Precision Optics (US:POCI)2023-02-15 02:42Financial Data and Key Metrics Changes - Revenue for Q2 2023 was a record $5.9 million, up 51% from $3.9 million in the same quarter a year ago. Excluding a one-time $600,000 technology rights revenue, total revenue would have been $5.3 million, corresponding to a 38% year-over-year increase [31][34] - Gross margin reached 46% for Q2 2023 compared to 29% in the same quarter last year. Excluding the technology rights revenue, gross margin was 40%, marking an 11% improvement year-over-year [27][31] - Net income was $634,000, a significant improvement from a loss of $507,000 in the same quarter a year ago. Adjusted EBITDA was positive at $993,000 compared to a loss of $72,000 in the same quarter last year [28][34] Business Line Data and Key Metrics Changes - Production revenue for Q2 2023 was $3.6 million, a 59% increase from $2.3 million in Q2 2022, driven by increased orders for spinal products and a new defense aerospace contract [16][18] - Engineering revenue was $1.7 million for Q2 2023, a 4% increase compared to the same quarter of the previous fiscal year [24] Market Data and Key Metrics Changes - The total addressable market for single-use medical imaging devices is estimated at $500 million per year, growing at a rate of 15% to 20% annually [5] - The company has seen increased customer interest in single-use products, indicating a shift in market demand towards single-use medical devices [12] Company Strategy and Development Direction - The company completed its uplisting to NASDAQ, which has increased investor interest and trading volume [10] - A technology licensing and royalty agreement was finalized, aimed at enhancing access to the single-use medical device market and supporting long-term growth [11][14] - The company is focusing on transitioning products from reusable to single-use designs, which requires adjustments in the supply chain and production processes [12][51] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing a robust development pipeline with several programs poised to enter production within the next 12 to 18 months [42] - The company expects solid revenue growth in the range of 20% for the fiscal year overall, despite some anticipated fluctuations in individual production programs [35][36] Other Important Information - The company achieved operating profitability for the first time in many years, with a focus on maintaining a high level of utilization of engineering resources [28][34] - The company is actively searching for a new permanent CFO following the resignation of the previous CFO [29][30] Q&A Session Summary Question: Can you provide more color on accounts receivable? - Management indicated that accounts receivable is broad, with a few long-term customers being slow-paying, but the majority is spread across many customers due to heavy deliveries at the end of the quarter [40] Question: What guidance can you provide going forward? - Management did not provide specific guidance beyond mentioning a strong pipeline of opportunities [41] Question: Can you elaborate on the pipeline and expected commercial launches? - Management noted that there are 7 to 8 programs ready to go into production in the next 12 to 18 months, with several poised for imminent launch pending customer funding and FDA approvals [42][43] Question: Why choose the royalty route for the licensing agreement? - The royalty arrangement allows the company to benefit from the growth in the single-use market without fully utilizing its production resources, providing a steady income stream [44][51] Question: Are there plans for more acquisitions? - Management confirmed that they are looking at acquisitions on an opportunistic basis, given the fragmented nature of the optics industry [52] Question: How does the company view its performance compared to three years ago? - Management believes the company is performing as well or better than expected [53] Question: Does the single-use program bring relationships with larger customers? - Management confirmed that they are seeing larger opportunities, with many current programs involving established medical device companies [67] Question: Are these programs replacing existing devices? - Yes, larger companies are moving from reusable to single-use devices, which lowers the risk of program success due to established markets [72]