Precision Optics at Planet MicroCap: Growth and New Horizons

On Wednesday, 23 April 2025, Precision Optics Corporation (NASDAQ:POCI) presented at the Planet MicroCap Showcase: VEGAS 2025. CEO Joe Forkey outlined strategic developments, highlighting both challenges and growth prospects. While the company faces a temporary revenue plateau, new programs are set to drive future growth. Precision Optics is leveraging its proprietary technology to secure a competitive edge in medical devices and defense aerospace.

Key Takeaways

• Precision Optics is at an inflection point with two major programs entering production.
• Fiscal year 2025 revenue is expected to remain flat, but new programs promise growth.
• The Unity platform aims to standardize designs, reduce costs, and accelerate development.
• Recent $5 million equity financing supports facility expansions and increased production.
• Single-use endoscopy market growth is outpacing traditional endoscopy, offering significant opportunities.

Financial Results

• Revenue for fiscal year 2025 is projected to be flat compared to 2024.
• Two new programs in production are expected to generate $10 million annually.
• The company reported a $6.6 million backlog in aerospace orders.
• Target gross margin is approximately 40%, though recent investments have impacted margins.
• Precision Optics recently secured $5 million in equity financing.

Operational Updates

• Specializes in micro optics, 3D imaging, and digital imaging technologies.
• Medical devices account for 65% of revenue; defense aerospace contributes 25%.
• The Unity platform standardizes design components, enhancing efficiency.
• Manufacturing capabilities are expanding, with plans to double and triple production rates.
• Facility expansions are underway to support increased production demands.

Future Outlook

• The goal is to have two to three programs enter production annually.
• The Unity platform is expected to expand the development pipeline.
• Continued investment in R&D to maintain technological leadership.
• Exploration of strategic partnerships and acquisitions remains a priority.

Q&A Highlights

• Precision Optics sees limited competition in producing 50 micron right angle prisms.
• Single-use endoscopy is growing at a 15% to 20% CAGR, compared to 5% to 7% for general endoscopy.
• Recent financing and contracts are expected to comfortably push the company beyond breakeven.

For a detailed account, readers are encouraged to refer to the full transcript provided below.

Full transcript - Planet MicroCap Showcase: VEGAS 2025:

Robert: Alright. We’re gonna go ahead and get started with the next presentation here. We have Precision Optics Corporation, ticker symbol of POCI on the NASDAQ. And presenting from the company is the chief executive officer, doctor Joe Forkey. Joe?

Joe Forkey, Chief Executive Officer, Precision Optics Corporation: Thanks, Robert. Thank you all for sticking around. I know it’s getting late in the day, especially for anyone from the East Coast like myself. So I appreciate you all saying, to hear about our company Precision Optics Corporation. As the name implies, we are a technology company that deals with optics technology.

We have some proprietary technology in the areas of micro optics and imaging technologies. I’ll talk a little bit more about that in a minute. And the main markets that we work in are medical device and defence aerospace. Our business model is is pretty straightforward. So we we’re a technology company, as I say.

We have some, unique can

Robert: you see that?

Joe Forkey, Chief Executive Officer, Precision Optics Corporation: So we have some, unique IP that we’ve developed over the years, and we talk with our customers about what that IP can do for them. And so, basically, we we work with our customers, and we we talk to them about our our technology. We show them prototypes and demos. And if they agree and we agree that our technology can enable their product that they need for their next generation procedure, then we work together with them, and, we work on a time and materials basis to develop a specific product that embodies our technology. So I like to say we take our technology and we turn it into the size, shape and color that our customer needs for their particular product.

Because we’re enabling their product, once the product is developed, we’ve gone through prototypes, they’ve done their testing, the FDA has approved it, then we move the product into production and we’re the ones who do the manufacturing. And so the business model is pretty straightforward. We get paid for the product development, but really what we want to do is use this product development process and our IP as the engine that drives more and more programs into manufacturing. Medical device products and defense aerospace products, once they get into production, tend to have a long lifetime. So as we as we throw more and more products into manufacturing, we expect to see the company grow in revenue and the company to grow in general.

