POCI

Good day. Welcome to the Precision Optics third quarter fiscal year 2026 financial results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal the conference specialist by pressing the star key followed by zero. After today's presentation, there'll be an opportunity to ask questions. To ask a question, you may press the star key, then one on your telephone keypad. To withdraw your question, please press the star key, then two. Please note, this event is being recorded. I would now like to hand the conference over to Mr. Robert Blum with Lytham Partners. Please go ahead.

All right. Thank you, Darcy, thank you to everyone joining the call today. As the operator mentioned, on today's call, we will discuss Precision Optics third quarter fiscal year 2026 financial results, and it's for the period ended March 31, 2026. With us on the call representing the company today are Dr. Joe Forkey, Precision Optics Chief Executive Officer, and Wayne M. Coll, the company's Chief Financial Officer. At the conclusion of today's prepared remarks, we'll open the call for a question-and-answer session. Again, if you dialed in through the traditional teleconference line, as the operator indicated, please press star then one to ask a question. If you are listening through the webcast portal and would like to ask a question, you can submit your question through the Ask a Question feature in the webcast player.

Before I begin with prepared remarks, we submit for the record the following statement. Statements made by the management team of Precision Optics during the course of this conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended, and such forward-looking statements are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements describe future expectations, plans, results, or strategies and are generally preceded by words such as may, future, plan or planned, will or should, expected, anticipates, draft, eventually, or projected.

Listeners are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements, including the risks that actual results may differ materially from those projected in the forward-looking statements as a result of various factors and other risks identified in the company's filings with the Securities and Exchange Commission. All forward-looking statements contained during this conference call speak only as of the date in which they were made and are based on management's assumptions and estimates as of such date. The company does not undertake any obligation to publicly update any forward-looking statements, whether as a result of the receipt of new information, the occurrence of future events, or otherwise. With that said, let me turn the call over to Dr. Joe Forkey, Chief Executive Officer, Precision Optics.

Joe, please proceed.

Thank you, Robert, and thank you all for joining our call today. Last quarter, we said Precision Optics had strong production demand but was still working through the challenges of scaling a much larger manufacturing business. In the third quarter, revenue continued to grow, and we began to see the payoff of the investments we've made in the last few quarters, improving manufacturing processes and efficiency. 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 that reflects both the strength of our core production programs and the manufacturing improvements we've made over the last several quarters. Our two largest production programs continue to drive the business.

Revenue from our top-tier aerospace customer reached $3.6 million, a new record, representing 44% sequential growth. This was the result of our investment in production capacity now achieving improved efficiency. Production yields on this line have now increased to 97% consistently, a significant improvement from previous months that were typically in the 85%-95% range. Our customer has faced bottlenecks elsewhere in their deployment process, they have asked us to slow production against our existing backlog in Q1 and Q2 of fiscal 2027, with new orders expected for Q3. All indications are that we continue to be the sole source for this assembly and that the long-term prospects for this program remain extremely high.

Our single-use cystoscope program also contributed record revenue at $2.2 million in the third quarter, an all-time high, and representing approximately 10% sequential growth. More importantly, we have made dramatic progress in terms of production yields and costs. Here too, yields have increased to current rates above 90%, but not yet to the targeted 95% level, which we expect to achieve in Q4. Beyond those two lead programs, we continue to advance newer programs, including our single-use ophthalmic endoscope program, supported by a $3.5 million follow-on production order that we just announced last week. Our Ross Optical division also contributed significantly to the quarter's improved bottom line. Revenue for Ross Optical was approximately $1.3 million compared to $1.0 million in Q2 and $0.8 million a year ago, representing 65% year-over-year growth.

This is important because this business can support higher revenue without a proportional increase in headcount or other fixed costs, so incremental revenue contributes meaningfully to gross profit and adjusted EBITDA. As a result of revenue growth and production improvements, our overall growth margin improved to 24% compared to 10% a year ago and 3% in Q2. While we still have work to do, the quarter showed that our operational improvements are beginning to translate into stronger financial performance as our production lines become more stable and the higher revenue levels leverage the manufacturing infrastructure we've built over recent quarters. The process and personnel updates that have driven the results are directly attributable to the change we made in our operating leadership, bringing on Joseph Traut as Chief Operating Officer in October of last year.

Joe has rebuilt the operations team, making changes where needed and empowering others to act with urgency to deliver more product with greatly improved efficiency. Joe and his team have made great progress in six months. I am confident we are seeing just the beginning of what they can accomplish going forward. We also strengthened our balance sheet in March through an oversubscribed $10 million public offering led by existing and new investors and including participation from directors and officers. This capital supports our growth plans. I want to thank all of our investors for their support. Given the strength of our results and our visibility into the remainder of the fiscal year, we are increasing fiscal 2026 revenue guidance to a range of $29 million-$31 million compared to our previous guidance of $26 million-$28 million.

This represents 52%-62% growth over fiscal 2025 revenue of $19.1 million. We are also increasing fiscal 2026 adjusted EBITDA guidance to a range of -$2.5 million to -$2.7 million compared to our previous guidance of -$2.5 million to -$3.0 million. This translates into another quarter of roughly break-even adjusted EBITDA in Q4. For comparison, adjusted EBITDA was -$3.7 million in fiscal 2025 and -$2.7 million in the first six months of the current fiscal year. As we look forward to Q4 and into fiscal 2027, we anticipate continued strong performance from our lead aerospace and cystoscopy production lines, along with our quickly ramping single-use ophthalmic endoscope line.

With the highest backlog in many quarters, we believe that the recent increases in Ross Optical revenues are sustainable and will continue to contribute to positive margins and bottom-line profitability going forward. In addition to the continuation of these strong revenue-producing programs, we expect as many as five to six programs in the development pipeline to move to production in fiscal 2027. Three of these are scheduled to enter production over the next six months. A low-volume single-use device for small joint arthroscopy, an upper GI scope, and a robotic surgery articulating rigid scope. While there are always timeline, yield, and efficiency challenges when development programs are transitioning to production, our new operations team is deeply experienced and already working closely with the production and product development teams to ensure a smooth transfer and efficient drive to profitable volume production.

