st, 2025, an increase of more than 82%. At the end of May, our backlog and forward load continues to be strong.

Caroline Felix | Investor Relations

Thanks, Tracy. The next question is, fiber and copper pricing has been increasing significantly. Is this positive or negative for OCC gross margins?

Tracy Smith | Executive Vice President and Chief Financial Officer

Well, as you would expect, as materials prices that are used in our products increase, there can be a negative impact on our gross margins. However, during the second quarter, we saw our gross profit margins increase to 34.2%. Generally, we are able to prospectively mitigate the impact of increasing raw material costs by adjusting our selling prices. And, of course, we use many different types of raw materials in the manufacture of our products, so the mix of products manufactured and sold can also impact gross margins.

Caroline Felix | Investor Relations

Thanks, Tracy. Next question. Is there an opportunity to profit from hyperscaler growth in the data center given the inference build-outs?

Neil Wilkin | President and Chief Executive Officer

As we have mentioned before, our product solution offerings for the data center market are best suited for multi-tenant data centers and enterprise data centers. However, we continue to believe the growth in Tier 1 hyperscale data centers can positively impact these other markets, multi-tenant data center and enterprise data center markets.

Caroline Felix | Investor Relations

Thanks, Neil. Next question is, can you try and give a sense of what revenue can be at full capacity Is full capacity realistic in this demand cycle?

Tracy Smith | Executive Vice President and Chief Financial Officer

Changes in product mix of products being sold and manufactured impact our capacity at any point in time. Additionally, staffing, raw material availability, and other factors impact our capacity as well. So, we're not providing a revenue level for full capacity. However, we can say that at our current manufacturing and staffing levels, we believe we still have room to support additional revenue growth, and we are seeing opportunities to do so. Additionally, we are evaluating increasing manufacturing staff and adding certain machine capacity in anticipation of future long-term growth.

Caroline Felix | Investor Relations

Thanks, Tracy. The next question is, can you comment on the proportion of growth being driven on new versus existing customers?

Neil Wilkin | President and Chief Executive Officer

We are currently seeing growth among our existing customers and new customers. Additionally, it's worth noting that most of our sales are made through distributor channels, so we do not always have a clear picture of the customer purchasing our products through distribution or the end users of our products.

Caroline Felix | Investor Relations

Thanks, Neil. Next question. Is there an opportunity for OCC to increase service revenue?

Neil Wilkin | President and Chief Executive Officer

If by service revenues the person posing the question is referring to installation or other similar services, that's not part of our business strategy.

Caroline Felix | Investor Relations

Got it. Thanks, Neil. The next question is, does OCC sell products for the grid? Do you expect to benefit from grid-increased CapEx and investments?

Neil Wilkin | President and Chief Executive Officer

OCC does manufacture products suitable for certain applications in the power grid. As power grid capital expenditures increase, we would expect the benefit. However, to be clear, OCC does not sell power cables for use in the power grid.

Caroline Felix | Investor Relations

Thanks, Neil. The next question is, can you explain if you foresee any capacity issues and if you are investing in increasing the capacity available?

Tracy Smith | Executive Vice President and Chief Financial Officer

We regularly consider the need for investment in machinery and equipment and our human resources to expand our capacity in general and also for specific opportunities. We are seeing some opportunities to increase our capacity currently.

Caroline Felix | Investor Relations

Thanks, Tracy. Next question. Are you seeing any new or emerging risks, including project delays?

Neil Wilkin | President and Chief Executive Officer

We are not seeing any unusual risk with respect to demand for our products at this time. There are individual projects that are delayed from time to time, but that's not unusual in our markets. We are seeing some industry-wide delays as a result of high product demand and certain optical fiber shortages.

Caroline Felix | Investor Relations

Thank you. The next question is, In the past, you have commented on improvements in OCCN markets. Have those improvements continued this quarter?

Neil Wilkin | President and Chief Executive Officer

As we said last quarter, we continue to see growth opportunities in many of our targeted market sectors, including in particular the data center market. Our improved top line in the second quarter is a result of those growth opportunities, not only in the data center market, but broadly across most of our markets. Additionally, it's worth noting that our product offerings customers and targeted market sectors in which we sell our products are quite diverse, and OCC benefits from this diversification.

Caroline Felix | Investor Relations

Thanks, Neil. The next question is, can you comment on lead times and supply issues or constraints?

Neil Wilkin | President and Chief Executive Officer

Yes. Currently, the industry is experiencing optical fiber shortages due to excessive product demand for data centers as well as certain other product applications. As a result, we are seeing increased lead times throughout the industry. OCC is successfully managing these industry dynamics as we have demonstrated during the second quarter. We do not believe these industry factors will prevent us from continuing to grow revenue, including during the second half of fiscal year 2026.

Caroline Felix | Investor Relations

Thanks, Neal. The last question is, is there anything about the timing or timeline of orders that can help us understand why bookings have so far been increasing the backlog instead of being converted into sales?

Tracy Smith | Executive Vice President and Chief Financial Officer

OCC currently is seeing an increase in both our net sales and in our sales order backlog and forward load, which we believe is consistent with expectations during periods of increased product demand.

Caroline Felix | Investor Relations

Thanks, Tracy and Neil. We have no other questions that were provided in advance of the call today at this time.

Neil Wilkin | President and Chief Executive Officer

Okay. Thank you, Caroline. And now, if any analysts or institutional investors have any remaining questions, we are happy to answer them. We ask that you limit yourself to one question and one follow-up, please. Madison, if you could please indicate the instructions for our participants to call in any questions they have, I would appreciate it. Additionally, if you'd please limit people to one question and or one follow-up question, we'd appreciate it. Again, we are only taking live questions from analysts and institutional investors.

Madison | Conference Operator

Certainly. If you'd like to ask a question, press star 1 on your keypad. To leave the queue at any time, press star 2. As a reminder, in the interest of time, please limit your questions to one question and one follow-up. Once again, that is star and 1 to ask a question, and we'll pause for just a moment to allow everyone a chance to join the queue. And we will take our first question from Sergio Mascros with EDM Discovery. Please go ahead. Your line is now open.

