Optical Cable (OCC) Q2 2024 earnings summary

Executive summary

• Net sales for Q2 FY2024 were $16.1M, down 17.9% year-over-year, with sequential growth of 8.5% from Q1 FY2024; first half net sales were $31.0M, down 18.3% year-over-year.

• Gross profit for Q2 FY2024 was $4.0M (25.1% margin), down from $6.8M (34.6% margin) in Q2 FY2023; first half gross profit was $7.8M (25.0% margin), down from $13.3M (35.1% margin) prior year.

• Net loss for Q2 FY2024 was $1.6M ($0.21/share) versus net income of $2.4M ($0.31/share) in Q2 FY2023; first half net loss was $3.0M ($0.39/share) compared to net income of $3.2M ($0.41/share) prior year.

• Both enterprise and specialty markets, including wireless carrier, saw year-over-year sales declines in Q2 and first half FY2024, but sequential improvement from Q1 to Q2.

• Q2 FY2023 results benefited from a $1.7M insurance gain, which did not recur in Q2 FY2024.

Financial highlights

• SG&A expenses for Q2 FY2024 were $5.3M, down from $5.7M in Q2 FY2023; as a percentage of sales, SG&A rose to 33.0% from 28.9%.

• First half SG&A expenses decreased 6.3% to $10.4M, mainly due to lower employee incentives, commissions, and shipping costs.

• Cash at April 30, 2024 was $1.1M, down $379K from October 31, 2023.

• Working capital at April 30, 2024 was $24.3M, with a current ratio of 4.4:1.

• Outstanding borrowings on revolver: $8.0M; available credit: $2.0M.

Outlook and guidance

• Management expects net sales to begin growing compared to the first half of FY2024, citing positive indicators in some markets despite ongoing softness.

• Maintaining headcount is expected to position the company for a demand rebound as market conditions improve.

• No material capital expenditure commitments as of April 30, 2024; FY2024 capex budget is $1.0M.

• Future cash flow from operations, cash on hand, and existing credit facilities are expected to fund operations for at least the next twelve months.

• Focus remains on operational efficiency and capturing profitable growth opportunities in the second half of FY2024.