Earnings call transcript Q4 2023

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Operator

Good morning, and welcome to the Sono-Tek Fiscal Year End 2023 Earnings Conference Call. All participants will be in a listen-only mode for the duration of the call. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note that this event is being recorded today.

I would now like to turn the conference over to Stephanie Prince with PCG Advisory. ahead. go Please

Stephanie Prince

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

year fourth XXXX their released end quarter Sono-Tek morning. and fiscal this results earlier

you and at the part copy to If in page the the a of release, The tab tables have go product, of on section. please last market press of release/news be the sales and today's release sono-tek.com the website will Investors discussion. click geography on company's don't the

Sono-Tek's today Chief call CEO; are the Chairman on Coccio, COO; Bagley, and Harshbarger, Chris Steve me Financial and President With Steve Dr. and Officer.

over Before turning the like management, call statements. remarks to following make concerning forward-looking to the would I

results constitute various those in Harbor Act conference that expectations, of filings may a prospects no Private those future call. various under as forward-looking Please be from company contained The made the company the Reform update of and remarks important purposes of obligation by statements call in note provisions conference statements forward-looking Securities for assumes Safe about XXXX. to discussed on the this Litigation plans indicated that these vary the SEC. the materially information Actual factors, may this for the including result with company's

call I of Coccio, Sono-Tek. now over Chris? to would turn Chairman like the Chris to and CEO

Christopher Coccio

Harshbarger, COO then business results. then will a Chief Officer we the will to begin that provide Good and and Steve our results fourth and you, remarks with will for Steve year this thank going fiscal Bagley, review. I some Stephanie Today our the morning market XXXX through we're discuss operational thank joining quarter and opened. opening and go you morning for us. financial everyone Financial end before and released President

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

two which holds per XX, our year is fiscal on Sono-Tek year. calls ended end a reminder, call, fiscal This currently February earning As XXXX.

of XXXX. XXXX fiscal earnings October be first half will for in the Our of call year next

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

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

opening and commonly systems can now global medical which benefit are for includes markets on technology. clean semiconductors, prices recently, all meaningful and over unique This capture, technology and needs, reach we $X systems. new film thin cells strong three Most including remained machines sell larger focused impact energy experiencing with fuel carbon our can for demand million, main long-term three $XXX,XXX areas growth; revenue. they Sono-Tek's strong quarterly Our these sectors and devices. societal from microelectronics from All coating of and and very

our the continue opens of more market Now more advance, advanced billion global our over $X coating to as and to capabilities solutions.

to orders as lines respective million are complete. production two time, other that all Since Sono-Tek's corporate in the in also million then our as expected at total August. of to also sector first investments $X.X from of one $X in clean energy was order the $X.X begun another received first Our largest we that the important areas same customer milestones. have million each from are receipt at these and with the off, the valued initial pay have $X history the order when The order well million

Revenue for high issues impacted fair to year of manufacturers equipment encountered declined our a that and supply many the number XX% $XX.X million tech fiscal we chain growth. like by

As taken a result aggressively and in an effort to again, issue avoid actions. several this we've

of increasing early large reorder resolved inventory would availability. chain supply chunk creating we with that by very never to and significantly have the levels issues points, items simple the problems expect with First, you even

Some is of that year-over-year just reflected this reported. $XXX,XXX inventories we the in increase in

own end next in-house issue chain key After by capabilities implementing we products our XX% hope of in that isolated today with to for to issues supply actually this inventory By make this COVID-XX actions we're and started process chain we will increasing hope arise. future supply internally about the these that XX% prior XX% change, about may the our need produce addressing area. long-term that We we we of goal mitigate remaining need components needs. which We we that to components similar about to the any year produce the manufacture in-house.

increased The been during million $X.X totaled largest can year-end. XX% we at delay up. is end our year receiving can held in critical be that our This where need you the have which orders in see seen backlog, of and fiscal several components

bubble year to June XXXX work in starts our in expect shipments delivery to this beginning fiscal X. second that fiscal on We of their through quarter way

on first below week fiscal be ending are sales to is quarter XX, due $X.X supply delays next QX slightly XXXX. million net lingered However, of XXXX chain of sales that May QX in to fiscal the net expected into which

for XX to supply However, chain fiscal sales show both and growth, first our ease. any remaining months issues as net XXXX half our expectations is of for year-over-year positive the

I that Los Angeles or X at presenting want Before I be you and at there. some to AM XX Micro Harshbarger of Time Steve Time. Pacific the time attending Eastern our we Bagley, will I LD meeting look Conference turn It's over in mention the Financial on to X, Wednesday, June call and forward PM first Steve Chief our to Officer,

will details additional Bagley provide Steve results. our Steve? on Now financial

