Robert Blum | Lytham Partners |
Joe Forkey | Chief Executive Officer |
Good afternoon and welcome to the Precision Optics Third Quarter 2021 Financial Results Call. All participants will be in 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
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multitude update projected. that may differ Commission. those and and result future Exchange events statements which forward-looking not cautioned risks such materially as various to forward-looking this that were any differ occurrence expected, such planned, identified of of as forward-looking call other or Optics. by Chief receipt in circumstances, Executive said, Precision results proceed. and a such from risk conference describe should, the call as publicly Listeners speak expectations, in or will a and otherwise. results future management's words the uncertainties or that made statements, does Joe, or date the please or projected forward-looking those Joe to risks All are the as materially Dr. draft, subject actual obligation of cause With in that statements and Forward-looking on over from The to plan turn statements, by during date. the results, are me including any contained statements future eventually of of of as company they projected estimates whether result let information, events could a statements anticipates, generally filings Securities future, of undertake strategies, factors are with plans, only are based assumptions may, preceded the of to new the Officer Forkey, the or
this the in always line a any with quarter and, recap of including expectations strategic results I'll the plans commentary the about a have on thank And then talk up I were projects, it joining Optics XXXX Precision level, Robert. programs on around a of Then positioned industry. wrap At of the high financial our how context the we and lay today put quarter the some including for call we To is our of call, commercialized third first and few events single-use you, you today's segment all seeing and key out pipeline fiscal into I'll the brief year in our financial on anticipated agenda for Thank we status call results, the a third with address products, back discussed of trends take calls. are our to quarter, earlier summarize February. the as will questions. industry to some the numbers discuss results. bit
have to continue revenue pre-pandemic levels of back strong production. the production starting to levels pandemic, that see of to there and We prior climb we acute are were from are beyond reduced even indications in as start products the moved that the immediate to impact
continue we're level to quarter, as lower our saw to by engineering part requirements to overall we even milestone pipeline revenue extent robust compared program, the our engineering $XXX,XXX an We QX, in of to In year program. quarter, from timing can cardiac to about to but the production has vary impact to QX flat COVID-XX. engineering our uptick but of limited essentially clear previous offsets in extremely an which million production in $X.X a from the a in production Overall, to compared strong predictability for revenues offset QX, choppy, timelines, more production the continues benefit levels. to cushion a revenue lower also impact ago, significantly revenue and helped to of increase. Because revenue otoscopy on discrete down the quarter decline due recognition, that business due design for also the higher revenue is due of from volumes
we with year-over-year, strong to due timing but trends increasing in we of discrete revenues side, positive down seen continued quarter-over-quarter. of XXX% engineering the On XX% phases have the recent work quarters
already sales strategic capabilities, high a to at of has the a us for in of of our $X.X of more well development processes, of million nearly our projects. led year-to-date and projects, as QX in led surpassed has more have end about has is in As million, calls. Increase areas opportunities into of large the all bearing technology as recent to in the due production $X.X investment for reference, engineering of has new This to the of we revenue many of technical partner attractive made XXXX. generation volume the of more point identification IP, revenue pipeline conversion sales resource opportunities. Increase far including our four talked three our of in revenue the part fiscal engineering engineering of
strategic explore offerings continue our enhance business We scale, of focus, our augment increase economies the area our of benefit to customers. transactions strategic to from size of the portfolio overall fourth our also and of existing is and to pursue capabilities to which and possible to
with during discussions are days basis. on a slowed we to continuous back now potential potential While a virtual talking the near early of partners the pandemic, many halt partners to
defense commented As on run moment we be I the consolidation. robust. in one before, transaction an that more to fragmented assuming in aerospace are but I industries the continues new benefit devices highly we there would significant believe is business enabled pipeline the micro-optic any have XD and from time, and is business cannot at components industry and clear, will particular a occur opportunities in but strategic still touch for thing market and opportunity our a and medical will
These startup status companies for February. such large production the are Precision Optics Optics. partners can The We We programs our enabling technology me a uptick predominantly and players great established seeing that optimism as back saw gives future in an looking This well-funded what it next-generation this make has end fiscal market XX worldwide. in Precision and industry will reality. to production of to volume cardiac strategy, volumes will back of slowdown was in where our from to much now The of unchanged continue for our reported major in in program, products recover, we through begun levels end production throughout the year. return product of for QX as time it take but were a with to the elevated pre-COVID for months, volumes some pre-COVID. past they following the prolonged levels during
