OPTICAL CABLE CORP Q3 FY26 Results

Our third quarter results demonstrate the strength of our team, the disciplined execution of our strategy, and the momentum we are building across our targeted market sectors. Net sales increased 22.0% in the third quarter, reflecting strong demand in our enterprise, data center, and specialty markets. Gross profit increased 43.9% in the third quarter, due to increased volumes and the positive impact of our manufacturing operating leverage. With compelling opportunities ahead in both domestic and international markets, we remain focused on capturing growth, delivering exceptional service to our customers and end-users, and driving sustainable value creation for our shareholders. Following a solid start to the year, we continued to build on OCC’s strong growth and momentum during the third quarter of fiscal year 2026, delivering year-over-year increases of net sales, gross profit and net income. Net sales increased 22% to $24.3 million and gross profit increased 43.9% to $9.1 million during the third quarter. Our net sales increase was largely driven by strong demand in OCC’s enterprise, data center and specialty markets. Our strong gross profit results during the third quarter and also fiscal year-to-date continue to demonstrate the benefit of OCC’s manufacturing operating leverage. As our production volumes increase, our fixed manufacturing costs are spread over higher sales volumes and manufacturing efficiencies also tend to increase. As of the end of the third quarter, our sales order backlog and forward load stood at $13.5 million. We are now in the last quarter of our fiscal year, and we are confident in OCC’s ability to build on our momentum and capitalize on the opportunities ahead. At the same time we continue to explore opportunities to further strengthen OCC’s capabilities and support long-term growth. As always, we remain focused on delivering exceptional service to our customers and end users and driving sustainable value creation for our shareholders. So there’s a lot of questions in that first statement. As you can see from our press release earlier this morning, our results during the third quarter of fiscal year 2026 support our previous expectation that the second half of 2026 would be very strong. We continue to believe that that’s going to be the case. We continue to have a robust backlog and forward load that are increasing. At the same time sales are increasing. We can’t specifically comment on how long we expect our higher backlog to continue. However as we’ve seen in the past, when the backlog increases to a certain level, it certainly is indicative of what we believe we’re going to see in the following quarter or so. But a lower backlog doesn’t necessarily mean that’s going to generate a lower sales number, and we’ve talked about that previously. It’s not a data point we’ve always described, but we’ve only been disclosing it to folks through our press releases and 10-Qs when we believe that number has some significant value. I think I can also say that even though we don’t know what the backlog will do, we still believe that the industry in general is seeing high levels of demand, and there does not appear to be any indication that demand is weakening, at least as far as we can see at the moment. This does not necessarily mean that we will not see any seasonality. Our first quarter has many holidays in it including Thanksgiving, Christmas and other December holidays, as well as New Year’s. So at this point, we’re not really sure what we’ll see in the first quarter, but we are seeing a significant amount of demand across the board in all of our markets. Yes. As we noted in our press release this morning, our enterprise, data center and specialty market sectors are all increasing during this quarter and during our year-to-date periods for and through the third quarter of 2026. Our specialty markets include market sectors such as the military market sector. So yes, I’ll take that one. The sales cycle for certain portions of the data center market sector do tend to be longer. That can include qualification requirements as a new supplier for certain new products being supplied. However as we’re going through those qualification processes, where they exist, or periods where the sales cycle is longer, those potential sales do not show up in our backlog. Our forward load and backlog is really items where we’ve either received an order or where we expect that an order is noncancelable and that we will be delivering it at some point in the future. Sometimes that’s a short time period. Sometimes that’s a longer time