Pro-Dex, Inc.

What they do

Pro-Dex develops, manufactures and sells multi-function surgical handpieces under exclusive development and supply agreements, primarily to medical device OEMs and distributors, using patented adaptive torque-limiting technology and proprietary sealing solutions. Devices are machined in Irvine, California and assembled in Tustin, California, with engineering, quality and regulatory consulting services also offered. Rotary air motors are sold to industrial customers but are a de minimis portion of the business. Since February 2026, subsidiary Advanced Precision Machining, LLC (APM) in Costa Mesa, California manufactures machined sub-assemblies and aerospace/defense parts, and holds ITAR and JCP registrations as a U.S. Government Prime Contractor.

Revenue drivers

• Medical Devices — Sales of surgical handpieces and related devices generated $62.1 million, or 80% of total revenue, in fiscal 2026, up from $47.7 million (72%) in fiscal 2025.
• Repairs — Service and repair of installed devices generated $12.5 million, or 16% of revenue, in fiscal 2026, down from $18.6 million (28%) in fiscal 2025 due primarily to lower repair volume from the largest customer.
• NRE & Prototypes — Non-recurring engineering and prototype services generated $1.65 million, or 2% of revenue, in fiscal 2026 versus $698,000 in fiscal 2025.
• APM (aerospace/defense) and Industrial/Scientific — APM added $718,000 of revenue from the February 9, 2026 acquisition through fiscal year-end, while industrial and scientific air motor sales were $1.5 million, or 2% of revenue.

Recent performance

Fiscal 2026 revenue rose 16% to $77.5 million from $66.6 million, driven by a $15.3 million increase in revenue from the largest customer's next generation orthopedic handpiece, partly offset by a $6.0 million reduction in repair revenue. Gross margin improved to 31% from 29%, and operating income rose 22% to $13.0 million. Net income was $13.7 million, or $4.12 per diluted share. In the fourth quarter, revenue increased 17% to $20.4 million, gross margin expanded to 35% from 20%, and net income rose to $2.9 million, or $0.87 per diluted share, aided by favorable product mix, better absorption of indirect manufacturing costs and APM margins.

Strategy

The company is pursuing growth through its core surgical handpiece business while integrating APM, acquired in February 2026, which manufactures several of Pro-Dex's machined sub-assemblies and also serves aerospace and defense customers as an ITAR-registered U.S. Government Prime Contractor. APM's president/founder was retained as a consultant, with $500,000 in non-recurring consulting fees paid in fiscal 2026 and $250,000 in the fourth quarter alone, to assist with manufacturing operations. Pro-Dex also continues engineering, quality and regulatory consulting and invests in personnel to support growth, with fiscal 2026 G&A personnel costs up $1.2 million including $582,000 of bonus accruals and non-cash equity compensation. No specific forward financial targets were disclosed in the excerpts provided.

Risks

• Customer concentration — The top three customers accounted for 92% of fiscal 2026 sales, with the largest customer at 78%, and that customer's supply agreement purchase commitments run only through calendar 2028.
• Core-market dependence — 98% of fiscal 2026 revenue came from medical device products and related services, so a decline in that market or failure to keep products current would materially affect results.
• Debt and covenant compliance — The company had $17.5 million of long-term debt at June 30, 2026 and cited in its 10-Q the risk of its ability to service debt and remain in compliance with related covenants.
• Integration of APM — APM was acquired in February 2026 and the company specifically identified its ability to integrate and effectively operate APM as a risk, along with reliance on APM's founder as a consultant.

Outlook

Management attributed fiscal 2026 growth to the largest customer's next generation orthopedic handpiece and stated that the customer has made purchase commitments through calendar 2028 and placed purchase orders for deliveries in 2027, though there is no assurance of extension beyond that date. The company pointed to APM as a contributor to favorable fourth-quarter margins after the February 2026 acquisition. No specific revenue or earnings guidance for fiscal 2027 was provided in the excerpts. The 10-Q notes results for interim periods are not necessarily indicative of the full fiscal year ending June 30, 2026.