This was a fantastic quarter for POC. We believe it's just the beginning of leveraging our improved operational infrastructure. With high revenue supported by our existing programs, new programs entering production today, and new production slated for the next six to 12 months, along with a strong outlook for Ross Optical revenue and high variable margins, we believe the recent positive trends will continue to drive growing profitability. In light of our operating performance and growing confidence in our production capabilities, which contributed to our successful capital raise, we are thinking about strategic investments in our business in two specific areas. First, we are investing in capabilities required to become the leading production company in micro-optics, including components and systems, especially those that are small and complex.

We have learned through the ramp of the production programs I spoke to before that there are greater requirements to becoming a premier production company than we initially expected. Investments go beyond simply increased production capacity. We require investment in quality assurance, manufacturing engineering, supply chain management, and other functions. We have made several of these out of necessity in recent months and will continue on this path to enhance and stabilize these capabilities to be well prepared for the anticipated ongoing increase in production volumes. Along with this, we continue to evaluate multiple options for potential updates to our manufacturing facilities. Second, we want to grow within the markets we currently serve, all of which continue to exhibit strong growth trajectories able to support the substantial long-term growth of POC. We participate in three primary markets: medical device, defense and aerospace, and satellite communications.

We have previously considered satellite communications as part of aerospace but have begun to treat that segment separately as we work to better understand market drivers and primary participants. Medical device, which remains our largest and most immediate opportunity, continues to move toward minimally invasive procedures, smaller imaging systems, and single-use devices. This aligns directly with our core strengths, particularly in micro-optics and digital imaging. Market data continues to support these observations, with recent reports estimating the disposable income market will grow at a compound annual growth rate of approximately 15%-20% over the next 10 years. This is also where our Unity platform becomes important. Unity was designed to reduce development costs, time to market, and execution risk through a modular imaging architecture that can support reusable and single-use endoscopic systems.

As more customers look to bring advanced imaging products to market efficiently, we believe Unity can enhance our role as a development and production partner and provide a strong competitive advantage. Today, we have one Unity program in our product development pipeline and are in discussions with four additional sales prospects today. The second major market is defense aerospace, which is increasingly driving optical systems to smaller size, weight, and power or SWAP. We believe there are opportunities in a broad range of products from autonomous vehicles to directed energy weapons. Interest in budgets for these types of systems have increased substantially given the wars in Ukraine and Iran. We are adding resources and emphasis here, as evidenced by our recent participation at the SPIE Defense + Commercial Sensing at the National Harbor in Maryland just two weeks ago.

Our recently announced development agreement for a high-end jet engine inspection borescope is a good example of the complex optical opportunities where Precision Optics can be highly competitive. The third market focus is satellite communications and related infrastructure. Current market studies estimate this market to be growing at 15%-25% per year. We see opportunities similar to the program, which is currently our largest revenue generator in both ground-based and space-based systems as satellite networks continue to expand. Across medical device, defense aerospace, and satellite communications, we are finding a common theme that customers need smaller, more precise, higher-performance optical systems. We will be investing in go-to-market resources to expand our presence and customer reach within these sectors, and we will consider add-on capabilities as needed to complement and broaden our current offerings.

Investments will be made with discipline and high expectations of returns, which we think is achievable given current market dynamics. With that overview, let me turn it over to Wayne to review the financials in more detail. Wayne?

Thank you, Joe. Let me expand on some of Joe's comments on the financial results, starting with revenue. For the third quarter, total revenue was $8.7 million compared to $4.2 million in the year-ago third quarter, an increase of $4.5 million or 108%. Revenue was also up compared to $7.4 million in the prior sequential quarter. Breaking it down, production revenue was approximately $7.6 million compared to $3.3 million in the year-ago quarter and $6.4 million in the prior sequential quarter. Product development or engineering revenue was $1.1 million compared to $900,000 in the year-ago quarter and $1 million in the previous quarter.

Our aerospace program contributed $3.6 million in revenue during the quarter, while the single-use cystoscope program contributed $2.2 million in revenue, net of tariffs. Ross Optical revenue was $1.3 million in the quarter compared to $1 million in the sequential second quarter and $800,000 in the year ago third quarter. Both represented quarterly records. As we discussed last quarter, we successfully negotiated agreements with these customers to pass through tariffs without markup. Total revenue net of tariffs would have been $8.3 million. For the quarter, gross margin was 23.6% compared to 10% in the year ago third quarter and 2.8% in the prior sequential quarter. Gross profit increased to $2.1 million compared to $418,000 in the year ago quarter.

As Joe discussed, the improvement was especially meaningful because it reflects the operational progress we have made in the business. Higher production volumes, better throughput, and improved yields all contributed to stronger gross profit performance. The gross margin was also impacted by the recording of a $225,000 refundable credit from the Commonwealth of Massachusetts Economic Development Incentive Program, which is earned by POC as we increase the number of employees at our Massachusetts locations. Given our anticipated growth, we expect additional refundable credits from the EDIP program in future periods. Total operating expenses were approximately $2.1 million during the third quarter compared to approximately $2.5 million in the year-ago third quarter. Breaking it down, SG&A expenses were $1.9 million during this quarter compared to $2.2 million in the year-ago quarter.

The decrease was primarily due to lower stock-based compensation and recruiting costs, partially offset by increased consulting, bonuses, and bad debt expense. R&D expenses were $267,000 during the quarter compared to $211,000 in the year ago quarter, an increase of $56,000. R&D expenses primarily represent employee-related expenses to support product improvement, development of new technologies, and standardized approaches to address opportunities in our three primary markets. As a result of the factors I've discussed, our net loss for the quarter was $108,000 compared to a net loss of $2.1 million from the year-ago third quarter and compared to a net loss of $1.8 million in the sequential second quarter.

Adjusted EBITDA, which excludes stock-based compensation, interest expense, depreciation, and amortization, was positive $300,000 in the third quarter compared to negative $1.3 million in the year-ago third quarter and negative $1.5 million in the sequential second quarter. This was a major milestone for the company and reflects the combination of record revenue, improved manufacturing performance, better yield, and continued operating expense discipline. As Joe discussed, we believe the third quarter provides evidence that the investments we have made in operations, leadership, manufacturing infrastructure, and production capacity are beginning to translate into improved profitability. Cash at March 31, 2026 was $10.7 million compared to approximately $900,000 at December 31, 2025. During the quarter, we completed an oversubscribed $10 million public offering to support our growth plans.