Sergio Mascros | Analyst, EDM Discovery

Hey, guys. Thanks for taking our questions, and congrats on a very, very strong quarter that we have been waiting for a long time. We have two questions. The first one is that we are wondering if the deal that Corning admitted closed a few months ago, and today also with Amazon, Is it an opportunity for OCC to provide server customization, engineering, or additional services?

Neil Wilkin | President and Chief Executive Officer

No, typically we don't provide those sorts of services outside of OCC if you're talking about services. I mean, Corning has a number of deals, including one with NVIDIA and – But that's not necessarily impacting OCC, but we're not seeing any limit on our ability to grow in the markets that we're targeting, particularly in data centers.

Sergio Mascros | Analyst, EDM Discovery

Okay, that's helpful. And the second question is, if you're having or expect to have any issues ramping up the capacity that you have available, for example, with labor availability or labor costs or any other issues?

Neil Wilkin | President and Chief Executive Officer

I mean, whenever you're ramping up capacity, you can have challenges. We are not experiencing challenges in that regard at the moment and don't anticipate it at this time. As we disclosed in our form 10Ks and 10Qs, we have what we believe some excess capacity. Of course, the ability to utilize that excess capacity depends on product mix. We're also looking, as Tracy mentioned earlier, at evaluating our capacity and making some increases by adding personnel as appropriate as well as some equipment.

Madison | Conference Operator

Thank you. And as a reminder, if you would like to ask a question, please press the star and 1 on your telephone keypad now. And we'll move next to Awos Nathan with Eden Discovery. Please go ahead. Your line is now open.

Awos Nathan | Analyst, Eden Discovery

Hello, guys. Again, thank you for taking the call and congratulations on a very strong quarter. I wanted to ask regarding the partnership you have with Nitea of Furukawa, and I was wondering if they are helping you obtain raw material like fibers and how do you view the partnership in light of the current business environment?

Neil Wilkin | President and Chief Executive Officer

So we are very pleased with our partnership with Lytera. We think that OCC and Lytera complement each other, and we are excited about the opportunities it provides for both companies. OCC has worked with Lytera, which is a supplier of optical fiber, as well as other suppliers for really decades. And at the moment, we've been fortunate that We have not been having any significant problems with fiber supply or other raw materials. There are some exceptions to that statement that have impacted certain customers, unfortunately, but as a general rule, we are not having that issue.

Awos Nathan | Analyst, Eden Discovery

Thank you.

Madison | Conference Operator

Thank you. At this time, this concludes our question and answer session. I will now turn the meeting back to Neil Wilkin for any additional or closing remarks.

Neil Wilkin | President and Chief Executive Officer

Thank you, Madison. I would like to thank everyone for listening to our second quarter of fiscal year 2026 conference call today. As always, we appreciate your time and your investment in Optical Cable Corporation.

Thank you. Madison | Conference Operator

This concludes today's meeting. We appreciate your time and participation. You may now disconnect. Thank you. jsPDF 3.0.3 D:20261009125659-00'00'

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¶¶ ¶¶ ¦ ¦ ¶¶ Angela | Conference Operator: Please stand by, your meeting is about to begin. 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's first quarter of fiscal year 2026 earnings conference call. All have been placed on mute to prevent any background noise. 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. Ms. Felix, you may begin your conference.

Caroline Felix | Moderator, Investor Relations

Good morning, and thank you for joining us for Optical Cable Corporation's first quarter of fiscal year 2026 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 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. 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.

Neil Wilkin | President and Chief Executive Officer

Thank you, Caroline, and good morning, everyone. I will begin the call today with a few opening remarks. Tracy will then review the first quarter results for the three-month period ended January 31st, 2026 in some additional detail. 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. 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. OCC is off to a strong start in fiscal year 2026. During the first quarter, we delivered net sales and gross profit growth largely driven by increased demand across our enterprise and specialty markets and the positive impact of our operating leverage. During the first quarter of fiscal year 2026, net sales increased 4.4% and gross profit increased 16.1% compared to the same period last fiscal year. And gross profit margin increased to 32.7%. Additionally, our sales order backlog and forward load increased more than 50% to $10.4 million as of the end of the first quarter when compared to the same prior fiscal year period. And we expect to continue to build on this momentum. While seasonality typically impacts the first half of our fiscal year, during our second quarter we are seeing growing momentum in our targeted markets and in particular in our data center markets. We are confident that OCC is well-positioned for growth during fiscal year 2026. As always, remain focused on disciplined execution to drive value for our customers and shareholders. With that, I'll turn the call over to Tracy, who will review in additional detail our first quarter of fiscal year 2026 financial results.

Tracy Smith | Senior Vice President and Chief Financial Officer

Thank you, Neal. Consolidated net sales for the first quarter of fiscal 2026 increased 4.4% to $16.4 million compared to $15.7 million for the same period last year. During the first quarter of fiscal 2026, we experienced an increase in net sales in both our enterprise and specialty markets compared to the same period last year. as we continue to see general market improvements in our industry and strengthen our severe duty market. Net sales to customers outside of the United States increased 18% and net sales to our customers in the United States increased slightly in the first quarter of fiscal year 2026 compared to the same period last year. As Neal referenced, our sales order backlog and forward load increased to $10.4 million compared to $6.6 million as of the end of our first fiscal quarter of 2025. Our sales order backlog and forward load also increased when compared to $7.3 million as of our 2025 fiscal year end. Turning to gross profit, our gross profit increased 16.1% to $5.4 million in the first quarter of fiscal 2026 compared to $4.6 million for the same period last year. Gross profit margin, our gross profit as a percentage of net sales, increased to 32.7% compared to 29.4% in the same prior year period. Gross profit margin for the first quarter of fiscal 2026 was positively impacted by higher volumes and the resulting positive impact of our strong operating leverage. Our gross profit margin percentages are heavily dependent upon product mix on a quarterly basis and may vary based on changes in product mix. SG&A expenses increased to $5.6 million in the first quarter of fiscal year 2026. compared to $5.5 million for the same period last year, primarily as a result of increases in employee and contracted sales personnel related costs and shipping costs. SG&A expenses as a percentage of net sales were 33.8% in the first quarter of fiscal 2026 compared to 34.7% in the first quarter of fiscal 2025. OCC recorded a net loss of $398,000 or 5 cents per basic and diluted share for the first quarter of fiscal 2026 compared to a net loss of $1.1 million or 14 cents per basic and diluted share for the first quarter of fiscal 2025. With that, I'll turn the call back over to you, Neal.

