PRO-DEX Net Income Nearly Doubles on Strong Sales, Investment Gains

TL;DR

**PDEX is crushing it, nearly doubling net income thanks to smart investments and solid sales growth; buy the dip if you can find one.**

AI Summary

PRO-DEX, INC. (PDEX) reported a significant increase in net income to $4.68 million for the three months ended September 30, 2025, up 89.86% from $2.466 million in the same period last year. Net sales also grew substantially, reaching $18.53 million, a 24.43% increase from $14.892 million in Q3 2024. This growth was primarily driven by a substantial unrealized gain on investments of $3.299 million, compared to $433,000 in the prior year. Gross profit increased to $5.367 million from $5.150 million, despite a higher cost of sales. The company's total assets rose to $64.298 million from $61.192 million at June 30, 2025, largely due to an increase in investments to $10.038 million from $6.740 million. Cash and cash equivalents increased to $514,000 from $419,000. A key strategic development is the completed acquisition of Monogram Technologies, Inc. by Zimmer Biomet Holdings, Inc., which will result in a realized gain of $6.8 million for PRO-DEX in Q2 fiscal 2026 and potential future CVR payments up to $12.37 per CVR.

Why It Matters

This strong performance, particularly the near doubling of net income and significant sales growth, signals robust operational health and effective investment strategies for PRO-DEX. The substantial unrealized gain on investments, coupled with the upcoming realized gain from the Monogram acquisition, provides a significant capital boost, which could be deployed for further growth or shareholder returns. For investors, the company's ability to leverage its investment portfolio, alongside its core medical device manufacturing business, demonstrates a diversified value creation approach. The transfer of exclusive development rights for Monogram products to Zimmer Biomet could also open new revenue streams and competitive advantages in the orthopedic market, benefiting customers through enhanced product development and potentially expanding PRO-DEX's market reach.

Risk Assessment

Risk Level: medium — The company's significant net income increase is heavily reliant on an 'unrealized gain on investments' of $3.299 million, which is subject to market volatility. While the Monogram acquisition promises a $6.8 million realized gain, future contingent value rights (CVRs) totaling up to $12.37 per CVR are not guaranteed, as 'there is no guarantee or assurance that any milestones will be achieved.' This reliance on investment performance introduces a degree of market risk.

Analyst Insight

Investors should closely monitor the company's core operational revenue growth, excluding investment gains, to assess sustainable performance. Given the upcoming realized gain from the Monogram acquisition, consider this a potential catalyst for future capital allocation decisions, such as share buybacks or debt reduction, which could further enhance shareholder value.

Financial Highlights

debt To Equity

0.55

revenue

$18.53M

operating Margin

16.78%

total Assets

$64.298M

total Debt

$22.785M

net Income

$4.68M

eps

$1.43

gross Margin

28.96%

cash Position

$514K

revenue Growth

+24.43%

Key Numbers

• $18.53B — Net Sales (Increased 24.43% from $14.892 million in Q3 2024)
• $4.68B — Net Income (Increased 89.86% from $2.466 million in Q3 2024)
• $3.299B — Unrealized gain on investments (Significant contributor to net income, up from $433,000 in Q3 2024)
• $1.43 — Basic net income per share (Increased from $0.76 in Q3 2024)
• $6.8B — Realized gain (Expected in Q2 fiscal 2026 from Monogram acquisition)
• $12.37 — Potential CVR payments per CVR (Maximum if all Monogram milestones are attained)
• $10.038B — Investments (Increased from $6.740 million at June 30, 2025)
• $514K — Cash and cash equivalents (Increased from $419,000 at June 30, 2025)
• 3,262,004 — Common shares outstanding (As of October 29, 2025)
• $21.564B — Total inventory (Decreased from $22.213 million at June 30, 2025)

Key Players & Entities

• PRO-DEX, INC. (company) — registrant
• PDEX Franklin, LLC (company) — wholly owned subsidiary
• Monogram Technologies, Inc. (company) — investment target acquired by Zimmer Biomet
• Zimmer Biomet Holdings, Inc. (company) — acquirer of Monogram Technologies, Inc.
• Air T, Inc. (company) — company with related-party investment and board members
• Mr. Van Kirk (person) — management director on Investment Committee
• Mr. Cabillot (person) — non-management director on Investment Committee
• Mr. Swenson (person) — non-management director and chair of Investment Committee
• NASDAQ Capital Market (regulator) — exchange where common stock is registered
• UMB Bank (company) — provider of loans