The offering included participation from both existing and new investors, as well as participation from directors and officers. This financing significantly strengthened our balance sheet and provides additional flexibility as we continue to scale production, support working capital needs, and invest in the growth opportunities Joe discussed earlier. Bank debt at March 31, 2026 was approximately $1.5 million. We continue to engage in productive discussions with our current as well as alternate commercial banks to improve our loan facilities commensurate with our growth plans. As Joe mentioned, based on the strength of our third quarter results and our visibility into the remainder of the fiscal year, we are increasing our fiscal 2026 revenue guidance to a range of $29 million-$31 million compared to our previous guidance of $26 million-$28 million.

We are also increasing our fiscal 2026 adjusted EBITDA guidance to a range of negative $2.5 million to negative $2.7 million compared to our previous guidance of negative $2.5 million to negative $3 million. With year-to-date revenue of $22.8 million and positive adjusted EBITDA achieved in the third quarter, our updated outlook reflects the improved operating performance of the business, continued strength in our core production programs, and our expectation that the recent positive trends will continue into the fourth quarter. I will now turn the call back over to Joe for some final comments.

Thank you, Wayne. Before we take questions, let me recap just a few points. First, Q3 revenue reached a new quarterly record of $8.7 million, driven by continued strength in our core production programs. Second, we achieved positive adjusted EBITDA, which is a major milestone for Precision Optics and demonstrates the impact of our strong production volumes, improved yields, better throughput, and overall impact of the operational changes we have put in place. Third, with the ongoing strength of our base production programs, newer production programs ramping today, and a number of programs slated to move from development to production in fiscal 2027, we anticipate continued profitable growth. Finally, we strengthened the balance sheet through our oversubscribed $10 million public offering and increased our full year guidance based on the strength of our results and visibility into the fourth quarter.

In many ways, this quarter demonstrates the business model we have been building towards. Our production programs are scaling, our operations are improving, our pipeline remains active, and our financial performance is beginning to reflect that progress. We still have work ahead of us, but we are encouraged by the trajectory of the business and believe Precision Optics is well-positioned to create significant long-term value for shareholders. With that, we'd be happy to take any questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press the star then one on your telephone keypad. If you are using a speakerphone, please pick up the handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Once again, if you would like to ask a question on the phone, please press star then one and wait for your name to be announced.

All right, Darcy, this is Robert. While we wait to see if anyone queues up through the live teleconference line, we want to remind everyone that's listening through the webcast, if you'd like to ask a question and you're listening to the webcast player, again, you can type that into the ask a question box there on the player. We do have a couple of questions online, Joe and Wayne, why don't we get to those first here. The first question here is, can you comment on revenue expectations in Q4 for aerospace and the cystoscope, what do we expect in Q1 for this as well?

Generally speaking, we expect both of those programs to continue at similar levels that we saw in Q3 with the one caveat that the aerospace program, our customers asked us to pull back a bit in Q1 and Q2. For that particular program, we may see 15%-20% pullback in Q1 and Q2. We expect that some of these other programs that are coming online will make up that difference. Generally speaking, over the long run, we expect both of those programs to continue at the same levels and even to continue growing.

All right. Very good. The next question here is, can you discuss more about the customer-requested slowdown, and what happens if it moves to a license model?

The customer-requested slowdown is for the aerospace program for which there is no licensing model. I guess what I can say is that 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. That process of combining it and building it into satellites is running slower than they anticipated. They've had some challenges on their side, because of that, they have excess inventory of the parts that we're building, and that's the reason for the slowdown. They've also said very clearly that they expect to be back up to similar levels as before once we get through these next couple quarters.

We see this as a bit of a blip and not a long-term issue.

Maybe just on the licensing side.

There is no licensing for the aerospace program.

Sorry, I think he was referring to the medical device, side.

To the other program. I'm sorry. There is a licensing option for both of our single-use programs, and that licensing option is that we'll stand up, we'll duplicate our production line in our customer's facility or another facility of their choice. We didn't talk about it today, but the cystoscope customer has funded us to build out another production line in our facility and has asked us to build a production line in their facility. We've been working on that. We see this as a positive for two reasons. The first one is, they invoke this clause by building the production line in their facility and not a third party.

We always expected that they would want to have duplication of supply for this critical component. Duplicating it within their own facility is the ideal situation for us as opposed to going to a competitor. The third piece is that for the units that they build in their facility, we'll collect a royalty. At the end of the day, we benefit financially when we're either building things in our facility or when they're building things in their facility. We've always known that there would be some mix. Right now, we'll be running basically three shifts on two lines. They'll be running one shift, maybe 1.5 shifts on their line. That ends up being a pretty good mix.

We see this as a way of the impact from that product continuing to grow even as our production levels stay the same or grow by just a small amount.

Right. Very good. Today, investor question needs to be expanded upon, please let us know. Again, if you're in the webcast portal there, please type your question into the ask a question feature there on the screen. Next question pertains to Unity. With the adoption of Unity, is the timeframe for conversion of R&D into production shortened?

It is. That's one of the main benefits of the Unity program, the Unity platform. That's one of the reasons that we put Unity together, because we expected that the reduction in time to market would be attractive to our customers, and certainly it's attractive to us. We want to move things through the engineering pipeline and into production. We're starting to see this bear out. We only have one program right now in the engineering pipeline that's using Unity. It has benefited from the Unity platform, so the time to production is shorter. I guess I would expand on this answer a little bit and say that we launched Unity a little over a year ago, about 15 months ago.

I have to say, I expected that by now we would have a product development pipeline full of Unity projects. We don't. We have one. The good news is that our sales and marketing team, I think, has done a good job. We frankly had to figure out the best way to market the Unity platform because it is a little bit different than simply going out and saying, "We can design an endoscope and then build it for you." Going out and saying, "We're starting with a platform," is a slightly different message. The way that we bring that messaging to the market took us a little while to figure out.

The good news is that, as I mentioned in the comments today, we have four customers now that our sales team is talking to about potential Unity projects. There's no guarantee that they'll all come into the engineering pipeline, but we are starting to see some more traction with Unity. We do expect that as we move forward, it will contribute to an increase in the programs in the product development pipeline, and it will have that benefit of moving things through the pipeline and into production faster than we've been able to do in the past.

All right, very good. Next question here is on Ross Optical. Do you view the significant increase in sales for Ross Optical this quarter as sort of a new run rate for that business?

