OCC

Good morning. My name is Angela, and I will be your conference operator today. At this time, I would like to welcome you to the Optical Cable Corporation's Q1 of fiscal year 2026 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 period. If you would like to ask a question at that time, please press star one on your telephone keypad. If you wish to remove yourself from the queue, please press star two. Ms Felix, you may begin your conference.

Good morning, and thank you for joining us for Optical Cable Corporation's Q1 of fiscal year 2026 conference call. By 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. 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 due to a number of factors and risks, including, but not limited to, those factors referenced in the forward-looking statements 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, Caroline, and good morning, everyone. I will begin the call today with a few opening remarks. Tracy will then review the Q1 results for the 3-month period ended January 31, 2026, in some additional detail. After Tracy's remarks, we will answer as many 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 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. OCC is off to a strong start in fiscal year 2026. During the Q1, we delivered net sales and gross profit growth, largely driven by increased demand across our enterprise and specialty markets and the positive impact of our operating leverage.

During the Q1 of fiscal year 2026, net sales increased 4.4% and gross profit increased 16.1% compared to the same period last fiscal year, and gross profit margin increased to 32.7%. Additionally, our sales order backlog and forward load increased more than 50% to $10.4 million as of the end of the Q1 when compared to the same prior fiscal year period. We expect to continue to build on this momentum. While seasonality typically impacts the H1 of our fiscal year, during our Q2, we are seeing growing momentum in our targeted markets and, in particular, in our data center market. We are confident that OCC is well-positioned for growth during fiscal year 2026. As always, remain focused on disciplined execution to drive value for our customers and shareholders.

With that, I will turn the call over to Tracy, who will review in additional detail our Q1 of fiscal year 2026 financial results.

Thank you, Neil. Consolidated net sales for the Q1 of fiscal 2026 increased 4.4% to $16.4 million compared to $15.7 million for the same period last year. During the Q1 of fiscal 2026, we experienced an increase in net sales in both our enterprise and specialty markets compared to the same period last year, as we continue to see general market improvements in our industry and strength in our severe-duty market. Net sales to customers outside of the United States increased 18%, and net sales to our customers in the United States increased slightly in the Q1 of fiscal year 2026 compared to the same period last year.

As Neil referenced, our sales order backlog and forward load increased to $10.4 million compared to $6.6 million as of the end of our 1st fiscal quarter of 2025. Our sales order backlog and forward load also increased when compared to $7.3 million as of our 2025 fiscal year-end. Turning to gross profit, our gross profit increased 16.1% to $5.4 million in the fQ1 of fiscal 2026 compared to $4.6 million for the same period last year. Gross profit margin, our gross profit as a percentage of net sales, increased to 32.7% compared to 29.4% in the same prior year period.

Gross profit margin for the Q1 of fiscal 2026 was positively impacted by higher volumes and the resulting positive impact of our strong operating leverage. Our gross profit margin percentages are heavily dependent upon product mix on a quarterly basis and may vary based on changes in product mix. SG&A expenses increased to $5.6 million in the Q1 of fiscal year 2026, compared to $5.5 million for the same period last year, primarily as a result of increases in employee and contracted sales personnel related costs and shipping costs. SG&A expenses as a percentage of net sales were 33.8% in the Q1 of fiscal 2026, compared to 34.7% in the Q1 of fiscal 2025.

OCC recorded a net loss of $398,000 or $0.05 per basic and diluted share for the Q1 of fiscal 2026, compared to a net loss of $1.1 million or $0.14 per basic and diluted share for the Q1 of fiscal 2025. With that, I'll turn the call back over to you, Neil.

Thank you, Tracy. As is our normal practice, we're going to 1st answer questions from individual investors that have been submitted in advance of today's call. Caroline, could you go through the questions with us, and we will respond?

Yes. Thanks, Neil. We'll get started. The 1st question is, can you update us on the data center opportunity in general, how you feel about it, and if the opportunity has strengthened or not during the quarter? Any major changes or updates?

We continue to be optimistic about the data center opportunities, particularly in the multi-tenant data center and enterprise data center sectors. OCC saw and is seeing significant and growing activity and customer requests for quotes in the data center sector, particularly in January, and that activity is continuing and growing as we enter the Q2 of fiscal 2026. We believe this momentum will continue and result in increased sales in our targeted sectors of the data center market as fiscal year 2026 progresses.

