OPTICAL CABLE Q2 FY26 earnings call OCC

OCC reported a robust second quarter with net sales increasing 26.6% year-over-year to $22.2 million, primarily driven by strength in enterprise, data center, and severe duty markets. Gross profit saw an even larger increase of 42.4% to $7.6 million, benefiting from higher volumes and manufacturing operating leverage. The company's net income turned positive at $1.1 million, or $0.12 per share, compared to a net loss in the prior year.

The sales order backlog and forward load significantly increased to $13.3 million by the end of Q2 FY26, representing a 27% sequential increase from Q1 FY26 and an 82% increase from Q4 FY25. Management expressed confidence in capitalizing on growth opportunities, particularly in the multi-tenant and enterprise data center market sectors, expecting continued positive revenue impact in the second half of fiscal year 2026.

OCC's product solutions are primarily suited for multi-tenant and enterprise data centers, rather than Tier 1 hyperscale data centers. However, the company believes that the growth in Tier 1 hyperscale data centers positively impacts demand in its targeted Tier 2 and enterprise data center markets. Sales cycles in these data center markets can be longer, but they have already positively impacted Q2 revenue and are expected to continue doing so.

While product mix, staffing, and raw material availability influence capacity, OCC believes it has room to support additional revenue growth at current manufacturing and staffing levels. The company is actively evaluating increasing manufacturing staff and adding machine capacity to anticipate future long-term growth, regularly considering investments in machinery and human resources to expand capabilities.

Despite industry-wide optical fiber shortages due to excessive product demand, OCC is successfully managing these dynamics. The company does not believe these factors will prevent continued revenue growth, including in the second half of FY26. While increasing material prices can negatively impact gross margins, OCC generally mitigates this by adjusting selling prices, as evidenced by the Q2 gross margin expansion.

OCC saw increases in sales in the military market sector in the past fiscal year, noting that military sales can increase even without active conflicts due to replenishment needs or sales to allies. The company also manufactures products suitable for certain power grid applications and expects to benefit from increased power grid capital expenditures, though it does not sell power cables.