OCC's Q4 2025 Earnings Call: Contradictions Emerge on Data Center Growth, Inventory Management, Strategic Partnerships, and Backlog Decline

Date of Call: December 18, 2025

Financials Results

• Revenue: $73.0M for FY2025, up 9.5% YOY (FY2024: $66.7M); Q4: $19.8M, up 1.8% YOY (Q4 FY2024: $19.5M)
• EPS: $0.18 loss per share for FY2025 (net loss $1.5M) vs $0.54 loss per share in FY2024; Q4: $0.01 income per share vs $0.05 prior-year Q4
• Gross Margin: 30.9% for FY2025, up from 27.3% in FY2024; Q4 gross margin 31.9% vs 33.5% in prior-year Q4 (sequential Q3 -> Q4: 31.7% -> 31.9%)

Business Commentary:

• Revenue Growth and Market Recovery:
• Optical Cable Corporation (OCC) reported consolidated net sales of $73 million for fiscal year 2025, up 9.5% year-on-year.

• This growth was driven by the successful execution of growth strategies and the recovery from industry weakness experienced in previous years.

• Operating Leverage and Profitability:

• Gross profit increased by 24.1% to $22.6 million in fiscal 2025, with a gross profit margin of 30.9%, compared to 27.3% in 2024.

• This improvement was due to strong operating leverage, which resulted in disproportionate increases in gross profit as net sales increased and manufacturing efficiencies.

• Strategic Collaboration:

• OCC entered into a strategic collaboration with Lightera, which led to Lightera holding 7.24% of OCC's outstanding shares.

• This collaboration is expected to expand product offerings and solutions, especially for the data center and enterprise sectors, benefiting both companies.

• Data Center Market Opportunities:

• OCC continues to expand its presence in the data center market, with a focus on multi-tenant data centers and enterprise data centers.
• Growth is expected in fiscal year 2026 due to the accelerating demand for cloud computing and artificial intelligence applications.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management emphasized optimism and momentum: "we are optimistic about our growth opportunities" and "confident we are well positioned for future growth in 2026 and beyond." Fiscal results cited: net sales +9.5%, gross profit +24.1%, gross margin to 30.9%, and a new strategic collaboration with Lightera expected to contribute to FY2026 growth.

Q&A:

• Question from Caroline Felix (Host): Can you update us on the data center opportunity in general, how you feel about it if the opportunity has strengthened or not during the quarter? And any major changes or updates?
  Response: Data center demand is strong; little impact in Q4 but expected to begin contributing to revenue in FY2026, with focus on multi-tenant and enterprise (Tier 2/3) data centers.

• Question from Caroline Felix (Host): Over the last quarter you have been commenting on improvements in OCC end markets. Have those improvements continued into Q4? Can you comment on new and emerging trends or risks?
  Response: Strength continued across most target sectors; some project delays exist but not material to growth; expect usual first-half seasonality in 2026.

• Question from Caroline Felix (Host): Do you believe OCC will have any hyperscale data center opportunities?
  Response: OCC products are best suited for multi-tenant and enterprise data centers; not expecting significant direct participation in hyperscale (Tier 1).

• Question from Caroline Felix (Host): What do you think the potential sales look like for 2026 and 2027?
  Response: Company does not provide guidance but is optimistic about sales increases in FY2026, particularly in H2, driven by market demand and the Lightera collaboration.

• Question from Caroline Felix (Host): Can you give a sense of the financial metrics behind the operational leverage? For example, how much EPS can impact different forward sales levels if they inflect higher on the collaboration?
  Response: No specific formula provided; management reiterated operating leverage depends on fixed-cost absorption and product mix, which is hard to predict.

• Question from Caroline Felix (Host): Q1 and Q2 are typically the weakest quarter in terms of seasonality. Should we still expect the typical seasonality into 2026?
  Response: Yes; seasonality expected to persist (historically ~46% of sales in H1, 54% in H2), though large orders or macro events can alter the pattern.

• Question from Caroline Felix (Host): Is the focus still on Tier 2 data centers? Or is there some potential to capture some of the Tier 1 data center demand as part of your collaboration?
  Response: Focus remains on Tier 2/multi-tenant and enterprise data centers; any Tier 1 impact would be limited and indirect.

• Question from Caroline Felix (Host): In terms of capacity available and any capacity constraints, are there any changes versus what you commented on last quarter?
  Response: No current capacity constraints; company believes it has capacity to capture expected FY2026 growth.

• Question from Caroline Felix (Host): OCC has been hiring a lot recently. Can you comment if you have seen any issues to find the right workers? Why the need to hire and will this increase OpEx significantly?
  Response: Some open manufacturing positions and modest turnover among newer hires; historically low long-term turnover; hiring not expected to materially increase operating expense.

• Question from Caroline Felix (Host): Can you please provide an update on progress of the Lightera collaboration?
  Response: Collaboration is proceeding well; teams are working effectively and management expects it to create growing opportunities for FY2026.

• Question from Caroline Felix (Host): Lightera has recently announced an investment into manufacturing. Is this an indication of strong demand for OCC?
  Response: OCC declined to speculate on Lightera's announcements or plans and deferred such strategic intent questions to Lightera.