period because we do have some customers that stage the deliveries over time. I don’t think that the backlog increasing a slight amount indicates that demand is flattening in any way. We continue to see significant growth opportunities, and we have seen our backlog and sales forward load continue to grow this past month. This does not mean we may not experience some typical seasonality, as I mentioned before, in the first quarter. But for now we continue to see continued strength in demand for our products, even if it’s not reflected in a small change in the backlog/forward load as of the end of the quarter. We are not seeing any new or unusual market risk at this time. As we’ve described during our second quarter earnings call we have been seeing some industry-wide delays as a result of high product demand and certain fiber optic -- optical fiber shortages. Additionally, we’ve seen some longer lead times for certain raw materials, as one would expect given the current high demand for products. We expect these challenges will continue, but we also believe we’re taking appropriate action to navigate those challenges. We are regularly considering 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. We do not generally comment publicly on the specific capacity expansion plans for various reasons including for competitive reasons. And I think that answers the question. Yes. Currently, the industry continues to experience optical fiber shortages due to excessive product demand for data centers as well as certain other product applications. We believe OCC is successfully managing these industry dynamics as we’ve demonstrated during the first nine months of this fiscal year. We do not believe these industry challenges will prevent us from continuing to report strong top line revenue growth during the remainder of fiscal year 2026. Notably, we work to limit potential impacts on our customers and our gross profits that these industry factors may have. Of course, as we’ve noted in the past, OCC’s profit margins can also be impacted by product mix and other factors which can be difficult to predict. We are seeing various different effects that are limiting our product shipments at some level, and so those are bottlenecks. Those are primarily impediments to ramping up manufacturing. The primary impediments to ramping up manufacturing at the current time are really optical fiber shortages, as we previously described. But as you can also see in our results, we’ve been able to generate increased sales despite those impediments. Yes. OCC has some fiber optic cable and connectivity opportunities in grid and energy vertical market sectors. OCC’s primary focus in the data center market sector is multi-tenant data centers and enterprise data centers. However, we are following the Google data center project near us. And as you’d expect, we will explore potential opportunities on that project. And of course, we’re very excited that they’re going to be setting this data center up so close to our Roanoke facility. Well as you’d expect, we don’t speak for Furukawa or Lightera. However, from OCC’s perspective, Lightera is not only a strategic collaboration partner with OCC, but they are also an important supplier to OCC. The strategic collaboration with Lightera does add certain products to OCC’s product offering. Well we’re actually currently increasing staffing at each of our facilities, with the largest increases at our fiber optic cable manufacturing facility in Roanoke and our connectivity and termination facility near Dallas. OCC has capabilities related to our targeted data center market sectors in each of our manufacturing facilities including Roanoke, Dallas as well as some in Asheville as well. Well our gross margin can vary based on manufacturing operating leverage and other efficiencies, but also product mix. And so we’re pleased that we’ve been able to show an increase in our gross profit margins over the last couple of quarters, and we’re hoping that we’ll continue to maintain higher margins at the production levels we’re currently at. I would like to thank everyone for listening to our third quarter of fiscal year 2026 conference call today. As always, we appreciate your time and your investment in Optical Cable Corporation. Additionally, I would like to note that this Friday marks the 25th anniversary of the terrible attack on the United States on September 11, 2001. We are so grateful for our country’s first responders and those that serve and support the U.S. military for protecting us, protecting our freedom and protecting our way of life. Thank you all. Have a good day.