Neil Wilkin | President and Chief Executive Officer

Thank you, Tracy. As is our normal practice, we're going to first answer questions from individual investors that have been submitted in advance of today's call. Caroline, could you go through the questions with us, and we will respond?

Caroline Felix | Moderator, Investor Relations

Yes, thanks, Neil. We'll get started. The first question is, can you update us on the data center opportunity in general, how you feel about it, and if the opportunity has strengthened or not during the quarter? Any major changes or updates?

Neil Wilkin | President and Chief Executive Officer

We continue to be optimistic about the data center opportunities, particularly in the multi-tenant data center and enterprise data center sectors. OCC saw and is seeing significant and growing activity in customer requests for quotes in the data center sector, particularly in January, and that activity is continuing and growing as we enter the second quarter of fiscal 2026. We believe this momentum will continue and result in increased sales in our targeted sectors of the data center market as fiscal year 2026 progresses.

Caroline Felix | Moderator, Investor Relations

Thanks, Neil. The next question is, in terms of outlook into 2026, in general, do you feel more or less optimistic now than in Q4?

Neil Wilkin | President and Chief Executive Officer

I would like to say that we continue to be very optimistic about potential sales growth this year. As you all know, we typically see seasonality impact our results during the first half of a given fiscal year, particularly during the first quarter. However, based on the fact that our sales order backlog and forward load has increased more than 50% to $10.4 million as of the end of fiscal quarter, the first fiscal quarter of 2026 when compared to the same period last year, and that the activity and requests for quotes we are seeing in our targeted market sectors, including the data center market sector, have been increasing. We continue to expect sales growth during fiscal year 2026.

Caroline Felix | Moderator, Investor Relations

Thanks, Neil. Next question. In the past, you have been commenting on improvements in OCC end markets. Have these improvements continued? Can you comment on new and emerging trends or risks?

Neil Wilkin | President and Chief Executive Officer

Thank you. As you all know, during fiscal year 2025, net sales increased 9.5% and gross profits increased 24.1% compared to the prior fiscal year, which we believe reflects the improvements we saw in many of our targeted markets last year, particularly during the second half of fiscal year 2025. So far, we continue to see growth opportunities in many of our targeted market sectors, including, in particular, the data center market, during fiscal year 2026. We believe this will continue to be the case, and this will positively impact OCC's revenue growth in fiscal year 2026.

Caroline Felix | Moderator, Investor Relations

Thanks, Neil. Next question. Can you please provide an update on progress of the LITERRA collaboration?

Neil Wilkin | President and Chief Executive Officer

Sure. As we've mentioned before, OCC has worked with LITERRA, formerly known as OFS, for decades. The strategic collaboration with Lytera announced last year was built on that long-standing relationship and the respect each team has for the other. The OCC and Lytera teams work well together and complement each other, enabling both companies to benefit from this important relationship. And we believe we're seeing the benefit of that as we move into fiscal year 2026. Thanks, Neil.

Caroline Felix | Moderator, Investor Relations

Next question. Could you comment on the type of products you expect to sell alongside Lytera? Will they be on the margin accretive connectivity side or more on the basic cabling side?

Neil Wilkin | President and Chief Executive Officer

Sure. So, OCC and Lytera have assembled product sets that we believe provide exceptional solutions to meet our customer needs. They're both on the cabling side and on the connectivity side. Lytera, speaking of Lytera products, They have a number of industry-leading product designs that are now included in OCC's product solutions offering. A couple of examples include Litera's rollable ribbon fiber optic cable, which is particularly well-suited for data center applications. Additionally, Litera's Invisalight product solutions are particularly well-suited for installations of passive optical land technology in existing buildings, where traditional passive optical land installations are more challenging. Of course, Lytera and OCC are both known for innovative product solutions and the development of new product solutions, which I would expect to continue to be the case.

Caroline Felix | Moderator, Investor Relations

Thanks, Neil. Next question is, can you explain if data center revenue had an impact in Q1 and what to expect for the rest of the year in terms of revenues?

Tracy Smith | Senior Vice President and Chief Financial Officer

OCC generally does not provide specifics regarding OCC's individual targeted market sectors. That said, during the first quarter, OCC saw increases in quotes and customer orders in the data center market sector, particularly in January. We believe this activity will continue to grow this year and will result in greater data center market sector revenues during the remainder of fiscal year 2026.

Caroline Felix | Moderator, Investor Relations

Thanks, Tracy. Next question is, Have you seen any interest regarding a potential acquisition of OCC by larger players, given that many of the larger players urgently need increased capacity?

Neil Wilkin | President and Chief Executive Officer

Caroline, as you might expect, we are unable to comment on whether or not there's been any such interest.

Caroline Felix | Moderator, Investor Relations

Thanks, Neil. Next question. Will you ever have an analyst day, perhaps with an investor deck?

Tracy Smith | Senior Vice President and Chief Financial Officer

OCC has given presentations to analysts in the past. However, as a small microcap company, OCC does not have any analyst coverage at the moment.

Caroline Felix | Moderator, Investor Relations

Thanks, Tracy. Next question. I've noticed increasing job activity including night shift jobs appearing on the job section of your website. Can we assume this is in anticipation of increased activity for the second half of 2026?

Tracy Smith | Senior Vice President and Chief Financial Officer

OCC currently is hiring in our manufacturing operations. We have been hiring to meet what we believe will be our personnel needs this fiscal year and recognizing the time it takes to train new manufacturing personnel. OCC is fortunate to have skilled long-term employees. Of course, OCC does have some personnel turnover as well that results in open positions. However, we are proud that OCC tends to have lower personnel turnover than other companies.

Caroline Felix | Moderator, Investor Relations

Thanks, Tracy. Next question. When do you think it's possible to start generating more revenue from the LITERRA collaboration? Can you give us an idea on how this might change current revenue rate?

