Optex Systems Holdings Inc
For the period ended Mar 29, 2026. Filed May 11, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 29, 2026 · Filed May 11, 2026
OPXS$8.20+1.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-12-28; filed 2026-02-11.
0001493152-26-006128
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-29; filed 2026-05-11.
0001493152-26-022219
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 76 previous paragraphs and 94 current paragraphs.
38 unchanged; 25 reworded; 31 added; 13 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 8 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (31)
Current report
A substantial portion of the Company’s revenue is derived from contracts with the U.S. Government, which are subject to annual congressional appropriations. Failure by Congress to pass appropriations legislation by October 1, the beginning of the U.S. Government’s fiscal year, often results in a continuing resolution (“CR”). A CR may delay the award of new contracts, the exercise of contract options, and the initiation of new programs, which could materially and adversely affect the Company’s operating results and future revenue.
Current report
The Company did not experience a material decline in total consolidated contract awards during the first six months of fiscal year 2026. However, certain contract awards for specific products were delayed from the first fiscal quarter into the second fiscal quarter of 2026. As a result, revenue associated with these awards was deferred into the second half of fiscal year 2026.
Current report
Furthermore, geopolitical conflicts in the Middle East, including heightened military actions involving the United States, Israel, and Iran beginning in February 2026, have contributed to increased oil prices and supply imbalances in global oil and natural gas markets. Prolonged disruption in these markets could result in higher pricing for acrylic raw materials used in the manufacture of the Company’s periscope and vision block products, which could adversely affect operating results if sustained over the longer term. The Company is actively monitoring conditions affecting its acrylic material supply arrangements and, based on current information, does not expect a material near-term impact.
Current report
Revenue
Current report
For the three months ended March 29, 2026, consolidated revenue decreased by $1.1 million, or 10.3%, compared to the same period in the prior year. The decrease was primarily attributable to a $1.0 million decline in revenue at the Applied Optics Center.
Current report
For the six months ended March 29, 2026, consolidated revenue decreased by $0.2 million, or 0.8%, compared to the same period in the prior year. The decrease was primarily driven by a $2.0 million decline in revenue at the Applied Optics Center, partially offset by a $1.8 million increase in revenue at Optex Richardson.
Current report
The decrease in revenue was primarily attributable to the federal government shutdown during October and November 2025 and the delayed enactment of the annual appropriations bill, which was not approved until February 3, 2026. These events delayed contract awards and deferred anticipated revenue into the second half of fiscal year 2026.
Current report
Gross Profit
Current report
Consolidated gross profit for the three months ended March 29, 2026 increased slightly compared to the same period in the prior year despite lower revenue. The increase was primarily attributable to the completion of legacy loss-making contracts at Optex Richardson, which were replaced by more favorably priced contracts, and favorable adjustments to warranty and contract loss accruals at the Applied Optics Center. These adjustments resulted from lower-than-expected customer return rates and costs below estimated losses associated with our day window program. Consolidated gross margin increased to 35.2%, compared to 31.3% in the prior-year period.
Current report
For the six months ended March 29, 2026, consolidated gross profit was relatively unchanged compared to the same period in the prior year. Gross profit at the Applied Optics Center decreased primarily due to higher cost of sales resulting from increased contract loss reserves, higher gold prices used in the coating process for one product line, and fixed manufacturing costs spread over lower revenue. This decrease was offset by higher gross profit at Optex Richardson, reflecting the completion of loss-making contracts and increased revenue from more favorably priced programs. Consolidated gross margin increased slightly to 29.2%, compared to 29.0% in the prior-year period.
Current report
Operating Income
Current report
Operating income for the three months ended March 29, 2026 decreased by $0.6 million compared to the same period in the prior year. The decrease was primarily attributable to higher general and administrative expenses, which increased by $0.6 million. The increase consisted of approximately $0.2 million in higher labor and fringe benefit costs, $0.2 million in increased stock-based compensation expense, and $0.2 million in higher legal expenses, royalties, information technology support services, research and development costs, consulting fees, and other expenses. Higher labor costs were primarily attributable to the addition of the Optex Richardson General Manager position and other staffing and organizational changes within engineering and administrative functions.
Current report
Operating income for the six months ended March 29, 2026 decreased by $1.3 million compared to the same period in the prior year. The decrease primarily resulted from a $1.3 million increase in general and administrative expenses, consisting of approximately $0.7 million in higher labor and fringe benefit costs, $0.3 million in increased stock-based compensation expense, and $0.3 million in higher professional fees, information technology support services, research and development costs, consulting fees, and other expenses. Higher labor costs were primarily attributable to executive leadership transition costs, including overlapping compensation associated with the former and current Chief Executive Officer (“CEO”), the addition of the Optex Richardson General Manager position, and other organizational changes.
Current report
Management expects general and administrative expenses to remain elevated as the Company continues to realign its organizational structure to support increased research and development activity, comply with Cybersecurity Maturity Model Certification (CMMC) requirements, and enhance internal software reporting systems.