Stephen Bagley

and Chris you, everyone. Thank good morning

Harshbarger this supply was to due will more shipments this. million, total resulting go concerning from $XX.X into detail Steve and fiscal challenges XXXX, sales to For and decreased delayed XX% chain

year, XXXX. XX% and the XX% originated the sales approximately During outside with in States compared United of of Canada fiscal

The $X.X and XX% compared to profit with less year. compared gross in when fiscal prior due was XXXX. Our decreased a to the year. than margin million gross warranty anticipated the favorable product margin gross costs was XX% prior in the with XX% when to profit increase The profit mix compared

XXXX, our fiscal to For million with X% $X period. prior year million expenses in total operating the increased X.X compared

selling for new development product products the and use for the supplies, higher materials to increased development $X.X primarily research which and research salaries of Our are to year, and and costs increased and million due is that development these existing XX% of in and the to $X.X travel costs and markets. million increased due were and offset expenses by decline decreased show in costs Marketing and primarily The decreases X% the and for trade related partially decreases salaries, new to commissions, year. for was expenses.

the in expenses to which with year. decreases due profit in operating an to for due in Operating primarily bad income debt compensation expenses increase combined compared stock-based gross increased X% the partially the administrative primarily margin was in million, was year offset $XXX,XXX by the decreased expense. expenses. to $X.X and General expense, X% in prior with corporate year for and XX% decrease to Operating the increases

The $X.X operating per the per For current with due net $X million $XXX,XXX loan decrease XXXX. or tax fiscal net was $X.XX decrease million in or income income in with compared to paycheck the expense recorded is for $X.XX the protection that in was period's share fiscal share prior XXXX, and income income year. combined program fiscal per forgiveness

to expenditures increase cash of the ongoing shares. were which slightly no shares outstanding, on XX, upgrades At approximately increased is weighted directed $XXX,XXX, our XXXX Cash, approximately of compared and all XX, development February debt approximately XXXX. February balance at lab million XX, XXXX million, sheet. when to Diluted an to equivalents $XX.X there continues Capital of manufacturing XX.X $XXX,XXX marketable year be securities facilities. average product for and February were our to

And now the an review the I'll year. Harshbarger, and over call Steve? for of to operational COO, President Steve turn

Stephen Harshbarger

and and FY Thanks good supply joining into Steve, for I our dive to into backlog going chain a everybody. bit XXXX. us morning record deeper today. Thanks high want

me Sono-Tek look we so our more in small lumpy can of full for saw $X hold installation allocation some more at first shipment. financial We revenue time only as records and Let revenue million plus stream recognition these activities, of explain particular that back the very platforms.

refer that geography Now press you for turning our remind ways; of can Sono-Tek to our to short going details. comments last down page all you on the release sales that's earnings my tables of address and by wanted these by in three breaks I'm and to to I results, the by and product, the how market,

chain was $XX.X challenges, primarily decreased talked FY XX% by For about. year This resulted from of that total supply delayed compared Dr. sales million. which to shipments due decline Coccio to to some XXXX last

the March delayed began new into year fiscal X. orders All of these rolled that over on

declined to called XX% $X.X $X.X updated SonoFlux of to By product, sales million chain fluxing our already supply million. coating increased revenue systems from XX% the is continued due Fluxing recently adoption the This that to to issues mentioned. we've the due spray lingering platform multi-axis XX.

are continued packages platform in large to other manufacturers category PCB was several to our are million sales coating already contract the parts grow increased have during model multi-axis to year value $X.X increased systems of machine. product the large in support latest and that machines this XX% We the spare by high primarily this Sales and that their upgrading field. that

to issues sales we've portions from XX% XX%, of from that Importantly by in the electronics, could spare three multi-axis challenges. is all this that the clearly energy, and delayed total use follow on respectively. chain have of alternative by course, The market, particularly these XX% which year, impacted value. reach XX% can our these deliveries because markets coating resulted each key of been decreased of to that systems of revenue and be supply is the This seen see begun which large impact XX% market the By these sales medical declines parts of these order markets.

current sectors shipped become As shipment that in The and other in XX% I to category not large fiscal fiscal XXX% the shipments XX% have a the XXXX. and R&D multisystem into fiscal basket successfully new of order The decline the in have market other of single applications a market is have order shipment received that the of year, remaining cancellation. grew industrial by merging scheduled XX% the we all mentioned, due quarter. established. for shift into for reflects current The

