OPTICAL CABLE CORPORATION REPORTS FOURTH QUARTER AND FISCAL 2023 FINANCIAL RESULTS
- Consolidated net sales for fiscal year 2023 increased by 4.5% to $72.2 million
- Gross profit margin increased to 30.9% in fiscal year 2023 compared to 29.7% for fiscal year 2022
- Net income for fiscal year 2023 was $2.1 million, compared to a net loss of $347,000 for fiscal year 2022
- Decrease in net sales in the enterprise and wireless carrier markets during the second half of fiscal year 2023
- Gross profit margin decreased to 22.4% in the fourth quarter of fiscal year 2023 compared to 33.0% in the fourth quarter of fiscal year 2022
Insights
Optical Cable Corporation's (OCC) fiscal year 2023 financial results show a 4.5% increase in net sales, reaching $72.2 million and a gross profit increase of 8.7% to $22.3 million. The company's gross profit margin improved from 29.7% to 30.9%, indicating better operational efficiency and cost management. Notably, the company reversed a net loss from fiscal year 2022 to a net income of $2.1 million in fiscal year 2023, which includes a one-time gain of $2.2 million from insurance proceeds.
However, the fourth quarter paints a different picture with a 13.6% decline in net sales and a 41.5% decrease in gross profit, resulting in a net loss of $1.3 million. This suggests potential challenges in sustaining profitability, possibly due to the softening of demand in enterprise and wireless carrier markets. The company's ability to navigate volatile markets and maintain growth in specialty markets will be critical going forward.
Investors should consider the company's strategic focus on diversification and operational efficiency, as well as its plans to adapt to changing market conditions. The long-term implications of OCC's market position and product mix, in addition to its substantial backlog at the beginning of fiscal 2023, will be key factors in assessing future performance.
The data communication cabling and connectivity industry in which OCC operates is subject to rapid technological changes and demand fluctuations. OCC's specialty markets growth and product diversification are positive indicators of its ability to adapt to industry trends, which is essential for maintaining a competitive edge.
OCC's emphasis on operating leverage—the ability to increase profitability by growing sales while controlling costs—has resulted in improved gross profit margins, especially noticeable in the first half of fiscal 2023. However, the second half's performance, with decreased sales and profit margins, suggests market challenges that may require strategic adjustments.
Understanding the product mix and its impact on profitability is crucial, as different products yield varying margins. The company's focus on efficiency and a trained workforce indicates a commitment to reducing production costs, which is particularly important in an industry with high competition and potential pricing pressures.
OCC's financial results highlight the importance of risk management in a volatile market. The company's insurance gain is a non-recurring event that significantly influenced the net income for fiscal year 2023. Investors should consider this when evaluating the company's underlying performance.
The fluctuating demand in the enterprise and wireless carrier markets introduces revenue risk, which OCC has partially mitigated through growth in specialty markets. However, the decreased performance in the fourth quarter indicates that risk factors such as market softening and production inefficiencies need to be closely monitored.
OCC's forward-looking statements about monitoring market trends and making business adjustments are indicative of a proactive risk management approach. However, the extent to which these adjustments can offset potential future losses will be a critical aspect for stakeholders to watch.
OCC® Achieves Increases in Net Sales, Gross Profit, Gross Profit Margin and Net Income
in Fiscal 2023 Compared to Fiscal 2022
Fiscal Year 2023 Financial Results
Consolidated net sales for fiscal year 2023 increased
The industry has experienced a softening of demand, particularly in the enterprise and carrier markets during the year, the Company noted. Despite this market volatility, OCC's net sales increased during fiscal year 2023 as a result of OCC's growth in its specialty markets and a substantial backlog/forward load at the beginning of fiscal 2023. During the first half of fiscal year 2023, the Company's net sales increased
OCC's gross profit increased
During the first half of fiscal year 2023, the Company's gross profit margin was
OCC's gross profit margin tends to be higher when it achieves higher net sales due to its operating leverage, as was the case in the first half of fiscal year 2023, relative to the prior year. In addition to the positive impact of this operating leverage, OCC's gross profit margin reflects increased production efficiency, specifically in the first half of fiscal 2023, as well as the impact of a more fully trained workforce. The Company's gross profit margin is also reflective of product mix.
