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Image source: The Motley Fool. Wed, Oct. 14, 2026 - Executive Chairman - Christopher L. Coccio - CEO and President - R. Stephen Harshbarger - Chief Financial Officer - Stephen J. Bagley Operator: Good day, everyone, and welcome to the Sono-Tek Corporation fiscal year 27 midyear results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press *1 on your touch tone phones. To withdraw your questions, you may press *2. Please also note today's event is being recorded. At this time, I would like to turn the floor over to Kirin Smith, with PCG Advisory. Please go ahead. Kirin Smith: Thank you, Jamie, and thank you, everyone, for joining us today. Sono-Tek released their second quarter and first half fiscal 27 results this morning. If you do not have a copy of the release, please visit the company's website at www.sonotech.com and navigate to the Investors section. The product market and geography sales tables on the last page of the release will be part of today's discussion. With me on the call today are Dr. Christopher Coccio, Executive Chairman Steve Harshbarger, CEO and President and Steve Bagley, Chief Financial Officer. Before turning the call over to management, I would like to make the following remarks concerning forward looking statements. Please note that various remarks that may be made on this conference call about future expectations plans and prospects for the company constitute forward looking statements for the purposes of safe harbor provisions under the Private Securities Litigation Reform Act of 2 thousand. Actual results may vary materially from those indicated by these forward looking statements. As a result of various important factors, including those discussed in the company's filings with the SEC. The company assumes no obligation to update the information contained in this conference call. As a reminder, this is our second quarter and first half call for the period ended 08/31/2026. Our next call will be our full year fiscal 27. Update for the period ended 02/28/2027. And will be held in May 2027. I would now like to turn the call over to Christopher L. Coccio, Executive Chairman of Sono-Tek. Christopher, please go ahead. Christopher L. Coccio: Thank you, Kirin, and good morning, everyone. You for joining us today to review Sono-Tek's fiscal second quarter and the first half 27 results. Steve Harshbarger will review the operational performance and business trends and then Steve Bagley will provide more detail on the financial results. The first half of fiscal 27 represented solid progress for Sono-Tek. With revenue growth, meaningful gross margin expansion, and improved operating profitability. Our balance sheet also remains very strong with no debt. Our results also reflect an important shift in the composition of our business with particularly strong growth in the medical market and increasing demand for higher value production systems. Now for the first half, revenue increased 6% to approximately 10.9 million gross margin expanded to 55% compared to 51% in the prior year period Operating income increased 41% to approximately 1.28 million and net income increased 22% to approximately 1.1 million. The medical market sales increased 289% to approximately 7.1 million The medical market continues to be an important growth driver for the company. We are seeing customers increasingly move from process development and qualification toward commercial manufacturing. Where Sono-Tek's precision ultrasonic coating technology can play a critical role. At the same time, we continue to see opportunities to expand our installed base and our relationships with customers as their production requirements grow. I also want to highlight the significance of the recent orders we announced from an existing alternative energy customer. We recently announced 3 orders totaling approximately $7.2 million which covered 10 production scale systems and represent the largest aggregate co. Customer order in Sono-Tek's history. What is particularly important about this order is that it represents an expansion of an established customer relationship The customer has successfully deployed our technology in an alternative energy manufacturing process. It is now expanding its use of Sono-Tek production systems across 3 geographic locations. that is a good example of the long term opportunity we see across our business. Supporting customers as they move from development into higher volume manufacturing and then expanding our relationships as their prospects scale. Together with the more than $3.6 million medical diagnostic production line order, announced in August. These programs alone now represent more than $10.79 million of backlog with the majority currently expected to be delivered in fiscal year 28. Importantly, these opportunities involve different customers and 2 distinct growth, medical devices and alternative energy. While the timing of individual production system orders can result in variability from quarter to quarter, we believe that increasing scale of these opportunities demonstrates a long term potential of our technology and our customer relationships. With that overview, I will turn the call over to Steve Harshbarger, our CEO and President. Steve? R. Stephen Harshbarger: Thank you, Christopher, and good morning, everybody. As Christopher highlighted, we had a solid first half with continued progress across several important areas of the business. Our results reflected strong medical sector demand a higher value production systems, improved gross margins, and disciplined execution across the whole organization. For the first half, revenue increased 6% to $10.9 million while gross profit increased 14% to approximately 6 million Gross margin expanded to 55% and operating income increased 41%. Perhaps most importantly, we continue to see our encouraging demand for our technology and applications customers are moving beyond development and into production. The medical market was the largest contributor to our first half growth, Medical sales increased 289% to approximately 7.1 million, and demand was driven by continued activity in drug eluting balloon coating systems, specialty stent applications and other medical device coating applications. We are seeing increasing adoption of our technologies as customers move from development and qualification into commercial manufacturing. That transition is really important because production applications evolve larger, more sophisticated systems, and they can create opportunities for follow on equipment services, and additional production lines as customers' volumes increase. From a production perspective, multi axis