Optical Cable Corporation

Please stand by. Your program is about to begin. If you need operator assistance, please press star zero. Good morning. My name is Shelby, and I will be your conference operator today. At this time, I would like to welcome you to Optical Cable Corporation's fourth quarter and fiscal year 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If you wish to remove yourself from the queue, please press star 2. Mr. Hoffman, you may begin your conference.

Thank you, and good morning. And thank you for joining us for Optical Cable Corporations. fourth 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.occfibre.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. 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 statement 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.

Thank you, Spencer, and good morning, everyone. I will begin the call today with a few opening remarks. Tracy will then review the fourth quarter and full year results for the three-month and 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&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 and beyond, the sun is starting to peek through. While OCC's net sales for fiscal year 2024 decreased 7.6% to $66.7 million 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 fourth quarter 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 fourth quarter of fiscal year 2023. We increased net sales 12.4% during the fourth quarter of fiscal year 2024 compared to the same period in fiscal 2023 and sequentially increased net sales 20.1% compared to the third quarter of fiscal 2024, making this our third consecutive quarter of sequential net sales growth for the year. OCC's increase in net sales and positive earnings during the fourth quarter 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 $18.2 million, a decrease of 18.3% compared to fiscal 2023, while net sales decreased 7.6% in fiscal 2024 compared to 2023. However, during the fourth quarter 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 OCCs 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 fourth quarter of 2024, and we expect to continue benefiting from it in fiscal year 2025 and beyond. OCC also incurs significant SG&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&A. Many of these expenses are relatively fixed rather than varying with net sales, with OCC benefiting from our SG&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&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, 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 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's 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 fourth quarter and fiscal year 2024 financial results.