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Precision Optics (PEYE)

Participants
Robert Blum Lytham Partners, LLC
Joseph Forkey President and CEO
Call transcript
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Operator

Good day and welcome to the Precision Optics Reports Third 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 Robert Blum with Lytham Partners. ahead. go Please

Robert Blum

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

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

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

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

Joseph Forkey

Thank you discuss all you, to XXXX Robert third financial thank year today joining fiscal our quarter results. our for and call

acquisition, of after the meet Lighthouse, the gross to quarters. results compared XX%, results organic for up nice September all both the since historical highest quarter, margins improvements including and the in have have achieved goal excluding a second level quarter This the we XX% key us press we quarter close, Lighthouse up is in to been XXXX up were has the Lighthouse were and corporate with the XX% few Consolidated Sequentially, from working the of operating benchmark. on over which As performance a excluding effect margins over business you years we that revenues very were see XX%. this million we and year-over-year. pleased gross are nearly last can as been to the really number key year-over-year initiatives was third $X.X revenue Revenue the provide business metric. the came together was issued release a the every watershed was XX% in of

modern adjusted the day EBITDA the on we company. bottom-line, a positive new a record $XXX,XXX for is reported Importantly, of which

uplift addition financial meeting onto advancement of other key intends we In progress initiatives, a the to of made also NASDAQ successfully number our and including of effect productive the reverse these stock to our that we to split the a Market received We the our other if Exchange. number are needed great for had results, on approval listing. from have discussions Capital uncertain at Exchange required shareholders annual factors with

provide now, announced comment the rest those am ramp with to like, this could the conference are improving into drivers Then working to call, that final revenues progress particularly some like through some are and on production. moved as of will in margins. since insight recently yet operational projects you All updates I our year what fiscal have on look fruition. to a key we I'd beginning the vision has and the about time is the specifics hope I for to into some NASDAQ near that pipeline as come We to accelerating of continue talked for project very details as pleased and few qualification additional have another future. last the we with told,

million earlier engineering and quarter's have was others, is than were is last production in million These which to beginning $XXX,XXX revenue, the talked that Lighthouse into of and production recently quarter. production previously, than increases pipeline pandemic, but year's $X.X This are for revenue, our we've now projects to impacted or a recover. contributed production transitioned significantly were $X.X third the higher XX%, $XXX,XXX production As we revenue. number about in by that calls, about last impacted higher negatively from quarter. our which

organic we increase the of the extend February which from revenue orders through for drivers in was here contract production deliveries contract as received that that of that new aerospace March. excluding announced expected major to end longtime is production on were customer, even XX% more, shipping in year-over-year $X.X contributed orders for very our to we Components defense for key from approximately a a $XXX,XXX spinal defense also on division. initial product approximately was So, which in as aerospace Optical increase March, Lighthouse, Expanding the The with the well we $XXX,XXX, our March production deliveries our The million, production initial bit which revenue. QX in approximately announced production increase revenue, record our September. announcement we a of at

October that We that that that expectation calendar are deliveries we year. cover have our ongoing that are with the expand the report the million run also end this of I'm of $XXX,XXX, to rate $X number per approximately opportunities was approximately to first this continue announced for from products a the received pleased was would will there application our providing. at beginning that year and we of of Consistent for now follow-on which order interpretation, today through nominally orders

products, some annually which prototype work continue to All-in-all, through expect We are going of will on customer several with to POC. we million testing revenue of represent additional customer's this dollars now. this likely programs

yet the rate not QX. we in having to we smooth, higher we $XXX,XXX the stage be delivery quarterly significantly are While last the volumes, future quarterly than consistent few at of of shipped run expect the days

production XXXX our of As spinal press we reported existing million totaling our one our $X.X product, in device large surgery of release, orders customers. we received medical from approximately March multiple

we now to the these for significant surgeries, of years. product XXXX this have the Due customer on restrictions, seen elective restrictions orders impact rebound than pandemic-related with significantly. this to year relaxation supplied orders in have for product. of this fiscal a But We more XX dropped