coating systems were a significant contributor to our first half growth. Increasing approximately 50% and that was driven primarily by specialty medical coding systems. OEM systems also increased approximately 67%, and that was supported by demand from our European fluxing OEM partner, and a China based semiconductor OEM customer. Inline coating systems declined 14% for the first half and that is primarily reflecting the difficult comparison with the prior year when we had 6 high ASP systems that were totaling about $4.4 million that were shipped. So while product line results can vary significantly based on the timing of these larger high ASP system shipments, the underlying demand for high value production platforms remains very encouraging. We also saw continued improvement in our industrial business which increased approximately 156% during the first half. And that was influenced by an optics related shipment to the defense sector. And this defense sector is going to be an area that we will continue to put increased focus on in the coming years. Alternative energy in the first half reflected reduced demand associated with changes in government policy and spending, and that was related to green hydrogen, electrolysis and fuel cell electrolysis and fuel cell applications. However, we continue to view alternative energy as a meaningful long term opportunity. And our recent $7.19 million order announcement that Dr. Coccio just touched upon earlier is a very good example of why we continue to believe in the long term potential in this market. These orders are from an existing customer that has successfully deployed Sono-Tek technology in an advanced clean energy manufacturing The customer continues to expand that deployment into additional production lines across 3 geographic locations. The 10 systems are currently expected to ship primarily during fiscal 28. This continued expansion demonstrates the strength of our business model where successful process development leads to high volume manufacturing opportunities and additional orders as our customers expand their production capabilities. On August 31, our backlog was approximately $9.5 million and that is up 23% from the end of the fiscal quarter. Now since quarter end, the 3 new clean energy auditors totaling $7.19 million have substantially increased our backlog in Q3 FY 27. A significant amount of this backlog is currently expected to ship in fiscal 28. Importantly, the recent alternative energy orders as well as that previously announced medical diagnostic production line order that was more than $3.6 million represents 2 different customers in 2 distinct markets. And with approximately 5 months or so remaining before fiscal 2028, we still have additional time to build upon this backlog even further. Now turning to our outlook, we are reiterating our expectation for flat to modest revenue growth for this current fiscal 27. And as we have discussed previously, the timing of several large production systems orders can create variability for us from quarter to quarter. At the same time, we continue to see encouraging demand particularly in medical devices and by the increasing value and scale of these systems we are supplying. Our focus remains on supporting our customers as they move from development into commercial manufacturing, expanding our installed base and continuing to invest in engineering, application development and commercial capabilities. The recent record order activity also gives us increased visibility into fiscal 2028 while we continue to pursue additional opportunities across medical, microelectronics, industrial, and alternative energy applications. And lastly, our balance sheet remains pristine. With cash continuing to grow and no outstanding debt. Positioning us really nicely for further execution on our growth strategy. With that, I will now turn the call over to Steve Bagley, our CFO, for a financial review of the results. Stephen J. Bagley: Very good. Thank you, Steve, and good morning, everyone. I will begin with some additional detail on our financial performance for the second quarter and first half of fiscal 27. For the second quarter ended 08/31/2026, total revenue was approximately $5.23 million compared with $5.16 million for the prior year period. And that is an increase of 69 thousand For the first half, revenue increased 6% to approximately $10.9 million and that compares with 10.3 million in the first half of fiscal 26. The first half increase was driven primarily by the significant increase in medical market sales and higher sales of multi axis and OEM systems. Gross profit for the second quarter approximately $2.8 million and that is the increase of approximately 7% from the prior year Gross profit margin was approximately 53% in the second quarter primarily reflecting an unusually favorable product and geographic mix. For the first half, gross profit increased 14% to approximately 6 million while the gross profit margin, expanded to 55% and that compares with 51% in the prior year period. The improvement in gross profit margin reflects a favorable product and geographic mix including a higher contribution from medical systems and other higher value production equipment. Now gross margins can vary significantly from period to period based on a specific system shipped customer and geographic mix, distributor involvement installation requirements and other factors. Accordingly, the gross margin levels achieved during the first half of fiscal 27 should not necessarily be viewed as indicative of margins expected in the future periods. And now a review of our operating expenses. Remained well controlled as we continue to invest in the business. Research and product development costs increased in the second quarter fiscal 27 to increases in employee health insurance, R&D materials, and other engineering expenses. For the first half, R&D costs remained steady at approximately 1.3 million compared to the prior year. As the costs I just mentioned were partially offset by decreases in some salaries and supplies. Marketing and selling expenses increased in both the second quarter and first half of fiscal 27 due to increases in salary related to our sales application lab our forward-deployed engineering, group, employee health insurance, and trade show expenses. Now our sales and marketing costs are variable and a large portion of the costs are dependent on trade shows and where geographically our sales are generated. General and administrative expenses, increased in both the second quarter and first half of fiscal 27 due to increases in salaries, employee health insurance, corporate expenses, stock based compensation and legal and