Tracy Smith | Senior Vice President and Chief Financial Officer

Working with LITERRA has already begun to generate more opportunities, and we believe this will continue and contribute to revenue growth in fiscal year 2026 and beyond.

Caroline Felix | Moderator, Investor Relations

Thank you. Next question is, can you give more color on the Litera collaboration and how you ended up at 7% for a share purchase? Did they want to buy more?

Neil Wilkin | President and Chief Executive Officer

Excuse me. It would not be appropriate for me to comment more on the Litera collaboration beyond what OCC and Litera have already disclosed. I would like to say that we think very highly of the Litera and the Litera team. And we believe their investment in OCC reflects Lyterra's confidence in our business and our strong collaboration with them. I will also say that I believe Lyterra, that the Lyterra OCC collaboration is benefiting both companies and will continue to do so.

Caroline Felix | Moderator, Investor Relations

Thanks, Neil. Next question. Can you comment on demand signals or expand on backlog and the tier two data center sales cycle? Can you give an idea on the typical sales cycle as it might pertain to the Litera collaboration activity and new revenue streams?

Neil Wilkin | President and Chief Executive Officer

First, the SEC team stays close to customers and others that impact opportunities on a daily basis. And that allows us to see what demand signals are happening in the marketplace and provides us insight and a good sense of market dynamics. Also, the data center cycle tends to be longer for data center markets, particularly Tier 2, than the sales cycle for OCC's typical sales. We also believe that strategic collaboration is benefiting OCC and Litera in generating additional opportunities, which we believe will continue to grow this fiscal year.

Caroline Felix | Moderator, Investor Relations

Thank you. Next question is, in the past, you had mentioned you expect the second half to be stronger than the first half. Is this still the case?

Tracy Smith | Senior Vice President and Chief Financial Officer

Yes. As we have mentioned earlier on this call, we do expect the remainder of fiscal 2026 to show further growth, including the second half of the fiscal year.

Caroline Felix | Moderator, Investor Relations

Thanks, Tracy. Our last pre-submitted question this morning is, at what point do you expect the growth to inflect in 2026?

Tracy Smith | Senior Vice President and Chief Financial Officer

While we're not giving revenue guidance for fiscal year 2026, either for the year or by quarter, I would point out that we have seen a growing sales order backlog and forward load. Our sales order backlog and forward load was $10.4 million at the end of the first quarter of 2026, an increase of more than 50% when compared to the same period last year.

Caroline Felix | Moderator, Investor Relations

Thanks, both. That was the last pre-submitted question.

Neil Wilkin | President and Chief Executive Officer

Thank you, Caroline. And now, Angela. We will take any questions from analysts and institutional investors that may have questions. We ask you to please limit yourself to one question and one follow-up. Angela, 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're only taking live questions from analysts and institutional investors.

Angela | Conference Operator

Thank you. If you'd like to ask a question, press star 1 on your keypad. To leave the queue at any time, press star two. We do ask that you limit yourself to one question and one follow-up. Once again, that is star one to ask a question. And we'll take our first question from Sergi Mascaro with Eden Discovery. Your line is now open.

Sergi Mascaro | Analyst, Eden Discovery

Hey, guys. Thanks for taking our questions. Can you hear me well?

Neil Wilkin | President and Chief Executive Officer

Yes.

Sergi Mascaro | Analyst, Eden Discovery

Okay, perfect. So the last call, you talked about some project delays. Can you update us about that?

Neil Wilkin | President and Chief Executive Officer

Yes, we had, I think in the last quarter, maybe the quarter before that, we had mentioned that we did have seen in the marketplace some projects that were being delayed, but that we didn't believe that that was affecting our overall results. Right now, I can't think of anything that is being delayed at the moment, but that always can happen in any quarter, but we don't expect that to be impacting our results this year.

Sergi Mascaro | Analyst, Eden Discovery

Okay, that's perfect. And my second and last question is that during the fiscal year 25, the backlog was growing about 20%. but we didn't see that translating into revenue growth. Why is that?

Neil Wilkin | President and Chief Executive Officer

Well, the backlog is a measurement of any point in time, but I think what we did see as it was growing, that last year we had increased sales 9.5% in total, and we saw significant strong sales in the third and fourth quarter of last year. And so I think that that's what was really... It's consistent with that backlog growth. I think the fact that we have mentioned that we're seeing a larger sales order backlog at the end of the first quarter and the fact that we're seeing more activity in quote requests in our markets, we believe that that's a good signal for the rest of fiscal year 2026.

Angela | Conference Operator

Thank you. And once again, if you'd like to ask a question, please press star and 1 on your keypad now. And at this time, there are no further questions in queue. I will turn the meeting back to Neil Wilkin.

Neil Wilkin | President and Chief Executive Officer

Thank you, Angela. I would like to thank everyone for listening to our first quarter of fiscal year 2026 conference call today. As always, we appreciate your time and your investment in Optical Cable Corporation, and that's most appreciated. I also want to thank the members of the U.S. Armed Forces and be with them and thinking of them during this period of time.

Thank you all. Angela | Conference Operator

This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect. jsPDF 3.0.3 D:20260606090323-00'00'

NASDAQ:OCC Q4 2025 Earnings Call Transcript Generated on 6/6/2026 Stephanie | Conference Operator: Good morning. My name is Stephanie, and I'll be your conference operator today. At this time, I'd like to welcome you to Optical Cable Corporation's fourth quarter and fiscal year 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. If you'd like to ask a question at that time, please press star 1 on your telephone keypad. If you wish to remove yourself from queue, please press star 2. Ms. Felix, you may begin your conference.

Caroline Felix | Director, Investor Relations

Good morning, and thank you for joining us for Optical Cable Corporation's fourth quarter in the fiscal year 2025 conference call. By this time, everybody 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 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 statement section of this morning's press release. These cautionary statements apply to the contents of the Internet webcast on www.opticalcable.com. OCCFiber.com as well as today's call. With that, I'll turn the call over to Neal Wilkin. Neal, please begin.

