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OPTICAL CABLE CORP (OCC)·Q1 2025 Earnings Summary

Executive Summary

  • Net sales rose 6.0% year over year to $15.7M, with gross profit up 24.6% and gross margin expanding to 29.4%; sequentially, sales declined from Q4’s seasonal high as management flagged typical first-half seasonality .
  • International demand accelerated (non‑US sales +21.3% YoY), military markets were strong, and backlog increased ~16% to $6.6M vs. $5.7M at Oct 31, 2024, supporting near‑term visibility .
  • SG&A increased to $5.5M (34.7% of sales) on employee and sales personnel costs; net loss narrowed to $(1.1)M (−$0.14) from $(1.4)M (−$0.18) YoY .
  • Management sees limited impact from proposed tariffs and potential incremental opportunity from AI/data‑center demand; no formal numerical guidance was issued, but tone remained constructive with backlog growth and operating leverage highlighted .

What Went Well and What Went Wrong

What Went Well

  • Gross margin expanded to 29.4% from 25.0% YoY on production efficiencies and operating leverage as volumes improved .
  • Backlog/forward load increased to $6.6M (+~16% vs. Oct 31), reflecting improved demand pipelines across enterprise and specialty (including military) markets .
  • CEO emphasized momentum and operating efficiency: “We achieved growth across key metrics including net sales and gross profit… poised to capitalize on growth opportunities and drive long‑term value” .

What Went Wrong

  • Sequential sales fell from $19.5M in Q4 to $15.7M in Q1 due to typical first‑half seasonality, and SG&A dollars increased, keeping operating loss at $(0.85)M .
  • Wireless carrier market remains soft; mix variability continues to influence margins quarter to quarter .
  • No explicit numerical guidance (revenue, margins, EPS), limiting near‑term estimate anchoring; management reiterated caution around tariffs (impact seen as limited but fluid) .

Financial Results

Sequential Trend (last three quarters)

MetricQ3 2024Q4 2024Q1 2025
Net Sales ($USD Millions)$16.222 $19.485 $15.743
Gross Profit ($USD Millions)$3.920 $6.532 $4.627
Gross Margin (%)24.2% 33.5% 29.4%
SG&A ($USD Millions)$5.237 $5.850 $5.459
SG&A as % of Sales32.3% 30.0% 34.7%
Operating Income ($USD Millions)$(1.337) $0.662 $(0.852)
Net Income ($USD Millions)$(1.557) $0.373 $(1.107)
Diluted EPS ($USD)$(0.20) $0.05 $(0.14)

YoY Comparison (Q1 2025 vs. Q1 2024)

MetricQ1 2024Q1 2025
Net Sales ($USD Millions)$14.855 $15.743
Gross Profit ($USD Millions)$3.714 $4.627
Gross Margin (%)25.0% 29.4%
SG&A ($USD Millions)$5.093 $5.459
SG&A as % of Sales34.3% 34.7%
Operating Income ($USD Millions)$(1.400) $(0.852)
Net Income ($USD Millions)$(1.425) $(1.107)
Diluted EPS ($USD)$(0.18) $(0.14)

Segment/Geography Commentary (qualitative, no numerical split disclosed)

AreaQ1 2025 Commentary
EnterpriseNet sales increased YoY .
Specialty (incl. military)Net sales increased YoY; particular strength in military markets .
United States+2.3% YoY net sales .
Outside United States+21.3% YoY net sales .