accounting fees. Our operating income for the second quarter decreased by 9% or 39 thousand to $382 thousand due to an increase in operating expenses However, first half operating income increased 41% to approximately 1.28 million compared with approximately 905 thousand in the prior year. And this improvement reflects the combination of higher revenue, improved gross margin and disciplined expense management. Net income for the first half increased 22% to approximately 1.11 million compared with approximately 909 thousand in the prior year. Our balance sheet remains very strong And as of 08/31/2026, cash and marketable securities totaled approximately 17.7 million and that compares with 14.8 million at the end of fiscal 26. And we continue to have no debt strength of our balance sheet provides us with the flexibility to continue investing in the business support working capital requirements associated with larger production system orders and pursue opportunities to expand our capabilities. Now as Steve discussed, backlog at August 31 approximately $9.5 million representing a 23% increase from the end of the first quarter. Following quarter end, we received 3 additional orders totaling approximately $7.19 million Now those orders, together with the previously announced medical diagnostic production line order of more than 3.6 million significantly increases the backlog heading into fiscal 28. Overall, we believe that our balance sheet and backlog position the company very well as we move through the remainder of fiscal 27 and prepare for our next fiscal year. And with that, I will turn it back over to Steve. R. Stephen Harshbarger: Thank you. Thanks, Steve. To summarize, we believe the first half demonstrated continued progress in the business. We delivered revenue growth, meaningful gross margin expansion and stronger operating profit. While the medical market continued to be a significant growth driver. At the same time, we are seeing increasing evidence of customers moving from development into commercial manufacturing, which can create opportunities for larger and more sophisticated production systems. Now this recent record clean energy order is an excellent example of this progression and together with a medical diagnostic program, provides significant early visibility into fiscal 28. You know, our priorities remain super straightforward. You know, execute well for our customers. We can continue expanding our installed base and invest selectively in our technology and commercial capabilities and capitalize on opportunities in microelectronics, medical, industrial, and alternative energy applications. With that, we will open the call for questions. Operator: And at this time, we will begin the question and answer session. To ask a question, you may press *1 on your touch tone phones. If you are using a speakerphone, we do ask that you please pick up the handset before pressing the keys. To withdraw your questions, you may press *2. Once again, that is *1 join the question queue. We will pause momentarily to assemble the roster. Once again, that is *1 to ask a question. Our first question today comes from Bill Nicklin from Bill Will Insights. Please go ahead with your question. Bill Nicklin: Hey. Good morning. R. Stephen Harshbarger: Good morning, Bill. Bill Nicklin: All right. Thanks for taking my questions. It looks as though the majority of your high-ASP orders are coming from opportunities where you become fully integrated into your customer's production lines? You think that is a fair assessment and maybe there should be some kind of a breakout going forward to show that these are integrated orders because it appears to me that the integrated orders create kind of a flywheel effect where you can get a new customer, but then you get these continuing orders without getting a new customer. So I wonder if you would comment on that and kind of how it affects your outlook for the next months and years? R. Stephen Harshbarger: Sure. Sure. You know, it does because it certainly makes a difference of where we are going to be putting our investments. You know, we have a substantial amount of cash as you know on hand. And I think there is a couple of areas where we will continue to invest as our business grows and our financial position strengths. First, I should point that, you know, people are always asking, where are you going to put that money? And on the acquisition side, we continue to have both inbound and outbound activity. And that is really nothing new for Sono-Tek, you know, giving the nature of our business we have always had companies approaching us, and we are always going keep an eye on opportunities, you might say, for potential opportunities. But I would say that activity certainly has picked up in that area for our business and is certainly gaining momentum there. And I certainly want to emphasize, though, that we proactively continue looking at acquisition opportunities we are really focusing only on companies that we really know very, very well. And these are areas where we have a great understanding of the markets in the business. We are not looking to venture into areas too far away from what is our core understanding. But probably the more interestingly is where we are going to look to invest organically. And that kind of goes back more to the core of your question. The core ultrasonic technology business that is the foundation of the business and we will certainly make unique investments there. But over the last several years, we are really starting to put a much greater emphasis on expanding our systems integration capabilities, which is what you were just talking about there. You know, particularly through our forward deployed engineering team. Or that, FDE team as we call it. And what this team does and it does it with excellence it is really to work very closely with customers to take our existing ultrasonic technology and integrate it into much larger, more sophisticated production platforms. And that is been a really important change in our business. You know, instead of just like selling, say, a coding system, we are increasingly providing a much more complete production solutions And of course that translates then into significantly higher ASPs higher average selling prices, basically. And what is exciting for us I think there is now that we have proven this model works finally. We are seeing that these large production platform orders coming our way more frequently. And we believe our investments in the integration and capabilities are really a big part of that reason why And just to give you an idea of our commitment here, you know, 2, oh, maybe it was 2.5 years ago, I should