Optex Systems Q1 Earnings Call Highlights

Core Insights - Optex Systems reported first-quarter fiscal 2026 results showing higher revenue and order growth, but faced margin pressure due to legacy programs and increased costs [4][7] - The company anticipates that the first quarter will represent the lowest profitability of the fiscal year, with expectations for sequential improvement in operating results as margins recover and revenue increases [1][7] Financial Performance - Operating income was $0.1 million, down from $0.9 million in the prior-year period, while net income was $0.2 million and adjusted EBITDA was $0.7 million [1][7] - Revenue for the quarter reached $9.1 million, reflecting an 11.6% year-over-year increase, but gross margin declined to 22.9% [3][7] - General and administrative expenses rose to $1.9 million, primarily due to higher labor costs, stock compensation, and professional services [2] Segment Performance - Optex-Richardson revenue increased by 55.9% year over year, driven by higher periscope production and increased XM30 activity, while AOC revenue declined by 20.1% due to lower volumes [6][8] - New orders totaled $7.9 million, up 31.7% year over year, with Optex-Richardson orders rising by 46.2% [15] Capital Investments and Stock Buyback - The board approved a new stock buyback program authorizing up to $10 million, replacing the prior program [5][17] - Management plans to invest approximately $2.4 million in fiscal 2026 for capital improvements aimed at expanding capacity and supporting new product development [19] Balance Sheet and Cash Flow - At the end of the quarter, the company had $5.8 million in cash, down from $6.4 million at fiscal year-end, with accounts receivable slightly decreasing to $4.4 million [11] - Inventory increased to $15.0 million as production ramped up for the XM30 program, while total working capital was reported at $21.2 million [12] Future Outlook - Management expects to generate net income and positive operating cash flow over the next nine months, with plans to fund capital investments through existing cash and operating cash flow [18] - The company anticipates additional laser filter awards as government funding resumes, which could positively impact future revenue [15]