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Precision Optics (PEYE)

Participants
Robert Blum Lytham Partners, LLC
Joseph Forkey President and Chief Executive Officer
Michael Potter Monarch Capital Group, LLC
Call transcript
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Operator

Good day, and welcome to the Precision Optics Reports Second Quarter of Fiscal Year 2022 Financial Results. 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 Mr. Partners. Lytham with Blum Robert Please go sir. ahead,

Robert Blum

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

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

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

Forkey, me turn said, Joe proceed. Dr. that So call let Executive with over Officer Optics. the Chief of Precision to please Joe,

Joseph Forkey

and our results results. Robert, you report you, first to as us quarter, our is fiscal for all This business report of joining and XXXX of lead we a growth and also aspects the number beyond. Lighthouse includes that as of half fiscal today an call thank we the XXXX that performance Imaging, strong financial second for key our of Thank back the exciting but quarter year call in in to should discuss

on We the to Capital we to our also today that stock announced uplist intend NASDAQ Market.

filing proxy scheduled and to a is filed of our today, X. XX-Q annual for our preliminary And so meeting, we anticipation in also which addition April

change the excited benefits are and growth to this development milestone We and about our very our bring should shareholders. this of

second let get talk uplist quarter results. So minute we for about our me a before plans to our into financial

population Market, improve of our to more Capital an company. on $X this believe stock listing the likely it's There investors positive are listing the on and important pipeline price of this have will the of talk share for the significantly trading about shares we an We several liquidity transactions I'll and need developments stock to Imaging of make move had maturation step for are the attractive minute, the in in our for Overall, of acquisition need projects, requirements trading that annual again, some Lighthouse and decided Capital recent NASDAQ the the will pursue meeting. the a them among which in minimum the prospective our existing the broaden and Market. shareholders of have many a should growth our NASDAQ to is in this right easier them of move in With in We believe time recently stock. making investors. our

application NASDAQ submitted and complication following to to Capital meeting. the listing unforeseen absent expectation listing We have criteria to our meeting for Market is able in the on the annual already complete quickly be uplisting any

a Our proxy it share deem that of to satisfy to is requirement a that if we of split, to a Directors effect reverse Board minimum stock of $X. today NASDAQ's filed includes allow motion they price necessary our

shareholder execute our range intention to use is included If reverse split it the lowest a criteria. have ratios. meet of is possible listing split, We a reverse the the ratio proposal in to necessary to

housekeeping long really in typical other our be first pursuing is a to The the and NASDAQ. of the situation. to time on for items planning our gratifying proxy goal listing a requirements It and be on meeting annual are company

We have well benefit this whole. as a our and support as the step them believe always appreciated as shareholders will company the of

engineering in was and operations our $X.X back recent of solid Overall million in newly growth solid revenue. acquired generated was result our $X.X the as Organic organically XX% organically the a million, quarter-over-quarter. strong revenue The with with up starting quarter. and from combined contributions recognized second growth year-over-year was the quarter-over-quarter Lighthouse which and Imaging our for growth Now of from division. revenue experienced approximately as We operations, Lighthouse let me well quarter we second brief second sequentially up developments. summary of was XX% rebound during our get a revenue some of results XX% increase production to business quarter

is of received device FDA fiscal contract our production. are projects of customer year. aerospace one defense finally optimistic just a the This of these Beyond now with new these two the weeks of Both medical for were from major production couple the last large received ago verge results, about pipeline notification second optimism the of clearance. based a years along that quarter we we our and projects on rest on receipt the in of are

multiple at systems I information project exactly our of on of deliveries. effort $X for We defense order rates or emphasize including discussions delivered customer's with job, want aerospace from their by supported intent through production Precision run team program over long-term rounds acquisition previously to calls multiple included greater rate recent provide me the delivery employees Based this an products the as clear I discussed that model production and order. technical many our more ongoing in opportunities Optical highly covered provide. those of mentioned schedule order. week. would this after regarding Let our incredible our order for we first we annual the than has aerospace customer, equal done and on six to the with meeting prototype the it's The million is challenging is be market. a expectations little kind attract deployment approximately from this months. have future company, customer a of and this specifications $X.X to that be Optical, the earnings this customer Ross negotiation for This Optics our of initial a and Ross we this These received that products pre-production in application. million I is this departments required be able an the in large expected contract roughly to announced and have for potentially defense division. company. we the of last The are a implies initial we strongly technical new great work scheduled utilize to a

