Optex Systems Holdings Fiscal 2025 Earnings Call - Strong Revenue Growth and Leadership Transition Set Stage for 2026

Speaker 1: Please hold. Thank you.

Karen, Financial Officer/CFO, Optex Systems Holdings: Million. Our gross profit improved to 29.2% in the fiscal year 2025 as compared to 28% in the prior fiscal year. The higher gross profit was attributable to the higher revenue, changes in product mix, combined with more favorable manufacturing overhead rates as the fixed costs remained constant across the higher level revenue. General and administrative, for the years ended September the 28th, 2025, and September the 29th, 2024, we recorded operating expenses of $4.9 million and $4.7 million, respectively. General and administrative costs increased $0.2 million, or 4.3%, during the fiscal year due to increased royalties and selling expenses, increased labor and fringe costs, and increased information technology costs, which was offset by reductions in investor relations expenses. Operating profit. For the year ended September the 28th, 2025, we recorded operating income of $7.1 million as compared to operating income of $4.8 million during the year ended September 29th, 2024.

The $2.3 million, or 47.9%, increase in operating income is primarily due to increased gross profit of $2.5 million, which is offset by the $0.2 million increase in G&A spending. Net income and EBITDA. During the year ended September the 28th, 2025, we recorded net income applicable to common shareholders of $5.1 million as compared to net income applicable to common shareholders of $3.8 million during the year ended September the 29th, 2024. The increase of net income of $1.3 million is primarily attributable to increased operating income of $2.3 million, offset by $0.8 million in asset impairment for our SpeedTracker product line acquisition and increased federal income tax expense of $0.2 million.

Our adjusted EBITDA increased by $2.3 million to $8 million during the 12 months ended September the 28th, 2025, as compared to $5.7 million during the 12 months ended September the 29th, 2024, on increased revenue and gross profit. For orders and backlog. During the 12 months ended September the 28th, 2025, the company booked $36.2 million in new orders, representing a 0.5% decrease from the prior year period orders of $36.4 million. The orders for the most recently completed 12 months consist of $21.3 million for our Optex Richardson segment and $14.9 million attributable to the Applied Optics Center segment. Backlog as of September the 28th, 2025, was $39.1 million as compared to a backlog of $44.2 million as of September the 29th, 2024.

We believe a portion of the reduced demand is related to the delay in award of ARC3 Abrams replenishment contracts to the prime contractors, as well as the delay in award for the BNVG Night Vision Goggle program, both of which were expected during the 2025 fiscal year. We also believe the delay in passing the annual congressional appropriations bill by the U.S. government has negatively impacted our orders during the last three months of fiscal year 2025. As a result of the October 2025 government shutdown and the November 14th, 2025, continuing resolution, which only funds the government spending through January the 30th, 2026, the slowdown of contract awards has continued through the first fiscal quarter of 2026. While we are hopeful government funding issues will be resolved by the end of January, we’re unable to predict the outcome past January 2026. Recent events.

Last, I would like to highlight some of the recent events occurring after September the 28th, 2025, which include the resignation of Danny Schoening, the CEO, and the appointment of his successor, Chad George, as CEO, both effective as of December the 20th, 2025. We are excited about the leadership and experience that Chad George brings to the Optex Systems Holdings team. Mr. Schoening will remain on the board, continuing his role in the position of chairman, and will continue to serve as the company’s facility security officer. Concurrently with Mr. George’s appointment as Chief Executive Officer, the board selected Mr. George to serve as a director on the board, effective as of December the 20th, 2025, until the company’s 2026 annual meeting of shareholders. In connection with Mr. George’s election as a director of the board, the board increased the total number of board seats from four to five.

These events and corresponding documents have been filed in the 8-Ks as of December the 4th, 2025. That concludes the financial portion of this call. I will now turn the perch back over to Danny Schoening for his comments in the period performance.

Danny Schoening, CEO (Outgoing), Chairman of the Board, Optex Systems Holdings: Thank you, Karen. As we continue to add new investors, I’d like to do a quick review of the products and services we provide from both divisions, which Karen just highlighted. The Applied Optics Division, or AOC’s core technology, is thin film coatings. We apply these proprietary coatings to either absorb or reflect certain wavelengths of light or electromagnetic energy. A common use of this technology would be to protect soldiers’ eyes, image-intensifier tubes used in night vision goggles, and also used to protect sensitive sensors from these same laser sources or to reduce the infrared signatures to decrease their detection from thermal cameras. AOC supplies these both externally to customers like the USDOD, Elbit, L3 Harris, to name a few, or they supply them internally to Optex, our second division.

