Optex Systems (OPXS) - 2025 Q2 - Quarterly Report

Financial Performance - Net income for the three months ended March 30, 2025, increased by $0.7 million to $1.8 million compared to $1.1 million for the prior year period[113] - Adjusted EBITDA for the three months ended March 30, 2025, increased by $0.8 million to $2.4 million compared to $1.6 million for the prior year period[113] - Net income for the six months ended March 30, 2025, increased by $1.1 million to $2.6 million compared to $1.5 million for the prior year period[114] - Adjusted EBITDA for the six months ended March 30, 2025, increased by $1.2 million to $3.6 million compared to $2.4 million for the prior year period[114] - For the three months ended March 30, 2025, total revenues increased by $2.2 million, or 25.9%, compared to the prior year period[119] - For the six months ended March 30, 2025, total revenues increased by $3.4 million, or 22.2%, compared to the prior year period[120] - Consolidated gross profit for the three months ended March 30, 2025 increased by $0.8 million, or 31.4%, compared to the prior year period[121] - Operating income for the three months ended March 30, 2025 increased by $0.9 million, or 65.0%, compared to the prior year period[122] - The gross margin for the three months ended March 30, 2025 was 31.3%, compared to 30.0% in the prior year period[121] - The operating income margin for the three months ended March 30, 2025 was 20.8%, compared to 15.9% in the prior year period[122] - For the six months ended March 30, 2025, total revenue was $18.93 million, an increase of $3.4 million or 22.2% from $15.49 million in the prior year[138] - The gross margin for the six-month period ended March 30, 2025, improved to 29.0%, up from 27.4% in the prior year, with gross profit increasing to $5.5 million[141] Revenue and Orders - The increase in net income and adjusted EBITDA is primarily driven by increased revenue and gross profit[115] - During the six months ended March 30, 2025, the company booked $15.7 million in new orders, representing a 12.3% decrease over the prior year period[125] - Optex Richardson segment orders decreased by $2.2 million, or 19.8%, compared to the prior year period[125] - The company experienced a 500.0% increase in Day Windows orders during the six months ended March 30, 2025[127] - The Applied Optics Center orders remained flat compared to the prior year period[125] - As of March 30, 2025, total backlog was $41.1 million, a decrease of $3.1 million or 7.0% from $44.2 million as of March 31, 2024[128] - Optex Richardson revenue increased by $2.0 million or 47.8% for the three months ended March 30, 2025, driven by increased production volume in the periscope product line[133] Production and Supply Chain - The company has increased periscope production levels by 50% over the fiscal year 2024 level due to improvements in labor market and supplier performance[106] - Significant material shortages were experienced during the fiscal year ended October 1, 2023, affecting production levels and delivery dates[105] - Approximately 7% of the Optex Richardson segment backlog consists of items priced prior to 2021, which has been affected by rising costs of aluminum, steel, and acrylic commodities[104] - The company does not anticipate significant material risks from recent tariff uncertainties, as most defense products are sourced domestically[107] Contracts and Opportunities - The company is both a prime and sub-prime contractor to the Department of Defense, with contracts covering various military applications[99] - The Company announced a $5.7 million award for laser filter units for the Applied Optics Center, expected to increase total backlog to $46.8 million[129] - The Company is pursuing international and commercial opportunities while reviewing potential new products to utilize existing production capacity[131] Financial Position and Cash Flow - As of March 30, 2025, working capital was $17.9 million, an increase from $15.1 million as of September 29, 2024[143] - The Company expects to generate net income and positive cash flow from operating activities over the next twelve months, but uneven revenue levels could create a working capital shortfall[152] - The Company entered into a Business Loan Agreement for a revolving line of credit of $3 million, with an interest rate of 7.07% per annum as of March 30, 2025[153] - The Credit Facility replaced a prior $2 million line of credit, and as of March 30, 2025, there was zero borrowed under the Credit Facility[155] - The Company is in compliance with all covenants under the Credit Facility as of March 30, 2025[154] Acquisitions and Costs - On January 18, 2024, the Company acquired intellectual property related to the Speedtracker Mach product line for $1 million, with potential future payments based on milestones[149] - The acquisition included transaction costs of $30 thousand, with a total earnout payment of $238 thousand contingent on achieving revenue milestones[150] - As of March 30, 2025, the Company had accrued warranty costs of $106 thousand, an increase of $54 thousand from $52 thousand as of September 29, 2024[157] - The Company recognized $11 thousand and $18 thousand in loss reserves on new contract awards during the three and six months ended March 30, 2025[158] - The Company had $226 thousand and $259 thousand of contract loss reserves as of March 30, 2025, and September 29, 2024, respectively[158] - The Loan Agreement requires the Company to maintain a fixed charge coverage ratio of at least 1.25:1 and a total leverage ratio of 3.00:1[154]