of with other customer. products work In addition, this continue the we to on development

these this we the next expect customer completed, based likely on stages new and months. represent while realized have Some to form this been to lead and of revenue could others heard are from POC. in XX on we in prototype everything to Overall, the in of development early development, already customer of have annually dollars work already is and seen million several production

is On each our XXX(k) second the two clearance customer recent the the customer from that I The any time. earnings last five-camera and expected ago. commented our weeks development XXX(k) calls, finally few FDA clearance colonoscope for we of that received the

milestone. it's for this clearance than has of taken a longer it still us great While much expected, any

support to clinical of the working camera determine currently firm product to are production with into We marketplace. per modules volumes customer their this the launch

order our see last We a matured was announced were due other products COVID. the the of also that continued underway. The for pandemic to on delayed delayed earnings is we that call defense product to well now due our recovery nice to

chain Coming the quotations. our evaluating and top second Production intend with launch told customer the segments of aerospace asked which We device, an positive have products significant growth to revenue currently in poised off has for but been contract, on during parts a our last over of and I Imaging we in new to a was new of pandemic, camera see as tenacity multiple The and orders significant confidence, production the of production, line worked is and the work, our bottom us we this QX of years, gives our in employees. into and of to gratifying testament recovery for that that are and the business orders integration QX Lighthouse beyond. production step Precision continuing This expect business it in with which we dedication of increase next to Lighthouse Engineering the pandemic, hard in year challenging this, will in And acquired to see our fiscal of overall supply defense performance by we and projects. broad a quarters. three had considering to the colonoscope one customers levels us our It great levels the us we combined have couple soon. extremely capabilities up all and combined revenue forward. due expect environment been This extensive to this has device the as well. deal. revenue to developments enough of immediately XXX(k) has for communicate always issues a are product order so quickly going common five going Layering presenting system, message Optics after at footprint would operations begin a They place in have other customers our team to and they well, defense division, newly very updated aerospace growing quarter the clearance contribute also four delayed recently the mature otoscopy stalled of the take company going medical effort plan with three is sales is now the integrate, to divisions more on of

a Our WEST with in medical in has we led first visit in potentially mid-December one co-exhibit presentation space. booth California. discussions first significant MD&M Anaheim, to And in April, customer joint time will the for show ongoing in in device integrated the at the

diligently outsourced division Imaging. We with one particular, individual that cooperation that existing that Behind customer have on many Lighthouse past. will new meantime, work results. programs, many All-in-all, Management integrated Accounting all the and interdivisional encourage and two lead three IT an Getting benefits made, the up by employees excitement, of collaboration second platform will pleased the that the with increase overall our have encouraged combination. corporate overall XX% the on to for already projects Precision opportunities in our positive of projects am Lighthouse efficiency. revenue progress in working development positive of collaboration significant the back quarter, of finding who heavily scenes, have are resources we sales results of engineers or I has our cooperation came the aspects Optics also combined and am Consultants expect quarter-over-quarter and Department, came In the are the to existing there on I and combined and capabilities and provide that year-over-year. pipeline streamline XX% operational the our which and been HR other to efforts engineering to of would production see environment joint together POC yielded five from our attitude depend was projects In from the very

up by Lighthouse was contributions mentioned customer up now production order delayed have and X%, Imaging, us our revenue was running soon. already has the also intend production restart the have they product, which our Excluding the told order that X% to production respectively. smoothly. defense from already is and pandemic, back I for that otoscopy commented I

that program cardiac endoscope by impacted production major the is third project. The the been had pandemic

a have recovering We their demand we continue rate, from at the but that news reduced to manufacture customer this nicely. product heard product our for positive is

that they the next allow continue to the runs place over the this product in at out end current expect for of production We time will a few reorder order year. when us this months to

with the coming than time up strong confidence, revenue is company, million I'll us in see last of the Adding levels Lighthouse our year-over-year revenues Transitioning in start are we and new will to product gives a with is $X.X all our which engineering quarter-over-quarter. a pipeline deployed programs, the growth order XX% pandemic for recovery. we calls, volume and past. in Ross these earnings quarter, impacted three pipeline, the is growing products existing products XXX% the and as For reflected of which Optical comment same larger quarters. in along that, impact This new the seeing of opportunities, I've divisions, were of combined defense couple production for second made in the our a that posted Imaging the steady to any in in significant especially by for backlog the engineering we aerospace

