Optical Cable Corporation
Q1 2021 Earnings Call Transcript

Published: 15 Mar 2021

[Operator:]

Good morning. My name is Laurie, and I will be your conference operator today. At this time, I would like to welcome you to the Optical Cable Corporation First Quarter 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Thank you. Mr. Palash, you may begin your conference.

[Aaron Palash:]

Thank you, Laurie. Good morning, and thank you all for participating on Optical Cable Corporation’s first quarter and fiscal year 2021 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 Wilkin, President and Chief Executive Officer of OCC; and Tracy Smith, Senior Vice President and Chief Financial Officer.

[Neil Wilkin:]

Thank you, Aaron, and good morning, everyone. I will begin the call today with a few opening remarks. Tracy will then review the first quarter results for the three-month period ended January 31, 2021 and 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&A session. However, 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 today. A year ago, we held our first quarterly earnings in the earliest days of the pandemic. We had started taking steps to protect our employees and ensure that our health and safety. We really could not have fathomed the impact of the pandemic would have on our country, our communities, or our business. A year later, the OCC team is working to control what we can in a market environment that is still affected by the ongoing COVID-19 pandemic. Despite the challenging conditions, we’ve continued our strategic efforts to capture growth opportunities in our targeted markets, while operating efficiently and implementing cost control initiatives. Our results for the first quarter of 2021 reflect the market environment and the actions we’ve been taking. While net sales in both our enterprise and specialty markets were down, we reduced our expenses and increased our gross profit margin year-over-year. Tracy will get into the numbers in a moment. I’m incredibly proud of what the OCC team is accomplishing through their perseverance. We are providing our customers with the mission-critical products and solutions for which they rely on at OCC. As part of these efforts, we’re continuing – we have continued to serving our country’s military and those on the frontline against COVID-19.

[Tracy Smith:]

Thank you, Neil. Consolidated net sales for the first quarter of fiscal 2021 were $11.9 million, a decrease of 7.8% compared to net sales of $12.9 million for the first quarter of fiscal 2020. We believe net sales during the first quarter of fiscal year 2021 were negatively impacted by the COVID-19 pandemic, as certain businesses continue to limit operations and/or reduce or delay product purchases. We are beginning to see some positive indicators of future strengthening in some of our markets and are hopeful we will to benefit from improvement in our market during the second half of fiscal year 2021. However, we cannot fully predict the duration or scope of the COVID-19 pandemic, and we cannot fully anticipate or reasonably estimate the continuing impact of the pandemic on our various markets and customers. Turning to gross profit, gross profit was $2.3 million in the first quarter of fiscal year 2021 compared to $2.4 million in the first quarter of fiscal 2020. Gross profit margin or gross profit as a percentage of net sales increased to 19.4% in the first quarter of fiscal 2021 compared to 18.7% in the first quarter of fiscal 2020. Gross profit margins tend to be higher when the company achieved higher net sales levels as certain fixed manufacturing costs are spread over higher sales. This operating leverage, which is beneficial at higher sales levels, was the primary factor of putting downward pressure on gross profit margin during the first quarters of fiscal year 2021 and 2020.

[Neil Wilkin:]

Thank you, Tracy. And now if you have any questions, we’re happy to answer them. Laurie, if you could please indicate the instructions for our participants to call in any questions they may have, I’d appreciate it. Again, we are only taking live questions from analysts and institutional investors.

[Operator:]

[Neil Wilkin:]

Thank you, Laurie. Aaron, are there any questions that were submitted by individual investors in advance of today’s call?

[Aaron Palash:]

Neil, there were no questions to me in advance of the call.

[Neil Wilkin:]

Okay. Well, I would like to thank everyone for listening to our first quarter conference call today. As always, we appreciate your time and your interest in Optical Cable Corporation. Hope you all will continue to stay safe and we appreciate your time. Thank you.

[Operator:]

Thank you for participating in the Optical Cable Corporation first quarter 2021 earnings conference call. You may now disconnect your lines and have a wonderful day.