say, Our FDE team consisted of just 1 person, And now today, we are up to 4 people on that team. And I would expect us to continue expanding capabilities over the next year or 2. And there is another really important reason why we are putting more resources in that particular area and that return on investment. When we invest in developing the next major innovation, say in our core ultrasonic technology, in areas like that. It can take, I do not know, 5, maybe 6 years before that investment really starts having, you know, a really meaningful impact on our business. But we invest in our integration capabilities that what we find is we can start seeing a meaningful return in as little as maybe just 1 or 2 years. that is a pretty significant difference in my opinion. So and again, do not get me wrong both types of investments are very important to us. And we certainly take certainly not do not back away from developing in the new ultrasonic coating technology area. But I like the idea of our decades of investment that we have already made in our ultrasonic coding technology with this strategy. Leveraging that is super important to us. So we are not necessarily having to invent something new every time we want to grow. You know, we already developed something really pretty remarkable technology. And now we are really investing in the engineering capabilities that allow us to take technology into much larger production platforms. And what we are finding is that these investments are showing to generate a return much more quickly than say a typical traditional R&D investment from us. So we are really getting more commercial value out of the technology that we have already spent these decades of time developing. And I believe that is going to be 1 of the most important investments areas for Sono-Tek over the next few years for us. I know that was kind of long winded, Bill, but hopefully, gave you a little bit of an overview. Bill Nicklin: You touched on a couple questions I have not even asked yet. that is pretty good. Yeah. So in my mind, if you look at these larger integrated orders, it is really an indication of like a flywheel effect where, it is not like you have to go out and get a new customer, each time you wanna get an order. So, your FTEs are out there getting new orders. But they are also working with customers where as your customer expands, they pretty much have to come to you. You are getting a double effect. You are getting a new customer, but then you are getting, this follow on business because if you are integrated with their manufacturing, the odds are if their manufacturing grows your orders are gonna grow. R. Stephen Harshbarger: that is that is exactly right. And this last order that we just announced for $7.2 million is really a prime example of that. You know, that is a customer that we walked through in the R&D phase very successfully and in the pilot line phase. We developed a really sophisticated high volume production system for them And that system sold well, they loved it, but it does not end there. You know, as that customer has success, the orders keep coming because every production line that they build, you know, we are attached at the hip with them, you know, because we are their quoting expert. So, it really changes our business model significantly start having customers like that where you would have these integrated partners to you. Bill Nicklin: Good. Following on that, back to the. Your whole forward deployed engineering strategy. I think you said you had 4 full time forward deployed engineers now. What might you have a year to 18 months from now? And what does that indicate about the momentum you see in your business? R. Stephen Harshbarger: Yeah. Well, now that we have proven the model is successful, you know, the. it is now-- there is no doubt about it now. You know, we put the first guy in there. It worked really well. Then we doubled it to 2, and then we doubled it to 4. And I should say it is 4 people in total. there is 1 support technician in there with 3 actual 4 forward-deployed engineers. That we have proven that model works for getting these significantly large orders. And now we are going to be doubling down on that. You know, that we are going to be continuing to add this more personnel into their continuing to make that bet because there is still the demand on the demand side that is pulling us there. So as long as we see our customer base pulling us into that area and wanting it, and desiring it, there is no reason for us not to double down on that. So, you know, we have not really said exactly how many we are gonna be hiring there, but I would not be surprised to see that team doubled in another year or 2, maybe even quicker. The challenge for us there is mostly that these are really skilled, experienced people with our technology and how to do integration. So finding them is always a little bit of a challenge. But, you know, we have some great guys in that area that I think are in the pathway to join that team. Bill Nicklin: Great. That sounds promising. I appreciate it. Thank you. R. Stephen Harshbarger: Good chatting, Bill. Take care. Operator: And our next question today comes from Dick Ryan from Oak Ridge Financial. Please go ahead with your question. R. Stephen Harshbarger: Hey. Morning, Dick. You there? I was break. Operator: I had a bad Mister Ryan, it is it is it seems that your line is breaking up. If you could give us a callback, disconnect, and rejoin, we can get you back in the question queue. And our next question does come from Ted Jackson from Northland Securities. Please go ahead with your question. R. Stephen Harshbarger: How's it going, Ted? Ted Jackson: Could not be better. I love these days, know, reporting season and companies are doing well. I got a few questions. I wanted to start out just with the medical market. You know, you have had a lot of success there. You know, the company, its initial success was really in the coating of stents and kind of done 2 things within it as you, you know, upped the game in terms of the kind of systems you sell and the ASP to them, and then you have expanded into you know, the balloon market. And I guess I am curious, do you see additional opportunity in these balloon. You know, these are blood. You know, these medical balloons do you see different applications beyond the 2 that you had the success with and what those might be And do you see-- I am guessing-- So I guess I am asking, is there an opportunity for you to expand the customer account with regards to, you know, this newer, you know, balloon opportunity? And then maybe some discussion about you know, other things where you feel you are well positioned. I