XXXX approximately U.S. U.S. fiscal and fiscal the of in was shift sales several positively sector energy in research the Canada XX% initiatives in by Government geography, By to invest in other markets. compared to green impacted XX% and originated This XXXX.

and U.S. year result manufacturing China the to China sites APAC sales decreased Mexico. by reduced operations a the believe, impacted based as we several revenue back For moving by XX% of to

made South In temporarily the expensive Korea in we have resulted this where several purchases. strong good addition, Japan U.S. but dollar and products our delayed in relationships, more customer

XX, February to $X.X large and from is this year million, shipments reflecting talked we've last on this deposits as million, been XXXX than of XXX% than reflects we've as was fiscal which new orders doubled higher the XX% it the Backlog year-over-year during was increase more Customer several XXXX. end, a about. delayed $X.X and million $X.X increase orders, receiving

Chris In chain as revenue the closing, challenges XXXX. May in to in first resulting ends for will deliveries mentioned earlier, our impact XX, lower QX FY still our current supply quarter quarter expectations compared and our the that

the orders quarters are We and the new subsequent in in backlog. number over of of large balance expect the orders as that our presently ship higher as year as well revenue we

back operator the this to our for up Q&A. I'll open to now turn

Operator

our And Instructions] go first Advisors. Please N with [Operator from will with Nicklin come Bill ahead question your here question. Circle

Bill Nicklin

Good morning.

Christopher Coccio

joining for Good Thanks morning, us. Bill.

Bill Nicklin

I taking expansion, focused three questions. for revenue have questions thanks visibility. Right, my on all

priced that for now, program is terminology What most of kind the The each first and the orders additional at this that be the long following order that company. equipment. likely within the nature you're my announcements than in I've recent order is in different systems we because least of multi-systems. orders announcements systems as as quite of the is Sono-Tek's also size noticed appears I've to see the your been than getting production place taking guess past in indicate higher the The cadence and most the they're multiphase past and from is individual are or

next means a what out granular of is, few revenues can what get is the and my more years? question this taking visibility revenue and little even and So on place for the growth quarters over you

Stephen Harshbarger

Yes, yes.

much more -- to The we been significant cycle sell $XXX,XXX longer of wording ASPs multiphase is than machines selling. often. machines of the platform now starting been You're correct. very have for that these our we're word that manufacturing most The is large high have traditionally would smaller

with possible to deliveries the they So, share requirements. customers need coordinate urgent start for requirements, their they and need our to production this to meet schedules when fastest Sono-Tek,

seeing know, their they say, I get this for much first you production that meet what's can it machines likely planned we're particular the floor. good be our say advance This ultimate in down energy to situation where year and have. are manufacturing systems needs sector, manufacturing would a what would in a their reach is high placing future start the to create from to their actually orders pipeline does Really, machines better And configurations customers of come the when for to orders. volume visibility of presenting the follow-on clean they we for need

these the transitions a requirements current these amount production requirements you these ever nothing or put most multiple of urgency over one that this large machines. industry lines, often it's for two one The that's And from going R&D customers, I've until of these the money in meet buy massive to pilot five like particular, of PO really to plans energy clean next have our tell sector. course into to platform in production certainly can sector, seen. just by I green of of their XX share energy they to don't lines, customers to production to volume it's the course particular driven being into looking aren't that we high two years. Sono-Tek, systems buy need buying to systems their But us. forecast They

Christopher Coccio

And did questions, that answer your bill?

Bill Nicklin

maybe at largest single then situations kind orders, customer number what's similar number other more I you a yes. Yes, of And production looking that beep now, of expect Getting specific customer? up, of a heard smaller okay. there you somewhat coverage from were what are the machines even systems? given on you're

Stephen Harshbarger

Yes.

are be machines coming that's it that Z, sure still sector, and XX They that again, product line still, are lines. are that volume R&D to to two of Z of kind are, on are continually continuing And the that R&D energy in looking ASPs the the with are million R&D machines to XX the For lines up larger regular the the be that green going top big And looking from all are again, these volume business, a is $X should they're to that again, coming make in to going would flow particular multiple to the they're in the our to high high machines. for pilot still flow lines, are customers over machines I out from over of that one that describe happening. impact typically. as But backlog all transitioning sector machines backlog production for a high pilot five at of even as R&D well. that will big get these platform, we is ones fill the at

Bill Nicklin

All right.

where $XXX,XXX of you've are $X be announcements $XXX,XXX referenced and I that if correctly, the that number. will multiples the understand just there orders or the made, million on machines machines, $X of multiples you that million So

Stephen Harshbarger

lines. one beginning yes, being, Yes, they is phase the buying all -- of production being an have multiple right needs that to multiple to five for just If potential that are the something energy bought They intent to order quickly, products Again their that yes, them. buy like the in of of high machine, their for The intend to multiple these would that what only have now, hit these it's wrong. terribly typically of machines skyrocketed demand area they for XX customers this been that. products are machines. have they systems, all those that's volume buy first None to so green went for there

Bill Nicklin

that's that's machine million. to and not on right And customer already machine going have belabor time, if announcement after multiple said to over clear, where buy is right. $X be XX one one, just so was you've then All a but to machines $XXX,XXX, it, a the you that made, you for

Stephen Harshbarger

correct, XXX% a You're yes.