products from production, This We of device are electronic a complex product production a the nine a currently XX ENT for currently regulatory product aversion in million volumes announced of imaging the in are us expect are years the through programs the production. to once of nearing or they transitioning they revenue months. fiscal approximately Two transfer just with is more next medical along to is fiscal $X.X $X.X to will ongoing tend last with projects and order products to XXXX. the QX to transition the production to changing next the in the and once production a for production, end through with stay we million With transfer products great to this product little success acquisition and to out first transferred QX suppliers, to $XXX,XXX we contribute risk product highly initial deliver great four approximately delivering to where for acquisition the other Production year of against the us requirements the This initial and is often the likely revenue used first and production. ongoing has very XX XX more. which million it of Because investment, growing now XXXX production, a otoscope continue optical company continued to slated Lighthouse types Lighthouse this to space XX to of of $X.X additional additional week. to This these development that contributing associated since of was Lighthouse each of value an pipeline example years than and an substantially. our and in five in or pipeline programs with of represents indicator months. successful came other of

camera growth which order product had that product FDA. should On I production for our the is is into our heading and the second They their early this the call, go-to-market next provide year. clearance in multiple last in revenue indicated finally release XXX(k) to now are they that reported plans now have colonoscope. transitioning to continued finalizing summer, that for help The to customer from fiscal expect received us

due pandemic. of these continue In other recovery also a few nice we programs, addition delayed the that to to specific mature products to were see

year-over-year a order to and for that is the defense delayed instance, we earnings the to the was November to due pandemic growth. levels back contributor pre-pandemic product was For reported during the revenue call

This programs as our and will appear cardiac believe devices, be that excited to we to production is defense combined XXXX. to from production program any Lighthouse, levels, the to a aerospace offering the fact would technical improved as received first order Lighthouse mismatch X.X of other of for After acquisition this the the opportunities of market the while first especially potential earnings large increase development it's to and volume time company. attractive markets in moment, as for much pull-through we This the nor our with QX invoicing of pipeline engineering start comment as that same acquisition, to not the we through fiscal and The their requires that our slight with report Our back customers. to made is is engineering million spoke expertise products the pipeline, provide. of an talking strong. services that and a we made which in we capacity of this company to despite last team. that enter pre-pandemic in quarter-over-quarter $X.X million timing the past, received programs. pretty compared in continuation us. the $X.X replenish current project and The company, revenue new to revenue order our due now products engineering a have able medical From of is continues means integrated $X.X before VP April. the opportunities, and in reasons lead with which device of quarter to some million an given revenue business development technical of POC year, last reduction have of engineering the program $XXX,XXX the was to transition acquisition with neither in has months. and had demand as both Transitioning orders optical customer are validation production. the dedicated Operations, December, production of which to program production to about their new transition discussions including soon engineering last a size transition I in the and projects I'll and achieving programs We be our merger I've of a this our am great revenue the into this in couple quarter. been I'm few at it soon indicator the heavy-duty for calls, in as because our standpoint, we after really began is both continues prior is expertise for strong pipeline million largely convinced engaged And customer part to augmented the combined multiple compared be in to combination electronics more level this the received as last even initiation the our What the our recently this can to with stages completely of we the that otoscopy

move are with size good pipeline, have while will to the well which very actively which some engineering bringing as recruiting the we speed engineers, as in is successful projects of to we the can We market labor the us both tight, additional And additional allow talent. increase production. on specific been

programs, While engineering with can from to quarter-to-quarter, increase revenues engineering specific mainly market, milestones, in the strong able be stages, fluctuate demand grow staff. that of we as will and continue revenue to we timing expect overall to our the technical due we

device, application product the the our of two different include production are Beyond to programs and and are XX pre-acquisition are Lighthouse already products, laparoscopy opportunities approximately arthroscopy robotic ophthalmoscope. mix These in there I've additional single-use engineering and move to which recently production, an scanning POC likely mentioned for projects five that that transitioned months. to are pipeline next ophthalmic a

the As of with as continues our the through I've past, ophthalmoscope on gating working forward to the in they part customer a move items their project urgency suppliers. single-use stated few continue with

