Precision Optics (US:POCI)2021-05-14 03:38Financial Data and Key Metrics Changes - In Q3, total revenue was $2.5 million, a slight increase from the same quarter last year, but down slightly sequentially [29] - Production revenue was $1.9 million, flat compared to the previous quarter and down from $2.2 million in Q3 of the previous year, primarily due to decreased orders in the otoscopy and defense programs [10][29] - Engineering services revenue was $550,000, representing a 162% increase year-over-year but down $300,000 from the second quarter due to timing of revenue recognition [30] - Gross margin was 33%, compared to 31% in the previous quarter and 34% in the same quarter last year, with potential gross margins estimated at approximately 38% without additional costs related to single-use engineering programs [30][31] - Net income for Q3 was $552,000, but excluding PPP loan forgiveness, it would have been a loss of $257,000 [32] Business Line Data and Key Metrics Changes - The cardiac program saw an uptick in production volumes, while the otoscopy program experienced a decline [10][14] - Engineering revenue increased significantly year-over-year, driven by strategic investments in sales and technical capabilities [11][24] - The company reported stable volumes in traditional products, including complex endo-couplers and specialized endoscopes [18] Market Data and Key Metrics Changes - The single-use endoscope market is expanding, driven by increased demand and advancements in technology [20][21] - The defense and aerospace markets are also seeing a demand for smaller optics, which aligns with the company's capabilities [43][46] Company Strategy and Development Direction - The company is focused on growing sales capabilities, investing in technical resources, updating production capabilities for single-use products, and exploring strategic partnerships or acquisitions [34][35] - The engineering pipeline is robust, with numerous projects in various stages of development, indicating strong future growth potential [27][35] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of the market and the company's positioning to capitalize on growth opportunities in the medical device and defense sectors [13][35] - The company is well-prepared to manage through ongoing challenges and is focused on transitioning projects into long-term production contracts [36] Other Important Information - The company has made significant investments in its engineering pipeline, which is expected to yield long-term benefits [26][27] - The company has three new patents pending related to innovations in single-use endoscopes, which could enhance its competitive position [40][41] Q&A Session Summary Question: Additional details on intellectual property related to single-use applications - Management discussed two categories of intellectual property: patentable innovations and trade secrets, emphasizing the importance of both in the single-use market [39][42] Question: Insights on aerospace and defense markets - Management highlighted the demand for smaller optics in defense and aerospace, driven by cost and efficiency considerations, aligning with the company's core competencies [43][46]