Thanks, Neil. The next question is, in terms of outlook into 2026, in general, do you feel more or less optimistic now than in Q4?

I would like to say that we continue to be very optimistic about potential sales growth this year. As you all know, we typically see seasonality impact our results during the H1 of a given fiscal year, particularly during the Q1. However, based on the fact that our sales order backlog and forward load has increased more than 50% to $10.4 million as of the end of fiscal quarter, the 1st fiscal quarter of 2026 when compared to the same period last year, and that the activity and requests for quotes we have seen in our targeted market sectors, including the data center market sector, have been increasing. We continue to expect sales growth during fiscal year 2026.

Thanks, Neil. Next question. In the past, you have been commenting on improvements in OCC end markets. Have these improvements continued? Can you comment on new and emerging trends or risks?

Thank you. As you all know, during fiscal year 2025, net sales increased 9.5% and gross profits increased 24.1% compared to the prior fiscal year, which we believe reflects the improvements we saw in many of our targeted markets last year, particularly during the H2 of fiscal year 2025. Far, we continue to see growth opportunities in many of our targeted market sectors, including in particular, the data center market during fiscal year 2026. We believe this will continue to be the case, and this will positively impact OCC's revenue growth in fiscal year 2026.

Thanks, Neil. Next question. Can you please provide an update on progress of the Lightera collaboration?

Sure. As we've mentioned before, OCC has worked with Lightera, formerly known as OFS, for decades. The strategic collaboration with Lightera announced last year was built on that long-standing relationship and the respect each team has for the other. The OCC and Lightera teams work well together and complement each other, enabling both companies to benefit from this important relationship. We believe we're seeing the benefit of that, as we move into fiscal year 2026.

Thanks, Neil. Next question. Could you comment on the type of products you expect to sell alongside Lightera? Will they be on the margin accretive connectivity side or more on the basic cabling side?

Sure. OCC and Lightera have assembled product sets that we believe provide exceptional solutions to meet our customer needs. They're both on the cabling side and on the connectivity side. Lightera, speaking of Lightera products, they have a number of industry-leading product designs that are now included in OCC's product solutions offering. A couple of examples include Lightera's rollable ribbon fiber optic cable, which is particularly well-suited for data center applications. Additionally, Lightera's InvisiLight product solutions are particularly well-suited for installations of passive optical LAN technology in existing buildings, where traditional passive optical LAN installations are more challenging. Of course, Lightera and OCC are both known for innovative product solutions and the development of new product solutions, which I would expect to continue to be the case.

Thanks, Neil. Next question is, can you explain if data center revenue had an impact in Q1, and what to expect for the rest of the year in terms of revenues?

OCC generally does not provide specifics regarding OCC's individual targeted market sectors. That said, during the Q1, OCC saw increases in quotes and customer orders in the data center market sector, particularly in January. We believe this activity will continue to grow this year and will result in greater data center market sector revenues during the remainder of fiscal year 2026.

Thanks, Tracy. Next question is, have you seen any interest regarding a potential acquisition of OCC by larger players, given that many of the larger players urgently need increased capacity?

Caroline, as you might expect, we are unable to comment on whether or not there's been any such interest.

Thanks, Neil. Next question, will you ever have an analyst day, perhaps with an investor deck?

OCC has given presentations to analysts in the past. However, as a small micro-cap company, OCC does not have any analyst coverage at the moment.

Thanks, Tracy. Next question. I've noticed increasing job activity, including night shift jobs, appearing on the job section of your website. Can we assume this is in anticipation of increased activity for the H2 of 2026?

OCC currently is hiring in our manufacturing operations. We have been hiring to meet what we believe will be our personnel needs this fiscal year and recognizing the time it takes to train new manufacturing personnel. OCC is fortunate to have skilled long-term employees. Of course, OCC does have some personnel turnover as well that results in open positions. However, we are proud that OCC tends to have lower personnel turnover than other companies.

Thanks, Tracy. Next question. When do you think it's possible to start generating more revenue from the Lightera collaboration? Can you give us an idea on how this might change current revenue rate?

Working with Lightera has already begun to generate more opportunities, and we believe this will continue and contribute to revenue growth in fiscal year 2026 and beyond.