We will come production a to continue in believe calendar order late XXXX.

develop medical of this at the is experience single-use technical the will to before, understanding I've develop project that products, to economics. As complexity the tangible we nature, chain segment single-use address to it as better We an about only stated price are as strategy not support has product. first large partnership it device intangible and supply business The product the many in of The precision end point with and us market. involves and lead here the to long-term believe rapidly the customer will the in market success single-use optics well also importance know-how is requirements creation allow can a in growing since IP a future opportunities. to added our to single-use gaining endeavor this

along are The production moving year targeted in pipeline other nicely. for projects engineering the next

are Beyond five these there projects, well. that continue to others numerous advance as

to the potential for order in grow contribute revenue these production, of time. one million projects of much production pipeline over remains Our of have each larger levels year of first goal $X many on the the to and to

Lighthouse, in past, and quality high with the a programs said with is is of been of to with as robust pipeline I've our long-term pipeline production. key the the large it and growth our and As a transitioning high likelihood as and has merger ever POC filled large is to

this beyond, the positive contributors Nearly production. trends look recently to the As strong revenue we to our last couple from fiscal the quarter believe additional and we of the of revenues transitioned the fourth will that of of year should continue quarter quarters programs continue. with third the all to record coming of

schedules, may individual direction and growth. clear the in of experience overall is the downs While and continued delivery programs ups revenue ongoing trend

about highlights. now Let financial me of bit the talk a some

while On $X.X quarter million. $X.X an the million, $X.X year topline, third was XX% revenue already engineering mentioned, sequentially. as million, revenue Production during XXXX was I've total increase XX% the year-over-year and of of revenue fiscal was

organic total year-over-year. up XX% Lighthouse revenue was Excluding

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

key margins representing the gross Lighthouse the during above for have Excluding quarter, milestone would been XX% company. a

production which calls. a when of outgrow it The their plan the number was production engineering came to acquisition on their overhead on in are us gross margin of by continued we that program programs continue a to will commented to As and in improve. improvement absorb more margin transition occurs. driven that Lighthouse quarter we gross to third overall fully and the pipeline to building we expect capacity, into Based at Lighthouse deal production have previous in Lighthouse, with factors schedule, with

production delivers of in costs so revenue many higher fixed our margins. are and growth First,

single-use coming cost Overall, processes whose the of to programs, Second, the products. in accompany new that high which through targets. and range XX% so engineering of the been These production sometimes in impacted margins clearly mature pandemic. margins of all business in engineering programs largely resumption program this gross with results initial were on are have of overruns the corrected, online ability already products other have that higher. third and but the our virtually standing production our line long quarter that finally, the some of program margins, And back contributing the been growth our volumes with production demonstrate runs model by have inefficiencies achieve are

of initiatives, margins But As new see pipeline and gross the expenses as million is as Operating during as programs million quarter that initial production, third $X.X largely expenses inclusion in in On to back but of basis, marketing research in costs. will year well the ago. that and operating move had development quarter-over-quarter to the million. of a amortization, into target million higher. the year-over-year to integration a reduced and and partly and shows, as engineering higher The depreciation the continue transition in due due certain ramping approximately compared The higher gross our $X.X and the stock-based pandemic. expectation third second others quarter as excluding increase margins. trade trend may to also towards our fluctuations the is XX% been quarter $X.X sales $X.X were approximately cash was change such some expenses up the we expenses, were and sales overall compensation, Lighthouse expenses, well to to marketing

reaching. our are the We and business that are level investments of scale in reflect making we maturity,

have reflect Texas, size in as Additional now well and Maine. our volumes our footprint in as accounting to we Massachusetts, for and headcount HR functions, physical example, in talent locations our as

no companies. longer small three are We

and the net talents loss during adjusted told, with our We expense, and of we are reported reach. profit EBITDA $XXX,XXX integration on adding $XXX,XXX. of quarter excludes third of income interest, line, Adjusted an our EBITDA part GAAP the stock-based compensation, net market amortization. depreciation, process to a leverage as All

continue pleased the our in invest are are flow We seeing we in model through yet leverage that and business still adjusted EBITDA. to the to

expectation growth achieve in the to greater in for continued expect adjusted beyond, quarter the also and With revenue we fourth EBITDA.