mean, I think things like implants and such would be logical. So that is my first question. Thanks. R. Stephen Harshbarger: Sure. it is a good question because the medical markets really evolving for us quickly these days. You know, what basically happened is we gained all this high volume production in the clean energy sector and that was primarily in the electrolysis area for things like fuel cells. And as that market started to shift with government policy and slow down for us in that particular sector, we have immediately then shifted resources over to the medical sector and what that allowed us to do is to take product lines like this developing balloon drug eluting balloon product line that we make machines for. And could develop a system that was much more extensive and had a lot more capabilities than say like our stent coding system. When we first started going into the stent coating market we sold relatively small systems because that was what our capability we had internally at that time. So, we were selling maybe $75 thousand to $100 thousand systems. Entering into the balloon market, where we now have a lot more capabilities internally to offer the customer a much larger package that had a lot more offerings to it. All of a sudden, the ASP of these machines took up off much higher. So they were more in the $250 thousand to $300 thousand area. The customers wanted that, really. They would have even liked to have it back in the days for stent coating market, but we did not have that capabilities at that time. So as we enter into DEB which is, I have to say, somewhat-- it is-- I would not call it its infancy, but it is coming out of its infancy. This is a market that is really maturing right now that we are what I would consider the industry leader for coating drug eluting balloons, the largest companies in that area pretty much use Sono-Tek machines for that process. Not everyone, but a good chunk of the major ones use us for that process. And I think there is a lot of a lot more road ahead of that. You know, that when we look at their forecast from our customers, if things go as they plan, we should be able to continue to support them as they add on additional manufacturing lines. And that is their intent in the future for most of our customers in that particular market. what is probably more exciting for me, though, is that most of these companies that make the drug eluting balloons or make the stents also make other medical devices as you have indicated. You know, they make whether it is heart valves or, meshes internal meshes that go into the body or diabetes devices. So many of these devices now need thin film coatings onto them to prove some sort of functionality. And Sono-Tek is no longer now being considered say, a stent coating company. Now we are being considered a medical device implantable company. And 1 that has the capabilities for high volume production, and it is proven. I know our customer base sees these press releases out there and they know we are shipping to the largest medical device companies in the world and they see that we are a financially stable company and so, it brings us huge amount of credibility. So, customers that would not have necessarily come to us in the past now have a very high level of confidence coming to us with their next gen medical device to bring it into our lab, prove it in. And that is something we have happening on a weekly basis here where somebody is bringing their next gen medical device in and proving it in. And as those get proven in they will prove their R&D sector and then they will go through FDA and then they will be in the full line. And that is where we start to really see the benefit of selling multiple machines at high ASPs. Well, it is pretty exciting. Ted Jackson: Yeah. it is definitely. it is super exciting. I mean, to see the to see what you hope for actually happening is super exciting to see that actually go through successfully. And then, it ties into this, I think, somewhat, but you talked a bit in your prepared remarks about a lot of excitement in developing markets and new things that were coming Is that excitement that you are seeing in the-- that is driving that commentary from you greater than these newer opportunities in the medical market maybe use some discussion on other areas where you are seeing where you have some enthusiasm. I know in the past you kind of bounced around some of the next gen display stuff, but maybe some color with regards to what your excited about for new markets that Sono-Tek really has not tapped yet? R. Stephen Harshbarger: Yeah. I mean, there is most definitely a plethora of new applications that are outside of what we have announced. You know, as an example, like the defense has a lot of applications that are out there that we can have a nice fit into. The micro electronics sector, including semiconductor, has a lot of nice applications. And then there is a lot of them that are what I would describe as a little bit more in their infancy but have huge upside potential like we have spoken before, like the micro LED markets or the insulation market for conductive coatings. These are all areas that companies not just Sono-Tek but other associated companies are putting many millions of dollars of investment into this. So if you are making, say, a large cell phone company or a display company, They all have these very active and expensive R&D programs which Sono-Tek is now very often part of. And they all will not be home runs. But the ones that are successful we are more than likely to be the chosen technology because we are the 1 that is proven on the R&D and pilot line level. And when they pull the trigger to go to high volume it is sometimes difficult for us to predict because it is not within our control. This is the transition of developing the whole product and bringing it to market. But when they do it, we see the benefit. And now we are starting to see that happen with many our customers. Things that we were working on 2, 3, 4 years ago, all of a sudden, it is got their approvals, they have got whether it is a large phone manufacturer or a TV manufacturer who said, yes, we are gonna make the switch to this technology. And Sono-Tek will be the standard. So it is spread over a large breadth of industries but the concept of us getting in on the R&D level proving it, making it work well, building a relationship where the customer were attached at the hip, and then transitioning to high volume production is the real strategy. And it is almost always focused on the high-tech industry sectors primarily. that is really where we are putting our focus in. Ted Jackson: Okay. And then my final