Thank you. Next question is, can you give more color on the Lightera collaboration and how you ended up at 7% for a share purchase? Did they want to buy more?

Excuse me. It would not be appropriate for me to comment more on the Lightera collaboration beyond what OCC and Lightera have already disclosed. I would like to say, though, we think very highly of the Lightera and the Lightera team, and we believe their investment in OCC reflects Lightera's confidence in our business and our strong collaboration with them. I will also say that I believe that the Lightera-OCC collaboration is benefiting both companies and will continue to do so.

Thanks, Neil. Next question, can you comment on demand signals or expand on backlog in the Tier II data center sales cycle? Can you give an idea on the typical sales cycle as it might pertain to the Lightera collaboration activity and new revenue streams?

1st, the OCC team stays close to customers and others that impact opportunities on a daily basis, and that allows us to see what demand signals are happening in the marketplace and provides us insight and a good sense of market dynamics. Also, the data center cycle tends to be longer, for data center markets, particularly Tier II, than the sales cycle for OCC's typical sales. We also believe the strategic collaboration is benefiting OCC and Lightera in generating additional opportunities which we believe will continue to grow this fiscal year.

Thank you. Next question is, in the past you had mentioned you expect the H2 to be stronger than the H1. Is this still the case?

Yes. As we have mentioned earlier on this call, we do expect the remainder of fiscal 2026 to show further growth, including the H2 of the fiscal year.

Thanks, Tracy. Our last pre-submitted question this morning is, at what point do you expect the growth to inflect in 2026?

While we're not giving revenue guidance for fiscal year 2026, either for the year or by quarter, I would point out that we have seen a growing sales order backlog and forward load. Our sales order backlog and forward load was $10.4 million at the end of the Q1 of 2026, an increase of more than 50% when compared to the same period last year.

Thanks, both. That was the last pre-submitted question.

Thank you, Caroline. Now, Angela, we will take any questions from analysts and institutional investors that may have questions. We ask that you please limit yourself to 1 question and 1 follow-up. Angela, if you could please indicate the instructions for our participants to call in any questions they may have, I'd appreciate it. Again, we're only taking live questions from analysts and institutional investors.

Thank you. If you'd like to ask a question, press star one on your keypad. To leave the queue at any time, press star two. We do ask that you limit yourself to 1 question and 1 follow-up. Once again, that is star one to ask a question. We'll take our 1st question from Sergi Mascarell with Eden Discovery. Your line is now open.

Hey, guys. Thanks for taking our questions. Can you hear me well?

Yes.

Okay, perfect. The last call, you talked about some project delays. Can you update us about that?

Yes. We had, I think in the last quarter, maybe the quarter before that, we had mentioned that we had seen in the marketplace some projects that were being delayed, but we didn't believe that was affecting our overall results. Right now I can't think of anything offhand that is being delayed at the moment, but that always can happen in any quarter, but we don't expect that to be impacting our results this year.

Okay, that's perfect. My 2nd and last question is that during the fiscal year 2025, the backlog was growing about 20%, but we didn't see that translating into a revenue growth. Why is that?

Well, the backlog is a measurement of any point in time. I think what we did see as it was growing, that last year we had increased sales 9.5% in total, and we saw significant strong sales in the Q3 and Q4 of last year. I think that that's what was really, it's consistent with that, with that backlog growth. I think the fact that we have mentioned that we're seeing a larger backlog, sales order backlog at the end of the Q1 and the fact that we're seeing more activity in quote requests in our markets, we believe that that's a good signal for the rest of fiscal year 2026.

Thank you. Once again, if you'd like to ask a question, please press star and one on your keypad now. At this time, there are no further questions in queue. I will turn the meeting back to Neil Wilkin.

Thank you, Angela. I would like to thank everyone for listening to our Q1 of fiscal year 2026 conference call today. As always, we appreciate your time and your investment in Optical Cable Corporation, and that's most appreciated. I also want to thank the members of the United States Armed Forces and be with them and thinking of them during this period of time. Thank you all.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Good morning. My name is Stephanie, and I'll be your conference operator today. At this time, I'd like to welcome you to Optical Cable Corporation's Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] Ms. Felix, you may begin your conference.

