- Earnings call transcript Q2 2023

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Operator

Good morning, and welcome to the Sono-Tek Corporation First Half of Fiscal Year 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Stephanie Prince with PCG Advisory. ahead. go Please

Stephanie Prince

and Gary, to joining everyone Thank thank today. us you you

first second yesterday. XXXX their released half quarter closed Sono-Tek market and fiscal the results after

and you market the press please tab the in website copy section. have sales release/news on Chris will sono-tek.com to of The tables Investors part product, of the Chief Chairman at me the on Coccio, With Dr. the are release Bagley, be company's Steve geography If and release, click the page President and today last the discussion. call Steve don't and Harshbarger, COO; CEO; Sono-Tek's today's a go and Officer. Financial of on

may company update in Chairman indicated conference filings forward-looking CEO over the note result on call. and The prospects I about under turning would like Actual and Coccio, as a statements the concerning to Private the the plans to obligation that of no call this future Litigation purposes factors, that by expectations, various company contained of discussed Act with those make vary provisions the Please important for materially remarks Safe various be statements of company's including Chris XXXX. like may now turn SEC. these conference the the those results information to Sono-Tek. Before to to assumes from of Reform remarks the call in made management, forward-looking constitute call I would following for statements. over Securities forward-looking this Harbor Chris? the

Christopher Coccio

Harshbarger, of review. some will joining remarks our that in the after market Harbor our a the the for Bear and particular through financial going were released Financial ended will half then will then taking Officer Chief that and and to statement. I fiscal for provide discuss and of opening COO Steve President and XXXX. results morning Good go in begin we're [ph]. Stephanie Steve XX, close quarter business mind Thank August results. first for you Today XXXX with you, the Bagley, operational Safe yesterday second the us. thank care year

comments, to happy call be his open for your questions. Following we'll the

per holds reminder, mid-year a Sono-Tek earning currently is calls fiscal two year. call. our This fiscal As

Our for on XX of year XXXX which end next earnings will February call in fiscal ends XXXX. May be

control briefly able developed a method nozzles of Now patented, to ultrasonic coatings coatings to Sono-Tek precision are involves decades of motion customers. frequency use are applying uniform technology thin who that for those micron our achieve The ago. high us, systems new several proprietary thin film the into incorporated revolutionary for

complex know made raw today's other we Our market is the that more solutions in and addressable offer environmentally thin shift resulted use strategy advantages offer years The solutions world. ago films ability dramatic has in precision among very savings and since growth versus has average energy prices. important several unit complete component the you principle our sales all water selling apply significant will our broadened in advantage material, in to friendly

and and very $XXX,XXX medical fuel history. previously. cells we've systems opening invested This opening three including carbon energy is has largest our All from thin recently, of markets can million and the often sector also and and resources sectors devices. new valued revenue these includes energy Most from $X main Sono-Tek's the Sono-Tek's growth; of market. with This $X.X on validating more all receive societal focusing long-term excited to August, for microelectronics we're technology benefit coating demand they which clean systems. Our reached price three In million, film strong unique a technology. corporate areas global commonly over we in semiconductors, and strong than quarterly capture, way now and machines one experiencing in for largest meaningful more larger sell clean are more the from date to this needs, the order in order at were impact

was capabilities the A quarter expect the solutions. assemblies of good an coating of by and capabilities become our our market just $X fulfill the for global our for of August and the X% in and important product XXst $X.X approximately As previously of our impacted and went of roll-to-roll slow order, we which beginning This of packaging opens is million approximately we to to delivery more billion we more line in industry, the coating to proud in handling, the example coatings continue to ending which second will mentioned what and components it's QX, Revenue expansion is the first advance, ship half year-over-year were product to to advanced market. a us. the into we quarter. in decline sales used million global resulted $X.X slight in second orders. a the XX% need food In that increase roll-to-roll ship first

part have that have market. into faded. will concerns in of increased the increased current due to Steve job orders on expenses in X% ending strong, employee in backlog as Bagley and Our compensation moments. service QX detail this the Travel, now increased at costs go Operating in more sales million, $X subject remained quarter a few calls for costs and COVID competitive well

substantially compensation earnings is increase and retain technical our employee critical forward. a managerial expected need and that risen personnel have the the going to Now, in market. have inflationary a continuing to on highly attract competitive we Salaries in impact

