Optex Systems Q4 Earnings Call Highlights

Optex Systems (NASDAQ:OPXS) detailed improved profitability in fiscal 2025 and pointed to U.S. government funding delays as a key factor behind softer order trends and a reduced year-end backlog, according to remarks from management on the company’s earnings call.

Margins and profitability improved in fiscal 2025

The company reported gross profit of 29.2% for fiscal 2025, up from 28% in the prior fiscal year. Management attributed the improvement to higher revenue, changes in product mix, and more favorable manufacturing overhead rates as fixed costs remained constant across a higher revenue base.

General and administrative (G&A) expenses were $4.9 million for the year ended Sept. 28, 2025, compared with $4.7 million in the prior year. The company said G&A costs increased by $0.2 million, or 4.3%, due to higher royalties and selling expenses, higher labor and fringe costs, and increased information technology costs, partly offset by lower investor relations expenses.

Operating income rose to $7.1 million in fiscal 2025 from $4.8 million in fiscal 2024. Management said the $2.3 million increase was primarily driven by a $2.5 million gain in gross profit, partially offset by the higher G&A spending.

Net income rose; impairment and taxes cited as offsets

Net income applicable to common shareholders increased to $5.1 million in fiscal 2025 from $3.8 million in fiscal 2024. Management attributed the $1.3 million increase mainly to higher operating income, but noted two offsets: an $0.8 million asset impairment related to the company’s SpeedTracker product line acquisition and an increase of $0.2 million in federal income tax expense.

Adjusted EBITDA increased to $8.0 million for the 12 months ended Sept. 28, 2025, compared with $5.7 million for the prior-year period, which the company tied to increased revenue and gross profit.

Orders were roughly flat, but backlog declined

For the 12 months ended Sept. 28, 2025, Optex Systems booked $36.2 million in new orders, a 0.5% decrease from $36.4 million in the prior-year period. Management broke out the bookings as $21.3 million for the Optex Richardson segment and $14.9 million for the Applied Optics Center segment.

Backlog at Sept. 28, 2025, was $39.1 million, down from $44.2 million a year earlier. Management said it believed part of the reduced demand reflected delays in awards of certain programs, including ARC3 Abrams replenishment contracts to prime contractors and the BNVG Night Vision Goggle program, which were expected during fiscal 2025.

The company also cited broader U.S. government funding uncertainty. Management said the delay in passing the annual congressional appropriations bill negatively impacted orders during the last three months of fiscal 2025, and added that the October 2025 government shutdown and a continuing resolution on Nov. 14, 2025—funding government spending through Jan. 30, 2026—contributed to continued slowdown in contract awards through the first fiscal quarter of 2026. Management said it was hopeful funding issues would be resolved by the end of January but was unable to predict the outcome beyond January 2026.

Leadership transition and operational focus

Management highlighted leadership changes after the fiscal year-end, including the resignation of CEO Danny Schoening and the appointment of Chad George as CEO, both effective Dec. 20, 2025. The company said Schoening will remain chairman of the board and continue serving as the company’s Facility Security Officer. The board also selected George to serve as a director effective Dec. 20, 2025, until the 2026 annual meeting, and expanded the board from four to five seats. Management said these events and related documents were filed on Form 8-K dated Dec. 4, 2025.

During the call, Schoening also reviewed the company’s two divisions and their offerings. The Applied Optics Center (AOC) division’s core technology is thin-film coatings, which management said are used to absorb or reflect specific wavelengths of light or electromagnetic energy. He cited applications including protecting soldiers’ eyes, image-intensifier tubes used in night-vision goggles, and sensitive sensors from laser sources, as well as reducing infrared signatures. Schoening said AOC supplies coatings to external customers—citing the U.S. Department of Defense as well as Elbit and L3Harris—and internally to the company’s Optex division.

The Optex division, management said, integrates these filters into laser-protected periscopes and other sighting systems, including U.S. Navy ship binoculars, howitzer support sighting systems, and systems used on platforms such as Bradley and Abrams vehicles.

Outlook comments centered on growth planning and new programs

Schoening described fiscal 2025 as an “exciting year,” pointing to 21.6% revenue growth and attributing performance to continued engagement with customers, a focus on product reliability, and capacity increases through CNC machining, automation, robotics, and supply-base development. He also said the company completed a strategic review identifying personnel and equipment needs to supplement current products and add capabilities in reticles, coatings, and optical assembly.

Looking ahead, Schoening said the company was planning around “double-digit growth” while working new opportunities. He said “all indications” pointed to beginning production of the Lightweight Transit, which he described as replacing the artillery’s aiming circle, along with initial builds of a driver periscope assembly for the XM30 program, which is intended to replace the Bradley Fighting Vehicle.

In brief closing remarks, George said he was excited to join the company and expressed confidence in continuing performance and the investments being made in products and capabilities.

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.