Precision Optics Corporation Inc (PEYE) reported Q2 2025 results with revenue of $4.53 million, marking a -9.9% year-over-year decline and a +7.9% quarter-over-quarter uptick. Gross profit was $1.07 million (gross margin 23.6%), while EBITDA remained negative at $-0.86 million and net income at $-0.97 million, translating to an EPS of -$0.15. The quarter underscored persistent margin compression driven by product mix and fixed-cost absorption, alongside ongoing operating-expenditure intensity (R&D at $317.7k; SG&A at $1.66 million; total operating expenses $1.98 million). Cash flow remained negative, with operating cash flow of $-0.79 million and free cash flow of $-0.82 million. The cash balance ended the period at approximately $0.21 million, and net debt stood at about $2.88 million, reflecting modest leverage but stressed liquidity for a small-cap medical-imaging supplier.
The balance sheet shows a substantial goodwill balance of $8.82 million and intangible assets of $0.29 million against total assets of $17.51 million. Current assets of $7.84 million versus current liabilities of $6.41 million yield a current ratio of 1.22, and a quick ratio of 0.62 signals limited near-term liquidity cushion. The company carries long-term debt of $1.62 million and short-term debt of $1.47 million, with total debt around $3.09 million and a net-debt position of roughly $2.88 million. Inventory and receivables levels contribute to a relatively long working-capital cycle (DSO ~69.7 days; DIO ~100 days), driving a cash-conversion challenge.
From a valuation standpoint, liquidity and profitability challenges are reflected in modest asset turnover (~0.26x) and negative EBIT/Net income margins (-20.1%/-21.4% respectively). Nevertheless, the company’s cash burn appears to have stabilized somewhat versus prior periods, and the balance sheet remains leveraged but not aggressively so for a micro-cap with specialized optical-imaging capabilities. Management commentary was not included in the provided transcript, limiting direct quotes, but the results imply ongoing emphasis on product-imaging solutions and potential for margin recovery if revenue improves and fixed costs are better absorbed. The investment thesis rests on stabilization of revenue, targeted cost management, and potential strategic opportunities in imaging and custom optics within healthcare and adjacent markets.