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, designs and manufactures autoclavable, battery-powered and electric surgical drivers and shavers used mainly in orthopedic, thoracic and craniomaxillofacial markets. In its 10-Q filed on October 29, 2026, it reported results for the fiscal 2027 first quarter ended September 30, 2026, with net sales of $20.6 million compared with $18.5 million a year earlier.

Medical device sales were $17.4 million, up 21% from $14.4 million, and now make up 85% of the total versus 77%. Orthopedic sales rose 16% to $12.8 million, mainly on the next generation handpiece sold to the largest customer. CMF sales jumped 39% to $3.9 million.

Industrial and scientific sales rose 330% to $740 thousand, almost entirely from Advanced Precision Machining, the supplier the company acquired in the third quarter of fiscal 2026.

Repair revenue slides 44% as the next generation handpiece takes over

Repair revenue fell $1.7 million, or 44%, to $2.1 million, because of fewer repairs of the legacy orthopedic handpiece sold to the largest customer. The company said that customer may be replacing legacy units with the next generation handpiece, so repair declines could continue.

Engineering and prototype revenue also halved, to $236 thousand. Discounts and other improved by $389 thousand because the extended contract with the largest customer no longer includes Volume rebates.

Gross margin expands to 33% while operating costs climb

Gross profit rose 28% to $6.9 million, and gross margin widened four percentage points to 33% on favorable product mix. Under-absorbed Manufacturing costs fell to $258 thousand from $619 thousand.

Operating expenses rose 48% to $3.3 million. General and administrative costs increased 49% to $2.1 million, including $466 thousand from the acquired machining subsidiary, and Research and Development rose 58% to $1.2 million. Operating Income was $3.5 million against $3.1 million, so the Operating Margin held at 17% on a calculated basis.

Why Net Income fell 35% despite higher operating income

Net income was $3.0 million, or $0.92 per diluted share, against $4.7 million, or $1.40, a year earlier, a decline of about 35% on a calculated basis. The gap came from other income: last year it contributed $3.1 million, helped by roughly $3.3 million of unrealized gains tied mainly to the Investment in Monogram, while this year it was a net expense of $136 thousand.

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

Cash generation, supplier delays and what to watch

Operating cash flow was $6.5 million, up from $2.3 million, helped by $3.8 million of receivable collections. Cash and cash equivalents rose to $11.8 million from $8.2 million at June 30, 2026, and Working Capital was $41.1 million. Notes payable totaled about $16.4 million on a calculated basis, and the company repurchased shares and paid $1.0 million of Debt in the quarter.

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