question. Just to refresh on the capacity in your current facility. I know you have gone through a number of expansions and sort of restructurings to bring it up. Like, where do you stand with regards to what you can produce out of your current footprint? And how long do you think that will last? R. Stephen Harshbarger: Yeah. The. We are intending to start a major we consider a major expansion at the end of this current calendar year, it would be like December, maybe January. We will start actually making things happen there. I actually have a meeting tomorrow on this because it is with these latest orders it is kind of accelerated things to get things going quicker. And that will allow us to take our existing manufacturing footprint from approximately what we believe is around $27 million capped up to around $33 million to $36 million peak. Within our existing buildings that we are in today. And Intel is pretty much building up mezzanine structure and also doing some optimization, I should point out of our manufacturing flow. We are in several buildings, so optimizing flow of our manufacturing will really bring us some efficiencies. And following that we still have 1 building here on our campus that we do not occupy, and we have a very short term lease on it. Of which that will be the last phase and that would take us up to around $44 million to $45 million in manufacturing capability. And that is on the radar. We have a plan place for that. We have not started or implemented that, but we have a plan in place for that retrofit as well. Now due to this increased frequency of these large higher ASP orders now coming in, we do have to start thinking about, well, where do we go from 45 to get up to 85? You know? So, we have we are going to have to start that process coming up here in that planning phase We will not start the building phase or anything like that, but we will have to start that planning phase in particular because some of the orders coming in now it only takes 3 or 4 orders that are significant size that could require us to make a significant structural move for more space. So, we have got to at least have it on paper a plan in place to be able to take us to that next phase. But that will be something that I am looking forward to having that prepared for us it is not like the old days where if you got 2 or 3 more orders, it did not make any significant difference. Now if we get 2, 3, 4 more orders of these multimillion dollar systems, it all of a sudden makes a big shift in our outlook. Ted Jackson: Okay. All right. Well, thanks for taking the time to answer my questions. R. Stephen Harshbarger: Hey. Good catching up, Ted. Operator: And our next question comes from Dan Dufault from Oak Ridge Financial. Please go ahead with your question. R. Stephen Harshbarger: Hey, Dan. Sam: Hey, guys. it is, Sam. I am gonna field some questions for Sam. R. Stephen Harshbarger: How you doing, Sam? Sam: Good. How are you guys? R. Stephen Harshbarger: Doing good. Thanks. Sam: Yes. Congrats on the quarter. I guess my question, I will kind of leapfrog off Ted's question on the capacity side. You know, you mentioned mezzanine structure kind of building out some of that capacity. what is some of the capital requirement you guys anticipate spending to get this expansion underway? R. Stephen Harshbarger: Yeah. The, initial CapEx we had estimated at around 700 thousand of which we are optimistically thinking that we are probably going to get New York State to be able to participate maybe with, oh, 150 thousand to $200 thousand as part of that. that is just for that initial mezzanine phase, Sam. Then for retrofitting the next building, which is the building we do not occupy, that will also be somewhere in the area of about a 600 thousand CapEx investment. So it is not huge dollars, but it is significant enough that we want to do it at the right timing for us here. And of course, the first phase is going to be underway no matter what that is kind of a decision that we have already said we have to do it. there is no choice. Sam: Got it. And do you think or anticipate the state helping out with that phase 2 at all or mostly just on the Phase I for now? R. Stephen Harshbarger: I would hope they would. I mean, that. You know, as we grow, and in particular, as we start thinking getting from the 30 to 40 and then 40 to 80 type of model. That we have to at least consider other options outside of New York State we have also already look. Been looking and talking to places like South Carolina. there is a lot of very attractive incentives to manufacture outside of New York State as at least an expansion like so maybe we would have 2 locations. And so with those incentives, I would hope New York would give us at least close to equally attractive incentives to encourage us not to leave and set up manufacturing in a less expensive area. But know, we have to do the responsible thing and look at both options. And then from there, we will make a final decision. So, I think that we will continue to see state sponsorship or contributions, I should say, whether it is in New York or alternative states, I think we will see contributions to help our expansion. Sam: Got it. And then on the margin side, I mean, you guys seen some elevated gross margins over the last few quarters. How much of that can you attribute to whether it is selling mix versus some advantages now with the higher ASP machines? R. Stephen Harshbarger: Yeah. It. it is a little bit of both, but I think the most significant impacts we see there is we are finding on these high ASP production machines that we the value we bring is very significant and that is in the application's expertise and all these additional things were added able to add on for the capabilities of our machines. And the customers are willing to pay for that increased value. So they definitely drive higher ASPs, but we are and better gross margins, but where it really starts to impact the gross margin is not on machine #1. it is on machine number 2 through 15. You know, they. We. By then, we start to optimize the costs after machine number 1. We can really start to drive margins higher. So, repeat high ASP machine orders are kind of the best case scenario. Scenario for us. And it just happens to be that a lot of those at least initial customer wise, are ending and landing in The U. S. Marketplace. A lot of our customers are been on shoring recently, especially these high-tech accounts. And that certainly is not a bad thing for Sono-Tek because our costs become better from a standpoint of eliminating distributor discounts to take place when they go overseas that very often happen. So, it is definitely a promising thing