OCC - Earnings call transcript Q2 2020 | Optical Cable Corporation

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Operator

Good morning. My name is Christie and I will be the conference operator today. At this time, I would like to welcome everyone to the Optical Cable Corporation Second Quarter 2020 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period [Operator Instructions]. you. Thank turn to now conference the will Mr. over I Palash. go ahead. Please

Aaron Palash

year and Thank Corporation's thank fiscal of By the good earlier a you release should Christie time, second conference everyone this all of earnings Cable and copy Optical morning, you, have call. on for quarter issued press XXXX today. participating

can visit for www.occfiber.com also a You copy.

Neil Tracy On the Chief OCC Chief and Smith, Executive Vice and Financial call with Officer. Wilkin, us Officer President today and Senior are President of

morning's content everyone results remind cautionary number statements differ apply to call this Cable Wilkin. as like call turn and those but begin. forward-looking factors I'd begin, referenced to of over the we in of may today's contain I'll that that Neil including risks, uncertainties. the www.occfiber.com, not may this Before release. a Corporation to and call. statements due press forward-looking materially as The the the of webcast to of limited statements risks factors involve on Internet that, well please to, With These actual future Optical Neil, section

Neil Wilkin

can. you, few Thank will as XXXX remarks. morning, of and month three review begin answer many I month for some ended and we in then detail. your results second the opening the quarter Tracy remarks, additional will with we today six Aaron the call XX, questions Tracy's will period good a everyone. April as After

we will the normal take practice, during Q&A and is As investors from our only questions analysts session. institutional

in time call the regarding such advance our opportunity our submit included in Instructions our other today. of earnings the shareholders However, are announcing of call. date press release offer to we also and submissions questions

occasion to by that is the the created. my time. in many and rising start the challenges face thank to me a challenging acknowledging I the this pandemic of team OCC for COVID-XX the want remarks has Let that

and during essential defense workforce, of workforce is to on to their guidelines our the of We continues Homeland and on has Department infrastructure infrastructure COVID-XX OCC the U.S. and able of our of under which to as obligated base from mitigate safety the and Security industrial operations, and lower at impact steps Infrastructure health families, uninterrupted operate employees the and day an we workforce pandemic, essential a of critical have taken the classified guidelines day have the is a and under COVID-XX to ensure U.S. because Department Security, Cybersecurity employees Defense continued Agency. the volumes. production critical number been our of

negatively production While operate, we COVID-XX and has markets flexibility to was were our Revenues OCC many volumes negatively been continue pandemic. impacted negatively impacted, and financial were impacted in negatively impacted. operations by the of

as our chains, well We disruptions expense, other increased business. some on minor debt experienced in supply our also as pressures bad

As sales year. a compared XX.X% the to quarter our the last result, year second decreased period net in XXXX of same fiscal

to the Excluding the compared of impact the year decreased sales in our first sales of during have one quarter Sequentially, only X.X% increased net the second XXXX. XX.X% net customer, however, second domestic would quarter. revenue quarter fiscal

patriotic OCC know, organization. a all you As is

Our including team and workers, mission healthcare essential facilities, our test is and responders critical incredibly other proud centers country's military, products laboratories. to first to hospitals, support provide

United continue the will users, end and have customers here world. part of both We around the and States to our and our to the meet do needs in

markets. and build certain customer a to pleased base sales in from somewhat are strong other diversified hard worked demand tends mitigate reduced have to We markets that

foundation and business We model. a strong a resilient have

manufacturing OCC and and business of even to operating in on growth operations, expenses. taken times, flexibility, efficiency our across on course leverage We best continuing challenging our are have take these financial positioned focus design uniquely and our actions position our OCC industry. control driving to on during execute build to and is and enhance OCC's initiatives, SG&A effectiveness sales improvements

will competitive into larger confident who the the to with and that, are over our future. quarter review distinct And advantages our will growth and financial year compete OCC our that I'll additional capabilities XXXX profitable facilitate results. and enable turn now successfully second detail competitors Tracy of call fiscal We to Smith in against