Yeah, that's a great question. We, I wish I had a very precise and certain answer. We've been having discussions internally about what the causes are. There are a couple of things we're thinking about. One is that we know that people were holding back earlier in this fiscal year and really over the last 12 months because of uncertainty surrounding the tariffs. With the Supreme Court ruling, there seems to be some settling of where the tariffs are gonna be. Customers can only hold out so long before their inventory gets to a level where they have to reorder.

We think some of it is coming from that there was some dip because people were holding back because of the tariffs, and now they're coming back online. There is some thought that there could be some folks who are doing what we saw after the pandemic when there were supply chain disruptions because of the war in Iran, that we could be seeing some people building excess inventory because of the concerns over supply chain. That one we think is a little less likely because the supply chain disruptions, of course, are specific to the Middle East, and not a lot of optics come through the Middle East. But there is a concern that that could be part of it as well, that people could be building up their inventory to an excessive amount.

It could be either of those things. We also are seeing, however, that we're getting new customers with meaningful size new orders. Given everything that we're seeing, and especially because we are seeing some new customers with new orders, we're seeing some customers who have been ordering at small volumes starting to pick up their volumes because their business is starting to grow some more. We do believe that the majority of it is coming from an increase in the need in that marketplace. We do believe that this is sustainable and that it will continue.

All right. Very good. Next question here is about sort of manufacturing capacity. Can you talk more about growing out, the facilities, where the company stands now square footage-wise or other, and where we will be roughly a year from now? As an extension to that, what is the capacity utilization currently, and where can we get to on that?

That's a great question. We've talked in previous calls about the facilities updates that we've already made. A facility update in Massachusetts moving the professional roles, if you like, the roles other than manufacturing to a new facility closer to Boston. We made a move of similarly in Maine to a new facility in South Portland for the engineering team. We moved the production from Maine down to our Massachusetts facilities, a little farther west of Massachusetts in Gardner, Mass., where our headquarters was. We've talked a couple times about the need to update the facilities that are in Gardner. We're the manufacturing facilities. We're looking at multiple options now for what the best approach is to update those facilities.

In terms of capacity, we have today we're in three buildings in that location in Gardner. One of those buildings has an enormous amount of space that our landlord rents out to various different people, and there's always additional space available for us. Instead of giving a capacity number today, what I would say is, if we decided to and we needed to, we could expand the footprint of the Gardner facility to 2x the size that it is today. We don't expect that the facility question will impede our ability to continue to roll out the new production programs. Having said that, being in three buildings in Gardner is not ideal.

Some of the space in the facilities that we're in in Gardner is not quite at the level that we would like it to be in terms of the modernness of the cleanroom, air handlers and those sorts of things. There clearly needs to be some update. The big question is, how do we do the update? Do we keep everything in Gardner? Do we move to a different facility? Do we pull it all together into one building? Those are exactly the questions that we're looking at now.

Again, we don't expect the answer to any of these questions to delay us in being able to roll the new programs into production, but it is part of what we'll be looking at over the next 12 months in order to update the facility so we'll be ready for the ongoing continuous growth in the long run that we continue to expect.

All right. Very good. Quick reminder, everyone. Again, if you are listening through the traditional teleconference line and would like to ask a question, press star then one on your telephone keypad. Again, if you're listening through the webcast player, type your question into the ask a question box there on the player. The next question here is regarding pipeline. It says here you mentioned four projects in the pipeline. Is that correct? Over what timeframe will you get answers on these? Where in magnitude of revenue potential do these projects fit compared to other projects?

I think this question is referring to the four programs that I mentioned are in the sales prospect, sales pipeline. Differentiated from our engineering pipeline, which is robust and moving programs into production. Assuming I have that right, these four programs are the four Unity programs. There are many more programs beyond that that are in our sales funnel, our sales pipeline, if you like. Our general target when we look at new programs coming into the engineering pipeline or that we're targeting with our sales team, is that these programs, particularly when they're a Unity program, would be programs that ultimately in production would lead to $1 million-$3 million a year in revenue when they get into production.

As they go through the engineering pipeline, they typically run anywhere from $1 million-$2 million over two years as they move through the engineering pipeline.

All right. Very good. The next question here is regarding tariffs. What is the scale of tariff refunds you expect, and will those be passed on to customers?

Yeah. We're still in the process of reviewing what that all looks like. There is a part of those tariff refunds, for instance, in the situations where we've negotiated agreements with our customers, both for the cystoscope and the satellite line, where we'll be refunding those tariffs. We do expect to not have to refund all of those tariff refunds. We think it'll be a net positive in terms of the bottom line, but it will of course reduce sales at the time those credit memos are issued.

All right. Next question here, I guess more of a, more of a comment here, but maybe a question here. When will you be able to talk more about specific customers and projects, in order to, he says other optics companies, are able to highlight specifically the contracts to more of a degree, when you're able to provide more color to attract investor and customer interest. I think specifically he's referencing the ability to name customers and projects here.

We would love to name specific customers. We talk with our customers about that routinely. The challenge we have, particularly with our very large customers, is that they're always hesitant and frankly don't allow us to do that. I think as we move forward, in some cases it becomes obvious to everyone in the industry because of the characteristics of the product and the ramp and the timing of the ramp that we're going through and that our customers are going through. Sometimes it becomes fairly general knowledge, and I think we can probably confirm things when we get to that level.

We will continue to work with our customers to be able to name specific names, but as of right now, we haven't been able to do that. We would love to do it. We'll continue pushing on it, but I don't have any prediction for when we'll be successful.

All right. Next question here regarding the cystoscope line. You mentioned in previous calls pending improvements in the cystoscope line. Have all of these improvements been realized in the third quarter?

They have not been. As I said in my comments, we've made significant progress on that line, in particular with the yield now at over 90% consistently and continuing to grow. That's compared to previous times when we've had yields typically in the 80% range, sometimes even below that. Getting to 90% in the third quarter was a huge accomplishment. We have a whole series of additional improvements that we are looking at and that our customer is looking at with us, it really is a great partnership to be able to get us consistently above 95%, and I think there's a good chance we could even get to 97%, 98%. There are plenty of improvements from a yield standpoint.