KPIs and Balance Sheet Highlights

KPI / MetricValueComparison/Notes
Backlog/Forward Load ($USD Millions)$6.6Up from $5.7 at Oct 31, 2024 .
Cash ($USD Thousands)$128Down from $244 at Oct 31, 2024 .
Trade A/R ($USD Thousands)$8,206Down from $10,946 at Oct 31, 2024 .
Inventories ($USD Thousands)$19,098Up from $18,725 at Oct 31, 2024 .
Total Assets ($USD Thousands)$37,817Down from $40,358 at Oct 31, 2024 .
Total Liabilities ($USD Thousands)$18,076Down from $19,516 at Oct 31, 2024 .
Shareholders’ Equity ($USD Thousands)$19,741Down from $20,842 at Oct 31, 2024 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue / Margins / EPSFY25/Q2–Q4None disclosedNone disclosedN/A (no formal guidance issued) .
Seasonality CommentaryFY25Typical first‑half weaker than second halfReiterated typical seasonality expectationsMaintained qualitative view .
Tariffs ImpactFY25N/ANot expected to be significant currently; monitoring fluid environmentInformational update .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Demand/BacklogBacklog increased through FY24; sequential sales up each quarter amid industry weakness .Backlog/forward load up to $6.6M; YoY sales growth; strength in military markets .Improving pipelines; constructive near‑term visibility.
Operating LeverageHighlighted disproportionate profit uplift at higher volumes; Q4 gross margin 33.5% .Gross margin 29.4% aided by efficiencies as volume improved .Positive; contingent on mix/volume.
Tariffs/MacroIndustry downturn eased late FY24; monitoring macro pressures .Tariff impacts expected limited; supply chains long; monitoring fluid environment .Neutral to slightly positive.
AI/Data CentersLimited exposure (not hyperscale); evaluating opportunities .Regular business in data centers; potential to benefit from AI-driven demand .Incremental opportunity.
Wireless CarrierOngoing softness; inventory overhang in channels .Still soft; not a focus of Q1 upside .Stabilizing slowly.
GeographyBroad global footprint (~50 countries) .Non‑US sales +21.3% YoY; US +2.3% YoY .International momentum.
Balance Sheet/AccountingRevolver reclassification; no covenant impacts .Working capital shifts: AR down, inventory up; cash modest .Normalizing operations.

Management Commentary

  • “We achieved growth across key metrics including net sales and gross profit… Our focus on executing our growth strategies and operating efficiently will drive results this year, including gross profit margin expansion with increased volume.” — Neil Wilkin, CEO .
  • “Gross profit margin… was positively impacted by production efficiencies created by higher volumes and the resulting positive impact of our operating leverage… [Margins] may vary based on changes in product mix.” — Tracy Smith, CFO .
  • “We currently don't anticipate a significant impact on OCC as a result of new tariffs… it is still too early to be certain… we will continue to evaluate potential impacts.” — Neil Wilkin, CEO .
  • “OCC does have some regular business in the data center market… we believe we have opportunities to benefit and expand that business from the significant data center demand… including what’s generated by AI.” — Neil Wilkin, CEO .

Q&A Highlights

  • Tariffs and BABA: Management expects limited tariff impact and notes potential “Made in USA” advantage under BABA, but is not counting on it for growth; will monitor and adapt as needed .
  • Outlook and Seasonality: Outlook unchanged vs. annual report; typical seasonality expected with softer first half; tone remains optimistic as industry weakness eases .
  • AI/Data Center Exposure: Regular participation in data centers with opportunities to expand amid AI‑driven demand; not yet a major business line .
  • New Products/Projections: New product launches not disclosed pre‑launch; multi‑year projections prepared internally but not shared publicly .

Estimates Context

  • Attempts to pull Wall Street consensus (S&P Global) for Q1 2025 EPS/revenue and next quarter were unsuccessful due to SPGI daily request limit at time of writing; therefore, explicit “vs. estimates” beat/miss analysis is unavailable. Default source for consensus would be S&P Global; data was not accessible at this time [GetEstimates error: “Daily Request Limit Exceeded”].
  • Without formal company guidance, near‑term estimate revisions may hinge on backlog conversion, product mix, and international/military demand signals highlighted by management .

Key Takeaways for Investors

  • Gross margin expansion and backlog growth indicate operating leverage is re‑engaging as volumes improve; watch mix to sustain margins near 29–30% region in the near term .
  • Seasonality likely tempers sequential Q2 trends; monitor backlog conversion cadence and enterprise/military order flow to gauge second‑half acceleration potential .
  • International strength (+21.3% YoY) suggests diversified demand drivers; FX and export tariffs are being monitored but seen as limited impact currently .
  • Wireless carrier remains a drag; upside skew hinges on enterprise/specialty markets and potential AI/data‑center projects where OCC sees opportunity to expand participation .
  • SG&A discipline vs. growth will be key: personnel costs elevated; scaling sales without disproportionate SG&A growth is a margin sensitivity to track .
  • Balance sheet shifts (lower AR, higher inventory, modest cash) reflect operational staging; inventory build should convert with backlog in coming quarters .
  • Lacking formal guidance and unavailable consensus at time of writing, anchor on operational indicators (backlog trajectory, mix, margin) and management’s constructive tone as near‑term catalysts [GetEstimates error].

Sources: Q1 2025 8‑K press release and exhibits ; Q1 2025 press release ; Q4 2024 8‑K and exhibits ; Q3 2024 8‑K and exhibits ; Q2 2024 call and press release context .