We’re at a point right now, at an inflection point, where we’re starting to see an enough of our programs that have been coming through the product development pipeline go into manufacturing. And in particular, I’ll talk about this later, there are two programs in particular that went into production in the last six to twelve months that are that are much larger than the programs that we’ve had previously. And these, we believe, will bring us beyond breakeven and and basically round out the the business model and get the manufacturing going in a way that gets us beyond breakeven. This is our revenue ramp over the last almost ten years now. You can see we’ve had a a nice ramp here.

Most of this was organic growth. We had a couple of small acquisitions, to continue to add to the technology base of the company. You see that, with the fiscal year end in June, fiscal ’20 ’3 to ’20 ’4, we had a little bit of a pullback. These were a couple of legacy programs from some of the acquisitions that we made, that that came to end of life. This year, which is fiscal twenty five, which will end this June, will be about flat compared to fiscal twenty four.

But with these new programs that have gone into production, we expect that the upcoming year and in fact this this quarter that we’re in right now will turn the corner and will get us, to much higher revenue and continue this overall growth of increasing revenue. Importantly, if you look at this slide, we’ve broken the revenue down into production, which is the blue part, and, engineering or our product development pipeline, which is really that pump that’s driving more programs into production. Importantly, even though the overall revenue sort of flattened out, the engineering revenue continued to grow, and it’s really this engineering work, this product development work here that has given rise to these new programs that are now going into production and starting to ramp and are the programs that are going to help us to continue this overall trend of increasing revenue. So the technologies that we work in are all in optics. Optics, of course, is a very broad discipline, so there are a couple of very specific areas that we work in.

The first is micro optics so we make some of the smallest optics in the world. We make lenses and prisms that are as small as 50 microns that’s about the width of a human hair. We can also make some of the world’s smallest cameras. This is an example of a camera that’s about a millimeter in size and these are small enough to go to places in the body that you just couldn’t go without this kind of technology. The second area that we’re focused on is three d imaging, and more generally I would say very high resolution imaging that can enable next generation, medical procedures.

So three d imaging in particular is used for robotic surgery. We did the very first three d endoscope for the very first really successful robotic company, which is Intuitive Surgical, back almost, twenty five years ago, and we’ve continued to develop that technology. This is really, quite relevant for robotic, surgery, which is an area that’s growing, quite aggressively. And then the third area that we focus on is digital imaging. This is a little bit broader.

This is basically, developing technology that allows us to use small CMOS sensors. These are the electronic, imagers that are that are in cell phones and that are in, laptops and such, And we’ve been working, mainly with a company called Omnivision to be able to transition that technology so that we can use it mainly in medical device applications, especially when we combine the digital imaging with micro optics, we can make very, very small endoscopes. So medical device is the main market that we apply our technology to. This is about 65% on a revenue basis of the work that we do. The three areas here I already mentioned that three d endoscopes are used for robotic surgery.

Micro precision optics, as I said, allows us to make very, very small endoscopes. We can make endoscopes that are as small as a few hundred microns, so, this allows us to work in disciplines where the incision size or the natural orifice in the body is very, very small, and these are places where having a smaller incision isn’t just nice to have. It really enables the procedure. So you can think about places in the body where the access is very limited, this means that we work a lot in places like cardiac, spine, we have one endoscope that can go through a blood vessel up into the heart so that the surgeon can watch the inside wall of the beating heart while they’re doing cardiac ablation, right? We do a lot with ophthalmology, we do a lot with otoscopy, ear, nose and throat in general, cystoscopy, urology those kinds of procedures are places where our micro optics technology, is very, very critical.

The third area in digital imaging really allows us to build full entire medical device systems so we can build systems that not only can collect the light and form the images optically, but then can convert those images into electronic form and then can process those images in the way that the surgeon needs to be able to see it, on the screen. So, this is really a revolution in endoscopy to be able to use CMOS sensors. In particular, this allows us to reduce the price and increase the performance so that we can get to price points that allow for single use endoscopes. Single use endoscopes have huge advantages. The main one is that it has a big advantage from a safety standpoint for patients.

