OPTICAL CABLE CORP Q2 FY26 Results

Following a solid start to the year, OCC continued to advance its strong growth and momentum – delivering year-over-year increases of 26.6% in net sales and 42.4% in gross profit during the second quarter of fiscal 2026. Our net sales increase was largely driven by strength in OCC’s enterprise, data center and severe duty markets, and our manufacturing operating leverage contributed to the disproportionate increase in gross profit during the second quarter. As we look to the second half of the year, we are confident in OCC’s ability to capitalize on our momentum and our continuing opportunities for growth. We remain focused, as always, on the disciplined execution of our strategy and delivering value for our shareholders. 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 as Tier 2 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 of OCC's other targeted market sectors. However, sales into these data center markets have positively impacted OCC's revenue in the second quarter, and we believe that our revenue will continue to be positively impacted during the second half of fiscal 2026. 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 to allies which can result in increased sales. During the past fiscal year, we saw increases in our sales in the military market sector. 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. 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. 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. OCC does manufacture products suitable for certain applications in the power grid. As power grid capital expenditures increase, we would expect to benefit. However, to be clear, OCC does not sell power cables for use in the power grid. 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. 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. 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. 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've disclosed in our Form 10-Ks and 10-Qs, we have what we believe is 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.

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 Neil 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 $0.12 per share, for the second quarter of fiscal 2026, compared to a net loss of $698,000, or $0.09 per share, for the second quarter of fiscal 2025. OCC recorded net income of $657,000, or $0.07 per share, for the first half of fiscal 2026, compared to a net loss of $1.8 million, or $0.23 per share, for the first half of fiscal 2025. As was 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 31, 2026, an increase of more than 27%, and when compared to $7.3 million as of October 31, 2025, an increase of more than 82%. At the end of May our backlog and forward load continued to be strong. 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. Changes in product mix of products being sold and manufactured impacts 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. 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. We regularly consider the need for investment in machinery and equipment and/or human resources to expand our capacity in general and also for specific opportunities. We are seeing some opportunities to increase our capacity currently.