• Question from Anthony Christ (Odyssey Investments): Any visibility into whether Lightera may refer SMF or hollow-core fiber business to OCC; can you explain those products and potential follow-up?
  Response: Management said hollow-core reduces latency and SMF is standard single-mode fiber; OCC can't speak for Lightera's deployment plans and noted such decisions are Lightera's to disclose.

• Question from Anthony Christ (Odyssey Investments): Would SMF and hollow-core fibers be competitive with Corning, and will Lightera provide automation/AI to produce them?
  Response: Management declined to detail competitor comparisons or Lightera's production/technology plans, noting Lightera is a recognized fiber technology leader and proprietary strategy is Lightera's domain.

• Question from Shawn Boyd (Next Mark Capital, LLC): Historically Q4 shows double-digit sequential seasonality; this year it didn't. Were there project delays or pushouts that caused that?
  Response: No significant project delays impacting Q4; seasonality explains differences—company reiterated H1/H2 split (46%/54%) and noted volatility across diverse market segments can offset sector-specific swings.

• Question from Shawn Boyd (Next Mark Capital, LLC): On the Lightera collaboration inked in July, when should we expect top-line impact (H1 vs H2) and what are gating factors delaying revenue contribution?
  Response: Management expects a positive impact in FY2026 (likely H2) but cannot provide timing specifics; gating factors include integration work, product/channel setup and typical coordination before revenue realization.

Contradiction Point 1

Data Center Market Demand and Opportunities

It involves differing perspectives on the strength of the data center market, which is critical for OCC's growth and revenue projections.

Can you provide an update on the data center opportunity and whether it has strengthened during the quarter? Are there any major changes or updates? - Caroline Felix

2025Q4: OCC sees the data center market as strong and growth-oriented, particularly in multi-tenant data centers (MTDCs) and enterprise data centers. OCC's products are well-suited for these segments, and while the impact is not immediate, OCC expects the data center market to boost revenue in fiscal year 2026. - Neil Wilkin(CEO)

Can you discuss trends in the oil and gas and military markets? - Unknown Attendee

2023Q4: During fiscal year 2023, we saw market strength in most of our specialty markets, including oil and gas and military, which helped offset weakness in the enterprise market. - Neil Wilkin(CEO)

Contradiction Point 2

Inventory Management and Market Demand

It pertains to OCC's inventory management strategy and its response to market conditions, which are crucial for operational efficiency and customer satisfaction.

Is there visibility into whether Lightera may refer us to SMF cabling or hollow fiber cabling as Tier 1 products? - Anthony Christ (Odyssey Investments)

2025Q4: Some of our customers had excess inventory during the past year, but OCC has been less impacted by this than some of our other competitors. Our inventory levels are appropriate to service customers' expected needs, and we monitor and adjust based on customer needs and market conditions. - Neil Wilkin(CEO)

Are customer inventories in the carrier market a concern? Has demand in the carrier market started to pick up again? - Unknown Attendee

2023Q4: The wireless carrier market had some excess inventory during fiscal year 2023, impacting demand. We believe demand will begin to pick up again, but we cannot exactly say when or to what extent that will be the case. - Neil Wilkin(CEO)

Contradiction Point 3

Strategic Partnerships and Market Expansion

It concerns the strategic partnership with Lightera and the expected impact on OCC's product offerings and market expansion, which are key growth drivers for the company.

Can SMFs and Hollow Case fibers compete with Corning’s fibers, and will Lightera provide automation or AI to produce them? - Anthony Christ (Odyssey Investments)

2025Q4: OCC anticipates a positive impact from the Lightera collaboration, but does not provide specific details on when the impact will be visible in sales. The collaboration involves extensive work before impact on sales, but progress is going well. - Neil Wilkin(CEO)

What trends are you seeing in the oil and gas and military markets? - Unknown Attendee

2023Q4: During fiscal year 2023, we saw market strength in most of our specialty markets, including oil and gas and military, which helped offset weakness in the enterprise market. - Neil Wilkin(CEO)

Contradiction Point 4

Data Center Market Opportunities

It involves differing expectations regarding the timing and impact of growth opportunities in the data center market, which could influence investor expectations and strategic planning.

Can you provide an update on the data center opportunity, whether the opportunity has strengthened during the quarter, and any major changes or updates? - Caroline Felix

2025Q4: OCC sees the data center market as strong and growth-oriented, particularly in multi-tenant data centers (MTDCs) and enterprise data centers. - Neil Wilkin(CEO)

What are you seeing regarding AI's impact? - Dean Sterrett

2025Q3: AI growth is positively impacting our industry, particularly in hyperscale data centers. Although our products are well-suited for Tier 2 and Tier 3 data centers, we expect to see benefits from AI and data center growth. - Neil Wilkin(CEO)

Contradiction Point 5

Backlog Decline Explanation

It involves differing explanations for the decline in backlog levels, which could impact investor perceptions of demand and strategic planning.

Were there project delays or pushouts that caused the lower-than-expected fourth-quarter performance? - Shawn Boyd

2025Q4: OCC has seen seasonality impacts, particularly in the first half of the year, which is typical. There were no significant delays impacting the fourth quarter. - Neil Wilkin(CEO)

Does the backlog decline from Q2 indicate Q4 seasonality will be weaker than usual? - Dean Sterrett

2025Q3: The decrease in backlog and forward load is more of a leveling cost rather than a significant decrease. - Tracy Smith(CFO)