OCC - Earnings call transcript Q3 2020 | Optical Cable Corporation

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Operator

Good morning. My name is Maria, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Optical Cable Corporation Third 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. you. Thank Instructions] [Operator Mr. begin may your you conference. Palash,

Aaron Palash

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

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

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

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

Neil Wilkin

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

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

to place press the OCC and in of of for call the to a be we However, Instructions we safety thank our want year health both have will safe to the our in at taken precautions continued adhering and home diligence of keep the work employees healthy. continue are our XXXX we submit today. OCC locations, submissions in COVID-XX and We've number their free. able our uninterrupted advance we three through been its and release volumes. all at date that earnings such a of and which questions also production remain and on to families for COVID at call. continues lower all have of us. announcing at and ensure the team offer our I to of to this in challenging It we've our diligence the but on continued regarding is time to to impact day-to-day opportunity employees other mitigate operations, steps of shareholders included

and COVID-XX mission-critical mentioned second I workforce, our our are ensure we not workers defense obligated pandemic Infrastructure As the Department This from operate to under of an Agency. -- call, workforce workforce classified essential is U.S. is our guidelines Cybersecurity critical because during the in of industrial-based and OCC Defense continues our a quarter conference workforce essential Security critical of guidelines the Homeland first infrastructure of XX, Security, infrastructure and the by anniversary humbled and Department U.S. essential as the country's responders light deeply reminded we and job a is facilities everyday, tomorrow XXth and other is something we that importance are of of healthcare supply in especially take to that lightly of products the September but of to of being responsibility hospitals. do the our uninterrupted military, including under

to be negatively in impacted of decreases continue in revenues demand operate in partially COVID-XX strength customers we to have related many reduced specialty to offset helped and from resiliency offering markets quarter COVID-XX pandemic. certain and of operations industries. This That particular those both have our to experienced in the our causing customers the production to seen our strong said, we has other due markets continue as we volumes to while sales

to to compared quarter our the and XXXX. Roanoke third are for important Despite decreased compared production year sales facility. efficiency XX.X% benefiting a last Sequentially decreased we've at progress our these from enhanced X.X% made headwinds, year. of sales As quarter improvements the period net in fiscal XXXX fiscal and throughput the third the production result same quarter second cost net reductions, year

company also on capital, our position new XXXX. up revolving with calculation. We of by our the million, model. before, flexibility of and principal proven as our for OCC capital foundation Mill availability our credit successfully focused operating to strengthening $XX This while allows refinancing amount resilient made facility borrowing aggregate on has strong fiscal to serve with uniquely important progress as financial positioned efficiently based OCC maximum the greater remain a continues continuing year industry as provides customers. in North quarter business our working Further a during with a a have and we Capital possible, based The working to needs. financial be OCC third we revolver

with future facilitate our additional our We the further larger enable the second to our confident quarter our strengthen compete competitive are ultimately results. recovery review year markets. post detail capabilities, and positioning economic pandemic call that, who over both XXXX profitable initiatives successfully against advantages, in turn our into financial will to that I'll market competitors underway And in Tracy of OCC Smith, fiscal and growth, will now distinct

Tracy Smith

decrease XXXX. months did $XX.X first to number fiscal in net the of to period to The nine primarily the this were XXXX quarter nine due recur pandemic. year quarter year. from Consolidated the last of of million, of sales year of customer compared this $XX.X $XX.X quarter the same Consolidated large COVID-XX a decreased fiscal million, economic from fiscal first a net first the of during XXXX. of fiscal to third nine million Neil. market million XX.X% Net first of for volatile of for fiscal compared customer million decrease months for XXXX negatively in sales of net of the sales sales primarily nine sales XX% sales net carrier impacted to months levels third the in the decrease for fiscal year the in effects months of XXXX. Net that and the the you, XXXX, orders of fiscal XXXX were nine XXXX $XX.X one net the Thank months the were have $X.X fiscal in year-to-year. been net during of result Historically, from sales same quarter-to-quarter of year was first customer sales the wireless at not third the

operations first the We OCC months net COVID-XX were during impacted XXXX which customers reduced of and believe many businesses by pandemic, also sales negatively including significantly year fiscal of suppliers. or ceased the nine