Current report
Net income declined in both the quarter and year-to-date periods ended March 29, 2026, reflecting a deliberate step-up in corporate overhead during a leadership transition. Quarterly net income decreased by $0.4 million to $1.4 million from $1.8 million, and year-to-date net income decreased by $1.0 million to $1.6 million from $2.6 million. The primary cause was higher general and administrative expense, partially offset by higher interest income and lower federal income taxes.
Current report
Adjusted EBITDA also trended lower, consistent with the net income decline. Quarterly Adjusted EBITDA decreased $0.4 million to $2.0 million from $2.4 million, and year-to-date Adjusted EBITDA decreased $0.8 million to $2.8 million from $3.6 million.
Current report
The Company incurred increased non-recurring general and administrative expenses of $0.3 million, primarily due to higher salaries and benefits resulting from executive leadership changes. These changes included Chad George’s transition to President and CEO following Danny Schoening’s, retirement effective December 20, 2025, as well as the temporary double-staffing of certain senior roles during their retirement transition periods to allow for training and knowledge transfer.
Current report
During the three-month and six-month periods ended March 29, 2026, the Company incurred approximately $0.2 million and $0.3 million in additional stock-based compensation compared to the same periods in the prior year. This increase was primarily attributable to the issuance of market-based equity awards to the Company’s CEO and Chief Financial Officer on December 18, 2025. The fair value of these awards totaled $679 thousand as of the grant date and is being amortized over the estimated service period based on a Monte Carlo valuation model.
Current report
Depreciation and amortization expense decreased by approximately $0.03 million and $0.1 million for the three-month and six-month periods ended March 29, 2026, respectively, compared to the corresponding prior year periods. This decline was primarily driven by the write-off of intangible assets related to the Speedtracker product line acquisition on September 29, 2025, which eliminated the associated amortization expense. The reduction was partially offset by increased depreciation related to the acquisition of new capital equipment during the current year.
Current report
In contrast, orders for the Applied Optics Center increased by $2.1 million, or 30.9%, compared to the prior-year period. The increase was primarily driven by new orders for commercial optical assemblies and higher demand for specialty coating products. Orders for the Applied Optics Center may fluctuate from quarter to quarter due to factors such as government funding levels and the timing of orders from key customers.
Current report
Optex Richardson backlog declined to $25.2 million as of March 29, 2026, a decrease of $5.8 million, or 18.7%, compared to the prior year. The decrease primarily reflects the planned completion of several long-duration periscope contracts in the first half of the fiscal year, combined with shifts in government defense spending priorities and increased competitive pressure following the entry of a new market participant in select periscope products. The reduction in periscope backlog is somewhat offset by increased backlog in sighting systems for the XM30 program and muzzle reference systems in our other product lines.
Current report
Applied Optics Center backlog as of March 29, 2026 was $11.4 million as compared to a backlog of $10.1 million as of March 30, 2025, representing an increase of $1.3 million, or 12.9%. The increase in backlog for the Applied Optics Center is primarily due to new orders received for our commercial optical assemblies. We attribute the increase in orders to the timing of customer replenishment orders and higher demand in the first half of the current year as compared to the prior year first half.
Current report
Optex Richardson revenue decreased by $0.1 million or 1.2% for the three months ended March 29, 2026 as compared to the prior year period with lower revenue in our periscope product line. We are seeing lower demand for our standard periscopes based on the most recent U.S. defense budget appropriation and the entrance of new competition for several of our periscope products. The lower periscope revenue was mostly offset by increased revenue in sighting systems under our XM30 display periscope assemblies program, sales of back-up sight units, and shipments under our Israel Aquila repair program, combined with increased revenue in other product lines including muzzle reference systems, big eye units, beamsplitters, and mirrors.
Current report
Applied Optics Center revenue declined by $1.0 million or 23.3% for the three months ended March 29, 2026, compared with the prior-year period. This shortfall was primarily driven by the 2025 government shutdown and delayed passage of the 2026 fiscal year appropriations bill, which deferred order placements rather than reflecting underlying demand weakness.
Current report
Six Months Ended March 29, 2026 Compared to the Six Months Ended March 30, 2026
Current report
Revenue. For the six months ended March 29, 2026, revenue decreased by $0.2 million or 0.8% compared to the prior year period as set forth in the table below:
Current report
Optex Richardson revenue increased by $1.8 million or 18.9% for the six months ended March 29, 2026 as compared to the prior year period with increased revenue in sighting systems under our XM30 display periscope assemblies program, sales of back-up sight units, and shipments under our Israel aquila repair program, combined with increased revenue in other product lines including muzzle reference systems, big eye units, beamsplitters, and mirrors.
Current report
Applied Optics Center revenue decreased by $2.0 million or 21.7% for the six months ended March 29, 2026 as compared to the prior year period. This shortfall was primarily driven by the 2025 government shutdown and delayed passage of the 2026 fiscal year appropriations bill, which deferred order placements rather than reflecting underlying demand weakness. Based on current order bookings and expected contract awards, we anticipate a strong rebound in the second half of fiscal year 2026, with revenue increasing significantly, led by growth in laser filters, optical assemblies, and related products.
