Release Date: October 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sono-Tek Corp (SOTK, Financial) reported a 10% increase in revenue for the first half of fiscal 2025, driven by strong sales in the clean energy sector.
- The company achieved a record backlog of $11.7 million, reflecting increased order activity, particularly from the clean energy sector.
- Sono-Tek Corp (SOTK) successfully shipped three integrated coating systems totaling $2.19 million to a substantial customer in the clean energy sector.
- The strategic shift to larger, more complex systems has broadened Sono-Tek Corp (SOTK)'s addressable market and increased average unit selling prices.
- Net income for the first half of fiscal 2025 grew by 13% year over year, indicating improved profitability.
Negative Points
- Net sales for the second quarter decreased by 8% compared to the same period last year, indicating some challenges in maintaining sales momentum.
- Gross profit decreased by 10% year over year, with a decline in gross profit percentage due to product mix and labor expense reallocations.
- Sales in the medical sector declined by 77% in the first half of fiscal 2025, primarily due to lower demand for stent and balloon coating systems.
- APAC sales decreased by 32% in the second quarter, influenced by reduced sales to China amid a weakening Chinese economy.
- Operating income for the second quarter decreased by 49% compared to the prior year, primarily due to decreases in revenue and gross profit.
Q & A Highlights
Q: Can you provide details on the three large systems shipped during the quarter and their end markets?
A: The systems were shipped to different locations but for the same multinational customer in the clean energy sector, specifically for advanced solar applications. Follow-on orders from this customer are scheduled for FY2026 deliveries, totaling nearly $6 million. - R. Stephen Harshbarger, CEO
Q: How do you foresee the second half of fiscal year 2025 in terms of sales compared to the first half?
A: We expect growth for the current fiscal year, although the exact amount is uncertain due to the timing of shipments. We are confident in our projections for growth and are excited about the significant backlog for the next fiscal year. - R. Stephen Harshbarger, CEO
Q: What is the current capacity of your facility, and how much revenue can it support?
A: Our existing facilities can support up to $24-$25 million in revenue, potentially reaching $29 million with increased efficiencies. If we take over the remaining building, we could handle $40-$44 million in revenue. - R. Stephen Harshbarger, CEO
Q: How is the transition of emerging R&D applications affecting your business strategy?
A: The cycle for emerging R&D applications has shortened as we transition them to production lines more quickly. This allows us to focus on high ASP systems, which are crucial for long-term growth. - R. Stephen Harshbarger, CEO
Q: Can you update us on your supply chain and internalization efforts?
A: Our internalization efforts have been successful, reducing dependency on external vendors and potentially increasing margins. This project is about 50-70% complete and will continue to expand over the next year or two. - R. Stephen Harshbarger, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