FAQ

Risk Factors

• Investment Valuation Fluctuations [medium — financial]: The company's net income is significantly impacted by unrealized gains on investments, which totaled $3.299 million in Q3 2025, compared to $433,000 in Q3 2024. This volatility in investment performance introduces a substantial risk to the predictability and stability of reported earnings.
• Inventory Management [low — operational]: Total inventory decreased from $22.213 million at June 30, 2025, to $21.564 million at September 30, 2025. While a decrease can indicate efficient inventory management, significant fluctuations or an inability to manage inventory levels effectively could impact sales and profitability.
• Contingent Consideration from Acquisitions [medium — legal]: The completed acquisition of Monogram Technologies, Inc. by Zimmer Biomet Holdings, Inc. will result in a realized gain of $6.8 million for PRO-DEX in Q2 fiscal 2026. However, potential future CVR payments up to $12.37 per CVR introduce contingent liabilities and uncertainty regarding the ultimate financial outcome of this transaction.

Industry Context

PRO-DEX operates in the medical device sector, specifically focusing on surgical instruments. The industry is characterized by innovation, stringent regulatory requirements, and consolidation, as evidenced by the Zimmer Biomet acquisition of Monogram Technologies. Growth is often driven by new product development and strategic acquisitions.

Regulatory Implications

As a medical device company, PRO-DEX is subject to regulations from bodies like the FDA. While this filing doesn't detail specific regulatory challenges, compliance with manufacturing standards and product approvals is crucial. The acquisition of Monogram by Zimmer Biomet may also involve regulatory approvals and integration processes.

What Investors Should Do

1. Monitor the realization of the $6.8 million gain from the Monogram acquisition and the potential CVR payments.
2. Analyze the sustainability of net income growth beyond investment gains.
3. Evaluate the company's inventory management strategy.

Key Dates

• 2025-09-30: End of Q3 2025 — Reported net sales of $18.53 million and net income of $4.68 million, driven by a significant unrealized gain on investments.
• 2025-06-30: End of Q2 2025 — Total assets stood at $61.192 million, with investments at $6.740 million and cash at $419,000.
• 2026-02-28: Expected Q2 Fiscal 2026 — PRO-DEX anticipates a realized gain of $6.8 million from the acquisition of Monogram Technologies, Inc.

Glossary

Unrealized gain on investments

An increase in the value of an investment that has not yet been sold. This gain is recognized on the income statement but does not represent actual cash received until the investment is sold. (A significant driver of PRO-DEX's net income in the current period, highlighting potential earnings volatility.)

CVR (Contingent Value Right)

A type of financial instrument that provides the holder with the right to receive additional payments if certain future milestones or conditions are met. (Indicates potential future cash inflows for PRO-DEX related to the Monogram acquisition, adding an element of future value but also uncertainty.)

Cost of sales

The direct costs attributable to the production or purchase of the goods sold by a company during a period. (Increased in Q3 2025, impacting gross profit despite higher net sales.)

Right-of-use asset, net

An asset representing a lessee's right to use an underlying asset for the lease term under a lease agreement, recognized under accounting standards like ASC 842. (Represents the company's long-term lease obligations, with a net value of $941,000 as of September 30, 2025.)

Year-Over-Year Comparison

Compared to the prior year's third quarter, PRO-DEX has demonstrated robust growth, with net sales increasing by 24.43% to $18.53 million and net income surging by 89.86% to $4.68 million. This significant net income improvement was primarily fueled by a substantial unrealized gain on investments, which grew from $433,000 to $3.299 million. While gross profit saw a modest increase, the cost of sales rose at a faster pace. Total assets have grown, largely due to increased investments, and cash and cash equivalents have also improved.

