Precision Optics Records First Positive EBITDA — But the Aerospace Tap Is Turning

A record quarter and a 20-point gross margin swing mark the inflection; the near-term ceiling is now set by a customer's own bottlenecks.

POCI · Earnings Call · 2026-05-13

The Turn: From 3% to 24% Gross Margin

For two years, Precision Optics (POCI) has been a story about promise: record backlogs, a new operations team, expanding cleanrooms, and yields that were chronically disappointing. On the fiscal Q3 2026 call (period ended March 31, 2026), the promise finally landed. “Revenue was $8.7 million, a new quarterly record for Precision Optics and more than double the quarterly revenue of a year ago. More importantly, we achieved positive adjusted EBITDA, a major milestone.” — Joseph Forkey, Chief Executive Officer · 2026-05-13 Adjusted EBITDA came in at approximately $300,000 — versus negative $1.3 million a year ago — and net loss collapsed to $108,000 from $2.1 million. The operating mechanics are the real news. Gross margin swung from a bleak 2.8% in fiscal Q2 to 23.6% in Q3, a 20-point move in 90 days. The 23.6% gross margin stands against 10% a year ago and was driven by aerospace yields hitting 97% and single-use cystoscope yields climbing above 90%. The improvement is attributed to COO Joe Traut and the production team's focus on core production programs — the two flagship lines alone contributed nearly $5.8 million of the quarter's revenue. Quarterly revenue of $8.7 million was up 108% year over year.

The Aerospace Caveat and a Quiet Model Shift

The caveat, disclosed for the first time, is that the very engine of this growth will idle for two quarters.

We've heard from our customer that they take the assembly that we make and then they combine it with components from many other suppliers and build it into satellites. And that process of combining it and building it into satellites is running slower than they anticipated... we see this as a bit of a blip and not a long-term issue.
Joseph Forkey, Chief Executive Officer · 2026-05-13

Management expects the aerospace program to pull back 15-20% in fiscal Q1 and Q2 2027 before new orders resume. Last quarter, the same program was the upside driver: “It's really the 2 big production programs. It's the aerospace program and the single-use cystoscope... both of them are really coming in at a higher level than we had originally anticipated, which is great news.” — Joseph Forkey · 2026-02-17 The reversal is a reminder that POC's fate is tied to customers' own supply chains, not just its own yields. Meanwhile, the single-use cystoscope is quietly evolving from a production contract into a licensing business. In Q&A, CEO Joe Forkey explained the customer has funded a second line within POC's own facility and asked POC to build a third line inside the customer's facility — where POC will collect a royalty. “For the units that they build in their facility, we'll collect a royalty... we benefit financially when we're either building things in our facility or when they're building things in their facility.” — Joseph Forkey, Chief Executive Officer · 2026-05-13 This is the maturation of a clause first flagged a year ago; back in May 2025 Forkey described the same mechanism: “There is a mechanism where they can manufacture themselves or have a second supplier, and we're paid a royalty as part of the agreement we have with them.” — Joe Forkey, Chief Executive Officer · 2025-05-15 The difference now is that the clause is being invoked — shifting economics from manufacturing margin to recurring royalty income.

Reframed Markets and the Inflection Test

The company is also reframing its go-to-market. satellite communications is now tracked as a market distinct from defense/aerospace, and management is investing in capabilities to become "the leading production company in micro-optics" — quality assurance, manufacturing engineering, and supply chain management. The Unity program, the modular imaging platform launched 15 months ago, has one engineering-pipeline customer but "discussions with 4 additional sales prospects today." Unity is meant to shorten the path from R&D to production, a claim management has made repeatedly: “Generally speaking, we expect that it will accelerate the timeline by 6 to 12 months.” — Joe Forkey, Chief Executive Officer · 2025-05-15 Asked about the hockey stick, Forkey demurred: “I'm not going to predict when the hockey stick will come. We're focused on continuing to drive programs into the engineering pipeline.” — Joseph Forkey, Chief Executive Officer · 2026-05-13 The market has tempered its enthusiasm: the stock is up roughly 9% over the last 90 days but sits 23% below its mid-June high near $5.96, having given back much of the post-earnings pop. The balance sheet, at least, is no longer a constraint. The oversubscribed $10 million public offering left the company with $10.7 million in cash and bank debt at just $1.5 million. Management raised full-year revenue guidance to $29-31 million (52-62% growth) and trimmed the adjusted EBITDA loss range. The quarter is best read as an inflection point, not a finish line. On one hand, the company has proven it can convert record production volume into gross margin and bottom-line improvement — the breakeven milestone that prior calls had been waiting for. On the other, the aerospace pullback and a flat-to-tapering Q4 mean the next two quarters will test whether POC's primary markets — medical device, defense/aerospace, and the newly distinct satellite communications — can offset a temporary 15-20% hole in the largest program. With 5-6 new programs slated to move from development to production in fiscal 2027 and gross margin still well below its 37% peak in 2023, the structural case is intact. The near-term tape, however, will be decided by whether "a bit of a blip" turns out to be exactly that.