-- machines, machine, needs that's times when that So those for and if XX, $XXX,XXX, $X.X would million, be for correct. times X.X, XX customer the they one we, XX or XX for announcement it ones

Bill Nicklin

great. All right, that's

second I and broad toward most describing companies are where is bubbles problems, calls few Now, chain as out have supply normalization, what in question. by of normal they a impeded quarters. based they shipments. that back heading the lower than in say having industrial them follow But Several shipments this they're in then past of their and conference they're period coming been now they're say

the like period a but on the moved given It new sounds it's getting extended experiencing I kind higher for through So and thing, am growth the of an bubble the correct normal time, expectations with same of orders significantly system. you're you're of that?

Stephen Harshbarger

systems increased like certainly XXXX and FY FY from supply into the are chain, revenue after very way frequency more due supply due surge we platform large revenue we supply you Yes, be feeling that our quarter-to-quarter chain to supply, we're high our shipments. flow good these the us working because of regularly our chain lumpy its although XXXX continued to of -- for will still these during growth machines, these into for through are surge, for a backlog. FY revenue the mentioned XXXX predicting the ASP ASP starting about production bubble more see the delayed revenue, to impacted and definitely to And will,

on top like revenue historically to are start already. When business now, million starts of normal of a huge our machines we what when you're only is a $XX impact it million adding million to make we a $XX $X company flow

million what that's and a big we going to regularly, coming in that's more real get of these the we difference as flow think be $X I should seeing happening. machines So be

Bill Nicklin

All right, thanks.

to, up, improvement quarter just see on the that like backlog that out? even catch higher that improve you're and the coming to bubble But some problems, than you'll what the rate in be are is the chain granular the looks saying again, from issues, replenish you're it you'll starting then because get shipments supply in jump will to to through, Now, booking, plus June, from your year. continue through shipments up with a quite from orders that that chain or this, that's at going normal the in able of supply shipments the moving

Stephen Harshbarger

yes. Yes,

on the exceed think tracking nail our if out, -- -- as the future find our we'll head where hit I increases. You the you you anticipating to of products the shipments going that demand start our strongest intake order indicator our become if because that we're heading we're backlog, for

we a backlog. anticipate So our replenish bookings yes to strong enough

Bill Nicklin

my Great. you're visualization probably will going of production accelerate production single pilot driving the past coming at orders, will. units And if in standalone orders appears number It a question, and as And from in equipment arrangements orders the than last equipment where other does was kind a is your There the that least selling line suppliers? and the you R&D you for and to transom. does OEMs new nothing nature order project line might else between your of two, or alongside and you're that I are correct, customer's other Sono-Tek receiving? equipment it to there number over the open how is vendor but the were also, down this, purpose, sitting affect for growth of this am buying have production that be different your a were road single your orders business orders of one, a How does from line. equipment another complete customer that

Stephen Harshbarger

the end parts large standing of line And for before many the often What machines these of to process. And sitting systems really coating equipment is full it's manufacturing the saying the results really prefer to and make our many recognize ultrasonic after also we're that there's, Yes, coating true. in the processes. would for course alongside and manufacturing systems, product we machine complete that critical coating responsibility Sono-Tek customers you're up the of take to supply coating. that are the of our

higher So outsourcing disciplines. solution to a partners And increasingly end continues supply of we've to strategic our, drive the then we rapidly an been from number larger of higher us with. increasing They're customer ASP for several different and variety this work us. allows which

partners relationships even And closer strategic some actually. in create potential these the for of also additional future some opportunities

Bill Nicklin

you've It positive. I ball Thank and That's you. up you. let's got great. teed looks pretty efforts appreciate and the happens. what here all see sounds like your It Thank

Stephen Harshbarger

bill. I it, appreciate Thanks.

