OPTICAL CABLE CORP (OCC)·Q3 2025 Earnings Summary

Executive Summary

• Net sales rose 22.8% year-over-year to $19.9M and 13.5% sequentially, with broad strength across enterprise and specialty markets and improving military and severe duty demand .
• Gross profit increased 61.2% YoY to $6.3M; gross margin expanded to 31.7% (from 24.2% YoY; 30.4% in Q2), driven by operating leverage and production efficiencies; SG&A grew 9.5% to $5.7M as sales costs and shipping rose .
• OCC returned to profitability: net income was $0.30M ($0.04 EPS) vs. $(1.56)M ($(0.20) EPS) in Q3’24; backlog/forward load was $7.1M (near Q2’s $7.2M, above Q1’s $6.6M and FY24 year-end’s $5.7M), which management characterized as leveling due to timing, not demand .
• Strategic collaboration with Lightera (7.24% equity stake) expands data center and enterprise solutions; management frames it as a growth accelerator while continuing to prioritize Tier 2/Tier 3 data center opportunities over hyperscale .
• No formal guidance; management reiterated operating leverage, sustainable OpEx, adequate capacity, and typical seasonality (second half stronger), supporting a constructive near-term narrative .

What Went Well and What Went Wrong

What Went Well

• Significant top-line and margin expansion: net sales +22.8% YoY (to $19.9M) and gross profit +61.2% YoY (to $6.3M); gross margin reached 31.7% as volume improved manufacturing efficiencies and operating leverage .
• Return to profitability: Q3 net income of $0.30M and $0.04 EPS vs. prior-year loss, supported by improved gross margin and fixed-cost leverage; SG&A as % of sales fell YoY to 28.8% .
• Positive market backdrop and broad-based demand: growth in both enterprise and specialty markets, with strengthening in military/severe duty; international sales +26.2% YoY and US +22.0% YoY .
• Management quote: “We… continued to see the benefits of OCC’s significant operating leverage… as our 22.8% year-over-year increase in net sales drove gross profit growth of 61.2%” .

What Went Wrong

• SG&A dollars increased 9.5% YoY to $5.7M due to sales-related personnel costs and shipping; while leverage improved, absolute OpEx rose with growth .
• Backlog/forward load dipped modestly to $7.1M from $7.2M in Q2; management views it as timing rather than demand deterioration, but it removes a small sequential tailwind .
• No explicit guidance or hyperscale positioning: management remains focused on Tier 2/Tier 3 data centers and declined to provide forecasts, which can limit near-term estimate anchoring and hyperscale-driven upside narratives .

Financial Results

Regional Net Sales Growth (YoY):

Backlog/Forward Load:

Balance Sheet Highlights (selected):

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “OCC delivered significant net sales growth and gross profit expansion… capturing additional opportunities as demand for our products increased in many of our markets.”
• “Gross profit margin… was positively impacted by production efficiencies created by higher volumes and the resulting positive impact of our operating leverage.”
• On Lightera: “We are confident that our strategic collaboration… will significantly expand our opportunities in the data center and enterprise sectors, will accelerate OCC sales growth, and will create significant value for OCC and its shareholders.”
• On capacity: “We believe we have the capacity to capture the exciting growth opportunities… we don’t have any needs or plans to significantly invest in extra capacity at this time.”

Q&A Highlights

• Backlog: The ~$0.1M sequential dip to $7.1M is a “leveling off” due to shipment/order timing, not weaker demand; backlog remains higher than at FY24-end and Q1’25 .
• Margins: Variability driven by product mix plus operating leverage; higher volumes spread fixed manufacturing and public-company costs, boosting gross margin .
• Capacity/Utilization: Sufficient equipment capacity; personnel hiring and overtime flex; calculated machinery capacity around 50% due to diverse product flows and shift structure .
• OpEx: Operating expenses viewed as sustainable at current/elevated sales levels .
• Data Center strategy: Focus remains Tier 2/Tier 3; collaboration with Lightera expected to expand offerings; hyperscale opportunity acknowledged but not core today .

Estimates Context

• S&P Global consensus estimates for EPS and revenue were unavailable for benchmarking for Q3 2025; the S&P dataset returned no active coverage metrics, preventing a beat/miss determination. Values retrieved from S&P Global.*
• The quarter’s “actual” revenue and EBITDA are reflected in reported results; absent consensus, investors should focus on sequential/YoY trajectories and margin sustainability . Values retrieved from S&P Global.*

Key Takeaways for Investors

• Strong execution and operating leverage delivered margin expansion and a return to profitability; monitor product mix and SG&A discipline as sales scale .
• Backlog remains elevated vs. earlier periods despite a small sequential dip; supports near-term visibility amid typical second-half seasonality .
• The Lightera collaboration is a meaningful strategic catalyst for Tier 2/Tier 3 data center and enterprise solutions; watch for commercialization signals and cross-selling traction .
• Gross margin sensitivity to mix implies quarter-to-quarter volatility; structural leverage should aid margins as volumes rise .
• With no formal guidance and limited Street coverage, trading will likely hinge on operational prints, backlog trajectory, and narrative around data center/military demand .
• Near term: constructive into Q4 on seasonality and backlog; Medium term: collaboration-driven portfolio expansion and broad demand backdrop can sustain growth if execution persists .

Citations: Q3’25 press release and financial tables ; 8-K Item 2.02 and exhibits ; Q3’25 call transcript ; Q2’25 press release and call ; Q1’25 press release ; Strategic collaboration press release .

Disclaimer: Values retrieved from S&P Global.