Earnings Performance - Sono-Tek Corporation reported quarterly earnings of $0.03 per share, exceeding the Zacks Consensus Estimate of $0.02 per share, and up from $0.02 per share a year ago, representing an earnings surprise of +50.00% [1] - The company had revenues of $5.13 million for the quarter ended May 2025, which was 1.1% below the Zacks Consensus Estimate, but slightly up from $5.03 million year-over-year [2] Stock Performance - Sono-Tek shares have declined approximately 6.2% since the beginning of the year, contrasting with the S&P 500's gain of 6.5% [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating expectations of underperformance in the near future [6] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.03 on revenues of $5.6 million, and for the current fiscal year, it is $0.04 on revenues of $19.62 million [7] - The Electronics - Semiconductors industry, to which Sono-Tek belongs, is currently ranked in the top 34% of over 250 Zacks industries, suggesting a favorable industry outlook [8]

Part I [Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201%20%E2%80%93%20Condensed%20Consolidated%20Financial%20Statements) The company's financial statements for the quarter ended May 31, 2025, show total assets increased to **$23.42 million**, net income rose to **$485,000**, and operating cash flow was **($922,000)** [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Summary (as of May 31, 2025) | Account | May 31, 2025 (Unaudited) ($) | February 28, 2025 ($) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $4,863,039 | $5,202,361 | | Total current assets | $18,966,929 | $18,988,465 | | **Total Assets** | **$23,422,323** | **$23,411,636** | | **Liabilities & Equity** | | | | Total current liabilities | $5,026,984 | $5,487,307 | | **Total Liabilities** | **$5,149,459** | **$5,619,441** | | **Total Stockholders' Equity** | **$18,272,864** | **$17,792,195** | [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Income Statement Summary (Three Months Ended May 31) | Account | 2025 (Unaudited) ($) | 2024 (Unaudited) ($) | | :--- | :--- | :--- | | Net Sales | $5,132,773 | $5,031,038 | | Gross Profit | $2,664,514 | $2,454,487 | | Operating Income | $483,368 | $238,296 | | **Net Income** | **$484,985** | **$330,837** | | Diluted Earnings Per Share | $0.03 | $0.02 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary (Three Months Ended May 31) | Activity | 2025 (Unaudited) ($) | 2024 (Unaudited) ($) | | :--- | :--- | :--- | | Net Cash (Used in) Provided by Operating Activities | ($922,293) | $327,964 | | Net Cash Provided by (Used in) Investing Activities | $662,450 | ($60,743) | | Net Cash Used in Financing Activities | ($79,479) | $0 | | **Net (Decrease)/Increase in Cash** | **($339,322)** | **$267,221** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Key notes detail revenue recognition for short-term contracts, product line contributions, export sales, and significant customer concentration - Sales revenue is primarily derived from short-term contracts (less than 12 months) and recognized when control of equipment is transferred to the customer[33](index=33&type=chunk)[34](index=34&type=chunk) Revenue by Product Line (Three Months Ended May 31, 2025) | Product Line | Revenue ($) | % of Total | | :--- | :--- | :--- | | Integrated Coating Systems | $3,054,000 | 59% | | Multi-Axis Coating Systems | $677,000 | 13% | | OEM Systems | $130,000 | 3% | | Fluxing Systems | $152,000 | 3% | | Spare Parts, Services and Other | $1,120,000 | 22% | - For the three months ended May 31, 2025, sales to foreign customers were approximately **$1.59 million**, or **31% of total revenues**[49](index=49&type=chunk) - A single customer accounted for **57% of sales** during the first quarter of fiscal 2026 and **68% of outstanding accounts receivable** at May 31, 2025[50](index=50&type=chunk) [Management's Discussion and Analysis (MD&A)](index=16&type=section&id=Item%202%20-%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a **2% increase in net sales** to **$5.1 million**, improved gross margin to **51.9%**, and a strong liquidity position with **$10.9 million** in cash - Net Sales increased **2% to $5.13 million**, driven by strong shipments to the Alternative/Clean Energy market[62](index=62&type=chunk) - Gross margin expanded **310 basis points to 51.9%**, attributed to a favorable product mix and higher concentration of U.S. sales with lower commission expenses[62](index=62&type=chunk) - Operating income increased to **$483,000** from **$238,000** in the prior year period[62](index=62&type=chunk) - As of May 31, 2025, the company had **$10.9 million** in cash, cash equivalents, and marketable securities with no outstanding debt[62](index=62&type=chunk) [Results of