for us and that is going to be nice for us heading forward. You know, the. These last orders announced that are gonna be shipping in fiscal 2028, that $7.2 million as already disclosed, that is REAP repeat orders. So they should come in at nice margins for us with relatively low install costs and so forth. Sam: Yeah. That was gonna be my follow-up You given the order you know, with the follow on orders in the you know, green energy side. So can you maybe allude to or, you know, provide some commentary on margins going forward, whether it is 2028 or kind of you know, the current levels are sustainable or there is room for growth going forward? R. Stephen Harshbarger: Yes. You noticed probably in our commentary, we cautiously worded our margin expansion over the last 2 quarters. And that was intentional because we knew we had some high ASP margin systems that were shipping to U. S. And then we had some really excellent gross margins that came out Q1 and Q2 as a result of that. And that probably the coming quarter maybe not quite as attractive because we have those same high ASP systems in them. But what is exciting is what is flowing into our backlog is again more of these high ASP, high volume production systems. So what is we are describing as unusually favorable right now Optimistically hoping that we take that unusual away as things go forward and we start to get more and more orders that look like those orders where it will not become unusual anymore. We will have to see how that all plays out, but that would be what I would hope to anticipate is more of that type of orders reaching us high ASP repeat orders where we are able to optimize the costs. Reaching us more commonly so it does not become the unusual. It becomes the norm, hopefully, but we will have to see how that all plays out. Sam: Got it. Well, appreciate the commentary. And, again, congrats on the quarter. R. Stephen Harshbarger: Hey, thanks, Sam. Good talking to you. Operator: And our next question comes from Greg Weaver from Invicta Capital. Please go ahead with your question. Greg Weaver: Questions here. R. Stephen Harshbarger: Good morning, Greg. Greg Weaver: Hey, Steve. You touched on this a bit with your answer to Ted's questions, but maybe I will put a finer point on it. Could you characterize your visibility on your medical business? Can continuing at these nice levels given the noted commercial manufacturing transition? R. Stephen Harshbarger: Yes. I can say that the level of I activity in our labs and the level of activity with our FDE team, the forward-deployed engineering team. Is very high. And that is both for existing successes that we are actually out there implementing as well to expand upon those with more production lines as well as new products that are coming into the mix, which then would have the potential to mature into something where it becomes significant with multiple lines, high volume manufacturing. So the medical side is continuing to be 1 that is really progressing very nicely for us. it is been exciting to see that we had this success with Alt Energy making that transition very cleanly. Now we are making it happen very successfully. In the medical side. But I would like to see that continue next on to the microelectronics side. I mean, we have some pretty large systems in the microelectronics side, but I think they could become significantly larger also. So it is kind of taking 1 chunk off at a time for where we have the most expertise in those areas, but we are gaining that expertise very quickly because of that new forward deployed engineering team that we got some really smart guys in that area that know their business. Greg Weaver: Excellent. Alright. Yeah. You have you have filled that giant hole the alternative energy there nicely, but it does not show on the top line, but you can see it in the segments for sure. How about kind of related to that, on the spares and repair side of things, you are on the spot $4 million-ish run rate right now. But I guess with transition of these larger production systems, you think there will be a pickup in that business as especially some of these medical systems come off warranty? R. Stephen Harshbarger: Yeah. That. We just actually had this conversation yesterday and that is part of what is exciting about these high volume multisystem border going out there in the field I think we will see 2 significant things happen. 1 is high volume production orders first. They. These machines cannot be down ever. it is not like an R&D machine. So having things like calibration contracts and service contracts in place are much more likely to be welcomed because there is a higher level of criticality to make sure everything is running perfect And even through government agencies like the FDA, there is a higher level of scrutiny to make sure that you have things like your machines calibrated which comes at a cost. So, we would anticipate as these machines fall out of warranty these newer high volume production machines that we will start to see a reoccurring revenue stream start to fold into our process. And that is been 1 of things that we have been spending a lot of time on is trying to get a real steady significant services related reoccurring revenue stream. And we are optimistic thinking that will be the start of something significant for us in the coming year as these machines start to fall out of warranty for us. And there should be also associated fairly nice spare parts business there also both are spare parts being kept on the shelf because they are critical lines that cannot be down. As well as just normal consumables that will wear over time. And because most again, these lines in general many of them run 3 shifts a day, 24 hours, you know, 7 days a week. So the wear on them is significant and over periods of time they should start to need replacement parts and support as well. So the larger the fleet we have out there in the field, the larger potential revenue stream we should see from services coming from that as well. Greg Weaver: Excellent. Yeah. it is good to see a nice revenue base build up here. And I guess on that note, kind of, you have made a lot of investments over the past few years as you have kind of readied the business to do this rinse and repeat production orders. Larger systems. Could we talk a little bit maybe about what you foresee as operating leverage from this $22 million run rate? What should we think about as flow through for incremental dollars of sales? How much should we see go down to the bottom line? R. Stephen Harshbarger: Yeah. The. You know, I got to believe we are gonna see And, we will see how it flows up, I gotta believe we are gonna see some