Current report
Gross Margin. The gross margin during the six-month period ended March 29, 2026 was 29.2% of revenue as compared to a gross margin of 29.0% of revenue for the prior year period and consolidated gross profit was relatively unchanged compared to the same period in the prior year with higher gross profit for the Optex Richardson segment offset by reduced gross profit for the Applied Optics Center segment.
Current report
G&A Expenses. For the six months ended March 29, 2026 and March 30, 2025, general and administrative expenses were $3.7 million and $2.3 million, respectively, representing an increase of $1.3 million compared to the prior-year period. The increase was primarily attributable to approximately $0.7 million in higher labor and fringe benefit costs, $0.3 million in increased stock-based compensation expense, and $0.3 million in higher spending on other general and administrative costs. Higher labor costs were primarily driven by executive leadership transition costs, including overlapping compensation associated with the former and current CEO, the addition of the Optex Richardson General Manager position, and other organizational changes.
Current report
Operating Income. For the six months ended March 29, 2026, operating income was $1.8 million, compared to $3.2 million for the six months ended March 30, 2025. The decrease in operating income was primarily attributable to the increase in general and administrative expenses described above.
Removed paragraphs (13)
Previous report
For the three months ended December 28, 2025, our total revenues increased by $0.9 million, or 11.6%, compared to the prior year period. The increase in revenue was primarily driven by increased revenue at the Optex Richardson segment, partially offset by decreased revenue at the Applied Optics Center segment.
Previous report
Consolidated gross profit for the three months ended December 28, 2025 was slightly lower during the current year period as compared to the prior year period with changes in mix between segments and product lines combined with a higher mix of shipments against our legacy long-term loss contracts. During the current year period the Applied Optics Center realized increased cost of sales due to contract loss reserves which was driven by higher usage and the price of gold applied during the coating process on one of its product lines. The lower gross profit for the Applied Optics Center segment was somewhat offset by improved gross profit at the Optex Richardson segment on higher revenue, changes in product mix, improved labor performance on our periscope line and a reduction in loss contract deliveries as the long-term loss contracts have completed or are nearing completion. The consolidated gross margin percentage decreased from 26.0% to 22.9% in the current year period as compared to the prior year period.
Previous report
Our operating income for the three months ended December 28, 2025 decreased by $0.8 million compared to the prior year period. The decrease in operating income was primarily driven by lower gross profit combined with higher general and administrative spending of $0.7 million during the current year period as compared to the prior year period. General and administrative spending increased due to higher labor and labor fringes of $0.5 million, increased stock compensation of $0.1 million and higher legal and IT support services of $0.1 million. Increased labor was primarily driven by the transition of the former and current Chief Executive Officer during the current year period, combined with the addition of the Optex Richardson General Manager position as well as other employee and structural changes within the engineering and administrative departments for both operating segments.
Previous report
Our net income decreased by $0.6 million to $0.2 million for the three months ended December 28, 2025, as compared to $0.8 million for the prior year period. Our adjusted EBITDA decreased by $0.4 million to $0.7 million for the three months ended December 28, 2025, as compared to $1.1 million for the prior year period.
Previous report
During the three-month period ending December 28, 2025, the Company incurred $0.3 million in increased general and administrative costs associated with higher salaries and fringes for Chad George, serving as President of Optex Systems Holdings. Danny Schoening retired as Chief Executive Officer effective on December 20, 2025, at which time Chad George assumed the role of the Company CEO. In addition, during the three-month period ending December 28, 2025, there were two senior level positions that were double staffed as retiring employees were training their hired replacements. With the resignation of Danny Schoening in December, and the retirement of the two senior level employees in early January 2026, we do not expect these expenses to recur beyond the first three months of fiscal year 2026.
Previous report
Orders for the Applied Optics Center increased by $0.7 million, or 20.6%, from the prior year period, primarily as a result of increased orders for our optical assemblies. Orders for the Applied Optics Center can be somewhat volatile from quarter to quarter depending on factors such as government funding and commercial sales levels of key customers. We are anticipating an increase in laser filter awards over the next three quarters as a result of the approved government appropriations bill in combination with our outstanding requests for proposals for or laser interface filters (LIF) and laser filter units (LFU) programs.
Previous report
Optex Richardson backlog as of December 28, 2025, was $27.9 million as compared to a backlog of $31.0 million as of December 29, 2024, representing an decrease of $3.1 million or 10.0%. The decreased backlog for the Optex Richardson segment is primarily driven by lower customer demand for periscopes.
Previous report
Applied Optics Center backlog as of December 28, 2025 was $10.0 million as compared to a backlog of $11.0 million as of December 29, 2024, representing a decrease of $1.0 million or 9.1%. The decrease in backlog for the Applied Optics Center is primarily due to lower customer demand for laser filters. We attribute the lower demand to program delays resulting from the 2025 government shutdown and delay in funding the government appropriations bill for fiscal year 2026.