Operations](index=18&type=section&id=Results%20of%20Operations) Sales growth was driven by a **309% increase in Integrated Coating Systems**, with Alternative Energy sales up **42%**, and gross margin improving to **51.9%** Sales by Product (Three Months Ended May 31) | Product Line | 2025 ($) | 2024 ($) | Change (%) | | :--- | :--- | :--- | :--- | | Integrated Coating Systems | $3,054,000 | $747,000 | 309% | | Multi-Axis Coating Systems | $677,000 | $2,664,000 | (75%) | | OEM Systems | $130,000 | $332,000 | (61%) | Sales by Market (Three Months Ended May 31) | Market | 2025 ($) | 2024 ($) | Change (%) | | :--- | :--- | :--- | :--- | | Alternative Energy/Clean | $3,248,000 | $2,282,000 | 42% | | Electronics/Microelectronics | $943,000 | $1,568,000 | (40%) | | Medical | $809,000 | $857,000 | (6%) | Sales by Geography (Three Months Ended May 31) | Region | 2025 ($) | 2024 ($) | Change (%) | | :--- | :--- | :--- | :--- | | U.S. & Canada | $3,543,000 | $3,091,000 | 15% | | EMEA | $897,000 | $1,245,000 | (28%) | | Asia Pacific (APAC) | $597,000 | $513,000 | 16% | - Gross profit increased **9% to $2.67 million**, and gross margin improved to **51.9%** from **48.8%**, driven by a favorable product mix and lower commission expenses on a large U.S. order[66](index=66&type=chunk) [Liquidity and Capital Resources](index=20&type=section&id=Liquidity%20and%20Capital%20Resources) Working capital increased to **$13.94 million**, while cash and marketable securities decreased due to higher accounts receivable and inventories, resulting in **($922,000)** cash used in operations - Working capital increased to **$13.94 million** at May 31, 2025, from **$13.50 million** at February 28, 2025[77](index=77&type=chunk) - Cash used in operating activities was **$922,000**, a decrease of **$1.25 million** from the prior year, mainly due to increases in accounts receivable and inventories[80](index=80&type=chunk) - Accounts receivable increased by **$749,000** due to revised payment terms for one customer on a **$2.9 million** order; the company does not foresee collection issues[81](index=81&type=chunk) - The company has a **$1.5 million** revolving line of credit and a **$750,000** equipment line of credit, with no outstanding borrowings under either as of May 31, 2025[47](index=47&type=chunk)[48](index=48&type=chunk) [Critical Accounting Estimates](index=21&type=section&id=Critical%20Accounting%20Estimates) The company identifies Accounting for Income Taxes and Revenue Recognition as critical policies requiring significant judgment, particularly for deferred tax assets and equipment control transfer - The company's critical accounting policies are identified as Accounting for Income Taxes and Revenue Recognition[90](index=90&type=chunk) - For revenue recognition, judgment is required to determine the point in time control of manufactured equipment is transferred to customers, based on contract terms[93](index=93&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=24&type=section&id=Item%203%20%E2%80%93%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is not subject to material market risk, avoiding speculative financial instruments, and faces immaterial foreign currency or interest rate risks due to U.S. dollar operations - The company does not issue or invest in financial instruments for trading or speculative purposes[97](index=97&type=chunk) - Operations are primarily in the United States and all sales transactions are in U.S. dollars, so the company is not subject to material foreign currency exchange rate risk[97](index=97&type=chunk) - Market rate risk from changing interest rates on its **$4.86 million** in cash and **$5.99 million** in marketable securities is not considered material[98](index=98&type=chunk) [Controls and Procedures](index=24&type=section&id=Item%204%20%E2%80%93%20Controls%20and%20Procedures) The CEO and CFO concluded that disclosure controls and procedures were effective as of May 31, 2025, with no material changes to internal controls during the quarter - The CEO and CFO evaluated the company's disclosure controls and procedures as of May 31, 2025, and concluded they were effective[99](index=99&type=chunk) - No changes in internal controls over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[100](index=100&type=chunk) Part II [Legal Proceedings & Risk Factors](index=25&type=section&id=Item%201.%20Legal%20Proceedings%20%26%20Item%201A.%20Risk%20Factors) The company reports no legal proceedings and no material changes to risk factors from its most recent Annual Report on Form 10-K - The company has no legal proceedings to report[103](index=103&type=chunk) - There are no material changes to risk factors from the most recent Form 10-K[103](index=103&type=chunk) [Issuer Purchases of Equity Securities](index=25&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **21,335 shares** for **$79,479** under its **$2 million** stock repurchase program, with **$1.91 million** remaining Stock Repurchase Activity (Q1 FY2026) | Period | Shares Purchased | Average Price Paid ($) | | :--- | :--- | :--- | | March 2025 | 11,646 | $3.77 | | April 2025 | 9,689 | $3.67 | | May 2025 | - | - | | **Total** | **21,335** | **N/A** | - The total cost for shares repurchased during the quarter was **$79,479**[104](index=104&type=chunk) - The stock repurchase program, for up to **$2,000,000**, had **$1,912,654** remaining value for future purchases as of the end of the quarter[104](index=104&type=chunk)

