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Precision Optics (PEYE)

Participants
Robert Blum Investor Relations, Lytham Partners
Joe Forkey Chief Executive Officer
Call transcript
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Operator

Good day and welcome to the Precision Optics Reports First Quarter of Fiscal Year 2022 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Robert Blum with Lytham Partners. ahead. go Please,

Robert Blum

we'll conclusion Habhegger, quarter you representing for is Dan Thank Financial discuss Betsy. company's thank Joe the press us of Optics question-and-answer today's the a the details And remarks, with also replay financial September Precision call the and XXXX Officer; All XXXX. Forkey, capabilities company XX, us very through Officer. session. today today, prepared all today's as With well release. first of for available, instructions, Optics joining for Chief as through the open webcast conference to Executive the fiscal for as were you call year results ended call both both right. in At on Precision much, Today's webcast, of the Betsy dial-in Chief the the being Dr. mentioned, are included

prepared of Act the Exchange and amended, statement: Private the of statements Act XXXX. and course XXXX Section the Reform of conference Securities Before meaning during for the may to we amended, are of submit by with XXE XXA such Section of Harbor XXXX of of as made statements of provisions as the Optics Act forward-looking pursuant Securities team Safe the the Securities forward-looking contain made remarks, Litigation management call Statements begin Precision we following within this the of record the

update to forward-looking other actual various events filings conference and eventually may as forward-looking projected date. Listeners company made multitude the result differ and are cautioned the any preceded may, our those future plan any of of from Executive they cause or With Optics. this information, as or are a identified future, from based of that Forward-looking statements, statements occurrence during anticipates, the forward-looking materially events should, Dr. that will statements result Forkey, Chief statements statements, forward-looking plans, Precision risks as said, a does assumptions management's or Securities differ such of or to could whether otherwise. All as factors only turn those me uncertainties which to are describe by date or words that strategies, speak of the were Officer projected. such receipt projected let expectations, obligation with risks call results in such and including of publicly Exchange the Commission. The on please as risk of of circumstances, or proceed. estimates draft, materially future generally the over future the and in the Joe Joe, in not in contained that subject statements results the results, new planned, to undertake are call and expected,

Joe Forkey

acquisition last you, third Thank late XXXX discuss today in to in year-end call our and our the first conference our And is investor Lighthouse our year early thank Robert. you September fiscal call results. call This all financial month-and-a-half, in joining our call quarter following for October.

your of wanted I continued you to thank participation. for all and So interest

our the start of first of term, to with the respond remainder the at exciting acquisition customers. During time combination I results. list the beyond. pipeline summary us opportunities Lighthouse capabilities in see Ross the with importantly, that an us. significant those want I'll with of well more near projects to in review the I the and we first a for But outlook is an Lighthouse quarter. And has results the It of the needs grown term, positions substantially Optical POC longer quarter and to call today, production, of will the provide fiscal nearing the perhaps for available of of Imaging. a In XXXX very

While is a quarter first year our our the million has in to three quarters highest ago. been or quarter and last production as our $X.X The revenue quarters last experienced it in year-over-year overall recent most coming was four million the the production have what of year-over-year, products in the revenue by the with consistent slowing fourth quarter programs. has major change postponing pandemic compared our down $X production the reduced $X.X million revenue sequential few was on in release the for we at nearly for

One three delayed received first – report pandemic. is start this that had finally to will this before I reorders program. the a since the provide our pleased more we reorder defense these for in details the the programs of moment. been of today I'm product, on for main just the which production since

single delays On as due revenue the milestones for quarter part of side, some customers. the the in five the This development was in from new it first use engineering as program, delays quarters. ophthalmology in our been lowest was well orders last in reaching invoiceable has for receipt specific to