Operator

come go question. question And from with your Please our Ted Northland. ahead Jackson next with will

Ted Jackson

Hey, morning. good

Christopher Coccio

Ted. good Hey, morning,

Ted Jackson

So of Bill's more of level a up to of higher sort follow I'm line going on thought. at some

you of impressive, So your it, to it's fiscal which going years the is you look looking all of XX% used in backlog, backlog XX% then at revenue. part your of if the the And call in range to and I back, the kind backlog, historical four, kind say, at if the the go been last way kind with issues by look XX-month of be, two supply see to of forward, year. clearly chain XX% the

to was kind we've seen quarters, of XX% say maybe be would a that, aggressive go in at high backlog what you'd that pushing revenue. of of too end way look high to understanding fair the look fiscal that Is million $X.X fiscal and in is business you? I million like the that's going or of end, couple of last of XXXX than that's which If XXXX the your higher the that out $XX be revenue, hey, north for of that, to at

Stephen Harshbarger

I year. given anything that intake to going that this backlog we should full But strong. projections revenue right there's fiscal backlog we're be $X.X year haven't for -- the will this on order that's million, in out now, don't right The not being ship. still And or edge, shipping I what year is in shipping our Well, out that's of about really able now everything think anticipating, will to say, be. example, stating

for positive. not to showing it's strong. going continue we really no I year where is we're it really without anticipate other I the we're saying definitely for And come to looking to us growth, to to than going think there in be think go exactly that reason think

really healthy than even really we're out whether But and the from in the up or we're going XXXX revenue Now is not out a for be multiple for anticipating, is longer orders accelerate we with able large lead to getting really our be a shocked backlog there will backlog us. of large XXXX. if in are out. Because be anticipating see starts time going surprised those XXXX FY these wouldn't stream those FY question. with beef Because because systems, healthy orders I look some revenue production ship I our whether just very, very start that good that a typical lot machines here FY still if to of wouldn't on to majority

So of a dollar XX configuration months is. can machines plus these lot of on million the what six have depending build times to

long to the machines. just times mind need in build that something we is large on keep it So these platform

or I which machines, consider lead $XXX,XXX business, platform short relatively machines. talking our smaller flow on them, Our you're about now times still $XXX,XXX if have

Christopher Coccio

Yes, for might I moment, here add if Steve. a

Sono-Tek's years, XX% -- at growth, last the have so. business in that's it, But changed things liked really a whatever. the or year grown we a Over had

of we're our the into those Moving questions -- production into think out, moving phase business. pointed I

to position that units. instead selling So we're good, in well, -- a sell it something, $X.X felt multiple X million of for now or unit

was change go? a previous see our money that this future. through to come area it particular, now because in way coming in bubble and energy And putting a the the really sector, don't us business is question, other amount that the which that's structure. large and the highlighted government the that into that we in of over And of this is So is clean will

of and energy Wherever doing, So two, I clean amount area. think see structure, an pre we have change, third into that past there to in Harshbarger business add our and are basic taken within mentioned that's and or we're which federal to funding just Steve do our the production is year the the then we opportunity strategic moving processing. two on in which the really changes it. post And place large

tenure the in think change and this structure, business I I've optimistic So from past. with very personally seen what without a I'm is about my it numbers, in comparison forecasting the

Ted Jackson

cusp Well, I'm don't sounds let some the are of really happen. get It too me want optimistic. I just good you optimistic, to you stuff like all. having guys on that's

going on the keep revenue Let's stuff.

about thinking to drive going revenue. FY just of So what's XXXX sort

-- So Can when see line in of bit we systems from that line the particular that XXXX -- given mean, clearly multi-systems, least to systems, is item of your would at you've a what in did of were kind you back flow XXXX backlog see meet some come seeing in larger what on look where at that $X.X revenue that's perhaps could it? large to you is are. through hang-ups and quite expecting exceed down on your kind some They multi-axis to had multi-axis with we where million I items, you given you're we XXXX. systems there, we're there -- it and that that realistic

Stephen Harshbarger

systems, coating partially the FY should to track now. backlog XXXX didn't go be for it this year. by in exceeding driven delayed we certainly for And up that's that that shipments on multi-access Most us are in these our

and So see, especially multi-axis there's of energy sector we'll electronics from particular, the shipping coming out in the systems sector, in be coating XXXX. that clean a that lot FY you'll

area. in challenges The multi-axis where other most coating significant news our is had chain supply we good the is

than capabilities job us had a expedient accelerating area, done of allow which more should in-house a we encountered what this pretty But this to our Sono-Tek, we've past good at in manner achieve year. shipments

intake grown. the in on makes it actually just It's chain to closer coating half us the ourselves was FY back not get at coating ability the machines XXXX. our year, like systems this during challenges, without -- slower because It's to the multi-axis help that multi-axis second ship slowed. year So orders to allow should will a that a is norm for again has which supply fiscal which of it systems, least appear