The other thing we continue to look at, and, you know, we haven't emphasized this as much, but it certainly is part of what's been happening, is that, there are updates to the procedures that we're using, to the tools and to the fixtures. These things take a little bit longer, to update because it's not simply training people better, it's actually changing the process a little bit. There are a series of updates to the procedures that we're using and the tools and the fixtures that we expect will continue to allow us to reduce the touch time, or the other way to say it is to increase the throughput with the same number of technicians. We've seen some improvements there. Again, there's more to be done.

I think we will see significant increase again in Q4, and then I think we'll continue to see increase even beyond that into Q1, Q2, into next year. The other thing is, as the volumes continue to increase, we will get to points where the volumes are high enough that the return on investment for more significant changes in the tools and fixtures, again, to drive down the touch time even more, will become possible. I think this is one of those cases where we'll see continuous improvement over the long run.

All right. Very good. This will be my final reminder. If you'd like to ask a question, online, go ahead and type that into the ask a question box on the webcast player. Question here is: Does the industry recognize your momentum? If so, at what point do you expect revenue to "hockey stick"?

I'm not gonna predict when the hockey stick will come. We're focused on continuing to drive programs into the engineering pipeline and continue to drive the engineering pipeline programs into production. We see revenue continuing to increase in a nice, healthy way as we move forward. The question about whether the industry recognizes us is an interesting one. I think that with some of the marketing work that we've done around Unity, we're getting better exposure out there in the marketplace. I also think that with the new facilities that we have in Portland and the new facilities that we have in Massachusetts, having customers come and see us here helps with the impression that they get of the company.

Having them see the production lines that we already have running, gives us added credibility that we can not only do the top-notch engineering, which we've been known for for many years, but now customers can see that we can roll those into production and be very successful with production. All of these improvements that we've talked about here from a financial standpoint also roll into improvements in our ability to market ourselves to the industry. I can't give specific predictions on hockey sticks or specific numbers on how much better we're being recognized today, but we do see that. We do sense the momentum in the marketplace that people will come and talk to us and talk about things that we're talking about publicly and recognize that we've made progress.

I think all of those things are just gonna help to accelerate the rate at which we can pull new programs into the engineering pipeline and, of course, those rolling through into production to help grow the revenue. We're pretty excited about it.

All right. Very good. A question here and more broadly, talk about expectations for profitability here.

I guess what I would say is, this quarter was basically break even, a little bit positive from break even. At the same revenue levels that we're at now with the improvements that we continue to make, we would expect that that would continue to grow in the positive direction. We have that little bit of slowdown on the aerospace program that we have to manage through. We've got some other programs coming online, I think we'll see things continue to grow there, but it'll be close to break even. In general, as we have new programs going into production and as we have more programs coming into Ross Optical, those will have a very high variable margin. I think getting to break even is one thing.

Moving beyond break even, I think can accelerate pretty quickly because of the fact that we're leveraging the infrastructure that we've already put in place. We do see this quarter that we're reporting on here as really an inflection point, and we expect to see growing profitability as we move forward.

All right. Very good. With that, Joe, I will turn it over to you for any closing remarks.

Thank you, Robert. Thanks everyone for joining us on the call today. We look forward to speaking with you again in a couple of months. Thanks, everyone. Have a good evening.

The conference is now concluded. Thank you for attending today's presentation.

Good day, and welcome to the Precision Optics Reports Second Quarter Fiscal Year 2026 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Robert Blum with Lytham Partners. Please go ahead.

All right. Thank you very much, operator, and thank you to everyone joining the call today. As the operator mentioned, on today's call, we will discuss Precision Optics' second quarter fiscal year 2026 financial results for the period ended December 31, 2025. With us on the call representing the company today is Dr. Joe Forkey, Precision Optics' Chief Executive Officer; and Wayne Coll, the company's Chief Financial Officer. At the conclusion of today's prepared remarks, we will open the call for a question-and-answer session. If you dialed into the call through the traditional teleconference line, as the operator indicated, please * star, then 1 to ask a question. If you are listening through the webcast portal and would like to ask a question, you can submit your question through the Ask a Question feature in the webcast player. Before we begin with prepared remarks, we submit for the record the following statement. Statements made by the management team of Precision Optics during the course of this conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements describe future expectations, plans, results, or strategies, and are generally preceded by words such as may, future, plan or planned; will or should; expected, anticipates, draft, eventually, or projected. Listeners are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements, including the risks that actual results may differ materially from those projected in the forward-looking statements as a result of various factors and other risks identified in the company's filings with the Securities and Exchange Commission. All forward-looking statements contained during this conference call speak only as of the date in which they are made and are based on management's assumptions and estimates as of such date. The company does not undertake any obligation to publicly update any forward-looking statements, whether as a result of the receipt of new information, the occurrence of future events, or otherwise. All right. With that said, let me turn the call over to Dr. Joe Forkey, Chief Executive Officer of Precision Optics. Joe, please proceed.