Associated therefore with scope to was resources not used of the did the work to that complete contribute of the program. current this quarter, the revenue engineering success to ophthalmology was program purchase were necessary long-term but outside delays, support orders, and

resolving the process in issues. We of these are

is our revenue to in the for all materials projects With customers, an costs for we and of pipeline pro proposal quarter we forma additional we associated projects, beyond. business quarters results been our Because to newer quarter their revenue year and changed for And is not used So in rebound approach approach engineering by have nearly will a the the it that on including using our so in are this performed. and didn't work the years. close recognized X, covered future Lighthouse also engineering out Lighthouse approach, for This we the is scope that results the contributions not combined first which about most December, an historical reduce revenues is in is until in it in To process expect for of today. effective risks projects model. October for October date release with our In a started work the many delays time milestone financials ago. company. we or has of X engineering with included acquisition of second reported are Lighthouse’s historical by

XXXX expect will discuss growth revenue company for the We combined fiscal we operations, higher forma we second the pro for than between the combined second for in forma Lighthouse’s quarter company expect second first the the quarter million. million revenue in be POCs to $X.X in expected and quarter first earnings of XXXX to I more call our company quarter future the and next revenue do February, $X.X expectations fiscal will numbers the announce time. at combined levels. detail in recovery Considering the that pro overall and be quarter of At

we a steps a Lighthouse the since and combination. on acquisition, of to Although it take been closed has we already to realize half only the have begun month underlying value the

LED discussed for we micro-optics, chain October the two in expertise single sensors, value the design processing. smaller and highest imaging and that the systems system real marketplace. the customer is integration of provide enhances call and true optics, and and This coupled with companies image conference puts an the customers of combined earnest. products capabilities. supply The with the optical entire generation imaging the integration respond of will incorporate of particularly combination their complete the medical of cost POCs to optics where manufacture these device next state-of-the-art partner electronics device require of on X, and Lighthouses’ activities the imaging the the management, to expertise company's chain companies CMOS two quality As Combining a technical company device with in manufacturing, our desire XD our the along light advantage during and find begun in medical migration requirements in supply competitive excellent including medical complementary in The market management to of lies design to has combined robust sources, solutions. in systems space, effective integration further to position

counterparts from division one on especially existing working came virtually these of development senior I teams for of engineering Three now In the customer from companies of team. practices. the by Optics. came to are so five large and two part individual driven they encouraged groups specific in Precision from who had two being operating because solutions to recognize the quickly together aspects visits best other, that numerous programs. having the their benefits of Lighthouse information really technical differences procedures now already two engineers believe I the managers best to discuss smoothly, as and discussions progressing that and in see are am We management employees with particular, find to and have all have share met working each to and similarities together

of in manning all for up. believe As technical these groups in and we the we cutting-edge booths, at driven next customers company the two the our From attended conferences participating the standpoint, three divisions, groups attend to success joint Ross to and conference In technical and for Precision and really a sales now plans sales cultures capabilities first of are working and discussions solve the together. booth sales use plan representing conferences indicator integrated our the we has from calls making of put I Optical, single we the industry likely And an is calendar Lighthouse we technology staff together October, as a problems anticipated, this ground of and combined strong of year, Imaging. technical marketing long-term together. to have Optics, the with a all company. already companies motivation technical alignment

understand we the begun future two then comment opportunities work the of capabilities this some that for Optics our with the I to how have and and has our both existing to all, who created proposals the work well now to benefits positive. Finally, the on happy projects. programs board, Across in that that and on of work am both clear cases, us thought Lighthouse Precision a have the All Lighthouse they and based I'll would is cases, customers to it other provide very creates other on our proposed asking working add existing consider include hesitant past, quick update combined divisions, really company. together the engineering were Precision response to merger. our told Group. expressed by from therefore extend In and of we the been they in Lighthouse’s because work two contract a customers, us wouldn't competitors benefits customer some each one and quick together. the customers our by Precision Optics has even And an customers In Optics pipeline us our of production Lighthouse POC with case, engage the and together. understanding customers organizations Lighthouse both in provide Precision are have asked the briefly Optics

follow-on finally already I I since that pandemic. been $XXX,XXX lead we This really mentioned, product. of am received have order for is an defense start our order for we As waiting the pleased the before have an

expect this expect from the remainder to revenue one this project of for completed. order we with about on spread $XX,XXX follow-on program is when with quarter, out four the additional the Based in this during quarters. the customer, We to next see orders see second discussions this over