Our people are truly thing. the most important

next well. pre-pandemic as levels costs months travel We nine also expect sales over the approach and XX to to

increases and already a costs the lag costs, begun our labor in as effect realizing reflect salary these prices to there additional we and those material clearly in have material higher raising is place. While are

devices, new growth $X continuing and very about medical and and such for the million quarter of semiconductors, applications. We in markets we're for flexing, out glass target high many float opportunities remain their our energy. growth customer our test sectors However, confident clean we opportunities on to labs, and where our especially level of development to outlook continue of our see as that spray the backlog traditional excited visits based the end feasibility customers in

So goes supply higher although to cross the and our sales any we last details financial that, Steve Actual Financial to to economic of quickly depend year, turn Bagley, With results results. last chain how levels. quarter to continue will Chief of than Steve? normal be be to more on call despite on some course the I'll over expect the greater year many our the the annual for Officer back today, currents assurance, projected the provide cannot highest fourth we year. fiscal with

Stephen Bagley

thank and Very everyone. good, good you Chris morning

the supply $X.X second X% total For challenges. delayed to quarter resulting from sales XXXX, to of shipments chain due fiscal decreased million

directed During the sales outside of profit fiscal the $X.X with compared to expenses to million XXXX. in prior materials expenses travel to decrease than and primarily development which gross primarily and the The product X% at COVID-XX period. a and and profit from million for increased show development period. X% year XX.X% quarter of fees originated Gross Marketing primarily the to trade and to of expenses XX% quarter, X% $X.X and $XXX,XXX, compared States XX% is compared Canada expenses to with and to of Operating compared increased prior global less research second quarter selling increased the to the Research growth professional XX% United decreased was due supplies, due due with XXXX, second compared in of costs $XXX,XXX margin approximately and prior ongoing year General are and expenses. favorable XX% initiatives. due year salaries fiscal to to costs mix period. the the increased the $XXX,XXX, to the administrative focused product increased of decreases lifting corporate resulting higher X% restrictions. decreased

XXXX $XXX,XXX share Our compared decreased quarter of XX.X the Net the revenue weighted XXXX. X% or XX% $X.XX outstanding due the gross $XXX,XXX operating for for prior period. in share quarter second shares. quarter with Operating in the in was the the expenses. with average per $XXX,XXX decreases approximately fiscal to fiscal slightly year margins $X.XX with combined income compared increased per increases million shares decreased for or and income to Diluted profit to primarily second to operating of

half compared with Canada total XX% sales approximately XXXX sales year-over-year by States of fiscal first in United the of of X% the and increased the XX% half For originated first outside XXXX. of fiscal

compared $XXX,XXX million a favorable year margin Our that's to the product gross in $X.X $X.XX $X the the increased to first for or period, X% half gross was compared compared for to to XX.X% share, XX% half Net of decreased with for per of the fiscal share profit fiscal of mix. with income margin compared for XXXX million fiscal the profit half decreased XXXX. prior the Operating XXXX. X% first XX% Operating first to $X.XX XX.X% period. income or $XXX,XXX. due first and per with half The prior year decreased with

half. of of million the and at turn Cash, Harshbarger, continues operational $XX.X investments of on Protection first were Steve? forgiveness and to our August focused there quarter of is $X be year net million. the equivalents, to does debt Loan half Our our facilities. balance now spending XXXX Plan no and over $X.X our pre-tax for ongoing the call I second just sheet. And the President as for income and first on CapEx mentioned, include I'll million, the short-term Paycheck of upgrades review $XXX,XXX, cash manufacturing was XX, Steve COO and

Stephen Harshbarger

saying Sono-Tek Thanks providing higher a sales is customers spray I Thanks Steve full and start product and course which off machines. shipments, by orders proportion of recent complete in of are solutions good than growing with success coating individual coating morning joining our result today. a want years, us for of rather for our revenue everybody. to that

of own production As requirements, currently shipments managed product and timing ongoing supply issues. for customer chain now systematically our management, this a flow for result more are shift, internal

quarter-to-quarter, and in can fluctuations orders particular frequently backlog. in be now seen from which to revenue orders plus variable more in dollar more due the well, can our result million large As highly

ways; our I'm by to you going to product, that's today. be sales turning and what by in breaks about and down Now with results, three talking market, Sono-Tek geography to by

see the all these release, can details. for You earnings press of tables last short reference, on release the our page the reference