Key Financial Figures

• $4.04 — soon after the announcement we received $4.04 per share in cash for each of the 2,212
• $8.9 million — the acquisition, for total proceeds of $8.9 million. Accordingly, in our second quarter of
• $6.8 million — record a realized gain in the amount of $6.8 million. In addition, we received 2,212,378 non
• $1.04 — payments, if made, range in value from $1.04 to $3.43 per CVR for a total amount of
• $3.43 — , if made, range in value from $1.04 to $3.43 per CVR for a total amount of $12.37 sh
• $12.37 — to $3.43 per CVR for a total amount of $12.37 should all milestones be attained. Ther

Filing Documents

• pdex_10q-093025.htm (10-Q) — 620KB
• ex31x1.htm (EX-31.1) — 9KB
• ex31x2.htm (EX-31.2) — 8KB
• ex32.htm (EX-32) — 6KB
• 0001079973-25-001655.txt ( ) — 3666KB
• pdex-20250930.xsd (EX-101.SCH) — 33KB
• pdex-20250930_cal.xml (EX-101.CAL) — 47KB
• pdex-20250930_def.xml (EX-101.DEF) — 89KB
• pdex-20250930_lab.xml (EX-101.LAB) — 237KB
• pdex-20250930_pre.xml (EX-101.PRE) — 195KB
• pdex_10q-093025_htm.xml (XML) — 485KB

— FINANCIAL

PART I — FINANCIAL INFORMATION ITEM 1.

FINANCIAL STATEMENTS (Unaudited)

FINANCIAL STATEMENTS (Unaudited) 1 Condensed Consolidated Balance Sheets as of September 30, 2025 and June 30, 2025 1 Condensed Consolidated Statements of Operations for the Three September 30, 2025 and June 30, 2025 2 Condensed Consolidated Statements of Shareholders' Equity for the Three Months Ended September 30, 2025 and 2024 3 Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2025 and 2024 4 Notes to Condensed Consolidated Financial Statements 6 ITEM 2 .

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 17 ITEM 3 .

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 24 ITEM 4 .

CONTROLS AND PROCEDURES

CONTROLS AND PROCEDURES 24

— OTHER

PART II — OTHER INFORMATION ITEM 1.

LEGAL PROCEEDINGS

LEGAL PROCEEDINGS 26 ITEM 1A.

RISK FACTORS

RISK FACTORS 26 ITEM 2 . UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 26

OTHER

ITEM 5. OTHER INFORMATION 26 ITEM 6. EXHIBITS 27

— FINANCIAL

PART I — FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS PRO-DEX, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except share amounts) September 30, 2025 June 30, 2025 ASSETS Current Assets: Cash and cash equivalents $ 514 $ 419 Investments 10,038 6,740 Accounts receivable, net of allowance for credit losses of $ 2 and $ 0 at September 30, 2025 and at June 30, 2025, respectively 18,234 16,433 Deferred costs 32 24 Inventory 21,564 22,213 Income taxes receivable 106 1,056 Prepaid expenses and other current assets 235 410 Total current assets 50,723 47,295 Land and building, net 6,038 6,061 Equipment and leasehold improvements, net 4,969 5,153 Right-of-use asset, net 941 1,050 Intangibles, net 19 26 Deferred income taxes 1,415 1,415 Investments 149 148 Other assets 44 44 Total assets $ 64,298 $ 61,192 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 3,965 $ 4,614 Accrued liabilities 4,127 3,479 Income taxes payable 776 186 Deferred revenue 122 202 Notes payable 4,612 6,148 Total current liabilities 13,602 14,629 Lease liability, net of current portion 555 685 Notes payable, net of current portion 8,628 9,246 Total non-current liabilities 9,183 9,931 Total liabilities 22,785 24,560 Shareholders' Equity: Common stock; no par value; 50,000,000 shares authorized; 3,262,004 and 3,261,043 shares issued and outstanding at September 30, 2025 and June 30, 2025, respectively 905 704 Retained earnings 40,608 35,928 Total shareholders' equity 41,513 36,632 Total liabilities and shareholders' equity $ 64,298 $ 61,192 The accompanying notes are an integral part of these condensed consolidated financial statements. 1 PRO-DEX, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except share and per share amounts) Three Months Ended September 30, 2025

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