Ted Jackson

the is kind if upgrade that in thing systems, numbers see on in you of the that is go as how of you seen strongest and out that the XXXX continue should talked China fiscal that through XXXX. through that put like you've of an that would. I Is U.S., area mean, is that in seen that fade, this through of or numbers mean, about say the the towards fluxing a just you've and something you're upgrade kind mean, towards like it from business will something I Then of process, we've up going manufacturing to we since kind movement that the is of sustainable? lot strength I XXXX? XXXX back you Mexico, we'll seen, that go you

Stephen Harshbarger

to are particular, and area huge But are would worth really $XX,XXX Mexico, the these sectors machines government where stable to going than I moving the it's don't back is go are not but China, has machine to to to predict us. going don't like they back may only down, machines send what used think they significant but to already from it's really U.S., massive customers the It's remain that. even show to investing $XX,XXX a for so have anything back more in it's between us Yes. or I to there that not fluxing U.S. like The in them valued systems increases. those not China been send for Mexico.

new So they machines. buy

latest about than XX, about our priced system higher fluxers. traditional XX% thing area, our the the And platform the spray fluxing it's in great SonoFlux

your by with well. part reason revenue lot our a increasing they because they more increased increased of why good of -- and haven't to So you're There's ASP systems, reduce platforms ASP there our as fluxing compared old fluxing increased lot a is have more flux a they what seeing the functionality.

tried said, have that already that our own customers is So have upgrading system wow, oh them really machine. worth Sono-Tek to new this fluxing and our from we Sono-Tek

Ted Jackson

there or income efforts operating Shifting your sales I growth? -- is Are need expenditures be and OpEx we've steady-state, wind over any how that something just on should sails. in investments in of your the side, any going your in kind I got marketing or we to that's this there is XXXX? all to more so be R&D moderate about think and mean, the made serious statement your to mean, that

Stephen Harshbarger

did... we Yes,

Ted Jackson

I'm we it. is guess I I'm is with I operating see is, leverage asking some will where going guess where

Stephen Harshbarger

see leverage year started into into finished facility quite invested I expanding see all recently It's our in FY leverage into is probably bit already when XXXX start now. to some prior Got a going operating we'll and that finances just you. we've occur, the manufacturing most been suspect, invested those right into. to We that that the

that we building all expenditures taken production over we've to now to renting. been one happened. starting of able had now things to we're has the do So those And to renovate do and be which more areas, into

been anything else lot on that of expenses completed have have a add to that the one? you Did So in area.

Stephen Bagley

But that the back and decrease due at one see When the operating always sales. for started variable advertising, selling, what and to our of the see come you is look you should -- development, down line in some COVID. pick revenue. there that's expenses, always up we that our decrease much in of commissions what in year marketing trade R&D, pretty show hopefully The primarily to due the to last course is major the so product overall,

So The really on you come was don't if you my I And to year, anything that's through that expect look it, G&A, would see -- next right flat. now. there. at but expectation it should something I

Christopher Coccio

Yes.

Stephen Harshbarger

Chris. Okay

Christopher Coccio

we a well as put know, emphasis in other course, level people you the or on add top development talent. and of engineering And issue, particularly Bagley all in occurring is the inflation But add, development. just what's I what do of should research also to saying, as lot salaried called and Steve to was product

doing maintain we're retrain. we then have what to to quality people other some having to opposed and to as do starting a So workforce company there losing to

R&D things there's our there, the inflation emphasis that's and salaries on So of continued place. two taking going on

Stephen Bagley

the our where pay mean, bit here, so salaries, to takes I of a up engineers it -- leverage because number see of that's you would as little mentioned our people ways, off. on as to will the one we've current different to that of maintain an but that of level that's get time had major just a speed, in Chris -- offshoot,

Ted Jackson

in new maybe think and or brought it Just this building how of Maybe moved up we kind to should little bit should the that kind about regards CapEx call XXXX, is of brought should the $XX,XXX because through you with XXXX? the I investment flat, that? -- productivity, in a think mean, we it that off taper now you've

Stephen Harshbarger

think did to to based we're anticipate to expand our on because though, finish to expansion our flat looking we Although it we I have going forward. be I here, be think continuing projections needs

bit where our thought just might we'll down would to expenditures. a it plans, have I I'm which down longer similar us as see year, long this anticipating as it really intake So continuing expansion strong CapEx be go give happening, to order we no this little go

Ted Jackson

then last mic, inventory. question, my I'm this the hogging up And then Okay. you've and built but

trend new your being supply response numbers this we You inventory it of the to of we expect kind of it to going kind the Will issues. down went through norm chain see ever part being be forward? these or should