[Q1 FY2026 Financial Highlights](index=1&type=section&id=First%20Quarter%20Fiscal%20Year%202026%20Highlights) Sono-Tek reported its fifth consecutive quarter with revenue over **$5 million**, driven by a significant solar order, leading to improved profitability with gross margins at **52%** and operating income more than doubling | Financial Metric | Q1 FY2026 | Q1 FY2025 | Change | | :--- | :--- | :--- | :--- | | **Net Sales** | $5.13 million | $5.03 million | +2% | | **Gross Profit** | $2.7 million | $2.5 million | +9% | | **Gross Margin** | 52% | 49% | +3 p.p. | | **Operating Income** | $483 thousand | $238 thousand | +103% | | **Net Income** | $485 thousand | $331 thousand | +47% | | **Diluted EPS** | $0.03 | $0.02 | +50% | - This marks the fifth consecutive quarter with sales over **$5 million**, driven by strong shipments to the Alternative/Clean Energy Market, including a single high ASP order of **$2.95 million**[1](index=1&type=chunk)[3](index=3&type=chunk)[7](index=7&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management expressed satisfaction with the strong start to FY2026, anticipating continued first-half profitability but a cautious full-year outlook due to policy uncertainties - The first half of fiscal year 2026 is expected to maintain current revenue levels and strong profitability[2](index=2&type=chunk) - The full-year outlook is cautious, with expectations for relatively flat revenue growth due to uncertainty related to governmental clean energy incentives and evolving tariff policies[2](index=2&type=chunk) - The company is seeing promising demand from the medical device industry for high-volume production systems and is focusing on large-scale systems with significantly higher average selling prices (ASPs)[2](index=2&type=chunk) [FY 2026 Guidance](index=2&type=section&id=FY%202026%20Guidance) The company expects continued first-half growth and profitability, supported by a **$7.5 million** backlog, but forecasts flat full-year revenue due to policy uncertainties - Strong growth and profitability are expected for the first half of FY2026, but the full-year outlook is for relatively flat revenue growth due to policy uncertainties[4](index=4&type=chunk) - As of May 31, 2025, the equipment and service-related backlog totaled **$7.5 million**, providing a stable base for near-term demand[4](index=4&type=chunk) [Detailed Financial Analysis](index=2&type=section&id=Detailed%20Financial%20Analysis) This section details financial performance, highlighting increased gross profit and operating income driven by product mix, and significant shifts in sales across categories, markets, and regions [Profitability Analysis](index=2&type=section&id=Profitability%20Analysis) Gross margin improved to **52%** from **49%** YoY due to favorable product mix and US sales, significantly increasing operating and net income | Profitability Metric | Q1 FY2026 | Q1 FY2025 | Change | | :--- | :--- | :--- | :--- | | **Gross Profit** | $2.7 million | $2.5 million | +9% | | **Gross Margin** | 52% | 49% | +3 p.p. | | **Operating Income** | $483 thousand | $238 thousand | +103% | | **Net Income** | $485 thousand | $331 thousand | +47% | - The gross margin increase was mainly due to a favorable product mix, including a repeat high ASP order, and a concentration of shipments to the U.S., which typically involve minimal distributor discounts[6](index=6&type=chunk) [Sales Analysis by Segment](index=2&type=section&id=Sales%20Analysis%20by%20Segment) Sales were significantly impacted by a **$2.95 million** solar order, driving substantial growth in Integrated Coating Systems and Alternative/Clean Energy, while other segments declined Sales by Product Category (YoY) | Product Category | Q1 FY2026 Sales ($) | YoY Change | | :--- | :--- | :--- | | Integrated Coating Systems | $3.05 million | +309% | | Multi-Axis Coating Systems | $0.68 million | -75% | | OEM Systems | $0.13 million | -61% | Sales by End Market (YoY) | End Market | Q1 FY2026 Sales ($) | YoY Change | | :--- | :--- | :--- | | Alternative/Clean Energy | $3.25 million | +42% | | Electronics/Microelectronics | $0.94 million | -40% | | Medical | $0.81 million | -6% | | Industrial | $0.12 million | -62% | Sales by Geography (YoY) | Geography | Q1 FY2026 Sales ($) | YoY Change | | :--- | :--- | :--- | | U.S. & Canada | $3.54 million | +15% | | Asia Pacific (APAC) | $0.60 million | +16% | | Europe, Middle East, Asia (EMEA) | $0.90 million | -28% | [Balance Sheet and Cash Flow Overview](index=3&type=section&id=Balance%20Sheet%20and%20Cash%20Flow%20Overview) As of May 31, 2025, Sono-Tek maintained a strong balance sheet with **$10.9 million** in cash and no debt, reflecting solid financial health - Cash, cash equivalents and marketable securities totaled **$10.9 million** at May 31, 2025[13](index=13&type=chunk) - The company had no debt on its balance sheet and stockholders' equity was **$18.3 million**[13](index=13&type=chunk) - Capital expenditures in Q1 FY2026 were **$52,000**, invested in manufacturing facility upgrades[13](index=13&type=chunk) [Financial Statements](index=5&type=section&id=FINANCIAL%20TABLES%20FOLLOW) This section presents detailed unaudited condensed consolidated financial statements for the period ended May 31, 2025, including the Balance Sheet, Statement of Income, and sales breakdowns [Condensed Consolidated Balance Sheets](index=5&type=section&id=SONO-TEK%20CORPORATION%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) This section presents the condensed consolidated balance sheets, detailing assets, liabilities, and equity as of May 31, 2025, and February 28, 2025 - Total assets were **$23.42 million** as of May 31, 2025, nearly unchanged from **$23.41 million** at February 28, 2025[17](index=17&type=chunk) - Total liabilities decreased to **$5.15 million** from **$5.62 million**, while total stockholders' equity increased to **$18.27 million** from **$17.79 million** over the same period[17](index=17&type=chunk) [Condensed Consolidated Statements of Income](index=6&type=section&id=SONO-TEK%20CORPORATION%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20INCOME) This section presents the condensed consolidated statements of income, detailing revenue, gross profit, operating income, and net income for Q1 FY2026 and Q1 FY2025 | Income Statement | Q1 FY2026 (3 mo ended May 31, 2025) ($) | Q1 FY2025 (3 mo ended May 31, 2024) ($) | | :--- | :--- | :--- | | **Net Sales** | $5,132,773 | $5,031,038 | | **Gross Profit** | $2,664,514 | $2,454,487 | | **Operating Income** | $483,368 | $238,296 | | **Net Income** | $484,985 | $330,837 | | **Diluted EPS** | $0.03 | $0.02 | [Product, Market, and Geographic Sales](index=7&type=section&id=SONO-TEK%20CORPORATION%20PRODUCT,%20MARKET,%20AND%20GEOGRAPHIC%20SALES) This section provides a detailed breakdown of sales performance by product category, end market, and geographic region for Q1 FY2026 - Sales of Integrated Coating Systems grew **309%** YoY to **$3.05 million**, while Multi-Axis Coating Systems declined **75%** to **$0.68 million**[21](index=21&type=chunk) - The Alternative Energy/Clean market became the largest segment, with sales growing **42%** YoY to **$3.25 million**, representing **63%** of total sales[22](index=22&type=chunk) - Sales in the U.S. & Canada region increased by **15%** YoY to **$3.54 million**, while sales in the EMEA region decreased by **28%**[23](index=23&type=chunk)

Core Insights - Sono-Tek Corporation reported its fifth consecutive quarter of revenue exceeding $5 million, driven by a significant order completion in the advanced solar market valued at $2.95 million [1][2][3] - The company achieved a gross margin of 52%, an increase from 49% in the previous year, and operating income rose by 103% year-over-year [1][7] - Despite strong performance in the first half of FY 2026, the company maintains a cautious full-year revenue outlook due to uncertainties surrounding governmental clean energy incentives and tariff policies [2][5] Financial Performance - Net sales for the first quarter of FY 2026 reached $5.13 million, a 2% increase from $5.03 million in the same quarter of FY 2025 [7] - Gross profit increased to $2.7 million, up 9% from $2.5 million year-over-year, contributing to a gross margin expansion [7] - Operating income rose to $483 thousand, a 103% increase compared to $238 thousand in the first quarter of FY 2025 [7] - Net income for the quarter was $485 thousand, reflecting a 47% increase from $331 thousand in the prior year [7] Market and Product Insights - Sales in the Alternative/Clean Energy market increased by 42% year-over-year, driven by production-scale system shipments, including a high ASP order of $2.95 million [9] - Integrated Coating Systems sales surged by 309% to $3.05 million, primarily due to a repeat order for high ASP systems [8] - Multi-Axis Coating Systems sales