Precision Optics (POCI) Q4 2024 Earnings Report

Revenue: Q4 2024 revenue of $4.72 million, down ~-6% QoQ from $5.00 million in Q4 2023 and -9.9% QoQ from Q3 2024’s $5.24 million. For the full year, 2024 revenue was $19.1 million, vs. $21.0 million in FY2023; excluding a $0.6 million one‑time license revenue in FY2023, FY2024 revenue was down about 6.6% year over year (Wayne Coll commentary).

Gross margin: Q4 2024 gross margin 21.7% ($1.02 million gross profit on $4.72 million revenue); FY2024 gross margin 30.0% (vs 38.0% in FY2023). These levels reflect ramp‑up inefficiencies and higher COGS absorption costs at low volumes. Excluding the license revenue in the prior year, gross margins were in the mid‑30% range for FY2024.

Operating expenses: FY2024 operating expenses $8.51 million; Q4 2024 operating expenses $2.38 million. Higher Q4 SG&A included approximately $200k of one‑time recruiting costs and elevated internal R&D spend tied to the platform product initiative.

EBITDA / Adjusted EBITDA: FY2024 EBITDA (GAAP) negative at approximately $(1.30) million for Q4 2024; full‑year EBITDA negative at roughly $(1.60) million; Adjusted EBITDA (ex‑stock comp, interest, depreciation, amortization) negative $1.6 million in FY2024 and negative $1.1 million in Q4 2024.

Net income / EPS: Q4 2024 net loss of $(1.41) million; FY2024 net loss of $(3.00) million; basic/diluted EPS of $(0.23).

Cash flow: Net cash used in operating activities for FY2024 was $(0.98) million; free cash flow approximately $(0.99) million. Cash at end of period was $0.405 million. Post‑year‑end the company raised $1.4 million in a registered direct offering to fund working capital and growth initiatives.

Balance sheet: Total assets $16.91 million; total liabilities $6.84 million; total stockholders’ equity $10.07 million; total debt $3.43 million; net debt after cash likely negative by roughly $(3.03) million. Liquidity ratios as of 6/30/2024: current ratio 1.45, quick ratio 0.87, cash ratio 0.08; DSO 67.7 days; DIO 69.9 days; cash conversion cycle ~103–137 days depending on measurement; significant long‑term investments in goodwill/intangibles remain on the balance sheet (goodwill ~$8.82 million; intangible assets ~$0.29 million).

Key management themes from the QQ4 2024 earnings call:
- Revenue trajectory and guidance: CEO Joe Forkey highlighted that FY2024 revenue was $19.1 million and Q4 2024 revenue was $4.7 million, noting that delays in a few key programs reduced Q4 performance. He stated: 'these lower levels were driven by specific delays in a few key programs in the latter half of the fourth quarter... the long‑term outlook for these programs and overall business growth remains high.' He also forecast a step‑up in revenues in Q2 FY2025 as ramped programs gain momentum: 'we are starting fiscal 2025 in a much stronger position' and 'a step increase in revenue beginning in the second quarter.'
- Program mix and recoveries: The call emphasized four revenue streams (product development, optical systems production, Ross Optical, micro‑optics laboratory) and detailed program‑level dynamics, including the $9 million production order transitioning to production with ramped deliveries; the company noted the minority of FY2024 revenue that will not continue into FY2025 (~$0.4 million).
- Operational enhancements and platform product: Management detailed infrastructure upgrades (ERP rollout, Massachusetts consolidation, and capacity planning) and introduced the platform product concept: a baseline design framework with modular components to accelerate time‑to‑market, enhance margins on development work, and broaden customer engagement. Forkey described the platform as leveraging 'core design elements' and 'Lego blocks' to deliver faster, lower‑risk development while retaining customization for customers.
- Margin and cost dynamics: CFO Wayne Coll highlighted that gross margins suffered in FY2024 due to reduced production absorption and one‑time raw material carrying adjustments; he noted posted margins: 'FY2024 gross margins were 30%' and Q4 gross margins were 22%. He also indicated that defense/aerospace work in micro‑optics lab can exceed 50% margins, with other lines in the 30% range depending on volume.
- Cash and capital strategy: The company disclosed a year‑end cash balance of $0.405 million and subsequent capital raising of $1.4 million via a registered direct offering, with the intent to fund growth and potential facility expansion decisions. Forkey reiterated the company’s belief in the attractiveness of the business model and multiple financing avenues to support scaling.

POCI sits at an inflection point where near‑term profitability is contingent on successful ramp execution and platform product monetization. The company disclosed a clear верtical path: (i) stabilize and scale the $9 million single‑use endoscope program toward a projected $3.6 million in FY2025 revenue, (ii) resolve ramp and yield issues across otoscopy and robotic laparoscopy programs, and (iii) monetize the platform product as a scalable, high‑margin development framework. The EBITDA breakeven target around $5.5 million in quarterly revenue provides a tangible milestone for investors, implying that a substantial step‑up in volumes is needed to achieve profitability. Management’s guidance of a Q2 acceleration and a possibility of record quarterly revenues by the end of FY2025 is plausible if the production lines achieve stable yields and if the platform product adoption accelerates as described. However, the stock remains unprofitable on a GAAP basis in the near term, with net losses (~$3.0M for FY2024) and negative free cash flow, while liquidity remains tight post‑year end until the newer financing is deployed. Relative to peers and industry benchmarks, POCI’s gross margins and EBITDA profile are currently weaker than leading medical device manufacturers (for example, ISRG’s gross margins >60%), reflecting its smaller scale, early production ramp, and platform‑driven strategy. Nonetheless, the company’s diversified revenue mix, strong product development capabilities, and the platform concept offer a pathway to higher margins as volumes scale and the development cadence converts to billable baseline designs. In the medium term, the key performance levers are (1) successful ramp of the single‑use endoscope program, (2) improved yields and delivery visibility across production programs, (3) margin uplift from the platform product, and (4) Ross Optical rebound. Investment thesis: Maintain a cautiously constructive stance given the potential for a meaningful topline inflection in Q2 2025 and beyond. A more definitive positive read would require consistent quarterly revenue runs approaching the $5.5 million EBITDA breakeven threshold, visible margin improvements on a multiquarter basis, and evidence that platform product adoption translates into higher mix and sustainable profitability. In the meantime, investors should monitor program execution, platform product rollout milestones, and liquidity events that fund the transition to scale.