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…

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…

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.