As production levels the reported program. to XXXX, reduced fiscal we throughout we cardiac see much continue of from

the reduced that we our last customers’ As procedures increased. surgical the inventory endoscope the pandemic make, of year, number of

so And throttled on we rates. back production our

seeing from increases hear this demand. that customer to are they continue in We

While pending built the it for pandemic. or better long-term, our to end were Production for the it before to through that indications will customer market our excess up of of as timing the are than on levels during is pandemic. works product over our visibility otoscopy as they return have the product higher the they hold recovery, high this product the inventory as difficult predict remains

our are our product continues volume uncertain. of future continues the and this, sell this timing beginning signs order the some to is to with Despite be relationship customer still While and strong. requirements recovery, to very customer early of show market extent

production long-term evaluate they've this next This product. is ophthalmic program engaged on engineering quarter, we for it significant pipeline some and an help last likely to us As another program is engineering believe to year with work I development grow to potential mentioned design a them year. options become for work and continuing engagement

recover levels. the expect growth As we pandemic. commercialized increase so, to months impacted from we some to XXXX, the overall our of even through these continue to production to the in Longer be products higher or fiscal term, nominally, next continue over revenue XX by expect we of products pre-pandemic well all products or

As release any production in laparoscopy, and past, of with more Combined Lighthouse. for and development in is recent and robust mentioned even abdominal at it has in customers our have are arthroscopy, addition ophthalmology, the in the programs by into the I of as the cardiology has time our projects large areas we as Lighthouse, grown Urology. device targeted history, medical and it surgery, colonoscopy, throat, number months. next pipeline engineering now nose ear, these A XX of with been otoscopy,

We a we also are and the have projects of aerospace in working number market. on defense

there isn't me give discussed some these a of on While update on of on previous to will ones calls. the time comment we projects, for all brief I pipeline have

clearance that we He provide from us this clinical has completed. is the believes for is that the additional one told close XXX(k) multi-camera FDA. FDA trial the that to very customer Our colonoscope, which now receiving by device custom required recently the enabled been micro-cameras

entire for the our in and we confident sales this We day have and the in for meeting large end encouraged we that place product. through after their the Having see facilities. in a aerospace go-to-market we visited remains validation validation. uses us and move October. early have strong program an perhaps final The program, wait production our they prototypes team. some delivered to ophthalmology spent process the we forward now we single plans clearance, nicely. of early for design of September well move to quarters remain our our with developed the plan completed customer with positioned We defense Within person FDA, with continues and the orders, our orders the units. at the production details to with additional few this we We with that are October end receive they of what cameras. shared demo with customer approximately before They I be last many project us will that quarter. and While production use continue design rollout in that that received of company our further partnership assembly will left Also, salesforce robust in this systems soon customer of XXX believe discussed the

customer. to This in stated quarter. by a the believe, mid program right and in due to of We anticipate the that us to that few for go approval Similar were into we the production I that this cost overruns, next recent through product for year. program, the I continue program than this Despite next to move the the revenue will as that make first to our reduced complexity for in. this margin covered months revenue and from the regulatory in costs were quarter quarters, investments we is by the and as incurred is the earlier higher past, referred originally anticipated reason first have I that these major not

production us to intangible well will go the production. project gaining develop how will the use large rapidly device long of understanding this strategy our to medical are the be tangible use growing better revenue, know as single IP experience to single that to use addition In somewhat as market. term the and will we segment and program a allow and potential first single The products, long about term address

