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PRECISION OPTICS CORPORATION, INC. (POCI)·Q1 2023 Earnings Summary

Executive Summary

  • Record quarterly revenue of $5.09M, up 118% YoY and up ~6% sequentially; gross margin expanded to 33.9% from 27.4% YoY and 30% QoQ, and adjusted EBITDA turned positive at $0.11M .
  • Demand strength from defense/aerospace and medical programs, plus initial Lighthouse otoscope production, drove the quarter; defense deliveries were ~$0.85M with a ~$3M run-rate expectation .
  • Management reiterated a target for corporate gross margins “above 40%” as Lighthouse scales and integration efficiencies take hold; guiding FY23 revenue growth of “around 20%” and improving bottom-line profitability .
  • Uplisting catalyst: 1-for-3 reverse split completed Nov 1, 2022 and NASDAQ approval letter received; trading expected to commence Nov 16 under ticker POCI, raising visibility and potential liquidity .

What Went Well and What Went Wrong

What Went Well

  • Record revenue and margin expansion: “record revenue of $5.1 million, up 118% year-over-year, increasing gross margins, and positive adjusted EBITDA” .
  • Program transitions to production across defense/aerospace and medical, including Lighthouse’s otoscope; defense deliveries of ~$0.85M in Q1 aligned with ~$3M/year run-rate .
  • Strategic positioning and NASDAQ uplisting progress: “we received a letter from NASDAQ indicating we are now approved for listing… trading… will begin on Wednesday… [Nov 16]” ; reverse split implemented Nov 1 .

What Went Wrong

  • Still a GAAP net loss, albeit much smaller: net loss of $0.074M versus $0.577M YoY; EPS at $(0.00) vs $(0.04) YoY .
  • Operating expenses elevated due to Lighthouse integration, expanded sales/marketing, and uplisting costs; SG&A rose 60.2% YoY to $1.50M .
  • Estimates benchmarking unavailable; consensus figures from S&P Global could not be retrieved, limiting external beat/miss analysis (see Estimates Context).

Financial Results

MetricQ1 2022Q4 2022Q1 2023
Revenue ($USD Millions)$2.336 $4.800 $5.085
Gross Margin %27.4% 30.0% 33.9%
Net Income ($USD Millions)$(0.577) n/a$(0.074)
Diluted EPS ($USD)$(0.04) n/a$(0.00)
Adjusted EBITDA ($USD Millions)$0.218 n/a$0.110

Segment revenue disaggregation:

SegmentQ1 2022 ($USD)Q1 2023 ($USD)
Engineering Design Services$373,316 $1,642,967
Optical Components$1,538,932 $2,652,681
Medical Device Products & Assemblies$424,096 $789,653
Total$2,336,344 $5,085,301

KPIs (production vs engineering, program specifics):

KPIQ3 2022Q4 2022Q1 2023
Production Revenue ($USD Millions)$3.100 n/a$3.400
Engineering Revenue ($USD Millions)$1.500 n/a$1.600
Defense/Aerospace Deliveries ($USD Millions)$0.100 n/a$0.850
Lighthouse Engineering Contribution ($USD Millions)n/an/a$1.100

Notes:

  • Q4 2022 revenue cited in the 8-K/press release as $4.8M; margin referenced from management remarks (no 10-Q disaggregation available for Q4 in this dataset) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue GrowthFY 2023Not quantified on prior call“around 20%” growth for FY23 Introduced
Corporate Gross MarginFY 2023+Target ~40% (prior commentary) “overall corporate margins above our goal of 40%” as Lighthouse integrates Raised (above target)
Bottom-line/EBITDAFY 2023Goal to achieve bottom line profitability and growth Positive adjusted EBITDA $0.110M in Q1; expect continued improvement through FY On track
NASDAQ UplistingNov 2022Reverse split timing updates; uplisting contingent on price/volume NASDAQ approval letter received; trading expected Nov 16 under “POCI” Confirmed schedule