You don’t have to worry anymore about re sterilizing endoscopes and using the same endoscope on one patient than the next patient and the next patient, so this virtually eliminates the possibility of cross contamination. There’s been a huge push in the industry to move into this direction. The FDA has been very interested in it, and this, area is now really taking off with growth rates that are two to three times the rate of minimally invasive surgery, in general. It turns out that that single use endoscopes also have big benefits for the hospitals who are better able to manage their endoscope inventory they just look at it like a scalpel and to surgeons who get a brand new image every time they open up a new scope. So single use endoscopes is a big area of growth for us.

The second area that we work in is defense aerospace. This represents about 25% of our revenue these days. Defense aerospace is an area that really customers found us. They saw what we were doing at some of the optic shows and so they approached us and and we found a number of programs that have been very successful here. We are looking at ways that we can expand our marketing, resources now that we’re growing a little bit and getting beyond breakeven, so we’ve started looking at specific areas within the broad market of defense aerospace.

The first area is with satellite communications. So, there are a number of companies that are building satellite networks and the satellite to satellite communication is almost always done with laser comms and so being able to direct the laser communication, the laser beam from one satellite to another that’s a hundred or a thousand miles away requires very, high precision and this turns out to be very similar to the things that we have to do to align micro optics. So that’s the first area, satellite communication. Drones of course use lots and lots of optics and as you get to smaller and smaller sized drones, the smaller optics are lower weight and therefore have benefits for these kinds of systems. And then the third area is with, laser weapons, which are actually the counter to the drones, right?

So we can work on both sides of that. It turns out that some of the technology that’s used for laser weapons requires very, very small lenses and so we can provide those to some of the big defense contractors. On the digital imaging side, one of the critical aspects of the team that we’ve assembled that helps us to compete here is that we have the technical disciplines that allow us to design the entire image train from the wall plug on the front end to the illumination to the optical forming of the image to the conversion of that image into electronics and then the electronics that do the image signal processing to create the image that shows on the screen. Being able to do the entire thing from the beginning to the end is a huge benefit to our customer because they have one supplier that’s responsible for the entire image train and that has huge benefits. One of the things that we’ve done just recently in the last few months is we have launched a new, approach to, bringing our technology to the market.

So I told you back in the beginning that the business model is for us to show our proprietary technology to our customers and if they and we agree that that technology can be turned into a product for them, then we’ll move forward. What we’ve done, what we recognize is that over the years we have developed many products and what we’ve determined is that 60% to 70% or 80% of every product that we design with our IP has very similar designs. And so while we have to design every product to be custom for our customers, we can now start with a baseline design that’s based on all the programs that we’ve already worked on that gives us a big head start on being able to develop the next product for the next customer. And so we call this our Unity platform. It has a number of benefits for the customer.

The first one is that because we’re already starting with a baseline design, we can finish the design even though we’re doing some custom pieces much faster. So the time to market is much faster. That’s a benefit for our customer and a benefit for us. The second piece is that because we’re not starting the design from scratch, we can do it more effectively and so the cost is lower. We can split that cost benefit with our customer and keep some for POC.

And then the third piece is that because we are taking core components to the design that have been in other designs that have gone through regulatory testing and FDA compliance requirements, the likelihood that the new product, which is going to have some of these same design elements, will pass those regulatory tests is much higher than if we were starting with a brand new design from the ground up and so it derisks the project. So for all of these reasons, our customers are very interested in this. As I said, we we launched this, just a few months ago, the January, beginning of February, and the response has been quite positive. So we expect that that the Unity platform is going to help us to continue to populate that product development pipeline and even accelerate the rate at which we can get new customers in there, which helps in the overall business model to bring more programs into production. I mentioned just a minute ago that we’re what I would call horizontally integrated.

We’re integrated in terms of the technology that we provide in order to be able to provide the whole solution to our customer. We’re also integrated from the standpoint of going from the design all the way through to mass manufacture and this is really critical because what it means is that the team that’s going to be manufacturing the product is sitting next to the team that’s doing the design. So when our designers are designing for manufacture, people who are going to have to manufacture it are sitting right there. It’s also a big benefit for our customer because they come to us at the beginning of the program when they’re really conceiving their product and they know that they have a partner that will take them all the way through to manufacture when they get into the market. This this slide I really like, for for shareholders and investors who have been watching our our company for a while.