that programs, strong brings the before, and projects earnings demand, and have we I've on which stage team. believe pipeline continue engineering to specific meet XX Lighthouse few these many we contributing strength we next in next to discuss combined early us call to our production move X programs the addition could pipeline. beyond the that our additional In To commented expand months. will of on are that And this engineering our to size additional firmly combined, to feasibility we

of of another As candidates. we activities joint the technical indication the teams, of integrate prospective interviews efforts begun have two already new to engineering

our balance of the Let and me comment some now sheet. statement and specific of on to turn summarize elements income

already was year revenue of engineering XXXX $X.X the top million was On revenue the $XXX,XXX. $X.X million. while about mentioned nearly first as quarter Production during I've fiscal dollars, line, revenue was

discussed, impacted the that four and already revenue I've production in lowest engineering time delays the Engineering last new revenue highest in orders. by one mainly some over is As but this program specific was quarters, the period. revenue

issues, and work both in revenue engineering and on As we therefore beyond. correcting of revenue expect we to rebound these second quarter total the

future between don't million As which to $X.X second I quarter mentioned dollars. exact basis, results, $X.X a this of our or operations, many of proforma million is will with on include would have the specific quarter launch been I will growth for pipeline it guidance the some revenue but Lighthouse want provide expectation level and company. that including production the first revenues dependent the the at be combined of higher, on of timing Lighthouse, projects

to the quarter and single couple XX% first which reduced gross a associated margin product for a any gross the XX% were margin to Our by overruns the of estimate was XX% previous compared We use in allocated the first without quarter quarter, cost ago. our revenue, points. on year the about in percentage $XXX,XXX XX order the

of first allocated approximately that costs during XX%, have this, Another R&D think of margin cost about instead to those quarter. sold, way the goods of been is been gross would if to

will along margins more rebound in future. the revenue manufacturing with the cost utilization with growth complete engineering of and believe current know-how, each, far work discussed As and we which and We calls, of Investment on have represents gross the correcting beyond production higher engineering payoffs previous has an in a overruns pipeline quarters much one our in project, to that lead projects margin. through Technology overhead,

in The going we XX% gross approximately includes excluding $XXX,XXX basis, XX% the quarterly expenses compensation, As in related believe Imaging expenses, to This acquisition expenses This just of operating will one-time non-acquisition operating cash at $X.X were business is margins be well as stock All as $X.X and look compared the On Operations, GAAP range. to the we ago, the year expense, excluding loss million. first here. a impact Operating efforts including approximately prudently depreciation over the costs, flat, compared engineering these net EBITDA compensation, QX basically reported within interest, based quarter, acquisition and ongoing which of expenses biggest forward, the gives stock $XXX,XXX. had Lighthouse of the amortization. previous the line business on were amortization, adjusted project and million. expenses of $XXX,XXX, $XXX,XXX with to our based a during to the a and the loss business. indicative depreciation manage of excludes quarter net quarter one income issue first told,

as Looking fiscal and well and due expect engineering quarterly continued pipeline in program to production for expect performance, is ups timing anticipating production growth remainder financial to transition good year reason to projects positive in Adding downs and combined and and comes the back to revenue revenues and the of there forward profitability, as overall overall, as growth we new XXXX deliverables. amounts previously growth company. of defense are online. project running still the of expected beyond, some revenue production we But Lighthouse's

XXX,XXX associated and specific Imaging execute the of believe plan integration sheet after financing associated The for sheet of XXth Approximately the overall received proceeds second Lighthouse positions those cash that items Approximately the us $XXX,XXX some as Lighthouse Operation. XXXX private balance we of to up September that balance our integration on and were We available balance that XXX,XXX going in our expenses. sheet, required, with was at on along Turning including to the X. closed Optics to from the $X,XXX,XXX. XXth was placement balance An the for to be received expenses added remainder purchase proceeds on cash show balance Optics Precision first $X,XXX,XXX private used acquired and and forward. bolster our the acquisition the any will now quarter the XXth, September our October working the will our capital Lighthouse of with was well placement end Precision the and before September at manage balance from to additional sheet quarter. Imaging

