Precision Optics (NASDAQ: POCI) reported fiscal Q4 2026 revenue of $8.77 million, up 41.9% from $6.18 million a year earlier, while diluted EPS was $(0.01), compared with $(0.18). Record production revenue and a higher gross margin narrowed the GAAP net loss to $0.10 million and produced a second consecutive quarter of positive adjusted EBITDA.

Core Financial Results

Production revenue grew faster than total revenue, rising approximately 57% to $8.0 million. Combined with gross margin expansion to 25.3% from 13.0%, this lifted quarterly gross profit to $2.22 million even as operating expenses increased by approximately 8%.

The higher gross profit absorbed nearly all operating expenses, reducing the operating loss to $0.11 million from $1.36 million. Adjusted EBITDA, which excludes items including stock-based compensation, depreciation, interest and taxes, improved to positive $0.35 million.

The fourth-quarter results were unaudited. Adjusted EBITDA is a non-GAAP measure and should be considered alongside the company’s GAAP net loss.

Business and Program Performance

Production revenue reached a quarterly record of $8.0 million, up from $5.1 million in the prior-year quarter and $7.6 million sequentially. Precision Optics cited record quarterly revenue from an existing top-tier aerospace customer and continued production of its single-use cystoscopy surgery system.

The company also continued ramping production under a previously announced $3.5 million follow-on order for a single-use ophthalmic program. Additional activity included a $1.3 million follow-on production order from a large defense company and an initial engineering order from a U.S. space technology company. These orders support the pipeline, but the company did not quantify their contributions to Q4 revenue.

Profitability, Cash Flow and the Balance Sheet

For the full fiscal year, revenue increased 65% to $31.53 million, while the net loss narrowed to $3.63 million from $5.78 million. Full-year adjusted EBITDA remained negative at $(2.09) million, improving from $(3.73) million. However, the annual gross margin declined slightly to 17.2% from 17.8%, meaning the stronger Q4 margin was not representative of the entire year.

Fiscal-year operating cash outflow improved to $1.55 million from $3.40 million. Cash and cash equivalents nevertheless increased to $9.84 million from $1.77 million, primarily because Precision Optics received $10.63 million of net proceeds from a public stock offering. The cash increase therefore came from financing rather than internally generated cash flow.

Long-term debt, including current maturities, declined to approximately $1.29 million from $1.87 million. At the same time, shares outstanding increased to 10.97 million from 7.71 million, reflecting the equity financing and other share issuances during the year.

FY2027 Guidance

Precision Optics expects FY2027 revenue to remain close to FY2026 levels because of a temporary production pause by an existing satellite customer. Growth in single-use medical devices, renewed defense production, programs moving into production and new engineering work is expected to partly offset that reduction.

The $31.5 million midpoint of the revenue range is approximately equal to FY2026 revenue. Management expects a stronger second half based on its assumption that orders from the existing satellite customer will resume.

Although the adjusted EBITDA outlook indicates further progress, it still calls for a full-year loss on this non-GAAP measure. The company did not provide corresponding GAAP net income guidance.

Management’s View

CEO Joe Forkey described rebuilding the product development pipeline as a priority. Precision Optics has appointed Peter Thier as senior vice president of sales and marketing and received an initial engineering order from a second satellite customer, though management emphasized that the relationship remains at an early stage.

Management plans to continue investing in capabilities, capacity and market penetration. Its expectation of returning to record quarterly revenue levels during the second half of FY2027 depends in part on the existing satellite customer resuming orders.

Risks Investors Should Monitor

• Satellite customer order timing: The temporary pause is significant enough to keep FY2027 revenue guidance near the FY2026 level. A delayed resumption would place additional pressure on the second-half outlook.
• Execution across offsetting programs: Medical-device growth, renewed defense production and programs transitioning into production must collectively offset lower satellite demand. The company has not quantified the expected contribution from each source.
• Profitability remains incomplete: Q4 adjusted EBITDA was positive, but FY2026 adjusted EBITDA and GAAP net income remained negative. FY2027 guidance also anticipates an adjusted EBITDA loss.
• Dependence on external financing: Operating activities used cash during FY2026, while the improvement in the cash balance was mainly funded by a public stock offering that increased the outstanding share count.

Summary

Precision Optics ended FY2026 with record quarterly revenue, sharply improved gross margin and near-breakeven GAAP results as production volume increased. The main question for FY2027 is whether expanding medical and defense programs can bridge the temporary satellite-demand gap until expected orders resume, while the company continues working toward sustainable positive EBITDA and operating cash flow.

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