million expenses approximately net third the higher first fixed higher Gross compared last net nine third the $X.XX costs recorded recorded per OCC over XXXX. percentage XX.X% months XXXX. basic million of or and first profit $X.X profit year increase accounts the our nine and Roanoke Capital. months in company XXXX nine improvements This beneficial due certain XX.X% the during primarily nine fiscal decreases to million XX.X% year. third $X.X partially months for XX.X% same per in and incentives as $XXX,XXX XX.X% this gross of costs. OCC of or spread the Gross along sales XXXX. XXXX SG&A with or XXXX, share in fiscal nine collectibility of months higher compared the were fiscal months into first be July to owned diluted share fiscal which the $X $X.X levels $X.X diluted nine in the Pinnacle the factor compared or nine for in sales quarter facility. fiscal third sales. months production of gross the SG&A third on of quarter year. These expenses to $X.XX entered of Gross a XXXX same third compared about Gross agreement sales bad net diluted Mill margin SG&A SG&A million XX.X% lower expense when XXXX. by XXXX expenses period the third sales in as Bank was result third XX.X% other quarter fiscal the higher fiscal of XXXX. third compared nine were of employee XX.X% in to the fiscal achieved XX.X% million commissions first the of $X.X loss of in XXXX the fixed last as environment. third the third million XXXX, security million our compared net focused the basic of of $X.X its basic Gross of efficiency compared net operating profit $X.X profit a expenses and XXXX, diluted decreases quarter sales offsetting nine XX.X% in SG&A costs pressure million of fiscal XXXX in $X costs, fiscal fiscal quarter for quarter percentage expenses first months credit last net of loan as decreased quarter XXXX. production quarter of as net a of fiscal first unprecedented and million of was note reductions to net in fiscal or the first the On profit. a over margin, achieved to million $X.X in to certain period and expenses Turning gross loss months pandemic throughput the loss is the tend a in and the and to gross or fiscal share in fiscal including $XX.X a our of million as fiscal net quarter profit to with XXXX share XXXX with months approximately the loss revolving of the profit XXXX. quarter to percentage during margin, of months reductions $X.XX OCC was cost we as and SG&A $X.XX to principally XXXX a during of profit of and for of on XXXX were to was employee-related sales in compared and sales per profit in first margins nine compared subsidiaries to first net significant fiscal controlling terminated same and months customer was The was for of compared for were North the manufacturing per a spread downward to period fiscal of $XX.X decreased fiscal primary at year fiscal leverage, the company's XXXX. of during first quarter to debt a offset million levels decrease basic are first wholly of the of putting nine and compared million an to $XX percentage during concerns

credit million refinancing promissory also a on North provided of a the with into working of up master entered transaction part As a based based Mill maximum OCC note that capital aggregate amount principal revolving to availability with $XX calculation. borrowing

July of million As XXXX, $X.X of note credit had available outstanding and borrowings our $X.X we million XX, in on revolving credit.

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

Neil Wilkin

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

Operator

no or you. Wilkin turn Thank [Operator for to Neil like floor I'd showing And additional this closing at questions the Instructions] back remarks. I'm over any to time.

Neil Wilkin

morning accept Okay. in call. we of writing Thank the Maria. you, Aaron, prior this to course questions submitted

and have we them you go to off and think ahead some read received please? I Could respond those questions. we'll

Aaron Palash

Yes.

We have questions. few a received

first a did OCC consultant is XXXX? one compensation The new hire in

Neil Wilkin

with compensation has same periodically been to as a based committee Okay. with know use They in done no. Short compensation there -- -- consultant hires compensation use change has that utilizes past. that the design independent consult one remaining years, not team. them all uses to CFO a always in committee CEO entire is, that's members been currently same across that assist who evaluate and We and the The structures and answer as is the the OCC targets. you compensation. setting and compensation data the company couple of and setting is that on compensation of consultant provides but last committee performance the the that using on still the proper do focuses hitting the -- the compensation compensation incentives in and compensation used consultant levels others has for we provide the we're The leadership

questions compensation bit how that have you compensation If be compensation, statements, about view some committee our that, little describe we and views reference. a proxy helpful a more in we should how the

Aaron Palash

Great.

Next David have yet? the company does with question Goode a role

Neil Wilkin

as Norfolk than region OCC Roanoke. investor an investment. is in Roanoke, Southern, Goode a an he expressed shareholder other of in company. when even No, former and interest the proud a as course, as his to that interest he's And native has And Roanoke. David President of and an always a Chairman the say he's in left we're expressed appreciate and of

Aaron Palash

generate significant you years? Do over next several to income Great. expect royalty the

Neil Wilkin

this want to take you one? Tracy, do

Tracy Smith

Sure.

are protect our – that We generating royalty place significant royalty to our continue at currently time this this importance licenses time. and new income significant to We product at patents have innovations. don't development using on

expect While will the I in of a meaningful increased this royalties to over an it near-term, say revenue long be whether time term. we stream revenue source at become don't can't the

have enabling revenue technology have believe in granted possibly and for the and our connectors, We certain could will value license OCC CatX patents which future. generate for future been royalty to related products we

Aaron Palash

on Okay. stock? when Do have Last line you question. will time a you repurchase

Neil Wilkin

Do you take one, that want Tracy? to

Tracy Smith

Sure.

to noted repurchases notice, we to and file retire is to be expect shares. has going repurchase plans no today, or current in future which until XX-Q, the has our As company suspended later

our uncertainty right program can't now. market environment Given continuing really about the speculate created the market we repurchase – COVID-XX, by current including

Aaron Palash

on the submitted it That's questions.

Neil Wilkin

Well, you, like today. our to third listening I quarter for to conference Okay. Aaron. would everyone thank call thank

appreciate Corporation. to your in you always, continue we Optical Hope interest be And we As time your your families and time Cable thank and you safe. for your today.

Operator

and does ladies today's you, conclude call. This conference Thank gentlemen.

day. You have wonderful a may now and disconnect

Optical Cable (OCC) 10 Sep 202020 Q3 Earnings call transcript