Tracy Smith

in market XXXX. the wireless been market fiscal XXXX specialty in $X.X customer XXXX. decreased one fiscal of quarter sales that Consolidated year-to-year. year. half markets, orders in record of Thank XXXX for in net of same net year were million to in for Historically, the the not half due compared XXXX of were second from and $XX was of the result large fiscal this the net customer first you, sales fiscal The decrease a XXXX the second quarter the first net the $XX.X XX.X% have effects economic million XXXX, quarter did and The half of the to Neil. respectively. sales in quarter the levels the from to in a fiscal the enterprise net second year of half quarter the the and million fiscal pandemic. XXXX $XX.X second first the compared number market. of of sales during were Sequentially, impacted million, period COVID-XX negatively second increases and including volatile of same $XX.X to carrier net quarter Consolidated fiscal of first increased fiscal of quarter million net quarter in Net sales year sales second XX.X% to carrier second quarter-to-quarter wireless last in a sales for second million of of the XX.X% first sales XXXX of fiscal for the compared customer from $X.X fiscal markets Net quarter in both net certain the of of $XX.X sales our half in and of of and primarily year decrease and the half the to XXXX. million, year this decrease first first sales

$X.X as or requirement expenses quarter gross in first expenses environment. the basic compared in of compared half fiscal XXXX. of compared basic XXXX a of per profit Turning share fiscal first over These $X.XX and million XX.X% in to the sales half in a half of compared XXXX loss of OCC operating year. half certain to was an quarter achieved sales under the XX, levels with and unsecured during or compared of manufacturing second spread in Gross primarily profit the XXXX million quarter Bank. decreases This were were to XXXX. first and at compared fiscal OCC’s recorded now of Protection a was were On and of second when second sales $X.X as $X.XX million Pinnacle lower beneficial quarter as result this Programs. collectability fiscal net first of a partially employee for $X or quarter XXXX, XX.X% costs, percentage of of in letter pandemic principally for decreases leverage, in amount fiscal Gross offsetting over percentage agreement half costs of net last period XXXX obtained fiscal of per of the to to a XXXX, of a amended second diluted and XXXX. first for pressure of of is half a improvements the $X.X fiscal secure $X.X OCC compared to basic second fiscal $X.X for in the the second SG&A gross or quarter profit. quarter the first or to net quarter related of more XXXX Roanoke expenses year. same $X.XX profit fiscal lender to XXXX loan quarter first XXXX second XXXX XXXX production to achieved net to decreased that the net SG&A and levels, net diluted including of the XX.X% the Pinnacle and was Gross loan commitment the net facility. the we the XXXX. as $X.XX compared expense fiscal XX.X% or half company's gross XXXX company’s second throughput is Gross of the credit in higher to million and SG&A required. X, margin net sales in XXXX sales of expenses the during profit per diluted certain of million million per margin fiscal fiscal refinance as of The in profit loss bad debt fiscal reductions equity for of quarter which offset April during commitment XXXX. financing was of $X.X was same efficiency gross in XX, of basic company or XX.X% a fiscal fiscal $XX.X the increase percentage of XXXX. and of XX% by in compared $X in prior commissions year profit of about during million share half sales other X.X% to part and significant were and sales. costs XX.X% to XX.X% loss SG&A for remove first same the higher diluted decreased primary due expenses. revolving to million and period as million $XX.X share tend profit Bank XXXX. million $XXX,XXX second percentage profit half fiscal Payckeck the million first quarter the spread during in decrease a of half second an Gross the was cost fiscal recorded credit fixed the The second first thereof expenses the XXXX million share unprecedented of XXXX. be last margins incentives year fiscal the the $X.X agreement to higher notes first in in net credit employee customer period April half compared production compared fiscal the SG&A previously SG&A On the to productions was sales, this $X.X XX.X% loss XXXX, of the last margin higher downward combination accounts factor the the to on concerns to of putting as fixed May the for fiscal to

However, our another source for continuing to are we revolver. to financing of work obtain

we $X credit of As XX, outstanding had million borrowings of notes. XXXX, April revolving our on

I that, balances real $X.X with under back outstanding million $X our Neil. will of and the loan had call million turn loan. to loans also PPP our We over term estate on And

Neil Wilkin

if have in participants to Tracy. questions we're taking again, have you, Christie, questions, please could And to Thank you if instructions I investors. any now only they indicate may from call any institutional you happy for answer and appreciate we're would questions analysts it. And live the them.

