Sono-Tek Corporation Q2 FY2024 earnings call

• Sono-Tek developed proprietary ultrasonic coating technology for precision thin films, offering environmental benefits and savings. - Strategic shift to large complex systems led to growth in average unit selling prices, with systems now selling over $300,000 and up to $1 million. - Second quarter was the strongest ever, 50% higher than the prior year, with backlog at $10.7 million, the highest in history. - Invested $1.4 million in R&D in the first half of FY2024, up from $1 million the prior year, and increased headcount by ~10% in engineering, R&D, and sales. - Net sales in Q2 were $5.64 million, gross profit $2.8 million, operating income $566,000. - Backlog includes large orders from clean energy and medical sectors, with transition from R&D to production-scale systems.

For the second quarter of fiscal 2024, net sales were $5.64 million, a 50% increase from the prior year. Multi-access coating machines, commonly used in clean energy and medical device markets, saw sales up 96% to $2.9 million. Integrated coating systems sales doubled to $853,000 due to the Float Glass Coating platform. Fluxing systems sales dipped against tough comparisons, but spare parts and service-related revenue grew 64%. By market, alternative clean energy sales grew 161%, medical sales rebounded 117%, and industrial sales grew 104%. Geographically, ~57% of sales were to the U.S. and Canada, while Asia-Pacific sales decreased 35%. Revenue contribution: Multi-access coating machines were a significant contributor at $2.9 million, making up a large portion of the sales, integrated coating systems at $853,000, etc.

• Expect at least 25% year-over-year sales growth for fiscal 2024 ending February 2024. - Confident in second half shipments positively impacting sales. - Outlook strong due to early success of shift to larger, more complex systems for production applications with multiple and repeat orders. - Backlog includes significant orders, with potential for follow-on sales from existing customers.

• Supply chain constraints were an issue in prior periods, though addressed. - Operational risks related to managing growth, including capacity utilization and staffing to support increasing orders. - Market risks such as economic slowdown affecting industrial companies and potential impact on sales growth.

Q: Curious what the EBITDA comparison was in the quarter.

A: Steve Bagley mentioned EBITDA around 994 after adding back depreciation and amortization.

Q: Rationale for not having quarterly calls.

A: Chris Coccio stated they typically don't focus on EBITDA and had typically never done quarterly calls but were considering transition.

Q: Gross margin and operating leverage.

A: Steve Harshbarger discussed margins holding around 50%, with expectations of operational leverage from follow-on service and spare parts.

Q: Capacity utilization.

A: Steve Harshbarger said existing facility can handle up to $40 million+ in revenue, with potential for expansion.

Q: Backlog and order timing.

A: Steve Harshbarger mentioned backlog has $1.1 million and $2.19 million orders, with a 50/50 split between current and next fiscal year delivery