Optical Cable (US:OCC)2025-09-11 21:15Financial Data and Key Metrics Changes - Net sales increased by 22.8% in Q3 2025 to $19.9 million compared to $16.2 million in Q3 2024, and increased by 12.8% to $53.2 million for the first nine months of fiscal 2025 compared to $47.2 million in the same period last year [6][9] - Gross profit rose by 61.2% to $6.3 million in Q3 2025 from $3.9 million in Q3 2024, with gross profit margin increasing to 31.7% from 24.2% [10][11] - The company recorded net income of $302,000 or $0.04 per share in Q3 2025, compared to a net loss of $1.6 million or $0.20 per share in Q3 2024 [12][13] Business Line Data and Key Metrics Changes - Sales increases were noted in both enterprise and specialty markets, contributing to the overall growth in net sales [9][40] - SG&A expenses increased to $5.7 million in Q3 2025, but as a percentage of net sales, it decreased to 28.8% from 32.3% in the prior year [11][12] Market Data and Key Metrics Changes - The sales order backlog at the end of Q3 2025 was $7.1 million, slightly down from $7.2 million in Q2 2025, but higher than previous quarters [10][21] - The company is experiencing broad growth across both U.S. and international markets [40] Company Strategy and Development Direction - The company entered a strategic collaboration with Laterra to expand product offerings in the enterprise and data center sectors, with Laterra holding a 7.24% stake in OCC [7][28] - The focus remains on disciplined execution and capitalizing on growth opportunities to drive shareholder value [7] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in the industry and the strength in targeted markets, despite not being directly involved in hyperscale data centers [42][44] - The company is not currently planning significant investments in additional capacity but is filling open positions to meet anticipated demand [25][56] Other Important Information - The gross profit margin is heavily influenced by product mix and operating leverage, which has improved due to higher sales volumes [11][52] - The company is in the process of improving its website to better showcase its data center products [61] Q&A Session Summary Question: Can you comment on what you're seeing in your traditional markets? - Management noted strength in targeted markets, benefiting from a strong market position reflected in top-line results [15] Question: Can you comment on the impact of AI? - AI is positively impacting the industry, particularly in the growth of hyperscale data centers, although OCC's products are more suited for tier two and tier three data centers [16][18] Question: Does the decline in backlog indicate weaker demand? - Management described the decrease in backlog as minimal and not indicative of weaker demand, attributing it to timing of shipments [20][22] Question: Why was the gross margin lower despite higher sales? - The gross profit margin varies based on product mix, which impacted the comparison between quarters [23] Question: Will you need to increase capacity? - The company believes it has sufficient capacity to meet anticipated demand without significant new investments [25] Question: Is the current OpEx level sustainable? - Management indicated that operating expenses should be sustainable at current and higher sales levels due to operating leverage [26] Question: How will Laterra add value to OCC? - The collaboration is expected to expand product offerings and solutions, benefiting both companies [29] Question: What is the typical ticket size for tier two or tier three data centers? - Management did not provide specific forecasts but noted that opportunities vary widely [33] Question: Will Laterra invest in sales and marketing for the partnership? - Laterra has begun marketing efforts, including participation in trade shows, but specific strategies were not disclosed [30][31] Question: How is the collaboration with Laterra expected to drive production volume? - The collaboration is anticipated to create more production volume, leveraging OCC's existing capacity [55]