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OPTICAL CABLE CORPORATION REPORTS FIRST QUARTER OF FISCAL YEAR 2024 FINANCIAL RESULTS

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Optical Cable Corporation (OCC) announced financial results for Q1 2024, with net sales at $14.9 million, a decrease of 18.8% from the previous year. Gross profit was $3.7 million, down 43.1%. SG&A expenses were $5.1 million. OCC recorded a net loss of $1.4 million compared to net income of $810,000 in Q1 2023. Management remains optimistic about market opportunities in fiscal year 2024.
Positive
  • Consolidated net sales for OCC in Q1 2024 were $14.9 million, a decrease of 18.8% from the previous year.
  • Gross profit was $3.7 million in Q1 2024, down 43.1% from the same period in 2023.
  • SG&A expenses were $5.1 million in Q1 2024, compared to $5.5 million in Q1 2023.
  • OCC recorded a net loss of $1.4 million in Q1 2024, compared to net income of $810,000 in Q1 2023.
  • Management remains positive about market opportunities in fiscal year 2024.
Negative
  • Consolidated net sales decreased by 18.8% in Q1 2024.
  • Gross profit saw a significant decline of 43.1% in Q1 2024 compared to the same period in 2023.
  • OCC recorded a net loss of $1.4 million in Q1 2024, a decrease from net income of $810,000 in Q1 2023.

Insights

An 18.8% decrease in consolidated net sales for Optical Cable Corporation signals a contraction in the company's enterprise and wireless carrier markets. This contraction is attributed to macroeconomic pressures, which is a concern for stakeholders as it suggests a broader economic trend that could persist. The significant decrease in gross profit by 43.1% and the drop in gross profit margin from 35.7% to 25.0% indicate escalating costs or pricing pressures that could squeeze margins further if not addressed. The decline in gross profit margin is particularly noteworthy as it reflects the impact of operating leverage, where fixed costs are spread over a smaller revenue base, leading to reduced profitability.

The reduction in SG&A expenses, while positive, may not be sustainable if it results from cuts that could impair the company's ability to generate future sales. The reported net loss of $1.4 million compared to a net income in the previous year is a red flag for investors, as it reflects a significant downturn in financial performance. This could impact the company's stock price and investor sentiment, leading to a reassessment of the company's valuation and future prospects.

Despite the current downturn, OCC's management expresses confidence in market position and potential opportunities. This optimism must be weighed against actual performance and market data. The enterprise and wireless carrier markets are noted as showing signs of softness, which could indicate either a temporary dip or a longer-term shift in demand. This requires close monitoring of industry trends and competitor performance to validate management's positive outlook.

Furthermore, the decision not to implement personnel reductions, unlike competitors, suggests a strategic choice to maintain operational capacity in anticipation of market recovery. This could either be a strategic advantage if the market rebounds quickly, allowing OCC to capitalize on opportunities with a ready workforce, or a financial strain if the recovery is slower than expected.

The financial results of OCC reflect broader economic challenges that are affecting the industry. Macroeconomic pressures such as inflation, interest rate hikes, or supply chain disruptions could be contributing factors to the decreased demand in OCC's target markets. The reference to a higher-than-typical sales order backlog in the previous fiscal year suggests that the company may have been benefiting from pent-up demand or market conditions that have since normalized.

The role of operating leverage in OCC's profitability is a critical point for understanding the company's cost structure. As sales decrease, the inability to reduce fixed costs proportionately leads to a decline in profitability. This is an important consideration for stakeholders, as it can indicate the company's vulnerability to fluctuations in sales volume.

ROANOKE, Va., March 13, 2024 /PRNewswire/ -- Optical Cable Corporation (Nasdaq GM: OCC) ("OCC®" or the "Company") today announced financial results for its first quarter ended January 31, 2024.

First Quarter 2024 Financial Results

Consolidated net sales for the first quarter of fiscal year 2024 were $14.9 million, a decrease of 18.8% compared to net sales of $18.3 million for the same period in the prior year, with sales decreases experienced primarily in the Company's enterprise and wireless carrier markets. The Company believes this is consistent with current macroeconomic pressures and challenges experienced by the industry generally, and in certain of the Company's target markets.

Additionally, the Company's net sales during the comparable first quarter of fiscal year 2023 positively benefited from a higher-than-typical sales order backlog/forward load of more than $12.0 million at the beginning of fiscal year 2023, while sales order backlog/forward load at the beginning of fiscal year 2024 had returned to more normal levels. At the end of the first quarter of fiscal year 2024, sales order backlog/forward load remained at a more typical level of approximately $5.0 million.