Previous report
Subsequent to the period ended December 28, 2025, on February 6, 2026, the Applied Optics Center received a new order from a prime military contractor for laser interface filters valued at $2.2 million with deliveries to begin in the third fiscal quarter of 2026 and extend into the second fiscal quarter of 2027. We anticipate additional awards since the appropriations bill was approved on February 3, 2026.
Previous report
Optex Richardson revenue increased by $1.9 million or 55.9% for the three months ended December 28, 2025 as compared to the prior year period with increased production levels on the periscope product line combined with higher sighting system deliveries against our new XM30 display periscope assemblies and higher customer demand for muzzle reference systems and big eye binoculars in our other product group.
Previous report
Applied Optics Center revenue decreased by $1.0 million or 20.1% for the three months ended December 28, 2025 as compared to the prior year period. The revenue decrease is primarily attributable to lower customer demand for laser filters and optical assemblies. We expect revenues to increase across laser filters and optical assemblies during the second half of fiscal year 2026 based on new order bookings and anticipated contract awards.
Previous report
On January 18, 2024, the Company acquired certain intellectual property and technical and marketing information relating to the Speedtracker Mach product line and entered into an asset purchase agreement and a contract manufacturing agreement with RUB Aluminium s.r.o. (“RUB”). The Company acquired the assets using $1 million cash on hand, with potential additional future cash payments based on successful completion of defined milestones. The initial term of the contract manufacturing agreement was one year, subject to additional one-year renewal terms. After the acquisition, the Company determined it would be more economical to move the manufacturing operations in house and is no longer ordering assembled units under the original contract manufacturing agreement. RUB will continue to provide the Company with purchased kit parts for the manufacture of the Speedtracker Mach products.
Previous report
The acquisition included transaction costs of $30 thousand. Pursuant to the asset purchase agreement, the total earnout payment will be $238 thousand only if the earnout revenue milestone is achieved during the earnout period, otherwise the earnout will be zero. As of September 28, 2025, it was determined that the earnout revenue milestone was unlikely to be achieved during the earnout period and the fair value of the contingent liability was zero. The asset was amortized on a straight-line basis over a seven-year period through September 28, 2025. On September 28, 2025, the Company reviewed the intangible asset value based on the anticipated revenues and cash flow of the product line over the next five years and determined that the remaining asset value could not be recovered. As a result, the remaining $0.8 million of unamortized intangible assets was impaired and as of September 28, 2025 and December 28, 2025, the remaining balance of intangible assets is zero.
Reworded paragraphs (25)
Previous wording
We have numerous fixed price multi-year contracts covering delivery periods up to five years from the contract award. Since fiscal year 2021, we have experienced substantial increases in the costs of aluminum, steel, gold and acrylic commodities, which has affected both the Optex Richardson and Applied Optics segment margins for deliveries against those orders during the year ended September 28, 2025 and the first fiscal quarter of 2026. Approximately 3% of our contract backlog is for items priced prior to fiscal year 2021 in a loss condition due to costs increases.
Current wording
We have had numerous fixed price multi-year contracts covering delivery periods up to five years from the contract award. Since fiscal year 2021, we have experienced substantial increases in the costs of aluminum, steel, gold and acrylic commodities, which have affected both the Optex Richardson and Applied Optics segment margins for deliveries against those orders during the year ended September 28, 2025 and during the first half of 2026. As of March 29, 2026, all but one of these legacy fixed price contracts have been completed, and the sole contract that remains active represents approximately 1% of our contract backlog, is for items priced prior to fiscal year 2021, and is in a loss condition due to cost increases.
Previous wording
A substantial portion of our revenue is derived from U.S. Government contracts, which are subject to annual congressional appropriations. Failure to pass the annual appropriations by October 1, the start of the new fiscal year, often results in a continuing resolution (“CR”) which can delay new contract awards, exercising of contract options, and starting of new program initiatives, which could materially and adversely affect our future revenues. From October 1, 2025 to November 12, 2025, the federal government of the United States was in a shutdown as Congress failed to pass appropriations legislation for the 2026 fiscal year. On November 10, 2025, Congress passed a CR, which funded the government at existing spending levels through January 30, 2026. On February 3, 2026 a funding appropriation bill was passed by Congress and signed by the President which covers the majority of U.S. Government spending for the 2026 fiscal year. The funding bill excluded the Department of Homeland Security which is subject to further negotiations. The Company has not experienced a slow-down of total consolidated contract awards during the first three months of fiscal year 2026, however we have experienced a reduction in contract awards for our laser filters at the Applied Optics Center which we attribute to the 2025 government shutdown and CR. While we cannot provide assurances, we are anticipating new contract awards against current outstanding proposal requests for these laser filters as a result of the approved funding.
Current wording
From October 1, 2025 through November 12, 2025, the U.S. federal government was in a shutdown as Congress did not pass appropriations legislation for fiscal year 2026. On November 10, 2025, Congress passed a CR that funded the federal government at existing spending levels through January 30, 2026. On February 3, 2026, Congress passed and the President signed an appropriations bill funding the majority of U.S. Government operations for fiscal year 2026. This legislation excluded the Department of Homeland Security, which remains subject to further negotiations.