Neil Wilkin | President and Chief Executive Officer

Thank you, Caroline, and good morning, everyone. I will begin the call today with a few opening remarks. Tracy will then review the fourth quarter and full year results for the three-month and 12-month periods ended October 31st, 2025 in 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. Fiscal year 2025 was a solid year for OCC, driven by the successful execution of our growth strategies and strong positioning in our target markets. We entered into a strategic collaboration with Litera that expands our growth opportunities, which we believe will be reflected in our top line in fiscal year 2026 and beyond. At the same time, we continue to operate efficiently and benefit from our strong operating leverage to drive gross profit growth. In fiscal year 2025, we realized the benefits of actions we took the previous year as the weakness across our industry during the second half of fiscal year 2023 and most of fiscal year 2024 subsided. As a result, 2025, we were able to capture new opportunities and deliver consolidated net sales of $73 million. Our net sales increased during each quarter of fiscal year 2025 compared to the same periods in fiscal year 2024. I'm pleased to share that OCC achieved growth by all measures during fiscal year 2025. Net sales grew by 9.5%. Gross profit grew by 24.1%. Gross profit margin increased to 30.9% compared to 27.3%. and FCNA expenses decreased as a percentage of met sales, all contributing factors to the significant improvements in operating results compared to fiscal year 2024. OCC benefited from strong operating leverage in fiscal year 2025, and we anticipate this will continue to bolster our results in fiscal year 2026 and beyond. Our manufacturing operating leverage tends to create disproportional increases in gross profit as net sales and production volumes increase. While both gross profit and gross profit margin can be impacted by product mix, as OCC's net sales and production volumes increase, substantial fixed costs are spread over higher sales volumes. And importantly, manufacturing efficiencies also tend to increase, particularly for fiber optic cable production. Gross profit disproportionately increased 24.1% as net sales increased 9.5% during fiscal year 2025. Our SG&A operating leverage also tends to positively impact efficiency and profitability as net sales increase. Many SG&A expenses are relatively fixed costs, rather than varying with net sales, including significant public company costs. As a result, OCC's SG&A expenses as a percentage of net sales typically decrease with increased net sales. OCC's commitment to pursuing new growth opportunities, including expanding our presence in targeted market sectors and the enhancement of our product solutions offerings, including those resulting from our strategic collaboration with Latera, will fuel our future success. As demand for cloud computing and artificial intelligence applications continues to accelerate, OCC is capturing the opportunity by expanding our existing presence and product solutions offerings for the data center market. We have continued to expand and innovate both our fiber optic cable product solutions offerings and our cable and connectivity product solutions offerings. As previously announced in July 2025, OCC and Litera entered into a strategic collaboration agreement to expand product offerings and solutions, especially for the data center and enterprise sectors. As a global leader in fiber optic and connectivity solutions, Litera has a long history of industry-leading innovation, design and manufacturing capabilities, including the production of high-performance optical fibers. As respected manufacturers in the fiber optic industry, OCC and Litera have partnered in various ways over many years, and this strategic collaboration builds on that long, successful relationship. Through this strategic collaboration, OCC and Litera expect to benefit from offering expanded fiber optic and copper cabling and connectivity solutions to the enterprise and data center sectors, as well as an expanded presence in other sectors. The companies have combined portions of the extensive product portfolios of both OCC and Lytera to deliver integrated cabling and connectivity solutions offerings that will be sold by OCC. In connection with this, strategic collaboration, Litera has made an investment in OCC, purchasing shares of OCC common stock from OCC and resulting in Litera holding 7.24% of OCC's outstanding shares. Looking ahead, OCC remains uniquely positioned in the fiber optic and copper cabling and connectivity industry with differentiated core strengths and capabilities that enable us to offer top-tier products and application solutions and to and to compete successfully against much larger competitors. OCC is committed to enhancing and leveraging our core strengths and capabilities to drive long-term value for our shareholders. I'd like to highlight a few of those strengths for you today. First is our strong market positions, brand recognition, and long-term industry relationships with loyal customers, decision makers, and specifiers, installers and integrators, and end users across a broad range of targeted market sectors. Second is our extensive industry experience and expertise in OCC's engineering, sales, and business development teams, who are well respected for their product and application experience and expertise, which enables OCC to create and offer its portfolio of innovative high-performance products. Next, OCC has a growing portfolio of innovative fiber optic and copper cabling and connectivity products and solutions that enable us to meet the needs of our customers and end users as they are well-suited for the applications in our various targeted market sectors. We have significant production availability at our facilities, supported by knowledgeable and experienced manufacturing, quality, and engineering teams. Finally, our broad and diverse geographic footprint enables us to sell to approximately 50 countries every year. OCC has earned an exceptional reputation for its service excellence, innovation, and entrepreneurial spirit, and we have built a team that embodies OCC's core strengths and capabilities. As we turn to fiscal year 2026, we are optimistic about our growth opportunities, Encouraged by our successes this past year and excited to build on the growing momentum we are creating in our targeted market sectors, we look forward to leveraging our strengths and executing our strategies and initiatives to create long-term value for our shareholders. I'd like to thank the OCC team for its hard work, its commitment to OCC, and those that count on us. Your contributions to the team's accomplishment this past year have been significant. Much has been accomplished by the OCC team this year, and we are confident we are well positioned for future growth in 2026 and beyond. I'd also like to thank our shareholders for your continued support of OCC. And with that, I'll turn the call over to Tracy, who will review an additional detail on our fourth quarter and fiscal year 2025 financial results.