This shipments By quarter XX% the delayed shipments challenges half decreased the that for any $XXX,XXX in second the $X.X due $XXX,XXX we the as quarter roll XXXX. over we coating first last product, decline resulted QX SelectFlux from For industrial primarily of the first confident by in the current in each. these million shipments FY mentioned. machines year quarter, XX% second and in chain XX% sales to in last an of year's following remaining in by the to total to to Coating and first Multi-Axis ship QX of machines of dipped industrial $X.X sales to to our to first XX% sales recently of half are some at compared $XXX,XXX grew this the OEM increased Sono-Tek This second million the By to to quarters. to X% included these million over product of result to $X.X Europe. Also OEM half we're company. fiscal shipment market, this and six by contract of to second for strong will shipped by around growing $XXX,XXX year, XXX% PCB machines into XXXX. and seven orders The to supply the first strong quarter was large market several The due system. grew delayed are the challenges quarter. sales half first XX overall to in to remained manufacturing chain several the that to a half fluxing of Systems for segment supply significant by XX% first led by and manufacturers million a second and delayed and for second half XXXX XXX% million. and already launched to included resulting scheduled roll-to-roll X% grew growth the growth shipment FY fiscal which sales to $XXX,XXX our was the the but XX% $X.X as by partners decreased $X.X is respectively $XXX,XXX valued

industries million in with the quarter, This system packaging including service $XXX,XXX invested handling application $X.X second of has industry alternative coating medical to in integrated the their respectively into half product into increase into other roll-to-roll medical result also large Revenue food with shipped by $XXX,XXX fiscal systems year. quarter the Sono-Tek half equipment several ahead we expect to to energy incorporating for companies operations. ultrasonic $X.X looking the medical while and and first and the integrating half The capital increasing and technology. by for second decreased significant first XX% Sono-Tek the of clean first by U.S.-based sector a this year. to first XX% X% of several was the the market the decreased for the sectors. million energy our the and XX% from roll-to-roll technology The

impact unanticipated significant year-over-year expect to in on XX% year We quarter XX guess, to the Backlog increase the Latin which our million we a solid our offset to environment based fiscal XXXX. APAC when to anticipate our shipments our last turn lockdowns. third sales. sector. in the and fiscal on the XXXX, in half on deposits expect the the end year. to and XX, by the our was geography, full sales the second growth segment due This X% Backlog fiscal was And decrease challenges orders the additional from end reflecting first questions which backlog decreased both XX, QX. on XX, in new in economic quarter resulting the shipments the growth February XXXX in And continue decreased May chain for to on electronic to or ends Chris changes by XX, we backlog forecast. the and supply XXXX. of as America up orders bearing from deliveries U.S., However million of to COVID-XX related to impacted our China $X.X call half fiscal sales compared year existing the was any open XXXX February And it to revenue of in this in with $X.X increased August growth fourth increased and By I'll received fiscal end respectively following over in of higher that this the compared was we'll challenges Customer fiscal of new year EMEA and of and for lower XX% influenced I and of strong QX mentioned quarter for chains. operator. primarily strongly from million $X XX% back first currently months closing, earlier, compared now to the supply XX% new see an XXXX, XXXX by do backlog

Operator

Thank N. first with you. [Operator from Instructions] is question Our Nicklin Bill Circle Please go ahead.

William Nicklin

thanks and call. my taking Good morning for

Christopher Coccio

Good morning, Bill.

William Nicklin

How quite narrow a inventory are be been coming Can describe and very you in and chain. do it a might moving have in -- couple of of out resolution one lot of components the on you it gradual a doing? chain back? what's in, held in sitting I machines then in draw Will will the then down questions think right the parts, quickly, you like? and different just supply suddenly the or different and then broad is constraints supply look a that's result what first

Stephen Harshbarger

Yes it's QX really guess you really issues I everybody got question supply encountering the chain this these good know, impact days supply challenges. first the a chain by is past was we quarter and noticeably because

We still predicting obstacles this hit supply are, most but would I got I companies past out quarter. way chain ahead guess, add some of problems,

through solid a have on have team supply method in and approach been our challenges fortunate able are to a however, these this that's We plan very to we way. way our systematic place chain

come recognize anticipated could needed. can trust The can't than Like earlier and buying now buying predict to we're typical. just we inventory for modules we We've standard much it where upcoming like more and simply we that larger our first deliveries is quantities past. in vendors areas our parts in systems, in the

months. it vendor tell sudden becomes becomes us, then months sudden a get that you will of XX all know, it commonly four then and of a are You to going four a and weeks, in all

we to allows possibility take course on of this And of of of these and enough in the quantity inventory. to balance to shelves So eliminate extra sheet common us we put recognize healthy and luxury now have our parts on fortunately the running out our need parts.

