Optical Cable (NASDAQ:OCC) reported higher third-quarter fiscal 2026 sales, gross profit and net income, supported by demand across its enterprise, data center and specialty markets. Management said the company remains confident that the second half of the fiscal year will be strong, while acknowledging continued supply constraints involving optical fiber and certain raw materials.
For the quarter ended July 31, consolidated net sales rose 22% year over year to $24.3 million from $19.9 million. Gross profit increased 43.9% to $9.1 million, while gross margin expanded to 37.4% from 31.7% in the prior-year quarter.
Year-to-Date Results Show Return to Profitability
For the first nine months of fiscal 2026, Optical Cable posted net sales of $62.9 million, up 18.3% from $53.2 million in the comparable period of fiscal 2025. Gross profit increased 35.5% to $22.1 million, and gross margin rose to 35% from 30.6% a year earlier.
The company recorded net income of $2.5 million, or $0.28 per basic and diluted share, for the nine-month period. That compared with a net loss of $1.5 million, or $0.19 per share, in the first nine months of the prior fiscal year.
Neil Wilkin, Optical Cable’s president and chief executive officer, said the quarterly sales increase was driven largely by strong demand in enterprise, data center and specialty markets. Specialty markets include areas such as the military sector, according to Wilkin.
Wilkin said higher production volumes helped improve profitability by spreading fixed manufacturing costs across more sales and increasing manufacturing efficiencies. In response to an analyst question, he added that gross margin can also vary based on product mix, manufacturing operating leverage and other efficiencies.
Backlog and Demand Remain Elevated
Optical Cable ended the third quarter with sales-order backlog and forward load of $13.5 million, up from $13.3 million at April 30, $10.4 million at Jan. 31 and $7.3 million at Oct. 31, 2025.
Wilkin said the third-quarter results supported management’s prior expectation for a strong second half of fiscal 2026. He said the company continues to see robust backlog and forward load alongside rising sales.
Management did not provide a forecast for how long elevated demand or backlog levels may persist. However, Wilkin said the industry is experiencing high demand and that the company has not seen indications of weakening demand. He noted that Optical Cable could still experience seasonal effects in its first fiscal quarter because of holidays including Thanksgiving, Christmas and New Year’s.
Tracy Smith, executive vice president and chief financial officer, said most backlog and forward load is expected to ship within two to three quarters, although timing varies by customer. Some orders are scheduled for future delivery, while others are expected to ship once manufacturing is completed.
Management also said portions of the data-center market can involve longer sales cycles, including supplier and product-qualification requirements. Wilkin said prospective business undergoing those processes is not included in backlog or forward load until the company has received an order or expects the order to be non-cancelable.
Costs, Liquidity and Manufacturing Capacity
Selling, general and administrative expenses increased to $7 million in the third quarter from $5.7 million a year earlier. As a percentage of sales, SG&A was essentially unchanged at 28.7%, compared with 28.8% in the prior-year period.
For the first nine months, SG&A rose to $18.8 million from $16.9 million, but declined as a percentage of sales to 29.9% from 31.8%. Smith attributed the increases primarily to employee costs, contracted sales personnel costs, shipping expenses, compensation and sales incentives.
Smith said some sales compensation and shipping costs tend to fluctuate with revenue, but management could still see future SG&A operating leverage as sales grow. The company did not provide guidance for future SG&A levels, revenue, deliveries or fiscal 2027 margins.
Working capital stood at $19.2 million at the end of the third quarter, compared with $13.9 million at the end of fiscal 2025. Smith said Optical Cable believes its working capital and credit revolver are sufficient to support its needs. He added that cash is swept daily to reduce the revolver balance, meaning the company’s reported cash balance is generally not high at any given time.
The company is considering investments in equipment and personnel to expand capacity for certain products and facilities. Wilkin said staffing is increasing across Optical Cable’s operations, with the largest increases at its fiber-optic cable manufacturing facility in Roanoke and its connectivity and termination facility near Dallas.
Fiber Constraints and Partnership Activity
Management said the industry continues to face shortages of optical fiber due to demand from data centers and other applications. The company has also encountered longer lead times for certain raw materials. Wilkin identified optical-fiber shortages as the primary current impediment to increasing manufacturing output, though he said Optical Cable has still generated higher sales despite those constraints.
Wilkin said the company is working to limit the potential effects of supply conditions on customers and gross profits, while noting that margins remain subject to product mix and other factors. Management said it does not believe the current industry challenges will prevent strong top-line growth through the remainder of fiscal 2026.
Optical Cable also said it has begun recording some sales of products from Lightera, which management described as both a strategic collaboration partner and an important supplier. Wilkin said the collaboration adds certain products to Optical Cable’s offering.
About Optical Cable (NASDAQ:OCC)
Optical Cable Corporation (NASDAQ: OCC) is a publicly traded designer and manufacturer of optical fiber and copper communications cable solutions. Headquartered in Roanoke, Virginia, the company develops a broad range of standard and custom cable assemblies, connectors, hardware and accessories. Its product portfolio addresses data transmission requirements in demanding environments, including long-haul telecommunications, industrial automation, defense systems and submersible applications.
The company’s offerings are organized across multiple product lines, encompassing outside-plant fiber optic cable for aerial and underground installations, indoor/outdoor copper connectivity and specialty engineered cable assemblies.