declined by 75% to $677,000, attributed to reduced R&D funding in the clean energy sector following government policy shifts [8] Guidance and Outlook - The company expects continued revenue growth and strong profitability in the first half of FY 2026, supported by a backlog of $7.5 million [5][6] - Full-year revenue growth is anticipated to be relatively flat due to market adjustments in response to recent governmental policy changes [5][6] - The company remains focused on high ASP orders and is well-positioned to navigate potential short-term demand shifts [3][5] Balance Sheet Overview - As of May 31, 2025, Sono-Tek reported cash, cash equivalents, and marketable securities totaling $10.9 million, with no debt on its balance sheet [16] - Stockholders' equity stood at $18.3 million, reflecting a healthy financial position [16]

Core Insights - Sono-Tek Corporation reported its fifth consecutive quarter of revenue exceeding $5 million, driven by a significant order in the advanced solar market valued at $2.95 million [1][5] - The company achieved a gross margin of 52%, an increase from 49% year-over-year, and operating income rose by 103% compared to the previous year [1][5] - Despite strong performance in the first half of FY 2026, the company maintains a cautious full-year revenue outlook due to uncertainties surrounding government clean energy incentives and tariff policies [2][4] Financial Performance - Net sales for the first quarter of FY 2026 reached $5.13 million, a 2% increase from $5.03 million in the same quarter of FY 2025 [5][20] - Gross profit increased to $2.7 million, up 9% from $2.5 million year-over-year, contributing to a significant rise in operating income to $483 thousand [5][20] - Net income rose by 47% to $485 thousand, reflecting improved gross profit and reduced operating expenses [5][20] Market and Product Insights - The alternative/clean energy market saw a 42% year-over-year increase in sales, driven by production-scale system shipments, including the high ASP order [14][24] - Integrated coating systems sales surged by 309% to $3.05 million, primarily due to the repeat high ASP order for clean energy applications [14][24] - The electronics market experienced a decline of 40% year-over-year, influenced by the absence of a significant prior year sale [14][24] Geographic Performance - Sales in the U.S. and Canada increased by 15% year-over-year, totaling $3.54 million, bolstered by the advanced solar market order [14][25] - Sales in the Asia Pacific region rose by 16%, while Europe, the Middle East, and Asia saw a decline of 28% [14][25] - Latin America experienced a significant drop in sales, decreasing by 47% compared to the previous year [14][25] Guidance and Outlook - The company expects continued revenue growth and strong profitability in the first half of FY 2026, supported by a backlog of $7.5 million [4][6] - Full-year revenue growth is anticipated to be relatively flat due to potential impacts from government policy changes affecting customer orders [2][4] - The company remains focused on long-term growth strategies, particularly in the medical device industry and high ASP orders [2][4]

Core Viewpoint - Sono-Tek Corporation has received a significant order of $1.12 million from a long-term customer in the medical diagnostic testing industry, indicating a strong evolution in their partnership and the company's advanced capabilities in automation and high-volume production [1][2][3]. Company Overview - Sono-Tek Corporation, founded in 1975, is a pioneer in ultrasonic coating technology, evolving from R&D solutions to high-performance manufacturing platforms for various innovation-driven industries [5]. Customer Relationship - The customer, a global manufacturer of medical diagnostic platforms, has been a partner of Sono-Tek for nearly a decade, previously deploying over ten mid-size ultrasonic coating systems, each valued between $110,000 and $150,000 [2]. - The new order signifies a major advancement in the relationship, showcasing Sono-Tek's enhanced capabilities [2][3]. Technological Advancements - The new system ordered is designed to support sophisticated automation and reduce operator intervention, facilitating scalable production of advanced diagnostic consumables [3]. - This order aligns with Sono-Tek's strategy to provide fully integrated, high-performance coating platforms that meet the demands of high-volume manufacturing in sectors such as medical devices, alternative energy, and microelectronics [4]. Market Position - Sono-Tek's systems are recognized for enabling thin-film deposition with exceptional uniformity, material efficiency, and process control, catering to advanced applications in medical devices, microelectronics, and alternative energy [5].