quarter pleased that towards to with up urgency issues for rectified second continues first merger report of we of the even increased of were with took end I the the attributable the and we first revenues, resources our to move the without on activities the steps recall issue, in in bearing engineering may You quarter. The this the single-use over the customer. ophthalmoscope that quarter had part non-revenue to ophthalmic the endoscope. engineering XX% forward am project single-use allocation our some first quarter to

previous many suppliers a in moment, the few items a the late major order quarter likely potential calls. At completed have this other customer our calendar milestones reported product XXXX we from with calendar being two for or in a XXXX. of we production project While with program, required back pushed will result estimates I've are the in working anticipating through in the is that launch

tangible us benefit production, the The While and about we space. Lighthouse months the programs single-use single-use production. will gaining and requirements revenue continue the understanding on product experience from transition project for in with to not better conception of long-term during The intangible continue assembly Imaging. as for also executing the pave pandemic, allow only that to of farthest and business complex to the optical development way of the full and device program, merger single-use to the manufacturing clearance engineering scale experience way are along we regulatory develop segment stalled imaging and of that process well IP proceeding this to generate next transfer long-term rapidly large strategy the growing slated This a now and a pandemic to electronic Many are medical stage before our in as we completed system to development the market. know-how with from production the is up. the bringing a all was address XX highly product from the is but the is our ENT come

next custom We couple could products surgery. endoscopes, the fully to a designed just pipeline production months. expect each two for Lighthouse transition in in this product orthopedic next the The specific are

will hundred high demonstrate verification is design a currently be will single-use units a build we production. that which where a major the support and to will and volume validation these few undergoing process, of process product fabricate One

scope is a and reuse. both other surgery customer. for Prototypes used Lighthouse have by resterilization for tested different is The orthopedic successfully designed and and been fabricated our and

building currently our while XXX(k) FDA are their to production We lot the application customer pilot for a clearance. finalizes

fully is custom a articulating project Lighthouse expected next the XX in Another months high-definition camera. robotic surgical to launch

recently have customer funded C financing round customer to nearly of product completed human tested company well which million commercial highly to clinical our full launch. system, has This already $XX has bring We their in successfully sophisticated a prototypes startup that for completed trials. this

will that the later of We calendar that are part this currently building launch, product be slated which confident for year. we is are

large me call, pipeline first levels over revenue are order of engineering year the production these give this during of much our programs contribute summarize one Each of production the the larger While many of the opportunities I of is that of for and to in of grow time. too potential breadth these examples an idea on pursuing. all we hope can you have million to the to $X

is I've large large merger And with key to filled quality now as summarize on our I'll with with of of and the past, programs is balance has pipeline it statement sheet. of as POC likelihood and production. been and the robust items of and high and our high a some said a the is our in long-term income As specific the ever growth comment transitioning to Lighthouse, pipeline.

topline, and fiscal revenue the revenue the revenue sequentially. XX% highest was this second revenue $X.X grow year million. was XXXX as from I've XX% last million, should an quarter as during Lighthouse, was the in was I continue excluding of production while already Even and the $X.X $X.X engineering increase mentioned, Production On to of year-over-year here. million, quarters five mentioned,

XX% compared year-ago. quarter and a the in was in XX% margin to first quarter quarter second sequential second gross XX% Our for the the

were margins were move $X.X and aerospace get more compared full but to production, of for well to million ramping $X.X non-acquisition-related operating as expenses to to resources approximately initiatives, amortization of closer is deliver to such the compensation, inclusion expenses of and a increase On target to see trade to cash and to closer projects Moving depreciation quarter. million. This our to certain shows. on marketing backup primarily as forward in XX%. we of expenses, as we as QX stock-based absorption move expect the approximately Operating begin defense previous the new as excluding and basis, also our Lighthouse $XXX,XXX contract production due sales

of reported We limited net operating loss integration size the the continue increase All costs, stock-based profitable some expense going an Adjusted on company, with second expense, will to during to investments interest Again, as modest only a acquisition during second compensation, these EBITDA combined and in and step be EBITDA the EBITDA adjusted scope. net with forward be expect told, expected quarter income line, for QX. in adjusted in the make we of excludes in GAAP the both the are $XX,XXX. half and expecting we but loss $XXX,XXX year, we of the depreciation QX amortization. revenue up of

to I'll balance our of now highlight just Turning sheet. couple a lines.