Thank you, Robert, and thank you all for joining our call today. When we spoke last quarter, we described Precision Optics as operating at a new level, driven by record systems manufacturing revenue and sustained strength in our 2 largest production programs. I'm pleased to report that in the second quarter of fiscal 2026, that momentum not only continued, it has accelerated. Revenue for Q2 reached a record $7.4 million. That total consisted of $6.0 million in production revenue, net of tariffs, up 92% year-over-year and up 9% sequentially, and $1.0 million in engineering revenue, which was down 29% year-over-year, but up 47% sequentially. This sequential growth in engineering, along with continued growth in engineering bookings, is particularly important as it reflects the early stages of the recovery we discussed on our last call. It has become clear that our production business is, on its own, acting like a successful start-up company. This does not mean the 2 sides of our business are not tightly interwoven. They are. Production programs are the result of the sales and execution of our engineering or product development team. However, we have experienced growing pains as significant production programs have ramped, while we were under-resourced in terms of line management, production support, and other functions that a rapidly growing production business requires. Recognizing we were not addressing operating challenges in a sufficiently aggressive fashion, we changed leadership with the addition of Joe Traut as COO in October. By the end of the year, production was running better, and it has continued to improve in early 2026. Concurrently, we have invested in sales leadership and marketing efforts, and our pipeline of product development opportunities is growing. While the gross margin and bottom line performance in the second quarter were not what was expected, we are making solid progress week in and week out and can see results continuously improving. Today, I'll focus my remarks on 4 primary areas: first, updates on our manufacturing programs; second, the operational improvements underway and their expected impact on gross margin and adjusted EBITDA; third, positive developments in product development and the rebound we are seeing at Ross Optical; and finally, our updated guidance and outlook for the remainder of fiscal 2026. Let me begin with production, which continues to be the primary driver of our revenue growth. Our top-tier aerospace program generated $2.7 million in revenue during Q2. This marks another quarter of sustained high-volume performance at the same record levels set in Q1. As a reminder, this program involves a highly specialized optical assembly used in a next-generation aerospace platform. The product has stringent performance and reliability requirements, and we have become a trusted strategic sole-source supplier to this customer. Demand remains strong. Our joint forecast with the customer, combined with our internal capacity planning, supports an increase from the shipment levels of approximately $2.5 million in the second quarter to over $3.5 million for the fourth quarter of this fiscal year. Importantly, by the end of Q2, our operations team had updated the line to enable more than 50% higher maximum throughput compared to the end of Q1. The team also made good progress improving operating efficiency, and we are already beginning to see tangible throughput increases, which we expect will have a positive impact on our financial results in Q3 and more substantially in Q4. One of the most compelling aspects of this program is its operating leverage. Quarterly volumes could increase by 50% without requiring any increase in headcount. In fact, with steady material flow to avoid start-and-stop production patterns and line-down inefficiencies, we could potentially add approximately $1 million of incremental quarterly revenue with minimal incremental costs beyond materials, translating into significant gross margin and bottom line expansion as volumes increase. This remains a cornerstone program for Precision Optics and a powerful contributor to our path toward profitability. Our single-use cystoscope program for a surgical robotics company generated $2.0 million in revenue during Q2 compared to $1.5 million in Q1, marking the sixth consecutive quarter with record revenue. End market demand remains extremely strong, and our customer continues to push for higher output. However, gross margins on this program remains challenged in Q2 as yields have been below expectations and labor utilization has been suboptimal due to training time and other inefficiencies in production line operations. During the second quarter, we made substantial progress on improving operations that should drive improved gross margins in the third and fourth quarters. First, 2 significant updates, one to the product design and the second to the supply chain, both in development for several months, are scheduled for implementation this quarter. These updates were delayed primarily due to the complexity and added care required to make changes to an FDA-cleared product already being used clinically. Because these updates represent reductions in cost and improvements in yield, they both will have a strong impact on gross margin. In fact, because the yield improvement is at the final assembly stage, it represents virtually 100% variable margin. We expect these changes to result in a $150,000 to $200,000 quarterly increase in gross profit at current production rates. In addition to these updates, our new operations team has successfully stabilized the main production line and significantly increased throughput on a second partial line. Production and shipments are now predictable, enabling better planning and higher efficiency, which contribute to higher gross margin, a stable line, and stronger customer confidence. We expect that the anticipated improvements in our single-use and aerospace programs would bring the company to break-even levels of adjusted EBITDA even before other anticipated positive developments. Beyond our 2 lead programs, a third key production program, a single-use ophthalmic device, is now ramping significantly and should contribute towards continued growth in the second half of the fiscal year and beyond. In calendar 2025, revenue from this program was limited, as we built only 1,000 units, and start-up margins were significantly negative. We expect the next order will be for 10,000 to 15,000 units and will support $2 million to $3 million in revenue this calendar year with gross margin greater than 30%. The operational progress on this scope has been dramatic and highlights the benefits of our new operations management team, as well as learnings from our other single-use program. In November, yields were approximately 60%. Today, yields are routinely above 90%, and we are pushing to exceed 95%. In November, we produced approximately 6 units per day. Today, we are producing 20 to 25 per day and working to increase to 35 per day. In summary, our production revenue levels continue to validate the strength of demand across our key programs and markets. However, as we discussed in detail last quarter and again here, gross margins remain challenged due to manufacturing inefficiencies associated with scaling operations, yield challenges on our single-use programs, and outsized impacts from production scrap. These issues contributed to negative adjusted EBITDA in Q2, despite the large increase in revenue. That said, we are already seeing meaningful improvement as we enter the second half of our fiscal year. The impact of the new operations leadership team began to materialize toward the end of the quarter. We saw measurable operational improvements in December, improvements that we expect will carry forward into Q3 and expand further in Q4. We acknowledge that this is an approximate 1-quarter shift to the right from our original expectations, but we believe we now have the people and systems in place to execute on an improved manufacturing optimization plan that is already improving profitability and will lead to positive adjusted EBITDA beginning in Q4. In recent quarters, our Ross Optical division has produced lower results than we have seen historically, largely due to the impact of tariffs and the associated changes in customer purchasing trends. This now has begun to turn around. Ross Optical delivered revenue above $1 million for the second quarter in a row, and we enter Q3 with the highest backlog in over 3 years. This provides strong evidence that the market rebound we anticipated is beginning to take shape. Because the Ross Optical division can support higher revenue without significant incremental fixed costs, revenue increases here carry strong variable margins. Accordingly, we expect Ross to experience improved margins in the second half of fiscal 2026. Product development, or what we sometimes describe as engineering revenue, increased sequentially and is forecasted to continue to increase in Q3 and Q4. This forecast is supported by the second consecutive quarterly increase in product development purchase order bookings in Q2, which were at the highest level in over a year. As we've discussed in earlier calls, the aggressive time line for the development of the single-use cystoscope product, combined with the transfer to production a 1.5 years ago, resulted in an abrupt reduction in engineering work that has taken some time to recover. We attribute the recent success and increased bookings in part to the renewed marketing efforts we initiated over the past year, and we expect bookings increases to continue through Q3, Q4, and beyond. Our primary pipeline for new customer programs continues to be minimally invasive medical devices. And while we still receive inquiries about reusable devices, the trend, as expected, is continuing to move to single-use. As we've discussed on previous calls, this strong market interest is based on the benefits of virtual elimination of cross-contamination, superior image quality, and ease of use. While the single-use endoscope market has grown substantially over the last couple of years, market studies still predict annual growth rates to continue in the mid-to-high teens over the next 10 years. With the successes of our first few programs that have gone to production in this area, we are well positioned to take advantage of the ongoing growth in this market. We also continue to see strong interest in our technologies from the defense aerospace market, with a particular emphasis on next-generation aeronautic and satellite systems for both commercial and government use. The specific segments that we target have seen heavy investments in recent years, supporting expectations for double-digit annual growth rates over the next decade. Our large production aerospace program, along with some of our recently announced new programs, fit squarely into these market segments, and we believe there are additional opportunities for us in this area. Several programs already in our product development pipeline continue to advance toward production, with 4 programs scheduled to transition in the next 12 months. Three of these are for reusable products used in sinoscopy, urology, and otoscopy, and one for a single-use product for a specific arthroscopic procedure. Each of these programs is expected to contribute roughly $1 million to $3 million in annual revenue when they transition to production. Importantly, as more of these programs enter production, we expect significant leverage of the operations management and support teams that we have been investing in over the last few quarters, resulting in higher gross margins across all programs. Given stronger-than-anticipated production demand, we are increasing our full year revenue guidance to a range of $26 million to $28 million, which is up from the $25 million we estimated previously. However, the timing shift in margin recovery by about 1 quarter results not only in an additional quarter of adjusted EBITDA loss, but also pushes positive adjusted EBITDA quarters out of this fiscal year into the next, removing the opportunity to recover this year from the EBITDA losses in the first half. Combined, this results in revised full year adjusted EBITDA guidance of negative $2.5 million to negative $3.0 million. We expect Q3 to be a strong improvement over Q2 and Q4 to improve to positive adjusted EBITDA. Importantly, our long-term prospects remain strong, as evidenced by sustained top line growth, improving operational discipline, increasing bookings, especially for product development, and a strong overall backlog entering Q3. We remain confident that our business model and the markets we are serving can sustain substantial growth over the coming quarters and years. With that overview, let me turn it over to Wayne to review the financials in more detail. Wayne?

