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CORPORATE OVERVIEW

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Page 1: CORPORATE OVERVIEW...BRADLEY SUPPORT –WHAT WE DO… Bradley Fighting Vehicle Back-Up Sight Periscope Assembly 15 Degree Periscope Assembly M45 Periscope Assembly M17 Periscope Assembly

CORPORATE OVERVIEW

Page 2: CORPORATE OVERVIEW...BRADLEY SUPPORT –WHAT WE DO… Bradley Fighting Vehicle Back-Up Sight Periscope Assembly 15 Degree Periscope Assembly M45 Periscope Assembly M17 Periscope Assembly

FORWARD-LOOKING STATEMENT

This presentation includes forward-looking statements that are subject

to many risks and uncertainties. These forward-looking statements,

such as statements about Optex’s short-term and long-term growth

strategies, can sometimes be identified by use of terms such as

“intend,” “expect,” “plan,” “estimate,” “future,” “strive,” and similar

words.

These statements involve many risks and uncertainties that may cause

actual results to differ from what may be expressed or implied in these

statements. These risks are discussed in Optex’s Securities and

Exchange Commission filings and reports, including the risks identified

under the section captioned “Risk Factors” in its Form 10-K.

Optex disclaims any obligation to update information contained in

these forward-looking statements whether as a result of new

information, future events, or otherwise.

THIS PRESENTATION DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES

OF OPTEX OR A SOLICTATION OF AN OFFER TO BUY SECURITIES OF

OPTEX.

2OPTEX Overview March 2020

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PRESENTATION CONTENTS

3OPTEX Overview March 2020

1. What we do/make

2. Sustainable competitive advantages

3. What the market opportunity is

4. Who are the competitors

5. Clearly articulated business strategy

6. Brief financial overview

Page 4: CORPORATE OVERVIEW...BRADLEY SUPPORT –WHAT WE DO… Bradley Fighting Vehicle Back-Up Sight Periscope Assembly 15 Degree Periscope Assembly M45 Periscope Assembly M17 Periscope Assembly

WHAT WE DO…

4OPTEX Overview March 2020

CustomersOptexThreat

Defense

Offense

OPETX STANDS BETWEEN THE THREAT AND OUR CUSTOMERS.

Page 5: CORPORATE OVERVIEW...BRADLEY SUPPORT –WHAT WE DO… Bradley Fighting Vehicle Back-Up Sight Periscope Assembly 15 Degree Periscope Assembly M45 Periscope Assembly M17 Periscope Assembly

ABRAMS SUPPORT – WHAT WE DO…

ICWS Periscope

Assembly (M1A2 Only)

M1 Head Assembly

(M1A1/M1A2)

EMI Defroster

Window

Laser

FilterUnity Mirror

Assembly

(M1A1/M1A2)

M1 Head Mirror

Assembly Gunners

Primary Sight

(M1A1/M1A2)

CWSS

Commanders Weapon

Station Sight

(M1A1 Only)

Periscope Assembly

Driver's Unity (Short)

(M1A1/M1A2)

Periscope Assembly

Driver's Unity (Long)

(M1A1/M1A2)

MRS

Collimator Assembly

(M1A1/M1A2)

Mirror Assembly

Gunners Primary Sight

(M1A1/M1A2)

Periscope Assembly

Commander Side

(M1A1 Only)

Periscope Assembly

Commander Front

(M1A1 Only)

5OPTEX Overview March 2020

Page 6: CORPORATE OVERVIEW...BRADLEY SUPPORT –WHAT WE DO… Bradley Fighting Vehicle Back-Up Sight Periscope Assembly 15 Degree Periscope Assembly M45 Periscope Assembly M17 Periscope Assembly

BRADLEY SUPPORT – WHAT WE DO…

Bradley Fighting VehicleBack-Up Sight

Periscope Assembly

15 Degree Periscope

Assembly

M45 Periscope

Assembly

M17 Periscope

Assembly

M27 Periscope

Assembly

20 Degree Periscope

Assembly

Optex Systems Inc.

Military Artillery Fire

Control Systems

www.optexsys.com

OPTEX Overview March 2020 6

Page 7: CORPORATE OVERVIEW...BRADLEY SUPPORT –WHAT WE DO… Bradley Fighting Vehicle Back-Up Sight Periscope Assembly 15 Degree Periscope Assembly M45 Periscope Assembly M17 Periscope Assembly

STRYKER – LAV SUPPORT – WHAT WE DO…

Stryker/LAV Family of VehiclesM27 Periscope

Assembly

(Turret Version)

M17 Periscope

Assembly

M45 Periscope

AssemblyVision Block Assembly

LS Periscope

Assembly

(MGS Version)

LS MRS Collimator

Assembly (MGS

Version)

Optex Systems Inc.

