Optex Systems (OPXS) - 2024 Q2 - Quarterly Report

Financial Performance - Net income increased by $0.6 million to$1.1 million for the three months ended March 31, 2024, compared to $0.5 million for the prior year period [123]. - Adjusted EBITDA rose by$0.9 million to $1.6 million for the three months ended March 31, 2024, compared to$0.7 million for the prior year period [123]. - For the six months ended March 31, 2024, net income increased by $1.2 million to$1.5 million, compared to $0.3 million for the prior year period [124]. - Adjusted EBITDA for the six months ended March 31, 2024, increased by$1.8 million to $2.4 million, compared to$0.6 million for the prior year period [124]. - The increase in net income and adjusted EBITDA is primarily driven by higher revenue and improved gross profit performance across both operating segments [125]. - For the three months ended March 31, 2024, total revenues increased by $2.1 million, or 33.8$5.1 million, or 48.8%, compared to the prior year period [129]. - Consolidated gross profit for the three months ended March 31, 2024 increased by $1.0 million, or 64.6$2.0 million, or 86.9%, compared to the prior year period [130]. - Operating income for the three months ended March 31, 2024 increased by $0.7 million compared to the prior year period [132]. - Operating income for the six months ended March 31, 2024 increased by$1.6 million compared to the prior year period [133]. - Total revenue for the three months ended March 31, 2024, increased by $2.1 million, or 33.8$8.5 million compared to the prior year period [142]. - Total revenue for the six months ended March 31, 2024, increased by $5.1 million, or 48.8$15.5 million compared to the prior year period [148]. Orders and Backlog - The Company booked $17.9 million in new orders during the six months ended March 31, 2024, representing a 6.3$1.2 million, or 6.3%, to $17.9 million compared to the prior year period [137]. - Optex Richardson orders decreased by$3.5 million, or 24.0%, primarily due to a prior year award for $3.4 million in sighting systems for the Government of Israel [137]. - Applied Optics Center orders increased by$2.3 million, or 51.1%, driven by higher demand for laser filter units [137]. - Backlog as of March 31, 2024, was $44.2 million, an increase of$2.6 million, or 6.3%, from $41.6 million as of April 2, 2023 [138]. - Optex Richardson backlog increased by$4.7 million, or 18.7%, to $29.9 million as of March 31, 2024 [139]. Financial Position and Capital Management - The company moved its line of credit from PNC Bank to Texas Capital Bank, increasing the available line of credit to$3.0 million from $2.0 million [118]. - The Company had working capital of$13.6 million as of March 31, 2024, compared to $13.5 million as of October 1, 2023 [153]. - As of March 31, 2024, the Company reported a backlog of$44.2 million, reflecting an increase of 5.7% from $41.8 million on October 1, 2023, and 6.3$41.6 million on April 2, 2023 [155]. - The Company had approximately $0.3 million in cash and an outstanding balance of$0.5 million on its line of credit as of March 31, 2024, with accounts receivable totaling $3.7 million expected to be collected in Q3 fiscal 2024 [156]. - The Company plans to utilize current cash and available credit to fund inventory purchases to support backlog growth and anticipated revenue over the next twelve months [158]. - The Company has a revolving line of credit of$3 million with Texas Capital Bank, expiring on May 22, 2025, with an interest rate of 8.08% per annum [164]. - The Company has an authorized balance of $560 thousand remaining for its stock repurchase program as of March 31, 2024, with no repurchases made during the six months ended March 31, 2024 [166]. Acquisitions and Liabilities - The company acquired certain intellectual property and technical information related to the Speedtracker Mach product line for$1 million in cash, with potential future payments based on milestones [114]. - On January 18, 2024, the Company acquired intellectual property related to the Speedtracker Mach product line for $1 million in cash, with potential future payments based on revenue milestones [159]. - The acquisition included transaction costs of$30 thousand and a contingent liability of $86 thousand, with a total earnout payment of$238 thousand contingent on achieving revenue milestones [160]. - The fair value of a contingent liability related to an earnout agreement was $86 thousand as of March 31, 2024, with a total potential earnout payment of$238 thousand [115]. Operational Challenges - Recent supply chain disruptions have extended supplier delivery lead times, affecting operations and expected delivery dates [116]. - The Company anticipates continued material shortages and increased costs for aluminum, steel, and acrylic commodities, negatively impacting margins over the next three years [116]. - As of March 31, 2024, the Company had accrued warranty costs of $69 thousand, down from$75 thousand as of October 1, 2023, due to lower shipments and favorable changes in estimates [169]. - The Company recognized a gain of $120 thousand on changes in estimates for contract loss reserves during the three months ended March 31, 2024 [170]. - As of March 31, 2024, the Company had 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 [171].