Optical Cable Corporation (OCC) reported a notable improvement in its fourth-quarter performance for 2024, with net sales increasing by 12.4% year-over-year to $19.5 million. Despite a fiscal year net loss of $4.2 million, the company's stock experienced a significant rise, closing at $2.1, up 40.12% from the previous close. The market reacted positively to the company's improved gross profit margin and consistent sales growth.
Key Takeaways
- Q4 2024 net sales increased by 12.4% year-over-year.
- Gross profit margin improved to 33.5% in Q4.
- Stock price surged by 40.12% post-earnings report.
- Fiscal year net sales decreased by 7.6%.
- Net loss for fiscal year was $4.2 million.
Company Performance
Optical Cable Corporation demonstrated a robust performance in the fourth quarter of 2024, with net sales rising to $19.5 million, marking a 12.4% increase from the same period last year. This growth was supported by the company's strategic focus on maintaining production capacity and leveraging its broad product portfolio across approximately 50 countries. Despite these gains, the company faced a 7.6% decline in fiscal year net sales, reflecting ongoing macroeconomic pressures in the industry.
Financial Highlights
- Revenue: $66.7 million for fiscal year 2024 (7.6% decrease from 2023)
- Q4 2024 Net Sales: $19.5 million (12.4% increase YoY)
- Fiscal Year Gross Profit: $18.2 million (18.3% decrease)
- Q4 2024 Gross Profit Margin: 33.5% (up from 22.4% in Q4 2023)
- Fiscal Year Net Loss: $4.2 million ($0.54 per share)
- Q4 2024 Net Income: $373,000 ($0.05 per share)
Market Reaction
Following the earnings release, Optical Cable's stock experienced a notable increase, closing at $2.1, which represents a 40.12% rise from the previous close. This surge suggests a positive investor sentiment, likely driven by the company's strong Q4 performance and improved profit margins, despite the overall fiscal year losses.
Company Outlook
Looking ahead, Optical Cable Corporation anticipates opportunities for growth in 2025, with potential market strength and product offering expansion. The company remains committed to enhancing operational efficiency and capitalizing on emerging market recovery signs.
Executive Commentary
"As we ended fiscal 2024 and look forward to 2025 beyond, the sun is starting to peak through," stated Neil Wilkin, CEO. This optimistic outlook is echoed by CFO Tracy Smith, who noted, "We believe opportunities to improve net sales will continue during fiscal year 2025."
Q&A
During the earnings call, investors inquired about potential seasonality in 2025. The company responded by acknowledging that the first half of the fiscal year typically experiences slower sales, but no live analyst questions were addressed.
Risks and Challenges
- Continued macroeconomic pressures could impact market recovery.
- Potential supply chain disruptions may affect production.
- Market saturation in key geographic regions could limit growth.
- Competition from larger companies remains a significant challenge.
- Dependence on wireless carrier market, which is experiencing weakness.
Full transcript - Optical Cable Corporation (OCC) Q4 2024:
Conference Operator: Mr. Hoffman, you may begin your conference.
Spencer, Conference Moderator, Optical Cable Corporation: Thank you, and good morning, and thank you for joining us for Optical Cable Corporation's 4th quarter and fiscal year 2024 conference call. By this time, everyone should have a copy of the earnings press release issued earlier today. You can also visit www.occfiber.com for a copy. On the call with us today are Neil Wilkam, President and Chief Executive Officer of OCC and Tracy Smith, Senior Vice President and Chief Financial Officer. Before we begin, I'd like to remind everyone that this call may contain forward looking statements that involve risks and uncertainties.
The actual future results of Optical Cable Corporation may differ materially through a number of factors and risks, including, but not limited to, those factors referenced in the forward looking statements section of this morning's press release. These cautionary statements apply to the contents of the Internet webcast on www.occfiber.com as well as today's call. With that, I'll turn the call over to Neil Wilkin. Neil, please begin.
Neil Wilkin, President and Chief Executive Officer, Optical Cable Corporation: Thank you, Spencer, and good morning, everyone. I will begin the call today with a few opening remarks. Tracy will then review the Q4 and full year results for the 3 month 12 month periods ended October 31, 2024 in some additional detail. After Tracy's remarks, we will answer as many of your questions as we can. As is our normal practice, we will only take questions from analysts and institutional investors during the Q and A session.