Good morning, and thank you for joining us for Optical Cable Corporation's Fourth Quarter and Fiscal Year 2025 Conference Call. By this time, everybody 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. 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 due to a number of factors and risks, including, but not limited to, those factors referenced in the forward-looking statements 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, Caroline, 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 3-month and 12-month periods ended October 31, 2025, 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 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. Fiscal year 2025 was a solid year for OCC driven by the successful execution of our growth strategies and strong positioning in our target markets. We entered into a strategic collaboration with Lightera that expands our growth opportunities which we believe will be reflected in our top line in fiscal year 2026 and beyond. At the same time, we continue to operate efficiently and benefit from our strong operating leverage to drive gross profit growth. In fiscal year 2025, we realized the benefits of actions we took the previous year as the weakness across our industry during the second half of fiscal year 2023 and most of fiscal year 2024 subsided. As a result, in 2025, we were able to capture new opportunities and deliver consolidated net sales of $73 million. Our net sales increased during each quarter of fiscal year 2025 and compared to the same periods in fiscal year 2024. I'm pleased to share that OCC achieved growth by all measures during fiscal year 2025. Net sales grew by 9.5% and gross profit grew by 24.1%. Gross profit margin increased to 30.9% compared to 27.3% and SG&A expenses decreased as a percentage of net sales, all contributing factors to the significant improvements in operating results compared to fiscal year 2024. OCC benefited from strong operating leverage in fiscal year 2025, and we anticipate this will continue to bolster our results in fiscal year 2026 and beyond. Our manufacturing operating leverage tends to create disproportionate increases in gross profit as net sales and production volumes increase. While both gross profit and gross profit margin can be impacted by product mix, as OCC's net sales and production volumes increase, substantial fixed costs are spread over higher sales volumes. And importantly, manufacturing efficiencies also tend to increase particularly for fiber optic cable production. Gross profit disproportionately increased 24.1% as net sales increased 9.5% during fiscal year 2025. Our SG&A operating leverage also tends to be positively impacted by efficiency -- or excuse me, tends to positively impact efficiency and profitability as net sales increase. Many SG&A expenses are relatively fixed cost rather than varying with net sales, including significant public company costs. As a result, OCC's SG&A expenses as a percentage of net sales typically decrease with increased net sales. OCC's commitment to pursuing new growth opportunities, including expanding our presence in targeted market sectors and the enhancement of our product solutions offerings, including those resulting from our strategic collaboration with Lightera will fuel our future success. As demand for cloud computing and artificial intelligence applications continues to accelerate, OCC is capturing the opportunity by expanding our existing presence and product solutions offerings for the data center market. We have continued to expand and innovate both our fiber optic cable product solutions offerings and our cable and connectivity product solutions offerings. As previously announced in July 2025, OCC and Lightera entered into a strategic collaboration agreement to expand product offerings and solutions especially for the data center and enterprise sectors. As a global leader in fiber optic and connectivity solutions, Lightera has a long history of industry-leading innovation, design and manufacturing capabilities, including the production of high-performance optical fibers. As respected manufacturers in the fiber optic industry, OCC and Lightera have partnered in various ways over many years, and this strategic collaboration builds on that long successful relationship. Through this strategic collaboration, OCC and Lightera expect to benefit from offering expanded fiber optic and copper cabling and connectivity solutions to the enterprise and data center sectors as well as an expanded presence in other sectors. The companies have combined portions of the extensive product portfolios of both OCC and Lightera to deliver integrated cabling and connectivity solutions offerings that will be sold by OCC. In connection with this strategic collaboration, Lightera has made an investment in OCC purchasing shares of OCC common stock from OCC and resulting in Lightera holding 7.24% of OCC's outstanding shares. Looking ahead, OCC remains uniquely positioned in the fiber optic and copper cabling and connectivity industry with differentiated core strengths and capabilities that enable us to offer top-tier products and application solutions and to compete successfully against much larger competitors. OCC is committed to enhancing and leveraging our core strengths and capabilities to drive long-term value for our shareholders. I'd like to highlight a few of those strengths for you today. First is our strong market positions, brand recognition and long-term industry relationships with loyal customers, decision-makers and specifiers, installers and integrators and end users across a broad range of targeted market sectors. Second is our extensive industry experience and expertise in OCC's engineering, sales and business development teams who are well respected for their product an application, experience and expertise, which enables OCC to create and offer its portfolio of innovative, high-performance products. Next, OCC has a growing portfolio of innovative fiber optic and copper cabling and connectivity products and solutions that enable us to meet the unique needs of our customers and end users as they are well suited for the applications in our various targeted market sectors. We have significant availability of production availability at our facilities, supported by knowledgeable and experienced manufacturing quality and engineering teams. Finally, our broad and diverse geographic footprint enables us to sell into approximately 50 countries every year. OCC has earned an exceptional reputation for its service excellence, innovation and entrepreneurial spirit, and we have built a team that embodies OCC's core strengths and capabilities. As we turn to fiscal year 2026, we are optimistic about our growth opportunities, encouraged by our successes this past year and excited to build on the growing momentum we are creating in our targeted market sectors. We look forward to leveraging our strengths and executing our strategies and initiatives to create long-term value for our shareholders. I'd like to thank the OCC team for its hard work, its commitment to OCC and those that count on us. Your contributions to the team's accomplishment this past year have been significant. Much has been accomplished by the OCC team this year, and we are confident we are well positioned for future growth in 2026 and beyond. I'd also like to thank our shareholders for your continued support of OCC. And with that, I'll turn the call over to Tracy, who will review an additional detail on our fourth quarter and fiscal year 2025 financial results.

