Optex Systems Holdings, Inc. Announces First Quarter of Fiscal Year 2020 Financial Highlights

RICHARDSON, TX / ACCESSWIRE / February 10, 2020 / Optex Systems Holdings, Inc. (OTCQB:OPXS), a leading manufacturer of precision optical sighting systems for domestic and worldwide military and commercial applications, announced financial highlights for its first quarter of the 2020 fiscal year, which ended December 29, 2019.

Danny Schoening, CEO of Optex Systems Holdings, Inc., commented, “As mentioned in our Annual Shareholder Letter, our first quarter is typically the lowest of the year due to reduced production days and decreased government interactions during the holiday season. That said, solicitations and contract activity is high, supporting the continued government military spending. Our market position continues to be the strongest in our company history and we continue to see a strong path towards increases in revenue, gross margin, and earnings over the balance of the year.”

Schoening continued “Based on our current backlog delivery projections, we are anticipating the highest revenue growth during the second half of the current fiscal year as we begin shipping in late March of this year against our 2018 Improved Commander Weapon Station (ICWS) contract award.”

Our three-month period ending December 29, 2019 was consistent with the prior year three-month period revenue, with slight improvements in gross margin and operating income on changes in product mix. Our backlog as of December 29, 2019 was $22.0 million, a decrease of (10.6%) from the $24.6 million reported as of September 29, 2019. We attribute the decreased backlog to timing of customer orders and contract awards which typically ramp up during the second through fourth fiscal quarters. In January 2020, Optex announced an order for $1.1 million and two new Indefinite Delivery, Indefinite Quantity (IDIQ) type contract awards for periscopes for a combined total of up to $5.9 million over a five-year period. IDIQ contract awards are reflected in backlog only to the extent that individual task orders have been released by the customer pursuant to contract pricing and agreed delivery schedules. We are expecting releases against these new contracts as well as our other existing IDIQ contracts in the near term.

Our key performance measures for the three months ended December 29, 2019 and December 30, 2018 are summarized below.

Three months ended
(Thousands)

Metric
  December 29, 2019     December 30, 2018     % Change  
 
                 
Revenue
  $ 5,887     $ 5,891       0.0  
 
                       
Gross Margin
  $ 1,467     $ 1,443       1.7  
 
                       
Gross Margin %
    24.9 %     24.5 %     1.6  
 
                       
Operating Income
  $ 718     $ 700       2.6  
(Loss) Gain on Change Fair Value of Warrants
  $ (1,251 )   $ 1,385       (190.3 )
Net (Loss) Income Applicable to Common Shareholders
  $ (679 )   $ 1,354       (150.1 )
 
                       
Adjusted EBITDA (non-GAAP)
  $ 810     $ 829       (2.3 )
 
                       

Three months ended
(millions)

 
  December 29, 2019     December 30, 2018     % Change  
 
                 
Backlog as of period end
  $ 22.0     $ 24.6       (10.6 )
 
                       

We use adjusted earnings before interest, taxes, gains/losses on changes in fair values, depreciation and amortization (EBITDA) as an additional measure for evaluating the performance of our business as “net income” includes the significant impact of non-cash valuation gains and losses on warrant liabilities, noncash compensation expenses related to equity stock issuances, as well as depreciation, amortization, interest expenses and federal income taxes. We believe that adjusted EBITDA is a meaningful indicator of our operating performance because it permits period-over-period comparisons of our ongoing core operations before certain excluded items. Adjusted EBITDA is a financial measure not required by, or presented in accordance with U.S. generally accepted accounting principles (“GAAP”).

The table below summarizes our three-month operating results for periods ended December 29, 2019 and December 30, 2018, in terms of both the GAAP net income measure and the non-GAAP adjusted EBITDA measure. We believe that including both measures provides measures that are useful in evaluating our financial results across periods.

 
 
(Thousands)
Three months ended
 
 
  December 29, 2019     December 30, 2018  
 
           
Net (Loss) Income – GAAP
  $ (679 )   $ 2,025  
Add:
               
Loss (Gain) on Change in Fair Value of Warrants
    1,251       (1,385 )
Federal Income Tax (Benefit) Expense
    141       54  
Depreciation
    66       85  
Stock Compensation
    26       36  
Royalty License Amortization
          8  
Interest Expense
    5       6  
Adjusted EBITDA – Non-GAAP
  $ 810     $ 829  
                 

Highlights of the unaudited Condensed Consolidated and Segment Results of Operations have been prepared in accordance with GAAP. These financial highlights do not include all information and disclosures required in the consolidated financial statements and footnotes, and should be read in conjunction with our Annual Report on Form 10-K for the year ended September 29, 2019 filed with the SEC on December 16, 2019 and Form 10-Q for the three months ended December 29, 2019 filed with the SEC on February 10, 2020.