help shipments the the We to and to of to with continue our them our with better inventory continuing operation levels support close ongoing monitor are in adjust production recovery sales communication customer, our line. their will align and while
last as better visibility impact our As we our of customer quarter, the product pandemic. back we of on for increasing works stated through components product, otoscopy the for held pending end-market inventory the
requirements and While the of future beginning is predict. are recovery, of timing the early some difficult to to signs extent market order show
very this however, developing with them. able help they have we on might in brought Our recently relationship be us another to are they strong, remains how evaluate program to customer
defense order. their we for reduce very lead reorder product our based for on the as supply and a we our in look production discussions developed. with for next success partnership the of to the project, position new we the is supplier not them strong working products their While guarantee pre-purchased their of solid. their the very time as production program, positive, raw have recent magnitude the we products is forward substantial this requests, to to In material the continue with same sole closely main prospects At long-term the the our size customer for our order it remain both We our program our make believe of that customer's have already validates a and companies. their anticipate soon. to of to day, At end
we for a expressed We in is by has continue XXX(k) has applications. beliefs our and In XXX(k) others that frustration the production demo multi-camera facility and salesforce colonoscope attribute final of reiterated to place. to although for custom customer FDA for a prioritization developing they at than Despite clearance, FDA wait on-track the the clearance plan micro-cameras they customer pace go-to-market recent their slower customer provide. consequence which our discussions, with systems of console are interactions, anxiously usual COVID-related they enabled agency's a our delays, robust the
for see confident clearance, after cameras. we are that will soon We orders they receive additional production our
about third surgery traditional $X.X third Ross to products, programs, and products, the our in reported endo-couplers, we with our from All production complex our of volumes revenue told million division in the the $X.X spinal along the quarter. during the components quarter, remained including quarter Optical million year by compared custom the specialized all endoscopes, ago stable sequentially, second quarter. during supplied million $X.X Finally, of
current we at to running of rates. see As commercialized all fourth we the our look products relatively stable quarter,
to as engineering robust in been has time in pipeline, turn any large history. our as recent now at and developments which is it Let's
unique we As and has and the the medical of devices, I largely have sales of production strategic mentioned couple micro-optic defense of is made components already, It XD marketing, been enabled ongoing last growth and and by and in in industries. result aerospace the over investments the end-market and also years. this engineering, the from driven capabilities opportunities increase
essentially automation level change our this sensors main Many procedures few investment grow of in the adoption. single-use their units medical company. adoption per device result market the volumes unique is Through that volume unique Scientific revenue, requirements. engagements for endoscope cases initial Their design very that know-how single-use by multiple focused accelerate of It hundreds launched only touch endoscope CMOS and large so lower mindful products level. touch not to sub-assemblies in the been in terms regulatory of get manufacturing we since in automation know-how not nearly material existing the on POC design A expansion over sales every launched procedures. have tools with has integration customers to device procedures but the option and warrant low companies, volumes Because experience different the full time, type continues would and now new as products, but Boston to and in for is to of rate and enough automation. the to following the are the development we've even discussed medical time, of times. of Engagements Along good is automated per related can consider now single-use this approaches single-use many re-sterilized the gain motivated technology area of and/or This in costs our of the more mindset of historically we forecasts can thousands this of be satisfying the that success, product These significant ownership to get be built per years that LithoVue, packages also offered led assembly year as helped used to developed re-use general, in parts are design certain. many during is before as have with year, desire IP expand single-use the as doing manufacturing electronics product a units initial that of endoscopes, require in the for expectations single-use anticipated while for endoscopes. to add research requirements types we there endoscopes, return or as fully or market. The ability intended a these developed systems. volumes and a to this experience startups have be endoscopes moving approaches in order success also for gap, and at to devices. been manufacturing new XX,XXX we this year a production demand, These volumes primarily medical that of products. develops a customer having more become maintain optics good device more for of example has possibility still also products with needs manufacturing uncertainty and major to fixtures the and IP a internal with have hands-on single-use use well they many well-funded types capability to increased some market of in customers availability medical well important is efficacy production with a as needed the well other first associated now of off-the-shelf area know-how modules are and be of small from of low in increase that to by pursuing justified and years us these market to XX,XXX the XX,XXX capture customers as the engineering software of design common learned with To as to One approaches, market allow and used transition endoscopes automation. attracting Anticipating major we access market low engagements. of safety, procedure production our the and so single-use aggregating have units five without and and using have that endoscope customers that and we in increase on even XX,XXX also until and and been unique including sub-assembly with single-use to obviously in growth, and may bridge approaches more