Gross profit was $3.7 million in the first quarter of fiscal year 2024, a decrease of 43.1% compared to gross profit of $6.5 million for the same period in fiscal year 2023. Gross profit margin, or gross profit as a percentage of net sales, was 25.0% in the first quarter of fiscal year 2024 compared to 35.7% in the first quarter of fiscal year 2023.

Gross profit margin for the first quarter of fiscal year 2024 was impacted by lower volumes, as fixed charges were spread over lower sales, as well as reduced plant efficiency, as fewer sales and lower backlog impacted the flow of products through the Company's manufacturing facilities—the impact of operating leverage. Additionally, the Company's 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 were $5.1 million in the first quarter of fiscal year 2024, compared to $5.5 million for the first quarter of fiscal year 2023. SG&A expenses as a percentage of net sales were 34.3% in the first quarter of fiscal 2024, compared to 29.8% in the prior year period. The decrease in SG&A expenses during the first quarter of fiscal year 2024 compared to the same period last year was primarily the result of decreases in employee and contracted sales personnel-related costs and shipping costs.

For the first quarter of fiscal year 2024, OCC recorded a net loss of $1.4 million, or $0.18 per basic and diluted share, compared to net income of $810,000, or $0.10 per basic and diluted share, for the first quarter of fiscal year 2023.

Management's Comments

Neil Wilkin, President and Chief Executive Officer of OCC, said, "OCC has maintained a strong market position in our targeted markets during the first quarter even as the industry continued to be impacted by various macroeconomic pressures. While certain of our markets continue to show signs of softness, including our enterprise and wireless carrier markets, we believe that there are positive indicators in certain of our other markets and that we are positively positioned relative to our competitors. Overall, we expect market opportunities to improve during fiscal year 2024 relative to the beginning of the year."

"We remain focused on executing our growth strategies and we stand ready to make appropriate adjustments to ensure we capture opportunities in the current market environment. That said, we have not implemented personnel reductions like others in our industry have done. Our planned restraint in this regard is consistent with our view of expected opportunities, as well as considering the time it takes to train new personnel in certain areas of our production operations," Mr. Wilkin said.

"Looking ahead, we are confident that by delivering for our customers and end users and through our continued efforts to work efficiently, we will generate value for our shareholders," Mr. Wilkin concluded.

Conference Call Information

As previously announced, OCC will host a conference call today, March 13, 2024, at 11:00 a.m. Eastern Time. Individuals wishing to participate in the conference call should call (800) 343-4136 in the U.S. or (203) 518-9814 internationally, Conference ID: OCCQ124. For interested individuals unable to join the call, a replay will be available through Wednesday, March 20, 2024 by dialing (888) 562-3376 or (402) 220-1185. The call will also be broadcast live over the internet and can be accessed by visiting the investor relations section of the Company's website at www.occfiber.com.

Company Information

Optical Cable Corporation ("OCC®") is a leading manufacturer of a broad range of fiber optic and copper data communication cabling and connectivity solutions primarily for the enterprise market and various harsh environment and specialty markets (collectively, the non-carrier markets) and also the wireless carrier market, offering integrated suites of high-quality products which operate as a system solution or seamlessly integrate with other components.

OCC® is internationally recognized for pioneering innovative fiber optic and copper communications technologies, including fiber optic cable designs for the most demanding environments and applications, copper connectivity designs to meet the highest data communication industry standards, as well as a broad product offering built on the evolution of these fundamental technologies.

OCC uses its expertise to deliver cabling and connectivity products and integrated solutions that are best suited to the performance requirements of each end-user's application. And OCC's solutions offerings cover a broad range of applications—from commercial, enterprise network, datacenter, residential and campus installations to customized products for specialty applications and harsh environments, including military, industrial, mining, petrochemical and broadcast applications, as well as for the wireless carrier market.

Founded in 1983, OCC is headquartered in Roanoke, Virginia with offices, manufacturing and warehouse facilities located in Roanoke, Virginia, near Asheville, North Carolina and near Dallas, Texas. OCC's facilities are ISO 9001:2015 registered and its Roanoke and Dallas facilities are MIL-STD-790G certified.

Optical Cable Corporation™, OCC®, Procyon®, Superior Modular Products™, SMP Data Communications™, Applied Optical Systems™, and associated logos are trademarks of Optical Cable Corporation.

