Pro-Dex(PDEX) - 2022 Q4 - Annual Report

Financial Performance - Net sales for fiscal 2022 were $42.041 million, an increase of $4.012 million or 11% compared to $38.029 million in fiscal 2021[133] - Gross profit margin decreased to 31% in fiscal 2022 from 36% in fiscal 2021, with cost of sales rising to $28.909 million, representing 69% of net sales[133] - Operating income for fiscal 2022 was $5.123 million, maintaining a consistent 12% of net sales compared to fiscal 2021[133] - Net income for fiscal 2022 was $3.855 million, a decrease of 34% from $5.821 million in fiscal 2021[133] - Total cost of sales increased by $4.5 million, or 18%, in fiscal 2022, driven by higher product costs and material expenses[140] Sales Breakdown - Medical device sales accounted for 81% of total net sales in fiscal 2022, with orthopedic sales increasing by 21% to $21.877 million[135] - The proportion of total sales from repairs increased by 33% to $6.610 million in fiscal 2022[135] - Sales of industrial and scientific products increased by $65,000, or 8%, in fiscal 2022 compared to fiscal 2021[136] - Dental products sales rose by $304,000, or 189%, in fiscal 2022, primarily due to excess inventory sales[137] - Repair revenue increased by approximately $1.7 million, or 33%, to $6.6 million in fiscal 2022[138] Research and Development - Research and development costs decreased to $2.980 million, representing 7% of net sales, down from 11% in fiscal 2021[133] - Research and development costs decreased by $1.4 million, or 32%, from fiscal 2021 to 2022, due to a shift towards billable customer projects[143] Revenue Growth - The company experienced a significant increase in non-recurring engineering (NRE) and prototype services revenue, which rose by 213% to $1.014 million[135] - Revenue from NRE & prototype services surged by $690,000, or 213%, compared to fiscal 2021[136] Operational Challenges - The company faced supply chain challenges due to the COVID-19 pandemic, but managed to mitigate anticipated declines in sales by sourcing replacement components[115] - The company has experienced negative operating cash flow in the past due to long-lead time materials procurement[161] Cash Management - Cash used in operating activities totaled $847,000 in fiscal 2022, with a net income of $3.9 million[154] - As of June 30, 2022, working capital was $19.8 million, indicating sufficient funds to meet cash requirements for the next 12 months[160] - The company is focused on preserving cash balances by monitoring expenses and identifying cost savings, while potentially requiring debt or equity capital for working capital needs[161] - As of June 30, 2022, the company held $2.5 million in marketable public equity securities, which included unrealized holding losses of $262,000[162] Share Repurchase Program - A new share repurchase program was approved in December 2019, allowing the repurchase of up to one million shares of common stock[163] - During the fiscal year ended June 30, 2022, the company repurchased 75,250 shares at an aggregate cost of $1.6 million[165] - Cumulatively, the company has repurchased a total of 1,110,746 shares at an aggregate cost of $15.7 million under the share repurchase programs[165] - The previous share repurchase plan authorized the repurchase of 750,000 shares, which was nearing completion[163] - All repurchases under the 10b5-1 Plans were administered through an independent broker[165] Future Outlook - The company continues to focus on long-term growth despite short-term challenges, with positive long-term prospects expected[115] - Backlog at June 30, 2022, was $16.5 million, up from $9.7 million at June 30, 2021[139] - The Investment Committee is responsible for implementing the Surplus Capital Investment Policy, which was approved by the Board[164] - The company may reinstate its ATM Agreement to sell additional shares if needed[161]