Thank you, Neil. Consolidated net sales for fiscal year 2025 increased 9.5% to $73 million compared to net sales of $66.7 million for fiscal year 2024 with sales increases in both our enterprise and specialty markets. At the end of fiscal year 2025, our sales order backlog and forward load was $7.3 million compared to $5.7 million as of October 31, 2024. Looking forward, we anticipate additional growth opportunities during fiscal year 2026. We continue to expand our product solutions offering for the data center market as demand for cloud computing and artificial intelligence applications continues to accelerate. Consolidated net sales for the fourth quarter of fiscal year 2025 increased 1.8% to $19.8 million compared to $19.5 million for the same period in the prior year. We experienced an increase in net sales in both our enterprise and specialty markets during the fourth quarter of fiscal year 2025 compared to the fourth quarter of fiscal year 2024. Sequentially, OCC's net sales decreased less than 1% during the fourth quarter of fiscal year 2025 compared to net sales of $19.9 million for the third quarter of fiscal 2025. Turning to gross profit. Our gross profit increased 24.1% to $22.6 million in fiscal 2025 compared to $18.2 million for fiscal 2024. Gross profit margin, our gross profit as a percentage of net sales increased to 30.9% during fiscal 2025, up from 27.3% for 2024. Gross profit margin for fiscal year 2025 was positively impacted by higher volumes as fixed charges were spread over higher sales, the impact of operating leverage. Additionally, our gross profit margin percentages are heavily dependent upon product mix on a quarterly basis and may vary based on changes in product mix. Gross profit decreased slightly to $6.3 million in the fourth quarter of fiscal 2025 compared to $6.5 million for the same period last year. Gross profit margin decreased to 31.9% in the fourth quarter of fiscal 2025 compared to 33.5% in the fourth quarter of fiscal 2024. During the fourth quarter of fiscal year 2025, there was no significant change in the gross profit when compared to the third quarter of fiscal 2025. Gross profit margin sequentially increased to 31.9% in the fourth quarter of fiscal 2025 compared to 31.7% during the third quarter of fiscal 2025. SG&A expenses increased to $23 million in fiscal year 2025 compared to $21.5 million in fiscal year 2024. SG&A expenses as a percentage of net sales were 31.4% in fiscal year 2025 compared to 32.2% in fiscal year 2024. SG&A expenses increased to $6 million in the fourth quarter of fiscal 2025 compared to $5.9 million for the same period last year. SG&A expenses as a percentage of net sales were 30.4% during the fourth quarter of 2025 compared to 30% during the same period of fiscal year 2024. The increase in SG&A expenses during the fourth quarter and fiscal year 2025 compared to the same periods last year was primarily the result of increases in employee and contracted sales personnel-related costs and shipping costs, included in employee and contracted sales personnel-related costs, our compensation costs and sales incentives. While profitable during the second half of fiscal 2025, OCC recorded a net loss of $1.5 million or $0.18 per basic and diluted share for fiscal year 2025 compared to $4.2 million or $0.54 per basic and diluted share for the fiscal year 2024. OCC recorded net income of $49,000 or $0.01 per basic and diluted share for the fourth quarter of fiscal 2025 compared to net income of $373,000 or $0.05 per basic and diluted share for the fourth quarter of fiscal 2024. And with that, I'll turn the call back over to you, Neil.

