Sono-Tek Corporation (NASDAQ: SOTK) Q4 2025 Earnings Call | 05/28/2025

Sono-Tek Reports Q4 and Full Year Fiscal 2025 Results: Strategic Shift to Larger Systems Drives Growth

Sono-Tek, a company specializing in precision thin-film coating technology using ultrasonic nozzles, announced its financial results for the fourth quarter and full fiscal year ended February 28, 2025. The company highlighted a successful strategic shift towards offering more complex and complete coating solutions, which has significantly broadened its addressable market and driven growth in average unit selling prices.

Fiscal Year 2025 Financial and Operational Highlights:

• Revenue Growth: Sono-Tek achieved 4% annual revenue growth, reaching $20.5 million for the full fiscal year, up from $19.7 million in FY2024. The fourth quarter marked the fourth consecutive quarter of revenue exceeding $5 million.
• Net Income: Full-year net income was $1.3 million, similar to the prior year.
• Gross Profit: Increased 1% to $9.74 million, though the gross profit percentage decreased to 47.5% from 50% due to product mix and labor expense reallocation.
• Operating Expenses: Remained relatively stable at $8.73 million. Research and product development costs decreased slightly to $2.72 million due to salary reductions and reallocation of labor expenses.
• Strong Backlog: The company concluded Q4 with a solid equipment and service-related backlog of $8.6 million, which includes two of the largest orders in Sono-Tek's history, each for $2.95 million.
• Cash Position: Sono-Tek maintains a strong cash position with $11.9 million in cash, cash equivalents, and marketable securities, with no debt on its balance sheet.
• Capital Expenditure (CapEx): Full-year CapEx was $496,000, primarily for facility upgrades. Expected CapEx for FY2026 is approximately $435,000.

Business Segment Performance and Strategic Focus:

Sono-Tek's growth is largely attributed to its strategic pivot towards larger, higher-value systems and expansion into key sectors.

• Clean Energy Sector: Sales in this market surged by 64% year-over-year. Sono-Tek is successfully transitioning customers from R&D and pilot line machines to higher-ASP production-scale systems for applications like advanced solar cells, fuel cells, green hydrogen generation, and carbon capture. While a decline in clean energy orders is anticipated later in FY2026, near-term revenue growth is still expected.
• Integrated Coating Systems: Sales increased by 28% to $3.7 million, driven by success with a key strategic partner in the solar energy market. These systems are part of "Project Altair," which expands Sono-Tek's addressable market by offering sophisticated PLC-based systems.
• Multi-Axis Coating Systems: Sales grew 6% to $10.7 million. These solutions are key in clean energy and medical devices, utilizing Sono-Tek's newest and highest average selling price (ASP) platforms developed under "Project ARIES," which aims to enhance in-house design and building capabilities.
• Medical Device Industry: The company is experiencing strong momentum, particularly for high-volume production systems and balloon coating machines used in cardiac interventions. This represents a significant new market segment, offering higher revenue potential per machine compared to traditional stent coating systems.
• Semiconductor Market: Sono-Tek is actively quoting high-ASP machines and sees opportunities for growth by offering unique solutions that competitors cannot, especially for highly complex wafer handling systems. These systems are expected to command prices significantly higher than previous offerings.
• Geographic Sales: Approximately 61% of sales were to U.S. and Canadian customers, up from 55% in FY2024, reinforcing the strategy for high-volume, premium-priced systems. Sales in Asia, particularly China, continued to decline, while EMEA sales saw a slight increase driven by green energy.

Outlook and Future Initiatives:

Sono-Tek expects continued sales growth and profitability in the first half of fiscal 2026, supported by its solid backlog and steady demand across key markets. While full-year revenue visibility remains limited due to evolving clean energy conditions and potential tariffs, the company is confident in its long-term growth prospects.

Sono-Tek's proprietary ultrasonic atomization technology remains central to its systems. The company is actively exploring opportunities in new areas like thin-film batteries and protective barrier coatings for lithium batteries (related to fire safety), which are currently in the R&D stage but show promising long-term potential. The company believes it has a long runway for organic growth and is open to synergistic acquisitions if they align with shareholder and employee interests.