Optical Cable Q2 Earnings Call Highlights

Key Points

• Optical Cable posted a strong fiscal second quarter, with net sales rising 26.6% year over year to $22.2 million and gross profit increasing 42.4% as demand improved in enterprise, data center and severe-duty markets.
• The company swung to profitability, reporting net income of $1.1 million for the quarter versus a loss a year ago, helped by higher volumes, improved manufacturing leverage and lower SG&A as a percentage of sales.
• Management said backlog and forward load climbed to $13.3 million, signaling continued demand, especially in multi-tenant and enterprise data centers, while noting the company still has room to grow despite industry fiber shortages.

Optical Cable NASDAQ: OCC reported sharply higher fiscal second-quarter sales and profit, with management citing strength in enterprise, data center and severe-duty markets, as well as improved manufacturing leverage.

On the company’s fiscal 2026 second-quarter earnings call, President and Chief Executive Officer Neil Wilkin said OCC “continued to build on” its growth and momentum after a solid start to the year. He said net sales rose 26.6% year over year, while gross profit increased 42.4%.

“Our net sales increase was largely driven by strength in OCC’s enterprise, data center, and severe duty markets,” Wilkin said. He added that manufacturing operating leverage contributed to the larger increase in gross profit.

Second-quarter revenue rises 26.6%

Executive Vice President and Chief Financial Officer Tracy Smith said consolidated net sales for the second quarter of fiscal 2026 increased to $22.2 million, compared with $17.5 million in the same period last year. Sales also rose 35.2% sequentially from $16.4 million in the fiscal first quarter.

For the first half of fiscal 2026, consolidated net sales were $38.6 million, up 16.1% from $33.3 million in the prior-year period.

Smith said OCC saw higher sales in both enterprise and specialty markets during the second quarter and first half compared with the same periods last year. She pointed to “continued general market improvements, both domestically and internationally,” with particular strength in enterprise, data center and severe-duty markets.

Gross profit increased to $7.6 million in the second quarter from $5.3 million a year earlier, and rose 41.4% from $5.4 million in the fiscal first quarter. Gross margin improved to 34.2% from 30.4% in the prior-year quarter.

For the first half, gross profit rose to $13 million from $10 million, while gross margin improved to 33.5% from 29.9%.

Smith said the margin improvement reflected higher volumes and the positive effect of manufacturing operating leverage. She cautioned that gross margin percentages are “heavily dependent upon product mix on a quarterly basis” and can vary with changes in that mix.

OCC swings to quarterly profit

OCC reported net income of $1.1 million, or $0.12 per share, for the second quarter of fiscal 2026. That compared with a net loss of $698,000, or $0.09 per share, in the second quarter of fiscal 2025.

For the first half of fiscal 2026, the company recorded net income of $657,000, or $0.07 per share, compared with a net loss of $1.8 million, or $0.23 per share, in the prior-year period.

SG&A expenses rose 9.2% in the second quarter to $6.3 million from $5.7 million a year earlier. As a percentage of net sales, SG&A declined to 28.2% from 32.7%, which Smith described as the result of SG&A operating leverage.

For the first half, SG&A expenses increased 5.6% to $11.8 million from $11.2 million, while SG&A as a percentage of sales decreased to 30.6% from 33.6%. Smith said the increase in expenses was primarily due to higher shipping costs and employee and contracted sales personnel-related costs, including compensation and sales incentives.

Backlog and forward load increase

Management highlighted a significant increase in sales order backlog and forward load. Wilkin said the figure reached $13.3 million at the end of the second quarter, compared with $10.4 million as of Jan. 31, 2026, and $7.3 million as of Oct. 31, 2025.

That represented an increase of more than 27% from the end of the fiscal first quarter and more than 82% from the end of fiscal 2025.

In response to a shareholder question about data center demand moving into the third quarter, Smith said backlog and forward load “continues to be strong” at the end of May.

Asked why bookings have increased backlog rather than being converted into sales, Smith said OCC is seeing increases in both net sales and backlog and forward load, which she said is consistent with periods of increased product demand.

Data center demand remains a key focus

Wilkin said OCC continues to see growth opportunities across several targeted markets, including multi-tenant data centers and enterprise data centers. He said the company believes growth in Tier 1 hyperscale data centers is positively affecting opportunities in those markets, which are areas of particular focus for OCC.

“So far, we’ve been seeing significant opportunities in both the multi-tenant data center and enterprise data centers,” Wilkin said.

He noted that the sales cycle for certain data center projects tends to be longer than in some of OCC’s other target markets. Sales into those markets positively affected second-quarter revenue, and Wilkin said management believes revenue will continue to be positively affected during the second half of fiscal 2026.

Asked whether OCC could benefit directly from hyperscaler growth tied to inference build-outs, Wilkin said the company’s product offerings for the data center market are best suited for multi-tenant and enterprise data centers. However, he reiterated that growth in Tier 1 and hyperscale data centers can support those adjacent markets.

Supply, pricing and capacity

Management said the broader industry is experiencing optical fiber shortages due to high demand for data centers and certain other applications, resulting in longer lead times. Wilkin said OCC is “successfully managing these industry dynamics” and does not believe they will prevent continued revenue growth in the second half of fiscal 2026.

Smith said rising fiber and copper prices can negatively affect gross margins, but the company generally can prospectively mitigate higher raw material costs by adjusting selling prices. She also pointed to OCC’s 34.2% second-quarter gross margin as evidence of margin improvement despite those dynamics.

Asked about full-capacity revenue, Smith said product mix, staffing, raw material availability and other factors affect capacity. She said OCC is not providing a revenue level for full capacity, but added that the company believes it still has room to support additional revenue growth at current manufacturing and staffing levels.

Smith said OCC is evaluating increases to manufacturing staff and certain machine capacity in anticipation of future long-term growth. Wilkin later said the company is not currently experiencing challenges ramping capacity and does not anticipate such issues at this time.

On other end markets, Wilkin said the impact of increased U.S. military spending is difficult to predict because announced spending increases may or may not include products OCC sells. He said the company saw increases in military market sales during the past fiscal year and also sells to allies. Wilkin also said OCC makes products suitable for certain power grid applications and would expect to benefit from increased grid capital expenditures, while clarifying that the company does not sell power cables for the grid.

Wilkin said OCC remains confident in the company’s ability to capitalize on its momentum and growth opportunities while maintaining disciplined execution of its strategy.

About Optical Cable NASDAQ: OCC

Optical Cable Corporation NASDAQ: OCC is a publicly traded designer and manufacturer of optical fiber and copper communications cable solutions. Headquartered in Roanoke, Virginia, the company develops a broad range of standard and custom cable assemblies, connectors, hardware and accessories. Its product portfolio addresses data transmission requirements in demanding environments, including long-haul telecommunications, industrial automation, defense systems and submersible applications.

The company's offerings are organized across multiple product lines, encompassing outside-plant fiber optic cable for aerial and underground installations, indoor/outdoor copper connectivity and specialty engineered cable assemblies.

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