Thank you, Tracy. We have received a number of questions in advance of the call today. And we believe that those would be an interest to most participants. So we're willing to go through those questions first, and then we will address any remaining live questions from analysts, institutional investors because some of those questions overlapped, we did try to combine them in a manner that we're addressing the core questions that were submitted in the advance. . Caroline, if you could please read the questions. We're happy to provide our responses.

Thanks, Neil. The first question is, 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?

Yes. We believe like others in our industry that the data center markets are strong and will continue to grow. I wouldn't say that it had a significant impact in our fourth quarter, but we believe that it will start to impact us in fiscal year 2026. OCC has a presence in the data center market with established market relationships as well as products. Of course, as you all know, OCC's products are best suited for multi-tenant data centers or MTDCs, and enterprise data centers, sometimes referred to as Tier 2 and Tier 3 data centers. We're currently working to expand our presence in portions of the data center market, and we're optimistic that the data center market, particularly this multi-tenant data centers and the enterprise data centers will provide an opportunity for revenue growth in fiscal year 2026 for OCC. .

Next question is, 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?

Yes, OCC continues to see strength in most of our targeted market sectors. There are certain market sectors where we've seen some projects delayed, but we do not believe that this has negatively impacted OCC's growth this year or that it would negatively impact OCC's growth in fiscal year 2026. We also believe that the continued growth opportunities in OCC's targeted market sectors for fiscal year 2026 continue to be significant. Of course, as we have said in the past and experienced in the past, during the first half of each year, OCC does experience the impact of seasonality. And as of now, we currently expect that to be the case as well.

The next question is whether you believe OCC will have any hyperscale data center opportunities?

We've talked about this before or we've received this question before. And as we've noted, that really, our product solution offerings for the data center market are better suited and best suited for the multi data centers and enterprise data centers. We believe that there's significant growth opportunities in the multi-tenant data centers market segment as well as enterprise data centers, but particularly for the MTDCS. And that will provide significant opportunities for OCC in fiscal year 2026. Yes. I'd also add that -- and Tracy mentioned this in some of her comments, that the multi-tenant data centers also are possibly impacted by the growth -- current growth in cloud computing and artificial intelligence. And so we believe that, that's a true market opportunity for us. .

Next question is, what do you think the potential sales look like for 2026 and 2027?

I'll let Tracy take the financial questions.

Sure. As we said before, we don't provide forward-looking guidance. However, I will say that we are optimistic about potential increases in sales based on the opportunities that we expect to arise in fiscal 2026, particularly during the second half of fiscal 2026. Our belief is based on what we're seeing in our targeted market sectors as well as our expected opportunities to expand in those market sectors as a result of the strategic collaboration with Lightera. .

Next question. 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 do, in fact, inflect higher on the collaboration?

We can't give you a specific formula. As you all know, operating leverage as a result of fixed cost and manufacturing and also in SG&A costs being spread over higher sales. Manufacturing operating leverage is also impacted by product mix sold, which is not a variable that's very easy to predict.

Next question is, Q1 and Q2 are typically the weakest quarter in terms of seasonality. Should we still expect the typical seasonality into 2026? .

As Neil mentioned, we do continue to see a seasonality impact in our first and second quarters, although there can be exceptions particularly if there are larger orders that impact the first half of the year, or unanticipated macroeconomic conditions during the year.

Got it. Next question. 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?

Well, without speaking specifically about the strategic collaboration with Lightera. What I'd say is that OCC products are best suited for Tier 2 or multi-tenant data centers and the enterprise data center market. And so that's really where our focus is, as we mentioned before. And I would not expect that OCC to directly have any significant participation in Tier 1 or hyperscale data centers. Doesn't mean there couldn't be some impact at some level. And of course, those growth in Tier 1 data centers in the market, can impact what kind of growth is being seen in Tier 2 for multi-tenant data centers and other parts of the market. But directly, I wouldn't expect us to have a significant participation at all in the Tier 1 or hyperscale data centers.

