OCC

Business Context and Reporting Period

Company: Optical Cable Corporation (OCC)

Filing Type: Form 10-Q (Unaudited)

Reporting Period: Three months ended January 31, 2026 (First Quarter of Fiscal Year 2026)

Business Overview: OCC is a manufacturer of fiber optic and copper data communication cabling and connectivity solutions for enterprise, data center, harsh environment, and wireless carrier markets. The company operates as a single reportable segment.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Net sales increased 4.4% year-over-year, driven by growth in both enterprise and specialty markets. International sales rose 18.0%, while U.S. sales remained relatively flat.
• Margin Expansion: Gross profit margin improved to 32.7% from 29.4%, attributed to higher volumes spreading fixed manufacturing costs and favorable product mix.
• Expense Management: SG&A expenses increased 1.8% primarily due to higher sales personnel costs and shipping expenses tied to revenue growth. However, SG&A as a percentage of sales decreased to 33.8% from 34.7%.
• Profitability Improvement: The operating loss narrowed significantly by 75.6% to $208,295, and the net loss decreased by 64.1% to $397,529.
• Balance Sheet: Total assets decreased 3.2% due to a $2.2 million reduction in trade accounts receivable, partially offset by a $1.1 million increase in inventories. Total liabilities decreased 4.4% due to net repayments on the revolving credit facility.

Guidance, Outlook, and Risks

• Backlog: Sales order backlog increased to $10.4 million as of January 31, 2026, compared to $7.3 million at the end of the prior fiscal year.
• Seasonality: Management expects net sales to be lower in the first half of the fiscal year and higher in the second half, historically split at 48% and 52% respectively, though this is subject to volatility from large orders and macroeconomic conditions.
• Strategic Collaboration: In July 2025, OCC entered a strategic collaboration with Lightera, LLC, issuing 642,199 redeemable restricted shares. This partnership aims to expand product offerings in data center and enterprise sectors.
• Liquidity: The company maintains a Revolver with a maximum principal of $18.0 million. As of January 31, 2026, $4.6 million was outstanding with $4.7 million available. Management believes existing cash, operating cash flow, and the Revolver are sufficient to fund operations for the next 12 months.
• Risks: Key risks include dependence on a limited number of customers (one distributor accounted for 15.9% of sales), supply chain constraints, raw material price fluctuations (copper, optical fiber), and the impact of interest rates on debt costs. The Virginia Real Estate Loan matures on May 5, 2026, and the company intends to refinance prior to maturity.

Investor Verification Checklist

• Debt Maturity: Verify the refinancing status of the Virginia Real Estate Loan maturing May 5, 2026.
• Customer Concentration: Monitor the stability of the top distributor customer representing 15.9% of Q1 sales.
• Inventory Levels: Assess the $1.1 million increase in inventory against sales velocity to ensure no obsolescence risks.
• Redeemable Stock: Review the terms of the Lightera, LLC redeemable restricted stock ($3.0 million value) and potential future redemption obligations.
• Cash Flow Sustainability: Confirm that operating cash flow remains sufficient to cover debt service and capital expenditures without excessive reliance on the Revolver.