Hello and welcome to today's OpTex Systems Holdings, Inc. second quarter earnings call. At this time, all participants are in a listen-only mode. Later, you'll have the opportunity to ask questions during the question and answer session. To register to ask a question at any time, please press star 1 on your telephone keypad. Please note that this call is being recorded and I'll be standing by should you need any assistance. It is now my pleasure to turn the meeting over to Chad George, CEO. Please go ahead, sir.

Thank you. Hello, my name is Chad George, and I'm the CEO of Optic Systems. I'd like to begin by introducing Karen Hawkins, our CFO, who will take the opportunity to walk us through our second quarter fiscal 2026 financials. I'll then return later to add additional perspective on our business and a path forward. Karen?

Thank you, Chad. Before we begin, I'd like to note that statements made during today's call, including our responses during the Q&A session, may include forward-looking statements. These statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially. Factors that could cause such differences are described in our filings with the SEC, including risk factors section of our most recent 10-K. We will also make reference to non-GAAP measures such as adjusted EBITDA. Reconciliations to GAAP results are available in our filings. For the second quarter of fiscal year 2026, revenue was 96 million compared to 10.7 million in the prior year period. For the six months, revenue totaled 18.8 million compared to 18.9 million last year, essentially flat year over year. The first half of the year was impacted by the federal government shutdown and delays in approvals of the fiscal year 2026 appropriations bill. These factors pushed several contacts contract awards into the second half of the year. Looking ahead, we expect a stronger second half of fiscal year 2026 as delayed awards move forward. We continue to project full-year revenue in the range of $43 million to $45 million. Gross profit was $3.4 million for the quarter and $5.5 million for the six months, consistent with prior year periods despite the lower revenue. Gross margin improved meaningfully, 35.2% for the quarter, up from 31.3%, 29.2% for the six months compared to 29.0% in the prior year period. This improvement was driven by completion of legacy loss-making Periscope contracts, improved pricing on newer programs, and continued operational efficiencies. Operating expenses were $1.7 million for the quarter compared to $1.1 million last year, an increase of $0.6 million. for the first six months operating expenses were $3.7 million compared to $2.3 million, an increase of $1.4 million. The increase was driven primarily by leadership transition costs and organizational changes, higher stock-based compensation, increased research and development investment, ongoing compliance and systems upgrades, and to a lesser extent inflationary pressures. We expect operating expenses to remain elevated as we continue to invest in R&D meet cybersecurity maturity model certification requirements and enhance internal reporting systems. Net income for the quarter was $1.3 million, or $0.19 per diluted share, compared to $1.8 million last year. For the first month, net income was $1.6 million, or $0.23 per diluted share, compared to $2.6 million in the prior year period. adjusted EBITDA was $2.0 million for the quarter versus $2.4 million last year and $2.8 million for the six months versus $3.6 million last year. The year-over-year decline reflects lower revenue volumes and increased operating expenses. We continue to expect full-year adjusted EBITDA in the range of $7.5 million to $8.5 million. For the balance sheet and cash flow, we ended the quarter with $4.2 million in cash and cash equivalents compared to $6.4 million at fiscal year end, with no outstanding debt on our revolving credit facility. We used $1.3 million in operating cash flow compared to $4.0 million generated in the prior year period. This reflects higher operating expenses, increased inventory purchases to support the expected second half revenue. Working capital remained strong at $22.6 million compared to $21.1 million at fiscal year end. Orders and backlogs. New orders increased 3.8% year-over-year to $16.3 million for the first half. Ending backlog was approximately $36.6 million, providing good visibility into the remainder of fiscal year 2026. We continue to see steady bookings tied to defense programs. We invested $0.8 million in capital equipment during the first half and have $1.1 million in additional committed investments. We expect full-year capital expenditures to range between $2 million and $2.5 million. These investments support capacity expansion, new product lines, research and development, and enhanced prototyping capability. That concludes the financial portion of our remarks. I will now turn the call back over to Chad for closing comments.

Thank you, Karen. Well, the first half of fiscal 2026 was impacted by delays in government funding and contract timing. We remain encouraged by the strength of our backlog, improving gross margins, and continued demand across our core defense programs. We have made significant investments in research and development, manufacturing capabilities, and organizational structure that we believe position OPTX for long-term growth and expanded market opportunities. As funding activity normalizes and recently awarding programs ramp into production, We expect stronger revenue performance during the second half of the fiscal year. Our team remains focused on execution, operational efficiency, and delivering value to our customers, warfighters, and shareholders, and we are confident in the long-term direction of the business. With that, I'd like to open it up for questions.

Thank you. If you would like to ask a question, please press star 1 on your keypad. to lead the queue at any time, please press star 2. Once again, that is star 1 to ask a question. We'll pause for just a moment to allow everyone the chance to queue. And once again, that is star 1 if you would like to ask a question now. I am currently showing no questions in the queue at this time.

Okay.

Any closing remarks?

No. Thank you. I appreciate it. Thanks for your time.

Thank you. That brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Thank you for watching!