Tracy Smith | Senior Vice President and Chief Financial Officer

Thank you, Neal. Consolidated net sales for fiscal year 2025 increased 9.5% to $73 million compared to net sales of $66.7 million for fiscal year 2024 with sales increases in both our enterprise and specialty markets. At the end of fiscal year 2025, our sales order backlog and forward load was $7.3 million compared to $5.7 million as of October 31st, 2024. Looking forward, we anticipate additional growth opportunities during fiscal year 2026. We continue to expand our product solutions offering for the data center market as demand for cloud computing and artificial intelligence applications continues to accelerate. Consolidated net sales for the fourth quarter of fiscal year 2025 increased 1.8% to $19.8 million compared to $19.5 million for the same period in the prior year. We experienced an increase in net sales in both our enterprise and specialty markets during the fourth quarter of fiscal year 2025 compared to the fourth quarter of fiscal year 2024. Sequentially, OCC's net sales decreased less than 1% during the fourth quarter of fiscal year 2025 compared to net sales of $19.9 million for the third quarter of fiscal 2025. Turning to gross profits. Our gross profit increased 24.1% to $22.6 million in fiscal 2025, compared to $18.2 million for fiscal 2024. Gross profit margin, our gross profit as a percentage of net sales, increased to 30.9% during fiscal 2025, up from 27.3% for 2024. Gross profit margin for fiscal year 2025 was positively impacted by higher volumes as fixed charges were spread over higher sales, the impact of 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. Gross profit decreased slightly to $6.3 million in the fourth quarter of fiscal 2025 compared to $6.5 million for the same period last year. Gross profit margin decreased to 31.9% in the fourth quarter of fiscal 2025 compared to 33.5% in the fourth quarter of fiscal 2024. During the fourth quarter of fiscal year 2025, there was no significant change in the gross profit when compared to the third quarter of fiscal 2025. Gross profit margins sequentially increased to 31.9% in the fourth quarter of fiscal 2025 compared to 31.7% during the third quarter of fiscal 2025. SG&A expenses increased to $23 million in fiscal year 2025 compared to $21.5 million in fiscal year 2024. SG&A expenses as a percentage of net sales were 31.4% in fiscal year 2025 compared to 32.2% in fiscal year 2024. SG&A expenses increased to $6 million in the fourth quarter of fiscal 2025 compared to $5.9 million for the same period last year. SG&A expenses as a percentage of net sales were 30.4% during the fourth quarter of 2025 compared to 30% during the same period of fiscal year 2024. The increase in SG&A expenses during the fourth quarter and 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. Included in employee and contracted sales personnel related costs are compensation costs and sales incentives. While profitable during the second half of fiscal 2025, OCC recorded a net loss of $1.5 million or 18 cents per basic and diluted share for fiscal year 2025 compared to $4.2 million or 54 cents per basic and diluted share for the fiscal year 2024. OCC recorded net income of $49,000 or 1 cent per basic and diluted share for the fourth quarter of fiscal 2025 compared to net income of $373,000 or $0.05 per basic and diluted share for the fourth quarter of fiscal 2024. And with that, I'll call back over to you, Neal.

Neil Wilkin | President and Chief Executive Officer

Thank you, Tracy. We have received a number of questions in advance of the call today, and we believe that those would be of interest to most participants. So we're going to go through those questions first, and then we will address any remaining live questions from analysts and institutional investors. Because some of those questions overlapped, we did try to combine them in a manner that we're addressing the core questions that were submitted in advance. Caroline, if you could please read the questions, we're happy to provide our responses.

Caroline Felix | Director, Investor Relations

Thanks, Neal. The first question is, can you update us on the data center opportunity in general, how you feel about it, if the opportunity has strengthened or not during the quarter, and any major changes or updates?

Neil Wilkin | President and Chief Executive Officer

Yes, we believe like others in our industry that the data center markets are strong and will continue to grow. I wouldn't say that it had a significant impact in our fourth quarter, but we believe that it will start to impact us in fiscal year 2026. OCC has a presence in the data center market with established market relationships as well as products. Of course, as you all know, OCC's products are best suited for multi-tenant data centers or MTDCs and enterprise data centers, sometimes referred to as Tier 2 and Tier 3 data centers. We're currently working to expand our presence in portions of the data center market, and we're optimistic that the data center market, particularly the multi-tenant data centers and the enterprise data centers, will provide an opportunity for revenue growth in fiscal year 2026 for OCC.

Okay. Caroline Felix | Director, Investor Relations

Thanks, Neil. The next question is, over the last quarter, you have been commenting on improvements in OCC and markets. Have those improvements continued into Q4? Can you comment on new and emerging trends or risks?

Neil Wilkin | President and Chief Executive Officer

Yes. OCC continues to see strength in most of our targeted market sectors. There are certain market sectors where we've seen some projects delayed, but we do not believe that this has negatively impacted OCC's growth this year or that it would negatively impact OCC's growth in fiscal year 2026. We also believe that the continued growth opportunities in OCC's targeted market sectors for fiscal year 2026 continue to be significant. Of course, as we have said in the past and experienced in the past, during the first half of each year, OCC does experience the impact of seasonality. And as of now, we currently expect that to be the case as well.

Caroline Felix | Director, Investor Relations

Thanks, Neil. The next question is whether you believe OCC will have any hyperscale data center opportunities.

Neil Wilkin | President and Chief Executive Officer

We've talked about this before, or we've received this question before, and as we've noted that really our product solution offerings for the data center market are better suited and best suited for the multi-tenant data centers and enterprise data centers. We believe that there's significant growth opportunities in the multi-tenant data centers market segment, as well as enterprise data centers, but particularly for the MTDCs. that will provide significant opportunities for OCC in fiscal year 2026. Yeah. Yeah. I'd also add that, and Tracy mentioned this in some of her comments, that the multi-tenant data centers also are positively impacted by the growth, current growth in cloud computing and artificial intelligence. And so we believe that that's a true market opportunity for us.

Caroline Felix | Director, Investor Relations

Thanks. The next question is, what do you think the potential sales look like for 2026 and 2027?

Neil Wilkin | President and Chief Executive Officer

I'll let Tracy take the financial questions.

Tracy Smith | Senior Vice President and Chief Financial Officer

Sure. As we said before, we don't provide forward-looking guidance. However, I will say that we are optimistic about potential increases in sales based on the opportunities that we expect to arise in fiscal 2026, particularly during the second half of fiscal 2026. I believe is based on what we're seeing in our targeted market sectors as well as our expected opportunities to expand in those market sectors as a result of the strategic collaboration with La Terra.

Caroline Felix | Director, Investor Relations

Thanks, Tracy. Next question. Can you give a sense of the financial metrics behind the operational leverage? For example, how much EPS can impact different forward sales levels if they do, in fact, inflect higher on the collaboration?

Tracy Smith | Senior Vice President and Chief Financial Officer

We can't give you a specific formula. As you all know, operating leverage is a result of fixed costs in manufacturing and also in SG&A costs being spread over higher sales. Manufacturing operating leverage is also impacted by product mix sold, which is not a variable that's very easy to predict.