We’ve been we’ve been showing this pipeline, slide for a number of years now and if we whoops if we looked at this a year ago, all of these bars which are which are showing the the progress of each one of these programs that’s in the product development pipeline, all of these bars would have been, you know, sitting back a little ways. And the number of programs that are out here in production would have been half as many as there are today. So, we love to see these programs all moving forward, we love to have more programs here in production and as I alluded to earlier, were these two programs in particular, one of which went into production, just about, nine months ago and the second of which has been in production for about a year but now has accelerated fairly substantially. So bringing these programs into production, particularly these two on the top and having these other programs continuing to move forward, are all driving us towards that final piece of our business model which is putting projects into production. These are the two programs that I’ve mentioned a couple of times now.

I’m not going to go through in detail because we have a whole bunch of press releases on these, but suffice it to say they have, significant, dollar volumes for us and importantly, they they have allowed us to build a backlog that’s much larger than any backlog we’ve had in the past. So these two programs in particular have backlogs that will last well over twelve months. The two of them together represent manufacturing of about $10,000,000 a year and most of that is on top of the revenue that we had from these customers in previous years. So this is going to drive our overall revenue quite substantially. The go forward strategy is pretty straightforward, I’ve already talked a lot about these two recent large programs.

We announced just a few weeks ago that we’ve doubled the production rate for both of these and one of them we’re working towards tripling the rate, that we’ve been producing at over the last few months. We’ll continue to advance other pipeline projects into commercialization. Our goal is to have two to three programs go into production every year. We’ll expand the pipeline and the Unity, platform project we expect is going to help us to bring new programs into the pipeline and even build the overall size of the pipeline as we move forward. Obviously as a technology company, we continue to invest in R and D to stay ahead of, the current technology and to continue to push on the cutting edge of what’s possible.

We have invested over the last couple of years in sales marketing as well as engineering and we have some plans. In fact, we’ve started talking publicly about our plans to expand and update our facilities due to the the needs that are that are coming out of the expansion of production and the expansion of the of the business in general. And then finally, we didn’t talk about it today, but we we have made a couple of acquisitions over the last five or six years. The optics industry is is pretty highly fragmented. We think that there are other opportunities out there, so when we find opportunities, we’ll continue to look at places where we can generate strategic partnerships or strategic acquisitions.

Very quickly on the financials, so we already talked about the revenue, growing quite nicely and then leveling off last year, but again with these new programs, we expect this overall trend to continue. Gross margins you see have been up and down over the last few years. Our target gross margin is about 40%, and we we expect we’ll be able to get there with more, of these programs going into production and absorbing more of the overhead costs. The the the margins have been lower in fiscal twenty four and they’ve been lower this year in fiscal twenty four twenty five mainly because we’ve been investing, in the resources that we need to expand the production and because we’ve had the standard, issues when you start a production line from scratch and you start ramping very quickly, right? But we expect that we’re we’re pretty well through those and and that we’ll see an increase in the gross margins, going forward.

Adjusted EBITDA is exactly the same story as gross margins, right? So, we were about breakeven, we broke through to positive adjusted EBITDA and then we’ve been making some investments again because we saw the growth of the company coming. The balance sheet is here. The one point I want to point out here is that we did, do a financing just a few months ago. We closed on about $5,000,000, in financing.

It was a straight equity deal and it was supported by most of our existing shareholders, so we didn’t have to go outside. We have a great group of long standing supportive shareholders who understand what we’re doing and are very supportive of the of the path that we’re taking. And with that, I will stop and take any questions.

Robert: Any quest questions from the audience? Alright. Go ahead.

Joe Forkey, Chief Executive Officer, Precision Optics Corporation: So it really is the technology, but with a little caveat to that. There are some aspects to our supply chain that we have developed as we’ve developed the technology because there are natural partners for some of the technology that we have developed that are associated with adjacent technologies that are necessary in order to build an entire product. So here I can be very specific. Omnivision is one of the largest CMOS manufacturers in the world and we started partnering with them about ten years ago and we have a preferred relationship with them. They generally won’t talk to a company that’s trying to develop a product, unless they’re a very large company, But because we’ve developed this relationship with them over ten years and they see us as a bit of an integrator because we have we have many companies who come to us in order to take their CMOS sensors, combine them with our optics and build them into products.