Financial Data and Key Metrics Changes - Net sales for fiscal year 2025 increased by 4% to $20.5 million compared to $19.7 million for fiscal year 2024 [29] - Gross profit increased by 1% year over year to $9.74 million, but gross profit percentage decreased to 47.5% from 50% due to product mix and labor expense reallocations [29][30] - Net income for fiscal year 2025 was $1.2 million or $0.08 per share, down from $1.4 million or $0.09 per share in the prior year [33] Business Line Data and Key Metrics Changes - Integrated coating system sales increased by 28% or $814,000 to $3.7 million, driven by success in the solar energy market [16] - Multi-axis coating systems saw a 6% increase or $603,000 to $10.7 million for the full fiscal year [19] - Medical sales declined by 22% for fiscal year 2025, primarily due to lower demand for stent and balloon coating systems [22] Market Data and Key Metrics Changes - Sales to the alternative clean energy market grew by 64% over the prior fiscal year, significantly impacted by customers transitioning to production scale systems [22] - U.S. and Canadian sales increased by 15% or $1.63 million, representing 61% of total sales compared to 55% in fiscal year 2024 [24] - Latin America sales decreased by 34% or $412,000, while Asian sales declined by 16% or $510,000 due to weak demand from China [25] Company Strategy and Development Direction - The company is focusing on expanding its product offerings in the clean energy sector, medical devices, and semiconductor markets, with a strategic shift towards larger, more complex systems [9][12] - Investments in R&D totaled $2.7 million, aimed at enhancing product capabilities and expanding market reach [27] - The company is optimistic about future growth prospects, particularly in the medical and semiconductor sectors, leveraging its proprietary ultrasonic atomization technology [27][62] Management's Comments on Operating Environment and Future Outlook - Management noted some apprehension in the U.S. clean energy sector regarding order placements, but highlighted strong demand in the EU and Asia [45][46] - The company anticipates continued revenue growth and profitability in the first half of fiscal year 2026, supported by a solid backlog of $8.6 million [13][26] - Visibility into full-year revenue remains limited due to evolving conditions in the clean energy sector and potential tariff impacts [18][20] Other Important Information - The company maintains a strong cash position with cash, cash equivalents, and marketable securities totaling $11.9 million as of February 28, 2025, and has no debt [33] - Capital expenditures for the full year were $496,000, primarily for upgrades to manufacturing and development facilities [34] Q&A Session Summary Question: Clarification on backlog related to Alt Energy - Management confirmed that there are eight systems in backlog from the clean energy sector, all expected to ship in the current fiscal year [40] Question: Visibility on demand and potential pullback - Management acknowledged some apprehension in the U.S. clean energy sector but noted strong demand in other regions [45] Question: Impact of tariffs on business - Management indicated that tariffs have not significantly impacted operations outside of China, with favorable currency exchange rates aiding customer purchases [48] Question: Future growth and order visibility - Management expects to have clearer visibility on full fiscal year performance by the time Q1 earnings are reported [52] Question: Opportunities in medical and semiconductor sectors - Management highlighted strong momentum in both sectors, with a focus on high ASP systems and complex solutions [61][82] Question: Share repurchase program status - Management confirmed an active share repurchase program and stated it is regularly evaluated as part of capital allocation strategy [71]

Financial Data and Key Metrics Changes - Net sales for fiscal year 2025 increased by 4% to $20.5 million compared to $19.7 million for fiscal year 2024 [29] - Gross profit increased by 1% year over year to $9.74 million, but gross profit percentage decreased to 47.5% from 50% in the prior year [29] - Net income for fiscal year 2025 was $1.2 million or $0.08 per share, down from $1.4 million or $0.09 per share in the prior year [33] Business Line Data and Key Metrics Changes - Integrated coating system sales increased by 28% or $814,000 to $3.7 million, driven by success in the clean energy market [15] - Multi-axis coating systems saw sales grow by 6% or $603,000 to $10.7 million for the full fiscal year [18] - Medical sales declined by 22% for fiscal year 2025, primarily due to lower demand for stent and balloon coating systems [21] Market Data and Key Metrics Changes - Sales to the alternative clean energy market grew by 64% over the prior fiscal year [20] - U.S. and Canadian sales increased by 15% or $1.63 million, driven by the delivery of high ASP systems [23] - Latin America sales decreased by 34% or $412,000, influenced by a prior year float glass coating system sale that did not repeat [24] Company Strategy and Development Direction - The company is focusing on expanding into the clean energy sector, with significant growth in advanced solar cells and carbon capture applications [8] - A strategic shift to larger, more complex systems has broadened the addressable market and increased average unit selling prices [7] - The company is optimistic about future demand in the medical and semiconductor markets, leveraging expertise developed in clean energy [61] Management's Comments on Operating Environment and Future Outlook - Management noted some apprehension in the U.S. clean energy sector regarding order placements, but emphasized strong demand in the EU and Asia [45][47] - The company expects continued revenue growth and profitability in the first half of fiscal year 2026, supported by a solid backlog of $8.6 million [12][26] - Visibility into full-year revenue remains limited due to evolving conditions in the clean energy sector and potential tariff impacts [16] Other Important Information - The company invested $2.7 million in R&D for the fiscal year, down from $2.9 million in the prior year [27] - The company maintains a strong cash position with $11.9 million in cash, cash equivalents, and marketable securities, and no debt on the balance sheet [34] Q&A Session Summary Question: Clarification on backlog related to Alt Energy - Management confirmed that there are eight systems in backlog from the clean energy sector, all expected to ship in the current fiscal year [40] Question: Visibility on demand and potential pullback - Management acknowledged some apprehension in the U.S. clean energy sector but noted that the majority of their customers are financially stable [45][46] Question: Opportunities driving backlog in upcoming months - Management highlighted strong momentum in the medical and semiconductor sectors, with ongoing demand for high ASP products [60] Question: Medical market growth and geographical expansion - Management indicated that growth in the medical market is primarily coming from the U.S. and EU, with a shift towards more complex systems [78] Question: Semiconductor market commentary - Management noted that they are offering unique solutions that competitors cannot provide, which is driving progress in the semiconductor sector [83]

Core Viewpoint - Sono-Tek Corporation reported quarterly earnings of $0.02 per share, exceeding the Zacks Consensus Estimate of $0.01 per share, marking a 100% earnings surprise compared to $0.01 per share a year ago [1] Financial Performance - The company achieved revenues of $5.12 million for the quarter ended February 2025, surpassing the Zacks Consensus Estimate by 2.42%, and showing an increase from $4.77 million year-over-year [2] - Over the last four quarters, Sono-Tek has exceeded consensus EPS estimates two times and topped consensus revenue estimates three times [2] Stock Performance - Sono-Tek shares have declined approximately 3.7% since the beginning of the year, while the S&P 500 has gained 0.7% [3] - The current Zacks Rank for Sono-Tek is 3 (Hold), indicating expected performance in line with the market in the near future [6] Earnings Outlook - The consensus EPS estimate for the upcoming quarter is $0.03 on revenues of $5.79 million, and for the current fiscal year, it is $0.08 on revenues of $21.79 million [7] - The trend of estimate revisions for Sono-Tek is currently mixed, which may change following the recent earnings report [6] Industry Context - The Electronics - Semiconductors industry, to which Sono-Tek belongs, is currently ranked in the top 36% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8]

Financial Performance - Net sales reached a record $20.5 million, up 4% from $19.7 million in fiscal 2024, driven by strong shipments to the Alternative/Clean Energy Market[129]. - Gross profit decreased by 1% to $9.74 million, with a gross margin of 47.5%, down from 50% in the previous year, primarily due to product mix and reclassification of labor costs[129][135]. - Operating income fell to $1.01 million, down from $1.20 million in fiscal 2024, attributed to lower gross profit and higher operating expenses[129]. - Net income was approximately $1.3 million, a decrease from $1.4 million in fiscal 2024, reflecting lower gross profit and increased operating expenses[129]. - The backlog of equipment and service-related orders was $8.67 million, down 6.6% from the prior year-end record high of $9.28 million[129]. - Sales in the Alternative/Clean Energy market surged 64% to $9.84 million, driven by production-scale system shipments to the solar market[141]. - U.S. and Canada sales increased by 15% to $12.51 million, supported by the delivery of five high Average Selling Price systems totaling $3.85 million[142]. - Research and product development expenses decreased by 6% to $2.72 million, due to reduced salaries and reallocation of labor expenses[143][144]. - Total operating expenses rose slightly by 1% to $8.73 million, with general and administrative expenses increasing by 12%[143]. - Operating income decreased by $172,000 or 15%, to $1,010,000 in fiscal 2025 compared to $1,182,000 in the prior fiscal year[152]. - Net income decreased by $168,000 or 12%, to $1,273,000 for fiscal 2025 compared to $1,441,000 for the prior fiscal year[155]. Market and Sales Dynamics - In fiscal 2025, 39% of total sales were generated from international markets, amounting to approximately $7,998,000, down from 45% or $8,822,000 in fiscal 2024[24][35]. - Approximately 39% of sales originated outside the U.S. and Canada, highlighting the company's geographic diversity[131]. - The company expects to derive a substantial portion of sales from outside the U.S., indicating reliance on global economic conditions[47]. - The company is exposed to risks related to international sales, including tariffs and trade wars, which could significantly impact revenue[75]. - Changes in United States trade policy, including tariffs, may adversely impact the company's business and results