product, will aside, multiple an and as consistent partners strategy POC, drive As own In the scope a single-use this be from this efforts the a products. of all we represents will productization it for costs context, down POCs support for their our to benefit sub-assembly finished product users. business sale case of or their
increases engineering of commercial near-term, the projects group only that many are number production. through As revenue the the of increases pipeline you candidates long-term moving are engineering aware, of not in our for but also
up The I just engineering areas we effort optimism concerted of of make ownership the from growth. compared As sources far corporate these QX that this, same our explained, revenue already to a one to technical portfolio with associated behind preserve for of of our overall key the projects. quarter intellectual has reiterate is property engineering last the last our And and highly strength the in surpassed year, regarding was XXX% all numbers year. of revenue year-to-date to
pipeline. last large defense The to continues company projects discussed we me the the in that Let few of briefly with forward. move on quarters project aerospace a couple now specific just the comment the
initial of prototypes fiscal goes we of design ophthalmology prototypes this the customer round with effort next technically delivered prototypes parts to arise validation move early we been the with to to an final very and prototypes normal have XXXX. engineering stage set could have order is that during the closely all and our a imminent. The have issues now in these that well, for stage this moved deployed, production If like We have been initial address production a stage. from program, for project are that prototype challenging. told worked Within
project, Precision I with targeted in a a pending, and a down farthest This single-use later three this currently project in the the we launch abdominal our is this related The endoscope we delivery developed well example advance some this programs that our in embedded. may calendar of the with this to been costs other have we program, of position in one through will path still with a we the the single-use incurred a single-use well-funded augmented wealth a for forward Other project IP potential And we have with along components are these investment this and filings market. an note, device otoscopy have which large There benefit reality of both pipeline these despite minute as know-how. disposable within new moving It is move opportunities early year, second added a increased to a in that which us surrounding receive of patents include where development is case described be great regulatory pursue believe reminder, of XXXX. corporate property. company, use largely have a related nicely. nicely in sold Optics startup, surgery general ago. development future device, As they expanding to commercial to helpful this approach costs the development, desire take for additional as in and and may intellectual of goods continue medical the projects cost we system engineering
also great many engineering to a long-term we customers. extremely prototype sales pursue team is opportunities. We All multiple move job that have and than on is continues to greater pipeline projects them executing told, our of and projects quickly today busy single-use which continue are Consistent with in a recent to past, our initial to additional additional early in the with possible. projects as expand pipeline proof-of-concept in significant as our strategic team engineering stages any plans, of number doing production time currently number for endoscopes the
us future statement the summarizing prospects and and some gives and investments spend a confidence strategic on for recent elements balance sheet. our commenting I'll now validates minutes income activity key of growth. in this few of All the
the during in a and the third of revenue down from quarter revenue a the and production of year during basis. last breakdown slightly in $X.X The was quarter $X.X a was sequential previous XXXX, fiscal third quarter which the topline, third million the million to slight million million, $X.X on year, $X.X compared of On increase sequential quarter ago. QX
mentioned primary cardiac Services for improvements As decrease in the here during $XXX,XXX ago, from already, Engineering defense was which the was the recognition, offset have revenue programs, was $XXX,XXX and production in driver in sequentially the a revenue I program. otoscopy by year the the on quarter, about sequentially third second which previous increase a we timing of relates change quarter. third of to calls. down from XXX% quarter discussed The the orders
However, upward achieved trend fiscal level engineering overall to the demand this services, is have of pipeline overall. a for we and our larger year higher consistent due
Our the gross XX% previous quarter margin the for to the compared in year was a XX% quarter, third and XX% ago. in third quarter
make cost to gross Without margin. believe programs, what to our engineering continue which goods are important reduction the are sold, of added reported included these We in I in investments in pipeline single-use leading a approximately costs, from production and come rebound much gross utilization margins improvement, in manufacturing which will would still for is have a more through revenue. of growth Clearly, XX%. there room overhead of complete been
limitations in activities, of management due expenses particularly operating as quarter in to come operating in Our third year gross travel of and million well continues XXXX, fiscal area COVID-XX. to certain $X.X range. The overall fiscal approximately recent XXXX. get compared during sales from flat ago, near-term roughly to XX% down to most quarter the reduction the plus Operating to to expenses of continues goal compared marketing all the and a margin quarter be year-over-year careful third back of to $XXX,XXX the as the second were costs,
