Sono-Tek Q4 Earnings Call Highlights

Sono-Tek (NASDAQ:SOTK) reported higher profitability and modest revenue growth for fiscal 2026, as management said the company’s shift toward larger, higher-value production systems continued to support margins and earnings.

On the company’s fiscal 2026 earnings call, Executive Chairman Dr. Christopher L. Coccio said Sono-Tek delivered its second consecutive year of revenue above $20 million, with annual revenue of $20.9 million. He noted the company also achieved eight consecutive quarters with revenue above $5 million, its third consecutive year of annual revenue growth and its 16th consecutive year of profitability.

“Most importantly, we achieved significant profitability expansion,” Coccio said, pointing to a gross margin of 51%, 81% growth in operating income and stronger bottom-line results. He said the performance reflected operating leverage and a favorable product mix, particularly from higher average selling price, or high-ASP, production systems.

Medical and Electronics Markets Drive Growth

CEO and President Steve Harshbarger said medical was Sono-Tek’s strongest end market in fiscal 2026, increasing 54% year over year. Demand was driven by production-scale systems and broader adoption across medical device coating applications, including balloon catheter coating systems, stent applications and other advanced medical technologies.

The electronics market increased 16%, supported by electrically active coatings used in diagnostic-related devices. Harshbarger also said the company is seeing momentum in microelectronics, including opportunities tied to more complex production platforms.

Clean energy, by contrast, declined 19% as demand related to electrolysis slowed. Coccio attributed the weakness to government-level policy shifts, though he said solar-related system shipments earlier in the fiscal year partially offset the decline. Harshbarger said the company’s backlog, which had been heavily tied to clean energy in recent years, has “shifted drastically” toward medical and microelectronics.

Harshbarger said capabilities developed for clean energy applications have been transferable to other markets, helping the company diversify. “Our diversification really worked to our advantage here,” he said.

Margins Expand as Sales Mix Shifts

For the fourth quarter, Sono-Tek reported revenue of $5.6 million, up 10% from the prior-year period. Gross profit rose 15% to $2.79 million, gross margin reached 50% and net income increased 70% to approximately $557,000.

For the full fiscal year, Chief Financial Officer Stephen J. Bagley said net sales were $20.9 million, up 2% from $20.5 million in the prior year. Gross profit increased 8% to $10.56 million, with gross margin expanding to 51% from 48%. Operating income rose 81% to $1.82 million, and operating margin improved to 9% from 5%.

Total operating expenses were $8.7 million, relatively flat year over year. Research and development costs declined 6% to $2.55 million, primarily due to lower personnel and material costs. Sales and marketing expenses declined 4% to $3.53 million, reflecting lower commission and personnel costs. General and administrative costs increased 14% to $2.66 million, driven by higher salaries, insurance and stock-based compensation expense.

Net income for the year was approximately $1.8 million, up 42% from $1.27 million in the prior year. Bagley said the increase reflected stronger operating performance and margin expansion.

Backlog Remains Near Historic Levels

Sono-Tek ended fiscal 2026 with a backlog of approximately $9.12 million, which Harshbarger described as close to historically high levels and supportive of visibility into fiscal 2027.

During the question-and-answer session, analysts asked about bookings and the impact of reduced clean energy demand. Harshbarger said the company’s backlog has become lumpier as more high-ASP systems enter the order flow. He said orders of $3 million, $4 million or $5 million can cause significant movement in backlog depending on timing.

Harshbarger said Sono-Tek is working to increase the frequency of those larger orders while maintaining its normal flow of business. He said recent quoting activity is primarily coming from medical and microelectronics customers, and that customers are increasingly asking the company to provide broader turnkey solutions beyond its core coating equipment.

“It’s not uncommon for us to quote a customer, say a million-dollar machine, but by the end of the discussion, six months later, that million-dollar machine might be $6 million or $5 million or $4 million,” Harshbarger said.

Balance Sheet Strength and Capacity Plans

Bagley said cash, cash equivalents and marketable securities totaled $14.8 million at fiscal year-end, up from $11.9 million a year earlier. The company had no outstanding debt, and working capital increased to $16.2 million. Cash flow from operating activities was $3.2 million, compared with $525,000 in the prior fiscal year, supported by profitability and favorable working capital dynamics, including higher customer deposits and inventory management.

Asked about the company’s stock repurchase program, Harshbarger said Sono-Tek has repurchased a minimal amount of stock to date. He said the board continues to evaluate buybacks, but the company also wants to preserve flexibility for acquisition opportunities and strategic moves.

Management also discussed potential manufacturing expansion. Harshbarger said Sono-Tek is considering a first phase that would use underutilized vertical space in its existing facility by adding a mezzanine and reconfiguring portions of the manufacturing floor. He estimated the investment could be about $500,000 to $600,000 and could increase practical annual revenue capacity to roughly $35 million. A further expansion involving adjacent leased space could raise capacity to approximately $45 million, he said.

Fiscal 2027 Outlook Calls for First-Half Growth

Looking ahead, Coccio said Sono-Tek expects continued revenue growth and profitability in the first half of fiscal 2027, driven by momentum in medical and sustained demand for high-ASP systems. For the full year, the company expects revenue to be relatively flat to modestly higher compared with fiscal 2026.

Coccio said visibility beyond the first half remains limited because of continued uncertainty in certain clean energy sectors and the timing of high-ASP customer orders. Harshbarger added that if large orders arrive within the next month, they could likely ship in the current fiscal year, while orders received later could move into fiscal 2028.

Harshbarger also discussed the company’s semiconductor efforts, including development of a 300-millimeter wafer system aimed at the fab market. He said Sono-Tek plans to bring the machine to SEMICON Europa later this calendar year and expects revenue contribution from that product to be more likely in fiscal 2028, though orders could potentially occur in fiscal 2027.

“We remain confident in our outlook for FY 2027, supported by strong momentum in the medical and microelectronic sectors,” Harshbarger said in closing remarks.

About Sono-Tek (NASDAQ:SOTK)

Sono-Tek Corporation is a specialized equipment manufacturer that designs, develops and sells ultrasonic spray coating systems for precision fluid delivery. The company's core technology uses high-frequency ultrasonic vibrations to generate fine, uniform droplets that can be applied to a broad range of substrates with minimal waste and high accuracy. This method enables precise control over coating thickness, distribution and material usage, making it well suited to applications requiring micro-scale deposition and tight process tolerances.

The company's product portfolio includes bench-top research and development stations, pilot-scale units and full production systems.

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