Precision Optics (NASDAQ:POCI) reported record fiscal third-quarter revenue and positive adjusted EBITDA, as management said production improvements and stronger demand across key programs began to translate into better financial performance.
The medical and defense micro-optics manufacturer said revenue for the quarter ended March 31, 2026, was $8.7 million, up 108% from $4.2 million in the year-ago period and above $7.4 million in the prior sequential quarter. Chief Executive Officer Dr. Joe Forkey called the quarter “a major milestone,” citing record revenue, improved manufacturing yields and the company’s first positive adjusted EBITDA result in the period discussed on the call.
Core Production Programs Drive Quarterly Record
Precision Optics’ two largest production programs continued to account for much of the company’s growth. Forkey said revenue from the company’s top-tier aerospace customer reached $3.6 million, a quarterly record and up 44% sequentially. The increase followed investments in production capacity and improved efficiency, with yields on that line now consistently at 97%, compared with previous monthly levels typically between 85% and 95%.
Forkey said the aerospace customer has encountered bottlenecks elsewhere in its deployment process and has asked Precision Optics to slow production against existing backlog in the first and second quarters of fiscal 2027. New orders are expected for the third quarter of fiscal 2027. He said management views the slowdown as temporary and that “all indications” are that Precision Optics remains the sole source for the assembly.
The company’s single-use cystoscope program also posted record revenue of $2.2 million in the third quarter, up about 10% sequentially. Forkey said yields on that line have improved to above 90%, though the company is still targeting 95% in the fourth quarter.
In the question-and-answer portion of the call, Forkey said the company has not yet realized all expected improvements on the cystoscope line. He said additional yield gains and process changes are expected, including updates to procedures, tools and fixtures designed to increase throughput with the same number of technicians.
Margins Improve as Operations Stabilize
Chief Financial Officer Wayne Coll said production revenue was approximately $7.6 million in the quarter, compared with $3.3 million in the year-ago quarter and $6.4 million in the prior sequential quarter. Product development and engineering revenue was $1.1 million, compared with $900,000 a year earlier and $1 million in the previous quarter.
Gross margin rose to 23.6%, compared with 10% in the year-ago quarter and 2.8% in the prior sequential quarter. Gross profit increased to $2.1 million from $418,000 a year earlier. Coll said higher production volumes, better throughput and improved yields contributed to the stronger gross profit performance.
The gross margin also reflected a $225,000 refundable credit from the Commonwealth of Massachusetts Economic Development Incentive Program, which Precision Optics earns as it increases employee headcount at its Massachusetts locations. Coll said the company expects additional refundable credits from the program in future periods.
Total operating expenses were approximately $2.1 million, down from approximately $2.5 million in the year-ago quarter. SG&A expenses declined to $1.9 million from $2.2 million, primarily because of lower stock-based compensation and recruiting costs, partially offset by increased consulting, bonuses and bad debt expense. R&D expenses rose to $267,000 from $211,000.
The company reported a net loss of $108,000, compared with a net loss of $2.1 million in the year-ago quarter and a net loss of $1.8 million in the sequential second quarter. Adjusted EBITDA was positive $300,000, compared with negative $1.3 million a year earlier and negative $1.5 million in the prior quarter.
Ross Optical and Pipeline Add to Growth Outlook
Forkey said the company’s Ross Optical division contributed significantly to the improved bottom line, with quarterly revenue of approximately $1.3 million, up from $1.0 million in the second quarter and $800,000 a year earlier. Coll said the Ross Optical result represented a quarterly record.
During the Q&A session, Forkey said management believes much of the increase at Ross Optical is sustainable. He said some customers may have delayed orders because of tariff uncertainty, while others may be increasing inventory. He also said Ross Optical is seeing new customers with meaningful orders and existing customers increasing volumes as their businesses grow.
Forkey also highlighted newer production programs, including a single-use ophthalmic endoscope program supported by a $3.5 million follow-on production order announced the prior week. Looking ahead, he said as many as five to six programs in the development pipeline could move to production in fiscal 2027, including three over the next six months: a low-volume single-use device for small joint arthroscopy, an upper GI scope and a robotic surgery articulating rigid scope.
The company is also continuing to develop its Unity platform, a modular imaging architecture intended to reduce development costs, time to market and execution risk for reusable and single-use endoscopic systems. Forkey said Precision Optics currently has one Unity program in its product development pipeline and is in discussions with four additional sales prospects.
Balance Sheet Strengthened, Guidance Raised
Precision Optics ended the quarter with $10.7 million in cash, up from approximately $900,000 at Dec. 31, 2025. During the quarter, the company completed an oversubscribed $10 million public offering that included participation from existing and new investors, as well as directors and officers. Bank debt at March 31 was approximately $1.5 million.
Based on the third-quarter results and visibility into the remainder of the fiscal year, Precision Optics raised its fiscal 2026 revenue guidance to a range of $29 million to $31 million, compared with prior guidance of $26 million to $28 million. The updated outlook represents 52% to 62% growth over fiscal 2025 revenue of $19.1 million.
The company also narrowed its fiscal 2026 adjusted EBITDA guidance to a loss of $2.5 million to $2.7 million, compared with previous guidance for a loss of $2.5 million to $3.0 million. Forkey said the updated forecast implies another quarter of roughly break-even adjusted EBITDA in the fourth quarter.
Forkey said the company is considering strategic investments in two areas: capabilities required to become a leading production company in micro-optics, and growth within its core markets of medical devices, defense and aerospace, and satellite communications. He said investments may include quality assurance, manufacturing engineering, supply chain management, go-to-market resources and potential facility updates.
“In many ways, this quarter demonstrates the business model we have been building towards,” Forkey said. “Our production programs are scaling, our operations are improving, our pipeline remains active, and our financial performance is beginning to reflect that progress.”
About Precision Optics (NASDAQ:POCI)
Precision Optics Corporation, Inc designs, develops, manufactures, and sells specialized optical and illumination systems and related components primarily in the United States and the European Economic Area. It offers medical instrumentation products, including endoscopes and endocouplers, as well as other custom imaging and illumination products, such as Microprecision lenses and micro medical cameras, and 3D endoscopes for use in minimally invasive surgical procedures by hospitals and physicians.
