Image source: The Motley Fool. DATEThursday, June 5, 2025 at 11 a.
ETCALL PARTICIPANTSChairman, President, and Chief Executive Officer — Neil WilkinSenior Vice President and Chief Financial Officer — Tracy SmithVice President of Corporate Communications — Spencer HoffmanNeed a quote from one of our analysts.
[ tected] TAKEAWAYSConsolidated Net Sales— $17. 5 million for Q2 FY2025, representing 8. 9% growth and a sequential increase of 11. 5% from $15. 7 million in Q1 FY2025. Gross fit— $5.
3 million gross fit (GAAP) for Q2 FY2025, an increase of 32. 1% compared to the same period last year, with margin rising to 30. 4% from 25.
1% in the second quarter of fiscal 2024 and up from the prior quarter’s 29. Backlog and Forward Load— $7. 2 million sales backlog and forward load as of Q2 FY2025, up from $6.
6 million as of January 31, 2025, and $5. 7 million as of October 31, 2024. SG&A Expenses— $5. 7 million in the second quarter of fiscal year 2025, up from $5.
3 million in the second quarter of fiscal year 2024, mainly driven by higher personnel-related and shipping costs. SG&A as Percentage of Sales— 32. 7% for Q2 FY2025, down from 34.
7% during the first quarter and 33% in the prior year period. Net Loss— $698,000 or $0. 09 per for Q2 FY2025, narrowed from $1. 6 million or $0. 21 per for Q2 FY2024.
Mix— Fiber ducts are the largest segment, while copper remains significant; fiber-copper hybrids also comprise part of the mix.
Operating Leverage— Management notes benefit from spreading fixed costs over increased volumes, enhancing gross fit margins when duction rises.
Market Focus— Growth continues in military and specialty ; data center revenues are present in Tier 2 and Tier 3 segments but remain a small portion. Tariffs Impact— OCC’s U.
-based facilities have resulted in less tariff impact than some industry peers, though tariffs continue to affect select ducts and exports.
Seasonality— Company sales typically skew higher in the second half of the year, supported by historic sales patterns d on the call. SUMMARYOptical Cable Corporation (OCC 5.
26%) reported sequential and annual imvements in sales, gross fit, and gross margin for Q2 FY2025, driven by both enterprise and specialty market contributions.
Duct mix fluctuations and increased manufacturing efficiencies, amplified by operating leverage, contributed to gross fit margin gains in the second quarter and first half of fiscal 2025.
Management cited backlog expansion as evidence of positive underlying demand trends, adding clarity to forward revenue visibility.
Wilkin stated, "We continue to see positive industry trends from which we believe OCC will continue to benefit as the year gresses.
"The call clarified that OCC is deliberately not targeting hyperscale data center customers, focusing efforts instead on military, Tier 2, and Tier 3 data center.
Smith explained, gross fit margin percentages are heavily dependent upon duct mix on a quarterly basis and may vary based on changes in duct mix.
Wilkin confirmed that tariffs have impacted OCC but to a lesser extent than some competitors due to its U. -based manufacturing foot.
INDUSTRY GLOSSARYBacklog and Forward Load: The total value of confirmed orders pending shipment, indicating future revenue visibility within specified periods.
Tier 2 and Tier 3 Data Centers: Data center facilities classified below hyperscale, typically serving multi-tenant and enterprise with smaller-scale deployments.
Loose Tube Fiber: A type of fiber optic cable construction used primarily for outdoor applications such as in data centers or larger infrastructure jects.
Full Conference Call TranscriptNeil Wilkin: Thank you, Spencer, 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 3-month and 6-month periods April 30, 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 holders 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 dered sales, net sales growth and gross fit growth on both a year-over-year and a sequential basis.
Strong execution by the OCC team, coupled with our significant operating leverage also enabled us to der imved gross fit margins as we realized imved manufacturing efficiencies over higher duction volumes.
We continue to see positive industry trends from which we believe OCC will continue to benefit as the year gresses.
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, and $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 fit margin expansion with increased duction volume as we benefit from OCC's significant operating leverage.
I'm ud of the OCC team whose hard work allowed us to der a strong start to the first half of fiscal 2025 in a dynamic market environment.
As we look ahead to the second half of the year, we remain focused on disciplined execution and capitalizing on growth opportunities to drive holder value.
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 results. Tracy Smith: Thank you, Neil.
Consolidated net sales for the second quarter of fiscal 2025 increased 8. 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 while our enterprise 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 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.
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 fit. Our gross fit increased 32. 3 million to $5. 3 million in the second quarter of fiscal 2025 compared to $4 million for the same period last year.