Military Artillery Fire

Control Systems

www.optexsys.com

OPTEX Overview March 2020 7

Page 8: CORPORATE OVERVIEW...BRADLEY SUPPORT –WHAT WE DO… Bradley Fighting Vehicle Back-Up Sight Periscope Assembly 15 Degree Periscope Assembly M45 Periscope Assembly M17 Periscope Assembly

OPTEX PRODUCTS – WHAT WE DO…

Periscopes

M Series

ICWSLaser & Non-Laser Protected

Acrylic & Glass Periscopes

Sighting Systems

CSS, MRS

Big Eye, etc.Digital Day and Night (DDAN)

Muzzle Reference Systems (MRS)

Ships Binoculars, Collimators, etc.

AOC (Applied Optics Center)

Optical Cells, Eyepiece,

Objective Lens SetsOptically aligned metal

and glass lens sets

Laser Interference

Filters, ENVG Filters, Optical Coatings

Components – Laser Filter Units

OPTEX Overview March 2020 8

Page 9: CORPORATE OVERVIEW...BRADLEY SUPPORT –WHAT WE DO… Bradley Fighting Vehicle Back-Up Sight Periscope Assembly 15 Degree Periscope Assembly M45 Periscope Assembly M17 Periscope Assembly

OPTEX PRODUCTS – WHAT WE DO…

DDAN / M36 Sights Laser Protected Periscopes M17 Day/Thermal Periscope Back Up Sight

Naval Binoculars Howitzer Products

Red Tail

– Digital Spotting Scope

Commercial

Optical Assembly

OPTEX Overview March 2020 9

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SUSTAINABLE COMPETITIVE ADVANTAGES…

10OPTEX Overview March 2020

Building Patented and Proprietary Niche Products for over 30 YearsDesigned in Protection through Patents and Manufacturing Process Knowledge

Vertical Integration (Machining, Coating, Assembly of Optical Parts)Multiple Barriers to Entry

Highest Share in our US Market for Major Product LinesExcellent Economy of Scale through Suppliers and Factory Hours

Expanding Market (Europe and Middle East) through ITAR Registration and PartnershipsITAR Gets you to the

Table

Approved Supplier to: General Dynamics, BAE Systems, L3 Harris Technologies, US DoD, Israel – Ministry of Defense, Lockheed Martin

Growing Revenue, Increasing Margins, Increasing Earnings

(Scale)

Clean Capitalization Table and Healthy Balance Sheet (Robust)

Minimal

CapEx needs

CEO/CFO own 11.4% of Out-standing Shares –Aligned with Shareholders

Page 11: CORPORATE OVERVIEW...BRADLEY SUPPORT –WHAT WE DO… Bradley Fighting Vehicle Back-Up Sight Periscope Assembly 15 Degree Periscope Assembly M45 Periscope Assembly M17 Periscope Assembly

MARKET SHARE, CUSTOMERS, AND COMPETITORS

Periscopes & Vision Blocks Markets Sighting Systems Markets

UK

Germany

SouthKorea

Israel

75%US

20 – 30%Worldwide

MHI

US $10 – 20MM

Worldwide

$40 – 50MM

5%US

0.5 – 1%Worldwide

US $100MM

Worldwide

$500MM – $1B

UK

Norway

Belgium

UK

OPTEX Overview March 2020 11

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OPTEX BUSINESS STRATEGY

Optex has established core competencies by proving its product reliability and product

quality and by maintaining deep product and sector knowledge in an overall supply

chain control environment.

MA

RK

ETS

PRODUCTS

PRESENT NEWP

RESEN

TN

EW

Market Retention

• Optical Engineering

• Mechanical Sighting Systems

• Assembly Processes

Product Development

• New Periscope Technology Enhancement

• New Sighting Systems

Market Development

• Commercial Markets

• Foreign Military Sales Expansion

Diversification

• Opportunistic Commercial and Military

Product Development

OPTEX Overview March 2020 12

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FINANCIALS – GROWING REVENUE, GROWING MARGINS

Revenue vs. Gross Margin

1st Half Revenue 2nd Half Revenue Gross Margin

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

$0

$5

$10

$15

$20

$25

$30

2014 2015 2016 2017 2018 2019

Gross

Margin

Revenue

in Millions

OPTEX Overview March 2020 13

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FINANCIALS – WARRANT ANALYSIS

Growing Revenues with Increasing Gross Margins are generating significant Working Capital with no Debt and little need for CapEx.

With Warrants Exercised before Maturity

With Warrants Exercised at Maturity (cashless)

Stock Price (2/19/2020) $2.18 $2.18

Shares Outstanding (MM) 8.5 8.5

Warrants at $1.50 (MM) 4.1 1.3

Total Potential Shares (MM) 12.6 9.8

Equity Capitalization (MM) $27.52 $21.34

Cash (12/29/19) (MM) $1.68 $1.68

Warrant Proceeds (MM) $6.19 $–

Debt (12/29/19) (MM) $0.60 $0.60

Enterprise Value (MM) $20.26 $20.26

EV/LTM Revenue .83× .83×

Adjusted EBITDA 2019 (MM) $3.68 $3.68

EV/LTM Adj. EBITDA 5.5× 5.5×

Adjusted EBITDA Q120 (MM) $0.81 $0.81

OPTEX Overview March 2020 14

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FINANCIALS Q120 – CHANGE IN FAIR VALUE ON WARRANTS

This is a non cash value

representing the change in

estimated warrant liabilities for

outstanding warrants which is

driven by fluctuations in the

stock volatility rates, market

share prices, interest rates,

future dividends and term

of the outstanding warrants.