SG&A expenses increased
OCC recorded net income of
Fourth Quarter 2023 Financial Results
Consolidated net sales for the fourth quarter of fiscal year 2023 decreased to
Gross profit decreased
Gross profit margin decreased to
SG&A expenses were
For the fourth quarter of fiscal year 2023, OCC recorded a net loss of
Gain on Insurance Proceeds
During fiscal year 2023, the Company received insurance proceeds in connection with water damage that occurred at the Company's
Insurance proceeds received in excess of expenses incurred through October 31, 2023, a net total of
Management's Comments
Neil Wilkin, President and Chief Executive Officer of OCC, said, "During fiscal year 2023, we demonstrated the strength of OCC's market position, the efficiencies generated by our operating leverage, and our ability to navigate volatile markets. Like other competitors in our industry, however, we experienced significant softening of demand in certain markets as fiscal year 2023 progressed—particularly in the enterprise and wireless carrier markets. We finished the fiscal year achieving net sales growth, gross profit growth, and gross profit margin improvement during fiscal year 2023, as OCC benefited from our strong market position, our market and product diversification, our focus on growth initiatives, and our substantial backlog/forward load at the beginning of fiscal year 2023."
"Looking ahead to fiscal 2024, we continue to monitor changing market and macroeconomic trends, and believe we are prepared to make appropriate business adjustments as necessary. We are as focused as ever on driving growth, operating efficiently, and capitalizing on demand as we execute for our customers and end-users and generate value for our shareholders," Mr. Wilkin said.
Conference Call Information
As previously announced, OCC will host a conference call today, December 20, 2023, at 11:00 a.m. Eastern Time. Individuals wishing to participate in the conference call should call (800) 445-7795 in the
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
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 http://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 | Year Ended | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Net sales | $ 17,329 | $ 20,056 | $ 72,174 | $ 69,079 | |||
Cost of goods sold | 13,455 | 13,433 | 49,880 | 48,568 | |||
Gross profit | 3,874 | 6,623 | 22,294 | 20,511 | |||
SG&A expenses | 5,145 | 5,189 | 21,221 | 19,960 | |||
Royalty expense, net | 6 | 6 | 26 | 27 | |||
Amortization of intangible assets | 14 | 14 | 54 | 51 | |||
Income (loss) from operations | (1,291) | 1,414 | 993 | 473 | |||
Interest expense, net | (298) | (230) | (1,153) | (768) | |||
Gain on insurance proceeds received for | |||||||
damage to property and equipment | 247 | — | 2,199 | — | |||
Other, net | 114 | 12 | 173 | (27) | |||
Other income (expense), net | 63 | (218) | 1,219 | (795) | |||
Income (loss) before income taxes | (1,228) | 1,196 | 2,212 | (322) | |||
Income tax expense | 39 | 7 | 146 | 25 | |||
Net income (loss) | $ (1,267) | $ 1,189 | $ 2,066 | $ (347) | |||
Net income (loss) per share: | |||||||
Basic and diluted | $ (0.17) | $ 0.15 | $ 0.26 | $ (0.05) | |||
Weighted average shares outstanding: | |||||||
Basic and diluted | 7,603 | 7,893 | 7,880 | 7,523 | |||
OPTICAL CABLE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET DATA (thousands) (unaudited) | |||
October 31, | October 31, | ||
Cash | $ 1,469 | $ 216 | |
Trade accounts receivable, net | 8,728 | 10,964 | |
Inventories | 23,766 | 19,439 | |
Other current assets | 1,075 | 577 | |
Total current assets | 35,038 | 31,196 | |
Non-current assets | 8,841 | 9,362 | |
Total assets | $ 43,879 | $ 40,558 | |
Current liabilities | $ 7,768 | $ 7,483 | |
Non-current liabilities | 11,389 | 10,915 | |
Total liabilities | 19,157 | 18,398 | |
Total shareholders' equity | 24,722 | 22,160 | |
Total liabilities and shareholders' equity | $ 43,879 | $ 40,558 | |
AT THE COMPANY: | |
Neil Wilkin | Tracy Smith |
Chairman, President & CEO | Senior Vice President & CFO |
(540) 265-0690 | (540) 265-0690 |
AT JOELE FRANK, WILKINSON BRIMMER KATCHER: | |
Aaron Palash | Spencer |
(212) 355-4449 ext. 8603 | (212) 355-4449 ext. 8928 |
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SOURCE Optical Cable Corporation
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