In terms of capacity available and any capacity constraints, are there any changes versus what you commented on last quarter? .

We continue to evaluate our capacity. But right now, we believe that OCC has the capacity to capture the growth opportunities that we expect to see in fiscal year 2026. So I think that really answers that question.

Question. OCC has been hiring a lot recently. Can you comment if you have seen any issues to find the right workers? Why you saw the need to hire that significantly? And if this will increase OpEx significantly? .

Yes. I don't know if I'd characterize our hiring recently as significant. We do have a number of open positions that we are seeking to fill, and that's not unusual for that to be the case. Most of those positions are typically in manufacturing. We are fortunate that OCC has a good record of recruiting and retaining needed talent. But I think like a lot of businesses generally, not just in our industry, OCC has seen some additional turnover among newly hired personnel. However, OCC has what we believe is a record of unusually low turnover among our longer-term employees. So we do continue to expect to see hires. I don't expect that to significantly increase operating expense specifically. And of course, we are consistently looking at what expenses we're incurring in order to provide the appropriate staffing as well as the appropriate balance of expense relative to our opportunities. .

Thanks, Neil. Next question is, can you please provide an update on progress of the Lightera collaboration? .

Sure. So OCC and Lightera partnered in various capacities for many, many years. And so it's not surprising because we worked well with them in the past that our new strategic collaboration with Lightera, I believe, is going well. The Lightera team is exceptional. And we think highly of the OCC team as well, obviously. And we believe that the strategic collaboration will create growing opportunities for OCC in fiscal year 2026 and hopefully for -- although I can't speak for Lightera, and for Lightera also.

Last question this morning is, Lightera has recently announced an investment into manufacturing. Is this an indication of strong demand for OCC? .

Well, we can't -- OCC really can increment on announcements that Lightera has made or what their specific business plans are. So I'd leave those questions for Lightera rather than OCC. .

Thanks, Neil. We have no other questions that were provided in advance of the call today at this time. .

Okay. So if those are the questions, I guess, operator, Stephanie, if you could let us know if there's any questions from analysts, and we're happy to answer them. And if you could please, Stephanie give the instructions for the folks to ask those questions, that would be wonderful. Thank you. .

[Operator Instructions] We'll take our first question from Anthony Christ with Odyssey Investments. .

Thank you very much. Mr. Wilkin, I have tried to call 2 or 3 times, I'm located up in Northern Virginia. My question deals with, is there any visibility into whether or not Lightera may refer us some of the SMF cabling, single-mode fiber cabling or the hollow fiber cabling, which is basically Tier 1 products. And if you could -- I know the words -- if you could take a minute and explain what those 2 products are, I'd appreciate it. And then I have a follow-up.

Okay. So Hollow-Core on the -- is the type of fiber that's really looking to reduce latency and increased speed in certain applications. And so that is something that probably is usable in a lot of different applications. And our engineering team would be better able to answer that question, but as a general matter, that's the case. I think that I can't comment on what people are thinking about with respect to or what Lightera is thinking about with respect to how they're going to use that product. But OCC, we partnered with Lightera in a number of different ways, and Lightera is a large fiber producer of various different products that have been leading performance in the industry for many, many years. So again, our products are more focused on the traditional markets that we've had, enterprise, various parts of the enterprise market as well as a number of specialty markets, including harsh environment and military and others. We use some specialty technologies in some of those products. And then in data centers. We've had a presence in data centers before, but now we're focusing on expanding that and leveraging our current relationships and also focusing on expanding our product offering. I don't know if that really helps specifically on your question. SMF, specifically, I think, of just a single mode fiber. So that's a more typical product that would be used in data center, although multimode fiber is also used.

And we'll take our next question from Shawn Boyd with Next Mark Capital.

He said he had a follow-up question, though. Did you want to take that, Stephanie, first? Anthony did.

Anthony, would you like to announce your follow-up?

Yes. Yes.

Your line is open, Anthony. .

Okay. Dare I ask Neil, if those 2 fibers, the SMFs and the Hollow case fibers would make -- were competitive with the Corning fibers? And if any automation, AI would be given us by Lightera to produce them. .