I have Before plan on ago elements always take the a recent and our that to recap I in strategic place couple discussed like years major we questions, calls. of put

First, capacity. grow our and sales capabilities

own Second, invest resources and property. our our develop in intellectual technical

squarely all to fact, of And plan pleased via on am confident Imaging capabilities, in the Third, in acquisitions. Precision invest example, business. have our production believe now partnerships for our and we strategic will and the am in to element well our results in as to been the I and augment as positive or are future we acquisition state Lighthouse programs of the Overall, I own of see areas Obviously, explore with fourth, successful position in last acquisition recent acquisitions. areas of plan update this and our advance that market. skills starting external of execute quarters address fits this I strategic single-use the this for current But Optics this plan. growth. four all

XD imaging to would strong visionary their and our aerospace have We created defense next accomplish to micro-optics allows own. that be applications capabilities on in and within they generation which capability markets, market to the leverage device unable medical bring otherwise and particularly to customers a

& Manufacturing the team exhibiting December and the of the will York notes, New Medical XX. show Conference that us. Xth, Winter December of design in for have entire of assembled Xth, based East and the the Lighthouse, there one-stop believe Xth. participating through have the groups Investor production. in-person will in we a Lytham final device medical Also, am recognize the ahead one ahead about about shop week XXXX industry, about very With will lay to opportunities I be lot work Well, that in engineering that the optical City premier Optics will addition following be we us a on imaging couple customers there at of I is full excited in the and of I I combined of is today Precision Design A be the XX the our through we realize company. potential position the offering we on

will event, welcome these that participating we'll For I vision be meetings. would or you a events. in with both any opportunity and XXXX, to one-on-one highlight for of fireside during conducting chat the either be I to of our meet virtual

For all attention I reach thank out in anyone today. your happy you now his interested any is for that And I'd to coordinate. Robert please meeting, to and to take questions. team be

Operator

will the Instructions] [Operator question-and-answer now We begin session.

Robert Blum

Hey, Betsy, are you while can see if -- we maybe I'd there if I've couple I'll got questions, here. see to any like a Joe, address.

You chatted some a that little result learnings of upon a what bit feel about is the can this and single-use of without project, been anything may in of is developed those some some as it, to learnings point? you've you going of you expand the the know-how that anything have there proprietary,

Joe Forkey

sure, Robert. Yes,

So me make this let comment.

always any the pipeline technical projects doing technological we're specific we are side as our into of has some we we're aspects So, work engineering that company, so. a it. working the the customers, advancing obviously, to for the technical roll of as And requirements our that on things to capabilities

gone only as and this this that that to it's that one single-use close in already for of in useful patents But production. we important case, has what built big as we has, our the So where as has obviously, patentable out the into far point improving we've work work of places projects. three single-use through this particular learning, and get of kinds are that and think one by in all project mentioned our case, And gotten has as we're way process a sort in comments, obvious in through those I things. of, know capabilities my these this single-use as there you design are The sorts to the XXX units. going inventions, of the running for have And program areas is as part can development we of on I how projects. we through validation as area be will production my applied technical project, as think other a we the this

reusable basically production production. a two regular is units product, years for to worth Now XXX one of

as these single-use are And the built part we so we've we that in this And in that -- that learning are requirements. we're all fairly kinds development specific our that of process. case, things just are are of things to units and getting expertise of

in are lines, manufacture, have the these and these the to with design things are so incorporate important the tooling that that cost is every yield way minute that reason and set fixturing. design you of little program. production of way important a for goods time that is overall Every of single-use success literally every time, financial the And way success the important the overall of to touch minute program, do you that single-use, X.X% is the touch things $X And financial important. the different or of is every for the the for so up for you of maybe

going single-use going a or reusable of to you're into break selling of project, project. opposed bit of $X,XXX a not $X there's different to make a product. it an extra has $X you're for as project cost when a a the mindset so reusable If goods, and And or its