Previous wording
We have presented the operating results by segment to provide investors with an additional tool to evaluate our operating results and to have a better understanding of the overall performance of each business segment. Management of Optex Systems Holdings uses the selected financial measures by segment internally to evaluate its ongoing segment operations and to allocate resources within the organization accordingly. Segments are determined based on differences in products, location, internal reporting and how operational decisions are made. Management has determined that Optex Richardson, our Richardson plant, and the Applied Optics Center (“Applied Optex Center” or “AOC”), our Dallas plant, are separately managed, organized, and internally reported as separate business segments. The table below provides a summary of selective statement of operations data by operating segment for the three months ended December 28, 2025 and December 29, 2024 reconciled to the Condensed Consolidated Results of Operations as presented in Item 1, “Condensed Consolidated Financial Statements.”
Current wording
We have presented the operating results by segment to provide investors with an additional tool to evaluate our operating results and to have a better understanding of the overall performance of each business segment. Management of Optex Systems Holdings uses the selected financial measures by segment internally to evaluate its ongoing segment operations and to allocate resources within the organization accordingly. Segments are determined based on differences in products, location, internal reporting and how operational decisions are made. Management has determined that Optex Richardson, our Richardson plant (“Optex Richardson”), and the Applied Optics Center (“Applied Optex Center” or “AOC”), our Dallas plant, are separately managed, organized, and internally reported as separate business segments. The tables below provides a summary of selective statement of operations data by operating segment for the three and six months ended March 29, 2026 and March 30, 2025 reconciled to the Condensed Consolidated Results of Operations as presented in Item 1, “Condensed Consolidated Financial Statements.”
Previous wording
The table below summarizes our three-month operating results for the periods ended December 28, 2025 and December 29, 2024, in terms of both the GAAP net income measure and the non-GAAP Adjusted EBITDA measure. We believe that including both measures allows the reader better to evaluate our overall performance.
Current wording
The table below summarizes our three-month and six-month operating results for the periods ended March 29, 2026 and March 30, 2025, in terms of both the GAAP net income measure and the non-GAAP Adjusted EBITDA measure. We believe that including both measures allows the reader better to evaluate our overall performance.
Previous wording
The decrease is primarily driven by lower gross profit combined with increased general and administrative spending during the current year period as compared to the prior year period. Operating segment performance is discussed in greater detail throughout the following sections.
Current wording
Operating segment performance is discussed in greater detail throughout the following sections.
Previous wording
Product backlog represents the value of unfulfilled customer manufacturing orders yet to be recognized as revenue. While backlog is not a non-GAAP financial measure, it is also not defined by GAAP. Therefore, our methodology for calculating backlog may not be consistent with methodologies used by other companies. The booked backlog by period may also not be fully indicative of the predicted revenues for those periods as many of our orders provide for accelerated delivery without penalty and may additionally provide customers the option to adjust schedules to meet their most recent projected demand quantities. However, we provide customer order and backlog information as we believe it provides significant insight into forward demand, with some predictive power to short term future revenues.
Current wording
Product backlog represents the value of unfulfilled customer manufacturing orders yet to be recognized as revenue. While backlog is not a non-GAAP financial measure, it is also not defined by GAAP. Therefore, our methodology for calculating backlog may not be consistent with methodologies used by other companies. The booked backlog by period may also not be fully indicative of the predicted revenue for those periods as many of our orders provide for accelerated delivery without penalty and may additionally provide customers the option to adjust schedules to meet their most recent projected demand quantities. However, we provide customer order and backlog information as we believe it provides significant insight into forward demand, with some predictive power to short term future revenue.
Previous wording
During the three months ended December 28, 2025, the Company booked $7.9 million in new orders, representing a 31.7% increase over the prior year period orders of $6.0 million. The orders for the most recently completed three months consist of $3.8 million for our Optex Richardson segment and $4.1 million attributable to the Applied Optics Center segment.
Current wording
During the six months ended March 29, 2026, the Company booked $16.3 million in new orders, representing a 3.8% increase compared to the prior year period orders of $15.7 million. The orders for the most recently completed six months consist of $7.4 million for our Optex Richardson segment and $8.9 million attributable to the Applied Optics Center segment.
Previous wording
The following table depicts the new customer orders for the three months ending December 28, 2025 as compared to the prior year period in millions of dollars:
Current wording
The following table depicts the new customer orders for the six months ending March 29, 2026 as compared to the prior year period in millions of dollars:
Previous wording
Orders for the Optex Richardson segment increased by $1.2 million, or 46.2%, from the prior year period, primarily as a result of increased demand for our periscope products.
Current wording
Orders for the Optex Richardson segment decreased by $1.5 million, or 16.9%, from the prior year period, primarily as a result lower customer demand for periscopes and other optical assemblies.
