Shares of Omega Flex, Inc. OFLX have declined 4.5% since the company reported its earnings for the quarter ended June 30, 2025. This compares to the S&P 500 index’s 0.6% decline over the same time frame. Over the past month, the stock has declined 7.4% compared with the S&P 500’s 1.9% growth.
Omega Flex posted earnings per share (EPS) of 41 cents, down from 45 cents a year ago.
The company’s net sales of $25.5 million for the second quarter of 2025, up 3.7% from $24.6 million in the prior-year quarter. This modest increase was driven by higher sales volume despite broader market softness.
Net income attributable to Omega Flex stood at $4.2 million, down 7.6% from $4.5 million in the year-ago quarter.
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Gross Margins and Operating Profit Pressured
Gross profit increased in absolute terms to $15.4 million from $15.2 million, but the margin narrowed slightly to 60.4% from 61.8% in the prior-year quarter. Operating profit declined 10.6% year over year to $4.7 million, reflecting cost pressures across functional areas.
Engineering expenses surged 37.2% to $1.4 million, attributed to increased product development and certification costs. Selling expenses rose 7% to $5.2 million, driven by higher advertising, travel, and commissions. General and administrative expenses edged up 1.3% to $4.1 million, with stock-based compensation and staffing costs partly offset by lower director-related expenses.
Overall, the operating margin fell to 18.5% from 21.5% in the same quarter last year.
Management Commentary
Omega Flex acknowledged several headwinds, most notably a soft housing market that contributed to lower unit volumes during the first half of 2025. Management cited a decline in housing starts as a key factor weighing on top-line growth. Despite this, the company emphasized its strong cash position and conservative financial posture, with no outstanding debt and $50.7 million in cash and equivalents at the quarter end.
Management also highlighted the robust performance of its flagship TracPipe and CounterStrike flexible gas piping systems, along with the continued growth potential of its MediTrac corrugated medical tubing (CMT) line, which offers faster installation in healthcare facilities relative to traditional copper piping.
Factors Influencing Results
The modest increase in revenue in the second quarter was not enough to offset the higher expenses across engineering, marketing, and administrative functions. Notably, foreign currency fluctuations contributed positively to the quarter’s performance, with $0.2 million in other income compared to a $0.03 million loss a year earlier. However, interest income declined year-over-year due to lower interest rates, dropping from $0.6 million to $0.5 million.
The tax expense declined 3.3% to $1.3 million in the quarter, in line with lower pre-tax income.
Other Developments
A notable development in the equity compensation structure was the granting of 420,000 shares of restricted stock under the 2025 Equity Incentive Plan, representing 4% of Flex-Trac Inc.’s fully diluted shares. These shares cliff vest over eight years or earlier under certain conditions, such as death, disability or retirement. This move aligns management incentives with long-term performance objectives.
The company also continued regular dividend payments, declaring $0.34 per share in June, consistent with prior quarters. For the first half of 2025, total dividends paid amounted to $6.9 million.
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