change our our the XX, on was December cash balance at the $X,XXX,XXX. side First, balance the sheet biggest inclusion of goodwill asset The is XXXX from acquisition. of Lighthouse

AR, liability are the and Lighthouse the the inclusion acquisition, All impact are long-term associated to that spread now side the sheet we items earn-out items over two for as AP, one the now for liabilities. debt on of ledger, that acquisition and of the On also on primarily movements other relate have both balance you and notice the long-term current et These will cetera. such related other to liabilities.

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

work in as our sales overall the through in our increase pipeline resulted of an in and increase the capacity grow This engineering we capabilities. large even revenue pandemic. First, has

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

do team a so now continue have We our for couple and been years technical today. to building

leap in the have significant forward of With capability. we taken a our Lighthouse, technical addition

the in the of great update augment programs will invest great the solution partnerships to Blum the Third, you external Spring speaking be production example is set don't Lytham of own I single-use as for of of April leaders as of new to Robert second single-use A XXXX and call. Lighthouse of the for in meetings acquisition and please facility you industry, many significant we I'm that combines are additional schedule via position significant that skills and development participating order and with event that current our the X in through X. answer endoscope and tools able us Capital and a for be now. Investor production today, positioning to imaging. hand, with me of your confidence digital in Lighthouse that I'd the growth we can the stock And or and restart With developed with hesitate are future, be fixtures move Clearly, process future growth. production, a major fourth, begin poised this the we or projects. and Conference in well With to I forward One other out Overall, all extremely with we look delayed into for programs always in see will final the questions am and to listing the half premier pleased the to we acquisition. imaging then, of Market. restarting in happy with our the annual medical specifically two to I NASDAQ as was fiscal optics meantime, in pandemic we optical manufacturer any the time note, of used XXXX and industry's providers thank recently Optics reach to as a the pleased programs capabilities. Precision beyond. on but optimistic merger from our up one to on progress our ophthalmic our

Operator

you. Thank

Potter We with go [Operator first will come Capital ahead. will the now Monarch Michael session. begin Please Instructions] Group. The question question-and-answer from

Michael Potter

good company forward. on the and in lot obviously Hey, very Congratulations a on a going quarter Joe. moving

Joseph Forkey

Yes. Thanks, Michael.

Michael Potter

questions. follow-up of couple a Just

side, forward? the moving like it that two there's sounds are single-use On projects,

Joseph Forkey

Yes.

So you caught that.

like go into the talking that engaged are have in working they're POC, pipeline projects. work acquisition have Lighthouse, discussions true the XX had just a in I a we But the also I've of been came project which that looking they could that is project through about that which now would on on, been production that they it's have with POC, now, we and will number continuing that of we beyond additional So add for say. project customers a handful single-use months. historic through quarters projects That would I with is to next on. additional it represent that that the of

of will Some but we've in good preliminary would think very be there's say. there that'll already chance three these some done that few prototypes, more a I a early the six-month, pipeline I next come to into the

Michael Potter

for terrific. customer? go That's been the time. received recently, we know that very, XXX(k) you I our a actually production when you've long that'll on from customer though The we'll production get do working a approval that that very into order – anticipate that

Joseph Forkey

Yes.

to expect quickly actually detailed I tag. about I talk We him expect his any that talk we see and anytime a scheduled he and to connect pretty last after requirements, played I'm tried order But after would So we'd with week now. that. little phone an I

I say of matter would just a So weeks. it would be

Michael Potter

Terrific. on use the obviously customer the for big the more And case using color this made then announcement Can you last – you us announcement on there's is the that big a one, how give some product? week.