in-house put engineered into is team often chain supply an area This have problems. can that The really know, And and around our we address and selection second for that depth unfortunately, we more to chain were building areas some a future. house impact a Sono-Tek the been way is you better ultimately last us us. in you allows parts of you designing Partners of areas to start excellent for engineering a supply know, we was that resources presently of recently use built our to that for of for don't components of it in can with which two valuable out having outcome substantial us. us significant will our that, sometimes has energy approach, lot in to we approach that lot often large take the several This sometimes, we sometimes engineering shift subsystems plan for in But a provides know, it. solutions really an engineer have

secondarily, manage to chain those we're we because our margins First in-house. seeing have course we'll better And these systems. anticipate that our control we can better inventory now own supply for shifting of of items build on

would approach building chain will see work the that or with I that four four once shifting addition believe been orders for that three supply then of where same issues. as there chain resolved be normally shipping parts happens being out sitting in supply that as surge short-term in. we for the chain with, big So orders start that method by XX the months we out the will nine have to a or up ultimately ship three is to we're months going we our at And months, to said, do see I end those will up. time would own But backlog supply or in some problems level we in think come would how some completely,

William Nicklin

of what of been a or some business Can give this the ago second answer. such and into lab. question there's visits have complete particularly entails, of visits mention it these of the revenue? represents into My kind what insight a equipment customer visits, you for and is, these year the us trajectory development traditionally the of of Thanks versus service percent turned visits your level narrow to high mix

Stephen Harshbarger

Sure, sure.

been or it's we were busier. know, saw You that busier fortunate and laboratories that we our coming

we So we're significant the did expansion year, addition lab are in seeing us of some on coming our and customers with that from right lab pretty chunk this well. And past now expansions existing over existing energy equipment as laboratory huge of an into a clean with a both new sector.

machine in we it's, when the always did be although really to from be and the energy six six typically lab we customer the actually buy visit machine that months the nine is in then high us. into seems for coming fortunate get and still activity us. any is business around areas clean process area know, that are might to that It for will our that months sector all large right when to so has dropped -- were we delivered. we But You mark. lab when bit they from ultimately sector to in not the accelerating, you super at a And sector, and hydrogen flow maintaining that for the us XX% another could coming ultimately. a make some expansion longer buying ultimately machine than for into a us take are it walks have get that is it's medical like that that But for clean through it a sections first little energy particular nine the they

in and U.S. of international we're lab and us for the model labs outside other that trying expand encouraging to as very that's So really well. press the that's

William Nicklin

XX% customer, around being percentage or right, work ask of that the customers there, service provides? those done purchasers is equipment end instrumentation, of lab fool with some either a of lab so All the the XX% some up visit of have that if and kind questions, that potential the

Stephen Harshbarger

will initial I than I'm it we and The percentage XX% the coating full And buy about is our different but usually service, or the of they system. some do, to ultimately but is XX% but, phase really of should say a whether buying I'm actually buying XX% prior that starts the machine about. Correct. machine. it's a actually the And that have lot application talking to prior track contract a we services, talking buying it's percentage with coating in or expertise don't services, be a a of

William Nicklin

expanding been a electrolyzers a monopolize that to Thanks. some base a its has and in now broad decade. recent the want for appeared There don't to able the I I but observations, over based lot I've hydrogen industry call, All of for to right, and interest, that looking years. customer progress the many see plotting techniques be looked on but that back Sono-Tek entire question application have for been is well

was global I numbers green how the of will the with with where supply Now have been laid demand that the dramatic similar you be like me, decrease if the hydrogen recently that reading Inflation to HIF seems magnitude and the any a several rejiggering a ramp, Act goals IEA and production in out and the The we nothing are any a chain we production, in no of capacity". without are say with bill in change. [ph] be to of to bills, place. just I'm said very in Reduction Reduction "the and numbers out eightfold showed the those a achieve billion S&P much out production going back hydrogen revenues too, They and just from came be, Global have, an cost called Head REPowerEU, said Act pinch electrolysis and Inflation do, kind had producers the a that said, more came dollars hydrogen that reducing the produce to of guys increasing then need and I big for electrolyzer a critical need program activities the your at kind some one actually ramp have to said that cost. point point can of electrolyzer what for lot efficiency. of hydrogen. there's passage build Experts that came electrolyzers, area, orders reading at be greater the the did And calculation Europe capacity significant technology. of market the clean hydrogen hydrogen a increase. electrolysis of envelope assuming doesn't And growing than even and toward there's It the very, increase a supply healthy entirety heading green looks of a out difference make particularly your happens need increase, going that pardon rate. all Jeffries there electrolyzers the in and significant other markets, to a are we you the see markets that other of starts

and the you that's on what So possible? -- I'm you going put think spot ask you if