Previous wording
Backlog as of December 28, 2025 was $37.9 million as compared to a backlog of $42.0 million as of December 29, 2024, representing a decrease of 9.8%. The following table depicts the current expected delivery by quarter of all contracts awarded as of December 28, 2025, as well as the December 28, 2025 backlog as compared to the backlog on December 29, 2024.
Current wording
Backlog as of March 29, 2026 was $36.6 million as compared to a backlog of $41.1 million as of March 30, 2025, representing a decrease of 10.9%. The following table depicts the current expected delivery by quarter of all contracts awarded as of March 29, 2026, as well as the March 29, 2026 backlog as compared to the backlog on March 30, 2025.
Previous wording
Revenue. For the three months ended December 28, 2025, revenue increased by $0.9 million or 11.6% compared to the prior year period as set forth in the table below:
Current wording
Revenue. For the three months ended March 29, 2026, revenue decreased by $1.1 million or 10.3% compared to the prior year period as set forth in the table below:
Previous wording
Gross Margin. The gross margin during the three-month period ended December 28, 2025 was 22.9% of revenue as compared to a gross margin of 26.0% of revenue for the prior year period. The decrease in gross profit is primarily attributable to changes in product mix between segments combined with increased losses on our AOC day window program with higher material usage and increased gold pricing associated with the coating process. Cost of sales increased to $7.0 million for the recently completed period as compared to the prior year period of $6.1 million due to increased revenue and material costs.
Current wording
Gross Margin. The gross margin during the three-month period ended March 29, 2026 was 35.2% of revenue as compared to a gross margin of 31.3% of revenue for the prior year period. Consolidated gross profit for the three months ended March 29, 2026 increased $0.03 million compared to the same period in the prior year, despite lower revenue. Cost of sales decreased to $6.2 million for the recently completed period as compared to the prior year period of $7.4 million on lower revenue, a change in mix toward more profitable contracts and improved warranty trends.
Previous wording
G&A Expenses. During the three months ended December 28, 2025 and December 29, 2024, we recorded operating expenses of $1.9 million and $1.2 million, respectively. Operating expenses increased by 58.3% over the prior year period primarily due to increased labor and fringes of $0.5 million, increased stock compensation of $0.1 million and increased legal and IT service costs of $0.1 million.
Current wording
G&A Expenses. During the three months ended March 29, 2026 and March 30, 2025, we recorded operating expenses of $1.7 million and $1.1 million, respectively. Operating expenses increased by $0.6 million over the prior year period primarily due approximately $0.2 million in higher labor and fringe benefit costs, $0.2 million in increased stock-based compensation expense, and $0.2 million in other spending. Higher labor costs were primarily attributable to the addition of the Optex Richardson General Manager position and other staffing and organizational changes within the engineering and administrative functions.
Previous wording
Operating Income. During the three months ended December 28, 2025, we recorded operating income of $0.1 million, as compared to operating income of $0.9 million during the three months ended December 29, 2024. The $0.8 million decrease in operating income is primarily due to lower gross profit and higher general and administrative costs.
Current wording
Operating Income. For the three months ended March 29, 2026, we recorded operating income of $1.7 million, as compared to operating income of $2.2 million for the three months ended March 30, 2025. The $0.5 million decrease was primarily attributable to higher general and administrative expenses of $0.6 million.
Previous wording
As of December 28, 2025, Optex Systems Holdings had working capital of $21.2 million, as compared to $21.1 million as of September 28, 2025. During the three months ended December 28, 2025, we used operating cash of $(0.1) million, primarily driven by increased inventory and payments against accounts payable. During the three months ended December 28, 2025, there were no borrowings or payments against the Texas Capital Facility (as defined below).
Current wording
As of March 29, 2026, Optex Systems Holdings had working capital of $22.6 million, as compared to $21.1 million as of September 28, 2025. During the six months ended March 29, 2026, we used operating cash of $1.3 million, primarily driven by $1.3 million in increased inventory. During the six months ended March 29, 2026, there were no borrowings or payments against the Texas Capital Facility (as defined below).
Previous wording
The Company has capital commitments of $0.5 million for the purchase of property and equipment including a DLC coater and prototype metal machining center.
Current wording
The Company has capital commitments of $1.1 million for the purchase of property and equipment including a DLC coater, a prototype metal machining center, a high vacuum coating system and a 4D PhaseCam LWIR Interferometer and accessories.
Previous wording
Backlog as of December 28, 2025 was $37.9 million as compared to $42.0 million as of December 29, 2024, representing a decrease of 9.8%. For further details, see “Results of Operations – New Orders and Backlog” above.
Current wording
Backlog as of March 29, 2026 was $36.6 million as compared to $41.1 million as of March 30, 2025, representing a decrease of 10.9%. For further details, see “Results of Operations – New Orders and Backlog” above.
Previous wording
At December 28, 2025, the Company had approximately $5.8 million in cash and no outstanding balance on our revolving credit line. As of December 28, 2025, our outstanding accounts receivable balance was $4.4 million, of which $4.1 million has been collected during January 2026.