Joseph Forkey

with you talk very nature because tell of you the of cannot by – makes. larger application I to of And the are the customer I couple forecast are relates can going information that of products the shared aspects into any give have our they that products used. the that can of to you use. customer us the a available have request details they of about Unfortunately, the specific the of details, with our we they're a of and and the of into customer, the us forecast you and products we're which consistent have that which – that because making able very way the shared that I the product with that's not can into things. end go I tell the being systems I make I we that What publicly us any some without can go. these say I'm strong. can that tell nature

we only the guess of I basically are I want and but I anticipated to don't blanket said that, miss orders. orders that out we've it. are to received Beyond turn point sort that other this into initial people would here, The thing orders long-term,

is give But that commitment, they this kinds certain intention with giving products. blanket orders continues have first of for of given they six follow-on policy have of this for any the Now so that company customer's orders order million we're these levels us months, if able break is every ends don't in being we've products. us order, rate $X they is which $X.X succeed that a orders, without a to give production six over that these delivery about between. follow-on months million This up us run the it this the over particular look really year million to and $X.X a talked as the given schedule, you at reason why and if us for but anticipation commitments they've

into at. make larger the product that for is I that they had products point also go to other There their other have us looking our makes. customer a The want larger making requirements product are that we're

production same And the reasonable that of other XX on for a other could of these into some ones been program, in chance provide – go we have and products working next for some will some the so that these we've time there's months.

a standpoint. is with on customer things from stuff extremely that this we've the the been is difficult because enough technical that, we've that of happy working doing been Beyond

get to we've they us with entirely new plan with things happy we give some And have they've demonstrated that to enough we across told that the very the next expect request so largest quickly us and Board, they're projects the that they already in for “some also and relationship process, that customer strong that the products have. the become month very us So or started customer this with the so.” could is in

Michael Potter

That's up Joe. I'll the get queue. great, Keep Perfect. work. good back in

Joseph Forkey

Thanks Mike. lot, a

Operator

Instructions] [Operator

Robert Blum

Hey, while else see we It's Robert if queues up. I'll anyone here. in Joe, jump Blum,

programs and we've into a I Just concerns cetera? guess going first et capacity, any two off, shortages, items relating number talked labor to projects about product, here, of production production,

Joseph Forkey

Yes. Sure.

we come we quality of we labor hiring over sometimes tight, and in recruiting of while falls certainly been many These said hire are that, two have Having successful categories. people are we've and into ourselves as projects of to we've supply And folks, these train already technicians and been production market the whom There the So that growth people process assurance, it technicians, in started chain production because is attracting environment. the has new folks already such. concerns the sort physicians. on.

The lots of other competing the say the even the looking I tighter and physicians in now in been with would is there news of in companies Again, challenging some people the kinds Northeast, recruiting challenging area. for qualified successful kind engineering a time the market market where labor for the Boston particularly side that we're side. news employee. we've it's this technical company. that are The for of is, we've in good the technical is other been again,

So the is I say past, in longer. it's us good but than a harder we've the all-in-all, been would It's been it's news bit taking successful.

long we time. come Employees employees. stay because a reputation good a and think I very for typically have that's existing with our

cutting products. a work. and We doing folks, cutting particularly our a to great times attracted lot development the we're interesting companies and employees, think a doing that have of of edge edge that engineering of set really technical are And benefits I lot are

challenging, little forward. and we fact we'll go it's in And despite so think to as reasons, we've a that be able been all successful people, recruiting those I of for the

Robert Blum

here. item Okay, then great. And one just more

facts about accomplished uplisting As uplisting to to their which Are to it that the get the any milestones some price, the about other significant or NASDAQ there there. to be be or can in relates issues the intent we've stock obviously order remedied uplist to talked here, to NASDAQ? potential need of the

Joseph Forkey

Yes. Sure.

So with application. folks initial we answer the is been getting our to to already any They short They have questions. been uplisted certainly We've do. helpful. don't Having they've initial lots with work we've touch said in some of We responded to at that, their ask see submitted very NASDAQ, NASDAQ. roadblocks comments. the have

none were we as that meeting. for of see through meeting nor the the questions we the But as get We the to there have do any impediment. say, to of annual things have I particular annual that

quickly get we're to of to get as diligently the work requirements we can. and So going uplisted all as through

Robert Blum

any All there's you that Chuck, stand call in it over the back right. Great. to if I'll here. turn questions

Operator

to are I any questions, like turn call the remarks. there no would over closing As to more management for

Joseph Forkey

I Thank and forward you, operator. to Bye-bye. evening safe. on call of good very us stay everyone soon. look today. Thanks for you with Have joining a speaking all the

Operator

for presentation. conference Thank has today's The concluded. attending now you

now may You disconnect.