Stephen Harshbarger

Well, I opinion, near-term exciting know, opportunity company, our for to tell hydrogen you, it's in spaces Sono-Tek There's, have it's the clean you huge possible. and a in because for rapid my definitely growth. not we're you most energy green certainly know,

larger potential be I've than by, mentioning any by were government recession highly know, industry unlikely seen You impacted a because segment. you as are in investments that's ever area just driven it's much these other which it's to an massive

is is methane involved the hand, $XXX coming coal I is Green billion the And electrolyzer footprint. for mentioned, similar carbon vast why fuel I a, don't You precisely very of the decade, green onto bad that's emissions coating based been over create have Energy fertilizer, We've electrolysis is, into joining these near transition going energy, into huge are the catalyst the is because the is our cells PEM systems. for want. climate And the the clean reduce billion. our the all you green energy. economy. you hydrogen we've Korea mentioned, applied in some as environmentally South with going all used the environment. and Deal are electrolysis by which $XXX like of from conscious. governments of combined is you process. electrolysis greenhouse process. steel clean and worldwide with a it trillion carbon really an as said, full The a green call And hydrogen it's focusing used process But hydrogen which Sono-Tek friendly, vital the the energy XXXX. process, these this green leader where where guess machines heart can they $XXX bill hydrogen. massive reduce emits now fuels through is CoX, coating on experience it's water only wind. or New is governments membranes. in on you And which have the which or world is for creation when place this It's And with the Asian and particular come decarbonization by friendly like know, of the demand $X for Sono-Tek also billion It coat, Sono-Tek created providing what area a dollars be although where is The environmentally EU to this takes to led pushed Hydrogen, is This reactions reaction hydrogen green catalyst. drafting chunk to the a It's a is for to investments done for that in And are over such massive the hydrogen that to we coating other commonly around from needed they reason very so electrolysis in creation like environmentally growing machines rapidly system membranes important energy it friendly burns and but hydrogen. really solar sources industries. just is this emits membranes The this become done considered hydrogen being like gasification coming the to for from through as process for was

is So expertise our in really this area deep. application

with in excellent addressable fuel So customer our related major and much electrolysis changes, shocked with we're next the larger hydrogen The expedience. impact and huge massive they're base using combination be it there's area. predict will just to electrolysis impact much, while year. years activity seeing this a from to have us for a growth if that. to coming us, but a recent our for we up on see now big actively for governments that early trying in I cells, experiences customers it very market these implement on to steady It's by potential and becomes would hydrogen incentives do have such carbon these didn't capture systems It's green

William Nicklin

you math Great, $X and look with up tenth same thanks. the came a $X taken have a $X I of X% that one I some of at, out and simple did then trillion billion. And trillion is found that

lot a opportunity there's there. guess of out I So

So thank such a you very much for answer. comprehensive

Christopher Coccio

you. got chatting You Bill. it Good with

William Nicklin

That's it me. from

Operator

ahead. The Securities. Please from Jackson [Operator go Northland question with is Instructions] next Ted

Ted Jackson

got for taking of I've few my Thanks a questions. them.

by confident to the quarter? products be been able you the you going to happening delayed that supply want do it to that you in what end the step chain see makes into you issues First that tell expect of and forecast fourth simply and of the have the back and pretty all, how in deliver you're is, forward, can going I and numbers just me the year, the particular,

Stephen Bagley

Yes.

to a it had saying new we and months. have to shift be it our kind vendors. to We've for did there's gone three it in expectations that norm, happen are this able to out would that where it months, And sure, hitting missed, quarter. seeing a us vendor provide in was of was six they vendors our We our

adjusted from all we've So expectations chain of case believe. of worst kind to our supply the we scenario

backup. going around for have that we Now, get potentially lot a worse? but to here can something a but things where avoid having at still tasks we're where just a Yes, also doing vendor we're things happening. of a engineering cases built multiple it's it, we're us, from even possible, were solution some on, There's Sono-Tek as internally

taking we'll would at these dates a continue more anticipated our dates chain lot with to anticipating pretty machine and than point able that, us, already this for our have time supply But we're these for customers. hit that to confidence it's like. level delayed will revenue be So high a that we hit we

for Our that they're important need to this customers machines, they They're and energy out running. well. these clean anxious as get off sector applications equipment receive need there, especially the some in to very

how is level confidence the and because looking the pretty our we're demand. our backlog back approach of but chain So supply of at high,