Stephen Harshbarger

I would don't it's we now, supply And these high trend happening very will moment. issues resolve still this issues. cautious fiscal inventory chain it this at see the down, Right us until just year. but supply with to hope XXX%, that see that chain just they I forcing make we're so

some we normal hopefully, that just Now keep it's at worry flow at having a won't returns back But when world this to the to inventory. have nice to very high safe supply with point. that. We're us forcing but orders, of it it's chain, about point,

Christopher Coccio

started our we enough we too. to in to Yes, mean, think in past. our I we build And inventory, to seen not the aggressively learned some levels forestall managed saw any inventory we've all very problems up lesson, extent, as this I though coming so a numbers.

I think what though. said Steve is true,

As level were the bit, I back to find down we'll that off don't now go available, we out a think that we can before. we the but ever are supplies

Ted Jackson

that's looking I'm just Well, cusp seems exciting forward say to and you It to finish the just want it it me, some watching I out. guys are on looking and and Okay. like really from stuff, XXXX. play I'm forward to of and XXXX

Christopher Coccio

Thanks.

Stephen Harshbarger

Ted. Thanks

Christopher Coccio

you. Thank

Operator

question come [ph] from Advisors. here with Cast next Please ahead. Avi will go Our Instructions] Fisher [Operator Long

Unidentified Analyst

morning. Hi, Good

three issues, chain of Just questions. products What supply or are quick because two which...? delayed

Stephen Harshbarger

And coating in the commonly Yes. got heavily medical But clobbered. The machines. at where sector machines not systems very bit multi-axis are primary little sector as That's product used multi-axis well. those they're we used line sector, for is in electronics energy our the both a in really and green the very coating sector our industrial and the larger example. platform directed

Unidentified Analyst

Okay.

a you mean, So about presumably, right? supplier, The That really I from comes is robot that talking what a supplier? we're right? arm get a robot, from

Stephen Harshbarger

Yes. they're It's that from platforms. robot XYZ it describe of the handling it's I are as motion, in [ph] vanilla correct you you our like motion example, product systems Most But for -- manufacturers. But and for not, highly engineered platforms robot. some simple might that it's are application. a see and would custom systems saying

Unidentified Analyst

or Japan? that...? And coming those think I ABD -- like are Is somewhere mean, from are in I from from presumably, those coming

Stephen Harshbarger

the fortunately, product Europe than of the at for kind there manufactured out either inexpensive their all we for The more a Sono-Tek vendor same that robot which they're robots thing. -- is there, in partners. has sort equivalent capabilities, U.S., solutions purchased so steps one majority very have products, are very, entry U.S. a to from do we they're them low of just or or the our that like robot it's universities. I similar we're that by looking is it's the the point should And small in of machine say, custom-engineered our products, Japan, vanilla no that in It's and capabilities. a even and partner, While very combination -- from our with

chain we've why but coming have really some they that are of of China down out this heading own supply problems bringing we lot they're as and of and path their well. good quality, the in-house were delayed of of out shipment supply China There That's get identified, our more though other than to really Even but industry partner, we expertise increasing chain. the control need a capabilities. shipments, little own the this good really ourselves price, internal a a

within Sono-Tek. of brought talents internally So some those we that's why

Unidentified Analyst

little to and on a we're you will We address That you doing fairly Is now multiples sort up there may thought going actually look, this them. something, now. important to market small get larger R&D I'm opportunity there as -- can your a selling together. to move chain. own like But for Is that to presumably partner you've currently. say units addressable move an something more large, think your can clients to a We'll the your a market. just production, instead this partner into as partner, co-branded of us them And grows, have an that you're let's is to closer whoever we be your even priority about at work the say, hey sell of all? product of

Stephen Harshbarger

Coccio? that you The speaking to partner up? Are you someone want -- answer question, is do Dr.

Christopher Coccio

co-branding. brought customer. eyes they because to therefore serve we capable on And in our But we customers in the us we far we've you them are more is you're a so than and say as serve together. right doing to going to how are closely so work vendor, with necessarily without the vendor Yes, who had track, show we that what multiple conversations and

as going pointed for chain to we're yes, of but for not -- our is, the loss supply some go that China, out technology the China So go can to of information. and just to not some also to look for but you potential thing, of yes the the proprietary Steve issues, alternative, of business we're type

in-house. on be Steve these we're do that word, a better pointed out, track we call our amount has particular right systems to also, use to in track produce robotics, with a helping partners think substantial we're able I of to terms multi-axis on both want So if specialty us as of you and them the