However, as always, we also offer other shareholders the opportunity to submit questions in advance of our earnings call. Instructions regarding such submissions are included in our press release announcing the date and time of our call. Entering 2024, OCC's net sales were challenged by industry wide macroeconomic pressures, which began towards the end of fiscal year 2023 and became more persistent during the year. These pressures impacted many of our targeted markets, particularly our enterprise markets and certain of our specialty markets, including the wireless carrier market. I'm pleased to share that as we ended fiscal 2024 and look forward to 2025 beyond, the sun is starting to peak through.
While OCC's net sales for fiscal year 2024 decreased 7.6 percent to $66,700,000 compared to 2023, weakness across our industry has begun to subside. Thanks to strong execution of our growth strategies and our deeply entrenched market position, OCC has experienced a relatively low decline in revenues during this period compared to some of our peers. At the same time, we believe we have also been able to position OCC to capitalize on the opportunities ahead and we are ready to hit the ground running in the new year. For the Q4 of fiscal year 2024, OCC achieved growth across all key measures: net sales, gross profit, gross profit margin, income from operations and earnings per share all increased when compared to the Q4 of fiscal year 2023. We increased net sales 12.4% during the Q4 of fiscal year 2024 compared to the same period in fiscal 2023 and sequentially increased net sales 20.1% compared to the Q3 of fiscal 2024, making this our 3rd consecutive quarter of sequential net sales growth for the year.
OCC's increase in net sales and positive earnings during the Q4 of fiscal 2024 demonstrate the disproportionately positive impact of our operating leverage on profitability as production volumes increase. As OCC net sales grow, our gross profit, gross profit margin and profitability also tend to increase at faster rates than net sales. During fiscal year 2024, gross profit was $18,200,000 a decrease of 18.3% compared to fiscal 2023, while net sales decreased 7.6% in fiscal 2024 compared to 2023. However, during the Q4 of fiscal year 2024, OCC achieved a 33.5% gross profit margin and a disproportionate increase of 68.6% in gross profit in both cases compared to the same period in fiscal year 2023. While our gross profit and gross profit margins can also be impacted by product mix, generally as OCC's net sales production volumes increase, substantial fixed manufacturing costs are spread over higher sales volumes and importantly manufacturing efficiencies also tend to increase particularly for fiber optic cable production.
A key differentiator between OCC and our peers has been our decision to forego implementing reductions in production personnel during the periods of lower production volumes. In taking this disciplined approach, we considered our expectations of our future growth opportunities along with the time and resources necessary to train new personnel to the level we and our customers expect. In staying loyal to our principles and to our people in leaner periods, OCC is ideally positioned to hit the ground running and capture the opportunities ahead. We benefited from this discipline and forward thinking approach in the Q4 of 2024 and we expect to continue benefiting from it in fiscal year 2025 and beyond. OCC also incurred significant SG and A expenses to maintain and build our competitive strengths, capabilities and presence in our targeted markets and also incur significant public company costs that are included in SG and A.
Many of these expenses are relatively fixed rather than varying with net sales, with OCC benefiting from our SG and A expenses operating leverage as net sales increase. Looking ahead to 2025, we see indications of growing strength in our targeted markets and among our customer base as well as potential opportunities to expand our product offerings. Moving forward, we continue to focus on driving growth, operating efficiently and identifying and capturing additional opportunities to ensure we are executing for our customers and end users. As we continue to drive sales, we are confident our significant operating leverage with respect to manufacturing costs and SG and A costs enable us to generate increased profitability and long term value for shareholders. OCC remains committed to leveraging our core strengths and capabilities to offer top tier products and application solutions to our customers and to compete successfully against much larger competitors.
The OCC team is proud of its strengths and capabilities that have differentiated OCC for over 41 years of being a leading company in the fiber optic industry. I would like to highlight a few of those for you today. First, our enviable market positions, brand recognition and industry relationships with loyal customers, decision makers and end users across a broad range of targeted markets. Next (LON:NXT), our extensive industry experience and expertise. Our engineering, sales, business development teams are well respected for their deep product and application experience and expertise, which enables OCC to create its portfolio of innovative high performance products and associated intellectual property.
