Sono-Tek (US:SOTK)2023-05-25 18:18Financial Data and Key Metrics Changes - Total sales for fiscal 2023 decreased by 12% to $15.1 million, primarily due to delayed shipments from supply chain challenges [53][68] - Net income was $636,000 or $0.04 per share, down from $2.5 million or $0.16 per share in the prior fiscal year [64] - Cash, cash equivalents, and marketable securities increased to $11.4 million, up approximately $700,000 from the previous year [65] Business Line Data and Key Metrics Changes - Revenue from multi-axis coating systems declined by 32% to $6.8 million due to supply chain issues [69] - Fluxing sales increased by 71% to $1.2 million, driven by the adoption of the SonoFlux X2 platform [69] - Sales in the other product category grew by 29% to $3.8 million, mainly from high-value spare parts for existing machines [69] Market Data and Key Metrics Changes - Sales in the alternative energy, electronics, and medical markets decreased by 17%, 23%, and 15% respectively, due to reliance on multi-axis coating systems affected by supply chain delays [70] - Approximately 45% of sales originated in the U.S. and Canada, up from 32% in fiscal 2022, influenced by U.S. government investments in green energy [71] - APAC revenue decreased by 39%, attributed to reduced sales to China and the strong U.S. dollar making products more expensive in Japan and South Korea [71] Company Strategy and Development Direction - The company is focusing on moving into production and leveraging federal funding in clean energy, alongside enhancing pre and post-processing capabilities [11][58] - There is a strategic shift towards offering complete solutions rather than just components, broadening the addressable market [57] - The company aims to increase in-house production of components from 25% to 40% by year-end, with a long-term goal of 60% [61][150] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about revenue growth in fiscal 2024, anticipating a bubble of shipments from the backlog due to resolved supply chain issues [9][76] - The urgency from customers in the clean energy sector transitioning from R&D to high-volume production is noted as a significant driver for future orders [94] - Management does not foresee a return to previous lower shipment levels, expecting sustained growth due to increased demand in the clean energy sector [106] Other Important Information - The backlog increased by 60% to $8.5 million at fiscal year-end, reflecting delayed shipments of large orders [51][90] - Customer deposits more than doubled to $2.8 million, indicating strong order intake during fiscal 2023 [90] - The company plans to present at the LD Micro Conference in June 2023, marking its first attendance at this event [52] Q&A Session Summary Question: What is the nature of the current orders and their impact on revenue visibility? - Management confirmed that the terminology of multiphase programs indicates larger orders with higher average selling prices, enhancing revenue visibility [80][82] Question: How does the backlog relate to future revenue expectations? - The backlog of $8.5 million is expected to contribute significantly to fiscal 2024 revenue, with management anticipating strong order intake to replenish the backlog [129][126] Question: Are supply chain issues expected to normalize? - Management indicated that while supply chain challenges impacted fiscal 2023, they expect a revenue bubble in fiscal 2024, with continued growth driven by high ASP production systems [85][106] Question: What is the outlook for operating expenses in 2024? - Operating expenses are expected to remain steady, with continued emphasis on R&D and managing inflation in salaries [110][111] Question: Will inventory levels trend down in the future? - Management suggested that inventory levels may stabilize at a higher norm due to ongoing supply chain considerations [143]