Executive Summary
Precision Optics Corporation Inc reported QQ2 2025 revenue of $4.527 million, down 9.9% year over year but up 7.9% quarter over quarter as production backlogs intensified. The quarter produced a material shift toward higher production activity driven by two major programs: a single-use cystoscope imaging module for an AI-powered robotic platform and a defense/aerospace assembly program. These gains culminated in a 42% sequential production increase from Q1 to Q2, the largest in several years and the highest production revenue since fiscal 2023, signaling an inflection point as the company scales manufacturing capacity to meet backlogs.
Despite the revenue ramp, QQ2 2025 profitability remained negative: gross margin was 23.6% on gross profit of $1.07 million, and operating income came in at an operating loss of $0.91 million with EBITDA of approximately -$0.86 million. Management attributed lower quarterly gross margins to a shift of engineering resources toward finalizing the Unity imaging platform and a higher proportion of non-billable product development activity, plus ongoing back-half ramp in manufacturing headcount. SG&A was $1.66 million for the quarter, and R&D expense rose to $0.32 million for the period, contributing to the quarterly net loss of about $0.97 million or $0.15 per share (diluted).
Management highlighted Unity as the centerpiece of the strategic growth engine, designed to accelerate time-to-market, reduce development risk, and enable a scalable portfolio by reusing baseline design elements. Unity launched at Photonics West (January) and MD&M West (February) with strong customer interest, setting the stage for a step-up in product development revenue in Q3 and especially Q4 as customer projects move into production. Management guided to a Q3 revenue target of at least $5.0 million and a Q4 target of at least $6.0 million, with Adjusted EBITDA turning positive in Q4 as backlogs translate into higher, more efficient production output. The company also outlined capacity expansion plans, including clean-room space additions, multiple production lines, and a shift-based manufacturing boost, to accommodate a multi-year backlog and drive margin improvements as scale improves.
The QQ2 2025 results underscore a company in transition: a fragile near-term profitability profile amid a substantive scale-up thesis centered on Unity-driven endoscope platforms and two high-value programs. The risk-reward is tied to the speed and execution of capacity expansion, regulatory clearance timelines, and sustained demand from key customers. If run-rate production reaches the projected levels and Unity-based programs scale as expected, POCI could transition toward sustainable EBITDA positivity in late FY2025 and beyond, supported by a significantly enlarged backlog and a more predictable production footprint.
Key Performance Indicators
QoQ: -4.24% | YoY:-39.18%
QoQ: 27.02% | YoY:-48.08%
QoQ: 26.05% | YoY:-908.77%
QoQ: 28.57% | YoY:-787.57%
Key Insights
Revenue: QQ2 2025 = $4.527 million; YoY: -9.90%; QoQ: +7.86% (from Q1 2025). Gross Profit: $1.0699 million; Gross Margin: 23.64%; YoY Gross Margin change: -39.18%; QoQ: -4.24%.
Operating Income: -$0.910 million; Operating Margin: -20.10%; YoY: -48.08%; QoQ: +27.02%.
Net Income: -$0.970 million; Net Margin: -21.42%; YoY: -908.77%; QoQ: +26.05%.
EPS: -$0.15 (diluted); YoY: -787.57%; QoQ: +28.57%.
EBITDA: -$0.8608 million; EBITDARatio: -0.19x.
Liquidity and cash flow: Net cash from operating a...
Financial Highlights
Revenue: QQ2 2025 = $4.527 million; YoY: -9.90%; QoQ: +7.86% (from Q1 2025). Gross Profit: $1.0699 million; Gross Margin: 23.64%; YoY Gross Margin change: -39.18%; QoQ: -4.24%.
Operating Income: -$0.910 million; Operating Margin: -20.10%; YoY: -48.08%; QoQ: +27.02%.
Net Income: -$0.970 million; Net Margin: -21.42%; YoY: -908.77%; QoQ: +26.05%.
EPS: -$0.15 (diluted); YoY: -787.57%; QoQ: +28.57%.
EBITDA: -$0.8608 million; EBITDARatio: -0.19x.