Recapping the products from our Optex division, Optex uses these same filters and builds them into laser-protected periscopes and other sighting systems. These include U.S. Navy ship binoculars, Howitzer support sighting systems, and sighting systems on Bradley, Abrams, etc. If you’d like to learn more about the products or customers, I suggest that you go back and listen to our previous earnings calls where I go through a little bit in more depth. 2025 has truly been an exciting year on so many fronts, leading with the obvious that 21.6% revenue growth was achieved by many individual actions coming together. Starting with the customer set, we’ve continued to stay in front of them and listen to their needs. Product reliability continues to come up first. Our customers appreciate the Optex reputation for reliability.

Next, we’ve increased our capacity through the internal activities of CNC machining, automating processes, the use of robotics, and we’ve continued to develop our supply base and bring these capabilities up to those required by our customers. You’ve heard me comment on this over the last couple of years, but in 2025, it really all came together. Our employees really stepped up when asked to put in the overtime or take on new process qualifications. If that didn’t help us keep busy enough, led by Chad, we also completed a rigorous strategic review of our strengths, weaknesses, opportunities, and threats and identified the key personnel and equipment sets to not only supplement our current product set, but to bring on additional capabilities in the space of reticles, coatings, and optical assembly. We really have a cohesive process which highlights the effectiveness of having a strong management and board relationship.

I can’t emphasize that enough. When the board is proactive and forward-leaning with management, it’s very rewarding. Looking into 2026, the task at hand is how to continue this growth trajectory. From a budgeting and planning perspective, we continue to plan around double-digit growth while working several new opportunities. In the past, we’ve been very successful with driving the factory through the production of our existing products while adding a select number of additional revenue-generating items to the mix. All indications are that we’ll start the production of the Lightweight Transit, which replaces the artillery’s aiming circle, along with the initial builds of the driver periscope assembly for the XM30, which is tasked to replace the Bradley Fighting Vehicle. Two examples of the types of multi-year programs where we target, we execute, and we win.

As some investors have asked, yes, I’m cranked up on where we’re sitting in the process and product mix that we’ve developed. With that said, we formally announced the promotion of Chad George to replace me as the CEO. I had conversations with the board over a year ago that I was a little concerned about the business decisions that I was making that were going to be impactful in the next three to five years, and then that was on the outside of my runway. We decided to start looking, and when we found the right candidate, we pulled the trigger, and that’s exactly what happened. The timing worked out perfectly for all of us involved, and we’ve been systematically working through the handoff for the last four months. I’m still the largest shareholder and will continue to be Chairman of the Board.

On a support level, I’ll remotely continue to be the Facility Security Officer, which handles the paperwork and processes side of dealing with the classified documents and personnel who have their security clearances. So, at the end of the day, it’s been a very thoughtful, well-pounded-out process, which I think our shareholders expect and deserve. So, with that transition, I’d now like to hand the call over to Chad for his comments before we open it up for questions. Chad?

Chad George, CEO (Incoming), Director, Optex Systems Holdings: Thank you, Danny. I just want to start by saying I’m very excited to be here and that your leadership has put this business in a strong position, and I’m confident that we’re going to be able to continue that performance as we move forward here. I’m very excited about the products and the capabilities that we’re investing in and bringing to Optex, and I’m confident that we’ll be able to continue this growth and this type of performance moving forward. Thank you.

Danny Schoening, CEO (Outgoing), Chairman of the Board, Optex Systems Holdings: Great. So, with that, I’d like to answer a couple of questions. Let’s see. One was sent in, and hopefully we can take a few more from the callers. So, the first one is from Howard Ashong. So, Howard’s been a longtime Optex investor, so thank you, Howard, for sending this in. Howard asks, "I’m a little bit surprised at the way Danny announced his sudden departure while I assumed it would have happened with the August hire. I thought there would have been a longer transition period. What steps has everyone taken to ensure that the transition will be a smooth one?" Yeah. So, Howard, from the outside, it may look like it was quick, but it really wasn’t. So, Chad and I had discussions for several months prior to his coming on board with Optex.

Once he came on board as president, we discussed the objective from getting from point A to point B. The board and I worked out kind of a transition period of actions and reports that we’d look at, and then we finally made the decision and then executed. So, from the outside, it may have seemed like it was maybe a little bit compressed, but from the inside, it really wasn’t, and we really went through the method that we’re happy with. So, I’m still around, but the reins have been handed over, effective tomorrow, and we’re looking forward to a great 2026 and beyond. So, with that, John, I’ll hand it back to you if there’s any callers or if there’s been any additional questions that have been sent in.

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Danny Schoening, CEO (Outgoing), Chairman of the Board, Optex Systems Holdings: Very good. Thank you, John. So, on my behalf and all of the Optex employees, we thank you for joining us, and we look forward to 2026 and happy and safe holidays. Thank you. Goodbye.

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