Further information about OCC® is available at www.occfiber.com.

FORWARD-LOOKING INFORMATION

This news release by Optical Cable Corporation and its subsidiaries (collectively, the "Company" or "OCC") may contain certain forward-looking information within the meaning of the federal securities laws. The forward-looking information may include, among other information, (i) statements concerning our outlook for the future, (ii) statements of belief, anticipation or expectation, (iii) future plans, strategies or anticipated events, and (iv) similar information and statements concerning matters that are not historical facts. Such forward-looking information is subject to known and unknown variables, uncertainties, contingencies and risks that may cause actual events or results to differ materially from our expectations, and such known and unknown variables, uncertainties, contingencies and risks may also adversely affect Optical Cable Corporation and its subsidiaries, the Company's future results of operations and future financial condition, and/or the future equity value of the Company. A partial list of such variables, uncertainties, contingencies and risks that could cause or contribute to such differences from our expectations or that could otherwise adversely affect Optical Cable Corporation and its subsidiaries is set forth in Optical Cable Corporation's quarterly and annual reports filed with the Securities and Exchange Commission ("SEC") under the heading "Forward-Looking Information." OCC's quarterly and annual reports are available to the public on the SEC's website at www.sec.gov. In providing forward-looking information, the Company expressly disclaims any obligation to update this information, whether as a result of new information, future events or otherwise except as required by applicable laws and regulations.

(Financial Tables Follow)

 

OPTICAL CABLE CORPORATION

Condensed CONSOLIDATED Statements OF OPERATIONS

(thousands, except per share data)

(unaudited)

 


Three Months Ended
 January 31, 




2024


2023





Net sales

$    14,855


$    18,284

Cost of goods sold

11,141


11,763





      Gross profit

3,714


6,521





SG&A expenses

5,093


5,455

Royalty expense, net

7


7

Amortization of intangible assets

14


13





      Income (loss) from operations

(1,400)


1,046





Interest expense, net

(298)


(271)

Other, net

280


67

      Other income (expense), net

(18)


(204)





      Income (loss) before income taxes

(1,418)


842





Income tax expense

7


32





      Net income (loss)

$   (1,425)


$         810





Net income (loss) per share:      




     Basic and diluted

$    (0.18)


$        0.10





Weighted average shares outstanding:




     Basic and diluted

7,751


7,893

 

OPTICAL CABLE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET DATA

(thousands)

(unaudited)

 




January 31, 


October 31,


2024


2023

Cash

$              221


$           1,469

Trade accounts receivable, net

7,398


8,728

Inventories

23,023


23,766

Other current assets

1,198


1,075

     Total current assets

31,840


35,038

Non-current assets

8,654


8,841

     Total assets

$         40,494


$         43,879





Current liabilities

$           6,730


$           7,768

Non-current liabilities

10,416


11,389

     Total liabilities

17,146


19,157

     Total shareholders' equity

23,348


24,722

     Total liabilities and shareholders' equity  

$         40,494


$         43,879

 

AT THE COMPANY: 



Neil Wilkin

Tracy Smith

Chairman, President & CEO 

Senior Vice President & CFO

(540) 265-0690 

540) 265-0690

investorrelations@occfiber.com 

investorrelations@occfiber.com



AT JOELE FRANK, WILKINSON BRIMMER KATCHER:



Aaron Palash

 Spencer Hoffman

(212) 355-4449 ext. 8603

212) 355-4449 ext. 8928

occ-jfwbk@joelefrank.com

occ-jfwbk@joelefrank.com 

 

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SOURCE Optical Cable Corporation

FAQ

What were OCC's net sales in Q1 2024?

OCC's net sales in Q1 2024 were $14.9 million, a decrease of 18.8% from the previous year.

What was OCC's gross profit in Q1 2024?

OCC's gross profit in Q1 2024 was $3.7 million, a decrease of 43.1% from the same period in 2023.

What were OCC's SG&A expenses in Q1 2024?

OCC's SG&A expenses in Q1 2024 were $5.1 million, compared to $5.5 million in Q1 2023.

Did OCC record a net loss or net income in Q1 2024?

OCC recorded a net loss of $1.4 million in Q1 2024, compared to net income of $810,000 in Q1 2023.

What is OCC's outlook on market opportunities for fiscal year 2024?

Management remains optimistic about market opportunities in fiscal year 2024.

Optical Cable Corp.

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