Current wording
At March 29, 2026, the Company had approximately $4.2 million in cash and no outstanding balance on our revolving credit line. As of March 29, 2026, our outstanding accounts receivable balance was $5.7 million which will be collectible during the following quarter.
Previous wording
We refer to “Note 5 – Commitments and Contingencies – Non-cancellable Operating Leases” for a tabular depiction of our remaining minimum lease and estimated Common Area Maintenance (“CAM”) payments under such leases as of December 28, 2025, which disclosure is incorporated herein by reference.
Current wording
Please refer to “Note 4 – Commitments and Contingencies – Non-cancellable Operating Leases” for a tabular depiction of our remaining minimum lease and estimated Common Area Maintenance (“CAM”) payments under our leases as of March 29, 2026, which disclosure is incorporated herein by reference.
Previous wording
The Company expects to generate net income and positive cash flow from operating activities over the next twelve months. To remain profitable, we need to maintain a level of revenue adequate to support our cost structure. Management intends to manage operations commensurate with our level of working capital and line of credit under the Texas Capital Facility during the next twelve months and beyond; however, uneven revenue levels driven by changes in customer delivery demands, first article inspection requirements or other program delays associated with the pandemic could create a working capital shortfall. In the event the Company does not successfully implement its ultimate business plan, certain assets may not be recoverable.
Current wording
The Company expects to generate net income and positive cash flow from operating activities over the next twelve months. To remain profitable, we need to maintain a level of revenue adequate to support our cost structure. Management intends to manage operations commensurate with our level of working capital and line of credit under the Texas Capital Facility during the next twelve months and beyond; however, uneven revenue levels driven by changes in customer delivery demands, first article inspection requirements or other program delays could create a working capital shortfall. In the event the Company does not successfully implement its ultimate business plan, certain assets may not be recoverable.
Previous wording
On May 21, 2025, the Company and Optex Systems, Inc. renewed their existing credit facility with the Lender by entering into a new Business Loan Agreement (the “Loan Agreement”), effective May 22, 2025, pursuant to which the Lender will continue to make available a revolving line of credit in the principal amount of $3 million (the “Texas Capital Facility”). The commitment period for advances under the Texas Capital Facility is twenty-four months, expiring on May 22, 2027 (the “Maturity Date”). Outstanding advances under the Texas Capital Facility will accrue interest at a variable rate equal to SOFR plus a specific margin. The interest rate is currently at 6.4% per annum.
Current wording
On May 21, 2025, the Company and Optex Systems, Inc. renewed their existing credit facility with the Lender by entering into a new Business Loan Agreement (the “Loan Agreement”), effective May 22, 2025, pursuant to which the Lender will continue to make available a revolving line of credit in the principal amount of $3 million (the “Texas Capital Facility”). The commitment period for advances under the Texas Capital Facility is twenty-four months, expiring on May 22, 2027 (the “Maturity Date”). Outstanding advances under the Texas Capital Facility will accrue interest at a variable rate equal to SOFR plus a specific margin. The interest rate is currently 6.4% per annum.
Previous wording
During the three months ended December 28, 2025 the Company declared and paid no dividends. As of December 28, 2025, there are no outstanding declared and unpaid dividends.
Current wording
During the six months ended March 29, 2026 the Company declared and paid no dividends. As of March 29, 2026, there are no outstanding declared and unpaid dividends.
Previous wording
Our critical accounting estimates include warranty costs, contract losses and the deferred tax asset valuation. Future warranty costs are based on the estimated cost of replacement for expected returns based upon our most recent experience rate of defects as a percentage of warranty covered sales. Our warranty covered sales primarily include the Applied Optics Center optical assemblies. While our warranty period is 12 months, our reserve balances assume a general 90-day return period for optical assemblies previously delivered plus any returned backlog in-house that has not yet been repaired or replaced to our customer. If our actual warranty returns should significantly exceed our historical rates on new customer products, significant production changes, or substantial customer changes to the 90-day turn-around times on returned goods, the impact could be material to our operating profit. We have not experienced any significant changes to our warranty trends in the preceding three years and do not anticipate any significant impacts in the near term. We monitor the actual warranty costs incurred to the expected values on a quarterly basis and adjust our estimates accordingly. As of December 28, 2025, the Company had accrued warranty costs of $168 thousand, as compared to $162 thousand as of September 28, 2025. The primary reason for the $6 thousand increase in reserve balances relates to estimated warranties accrued for shipments of the Applied Optics Center optical assemblies during the three month period ended December 28, 2025.