Yes, I'm not the best person to answer the question about how those are going to be used. And there's a whole lot of intellectual property and strategy that goes behind which fibers are going into which applications and what plans the fiber manufacturers have. What I can just say is that Lightera is known for having leading technology in fiber development, everything from the Rollable Ribbon fibers to many, many other types of fibers. They've been a leader in many ways and are well respected in that regard. How they plan to deploy those technologies in different markets, is not really something that we can comment on. And those are questions that will really be left to Lightera, if they choose to answer them, which they may not be because of the proprietary nature of some of that. But Anthony, one thing I guess I would add is if you're asking how they compare to Corning, I would suspect that as with any other competitors, Lightera would have a very favorable view of their products, and I think the market does too.

[Operator Instructions] And we'll take our next question from Shawn Boyd with Next Mark Capital.

Can you hear me okay?

It's a little low, but I think we've been able to make out what you're saying.

Okay. Let's give it a shot here. So historically, the company has been -- has shown real positive seasonality in its October quarter, it's fourth quarter, up double digits sequentially. This year, we didn't quite see that. And I thought I might have heard something about delays. So the question is, were there any project delays or pushouts that might have caused that?

Well, first of all, generally, our seasonality is what we see in the first quarter versus the second quarter -- I mean, excuse me, the first half of the year versus the second half of the year. So I don't have the precise percentage in front of me, but the growth that we would have seen from the second quarter to the third quarter would have been, I would expect in double digits. Sequentially, that wasn't the case from Q3 to Q4, but I would expect Q3 and Q4 to be more equal. Again, with most of the seasonality being impacting the first half of the year and seeing positive increases in the second half of the year. .

And we did see our seasonality this year mirror that from 2024. So for the second half of the year, I think it was 48% in the first half.....

Of total sales.

I'm sorry, 46% of total sales in the first half of the year and the rest in the second half of the year, and that was exactly the same in 2025 compared to 2024.

And we'll be filing our annual report on Form 10-K today, we expect to, in the footnotes, we disclose details about some of the seasonality.

And the MD&A.

The other question that you had was the -- part of the same question you had was, did we see any products that have been delayed impacting the fourth quarter? I don't think that, that was significant. And again, I think that those delays are significant overall. I think there -- and one of the things that OCC benefits from is we're in many, many different markets geographically, in particular market segments. And so sometimes, we'll see big fluctuations in certain market sectors that are not truly visible because they're offset by other fluctuations in other market segments that we're targeting.

Let me just correct the seasonality percentage that I stated earlier, it was 46% in the first half of the year and 54% in the second half of the year. And that was the same seasonality pattern that we saw in 2024 and 2025. .

Okay. So the 46%, 54% is the year we just finished, FY '25? .

Yes, as well as 2024. They were exactly the same. .

Got it. Okay. That color is helpful. Appreciate that. So just as a follow-up, the collaboration with Lightera, which we inked back in July, you indicate that should -- would you start to see that impact the top line in 2026. Can you give us any more color on that? Can we see that in the first half, would it be the second half? And just as a follow-on, why is that taking this long? What is it that -- what are the gating factors before we see the revenue contribution of that? .

Yes. I mean, it's a good question. It also has a lot of details behind it, say specifically what we're going to see in 2026. We don't provide forecast on what we're going to see -- we do think we're going to see a positive impact, and we've stated that. With respect to the collaboration, as you'd imagine, when you're working with companies in a different way that there is a lot of work that goes into that I think that the work is going well and expeditiously and that there's a lot of work that's being done, you'd expect that, that would be the case before it started to impact sales, but I can't, beyond that, comment on what it is. I think that what I'd also -- I don't have the quite percentage -- if you'll just hold on for a second. So there was -- I was just confirming -- you talked about the double-digit increase because of seasonality. If you look at what our performance was in the second quarter of 2025 versus the third quarter 2025, that does create -- that we do see a double-digit increase in sales, which is consistent with the observation that you had made but you wouldn't necessarily expect to see that between the third and fourth quarter because of the seasonality between the first half and the second half, as we described, is fairly consistent.

There are no additional questions at this time. I'd like to now turn it back to our presenters for any additional or closing remarks.

Thank you, Stephanie. I appreciate everyone's questions. We'd like to thank everyone for listening to our fourth quarter and fiscal year 2025 conference call today. As always, we appreciate your time and your investment in Optical Cable Corporation. We hope that you and your families have a wonderful holiday and a happy new year. Thank you. .

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.