Optex Systems Q3 Earnings Call Highlights

Optex Systems (NASDAQ:OPXS) reported higher third-quarter and nine-month revenue, operating income and net income, supported by increased periscope production and stronger demand for military laser filters, while management said recently announced awards lifted backlog to $45 million as of Aug. 5.

For the quarter ended June 29, 2025, total revenue increased $2.1 million, or 22.6%, from the prior-year period. Revenue for the first nine months rose $5.5 million, or 22.3%, year over year. Chief Financial Officer Karen Hawkins said the growth was driven primarily by higher periscope production at the company’s Optex Richardson segment and increased customer demand across both Optex Richardson and the Applied Optics Center.

Optex Richardson revenue increased 46.3% in the third quarter and 34.3% over the first nine months compared with the respective prior-year periods. Applied Optics Center revenue declined 2.6% in the quarter but increased 10.3% over nine months.

During the nine-month period, periscope revenue at Optex Richardson climbed 76%, or $6 million, while military laser-filter demand at Applied Optics Center increased 32%, or $2.3 million. Hawkins said those gains were partly offset by lower demand for other military products at Optex Richardson and commercial optical assemblies at Applied Optics Center.

Profitability and Cash Position

Consolidated gross profit increased 10% to $3.2 million in the third quarter, compared with $2.9 million a year earlier. Nine-month gross profit rose 21.6% to $8.7 million. The company attributed the improvement to higher revenue and changes in product mix.

Gross margin for the first nine months was 28%, compared with 29% in the prior-year period, reflecting shifts between segments and product lines. General and administrative spending remained unchanged at $1.3 million for the quarter and $3.6 million for the nine-month period.

Operating income rose 18.3% to $1.9 million in the third quarter and increased 43.8% to $5.1 million over nine months. Net income was $1.5 million for the quarter, up from $1.3 million a year earlier, while adjusted EBITDA increased to $2.1 million from $1.8 million.

For the nine-month period, net income increased to $4.1 million from $2.8 million, and adjusted EBITDA rose to $5.7 million from $4.2 million.

The company ended June 29 with $4.9 million in cash, compared with $1 million at the end of its fiscal year in September 2024. It generated $5.4 million in operating cash flow during the first nine months, compared with $1 million in the prior-year period. Optex also paid down $1 million on its line of credit, reducing the balance to zero. Its $3 million credit facility was renewed in May for an additional 24 months through May 2026.

During the call, Hawkins said cash on hand had increased to $6 million as of the prior day. Chairman and CEO Danny Schoening said the board has considered potential uses for the cash, including investments in personnel, equipment and capabilities, dividends, share repurchases and acquisitions. He said the company has not made a specific capital-allocation decision.

Backlog and Recent Awards

Backlog stood at $38.3 million as of June 29, down from $45.6 million a year earlier. Hawkins said management believes the decrease reflected the timing of contract awards rather than a new demand trend.

Subsequent awards included a $2.8 million order supporting the XM30 program, a $10.2 million five-year requirement-type contract for optical sighting systems, and a $1.6 million laser-filter order. Those developments brought backlog to $45 million as of Aug. 5, according to the company.

Schoening clarified that the $10.2 million optical sighting systems award was an unfunded requirement-type contract when announced. He said the company reports the maximum potential value and expected delivery period for such awards, but backlog does not rise by the full amount until individual orders are funded.

The U.S. government later funded a first-year order for $4.2 million of muzzle reference sensor units under that contract. Schoening said the company generally does not issue separate announcements for each subsequent order under a previously disclosed contract, citing the potential for confusion.

Business Development and Product Update

Schoening described the Applied Optics Center’s core capability as thin-film coatings that absorb or reflect specified wavelengths of light. He said the coatings can be used to protect soldiers’ eyes, night-vision image intensifier tubes and sensitive sensors from laser sources. The division supplies products externally to customers including Elbit and L3Harris and internally to Optex Richardson.

Optex Richardson incorporates filters into laser-protected periscopes and other sighting systems, Schoening said. He characterized the XM30 win as supporting the company’s growth strategy of being designed into new vehicles while maintaining and upgrading previously fielded platforms.

On the Speedtracker product line acquired during the prior-year period, Schoening said Optex has been transferring production from the Czech Republic to Texas. He said the company is nearing the launch of the product and expects it to be advertised on Amazon within about 30 days. Management views the line as having commercial applications as well as potential military relevance, he said.

Hawkins said the company does not currently expect material adverse effects from tariff uncertainty or China’s export restrictions on rare earth metals. Most defense products are sourced domestically, and imported products generally are not subject to tariffs or duties, she said. For commercial optical assemblies using select Taiwan-sourced components, Hawkins said current backlog is covered by existing materials and inventory, while future orders would be repriced to include potential tariff effects.

Leadership Changes and Market Opportunities

Optex amended its bylaws after the quarter to allow its chief executive officer and president positions to be held by different individuals. Effective Aug. 11, Chad George became president and will report to Schoening, who remains CEO. George received an employment agreement through July 1, 2028, along with 10,000 restricted shares scheduled to vest Jan. 1, 2026.

Asked about potential opportunities related to the Golden Dome missile-defense initiative, George said he was familiar with the program but was not yet certain that Optex’s capabilities align closely with it. He said the company recognizes the initiative as a potential growth vector and will continue evaluating how it could support the effort.

Schoening also cited opportunities for protective coatings on sensors and applications aimed at reducing infrared signatures on vehicles and aircraft. He said George’s role will include evaluating alternative markets and additional growth opportunities.

About Optex Systems (NASDAQ:OPXS)

Optex Systems Holdings, Inc (NASDAQ: OPXS) is a technology company specializing in infrared sensing systems for defense and homeland security applications. The company engineers, designs and manufactures electro-optical and infrared (EO/IR) payloads and sensors used across a range of surveillance and targeting platforms. Its core focus areas include mission-critical solutions for unmanned aerial vehicles (UAVs), rotary- and fixed-wing aircraft, and ground-based observation systems.

Optex Systems' product portfolio consists of high-resolution thermal imaging cameras, infrared seekers, laser designators and multispectral platforms.

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