Additionally, OCC has significant available production capacity at our facilities supported by knowledgeable and experienced manufacturing quality and engineering teams. OCC possesses an incredible broad and varied offering of fiber optic and copper cabling and connectivity products and solutions that enable us to deliver products and solutions that meet the unique needs of our customers and end users in our various target markets. And we also take pride in our broad and diverse geographic footprint, where currently we sell our products and solutions to customers in approximately 50 countries every year. And this is just a few of the reasons why OCC holds such a strong position in our targeted markets. I'm immensely proud of the OCC's team's accomplishment this past year and grateful for their hard work, particularly given the macroeconomic weakness that has impacted our industry for more than a year.
Their commitment to serving our customers and end users with OCC suite of mission critical solutions will continue to drive our success. We remain committed to identifying growth opportunities and executing our strategies and initiatives to grow and create long term value for our shareholders. And with that, I'll turn the call over to Tracy, who will review in additional detail our 4th quarter fiscal year 2024 financial results.
Tracy Smith, Senior Vice President and Chief Financial Officer, Optical Cable Corporation: Thank you, Neil. Consolidated net sales for fiscal 2024 were 66 point percent compared to $72,200,000 for fiscal 2023 with sales decreases experienced in both the company's enterprise and specialty markets, including the wireless carrier market. Our net sales were negatively impacted by industry wide macroeconomic pressures in fiscal year 2024, which began to impact the company's net sales during fiscal year 2023 and continued through the Q3 of fiscal 2024. Consolidated net sales for the Q4 of fiscal 2024 increased 12.4 percent to $19,500,000 compared to $17,300,000 for the same period last year. OCC experienced increases in net sales in both its enterprise and specialty markets.
As Neil mentioned, our quarterly net sales sequentially increased 20.1% during the Q4 of fiscal year 2024 compared to the Q3. We achieved higher sequential net sales each quarter since the Q1 of fiscal year 2024 and we believe opportunities to improve net sales will continue during fiscal year 2025 compared to fiscal year 2024. Turning to gross profit. Gross profit was $18,200,000 in fiscal 2024, a decrease of 18.3% compared to $22,300,000 in fiscal 2023. Gross profit margin was 27.3 percent in fiscal 2024 compared to 30.9% in fiscal 2023.
Gross profit margin for fiscal 2024 was impacted by lower production volumes, resulting in fixed charges being spread over lower net sales as well as decreased plant efficiency as lower production volumes impacted the flow of products through our manufacturing facilities, both of which were effects of operating leverage. The variability of our gross profit margin in any quarter also reflects changes in product mix. Our gross profit increased 68.6 percent to $6,500,000 in the Q4 of fiscal 2024 compared to $3,900,000 for the same period last year as a result of production efficiencies created by increased volumes and the resulting positive impact of our operating leverage. Gross profit margin or gross profit as a percentage of net sales was 33.5 percent in the Q4 of fiscal 2024 compared to 22.4% in the Q4 of fiscal 2023. SG and A expenses increased 1.3 percent to $21,500,000 during fiscal year 2024 from $21,200,000 in fiscal year 2023.
SG and A expenses as a percentage of net sales were 32.2 percent in fiscal 2024 compared to 29.4% in fiscal 2023. SG and A expenses were $5,900,000 in the 4th quarter of fiscal year 2024 compared to $5,100,000 for the same period last year. SG and A expenses as a percentage of net sales were 30% in the Q4 of fiscal 2024 compared to 29.7% in the Q4 of fiscal of fiscal 2023. The increase in SG and A expenses during the Q4 and fiscal year 2024 compared to the same periods last year was primarily the result of increases in employee and contracted sales personnel related costs. OCC recorded a net loss of $4,200,000 or $0.54 per basic and diluted share for fiscal year 2024 compared to net income of $2,100,000 or $0.26 per basic and diluted share for fiscal year 2023.