Ted Jackson

think know you're I growth like terms Going quarter of kind your you you're as of of see my to re-flow the like, where some year-over-year. for expecting align you kind full in year might give sure third I revenues Ask guidance your in quarter forecast terms you're expecting? third to into be just year-over-year in kind make and terms I of be? of looking more with of Can waiting, down to what

Stephen Bagley

yes. Yes,

kind very upfront, but that right we to go one QX, a could and later. chain issues month too I to we here we're they they be past quarter, something close to lot how just to that very our this edge. plays the to in drop, out fall. of good quarter, given chunk There's drastic going see lot they're on at some to drop potentially anything guidance I have probably area When sort They're or of they're looked much side the have for could mean, going they're of hope you're which a going much play QX, like will to a we of variables our into it's but have that edge we in where of year, this like but there orders the come suspect supply that. being haven't reason But were shift happen. past kind We of not, and see we'll that of that of we'll could not out. into is

Ted Jackson

had I over due this I operating my when and rolled I that, know all was done coverage diligence something out Shifting flag. you'd to Okay. expenses, mean,

expecting up, you provide I how but mean, substantially them OpEx wasn't you expected it your not that I on they color to a a on be. it's actually, to little higher Can than see So were they I be I mean, little, were or this of see of continue of, at going we've going forward? this growing we sideways, percentage this are and point a go up trend the forward kind kind to of something jump as it basis to revenue to got sort at and revenue

Stephen Bagley

Yes, Op Do ahead, want expenses, you Chris. go to that take one?

Christopher Coccio

a company Yes, ours. like thank is point technology key a this Yes, high for you.

meet allow disappear disappear of competitive a much inflation. that we then were if to to all and meet people driven it that. the we're made what because and staff be more or unwilling management going by is would technology situation to to And decision to Some companies key offers just may the we refill we difficult elsewhere that, some because have let

I so going losses. will the that the think said, salaries to it think less poaching driven much we've be accomplished inflation stronger adjusted in let's so we've you it, throughout past months that. to company want So I call or position. we're be In we subject That to, whatever call six or

has sort I increases roll not months addressed So would three change in I end, major we pretty system. not and while pricing ago, say an we're through least take think a throughout And at another we've our compensation. started much to the anticipating that come but but six to XXX%, to a they it of staff

pricing. driven think we're product that So I time improvement and relationship over our going inflation see an in compensation to between

Ted Jackson

rate, want into quick I little down brought and Okay, drop color can the the a is a give thanks. so tax you Then in to, tax question just just much? what rate

Stephen Harshbarger

answer to want you one? do Bagley, that Steve

Stephen Bagley

Absolutely.

Ted Jackson

forward going too? seeing you're what of kind And

Stephen Bagley

yes, drop that to year, of having pick rate, tax, during right to the this and a was credits you year wait enough credits have versus prior that could of quite those the in see And earn you credits through, told tax flowing see. them in not is what the we year them. the us to tax, have have what our a Well, you bit now can did because apply them let's as up The R&D you accountants that were the whole, themselves. now had before is, to pick up tax the for you happening -- primarily earn

the that that is that the the sorry, in the of drop. drop taxes, see drop taxes, income and combine you with before primarily You why

Ted Jackson

rate, it's a going forward, to you're on the So going was a catch was accounting tax the tax down just with quarter-by-quarter up reason with the credit, the fair be say rate the basis. for tax credit R&D to then R&D

Stephen Bagley

Yes.

that numbers the prior I'm on, through year, hang with if was alright, earnings, look you we XX% exclude it run PPP and to I'm forgiveness about about I and to took to would forward. XX about the XXX? running our is you you'll have I you should had if say XX% the you're here and If prior going be at XX right now think what going with still going XX% be, would, to I

Ted Jackson

forward On basis. a go

Stephen Bagley

Yes, comes yes. is The basically all the those credits. And in I taxes, R&D right the biggest, thing was the income together. like earnings tax decrease biggest of now before application that said, just so it

Ted Jackson

financials, and come sitting in the expect that's you've going in to we in the that we does part the up regards what inventory. amount tick question I just It my quarter, mean, sounds of into year. What receivables back to roll of kind your year? and see flow? inventories, through and Same Python of, quarters up with terms chain the tied the thing the was third operating fourth then is your of of around to kind mean this had taking cash with then fair of can issues as flow kind pick in you you look that last receivables. your like got of in say at And sales, negative a operating big Okay. a receivables cash to I'd assume I your if supply