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

cash Accounts the resolved. quarter payable increased due revenue, one increased substantially been in the with customer in XX, but for issue which terms also due Our March receivable to an substantially $XXX,XXX. increase accounts balance and at now the inventory XXXX period. to has It was also during

as production levels, to expect pre development continue We returned more to production. projects we this move revenues and pandemic to

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

we engineering have our in grow First, worked large our to actively capacity. resulted in pipeline, year-over-year capabilities, and the sales, This and strong and growth of quarter-over-quarter increase revenue. has

have in the recruitment team, addition works we last our in intellectual targeted in we own property. the technical years, Through invested forward taken jump significant couple technical a our technical our of well resources have develop further as over as Second, the Lighthouse capabilities. of to

above, I and As mentioned in recruit our we technical invest continue to team.

increase we which size we pipeline, engineering rate particular of on and execute programs. can continue to our the So at

growth. capabilities, imaging. as acquisition our fourth, in main acquisitions. the extremely of of new production pleased pandemic-related or a call. the participating a to successful as gross with ongoing results two revenues was back And the well turnaround One our positive with well industry coming we update for in on XXrd. to to lighthouse future happy focus of is skills And we position well me continue note, activities, then, personnel in have speaking combines future the reach respond Blum hesitate continue in optics transactions the and invest meantime, and general final as into organic online. in Optics am while POC we growth. we I facilities for in Clearly strong Lithium be the please to those XXnd to future. take to and environment growth or acquisition surgeries are many both Investor don't the With June event of current I'd today production via macro any look the recovering Summer to growth, progress schedule significant believe Lighthouse you partnerships opportunities delayed production, in external our forward now own we and the of from all as pandemic Lighthouse from out complete with as thank medical I leaders and positioned your and I augmented additional elective XXXX projects slowdowns. Third, Overall, for improvements programs in industry's of a for Conference we be to digital moving our I questions. and but as strong Precision you and the attention in always the the revenue will Robert integration see and that and margins, coming in

Operator

Thank you.

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

Robert Blum

to Sara, to a see got you. for anyone while wait if couple here questions. ask I've likes

Joseph Forkey

Sure.

Robert Blum

maybe little Let's a talk -- bit about capacity. let's chat

and the expectation of As you we various indicated, meet manufacturing projects here? an you've a ramp your seen maybe help capacity have revenue, to a revenue, and understand demands everyone from further growth that the

Joseph Forkey

sure. Yes,

that well that and something some In I the general, XX which In going expect through lighthouse facility go the the been side. their production. looking facility. we because tight, have now right we've in certainly sure. the while our most we're both of in -- as reach always we as pay we administrative very as market in relevant months at pretty that potential group we're the will new a in technician do people, from I But before the I the people Maine terms today, facilities. from technical mode, actively next is comments close Texas, we a hiring to for in we other our depends to mentioned facility, successful solutions into growth potential Maine, to at the these is will little go of quite It this location. go a assembly outgrow in on room have capacity programs side bit We're labor think We're attention before bit standpoint, of facility while looking a the think of ways From costs. probably and I carefully. capacity So, we and terms saturate attracting think a in is as in

we're space in Massachusetts, looking just place talked bit a amount square there foot case, one that Boston, to some in need because as support far as that pretty space a to. In Massachusetts, fact, in a times, there in We up down facility we of have we we're that for flex and a to in I've use pretty we able have and actually that we there's help the actively a enough good of kinds success. near number opened of of can large fairly So, production actually a a space we're having single-use good easily flex and outside last and been so new facilities us, that we the about that the year project X,XXX in up so of need.