a difference. big a can make For couple a single-use dollars product,

long-term that there's with way a just team of so in layout, applicable be to program. a that the down area the financial different a do that's mindset that success has engaged believe device a little on, the suppliers with piece is It's that customer I one the future a I on falls to mindset successful, single-use market, aspects in our and at really is a paper with that single-use who's And our project sit want entire engineering to single-use thing thing And market. same single-use comment will looking of other in and bit be making overall one to really of category. of understanding their it's another to projects. really There developing

growing models have -- this of which that And of understand, will will the of and that part be the financial future evaluating through of will evaluate, of help projects, that we that to will us us project to models that be models rapidly parts gone single-use models of help which the I for medical associated space is that which to also will with space the this space operate not in, single-use operate part space, we large so models to in. we process this parts device but a and financial believe be able able useful

the way there you use terms case. specific this way summarize, technical in the to in to project technical And that single things a of in standard design are that that have applications we're of that kind you or are the knowhow product, are is very any set-up way a There useful. for So that would the developing the are then these areas, three you areas there's in the of advancements as financial this engineering use fixtures, pipeline. through that And design All we we're project there move particular single that around making things the you workflow. – specific very the models. that

Robert Blum

right, and that. over thank are other here Joe, I'll you turn here. if it. questions All item I One any other appreciate for do it there

to call anything I production details that are to be, – here? the little a some mentioned the you in lighthouse next quarter. you that provide next XX this But chatted months bit know over might so, set be additional important You've add programs during about that or might

Joe Forkey

Yeah. Sure.

of Lighthouse for – we're the let detail thought to still I about. you discuss for more why sense in the the flavor lot it still in – at them last has these doing getting things and next various can me earnings the of us POC is excited happening a that – team But in are all imagine, some little call. projects, just last couple of is And that months. some pretty everyone give some the I so made which details as So, getting been the a of so

that, in So expect production were there comments tell I into can of of my that Again, is of going into to the lots detail, mentioned months. in in we I you, XX area otoscopy. them without the projects four go one particular next in

used for for robotic a of an arthroscopy is the basically So that tunnel is in one fourth be otoscope. system. would ophthalmic the it's One One of area surgery. in the is laparoscope small-size scanning carpal procedures. And area in

can in in, the areas those you you terms working that POC As listening things if are similar were in disciplines. some tell, is of carefully, of

are of but past, robotic the recently, that about for instance. haven't areas talking about been surgery, we've talked Some them in in

their the things is the have there's POC kinds and you the trials, stage move disciplines terms had little clinical pilot some builds helps which ready start to process. laid responses of of POC if customers. of company, expand that are Again, to So things list four the technologies that positive in from us Their regulatory to some just through which to between match things the is programs out, through a of the doing. now to of a that to the like. Lighthouse different can all is of address commonality is gone I that, various levels there's a you the into of they there's footprint is that that, But for the them go are and next what customers in these from need and without going expand – – that – tell of nice the that have you lots doing detail, they things also have I doing,

One certainly pilot quarter. as and been bills the have this if of come quarter. cleared could don't by And already FDA, they quarter, come they soon the will has this as programs next almost

months. I these in first as already said, I've we orders production of expect other as three projects, – the through the next come to The XX

that people give a things. of from sense detail coming of So like, side not Lighthouse as of I everyone will know we that's as maybe sort what see would much but the

Robert Blum

perfect, you I'll Thank questions, are there back turn again. to you you. if any Joe. over very it much. That's Betsy, Thank

Operator

turn session. back conference This to for management concludes like remarks. would to any closing question-and-answer our the [Operator over I Instructions]

Joe Forkey

– Betty Have us speaking today. thanks during Betsy, you, joining the MD&M call to forward Thank with Thanks good and everyone I during do the Lytham look show everyone. of conference. and for a day. again you many the on