Stephen Bagley

at, negative looking you just at I mentioned cash for a know I'm on operations. there don't looking flow you months. the three if was Well, were

Ted Jackson

for Just months. the three

Stephen Bagley

I is front flow $XXX,XXX. and the six cash All right in months have our at Okay. was of positive me operating

my Now, up was there the place. at And did are have, and were took there set were, but that XXX,XXX. are well, one if was have who look we until the there it a AR, the number installation installation you okay, there few to us customers AR that they customer was primary reason approved agreements pay not a, for final increased

have year sales. the of for going have end, the was stuff forward. we course, say, inventories, these upon So their depend freight of due chain do to us affected be lot I hope on it. I and customer ask we to is A timing I it's finished supply to mean, amount of logistics use the forwarders of to but agreements that are stuff our and and that biggest ship customers had here I to getting would I mean, to always issues open depend we Part anticipate of I both quarter the we in sitting certainly would happen? ways. chain to as increase. the own getting the course, not, here work by next out. have do did increase upon all our and requirements. goods is to honest, going of It's is goes due least mean things of AR. we have quite going have supply that we whip that It's some seen one and to going to that couldn't

AR, large So, but in all end. to the I'd I increase tell can it right did which speak to that you subsequent now is drop quarter

Christopher Coccio

little of note -- our off that that, that with should from we're Sono-Tek, us we stable there's that the we us are terms that super pretty almost feel And I deposits. get nothing, like here, good customers And only funny that, very no it's and give risk hefty we risks take with fortunate are not our at companies way AR collecting. write that people they super,

would, more on we know company we U.S. and lot international example we a as have much we sale and sales a international than upfront was So example, ability the to an for very, easier. which an like collect collect sale, so a on based

Ted Jackson

and that. of issues. flow so kind you what number, guess year. had number piece say, chain of, at because of to we I'm this, inventory half get other your kind cross current a of of XX will go you I'm receivable a the I large is go of level But ago curious just messaging the march supply have And receivables sense this of as inventory and large might because a XX second higher inventory on hand, that, trying going fair where generation have have One that than in issues, is door a then out driving have a but probably supply of terms kind this, in then this amount I'm XXXX, you to you is into chain through months of there or kind as of that cash

in of your driving kind going of you the of the flow year, half inventories curious and of is XXXX. I'm what curious, the for back see with where I'm what So part back operating I'm terms kind of cash where, and really at happens just,

Stephen Bagley

that. understand I

it be sitting mentioned to at you specifically that certain end Let's I U.S. where key do of the all was there. cash that agreements mentioned thing I the just amount was deposit have there. we do Steve the we drop of at mentioned, right and that's do the should also third depend that see, I think in as the go have I forward. I going chain. the of flip as are are to And our from inventory mean, to X.X The that the to going shipped. going of And quarter having I the we at a AR flux. number outside number upon side of is, course now, Can I be try in know considerable there year end were two the supply units ship process. And just few of can that we We credit Ted. number I have a end, look and factors for tell have our to of at as yes, you protect from to to we're Steve the quarter is Those subsequent see purchase is due inventory the did end going quarter quarter out not and before, to we items It's a to going in and risk minimize with know at we've without a we customers. what that a us year X.X and best have letter items or Of end at end? additional that not.

Christopher Coccio

decision. in And the up will the will to happening. half -- of for the we Ted predict It be inventory that grow second do conscious that something year, a be is

Some will that sitting big of be a we because machines that for have part here ship that to expensive are them. machines to are waiting are come that in order

the is some just that can stop future, don't, for inventory building conscious, we of And so up so supply having the demand we these chain issues.

Stephen Harshbarger

time and Yes, and short positioned to one driven debt, not intelligent benefits cash security market we I where more have decisions. range. are can we much that over the They the Ted of so say too, have to no of make would company that like is is

future decisions very of we and say total for want our get on in compensation, think key impact it, terms back schedules. protect our thing, we and we sheet. by so team and is ourselves can more on we do and So can can that small that problems can about track we make inventory, the having think it's a delivery we We balance

long-term that's way freedom gives us interest. in best that a the So to the act for