Consolidated net sales for the third quarter of fiscal 2026 increased 22% to $24.3 million compared to $19.9 million for the same period last year. Consolidated net sales for the first nine months of fiscal 2026 were $62.9 million, an increase of 18.3% compared to net sales of $53.2 million for the same period last year. During the third quarter and first nine months of fiscal 2026, we experienced an increase in net sales in our enterprise, data center and specialty markets compared to the same periods last year, as we continued to see general market growth opportunities in our industry, both domestically and internationally, with strength specifically in our enterprise, data center and specialty markets. As Neil mentioned, our sales order backlog and forward load increased to $13.5 million at the end of the third quarter of fiscal 2026 as compared to $13.3 million as of April 30, 2026, $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 43.9% to $9.1 million in the third quarter of fiscal 2026 compared to $6.3 million in the third quarter of fiscal 2025. Gross profit margin, or gross profit as a percentage of net sales, increased to 37.4% in the third quarter of fiscal 2026, compared to 31.7% in the third quarter of the prior year. Gross profit increased 35.5% to $22.1 million in the first nine months of fiscal 2026, compared to $16.3 million in the first nine months of fiscal 2025. Gross profit margin increased to 35% in the first nine months of fiscal 2026, compared to 30.6% for the same period last year. Gross profit margin for the third quarter and first nine months of fiscal 2026 was positively impacted by higher volumes and the resulting positive impact of our strong 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. SG&A expenses increased to $7 million in the third 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 were 28.7% in the third quarter of fiscal 2026 compared to 28.8% in the third quarter of fiscal 2025. SG&A expenses increased to $18.8 million in the first nine months of fiscal year 2026 compared to $16.9 million for the same period last year. SG&A expenses as a percentage of net sales were 29.9% in the first nine months of fiscal 2026 compared to 31.8% in the first nine months of fiscal 2025. The increase in SG&A expenses during the third quarter and first nine months of fiscal 2026 compared to the same periods last year was primarily the result of increases in employee costs, contracted sales personnel-related costs and shipping costs. Included in employee costs and contracted sales personnel-related costs are compensation costs and sales incentives. OCC recorded net income of $1.9 million, or $0.21 per basic and diluted share, for the third quarter of fiscal 2026 compared to net income of $302,000, or $0.04 per basic and diluted share, for the third quarter of fiscal 2025. OCC recorded net income of $2.5 million, or $0.28 per basic and diluted share, for the first nine months of fiscal 2026 compared to a net loss of $1.5 million, or $0.19 per basic and diluted share, for the first nine months of fiscal 2025. Sure. Our working capital is strong at $19.2 million at the end of the third quarter and improved compared to $13.9 million at the end of fiscal year 2025. We do believe that our working capital and credit revolver are sufficient to support and sustain our working capital needs. I’ll take that one as well. As we have noted previously, 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. However we believe that our growth is being driven by both our existing customers and new customers and end users. I’ll take that one. We don’t generally provide guidance related to future or theoretical sales levels. However, certain sales compensation costs included in SG&A, as well as other costs such as shipping costs, generally tend to fluctuate with sales levels. However, this does not mean we will not see future benefits of SG&A operating leverage as sales continue to grow. As we believe we’ve described previously our cash is swept daily to repay the balance on our credit revolver, so our cash balance at any point in time will generally not be very high. At the current time we believe we have sufficient availability on our credit revolver and from cash generated from operations to meet our needs for the near term. Again, we don’t provide forward guidance, so I won’t comment on how we expect margins to progress throughout fiscal year 2027. I will say that we have continued to see strong sales and demand in August, but it is too early to comment on September. Sure. As previously noted, we can’t forecast specifically on how long we expect the increased demand cycle to continue. However I can say that the industry, in general, is seeing high levels of demand, and there doesn’t appear to be an indication of demand weakening in the near term. Okay. So other than what we have already disclosed, we cannot really provide any additional future customer demand outlook. As you might expect, we’re not able to specifically comment on inventory levels of our products at our customers. That said, given current market conditions, we believe it would be unusual for companies to be carrying inventory in excess of current expected demand. Various factors determine the duration of our sales order backlog and forward load which are specific to each customer. Our backlog and forward load generally represents what we consider to be noncancelable orders. However in some cases, customers may schedule out future deliveries, while others are expected to ship as soon as we can complete manufacturing. As a result, I would not say there is a typical duration. However I would say that most of our sales order backlog and forward load is expected to be shipped within two to three quarters. OCC has different levels of capacity for different product families at each of our manufacturing facilities. And so yes, we are looking into expanding capacity for certain products at certain facilities, and this includes additional hires as well as additional equipment. As you would expect, we are beginning to see some sales of some Lightera products, thus the change in the language in the 10-Q.