of operations[44]. - Customers or suppliers experiencing cash flow problems may modify, delay, or cancel purchase plans, adversely affecting sales and earnings[48]. Operational Challenges - The company has not faced significant issues with raw material availability, managing inventory through lean manufacturing processes[29][30]. - The company has faced challenges in the supply of various materials and components, particularly electronic components, due to global supply chain shortages[73]. - The company has encountered difficulties in obtaining adequate supplies of components and raw materials, which could negatively affect profit margins[72]. - A tightening labor market could lead to increased costs and negatively affect project completion and operational efficiency[51]. - The company may rely on subcontractors to meet current demand, and any loss of these services could materially affect operations[74]. - Inflationary pressures have risen sharply since late 2021, with expectations of elevated rates throughout 2025, potentially impacting the company's liquidity and overall cost structure[80]. Strategic Initiatives - The company has invested significantly in expanding its product portfolio and market reach, leveraging its core ultrasonic coating technology[12][15]. - Sono-Tek's ultrasonic coating technology is utilized across various industries, including microelectronics, medical devices, and alternative energy, enhancing product performance and process efficiency[12][20]. - Sono-Tek's application consulting services support customers in optimizing their coating processes, enhancing customer relationships and satisfaction[23]. - The company plans to focus on rapid growth, including organic growth and possible acquisitions, which may strain resources[53]. - The ability to protect intellectual property rights is crucial for competitive advantage, but challenges exist in enforcement[54]. - The company faces competition from larger firms with greater resources, which could impact market share and revenue growth[63]. - Rapid technological changes may render existing products obsolete, necessitating timely and cost-effective responses[64]. - Development of new products and systems requires significant investment, and lack of market acceptance could adversely affect business[68]. Governance and Management - The company has a strong balance sheet with no debt, providing financial flexibility for growth and development opportunities[26]. - The company has a staggered board structure, with terms for certain directors running until the annual meeting in 2026, ensuring continuity in governance[182]. - The company has a strong focus on corporate governance, with no family relationships among directors and officers, ensuring independence[188]. - The Audit Committee, chaired by Eric Haskell, CPA, is responsible for selecting an independent public accountant and reviewing material accounting items affecting the consolidated financial statements[185]. - The Compensation Committee, led by Carol O'Donnell, oversees executive compensation and ensures compliance with NASDAQ's independent director requirements[186]. - Dr. Adeniyi Lawal, appointed as a Director in April 2024, brings extensive experience in renewable energy and has directed multi-million dollar projects funded by the Department of Energy[202]. - Eric Haskell's experience in acquisitions and divestitures provides valuable insights for the company's growth strategies[199]. Financial Management - The company has adopted a Stock Repurchase Plan allowing for open market purchases of up to $2,000,000 of its common stock[101]. - The company has not paid any cash dividends on its common stock since inception, indicating a focus on retaining earnings for business use[123]. - The company has no current plan to pay dividends, which may lead to investors losing their entire investment[105]. - The company's internal control over financial reporting must be effective to maintain investor confidence; any material weaknesses could negatively impact stock price and liquidity[84]. - Cash and cash equivalents increased by $3,067,000 to $5,202,000 at February 28, 2025, compared to $2,135,000 at February 29, 2024[157]. - Working capital increased by $1,378,000 to $13,501,000 at February 28, 2025, from $12,123,000 at February 29, 2024[156]. - Stockholders' equity increased by $1,513,000 from $16,279,000 at February 29, 2024, to $17,792,000 at February 28, 2025[158]. - Accounts receivable increased by $877,000 in fiscal 2025, primarily due to a large number of sales occurring in the fourth quarter[160]. - Interest and dividend income decreased by $41,000 to $489,000 for fiscal 2025 compared to $530,000 for the prior fiscal year[153]. - Income tax expense decreased to $261,000 for fiscal 2025 from $303,000 in the prior fiscal year, due to a decrease in income before income taxes[154]. Employee Relations - The company has maintained a good relationship with its 79 full-time and 10 part-time employees as of February 28, 2025[37]. - The company anticipates the need to hire additional qualified personnel to support business expansion, which may not be feasible[50]. Cybersecurity - The company is implementing cybersecurity measures to protect its operations and financial results[115]. Stock Market and Investor Relations - The market price of the company's common stock has been volatile, influenced by factors beyond its control[98]. - The company faces risks from potential activist shareholders that could disrupt its business and affect stock price[111].