Gross fit margin or gross fit 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. Gross fit 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 fit margin was 29. 9% in the first half of fiscal 2025 compared to 25% in the first half of fiscal 2024.
Gross fit margin for the second quarter and first half of fiscal 2025 was positively impacted by duction efficiencies created by higher volumes and the resulting positive impact of our operating leverage.
Additionally, our gross fit margin percentages are heavily dependent upon duct mix on a quarterly basis and may vary based on changes in duct mix. 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.
Included in employee and contracted sales personnel-related costs are compensation costs and sales incentives. OCC recorded a net loss of $698,000 or $0.
09 per basic and diluted for the second quarter of fiscal 2025, compared to a net loss of $1. 6 million or $0. 21 per basic and diluted for the second quarter of fiscal 2024.
OCC recorded a net loss of $1. 8 million or $0. 23 per basic and diluted for the first half of fiscal year 2025 compared to $3 million or $0.
39 per basic and diluted for the first half of fiscal year 2024. With that, I'll turn the call back over to you, Neil. Neil Wilkin: Thank you, Tracy.
And now if any analysts or institutional investors have questions, we are happy to answer them.
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 questions from analysts and institutional investors. Operator: [Operator Instructions] And we will take our first question from Manny Stoupakis with Geo.
Manny Stoupakis: On your last call, you guys talked the significant demand from data centers.
I wanted to know if you can tell us -- it seems 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. Manufacturing advantage in case it becomes all domestic. NVDIA, [ TSSI ], Dell are all in that Round Rock, Texas area. What am I missing.
Why aren't we taking more advantage of this opportunity. Neil Wilkin: Well, data center market is divided into several different.
And what's getting the most press and what's getting -- what you're hearing NVIDIA and others, those are really at the hyperscale level. And so that is a different type of duct set than one OCC vides.
We have -- don't really -- haven't really targeted hyperscale data centers.
We do have sales in the data center 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.
One of the things we did this year is we've added loose tube duct offering to our ducts and some of those are used in data centers, in some cases, in addition to tight buffer.
So we're seeing some benefit of that. I think that there's more opportunity that we haven't taken advantage of yet. But a lot of what you're hearing is really at that hyperscale level.
Manny Stoupakis: 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 focusing on that area and starting to see extreme benefits.
I said, you can look at TSSIs and the rack integration. There's other ones in the cooling TZIM.
So I just -- just I was wondering, I know you touched on it on the last conference call, and I just wanted to see if the focus and the growth opportunity is still there and if this is something you're starting to see a little bit of momentum in, but it sounds it's a little bit more slow go than maybe it was anticipated or.
Neil Wilkin: We are starting to see some movement in that area, but it hasn't been a major part of our sales at the moment.
We're seeing more growth in the areas military, which is more squarely in our wheelhouse, but we are seeing opportunities in data centers and believe that we will benefit from that, but it will be smaller data centers.
We appreciate your question. Operator: And it appears that there are no further questions at this time. 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. And Spencer, if you read the questions, Tracy and I will address those.
Spencer Hoffman: Sure. So the first question, can you give a sense of potential operational leverage.
For example, what's your upside scenario -- what your upside scenario can look if revenue begins to jump while costs remain fixed. What could that look. Tracy Smith: I'll take that one.
The best sense of operational leverage can be seen in our historic quarterly results.
Because duct mix also plays a significant role in our gross fit margin, it 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 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.
Hopefully, that gives some indication of how operational leverage can impact our results at higher sales levels.
Also, if you review Neil's letter to the holders in our 2024 annual report, you'll see some descriptions, graphs and data regarding OCC's operating leverage over varying sales levels.
Spencer Hoffman: Thank you. The next question. What percentage of the 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.
Tracy Smith: Well, we don't generally disclose information related to what percentage of our is related to copper and what percentage is related to fiber.
I can say that fiber is definitely the biggest portion of our. 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. Neil Wilkin: Do you want to go to the next question, Spencer. Spencer Hoffman: Thank you, Tracy.
Can you us on data -- on -- for the next question, can you us on data centers [ MBI ] opportunity. Are there any changes over the last quarters. Neil Wilkin: So Spencer, this is Neil.
And I think I've addressed most of that question in response to the question we got previously.
We do see sales in the data center applications, but currently, it has not been significant, 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 basis in order to address the needs of our customers and end users in our targeted.
And as I've mentioned before, we have added loose tube fiber cable ducts to our offering, which also opens up some additional data center opportunities. Spencer Hoffman: Thanks, Neil.