Hello and welcome to today's OpTex Systems Holdings, Inc. second quarter earnings call. At this time, all participants are in a listen-only mode. Later, you'll have the opportunity to ask questions during the question and answer session. To register to ask a question at any time, please press star 1 on your telephone keypad. Please note that this call is being recorded and I'll be standing by should you need any assistance. It is now my pleasure to turn the meeting over to Chad George, CEO. Please go ahead, sir.

Thank you. Hello, my name is Chad George, and I'm the CEO of Optic Systems. I'd like to begin by introducing Karen Hawkins, our CFO, who will take the opportunity to walk us through our second quarter fiscal 2026 financials. I'll then return later to add additional perspective on our business and a path forward. Karen?

Thank you, Chad. Before we begin, I'd like to note that statements made during today's call, including our responses during the Q&A session, may include forward-looking statements. These statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially. Factors that could cause such differences are described in our filings with the SEC, including risk factors section of our most recent 10-K. We will also make reference to non-GAAP measures such as adjusted EBITDA. Reconciliations to GAAP results are available in our filings. For the second quarter of fiscal year 2026, revenue was 96 million compared to 10.7 million in the prior year period. For the six months, revenue totaled 18.8 million compared to 18.9 million last year, essentially flat year over year. The first half of the year was impacted by the federal government shutdown and delays in approvals of the fiscal year 2026 appropriations bill. These factors pushed several contacts contract awards into the second half of the year. Looking ahead, we expect a stronger second half of fiscal year 2026 as the late awards move forward. We continue to project full-year revenue in the range of $43 million to $45 million. Gross profit was $3.4 million for the quarter and $5.5 million for the six months, consistent with prior year periods despite the lower revenue. Gross margin improved meaningfully, 35.2% for the quarter, up from 31.3%, 29.2% for the six months compared to 29.0% in the prior year period. This improvement was driven by completion of legacy loss-making Periscope contracts, improved pricing on newer programs, and continued operational efficiencies. Operating expenses were $1.7 million for the quarter compared to $1.1 million last year, an increase of $0.6 million. for the first six months operating expenses were 3.7 million compared to 2.3 million, an increase of 1.4 million. The increase was driven primarily by leadership transition costs and organizational changes, higher stock-based compensation, increased research and development investment, ongoing compliance and systems upgrades, and to a lesser extent inflationary pressures. We expect operating expenses to remain elevated as we continue to invest in R&D meet cybersecurity maturity model certification requirements and enhance internal reporting systems. Net income for the quarter was $1.3 million, or $0.19 per diluted share, compared to $1.8 million last year. For the first month, net income was $1.6 million, or $0.23 per diluted share, compared to $2.6 million in the prior year period. adjusted EBITDA was $2.0 million for the quarter versus $2.4 million last year and $2.8 million for the six months versus $3.6 million last year. The year-over-year decline reflects lower revenue volumes and increased operating expenses. We continue to expect full-year adjusted EBITDA in the range of $7.5 million to $8.5 million. for the balance sheet and cash flow. We ended the quarter with $4.2 million in cash and cash equivalents compared to $6.4 million at fiscal year end with no outstanding debt on our revolving credit facility. We used $1.3 million in operating cash flow compared to $4.0 million generated in the prior year period. This reflects higher operating expenses, increased inventory purchases to support the expected second half revenue. Working capital remained strong at $22.6 million compared to $21.1 million at fiscal year end. Orders and backlogs. New orders increased 3.8% year-over-year to $16.3 million for the first half. Ending backlog was approximately $36.6 million, providing good visibility into the remainder of fiscal year 2026. We continue to see steady bookings tied to defense programs. We invested $0.8 million in capital equipment during the first half and have $1.1 million in additional committed investments. We expect full-year capital expenditures to range between $2 million and $2.5 million. These investments support capacity expansion, new product lines, research and development, and enhanced prototyping capability. That concludes the financial portion of our remarks. I will now turn the call back over to Chad for closing comments.

Thank you, Karen. While the first half of fiscal 2026 was impacted by delays in government funding and contract timing, we remain encouraged by the strength of our backlog, improving gross margins, and continued demand across our core defense programs. We have made significant investments in research and development, manufacturing capabilities, and organizational structure that we believe position OPTX for long-term growth and expanded market opportunities. As funding activity normalizes and recently awarding programs ramp into production, We expect stronger revenue performance during the second half of the fiscal year. Our team remains focused on execution, operational efficiency, and delivering value to our customers, warfighters, and shareholders, and we are confident in the long-term direction of the business. With that, I'd like to open it up for questions.

Thank you. If you would like to ask a question, please press star 1 on your keypad. to lead the queue at any time, please press star 2. Once again, that is star 1 to ask a question. We'll pause for just a moment to allow everyone the chance to queue. And once again, that is star 1 if you would like to ask a question now. I am currently showing no questions in the queue at this time.

Okay.

Any closing remarks?

No. Thank you. I appreciate it. Thanks for your time.

Thank you. That brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Thank you for watching!