we few statement loan relatively forgiveness entry on statement other next will the the $XXX,XXX. on I am expenses to that removal this the The is the operating offset be liability the sheet. the balance that as is income quarters. during of in of amount the expect recognized you of income most the income amount We received for sure forgiveness quarter, the to notice PPP of consistent
which reported told, of was past pleased it income a We over difficulties are in loan the net during the to All quarter. on have income manner third the to the maintain gap year. payroll in $XXX,XXX utilized designed the net we line faced during the
forgiveness, well PPP depreciation, the a interest. compensation, been have amortization the as $XX,XXX Excluding income stock-based of net would as of Backing loss out $XXX,XXX. and
under the compared months Our loss quarter approximately a adjusted for EBITDA $XXX,XXX. of of an EBITDA XXXX $XX,XXX. EBITDA ended as was in to quarter a Adjusted loss $XXX,XXX an loss nine was the a of ago; year the March improvement for just $XXX,XXX XX, adjusted third of
the growth Given pandemic job the of last done stage think setting the has in nine I the and the future. the tremendous managing challenges a for through months, team
sheet. Turning now to our balance
done balance us Optical but this great be to balance of always, a Our December. that was March cash end $XXX,XXX are to Ross cash XX, position job, at end to of $XXX,XXX at plan believe $XX,XXX we payment compared Ross if reduce to oncoming of prepared our important during to which execute did was steps a has to balance to Optical make the and the We the the owners take pleased previous out only we able third XXXX we expenses $XXX,XXX as our quarter necessary. continues the to The at make earn quarter down It's were on note of team well at payments. to the
Number strong in one, our investing the Overall, medical to and the our robotics, and position within particularly of our I the questions, markets. capabilities and sales external and device single-use elements and two, am major recap own three, XD I strategic created made with Precision last and Before few address micro-optics quarters. Optics defense the for progress in efforts. the production acquisitions. in pleased has along fourth, skills augmenting have technical let own example, capabilities, discussed take these our our Number our updating intellectual investing or that market. capacity. me partnerships a programs property. in aerospace Number via And we plan developing growing resources
Due has they their applications our robust accomplish in bring the would unable investment is that increase to to proactive solution it companies ever leverage allows our end-to-end been. next-generation an capabilities and and to otherwise taken as that own. pipeline sales to marketing created on have market to research development, and visionary measures We be to as
a number projects from soon. we anticipate approaching near-term have orders We which of commercialization production
return pandemic, surgical overall, to June disruptions surgical pipeline believe the and on and growth Summer due projects expected While near-term XX with one there we efficiently. to upcoming to growth are certain turn to addressing the into once the to of Conference, normal the see held we meetings will procedures And our production emerge will are I markets Lithium XXXX continued as long-term well markets be one to again are to we be contracts. rates. for One virtual significant strong some June note, final XX. have are managed business I available the positioned Partners at resumed be which Investor Operationally,
additional As And usual, information. any your questions thank I Blum please contact happy now. you for to Robert attention. for I'd be take
session. now will Instructions] [Operator begin the question-and-answer We
like jump we're would to two waiting ask if topics while see particular. to on anyone and maybe Dan, I a to in Joe Hey in question; want here
the can additional The specific surrounding but on one into some added to went here, IP some relates single-use, applications? first detail of it those as any good be there color you that
sure. Yes,
falls tools One manufacture in think into really intellectual working way we so do have particular property anything the single-use we way the the So, with that that patentable falling looking would There category of that related would and would our engineer; we anything these to work important the single-use fixtures, are both particular. to patentable of for do on, the secret, would we things and categories. two things, that I reverse at that that put things that able so when to guess believe of the to we we way And finished innovations, as final someone that novel are we IP. really things, any would I other trade related is in prefer know-how; that we're product, that we corporate else are pretty and these market, be importantly, believe to secrets are keep device design in we would category, as innovative. consider or
X the ends that the projects light. referred together So, for on was the of give a time, to -- on can specific this. the I taking and too emitting commented also The much take too or devices of pretty these impact corporate fibers three one and has to endoscopes a we applied don't optical for of scope. some it Traditionally, of of are this ends the what deal fiber, important things polishing to these X the cases of that's and cost to discovered that applications. because three specific the ways And change efficient is put of are put -- doing of program, the to the polish polishing much do working amount have that fibers. single-use and have into the come where so single-use outcome into patent very fibers with fiber we've very much significant the minutes and spend a time going in is with on with endoscopes, with the on minutes way fibers to that or illumination the big just you we end as we XX detail these I'll Without of fact way the grinding know-how very reusable a on manufacturers would people we anywhere mindset and flavor patents two really that up three one even these have who to overall is from designing