So the relationship that we have with them, the ability that we have to bring them to these projects is part of a supply chain aspect as you’re referring to that is beneficial. All of that though derives from the unique technology, particularly with the micro optics digital imaging, in order to be able to develop the products. They have. Yeah. So so there are, but none of them that I know of can make a 50 micron right angle prism.

That’s I mean, that’s that’s really the key. And it’s not just being able to make the components, it’s being able to design a system around those things because the intuition of how you deal with a really, really small optic is very different than the intuition of how you can handle a much larger optic. In fact, many times we’ll have customers come to us and say, we have this great design that we had this contract designer make for us and on the screen it looks really nice, but then when you show them the size of the parts and that you can’t work with them unless you get under a microscope, everything changes and we have to do a redesign because the the the way that you deal with those micro optics is very different.

Robert: Additional questions? No.

Joe Forkey, Chief Executive Officer, Precision Optics Corporation: Mhmm. Yeah. No. No. I get I get the question.

So so let me let me put it in in context this way. We had done a number of rounds of financing for a million dollars or a million and a half dollars. This time we came back to to our shareholders and and to potential investors and said we want to raise a more significant amount of money for us because we need money for the working capital and we need money for facilities expansion and we expect that this round of financing will get us through both of those things which will get us comfortably beyond breakeven.

Robert: Additional questions? Otherwise, yep, go ahead.

Joe Forkey, Chief Executive Officer, Precision Optics Corporation: It’s already happening. Yeah, so just to give you a little history, there have been groups that have been trying to get single use endoscopy going for twenty, thirty years, and we were involved in some of the earlier program. We looked at some of the earlier programs twenty years ago and past because we didn’t think it was ready. It’s really the advent of CMOS technology that can get the CMOS sensor at the distal end of the scope that reduces the overall cost significantly and then beyond that, we we saw this coming ten years ago, which is why we started working with Omnivision, the thing that really broke it loose is when Boston Scientific did their first single use product and showed that it was commercially viable and demonstrated to the hospitals and to the surgeons that the product would work not only as good as the products that they were already using but better because the CMOS performance actually ends up being better. So the growth rate of single use endoscopy today is something like fifteen to twenty percent CAGR, whereas endoscopy in general is more like five to seven.

And this is why, so that one of our big projects, the cystoscopy project, is a single use product, and we see more and more of that happening, and I think we’re very well positioned to be able to capitalize on it.

Robert: George, just real quick on the, the new aerospace order. Talk about sort of the ramp, how that’s sort of expected to progress here. Again, you have a junior end, right, so we’re sort of just finishing up or just finished up Q3 here, getting into Q4. Talk about what you see the ramp in the, the aerospace and and how that impacts your ability to get to breakeven.

Joe Forkey, Chief Executive Officer, Precision Optics Corporation: Yeah, sure. So this aerospace project we’ve actually been working on for about a year and a half. We’ve been in production for a little over a year. The thing that we just announced recently is that this customer this is a giant customer everyone would know their name, if I said it, they don’t let us say it, but but we finally finished the negotiation that had been going on for almost a year on a master services agreement, which is an indication that they they expect to have a long term relationship with us. The, the agreement included some commitments for $4,000,000 a year at least in revenue, and what we announced just a few weeks ago is that we have a 6.5, six point six million dollar backlog, which we expect to be able to build out over the next twelve months.

So compare that to, production run rates in the last couple of quarters, which are one half to one third of what that is, and so that that gives you an idea of the kind of acceleration. We also talked about the fact that we just recently doubled the clean room space in order to be able to double the rate at which we, at which we, produce that. And so this and the other Cystoscope project are really the the programs that are going to push us over breakeven. Gotcha.

Robert: That’s it. Alright. We’re good. On time. Thank you very much, everyone.

Take care.

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