at carefully, is we're as say, of top at the we're place looking that I it needs But Maine. the now right and main the that for for on and looking come. will we're that So, prepared well

Robert Blum

seeing supply have there ongoing? some production chain out projects you might issues Okay. of the of that sort you Are impact various any that

Joseph Forkey

we So, is of parts to question. two not, answer hope and the the yes those

There to active with say deal we actually hope couple taking it. shouldn't I So, pretty a steps of places. we're some are not,

been that that's in are And job supply with they've lot on one components. of give months a to couple good And electronic just redesigning our concern. team of a terms before electronics customers because the done component long-term a impacted of Many done you a replace because So, components across examples. these items in really another. then chain gets a even a lower case has that the supplier. support things the glass There's quickly need cost recognize make -- hold some or or the of that with particular of customers products worth are taking uses you glass we places, our significantly, for From to pretty they've and orders pipe with production, pretty longer But The XX placing basis. things and they number components that, case backordered product in that's have particular, area can is our really, of the to a by have have as a timeframe one And electronic of of sort do, areas of close that to the into another these actually of longer of attention even longer. job deal to the year and lighthouse pay have when board, place that group of to very is we specific shipments good glass to been up. we supply. requirements in

production groups, the in from use. that on and Germany, Some with war the of of some talk rate glass Eastern and the those the we there instance, in the suppliers come of with reducing Ukraine for of Europe impact energy supplies, types has some been

has at hand. enough to at very looking make So, carefully sure specific our -- very on have very detailed been things those at way team those we a in that material

far but our of team chain managing it has job So, short is a is it's we'll yes, so concern, to great a done and that. do issue, answer an the supply continue

Robert Blum

one maybe here. right, more All

or related an device of customers existing sort As a it customers? some either new focus get and some projects. aerospace of relates on of or -- off-late here uptick a Has had you've all projects, been there Normally, medical ones to with given sort are those aerospace your not defense included here defense with that into you success pipeline, these sort recently. of are

Joseph Forkey

there Yes, is.

into can there market. the a online dominates be with aerospace everyone given history, a much $X this run think significant as production few Lighthouse, pipeline, we at have medical which medical there. device the device. entirely work I work, a device -- so we clearly now And from million our brought with because ago, opportunities us defense that a talk rate, year about lot recent bigger the in the can we medical acquisition pretty of months a and but to footprint are was The the see project certainly that

with that added that because And the that combination the having now the answer in depth though defense those stronger pursuing pipeline pursuing quickly a the nicely. we I three the and would moving us device that in there opportunities are there or with is things, side of again, the space, like in are market. supplier, with Lighthouse, the of on additional team the of that Lighthouse those aerospace opportunities, add, are kinds so, aggressively, in electronics along we just two have POC short makes board I medical think are are

did like also medical aerospace the in in Just the defense space, it it device market. does

existing we've our a customers, company. so defense now some And had the us capabilities in even combined we the as an to have asked for introduction that already space, of

when I just times Ross of aerospace combined a project -- Optical we Lighthouse. aerospace that I a of come of couple -- $X of year acquisition a be from merge commented will really think capabilities think the this and market the couple from defense in ago, the on of like there'll years POC million those directly So, we've defense groups came number the a opportunities new

lots there and lots there's for think opportunity I of So,

Robert Blum

if I'll questions. Sara, All for you it perfect. there's back it leave other there. instructions over right, to turn I'll any

Operator

turn no further showing for to any Instructions] [Operator like management over back session. the our this I question-and-answer questions, remarks. would concludes conference you. Thank closing to

Joseph Forkey

soon. look good of call to And today. Thanks all you joining have very you, thank for us you speaking I and to on evening. Sarah. forward Thank all the a

Operator

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

You now disconnect. may