Optex Systems (OPXS) - 2025 Q1 - Quarterly Report

Financial Performance - Total revenues for the three months ended December 29, 2024, increased by $1.2 million, or 17.7$0.4 million, or 26.4%, primarily due to changes in product mix and higher revenue against a fixed cost base at the Applied Optics Center segment[112]. - Operating income for the three months ended December 29, 2024, increased by $0.4 million compared to the prior year period, driven by higher revenue and gross profit[113]. - Net income for the three months ended December 29, 2024, increased by$0.4 million to $0.8 million, compared to$0.4 million for the prior year period[119]. - Adjusted EBITDA for the same period increased by $0.4 million to$1.1 million, compared to $0.8 million for the prior year period[119]. - For the three months ended December 29, 2024, total revenue increased by$1.2 million or 17.7% to $8.2 million compared to$6.97 million in the prior year period[132]. Orders and Backlog - The company booked $6.0 million in new orders during the three months ended December 29, 2024, representing a 40.6$10.1 million in the prior year period[122]. - Orders for the Optex Richardson segment decreased by $3.6 million, or 58.1$42.0 million, a decrease of 6.7% from $45.0 million as of December 31, 2023[126]. - Orders for the Applied Optics Center decreased by$0.5 million, or 12.8%, from the prior year period, primarily due to order timing[125]. - Optex Richardson backlog increased by $1.7 million or 5.8$31.0 million as of December 29, 2024, driven by higher customer demand for periscopes[128]. - Applied Optics Center backlog decreased by $4.7 million or 29.9$11.0 million as of December 29, 2024, attributed to the timing of customer orders[129]. Supply Chain and Labor Issues - Optex Systems, Inc. reported significant increases in the costs of aluminum, steel, and acrylic commodities, negatively impacting net income for the quarter ended December 29, 2024[104]. - The company experienced material shortages affecting periscope products, which have delayed production and delivery schedules[106]. - The fiscal year ended October 1, 2023, and the first half of the fiscal year ended September 29, 2024, were marked by significant supplier delays and labor shortages[106]. - Forward-looking statements indicate expectations of continued challenges due to supply chain issues and material costs, impacting future financial performance[96]. - Improvements in the local labor market since 2023 have allowed Optex to increase its direct labor force and employee overtime, contributing to better supplier performance[107]. Contracts and Government Relations - Optex Systems, Inc. primarily manufactures products for the Department of Defense, with less than 1% of revenue related to resale of products manufactured by others[99]. - The company is both a prime and sub-prime contractor to the Department of Defense, with contracts also serving foreign governments[100]. - The U.S. military spending trends indicate a significant reduction in spending for ground system military programs, directly impacting revenue for the Optex Systems Richardson segment[108]. Financial Position and Assets - As of December 29, 2024, the company had working capital of $15.9 million, an increase from$15.1 million as of September 29, 2024[137]. - The company acquired certain intellectual property related to the Speedtracker Mach product line for $1 million, with potential additional payments based on future milestones[143]. - The company has a deferred tax asset valuation allowance of ($0.8) million against deferred tax assets of $1.7 million, resulting in a net deferred tax asset of$0.9 million as of December 29, 2024[155]. - The valuation allowance for deferred tax assets is due to historical losses and may not be fully recognized due to IRS Section 382 limitations related to a change in control[155]. Warranty and Loss Reserves - As of December 29, 2024, the company accrued warranty costs of $22 thousand, down from$52 thousand as of September 29, 2024, due to lower-than-expected warranty returns[153]. - The company had contract loss reserves of $213 thousand as of December 29, 2024, compared to$259 thousand as of September 29, 2024, primarily related to older legacy periscope IDIQ contracts[154]. - During the three months ended December 29, 2024, the company recognized $7 thousand in loss reserves on new contract awards and reduced existing loss reserves by$53 thousand[154]. - The company monitors actual warranty costs incurred against expected values on a quarterly basis and adjusts estimates accordingly[153]. - The company has not experienced significant changes to warranty trends in the past three years and does not anticipate significant impacts in the near term[153]. - Future taxable income forecasts related to deferred tax assets are subject to change due to market conditions and profitability uncertainties[155]. General and Administrative Expenses - General and administrative expenses increased by 7.2% to $1.2 million for the three months ended December 29, 2024, compared to$1.1 million in the prior year[135]. - The company generated operating cash of $2.8 million during the three months ended December 29, 2024, primarily driven by higher net income and collections against accounts receivable[137]. Accounting Estimates - The company’s accounting estimates involve significant estimation uncertainty and may materially impact financial condition or results of operation[156].