Operator

time, over Neil, have at we no you. [Operator this And questions. the to hand Instructions] floor I

Neil Wilkin

thank have know you. Aaron, submitted investors. I we individual by questions Okay, some

those us go could through you If answer we'll with those questions.

Aaron Palash

That sounds good.

Does compete first domestic sources? one. foreign OCC Here's or with the

Neil Wilkin

We have in see our don't and buy international amount folks, particular, in a significant and to we of, in sources, that We're both of of in the U.S. of foreign most fortunate we the domestic markets. competitors from don’t customers domestic a lot see tend sense lot competitors.

Aaron Palash

a competitive China question, pressure specifically pricing? China on Next been and put force has has

Neil Wilkin

quality, or from the experience countries. I we internationally don't that in. lot before, pressure, and competition markets position in manufacturers. performance, see you We and more was and in than our to pressure And do have fortunate the tend to both international of customer fact participate SEC leading is tends specific as pricing based on markets where on product before price. would We're rather the that We price pricing mentioning from a service international to domestically

markets. the that so impact our pricing helps of of pressure in some to And mitigate

Aaron Palash

the becomes more Next with XG involved XG it used from in advances as years OCC widely is to and could come? question, and benefit OCC

Neil Wilkin

Yes.

technologies. that. in going in doing OCC that the we over we growth we expansion in been of So are those, suited big position expansion benefits We wireless talking so obtain the ourselves our overall. to XG. and XG believe we're in for ways to position the XG ourselves that that contributor participate participated carrier everyone XG best industry is our of into that market can a that. of best of can well to various XG products has the and is have working are so And be extension about Certainly, is And years an we again, to

Aaron Palash

desire increased seen question, OCC has Next to USA more sourcing? do any

Neil Wilkin

too where words, certainly, the customer would buy But of buy I’ll someone things haven't In says service I to better foreign think from do locally sourcing a but and to because many source had other provide domestic specifically. source. advantages from is able you're we're normally level domestically so. we continue Not a one of and I’d of we'll instances a that high OCC,

Aaron Palash

OCC does market? carrier question, anything Next market the wireless through

Neil Wilkin

ourselves I mean believe positioning and mentioned markets. do be a to little sell in, But in that more more to volatile we talked some well. We've that we wireless do operate obviously, the before, and as and extension previously market tends into and the the market XG bit we market participate carrier market. I participate wireless or certainly sell to markets volatile our are by hope we of about as into the of some carrier than other

Aaron Palash

you down SG&A Next sequentially? the increase XX% question, expenses can in break

Neil Wilkin

Tracy that is take going to one.

Tracy Smith

increase That expense things the the materials company primarily Also, have occurred during Sure. bad SG&A we the proxy in expense like debt I my timing second of that based during such Okay. recorded was this mailing requirements our public that during that generally other occurred as quarter things related to reporting comments. that increase that including referred year, we in fluctuations certain on quarter. and to and obligations,

Aaron Palash

compensation so, costs second was the brought are employees? individuals And headcount into a the has Have by also quarter reduced second question, COVID quarter? in any and its back? in there you during Next third OCC quarter? employees experienced any reduction If the amongst

Neil Wilkin

not where our any have Let one have me We've had take first. the fortunate we last employees instances COVID-XX. been contracted that

As working all sure employees work see practices our those environment of practicing and our careful very with safe. keep at their we've to they're that travel talked even folks families that employees make and for working social social safe you are limiting about distancing they're outside visitors, limiting our before, about also and that and their facilities, distancing of we're to as

look something We fact a have not needed the always headcount, and that's loan have but would PPP to at think would the have that was possibility I we specifically reduced sooner, secure. been SBA, for

those let was keep long-term we and And so employed helpful workers when you do as from we're have the allowing as ensuring people off risk a well loan on best its in OCC earnings continue as critical business us doesn't basis, continue folks our making the at that the with skilled focused to don't year. the served terminate, make is flexibility COVID-XX and company, temporary off our impacting at this look to basis. company sure look OCC, standpoint, to this on a what managing lay the and issues. on our That on for to positioning purpose furlough because we impact of for the that pandemic of the or of also we're a as you And off short-term mass we'll well due of and those future, hope issues more the and particularly capabilities sure financial long-term to mean

an So issue. part obviously, we asked was, point that specifically that go at last you you hasn't back? hasn't of question have brought people the this let Aaron been haven't been, And point, people since

