Optex Systems Holdings, Inc Q2 FY2026 earnings call

• Financial and Margin Trends • Gross margins improved meaningfully year-over-year, driven by completion of legacy loss-making periscope contracts, improved pricing on newer programs, and continued operational efficiencies • Despite lower Q2 revenue, H1 gross profit was consistent with prior year periods • Operating expenses increased year-over-year, primarily due to leadership transition costs, organizational changes, higher stock-based compensation, increased R&D investments, ongoing compliance and systems upgrades, and moderate inflationary pressures

• Operational Updates • H1 revenue was negatively impacted by the U.S. federal government shutdown and delays in the approval of the fifth FY26 appropriations bill, which pushed several contract awards into the second half of the fiscal year • Steady new order bookings tied to core defense programs have continued, and the $36.6 million ending backlog provides strong visibility for the remainder of FY26 • The company invested $800 thousand in capital equipment in H1, with an additional $1.1 million in committed capital investment; these investments support capacity expansion, new product lines, expanded R&D activity, and enhanced prototyping capability

• Strategic Positioning • Management has made significant investments in R&D, manufacturing capabilities, and organizational structure to position Optex for long-term growth and expanded market opportunity • The team remains focused on operational execution, efficiency, and delivering value to customers, warfighters, and shareholders

The call does not break out financial performance by discrete product segments; only consolidated company-wide results are provided. Consolidated Q2 FY26 revenue was $600 thousand, compared to $10.7 million in the prior year Q2. Consolidated first half (H1) FY26 revenue totaled $18.8 million, which was essentially flat compared to $18.9 million in H1 FY25. Consolidated Q2 gross profit was $3.4 million with a 35.2% gross margin, up from 31.3% in the prior year period. H1 gross profit was $5.5 million with a 29.2% gross margin, up slightly from 29% in H1 FY25. Q2 operating expenses were $1.7 million, a $600 thousand increase year-over-year, and H1 operating expenses were $3.7 million, a $1.4 million increase year-over-year. Q2 net income was $1.3 million ($0.19 per diluted share), compared to $1.8 million in the prior year Q2. H1 net income was $1.6 million ($0.23 per diluted share), compared to $2.6 million in H1 FY25. Adjusted EBITDA was $2 million for Q2 and $2.8 million for H1, down from $2.4 million and $3.6 million respectively year-over-year. New H1 orders increased 3.8% year-over-year to $16.3 million, ending backlog was $36.6 million. Ending quarter cash and cash equivalents were $4.2 million with no outstanding revolving credit debt; working capital was $22.6 million.

• Full year FY26 revenue is projected to be in the range of $43 million to $45 million, with expectations of a much stronger second half performance as delayed government contract awards move into execution
• Full year adjusted EBITDA is projected to remain in the range of $7.5 million to $8.5 million
• Full year capital expenditures are expected to range between $2 million and $2.5 million
• Operating expenses are expected to remain elevated throughout the remainder of the fiscal year, as the company continues R&D investments, works toward cybersecurity maturity model certification, and upgrades internal reporting systems

• Forward-looking statements, including all guidance, are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from projections; key risks are disclosed in the company's SEC filings, including the risk factors section of its most recent 10-Ks
• Delays in U.S. federal government appropriations and government shutdowns have already impacted near-term revenue by pushing contract awards into later periods, and continued government procurement instability could create further timing disruptions
• Elevated inflationary pressures continue to put upward pressure on operating expenses, though this impact has been relatively modest to date

No questions were submitted by participants during the Q&A portion of the call, so no exchanges are available to summarize.