Thank you, Joe. Let me expand on some of Joe's comments on the financial results, starting with revenue. For the second quarter, revenue was $7.4 million compared to $4.5 million in the year ago second quarter and up compared to $6.7 million in the prior sequential quarter. Breaking it down, production revenue was approximately $6.4 million compared to $3.1 million in the year ago quarter and $6.0 million in the prior sequential quarter. Product development, or engineering revenue, was $1 million compared to $1.2 million in the year ago quarter and $700,000 in the previous quarter. Our aerospace program contributed $2.7 million in revenues, while the cystoscope program achieved $2.0 million. As we discussed last quarter, we successfully negotiated agreements with these customers to pass through tariffs without markup. The tariffs are treated as revenue and correspondingly as cost of goods sold. Net of tariffs, the aerospace program had revenue of $2.5 million and the cystoscope program, $1.8 million. Total revenue, net of tariffs, would have been $7.0 million. For the quarter, gross margins were 2.8% compared to 14.2% in the prior sequential quarter and 23.6% in the second quarter of a year ago. Joe touched on many of the key impacts on gross margins, but to summarize: high levels of manufacturing scrap and temporary tariff impacts, the yield and throughput on our cystoscope line was below optimal levels, profitability of our product development group was negative due to underutilization during the quarter, and our optics lab experienced a delayed reorder of a key defense program that we expect to begin building now in the fourth quarter. We believe improvements made by our new operations team, both those already implemented and those currently underway, will dramatically improve efficiencies and result in improvement to gross margins in the second half of the year. Turning to operating expenses. Total OpEx was $1.9 million during the quarter compared to $2.0 million in the year ago second quarter. Breaking it down, SG&A expenses were $1.7 million during both this quarter and the comparison quarter a year ago. R&D spending in the quarter decreased slightly to $250,000 from $318,000 in the year ago second quarter. The decrease is a result of progress made in prior periods in the development of the Unity platform, a key driver of our new product development engagements. As a result of the factors I've discussed, our net loss was $1.8 million for the quarter compared to $1.0 million in the year ago second quarter and compared to a net loss of $1.6 million in the sequential first quarter. Adjusted EBITDA, which excludes stock-based compensation, interest expense, depreciation and amortization, was negative $1.5 million in the second quarter of 2025 compared to negative $0.6 million in the year ago quarter and compared to a negative $1.2 million in Q1. Cash at the end of December was approximately $900,000 and bank debt was $1.6 million. We are making progress in negotiations to increase the use of debt capital to fund both our continued business expansion plans and working capital needs, and we believe the outcome will be favorable considering the positive trajectory of our business and recent discussions with potential partners. We expect to announce expanded loan facilities during the third quarter. As Joe mentioned, we have had to make revisions to our fiscal year outlook based on the first half results. We now expect revenue to be $26 million to $28 million, up from the $25 million previously outlined. Our adjusted EBITDA is now expected to be negative $2.5 million to negative $3.0 million compared to a positive $500,000 reported previously. With year-to-date adjusted EBITDA already negative $2.7 million, our outlook implies we will have approximately break-even adjusted EBITDA for the remainder of the fiscal year. I will now turn the call back over to Joe for some final comments.

Thank you, Wayne. Before we take questions, let me recap a few points. Q2 revenue reached a record $7.4 million, driven by expanded production revenue, which grew 105% year-over-year. Our aerospace shipments remain at record levels with meaningful increases expected in Q3 and Q4. Our cystoscope operations have stabilized with margin improvement expected in Q3 and Q4, and our ophthalmic program ramp is accelerating with yields now above 90%. Product development bookings are at the highest level in over a year, and the Ross Optical backlog is the strongest it has been in over 3 years. And finally, operational improvements driven by the new operations team are in place and gaining traction with margin recovery underway and expected to accelerate in the second half of the fiscal year. In many ways, fiscal 2026 remains a transition year, one in which we are building the infrastructure and processes required to support a significantly larger production business. This should be expected. It is an investment that is worth making, as we believe the production business is on a long-term growth trajectory that will create significant value for shareholders. We believe the production business over time can create value on its own, well beyond POC's current market capitalization. The success we're seeing is not unexpected. This is the result of much of the hard work over the last few years, and we're excited to see this part of the business growing as rapidly as it is. With that, we'd be happy to take any questions.

[Operator Instructions]

All right. Nick, this is Robert here. While we wait to see if anyone dials in through the teleconference line, I want to remind everyone on the webcast that if you'd like to ask a question, you can type it into the Ask a Question box there on the webcast player. Joe and Wayne, we have a few questions that have come in here. First one, can you clarify if the design revisions required to fix these yield shortfalls are currently within your internal manufacturing control? Or are you waiting on your customers to approve engineering changes? Furthermore, what is the exact lead time for these revisions to hit the P&L, and can you bridge the gap to that date without a dilutive equity raise?

