SRK Capital: Pro-Dex ($PDEX) Investment Case

In their H1 2026 investor letter, SRK Capital discusses Pro-Dex Inc. ($PDEX), a new holding the firm added during the fourth quarter of 2025. SRK Fund I, LP returned 26.80% in the first half of 2026, compared with 10.18% for the S&P 500 and 22.57% for the Russell 2000, a result the firm says it achieved with zero exposure to companies tied to the AI buildout. Portfolio manager Sean Kirkwood writes that he prefers to commit capital when a business model is proven and the economics are visible, focusing on situations where he believes market neglect or transitions have temporarily obscured normalized earnings power. SRK views Pro-Dex as fitting that approach: a stable, cash-generative core business where the firm believes investors receive robotic surgery upside and off-balance-sheet value for little to no credit.

Investment Highlight: Pro-Dex Inc. ($PDEX)

Why the Opportunity Emerged

• Kirkwood writes that he has followed Pro-Dex for many years and long sought an opportunity to own shares at an attractive price
• According to the letter, that opening came when the stock sold off on concerns that the company’s largest customer contract would not be renewed at year-end 2025
• SRK notes the risk was resolved when Pro-Dex secured a three-year extension through 2028, including minimum purchase commitments for 2026 and 2027
• The firm believes the renewal reinforces the durability of a relationship that has lasted more than fifteen years and provides a predictable, cash-generative base to fund growth

Business Overview and Competitive Position

• SRK describes Pro-Dex as a specialized medical device manufacturer that designs, builds, and repairs powered surgical handpieces for large OEM customers
• According to the letter, the company operates under long-term, exclusive supply agreements
• The firm views these relationships as difficult to displace because each product is tied to customer-specific regulatory clearances, designs, and validated manufacturing processes
• SRK also points to intellectual property owned by Pro-Dex as part of what anchors those customer relationships

mBôs Robotic Surgery Opportunity

• SRK sees the most attractive upside in Pro-Dex’s role as the exclusive hardware and component partner for Zimmer Biomet’s mBôs robotic surgery platform
• According to the letter, Pro-Dex manufactures the platform’s motorized end-effector components
• The firm notes the company also receives a high-margin sourced products fee on third-party disposable cutting tools used in each procedure
• SRK views this as creating a recurring, procedure-linked revenue stream

Off-Balance-Sheet Value and Acquisition

• SRK highlights that Pro-Dex owns 2.2 million contingent value rights tied to Zimmer Biomet’s acquisition of Monogram Technologies
• According to the letter, the CVRs are carried at zero on the balance sheet but could pay more than $25 million, or roughly $6.80 per share, if future mBôs milestones are achieved
• The firm notes the February 2026 acquisition of Advanced Precision Machining brings a key supplier in-house and expands manufacturing capacity
• SRK adds that the deal brings higher-margin aerospace, defense, and government customers

Valuation and Asymmetry

• SRK believes PDEX offers asymmetric upside at the current price
• The firm’s view is that it is paying primarily for the stable core business while receiving the potential mBôs economics and CVR value for little to no credit
• If commercialization scales over the next 24 to 36 months, SRK sees a clear path to materially higher earnings power and a substantially higher share price
• The letter does not provide a specific price target or valuation multiple for the position

SRK Capital views Pro-Dex as a durable, cash-generative medical device manufacturer whose largest customer overhang has been resolved by a contract extension through 2028. The firm believes the market is valuing the core handpiece business alone, leaving the mBôs procedure-linked revenue stream, the contingent value rights and the Advanced Precision Machining acquisition as sources of upside. In SRK’s view, successful mBôs commercialization over the next 24 to 36 months could lead to materially higher earnings power.

Click here for the full Pro Investor Letter.