Aaron Palash

the can question, Next bad debt you quarter expense? second talk about

Tracy Smith

would many analysis some markets, difficulty meeting certain when have the including during their apparent doubtful for serve. obligations. has XQ it of became COVID-XX allowance impacted course accounts, more we completing those of of But our customers

we in of earnings to reflect our believe as this the that do on can to amounts recovery periods. best in obviously ability, the extent this account collect We're future these for work to necessary to going the and account debt the so, accounts that So we bad quarter. the we’ll doubtful to extent to our estimated we possible

Aaron Palash

bit and longer from Next from increase? about expect down to question, October the term, a should inventories inventory talk can levels, were down they we January? Over you

Tracy Smith

customer to maintain inventory We demand. appropriate our meet

timing each Our the manner placed inventory how the of material orders place the quarter, of well raw on levels those orders. orders, as business and our receipt timing the and based fluctuate the by sales of nature of and as of us because customers

our quarter fluctuate So can from fluctuate and quarter. to quarter from quarter inventory does to

Aaron Palash

press you that your Next the PPP where are abbreviated the question, and in accompanies release, sheet you balance showing loan?

Tracy Smith

the forgiven A in expected portion in that non-current later file reflected remainders and in more, and in to XX detail today. would the months, expected to of be the is liabilities we this in a loan if repaid next current not be little that more amount be able liabilities. see in to more And you'll XX-Q clearly the the

Aaron Palash

the Can you Roanoke and update relative of give your production at the throughput us expectations? facility an efficiency to improvements

Neil Wilkin

manufacturing, marketing, bringing initiatives, focused reasons, sure to of up on in we're more volumes. that. we're I sales make as my and our of of negatively diligently SG&A we've that facility that is processes. work pay you profit and make spent improve XXXX a higher maybe that effective happened go in year very operations, costs, working then production had which really as as and know, evident fiscal production but What's done would more manufacturing volumes means in efficiency level fixed is because well those to less margin both be gross gain our there always XXXX. And normalized in continuing benefits that manufacturing particularly our we systems, specifically our And and believe back even we've to improvements is XXXX year fiscal year, if As development that some we and the all in changes impacted, make our our in ourselves and in the in to down to other that's to of this mentioned remarks, one the with improve business

seen have with we the we as those to benefit the the future, lot we and see see of benefits will the improving manufacturing. continuing increase. volumes we're And So to in initiatives, respect sales believe of benefits see

Aaron Palash

There recent What to view? buyer. is that may was strategic itself a suggesting a sell your OCC to need

Neil Wilkin

yet give, I’ll that the article give give first answers I about companies say the, I I’m seen look the answer. OCC I'll mean to it. standard to to the and able same to are I that flexible question but haven't I'll companies that on buyer. M&A questions fairly will focused And But public suggest that ourselves and to our the may of adjust the saying in need circumstances. start strategic that by operations we varying for we proud is sell are fact

past we that which believe we’re where in no, comment So for of can What a say that, to situation maximize we shareholder is way we looking to buyer. at already other value, said. I a those M&A sorts don’t strategic are be matters continually to But it'd opportunities. what than to best I've need include the on me sell would inappropriate

Aaron Palash

That was the final question.

Neil, wrap to So it to the you I'll back turn call.

Neil Wilkin

Well, participating families all for OCC. you thank Aaron. your you, will, you hope the Okay. in call your safe. I and will interest you today. thank I And on everyone stay appreciate I

Operator

This does today's conference conclude you. Thank call.

You may now disconnect.

Optical Cable (OCC) 12 Jun 202020 Q2 Earnings call transcript