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2022, Q4 2022)Current Period (Q1 2023)Trend
Supply ChainElectronics/glass supply risks; redesigns and LT orders; monitoring EU glass energy constraints Continued operational focus; utilization rising, efficiencies improving Improving resilience
Defense/Aerospace ProgramsInitial $1.5M orders; follow-on ~$800k; run-rate aspiration ~$3M/year ~$0.85M delivered; +$0.45M QoQ; ~$3M/year run-rate reiterated Accelerating deliveries
Single-use/Medical ProgramsSingle-use ophthalmoscope progressing; multiple pipeline programs near production Lighthouse otoscope in production; broader medical pipeline replenished; spinal product orders sustained Scaling production
Margin ExpansionAchieved 37% GM in Q3; organic >40% GM 33.9%; organic GM 42% excluding Lighthouse; corporate target >40% Structurally higher mix

Management Commentary

  • “Record revenue of $5.1 million, up 118% year-over-year, increasing gross margins, and positive adjusted EBITDA.”
  • “We are beginning to see the effects of higher manufacturing utilization and overall increases in efficiency on gross margins… achieve overall corporate margins above our goal of 40%.”
  • “During the first quarter of fiscal 2023, we delivered approximately $850,000 [defense/aerospace]… in line with our anticipated roughly $3 million per year run rate.”
  • “For the first quarter, production revenue was $3.4 million… engineering revenue was $1.6 million… Lighthouse contributed $1.1 million of this engineering revenue.”
  • “We implemented a 1-for-3 reverse split on November 2… approved for listing… trading… will begin… November 16… ticker… POCI.”

Q&A Highlights

  • Engineering capacity/utilization: Management balances high utilization with flexible capacity to onboard high-quality programs; uses conservative timelines, cross-staffing, and outside resources to flex capacity while continuing to hire selectively .
  • Program management/overruns: Shifted development programs to time-and-materials, adopted Lighthouse’s mature program management office to improve quoting, customer communication, and risk-sharing—reducing the likelihood of significant cost overruns .
  • Delivery cadence clarity: Defense program quarterly deliveries ramping, with customer discussions indicating larger, more continuous follow-ons, reducing quarter-to-quarter variability risk .

Estimates Context

  • Consensus EPS and revenue estimates from S&P Global were unavailable for Q1 2023 in this session; therefore a beat/miss assessment versus Wall Street estimates cannot be provided. We attempted retrieval, but the S&P Global daily request limit was exceeded. Where estimates are not available, investors should anchor on reported results and company commentary for near-term expectation setting [GetEstimates error].

Key Takeaways for Investors

  • Revenue scale inflection: The company is transitioning multiple programs into production across defense and medical, supporting sustained topline growth; FY23 guide “~20%” growth implies continued momentum .
  • Margin trajectory constructive: Utilization and mix are driving margin expansion, with organic GM already >40% and corporate margin targeted “above 40%” as Lighthouse integrates—supporting operating leverage .
  • Cash generation improving: Positive adjusted EBITDA in Q1 alongside lower GAAP net loss indicates operating leverage beginning to flow through; watch for sequential EBITDA/FCF improvements as production scales .
  • Defense program durability: ~$3M/year run-rate defense program plus follow-ons improve revenue visibility; reduced dependence on single programs mitigates volatility .
  • Medical pipeline breadth: Spinal product orders, otoscope production, and pipeline across orthopedics, robotics, urology, ophthalmic, and ENT create multi-vector growth optionality .
  • NASDAQ uplisting catalyst: Completed reverse split and NASDAQ approval letter set near-term visibility/liquidity catalyst as ticker changes to POCI; potential for broader investor base engagement .
  • Monitoring points: Track sequential gross margin, Lighthouse production ramps, operating expense discipline, and defense/medical follow-on orders to validate FY23 guide and margin targets .