Let's see. There's a lot there. It's a great question. So the design piece of the yield improvement that we expect to see on the cystoscope line, we have been working on for many months. The design change has been approved by our customer. We have received initial parts for that design change, and we've done the engineering builds that are required in order to qualify the design change. So there are a number of sort of documentation and some more testing that has to happen. There has to be some formal approval from our customer, which we're quite confident we will get because they've been part of the process all along. So we anticipate that this design change will go into production sometime in the next month or so. And I'll let Wayne comment on the latter part of that question about how we get there from a financial standpoint.

Thanks, Joe. Yes, we've had advanced discussions with lenders over the last several months, as I mentioned, and with due diligence proceeding, we do expect to announce a new loan facility during the third quarter. We also received -- recently received grant funding from Massachusetts, the impact of which we're still quantifying. We always consider equity financing as one option. But at the moment, we are uncertain how much equity capital, if any, is going to be needed to close any potential funding gaps.

Once again, if you have any questions on the webcast player, please type those into the Ask a Question feature there on the webcast box there. The next question is, can you comment on facility changes and when they will all be up and running? I know there's a little bit of an overlap there, but anything else you can expand upon?

Yes, sure. So we've talked on earlier calls about a fairly substantial plan with regard to facilities, and we reported that we've already made facilities updates in our main operation, the operation in the state of Maine, as well as some of the buildings in our Massachusetts facility. So we moved to a new headquarters, which we're talking to everyone from, I think, for the first time today. So those facility updates are complete, and everyone's moved in. This includes our engineering group. The last piece that we have to update is our production facilities. And right now, we're updating it as we need it. And over the next, I would say, 6 to 12 months, we're looking at a more substantial and complete overhaul in order to be prepared for the next couple of years. But in the meantime, we have the facilities that we need to execute on the programs that we're working on now and all of the programs that I talked about in the comments today. And so we see this as a longer-term effort that we have to move through. And as Wayne said, there are a number of funding options we can look at for that, including some programs through the state and otherwise to be able to support that facility's update for the production in the long run.

All right. Very good. Once again, if you're on the live dial-in line, please press star, then 1, to ask a question. If you're on the webcast, you can go ahead and type it in there. You have a couple more questions here. Can you -- and again, you've touched on this, but can you talk about your loan discussions and how certain you are that you'll be able to reach positive EBITDA without dilution?

I think Wayne already answered that. The loan discussions are quite advanced. We look at funding from multiple different sources, but we're quite confident that the discussions that we've been having with the banks will be successful.

Barring any additional questions that might come in, this looks like the last question. What's the long-term return you expect on the investments the company is making in its production infrastructure?

Yes. So we talked a lot about production infrastructure on the call today, and I just want to clarify. We see a lot of the investments that we're making in the operations team. So I just commented on the long-term investments we'll need to make on the production facilities. Some of what we've been doing over the last couple of quarters does include facilities updates, updating cleanrooms, adding new fixtures and tools. But really, the piece that is most substantial in terms of the impact that it will have on the next couple of quarters is on the infrastructure. And we talked about putting in place a new Chief Operating Officer. We have a new Senior Director of Operations. We have a number of new quality engineers, manufacturing engineers. We're really building out that personnel infrastructure. And so I'll answer the question this way. There's significant leverage that we can benefit from when it comes to the size of the production business that can be supported by the management infrastructure and the support infrastructure that we've been putting in place for production. It probably came through in the script here, but we -- I think we underestimated how much we needed to invest in that management team and that support structure. So those folks will be able to support a much higher level of production, even than we're talking about having in Q3 and Q4. So I think there will be substantial leverage that we obtain as we continue to increase the number of production programs. Beyond that, I think the investment is a very safe investment because from a baseline standpoint, the 2 programs that we already have in place that are driving the increases in volume, we have strong indications that those will continue for a long period of time. In one case, the program is a product that's a replacement of a product that's on the market already and has been for many years. In the other case, it's a product that's used in a satellite system that has a limited lifetime. And so we know that there will be a need for replacement of those systems. So from a baseline standpoint, we're quite confident that the programs that we've built this infrastructure for will be there for a long period of time, and we believe that we can support significantly higher production revenue with the operations management and support team that we put in place. So we expect significant return on those investments.

Actually, we do have a couple of additional questions that have come in. The next one here talks about your guidance increase in revenue for the year. Can you talk about which program or programs is getting higher-than-expected order flow from your original expectations there?

Yes. So it's really the 2 big production programs. It's the aerospace program and the single-use cystoscope. I believe the aerospace program is the one that's coming in at a faster rate. It's ramping faster of the 2. But both of them are really coming in at a higher level than we had originally anticipated, which is great news.

And maybe there's something you can help clarify here, because there's a question, is it primarily the borescope business that is driving aerospace? So maybe you could help clarify when you talk about defense and aerospace and how the borescope program relates to that.

Sure. So here, I can be very complete. We have 2 major defense aerospace programs that are in production. One is the aerospace program that we talked about an awful lot today that's running at a few million dollars a year. That one -- sorry, a few million dollars a quarter. That one is a system that's supporting a satellite program. The second one is the one that we've talked about on previous calls that we manufacture in our micro-optics lab. That's a program that we're still waiting for a reorder on. That one typically runs at a couple of million dollars a year. That one, we don't know -- we don't have visibility into what the final product is. And then the -- so those are the 2 production programs that are already running. We have a couple of product development programs, the one that the question is about is the borescope program. That program is in the product development phase of our business or a section of our business. And that program is substantially contributing to the increase in the product development revenue, which we're very anxious to get back up to levels that it was at a couple of years ago. So just to be clear, the borescope program is in the product development phase. It's a substantial part of the increase in the product development work that we're doing. It probably won't go into production for another year, I would guess. But when it does, we expect it to increase the production revenue at that point.

All right. Very good. Well, I am showing no additional questions at this time. So Joe, I will turn it back over to you for any closing remarks.

Great. Thanks, Robert, and thank you all for joining us today on the call. I look forward to talking with all of you soon. Thank you, and have a good evening.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.