Optical Cable Corporation
Q2 2021 Earnings Call Transcript

Published: 14 Jun 2021

[Operator:]

Good morning. My name is Maria and I will be your conference operator today. At this time, I would like to welcome you to the Optical Cable Corporation Second Quarter 2021 Earnings Conference Call. Thank you. Mr. Palash, you may begin your conference.

[Aaron Palash:]

Terrific. Thank you, Maria. Good morning and thank you all for participating on Optical Cable Corporation’s second quarter fiscal year 2021 conference call. At 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 second quarter results for the 3-month and 6-month periods ended April 30, 2021 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&A session. However, we also offer our 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. OCC’s second quarter results reflected the hard work of our team and the steps we have taken to protect the business, build on our strong place in the market and position the company to succeed as the effects of the pandemic subside. Tracy will speak to this in more depth, but at a high level, our net sales in the quarter benefited from the lifting of some restrictions and reopening of certain markets that had been negatively impacted by the COVID-19 pandemic. And as we moved through the quarter, we continue to see positive indicators in many of our markets. Additionally, we have taken steps to control costs and improve efficiencies, efforts which are ongoing. This quarter, we signed two important agreements that demonstrate our industry leadership and growth trajectory. The first is a contract to supply certain of OCC’s proprietary products to a major defense contractor for the U.S. Department of Defense. We expect to begin manufacturing the products in the fiscal third quarter of 2021 and we now believe that we will continue to be manufacturing these products into next fiscal year. OCC is proud of its own history of designing and manufacturing products for the U.S. military and we were once again humbled to do our part by applying our innovative technologies and substantial capabilities to supply and support the brave men and women protecting our freedom. We are fortunate to count a number of veterans among our dedicated team and all of us look forward to delivering the products and solutions on which our military relies and for which OCC is known.

[Tracy Smith:]

Thank you, Neil. Consolidated net sales for the second quarter of fiscal 2021 increased 5.9% to $15.7 million compared to net sales of $14.9 million for the second quarter of fiscal 2020. Net sales increased in both our enterprise and specialty markets, including the wireless carrier market in the second quarter of fiscal year 2021 compared to the same period last year. We believe net sales during the second quarter of fiscal year 2021 were positively impacted by the listing of some restrictions and the reopening of certain markets that had been negatively impacted by the COVID-19 pandemic. Net sales to customers in the United States increased 4.4% and net sales to customers outside of the United States increased 11.8% in the second quarter of fiscal year 2021 compared to the same period last year. Consolidated net sales for the first half of fiscal 2021 were $27.6 million, a slight decrease compared to net sales of $27.8 million for the same period last year. Sequentially, net sales increased 32.5% in the second quarter of fiscal year 2021 compared to net sales of $11.9 million for the first quarter of fiscal year 2021.

[Neil Wilkin:]

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

[Operator:]

And I am showing we have no phone questions at this time.

[Neil Wilkin:]

Aaron, could you go over any questions that have been submitted by individual shareholders prior to the call, please?

[Aaron Palash:]

Yes, Neil, I do have a few questions that were submitted in advance by non-institutional shareholders. The first, could you articulate where your CX-Series hybrid cable products line has been used historically and where the products line is headed? Is it suitable for FTTA applications?

[Neil Wilkin:]

Sure. Thank you, Aaron. OCC has a number of fiber optic cable offerings, including its CX-Series cables. Our hybrid cables include copper conductors and optical fibers and they are used in various applications, such as passive optical LANs, but also security industrial applications and also fiber-to-the antenna applications. And I think OCC is benefiting from having those offerings. We have – it’s been an important part of some of our more recent developments. Typically, just by way of information, we do not include our FTTA product offerings on our website, since these are products that tend to be custom-designed for our customers. However, we do have significant capabilities and expertise in the products used in this targeted market.

[Aaron Palash:]

Great. Thanks. Next question, with added disclosure in the fiscal year ‘20, 10-K, there appears to have been an increase in job listings from the company skewed towards Roanoke manufacturing. Can you address the challenges that the company has seen in the labor market and the steps being taken to address them?

[Neil Wilkin:]

Sure. There is a lot of companies – as the pandemic began, OCC made every effort to preserve as many jobs as possible, but we did have – started to have some normal attrition like we would have at any year during this past year. And we do not always hire new employees to fill those vacancies, as we were looking for efficiencies to offset the impact of the pandemic on sales and production volumes. We haven’t seen improvement in our markets. And accordingly, OCC has increased the number of job offerings particularly in manufacturing. While, as you can see, people see in the news, there is no – it hasn’t been particularly easy, and it’s been a challenging time to recruit new employees, but OCC believes it’s in a strong position to do so. We offer competitive wages and benefits. We operate in states that are supportive of workforce development efforts to help ensure OCC continues to have a strong pool of skilled and capable workers. And we have an enjoyable working environment where we think of each other as part of the OCC family. And I think that part of that family pulling together was demonstrated during this last more than a year during the pandemic. Just so proud of the OCC team. They demonstrated strength and resilience during incredible difficult times – incredibly difficult times. And it’s because of that strength and resilience that OCC is so well positioned as we begin to see some of the effects of the pandemic begin to wane. So longer term, we don’t see a problem in being able to recruit capable employees. But certainly, we are not immune to some of the short-term challenges that others are experiencing, although I believe a little bit better positioned.

[Aaron Palash:]

Great. Final question, does the company plan on adopting a new stockholder protection rights agreement at the end of the fourth quarter?

[Neil Wilkin:]

Thank you, Aaron. At this time, I don’t think it would be appropriate for me to speculate or get ahead of the Board of Directors on this issue. But of course, the Board will address whether to renew OCC’s shareholder protection rights plan at the appropriate time.

[Aaron Palash:]

Terrific. That was the final question.

[Neil Wilkin:]

Okay. Since we don’t have any more questions, we will go ahead and adjourn the call. I would like to thank everyone for listening to our second quarter conference call today. As always, we appreciate your time and your interest in Optical Cable Corporation, and I hope you all continue to stay safe. Thank you very much.

[Operator:]

Thank you. Ladies and gentlemen, this does conclude today’s conference call. You may now disconnect.