Optex Systems Holdings, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)

 
  (Thousands, except share and per share data)  
 
     
 
  Three months ended  
 
  December 29, 2019     December 30, 2018  
 
           
Revenue
  $ 5,887     $ 5,891  
 
               
Cost of Sales
    4,420       4,448  
 
               
Gross Margin
    1,467       1,443  
 
               
General and Administrative Expense
    749       743  
 
               
Operating Income
    718       700  
 
               
(Loss) Gain on Change in Fair Value of Warrants
    (1,251 )     1,385  
 
               
Interest Expense
    (5 )     (6 )
Other (Expense) Income
    (1,256)       1,379  
 
               
(Loss) Income Before Taxes
    (538)       2,079  
 
               
Income Tax Expense, net
  $ 141     $ 54  
 
               
Net (Loss) Income
  $ (679)     $ 2,025  
Deemed dividends on participating securities
          (671 )
Net (loss) income applicable to common shareholders
  $ (679)     $ 1,354  
Basic (loss) income per share
  $ (0.08)     $ 0.16  
 
               
Weighted Average Common Shares Outstanding – basic
    8,436,422       8,333,353  
 
               
Diluted (loss) income per share
  $ (0.08)     $ 0.16  
 
               
Weighted Average Common Shares Outstanding – diluted
    8,436,422       8,494,242  
                 

The accompanying notes in our Quarterly Report on Form 10-Q for the period ended December 29, 2019 filed with the SEC on February 10, 2020 are an integral part of these financial statements.

Optex Systems Holdings, Inc.
Condensed Consolidated Balance Sheets

 
  (Thousands, except share and per share data)  
 
     
 
  December 29,2019     September 29, 2019  
 
  (Unaudited)        
ASSETS
           
 
           
Cash and Cash Equivalents
  $ 1,683     $ 1,068  
Accounts Receivable, Net
    2,689       3,066  
Inventory, Net
    10,656       10,535  
Prepaid Expenses
    208       348  
 
               
Current Assets
    15,236       15,017  
 
               
Property and Equipment, Net
    1,065       1,102  
 
               
Other Assets
               
Deferred Tax Asset
    1,341       1,414  
Right-of-use Asset
    1,715        
Security Deposits
    23       23  
 
               
Other Assets
    3,079       1,437  
 
               
Total Assets
  $ 19,380     $ 17,556  
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
 
               
Current Liabilities
               
Accounts Payable
  $ 1,279     $ 1,833  
Operating Lease Liability
    549        
Accrued Expenses
    795       1,180  
Accrued Warranty Costs
    75       46  
Customer Advance Deposits
          3  
Credit Facility
    600       250  
 
               
Current Liabilities
    3,298       3,312  
 
               
Operating Lease Liability – Long Term
    1,240        
Warrant Liability
    3,287       2,036  
Total Liabilities
    7,825       5,348  
 
               
Commitments and Contingencies
               
 
               
Stockholders’ Equity
               
Common Stock – ($0.001 par, 2,000,000,000 authorized, 8,436,422 shares issued and outstanding)
    8       8  
Additional Paid in capital
    26,160       26,134  
Accumulated Deficit
    (14,613 )     (13,934 )
 
               
Stockholders’ Equity
    11,555       12,208  
 
               
Total Liabilities and Stockholders’ Equity
  $ 19,380     $ 17,556  
                 

The accompanying notes in our Quarterly Report on Form 10-Q for the period ended December 29, 2019 filed with the SEC on February 10, 2020 are an integral part of these financial statements.

ABOUT OPTEX SYSTEMS

Optex, which was founded in 1987, is a Richardson, Texas based ISO 9001:2015 certified concern, which manufactures optical sighting systems and assemblies, primarily for Department of Defense (DOD) applications. Its products are installed on various types of U.S. military land vehicles, such as the Abrams and Bradley fighting vehicles, Light Armored and Armored Security Vehicles, and have been selected for installation on the Stryker family of vehicles. Optex also manufactures and delivers numerous periscope configurations, rifle and surveillance sights, and night vision optical assemblies. Optex delivers its products both directly to the military services and to prime contractors. For additional information, please visit the Company’s website at www.optexsys.com.

Safe Harbor Statement

This press release contains certain forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995, including those relating to the products and services described herein. You can identify these statements by the use of the words “may,” “will,” “could,” “should,” “would,” “plans,” “expects,” “anticipates,” “continue,” “estimate,” “project,” “intend,” “likely,” “forecast,” “probable,” and similar expressions. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. Such risks and uncertainties include, but are not limited to, continued funding of defense programs and military spending, the timing of such funding, general economic and business conditions, including unforeseen weakness in the Company’s markets, effects of continued geopolitical unrest and regional conflicts, competition, changes in technology and methods of marketing, delays in completing engineering and manufacturing programs, changes in customer order patterns, changes in product mix, continued success in technological advances and delivering technological innovations, changes in the U.S. Government’s interpretation of federal procurement rules and regulations, changes in spending due to policy changes in any new federal presidential administration, market acceptance of the Company’s products, shortages in components, production delays due to performance quality issues with outsourced components, inability to fully realize the expected benefits from acquisitions and restructurings or delays in realizing such benefits, challenges in integrating acquired businesses and achieving anticipated synergies, changes to export regulations, increases in tax rates, changes to generally accepted accounting principles, difficulties in retaining key employees and customers, unanticipated costs under fixed-price service and system integration engagements, changes in the market for microcap stocks regardless of growth and value and various other factors beyond our control.

You must carefully consider any such statement and should understand that many factors could cause actual results to differ from the Company’s forward-looking statements. These factors include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward-looking statement can be guaranteed and actual future results may vary materially. The Company does not assume the obligation to update any forward-looking statement. You should carefully evaluate such statements in light of factors described in the Company’s filings with the SEC, especially on Forms 10-K, 10-Q and 8-K. In various filings the Company has identified important factors that could cause actual results to differ from expected or historic results. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete list of all potential risks or uncertainties.

Contact:

IR@optexsys.com
1-972-764-5718

SOURCE: Optex Systems Holdings, Inc.

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