Caroline Felix | Director, Investor Relations

Thanks, Tracy. Next question is, Q1 and Q2 are typically the weakest quarters in terms of seasonality. Should we still expect the typical seasonality into 2026?

Tracy Smith | Senior Vice President and Chief Financial Officer

As Neil mentioned, we do continue to see a seasonality impact in our first and second quarters, although there can be exceptions, particularly if there are larger orders that impact the first half of the year or unanticipated macroeconomic conditions during the year.

Caroline Felix | Director, Investor Relations

Got it. Thanks, Tracy. Next question. Is the focus still on Tier 2 data centers, or is there some potential to capture some of the Tier 1 data center demand as part of your collaboration?

Neil Wilkin | President and Chief Executive Officer

Well, without speaking specifically about the strategic collaboration with Lytera, what I'd say is that OCC's products are best suited for Tier 2 or multi-tenant data centers and the enterprise data center market. And so that's really... where our focus is, as we mentioned before. And I would not expect that OCC to directly have any significant participation in Tier 1 or hyperscale data centers. It doesn't mean there couldn't be some impact at some level. And, of course, those growth in Tier 1 data centers in the market can impact what kind of growth is being seen in Tier 2 for multi-tenant data centers and other parts of the market. But directly, I wouldn't expect us to have a significant participation at all in the Tier 1 or hyperscale data centers.

Caroline Felix | Director, Investor Relations

Thanks, Neil. Next question. In terms of capacity available and any capacity constraints, are there any changes versus what you commented on last quarter?

Neil Wilkin | President and Chief Executive Officer

We continue to evaluate our capacity, but right now we believe that SEC has the capacity to capture the growth opportunities that we expect to see in fiscal year 2026. So I think that really answers that question.

Caroline Felix | Director, Investor Relations

Thanks, Neil. Next question. OCC has been hiring a lot recently. Can you comment if you have seen any issues to find the right workers, why you saw the need to hire that significantly, and if this will increase OPEX significantly?

Neil Wilkin | President and Chief Executive Officer

Yes. I don't know if I'd characterize our hiring recently as significant. We do have a number of open positions that we are seeking to fill, and that's not unusual for that to be the case. Most of those positions are typically in manufacturing. We are fortunate that OCC has a good record of recruiting and retaining needed talent, but I think like a lot of businesses generally, not just in our industry, OCC has seen some additional turnover among newly hired personnel. However, OCC has what we believe is a record of unusually low turnover among our longer-term employees. So we do continue to expect to see hires. I don't expect that to significantly increase operating expense specifically, and of course we are consistently looking at what expenses we're incurring in order to provide the appropriate staffing as well as the appropriate balance of expense relative to our opportunities.

Caroline Felix | Director, Investor Relations

Thanks, Neil. Next question is, can you please provide an update on progress of the LITERRA collaboration?

Neil Wilkin | President and Chief Executive Officer

Sure. So, OCC and Litera partnered in various capacities for many, many years. And so, it's not surprising, because we've worked well with them in the past, that our new strategic collaboration with Litera, I believe, is going well. The Litera team is exceptional, and we think highly of the OCC team as well, obviously. And we believe that this strategic collaboration will create growing opportunities for OCC in fiscal year 2026 and hopefully for, although I can't speak for Lytera, for Lytera also.

Caroline Felix | Director, Investor Relations

Thanks, Neil. Last question this morning is, Lytera has recently announced an investment into manufacturing. Is this an indication of strong demand for OCC?

Neil Wilkin | President and Chief Executive Officer

Well, we can't. OCC really can't comment on announcements that Lyterra has made or what their specific business plans are, so I'd leave those questions for Lyterra rather than OCC.

Caroline Felix | Director, Investor Relations

Thanks, Neil. We have no other questions that were provided in advance of the call today at this time.

Neil Wilkin | President and Chief Executive Officer

Okay. So if those are the questions, I guess operator, Stephanie, if you could let us know if there's any questions from analysts. We're happy to answer them. And if you could please, Stephanie, give the instructions for the folks to ask those questions, that would be wonderful.

Thank you. Stephanie | Conference Operator

Thank you. If you'd like to ask a question, press star 1 on your keypad. To leave the queue at any time, press star 2. In the interest of time, we ask you please limit yourself to one question and one follow-up question. Once again, that is star 1 to ask a question, and we'll pause for just a moment to lock questioners to queue. And again, that's star one to ask a question. We'll take our first question from Anthony Crist with Odyssey Investments.

Anthony Crist | Analyst, Odyssey Investments

Thank you very much. Mr. Wilkins, I have tried to call two or three times. I'm located up in Northern Virginia. My question deals with is there any visibility into whether or not Litera may refer us some of the SMF cabling, single-mode fiber cabling, or the hollow fiber cabling, which is basically Tier 1 products. And if you could – I know the words. If you could take a minute and explain what those two products are, I'd appreciate it. And then I have a follow-up.

Neil Wilkin | President and Chief Executive Officer

Okay, so hollow core on the – is a type of fiber that's really looking to reduce latency and increase speed in certain applications. And so that is something that probably is usable in a lot of different applications. Our engineering team would be better able to answer that question, but as a general matter, that's the case. I think that I can't comment on what people are thinking about with respect to or what Lytera or is thinking about with respect to how they're going to use that product. But, you know, OCC, we've partnered with Lytera in a number of different ways, and Lytera is a large fiber producer of various different products that have been having leading performance in the industry for many, many years. So, again, our products are more focused on the traditional markets that we've had, enterprise, various parts of the enterprise market, as well as a number of specialty markets, including harsh environment and military and others. We use some specialty technologies in some of those products, and then in data centers. We've had a presence in data centers before, but now we're focusing on expanding that and leveraging our current relationships and also focusing on expanding our product offering. I don't know if that really helps specifically on your question. SMF specifically, I think of just a single mode fiber. So that's a more typical product that would be used in data center, although multi-mode fiber is also used.

Stephanie | Conference Operator

Thank you. And we'll take our next question from Sean Boyd with Neck Smart Capital.

Neil Wilkin | President and Chief Executive Officer

He said he had a follow-up question, though. Did you want to take that, Stephanie, first?

