Executive Summary
Precision Optics reported QQ3 2025 revenue of $4.20 million, down 20.2% year-over-year and 7.5% quarter-over-quarter, with a gross margin of 10.0% (vs. 35.0% in the year-ago quarter). The quarterly results were heavily affected by production yield challenges on the single-use cystoscope program, which led to a line shutdown and increased non-billable sustaining engineering, contributing to an EBITDA shortfall and a net loss of $2.10 million for the quarter. Management communicated that the root causes have been identified and corrected, and the company remains focused on ramping production and monetizing a robust aerospace and single-use endoscope backlog. A key near-term catalyst is the Unity platform rollout, which Cisco-like modular design is intended to shorten time to market and expand the addressable endoscope market, supported by a backlog that management cites as “greater than $6 million” and a minimum annual aerospace commitment of about $4 million for 2025–2026.
Management signaled confidence in a Q4 inflection point, guiding to approximately $6 million in revenue next quarter as production scales and the Unity-driven pipeline converts to billable revenue. The balance sheet shows liquidity support from a roughly $5 million equity raise in the quarter, ending cash of about $2.55 million, and a net cash position after financing activity of roughly $1.88 million in net debt (net cash figure negative). While near-term profitability remains a work in progress, the company has a clear operational plan: resolve yield issues, expand aerospace output (including a second cystoscope line in H1 FY2026), and accelerate Unity adoption across potential customers. This sets up a multi-quarter path toward revenue growth and potential EBITDA positivity if production efficiency and demand momentum persist.
Key Performance Indicators
QoQ: -7.53% | YoY:-20.15%
QoQ: -60.93% | YoY:-77.51%
QoQ: -123.98% | YoY:-688.42%
QoQ: -116.23% | YoY:-561.32%
QoQ: -100.00% | YoY:-474.71%
Key Insights
Revenue: $4.19m (Q3 2025) vs. $5.20m (Q3 2024); YoY -20.15%, QoQ -7.53%
Gross Profit: $0.418m, Gross Margin 9.99% vs. 35.0% YoY
Operating Income: -$2.038m, Operating Margin -48.69%
Net Income: -$2.098m, EPS -0.30
EBITDA: -$2.038m (reported), Adjusted EBITDA: -$1.30m
R&D: $0.211m in Q3 2025; 9M YTD $0.930m
SG&A: $2.250m in Q3 2025; YTD $5.90m
Cash & Cash Equivalents: $2.548m at period end
Net Debt: -$1.878m (net cash position negative)
Free Cash Flow: -$1.997m
Net Cash Provided by Fin...
Financial Highlights
Revenue: $4.19m (Q3 2025) vs. $5.20m (Q3 2024); YoY -20.15%, QoQ -7.53%
Gross Profit: $0.418m, Gross Margin 9.99% vs. 35.0% YoY
Operating Income: -$2.038m, Operating Margin -48.69%
Net Income: -$2.098m, EPS -0.30
EBITDA: -$2.038m (reported), Adjusted EBITDA: -$1.30m
R&D: $0.211m in Q3 2025; 9M YTD $0.930m
SG&A: $2.250m in Q3 2025; YTD $5.90m
Cash & Cash Equivalents: $2.548m at period end
Net Debt: -$1.878m (net cash position negative)
Free Cash Flow: -$1.997m
Net Cash Provided by Financing: $4.298m (equity raise)
Backlog: >$6.0m with aerospace program minimum commitments ~$4.0m/year for 2025–2026
Backlog Composition: Aerospace backorder + single-use endoscope programs; Unity-driven pipeline gains cited
Backflip to Guidance: Q4 target revenue ≈ $6.0m; expectation of gross margin recovery as volumes scale
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
4.19M |
-20.15% |
-7.53% |
| Gross Profit |
417.98K |
-77.51% |
-60.93% |
| Operating Income |
-2.04M |
-688.42% |
-123.98% |
| Net Income |
-2.10M |
-561.32% |
-116.23% |
| EPS |
-0.30 |
-474.71% |
-100.00% |
Key Financial Ratios
operatingProfitMargin
-48.7%
operatingCashFlowPerShare
$-0.27
freeCashFlowPerShare
$-0.29
Management Commentary
- Strategy & Unity: Unity platform launch in late January 2025 is expected to reduce time-to-market and cost in endoscope system development, with steady pipeline interest (five potential customers) and 15%+ April website traffic growth vs. January. Management views Unity as a framework to convert development programs into scalable production lines.
- Operations & Yields: The quarter was impacted by a cystoscope yield drop (below 50% vs. ~90% historical), leading to a temporary production pause and non-billable engineering work. Root causes were identified and corrected; line throughput is now double pre-shutdown and expected to contribute significantly in Q4. A second cystoscope line is planned for H1 FY2026.
- Customer & Backlog: Aerospace program backlog now under a binding agreement with minimum annual orders of nearly $4m for 2025–2026, with total backlog >$6m today. Customer collaboration on a second line indicates a strong strategic relationship and longer-term revenue visibility.
- Financials & Path to Profitability: Management asserts Q4 revenue rebound to roughly $6m and an inflection point toward positive adjusted EBITDA in the near term, contingent on manufacturing scale and higher production volumes. R&D spend supports Unity and platform development; SG&A growth reflects personnel investments. CFO highlighted improved line yields and stronger production ramp in aerospace as a key driver of margin recovery.
- Market Trends: Single-use endoscopes market is growing at high single-digit to low double-digit growth with 20% annual growth cited for CMOS-based endoscopes, aided by lower cost and risk of cross-contamination. Unity positions POCI to capture share in this secular growth trend.
We have corrected the root cause of these issues and are on a pathway to optimal production operations.
— Joe Forkey
The customer has agreed to minimum annual purchase commitments of nearly $4 million for 2025 and 2026. This commitment, along with the backlog greater than $6 million today, provides us with a level of predictability and visibility to our growing production schedule.
— Joe Forkey
Forward Guidance
Management guided Q4 2025 revenue to approximately $6 million, signaling a meaningful sequential rebound from Q3 and an inflection point on the LTM trajectory. The company cites a backlog greater than $6 million and a nearly $4 million per-year minimum aerospace purchase commitment for 2025–2026, implying meaningful revenue visibility as manufacturing scales. The Unity platform is a strategic enabler intended to accelerate time-to-market for new endoscopic systems and to convert more development projects into production revenue.
Assessment of achievability:
- Revenue trajectory: With Q3 revenue at $4.2m and management forecasting $6.0m in Q4, the implied QoQ growth is plausible given the improved yields, resumed cystoscope production, and the aerospace program ramp. However, execution risk remains tied to sustaining yield improvements, recruiting/training enough technicians for multi-shift manufacturing, and executing new production lines on schedule.
- Margin trajectory: Gross margin is likely to rebound from 10% in Q3 toward mid-teens as volumes scale and fixed costs absorb. Near-term margin expansion depends on higher production utilization, ramp of aerospace and cystoscope lines, and improved non-billable engineering efficiency.
- Backlog and visibility: The aerospace backorder footprint and Unity-enabled pipeline should sustain production revenue momentum into 2026, assuming ramp timing aligns with customer commitments and ability to deliver.
- Risks to watch: Tariffs and supply-chain dynamics, customer concentration risk (a single aerospace customer drives a material portion of revenue), and the potential for further ramp complexity as new lines come online. Investors should monitor quarterly production yields, order intake pace from Unity engagements, and the company’s ability to transition from development to standard production while maintaining quality and yield.