Unidentified Analyst

you've elaborated much you if to bring this pursuit spend in-house? on you this. said on sorry how Have I'm to more expect

Stephen Harshbarger

in. to of is the talent it's bring we already on had that investment started engineering we started prior we high We've recognized R&D to our when been it COVID bulk already. dependence made this actually And this vendor. upfront And mostly in and process because the

this Sono-Tek. shipping taken -- internally we've that from out machines -- are are so through the going we that products on shipping made now And now

Coccio at done made is point. of bulk out XX% coming As this are internally But them the now. mentioned, Dr. of already there's about the investment right

to good actually and partner industry is the But again, very a Now it's next partner. just upgrade continuing as it improve our to level.

appreciate down as But time. we think other investment big But avenues these for for So coming of I don't we for the the both same see their well. us have capabilities move at smart pipeline them going significant to it's a that. any

Unidentified Analyst

are Got work just it. and with partner it your parallel to having you And of, said, just this doing some you're in-house. more also like to sounds you track continuing clarify what

Stephen Harshbarger

correct. That's that's correct. Yes,

Unidentified Analyst

Okay. question. One last

-- how about much you, You've roll-to-roll the and that past the you about see I Thank talk sort units just you I I selling you progressing, roll-to-roll I didn't you. talk the hear talked pipeline track have how of website, of about didn't kind wide of it, Can hear in on maybe or your missed system. what this some too perhaps But systems. that's you're looks? but

Stephen Harshbarger

sure. Yes,

capture have we've still a We at target primary that roll-to-roll, roll-to-roll energy or program. to of that customers membranes market are few And hydrogen much have machines used but make project. still still The they point. towards remains It's green sector green for in We cells very plan have you roll-to-roll, carbon this we transition. go that to us, might is -- sold come we recall, them an is or not customer with for for fuel going and coating generation. for still active progressing the expressing seen the the

the still making like We seems and roll-to-roll But year. talking it single pieces now, are primarily to done roll-to-roll. this right actually not they to thought focused short-term, they about yet. just on going have transition But would it they're

move. does happen. to we're we'll to And kind point prepared the still go ready got the to So where that ready will waiting of transition ourselves to when But there, there. are we we be a it market market they go with and it make have for believe when we're

Unidentified Analyst

are just so has because of they other or looking can they're they instead looking at move Are And deferred CBD looking sort at funding at this they ahead technologies? customer raise scale? to

Stephen Harshbarger

to industry are customer, a towards, it's whole now particular it very not is is doing the today these roll-to-roll right at not to not this looking for membranes Yes, actually whole broadly although they that go towards of looking it's for the moment. industry go ultimately, replacement. And coating one

application For by this application they do of can't particular membranes, coatings this -- CBD. they don't

makes competition thankfully, So our particular this coatings slot-die for is area technology. our slot performance compared technology in most coating. about some advantages which But to slot-die, over choose have we customers our die

Unidentified Analyst

the opportunity, it's even not so -- roll-to-roll are in speaking, And broadly -- the now? this backlog right

Stephen Harshbarger

not. here there. Broadly an machine We'll and speaking, occasional get it's

still they are in when us do prepare to partner with bringing when transition that customers make see they advances are want We can to got the they for laboratories and in technology that a that. the it behind making in for want they've scenes them our Sono-Tek They understand and for the is we prepared to it. can

Unidentified Analyst

if how clients are long to unit? to first scale, or produce when the your it And take would up a move you ready production to

Stephen Harshbarger

of long bulk take to these would the systems it at because made think right allows don't the actually the there, which We've the in-house now. we investment show to have I machines all us customers. us

So we're close.

we're prepared the it's long are say level these ready, think be again lead some orders. they're Now always products. almost going so time customized to take to machines, when they I But to

Unidentified Analyst

right, thanks much. Thank All time. your Awesome. I you. appreciate very

Stephen Harshbarger

Avi. chatting, Good

Operator

back to I'd conference Dr. turn concludes any our over session. the this Coccio And Chris to like closing for question-and-answer remarks.

Christopher Coccio

and thanks everyone joining to today. us you, Thank Yes. for

based We growth our call high-tech next of on and for utility midyear XXXX in results. review markets. emerging many outlook products in the our will to forward strong that the look high a has Sono-Tek October

LD would you please directly June safe. So stay well, us that have in again Angeles, just Thank once contact Wednesday, bye. and that Micro the be Be any you Los at quarter will. X. if you I questions if you will good in we And remind

Operator

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

disconnect now lines. may your You

Sono-Tek (SOTK) 25 May 232023 Q4 Earnings call transcript