For the Q4 of fiscal 2024, OCC recorded net income of $373,000 or $0.05 per basic and diluted share compared to a net loss of $1,300,000 or $0.17 per basic and diluted share for the Q4 of fiscal 2023. Earlier today, we filed a Form 8 ks regarding the correction of a misclassification of the outstanding balance under our revolving credit agreement on our balance sheet for outstanding balance under our revolving credit agreement on our balance sheet for fiscal year 2023 in various interim periods. After reviewing relevant portions of the Financial Accounting Standards Board, Accounting Standards Codification as well as a review of various non authoritative interpretations and guidance authored by certain major U. S. Accounting firms, we determined that generally accepted accounting principles or GAAP required us to classify our revolver balance as a current liability rather than a non current liability as it had been previously classified.
As a result and as reflected in the Form 8 ks we filed this morning regarding the correction of this revolver balance in this classification, we have restated certain of our prior period financial statements. The impact on the prior period financial statements of this corrected revolver balance classification is described in more detail in our Form 8 ks filed today and also in our consolidated financial statements for fiscal year 2024, including Note 20 to those financial statements included in our annual report on Form 10 ks for fiscal year 2024, which we plan to file with the SEC later today. The prior classification did not have any effect on our previously reported total assets, total liabilities or total shareholders' equity. Further, the prior classification did not have any effect on our previously reported consolidated statements of operations, consolidated statements of shareholders' equity or consolidated statements of cash flows. There also was no impact on any covenants with lenders for the periods impacted as our borrowing arrangements do not include financial covenants that would be impacted by the classification of the revolver.
And importantly, nothing has changed with respect to our revolver agreement or with respect to the relationship with our lender. This is simply a reclassification of our revolver balance pursuant to GAAP. The term of OCC's revolver remains unchanged ending July 24, 2027, unless otherwise renewed. With that, I will turn the call back over to you, Neil.
Neil Wilkin, President and Chief Executive Officer, Optical Cable Corporation: Thank you, Tracy. And now if any analysts or institutional investors have any questions, we're happy to answer them. Shelby, if you could please indicate the instructions to our participants to call in any questions they may have, I would appreciate it. Again, we are only taking live questions from analysts and institutional investors.
Conference Operator: And I'm showing we have no questions in the queue at this time.
Neil Wilkin, President and Chief Executive Officer, Optical Cable Corporation: Thank you, Shelby. Spencer, I know we have at least one question submitted by an individual investor in advance. If you don't mind reading that, we're happy to respond.
Spencer, Conference Moderator, Optical Cable Corporation: We do. Thanks, and we have one question. And it is, given that we are already more than halfway through Q1, could management please comment on current trading and whether it expects typical seasonality patterns in 2025?
Neil Wilkin, President and Chief Executive Officer, Optical Cable Corporation: Sure. So as we've talked about in our filings previously and continue to say, we do experience seasonality in our industry. While it's not always the case, generally we think of
Conference Operator: And pardon the interruption, the feline is connected. Please continue with your conference.
Neil Wilkin, President and Chief Executive Officer, Optical Cable Corporation: Okay. Thank you, Shelby. For some reason, we got disconnected. So I'm not sure where we let off. Spencer, did I heard the question.
Was my answer to the question? Or is there anything I need to continue?
Spencer, Conference Moderator, Optical Cable Corporation: It didn't complete. Maybe we can tee it up and I'll ask the question again and we can jump back into it. So the question for everybody was, given that we are already more than halfway through Q1, could management please comment on current trade in and whether it expects typical seasonality pattern in 2025?
Neil Wilkin, President and Chief Executive Officer, Optical Cable Corporation: Of course. So we can't forecast exactly what's going to happen in 2025, but typically the first half of our fiscal years tend to be a little lower than the second half of our fiscal years. And various things can affect that during the year based on order volume or certain orders from customers, but typically that's how we see our seasonality.
Spencer, Conference Moderator, Optical Cable Corporation: Thank you, Neil. That was the only question.
Neil Wilkin, President and Chief Executive Officer, Optical Cable Corporation: Okay. Well, I'm sorry for the listeners for the interruption, not sure what happened. In any event, I would like to thank everyone for listening to our Q4 fiscal year 2024 conference call today. As always, we appreciate your time and your investment and interest in Optical Cable Corporation. We at OCC hope you and your families have a wonderful holiday season and a Happy New Year.
And again, thank you.
Conference Operator: The conference has concluded. Thank you for your participation. You may now disconnect.
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