Liquidity and cash flow: Net cash from operating activities = -$0.7868 million; Free cash flow = -$0.8188 million; Cash at end of period = $0.212 million; Availability on line of credit = $0.350 million; Net change in cash = -$0.423 million for the quarter.
Balance sheet highlights: Total assets = $17.51 million; Total liabilities = $8.03 million; Total stockholders’ equity = $9.48 million; Cash and cash equivalents = $0.21 million; Accounts receivable = $3.51 million; Inventory = $3.85 million; Goodwill = $8.82 million; Net debt = $2.88 million; Debt reported = $3.09 million. Current ratio = 1.22; Quick ratio = 0.62; Cash ratio = 0.033.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
4.53M |
-9.90% |
7.86% |
| Gross Profit |
1.07M |
-39.18% |
-4.24% |
| Operating Income |
-910.02K |
-48.08% |
27.02% |
| Net Income |
-969.68K |
-908.77% |
26.05% |
| EPS |
-0.15 |
-787.57% |
28.57% |
Key Financial Ratios
operatingProfitMargin
-20.1%
operatingCashFlowPerShare
$-0.12
freeCashFlowPerShare
$-0.13
Management Commentary
Theme: Unity platform and strategic shift to CMOS endoscopy
- Quote: Joe Forkey, CEO: Unity launch “provides significant benefits to our customers. Perhaps the most appealing benefit is an accelerated time to market... accelerates the path to production,” and management noted Unity could shorten development cycles by six to twelve months. This is expected to expand the company’s opportunity pipeline and shorten the path from engineering to production.
Theme: Production ramp and backlog visibility
- Quote: Joe Forkey: “The increase in production from Q1 to Q2, driven largely by these two programs, was 42%... the largest quarter-over-quarter production increase in many years and the highest production revenue since fiscal 2023.” This underscores a meaningful near-term revenue trajectory supported by backlogs in cystoscope and defense/aerospace programs.
Theme: Capacity expansion and operational execution
- Quote: Joe Forkey: “We are doubling our production capacity to achieve an annual run rate in the $3 million to $4 million range... The cystoscope program will double output in ~3-4 months; the defense aerospace program by end of March.” These comments illustrate a clear plan to scale manufacturing through facility upgrades, line expansions, and a broader workforce to meet backlog demand.
The increase in production from Q1 to Q2, driven largely by these two programs, was 42%. While this was not quite as high as we anticipated during our November call, it still represents the largest quarter-over-quarter production increase in many years and the highest production revenue since fiscal 2023.
— Joe Forkey, Chief Executive Officer
Unity provides significant benefits to our customers. Perhaps the most appealing benefit is an accelerated time to market... By leveraging previously validated design elements and by minimizing the need for bespoke engineering efforts to achieve prototypes, Unity reduces the uncertainties inherent in developing and testing novel imaging devices and results in potential cost savings as the risks of redesign are significantly reduced. And finally, Unity supports the development of multiple products from a single design framework, offering scalability for growing product portfolios.
— Joe Forkey, Chief Executive Officer
Forward Guidance
Near-term outlook is robust on production; management targets Q3 revenue of at least $5.0 million and Q4 revenue of at least $6.0 million, with Adjusted EBITDA turning positive in Q4 as the production ramp gains traction. Unity is expected to accelerate time to market by 6–12 months, enabling faster transition from engineering to production and expanding the development pipeline. Capacity expansion includes: (1) doubled clean-room capacity, (2) adding lines (two, potentially three) for the cystoscope and defense aerospace programs, (3) second shifts to boost throughput during ramp, and (4) capitalizing on a large backlog that is already “the largest in recent history.” Risks include continued regulatory clearance timing for customer programs, potential financing delays from customers, execution delays in scaling up staffing and infrastructure, and the concentration risk of two major customers driving a sizable portion of near-term revenue. Key indicators to monitor: (a) actual Q3/Q4 revenue realization versus guidance, (b) gross margin recovery as manufacturing scales, (c) progress on Unity baseline customization versus regulatory approvals, and (d) capex/operating expense trajectory as the manufacturing footprint expands.