Current wording
Our critical accounting estimates include warranty costs, contract losses and the deferred tax asset valuation. Future warranty costs are based on the estimated cost of replacement for expected returns based upon our most recent experience rate of defects as a percentage of warranty covered sales. Our warranty covered sales primarily include the Applied Optics Center optical assemblies. While our warranty period is 12 months, our reserve balances assume a general 90-day return period for optical assemblies previously delivered plus any returned backlog in-house that has not yet been repaired or replaced to our customer. If our actual warranty returns should significantly exceed our historical rates on new customer products, significant production changes, or substantial customer changes to the 90-day turn-around times on returned goods, the impact could be material to our operating profit. We monitor the actual warranty costs incurred to the expected values on a quarterly basis and adjust our estimates accordingly. During the last twelve months, we have experienced a significant reduction in warranty return rates on Applied Optics Center optical assemblies which, combined with resolution of the warranty issue we experienced in 2025 on our day window products, resulted in a favorable adjustment to our warranty reserve balance. As of March 29, 2026, the Company had accrued warranty costs of $25 thousand, as compared to $162 thousand as of September 28, 2025.
Previous wording
As of December 28, 2025 and September 28, 2025, we had $185 thousand, and $132 thousand, respectively, of contract loss reserves included in our balance sheet accrued expenses. These loss contracts are related to some of our older legacy periscope and day window contracts which were priced in 2019 to the early part of 2021, prior to Covid-19. Due to inflationary price increases on component parts and commodities and higher internal manufacturing costs (as a result of escalating labor costs and higher burden rates), two of our contracts are in a loss condition. These contracts are three-year Indefinite Delivery Indefinite Quantity (“IDIQ”) contracts with two optional award years, and as such, we are obligated to accept new task awards against these contracts until the contract expiration. Should contract costs continue to increase above the negotiated selling price, or in the event the customer should release substantial quantities against these existing loss contracts, the losses could be material. For contracts currently in a loss status based on the estimated per unit contract costs, losses are booked immediately on new task order awards. During the three months ended December 28, 2025, the Company recognized $174 thousand in new loss reserves against the long term IDIQs, and made shipments resulting in reductions of $121 thousand against existing loss reserves. During the three months ended December 29, 2024, the Company recognized $7 thousand in loss reserves on new contract awards and made shipments resulting in reductions of $53 thousand against existing loss reserves. Both contracts have ordering periods which have expired and are no longer subject to new contract task awards.
Current wording
As of March 29, 2026 and September 28, 2025, we had $56 thousand, and $132 thousand, respectively, of contract loss reserves included in our balance sheet accrued expenses. These loss contracts were related to some of our older legacy periscope and day window contracts which were priced prior to the Covid-19 pandemic and have been affected by inflationary price increases on component parts and commodities and higher internal manufacturing costs (as a result of escalating labor costs and higher burden rates). These contracts are three-year Indefinite Delivery Indefinite Quantity (“IDIQ”) contracts with two optional award years, and as such, we are obligated to accept new task awards against these contracts until the contract expiration. Should contract costs continue to increase above the negotiated selling price, or in the event the customer should release substantial quantities against these existing loss contracts, the losses could be material. For contracts currently in a loss status based on the estimated per unit contract costs, losses are booked immediately on new task order awards. During the three and six months ended March 29, 2026, the Company recognized zero and $174 thousand, respectively, in new loss reserves against two long term IDIQ contracts, made shipments resulting in reductions of $111 thousand and $191 thousand, respectively, and recognized a reduction due to a change in estimate of $59 thousand with respect to existing loss reserves. During the three and six months ended March 30, 2025, the Company recognized $11 thousand and $18 thousand in loss reserves on new contract awards, respectively, changes in estimates for the contract loss reserves of ($10) thousand and $4 thousand, respectively, and applied reserves of $8 thousand and $47 thousand to cost of sales against revenue booked during the periods, respectively. As of March 26, 2026, one of the loss contracts was completed and the Company has one remaining loss contract on our backlog with an expired ordering period that is no longer subject to new contract task awards.
Previous wording
As of December 28, 2025 and September 28, 2025, Optex Systems, Holdings Inc. had a net carrying value of $1.2 million in deferred tax assets represented by deferred tax assets of $2.0 and a deferred tax asset valuation allowance of $0.8 million against those assets. The valuation allowance covers certain deferred tax assets where we believe we will be unlikely to recover those tax assets through future operations. The valuation reserve includes assumptions related to future taxable income which would be available to cover net operating loss carryforward amounts. Because of the uncertainties of future income forecasts combined with the complexity of some of the deferred assets, these forecasts are subject to change over time. While we believe our current estimate to be reasonable, changing market conditions and profitability, changes in equity structure and changes in tax regulations may impact our estimated reserves in future periods.
Current wording
As of March 29, 2026 and September 28, 2025, the Company had a net carrying value of $1.1 million and $1.2 million in deferred tax assets, respectively, represented by deferred tax assets of $1.9 million and $2.0 million, respectively, and a deferred tax asset valuation allowance of $0.8 million and $0.8 million, respectively, against those assets. The valuation allowance covers certain deferred tax assets where we believe we will be unlikely to recover those tax assets through future operations. The valuation reserve includes assumptions related to future taxable income which would be available to cover net operating loss carryforward amounts. Because of the uncertainties of future income forecasts combined with the complexity of some of the deferred assets, these forecasts are subject to change over time. While we believe our current estimate to be reasonable, changing market conditions and profitability, changes in equity structure and changes in tax regulations may impact our estimated reserves in future periods.