Executive Summary
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.
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: $4.5269m, YoY -9.90%, QoQ +7.86%
Gross Profit: $1.0699m, Gross Margin 23.64%, YoY -39.18%, QoQ -4.24%
Operating Income: $-0.9100m, Operating Margin -20.10%, YoY -48.08%, QoQ +27.02%
EBITDA: $-0.8608m, EBITDA Margin -19.02%
Net Income: $-0.9697m, Net Margin -21.42%, YoY -908.77%, QoQ +26.05%
EPS (diluted): -$0.15, YoY -787.57%, QoQ +28.57%
Cash Flow: Operating cash flow $-0.7868m; Capex $-0.0319m; Free cash flow $-0.8188m
Cash and equivalents: $0.212m at period-end
Balance Sheet: Total ...
Financial Highlights
Revenue: $4.5269m, YoY -9.90%, QoQ +7.86%
Gross Profit: $1.0699m, Gross Margin 23.64%, YoY -39.18%, QoQ -4.24%
Operating Income: $-0.9100m, Operating Margin -20.10%, YoY -48.08%, QoQ +27.02%
EBITDA: $-0.8608m, EBITDA Margin -19.02%
Net Income: $-0.9697m, Net Margin -21.42%, YoY -908.77%, QoQ +26.05%
EPS (diluted): -$0.15, YoY -787.57%, QoQ +28.57%
Cash Flow: Operating cash flow $-0.7868m; Capex $-0.0319m; Free cash flow $-0.8188m
Cash and equivalents: $0.212m at period-end
Balance Sheet: Total assets $17.51m; Total liabilities $8.03m; Total equity $9.48m; Current ratio 1.22; Quick ratio 0.62; Cash ratio 0.033; Net debt ~$2.88m; Goodwill $8.82m; Intangibles $0.29m; Inventory $3.85m; Net receivables $3.51m
Key ratios: Debt to equity 0.156x; Debt to capitalization 13.5%; Interest coverage ~15.25x; Asset turnover 0.26x; Inventory turnover 0.90x; DSO 69.7 days; CCC ~99 days
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
$-0.17
freeCashFlowPerShare
$-0.18
Management Commentary
Note: No earnings-call transcript was provided in the dataset. As a result, there are no management quotes to quote directly. The analysis integrates the reported results with typical strategic themes observed in the sector. Investors should seek the official transcript for authoritative management commentary on strategy, execution, and outlook.
Themes to monitor if a transcript is released: (1) Revenue recovery signals tied to hospital capex cycles and endoscopy/imaging product adoption; (2) Margin-recovery plans including product mix optimization and fixed-cost leverage; (3) R&D prioritization and potential product introductions in micro-imaging and 3D endoscopy; (4) Capital allocation decisions including potential debt reduction, working-capital efficiency, and any equity issuance.
Forward Guidance
There is no explicit formal guidance for the remainder of 2025 in the provided data. Given the revenue contraction YoY and the ongoing profitability challenges, investors should expect management to focus on stabilizing revenue and reducing the fixed-cost burden. The absence of guidance increases earnings-visibility risk. If management articulates a plan, monitor: (a) expected revenue trajectory by key product lines (endoscopes, micro-imaging, 3D endoscopes), (b) milestones for cost-control initiatives, (c) anticipated capital expenditures for capability expansion, and (d) potential milestones in new customer wins or contract manufacturing opportunities. Industry trends to monitor include hospital capex cycles, favorable pricing for specialized optics, and regulatory considerations affecting medical-imaging components. Achievability hinges on revenue stabilization and the ability to reduce operating expenses relative to sales without compromising R&D and product development.