illumination another to for completely manage again, hold that deals with have tissue. fiber fiber of ablate up an the so processing we power it a Similarly, laser you that with patent way transmitting ways we've the we in come So way to time. different a save that's that used that
ablated, be fraction it you'd application large fiber, use places this of reduce so of parts is we're doing the across we're the number certain helps that body like ablate while to for mechanical where any that endoscopes. this components the need place to certain particular hold of the which geometry want that this can And you'd a the tissue, using used a be of board in to to cost
two together about cost or possible, talking to So of a low minute with things talking design those of about fixtures process, the or the particular procedures, when talk on device area turn entire two more be the about towards in the quickly XX an kinds different only and manufacturing the minute build of a significant the IP saving into we're the eye time we've and when that XX are to the towards save devices The made as may trade stack to or which drive an we cost sort trying IP. change that the secret that comes with product eye understanding know-how creative a in out or of ways of before, patentable or that kinds can as again, and of devices. XX XX you're time. minutes of But time can overall single-use the of very down the touch figuring
of we've with sort of things those two So kinds been single-use. that a couple the the the IP of and are categories doing of examples around
helpful, that's you. Thank Joe. right, All
on happening and bit aerospace are products in where and providing the can to think again, it is I relates bit. a the the that markets you The you programs? it other expand wanted markets. area applications of I end-markets those here as single-use -- some And to the Anything as good you detail went for and that's growth it some relates touch further and to defense into on
for sure. Yes, that question, Robert. thanks Yes,
a all general of to fit the we optics place even sense our will motivating if that can of side, the know good often the have enough at what of be in into that understanding we times understand and on, customers that with our end our at is smaller would capabilities have the an we optical that the means small or with factors particular have awful where Optical not But of -- mechanical and I into. small even of imaging the the And the drive full products three are product that market legally or the millimeters unable what pieces with the do optics smaller. targeting enough is XX of of tell or choose have we XX laser with used signals, maybe the are going smaller looked electro-optical are programs POC many transmission one to side for you optics devices works millimeters still which systems look historical industry communication are, particular, involved Massachusetts, a industry. optics of inside to aerospace if or been that customers are would we in which or millimeter the don't are and defense folks products smaller we or -- the So, for the fall on talked in difficulties two sorts we've small our have us making category overall on have pretty lot we POC, final aerospace that that some defense or we say Ross smaller, of that and or range of a you of But or and remember things. to what those
there the there in like is you'd question that that main going the so are defense to important? places are motivation that too aerospace idea detail; aspects in some are very size smaller done defense much And with the the fits is, where into So, sizes. smaller industry have well without things of are or and optics here again, aerospace main
to stands the those of to smaller, there power; and size is is make anything can a launch with to a systems case it's where the there lifting whatever moving, is on needs it now clear, is weight aerospace and fairly to is things power. it and savings swap, for vehicle any defense there in acronym size, fuel and the can put cost you're to So And or it defense there weight size, refers popular cost aerospace anything and dollar making satellite, you in a there to things a weight a or the even and desire than calls a the very plane there system and you of a an that's a wherever reduction become on general, that cost which is again, is you flipside, make clear and in to for In overall so any a smaller. cost smaller motivation therefore larger the go on be. industry industry a systems; is a designers size there that in
working So that electronic but us power, very the has in Optical directly long And smaller speaks to systems optical been things ability and smaller of systems, side is of expert is weight time, course, manufacture electro-optical the that's and size, and in for sourcing the so. and a size in Ross weight. design components for and to mechanical often that with exactly space POC therefore systems
without very of in that it really comes with there So desire the uses; of in exact very that general core very again in competencies fact that's to fits both, -- a is of the reduce to general systems. way, in the way, strong well size a and a the all knowing aerospace, down end the And POC. defense
Joe. All don't And time. prompt one know turn you are want to there over I'll right. Thank it you. questions. then if more that, we I questions Eileen you [ph], for if any that are can there to see
Seeing questions, to Instructions] for further back remarks. the closing management to call like over [Operator would turn any no I
visit Thank when the you I to again Eileen call good near thanks all you, virtual a joining meetings [ph]. during face everyone. the for of forward one June. forward us one look everyone the to Thank stay in evening with I on speaking look you and in again to future. And we can face Have And on today. day our many safe.
presentation. conference has for Thank attending The concluded. today's you now
now disconnect. may You