Core Viewpoint - Optex Systems Holdings, Inc. reported a decline in net income and profitability despite an increase in revenues, indicating challenges in margin management and cost pressures [1][3]. Financial Performance - For the fiscal first quarter of 2026, net income was 3 cents per share, down from 12 cents per share in the prior-year quarter [1]. - Revenues increased by 11.6% year over year to $9.1 million, up from $8.2 million, primarily due to higher production levels at the Optex Richardson segment [2]. - Gross profit decreased by 1.5% to $2.1 million, with gross margin contracting to 22.9% from 26% a year earlier [3]. Segment Performance - Optex Richardson experienced a revenue increase of 55.9%, or $1.9 million, driven by higher demand for periscopes and related products [4]. - The Applied Optics Center saw a revenue decline of 20.1%, or $1 million, due to lower customer demand for laser filters and optical assemblies [4]. Order Activity - The company booked $7.9 million in new orders, a 31.7% increase from $6 million in the previous year, with significant contributions from both segments [5]. - A subsequent order of $2.2 million for laser interface filters was received, with deliveries expected to begin in the third fiscal quarter of 2026 [5]. Margin Pressure and Cost Drivers - Management identified legacy contract dynamics and input cost pressures as key factors affecting margins, with gross margin compression attributed to long-term loss contracts and increased costs at the Applied Optics Center [6]. - Operating expenses rose by 58.3% to $1.9 million, influenced by higher labor costs, stock compensation, and legal expenses, contributing to an 83.7% drop in operating income [7]. Management Commentary and Outlook - CEO Chad George noted that sales growth was supported by increased demand for periscopes and new product development, while acknowledging margin pressures from elevated gold prices [8]. - The company anticipates higher revenues and gross profits in the latter quarters of fiscal 2026 as legacy loss contracts conclude and revenue shifts to more profitable product lines [9]. Balance Sheet and Capital Allocation - As of Dec. 28, 2025, working capital was reported at $21.2 million, with cash at $5.8 million and no outstanding borrowings [11]. - The company plans total capital expenditures of $2.4 million in fiscal 2026 to expand capacity and develop new capabilities [11]. Other Developments - On Feb. 9, 2026, the board authorized a new stock repurchase program allowing for the repurchase of up to $10 million of common stock, with timing dependent on market conditions [12].