Ted Jackson

is understanding mean, the I'm a to growth that to important statement? what Is the of press out but at day, in waiting modeling reading, your sounds to financials, going it Well, thought I in commentary was delays ask, your Can to that and question, it. I and door more what more the one is, of top multi-axis and I line, listening coating kind eventually chunk not, go judgmental opportunities is see from just front but on end put and like the of systems. more want I do fun actually the into the mean, I mean not kind think it's fall you release, in I'm down just of stuff the the mean, I done I an I and, a, big being of the with longer-term line. fair do bottom you have I getting yes, just a

Stephen Bagley

That area. things this of There's chain lot areas hiccups supply lot the of there of comes and we chunk chain in there's and biggest big of multi-axis to ship that area seeing a, of the demand chips. a that fair complex right the demand waiting that a now statement in And a from for is the was systems. we're everybody's semiconductor that, had where it a coating parts require parts chips seeing and supply one

circuit So some to real get those be chips trying boards can a our on days. and are those needed battle these of

Ted Jackson

say than your two margins we've seen, it for fluxing also better correct, Would is solutions, at we and of margin those a see gross I it the be ship better sale and that that be then fair, systems half you your when say back your it's mean integrated would this a the of would because memory or coating because of a that? maybe we that first that percent generally year half out, if look my relative,

Stephen Bagley

OEM that's best Our They're or Oh, we okay our there. have coating like, margins ones best one our platforms margins, the the that's that the in have systems our systems of like like multi-axis systems, not have the, margins. medical

actually the like mix platforms excellent six axis these existing right really platforms, one larger Now at there's the of some this But those they if point. sell in not backlog of now we have robotic margins.

Ted Jackson

question, technology, then of minutes know in use wondered just terms products and more industries a I educate, the last if about of just and different is a a helping is learn excited and that you and roll-to-roll the I and take And for couple you what that shipments me Okay. my which are describe solution stuff. and it. just could

Just Like, honest. it's saying? learning not to I'm mean? still be Sono-Tek mean, I what I I'm

Stephen Bagley

no No problem. Yes, problem.

format, have continuous in sheets roll. or So like the cover or if cover you have picture taking of to simplest a to you it things boards you

would be enters course. and through, machine, individual covering covering something the a I napkin, we If if But and So it's the paper it, napkin, of napkins towel don't coming size and machines. then that it leaves I'm goes of a cover roll. I'm really pieces coat the a napkins it napkins difference between

you hydrogen roll sector and we're customer And a are lot them of increase piece where they non-stop, like today. picture, or the things a like films. high volumes clean are a they're as In making most space stop, all the of to a it's you with flexible coming quantity roll for a production a there's days. right roll-to-roll that like in, of a films period of you a But paper this desire you go roll to our sudden quoting so can set coat, switching they're lot a big go in And through put especially leave. by almost throughput, we've manufacturers And to you of volume seeing existing quoting say, now So energy towel make Well, process roll-to-roll paper. we this process been hey, a your we these continuously can just the through membranes higher piece product in base. manufacturers a are where then in mostly; can flexible time? start

you about from going ready up Sono-Tek they're a several that's in type make transition. marketplaces, to of in As say significant they're for interest it's be on targeted to volume The they roll-to-roll and starts start there be transitioning bandages and film the clean one like And to when increase going container to are anything gauze energy before whether to wound rolls have of level to and interest packaging medical to to whether food are them a able production. where to very applications wants cut. spaces, top a us. devices, But see thinking or R&D lot pilot it's things of we that with hey, high that's

technical simple, you it they're how it's a your in it And roll And and system it not need break the manipulate of all increase of matter curing sounds that to too. So not, else the handling through that everything or play every product it coating just it when drying into format. again, the of damage how you product rip or a like comes of And things to really moving throughput. the but do to they're coating. through so successfully, it's how and product aspects and you're efficiency different handling or it's actually through roll move it super has believe roll-to-roll that not, you as coded

Ted Jackson

and with Thanks thanks That was very for all educational. my the patience questions.

Stephen Bagley

Nice to Ted. talking later. you, was Talk to That great. you

Operator

like to Chris turn any This concludes would over closing our question-and-answer session. back to remarks. Coccio conference for the I

Christopher Coccio

joining Well, thank everyone for you and today. thanks us

Sono-Tek continues to questions. have opportunities report results mid-May for excited ending end a we our conference XX-months We'll have and any year fiscal about Please February we're you outlook of additional in directly the XXXX, us growth. XXXX. contact if for hold strong when fiscal a

great well. So Be day. Goodbye. have a

Operator

The presentation. now today's you conference concluded. attending has Thank for

disconnect. now may You

Sono-Tek (SOTK) 18 Oct 222023 Q2 Earnings call transcript