The liability would only apply

in the event of a fundamental

change of the entity such as:

amendment of the articles of

incorporation, mergers and

share exchanges, transfers

of corporate assets,

entity dissolution.

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

OPTEX Overview March 2020 15

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FINANCIAL HIGHLIGHTS / VALUATION

OPTEX Overview March 2020 16

Twelve months ended

(Thousands)

Metric September 29, 2019 September 30, 2018 % Change

Revenue $ 24,530 $ 20,853 17.6

Gross Margin $ 6,253 $ 4,515 38.5

Gross Margin % 25.5% 21.7% 17.5

Operating Income $ 3,197 $ 1,486 115.1

Gain on Change Fair Value of Warrants $ 1,344 $ 95 1,314.7

Net Income Applicable to Common Shareholders $ 3,800 $ 930 308.6

Adjusted EBITDA (non GAAP) $ 3,680 $ 1,996 84.4

1. Revenue Growth

2. Margin Growth

3. Earnings Growth

4. No Debt

5. Clean Cap Table

6. Majority Independent

Board – NASDAQ

Compliant

HIGHLIGHTS

7X EBITDA = ~$3.00 Share Price, 10X EBITDA =~$4.33 Share Price

Page 17: CORPORATE OVERVIEW...BRADLEY SUPPORT –WHAT WE DO… Bradley Fighting Vehicle Back-Up Sight Periscope Assembly 15 Degree Periscope Assembly M45 Periscope Assembly M17 Periscope Assembly

SUMMARY

Market

Opportunity

Product

Portfolio

Proven Acquisition

Strategy

Customer

Base

• $1 Billion worldwide

• Increasing market share

(commercial and foreign)

• Identify targets’ critical capabilities and synergies

• Seek vertical integration and

operational bench strength

• Attractive purchase price

• Highest quality

• Innovative product development

• New product launches

• International foothold

• Major defense customers

• Top commercial customers

• Government & Primes

OPTEX Overview March 2020 17

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BUSINESS DIVISIONS OVERVIEW – BACKUP DATA

OPTEX SYSTEMS HOLDINGS, INC.

OPTEX SYSTEMS

~60% of Revenue

APPLIED OPTICS CENTER

~40% of Revenue

• Laser Protected Periscopes and Vision Blocks

• Military Optical Sighting Systems

• Weapon Systems, Optical Subassemblies

• High Definition Imaging Systems

• Thermal and Night Vision Systems

• Premier Thin Film Coatings

• Blocks Unwanted Wavelengths

• Eliminates Unwanted Reflections

• Protects Sensors and Optics

• Precision Optical Assembly Processes

• Stabilized Monoculars and Binoculars(Military & Commercial)

OPTEX Overview March 2020 18

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SELECT MAJOR CUSTOMERS

Defense Customers Commercial Customers

OPTEX Overview March 2020 19

Page 20: CORPORATE OVERVIEW...BRADLEY SUPPORT –WHAT WE DO… Bradley Fighting Vehicle Back-Up Sight Periscope Assembly 15 Degree Periscope Assembly M45 Periscope Assembly M17 Periscope Assembly

LEADERSHIP TEAM

Danny Schoening – CEO

30 years in Engineering, Manufacturing,

Optics, and Business Leadership; holds

3 US Patents. Previously with Honeywell

International (HON) and Finisar

Corporation (FNSR).

Karen Hawkins – CFO

27 years in Defense and Transportation.

Previously with General Dynamics (GD).

Joe Aizpuru – Engineering Manager

30 years in Engineering/Optics.

Holds 11 US Patents. Previously

with Honeywell International (HON)

and Finisar Corporation (FNSR).

Ed Franco – Materials Manager

30 years in Materials and Supply

Chain Management. Previously

with Honeywell International (HON)

and Finisar Corporation (FNSR).

Former US Army Logistics Officer.

Jeff Balch – Quality Manager

30 years in Optical Assembly

and Optex Experience.

Angelina Kerr – Contracts and ITAR

Compliance Manager

20 years in Project Management

and Contracts Support.

Bill Bates – General Manager

– AOC Division

34 years in Optics and Military and

Commercial Contracting. Previously

with L-3 Communications (LLL).

Ron Stinedurf – Manufacturing Manager

37 years in Optical Fabrication

and Manufacturing.

Al Gibson – Senior Thin Film

Coating Engineer

35 years in Thin Film Coatings with a

background in Aerospace Engineering.

OPTEX Overview March 2020 20