Precision Optics (US:POCI)2025-05-15 22:02Financial Data and Key Metrics Changes - For Q3 FY2025, revenue was $4.2 million, down from $5.2 million in Q3 FY2024, with production revenue at $3.2 million compared to $3.0 million year-over-year, while engineering revenue fell to $924,000 from $2.3 million [22][24] - Gross margins decreased to 10% from 35% in the same quarter last year, attributed to low yields and a one-month shutdown of production lines [24] - The net loss for the quarter was $2.1 million, compared to a net loss of $317,000 in the same quarter last year, with adjusted EBITDA at negative $1.3 million compared to a positive $52,000 [25] Business Line Data and Key Metrics Changes - The single-use cystoscope program faced significant production challenges, leading to a drop in daily yields to below 50%, necessitating a halt in manufacturing for root cause analysis [9][10] - Despite production challenges, overall systems production revenue increased over 20% quarter-over-quarter and more than doubled year-over-year [11] - The aerospace program's production revenue grew from approximately $300,000 in Q1 to just under $900,000 in Q3, with expectations for further growth in Q4 [12] Market Data and Key Metrics Changes - The single-use endoscope market is growing at annual rates estimated to be as high as 20%, driven by lower costs and superior performance of new technologies [16][17] - The company has a backlog greater than $6 million, with a commitment from a military customer for minimum annual purchases of nearly $4 million for 2025 and 2026 [13][35] Company Strategy and Development Direction - The company is focused on resolving production issues and expanding its Unity platform, which aims to streamline the development of new endoscopic systems [18][19] - The Unity platform is expected to reduce time to market by 6 to 12 months compared to custom designs, enhancing competitiveness [59] - The company is actively pursuing alternative suppliers to mitigate the impact of tariffs on its business [68][69] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in resolving production issues and anticipates significant revenue growth in Q4, projecting $6 million in sales [26][28] - The company maintains strong customer relationships and a robust pipeline of opportunities, particularly with the Unity platform [27] Other Important Information - The company has made recent changes to its Board, adding two new members with relevant experience in the medical device industry [20][21] - R&D spending increased due to investments in the Unity platform, with expectations for steady state expenses in the coming quarters [24][55] Q&A Session Summary Question: Were engineering clients affected by production issues? - Yes, engineering resources were diverted to address production issues, impacting revenue collection [31][32] Question: Will engineering fees be collected now that issues are resolved? - Correct, with production issues resolved, the company expects to collect both engineering and production fees [32] Question: Is the aerospace program expected to continue beyond 2026? - Yes, indications suggest the program will continue beyond 2026, with higher order rates anticipated [33][34] Question: Are there any contractual issues due to production delays? - No, the company has a good relationship with the customer and is moving forward positively [36][38] Question: Is staffing adequate for production needs? - The company is close to full staffing for assembly technicians and is looking to add a few more for smooth operations [39] Question: When will the second production line be operational? - The second line is expected to start running in the first half of fiscal 2026 [40] Question: Will the current quarter be EBITDA positive? - Yes, the company expects to achieve positive EBITDA in the current quarter [43][44]