Key Highlights

  • Net sales rose 11% to $20.6 million from $18.5 million in the prior year quarter.
  • Gross Margin widened to 33% from 29%, helped by favorable product mix.
  • Net income was $3.0 million, or $0.92 per diluted share, versus $4.7 million, or $1.40.
  • Medical device sales climbed 21%, while repair Revenue fell 44%.
  • Backlog was approximately $43.1 million at September 30, 2026.

Sales rise 11% as medical devices carry the quarter

Pro-Dex (NASDAQ:PDEX), an Irvine, California company, makes autoclavable, battery-powered and electric surgical drivers and shavers used mainly in orthopedic, thoracic and craniomaxillofacial procedures. Its 10-Q, filed on October 29, 2026, covers the fiscal 2027 first quarter ended September 30, 2026, when net sales reached $20.6 million, compared with $18.5 million a year earlier.

Medical device sales came in at $17.4 million, a 21% increase from $14.4 million, lifting their share of the total to 85% from 77%. Orthopedic revenue grew 16% to $12.8 million, chiefly because of the next generation handpiece sold to the largest customer. CMF sales jumped 39% to $3.9 million.

Industrial and scientific sales surged 330% to $740 thousand, nearly all of it contributed by Advanced Precision Machining, a supplier the company acquired during the third quarter of fiscal 2026.

Repair income falls 44% as the new handpiece replaces older units

Repair revenue dropped $1.7 million, or 44%, to $2.1 million, since fewer repairs were needed on the legacy orthopedic handpiece sold to the largest customer. Management noted that this customer may be swapping legacy units for the next generation handpiece, so repair declines could persist.

Engineering and prototype revenue was cut roughly in half, to $236 thousand. Discounts and other items improved by $389 thousand because the extended contract with the largest customer no longer includes Volume rebates.

Gross margin widens to 33% as operating costs rise

Gross profit increased 28% to $6.9 million, and gross margin expanded four percentage points to 33%, thanks to a more favorable product mix. Under-absorbed Manufacturing costs declined to $258 thousand from $619 thousand.

Operating expenses climbed 48% to $3.3 million. General and administrative spending rose 49% to $2.1 million, including $466 thousand from the acquired machining subsidiary, while Research and Development grew 58% to $1.2 million. Operating Income reached $3.5 million, up from $3.1 million, keeping the Operating Margin at 17% on a calculated basis.

Why Net Income fell 35% even though operating income rose

Net income came to $3.0 million, or $0.92 per diluted share, versus $4.7 million, or $1.40, a year earlier, a decline of roughly 35% on a calculated basis. The difference lies in other income. Last year it added $3.1 million, aided by about $3.3 million of unrealized gains, mostly tied to the Monogram investment, whereas this year it produced a net expense of $136 thousand.

The effective tax rate fell to 10% from 25%, reflecting a tax benefit linked to stock awarded to employees under performance awards.

Cash build, supplier setbacks and the outlook

Operating cash flow was $6.5 million, compared with $2.3 million, supported by $3.8 million in receivable collections. Cash and cash equivalents increased to $11.8 million from $8.2 million at June 30, 2026, while Working Capital stood at $41.1 million. Notes payable came to about $16.4 million on a calculated basis, and during the quarter the company repurchased shares and repaid $1.0 million of debt.

The company warned that the exclusive supplier of the proprietary finish used on the next generation handpiece has been delaying shipments, with resumption promised by mid-November, and that it could fall behind on deliveries to its largest customer. Backlog was approximately $43.1 million, and $42.4 million of that is scheduled for delivery during the rest of fiscal 2027.