Caroline Felix | Director, Investor Relations

Anthony did.

Stephanie | Conference Operator

Anthony, would you like to announce your follow-up?

Anthony Crist | Analyst, Odyssey Investments

Yes.

Yes. Yes. Stephanie | Conference Operator

Your line is open, Anthony.

Anthony Crist | Analyst, Odyssey Investments

Okay, thank you. Dare I ask, Neil, if those two fibers, the SMFs and the hollow case fibers, were competitive with the corning fibers? And if any automation AI would be given us by Lytera to produce them?

Neil Wilkin | President and Chief Executive Officer

Yeah, I'm not I'm not the best person to answer the question about how those are going to be used, and there's a whole lot of intellectual property and strategy that goes behind which fibers are going into which applications and what plans the fiber manufacturers have. What I can say is that VITERA is known for having leading technology in fiber development, everything from the rollable ribbon technology fibers to many, many other types of fibers. They've been a leader in many ways and are well respected in that regard. How they plan to deploy those technologies in different markets is not really something that we can comment on, and those are questions that will really be left to Litera. if they choose to answer them, which they may not be because of the proprietary nature of some of that. But, Anthony, the one thing I guess I would add is if you're asking how they compare to Corning, I would suspect that, as with any other competitors, Lytera would have a very favorable view of their products, and I think the market does, too.

Stephanie | Conference Operator

Thank you. Again, that's our one to ask a question, and we'll take our next question from Sean Boyd with Nix Smart Capital.

Sean Boyd | Analyst, Nix Smart Capital

Good morning. Can you hear me okay?

Neil Wilkin | President and Chief Executive Officer

It's a little low, but I think we'll be able to make out what you're saying.

Sean Boyd | Analyst, Nix Smart Capital

Okay. Let's give it a shot here. So historically, the company has shown real positive seasonality in its October quarter, its fourth quarter, up double digits sequentially. This year, we didn't quite see that. And I thought I might have heard something about delays. So the question is, were there any project delays or push-outs that might have caused that?

Neil Wilkin | President and Chief Executive Officer

Well, first of all, generally our seasonality is what we see in the first quarter versus the second quarter. I mean, excuse me, the first half of the year versus the second half of the year. So I don't have the precise percentage in front of me. But the growth that we would have seen from the second quarter to the third quarter would have been, I would expect, in double digits. Sequentially, that wasn't the case from Q3 to Q4, but I would expect Q3 and Q4 to be more equal. Again, with most of the seasonality being impacting the first half of the year and seeing positive increases in the second half of the year.

Tracy Smith | Senior Vice President and Chief Financial Officer

And we did see our seasonality this year mirror that from 2024. So for the second half of the year, I think it was 48% in the first half.

Neil Wilkin | President and Chief Executive Officer

Of total sales.

Tracy Smith | Senior Vice President and Chief Financial Officer

I'm sorry, 46% of total sales in the first half of the year and the rest in the second half of the year. And that was exactly the same in 2025 compared to 2024.

Neil Wilkin | President and Chief Executive Officer

And we'll be filing our – annual report in Form 10-K today. We expect to, in the footnotes, we disclose details about some of the seasonality.

Tracy Smith | Senior Vice President and Chief Financial Officer

And the MD&A.

Neil Wilkin | President and Chief Executive Officer

The other question that you had was, part of the same question you had was, did we see any products that had been delayed impacting the fourth quarter? I don't think that that was significantly And again, I don't think that those delays are significant overall. I think they're – and one of the things that OCC benefits from is we're in many, many different markets geographically in particular market segments. And so sometimes we'll see big fluctuations in certain market sectors that are not truly visible because they're offset by other fluctuations in other market segments that we're targeting.

Tracy Smith | Senior Vice President and Chief Financial Officer

Let me just correct the seasonality percentage that I stated earlier. It was 46% in the first half of the year and 54% in the second half of the year, and that was the same seasonality pattern that we saw in 2024 and 2025.

Sean Boyd | Analyst, Nix Smart Capital

Okay. So the 46-54 is the year we just finished, FY25?

Tracy Smith | Senior Vice President and Chief Financial Officer

Yes, as well as 2024. They were exactly the same.

Sean Boyd | Analyst, Nix Smart Capital

Got it. Okay. That color is helpful. Appreciate that. So just as a follow-up, the collaboration with Lytera, which we inked back in July, you indicate that we should start to see that impact the top line in 2026. Can you give us any more color on that? Can we see that in the first half? Would it be the second half? And just as a follow-on, why is that taking this long? What is it that – What are the key factors before we see the revenue contribution of that?

Neil Wilkin | President and Chief Executive Officer

Yeah, I mean, it's a good question. It also has a lot of details behind it, so specifically, you know, what we're going to see in 2026. We don't provide forecasts on what we're going to see. We do think we're going to see a positive impact, and we've stated that. With respect to the collaboration, as you'd imagine, when we're – when you're working with companies in a different way, that there is a lot of work that goes into that. I think that the work is going well and expeditiously, and that there's a lot of work that's being done. You'd expect that that would be the case before it started to impact sales, but I can't, beyond that, comment on what it is. I think that what I'd also – I don't have the quite percentage – if you'll just hold on for a second – So there was – I was just confirming, you talked about the double-digit increase because of seasonality. If you look at what our performance was in the second quarter of 2025 versus the third quarter of 2025, that does create – you do see a double-digit increase in sales, which is consistent with the observation that you had made. But you wouldn't necessarily expect to see that between the third and fourth quarter because of seasonality between the first half and the second half. as we described, is fairly consistent.

Stephanie | Conference Operator

Thank you. There are no additional questions at this time. I'd like to now turn it back to our presenters for any additional or closing remarks.

Neil Wilkin | President and Chief Executive Officer

Thank you, Stephanie. Appreciate everyone's questions. We'd like to thank everyone for listening to our fourth quarter. and fiscal year 2025 conference call today. As always, we appreciate your time and your investment in Optical Cable Corporation. We hope that you and your families have a wonderful holiday and a happy new year.

Thank you. Stephanie | Conference Operator

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect. jsPDF 3.0.3 D:20260606090324-00'00'