Danny Schoening

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Thu, Jul 18, 2019

2018 – Summer Review (July 2018)

2018 – Summer Review
Similar to the Texas Summer, Optex’s business is heating up! As you have seen from our recent 10Q and our last Press Release on the 500,000 share buyback, the message we’ve shared for the last two years continues……increased revenue, increased margins, and increased earnings.
Military spending is obviously up, and the armored vehicle production is driving hours through our factories and helping to level out our production cycles. With the increased bookings of multi-year IDIQ contracts, delivery schedules tend to be more consistent and provide our production teams the increased visibility needed to plan and manage our resources more effectively and increase labor efficiency. We’re seeing a more consistent quarter over quarter customer order pattern in our defense and commercial products which helps smooth out the quarterly swings in our revenue stream. Again, great news for the factories as they manage the day to day requirements of keeping critical equipment in front of our soldiers.
On a similar note, some of our shareholders have expressed concern over the decrease in the number of Press Releases on new orders. Our practice has always been around sharing critical information to our shareholders per SEC requirements. That said, with the increased number of multi-year IDIQ contracts, the individual contract releases may only meet these requirements when taken in the aggregate. Our practice has been to announce the overall IDIQ contract award with the expected total value across the extended contract period, but not to announce each individual contract release order. In consideration of our shareholder feedback, we will review our policy on new order announcements to determine the best process to communicate these awards and continue to meet the SEC guidelines. While we reconsider this practice, shareholders can continue to watch our published backlog with forecasted ship dates in our periodic reports on Form 10-K and Form 10-Q to get an excellent picture of the overall business. In addition, our annual 10K Part I, “Contracts” provides a complete update on the status all of our active material long-term contracts, the total contract awarded values, the remaining “undelivered” values and the expected delivery terms.
Finally, I’d like to comment on our use of the cash generated from operations. We continually review our working capital requirements to ensure we have the available resources required to maintain our base operating level and anticipated growth levels during periods of increased customer demand. As our operating performance has significantly improved during the last year, we have generated additional cash which exceed our operating requirements. In addition to maintaining a healthy working capital and strong balance sheet, our objective is to increase shareholder value through three primary options. First, you’ve seen in 2017 where we executed a Dividend program. We paid $0.02 per quarter to Shareholders and Warrant holders for 4 consecutive quarters. This dividend program ended in the second fiscal quarter of 2018. Next, you’ve seen Optex buy back shares and retire them to our treasury. We’ve used this technique when a large block of shares can be obtained at what we believe to be an excellent price with little or no transaction fees. And finally, you’ve seen Optex use cash for acquisitions, investments in technology, and other revenue generating opportunities. This last technique, while more opaque to the investor on a daily basis, is applied with the mindset of increasing Shareholder Value through growth and improved operating performance.
To conclude, we believe we’re on the right path. The business is strong, revenue is increasing, we’ve cleaned up the ownership structure, we’ve managed debt at a very low level, and our customers continue to provide excellent feedback on our quality, performance and product value. We anticipate the market will soon begin to recognize and reward these efforts by potential recognition in the capital markets thus increasing scenarios for our warrant holders to start to consider exercising their options.
Indeed, a hot time in Texas!
Danny Schoening CEO