significant leverage here at least from this next phase from that 2022 to say $40 million area. There should not be a lot of significant extra cost there. So it is going to flow through. And on all honesty, I do not really know how far it is gonna flow through and how much of an impact it is gonna happen. But it is got to happen. I mean, we certainly do not need to be increasing cost for a lot of things here, you know, other than direct personnel building these machines. You know, we have got so much accomplished already there. And the 1 area though outside of that we will continue to really be investing heavily will increase our cost, would be in that forward-deployed engineering team, Eric. Because I just believe that is really a key aspect to having customers that are very attached to our hip and loyal to us, and they really recognize the benefit that we are bringing. Greg Weaver: Sure. Yeah. it is definitely shown to be a good investment. Makes sense. And just 1 last 1 for me. You highlighted this optics order for defense and then kind of made a comment off the cuff about you were bullish on defense. Can you talk a little bit about what you are seeing there and the maybe what is the use case for this particular system you sold? R. Stephen Harshbarger: Yeah. The. This particular 1 is. I cannot say too much because it being a defense sector area, but there is lots of optics related technologies when it comes to flying objects. That they there. there is. They are all over it, and they all need sensors and, different type of, optics related things that have to happen on them. And we see that there is a market there. there is a demand there. it is growing. We see our technology has some really good fits for several of the applications. it is not an area that we presently, like, say, go to defense sector trade shows are market very heavily to it. Even if you look at our website, you do not see a defense sector chunk of our website which I suspect there probably should be something that we are more focused to that sector. it is kind of 1 of those ideal candidates for us. You know, we are always looking for markets that are high-tech, that are not so price sensitive. That can, you know, spend. We can get the margins that we hope for in them. And the defense sector certainly falls on that category. It may require us to do a little bit of work on some of our internal requirements of how we maintain and keep documents that defense sector requires some special compliances in that area. They are not they are all areas that after a little bit of investment, we could comply. So we are looking at that as well. So I would not be surprised and say, you know, another quarter so if you are like, oh, Sono-Tek now has a in another tab in addition to clean energy, microelectronics, and medical. Now they have a tab that says defense sector. And we will start advertising and focusing on areas that we know we have had some proven successes in. Greg Weaver: Great. Appreciate that. Keep up the good work. Thanks. R. Stephen Harshbarger: Hey. Good talking. Operator: Next question comes from Kirin Nairobi from Encore Holdings Group. Please go ahead with your question. R. Stephen Harshbarger: Hi, Kirin. You with us still? Operator: Kirin, is it possible your phone is on mute? And we will move on to Jason Arasner from Bumbershot Holdings. Please go ahead with your question. Jason: Good morning. Thanks for taking the questions, and, appreciate the calls getting long. So I will I will try to keep it quick. Yeah. Focusing for a second on the semiconductor and microelectronics side. I think I saw you guys are currently at SemiCon West, and then also going to SemiCon Europa. I do not really. You know, in defense, I kinda do not participate in the trade shows. I do not really remember you doing much participation in the events in semiconductors either in the past. So if maybe you could talk about that opportunity kind of specifically in semi. Is it entirely spray coating of photoresist? You know, or is it mostly the alternative substrates? 200-millimeter below, or are you also move in up to 300-millimeter wafer stuff? Sure. that is a lot of interest in optical components in semi as well as the phone. So just any kinda color there. R. Stephen Harshbarger: Yeah. Sure. there is there is. it is a very broad area for us. Broader than I actually recognize myself even when we first started jumping into it because in the beginning, I thought it was all photoresist. But what we are recognizing as we start to introduce products that are high volume manufacturing capable, all of a sudden we are starting to receive inquiries in areas that are outside of photoresist. And I cannot go into, unfortunately, to too much detail because there super tight lipped with confidentiality's and NDA's in this particular industry because this is usually on most of, like, the next gen chips that are being used, like, in the AI world. So they really tight lipped us on very much what do there. But we think there is both areas for our continued marketplace for photoresist both in 200-millimeter, which we are already attacking, but also making a shift towards larger 300-millimeter wafers and trying to bring that from the lab and low volume production area to the fab area. And that is that is gonna be our focus at Semicon Europe. Semicon West that we are at right now, we are not so much focusing on that because it is just a little bit too early, just a few months too early, but we will be focusing on that in semicon Europe. But I firmly believe there will be more applications outside of photoresist as well that may actually even pull us there into the larger 300-millimeter area, maybe even faster than the planned photoresist area. there is a lot of unique thin film processes that take place in that whole semiconductor manufacturing area. And it. All we need is to find 2 or 3 of them that are like, oh, that is a perfect fit for Sono-Tek and now it. And these are companies in general that would not have even asked us to be that fit if we did not now have the capabilities that we have today. Because they are not even interested in talking to somebody unless you have proven it that you can work in super high volume production. But now they see that all right, this company is made that transition where they can provide us the appropriate equipment if the application is successful. So, do have some things happening on the laboratory area to prove for high volume manufacturing. And that is the main thing that they want proof to transition into high volume manufacturing capabilities. And so, I think although that is it is not as short term say, like medical or Alt Energy, but I think that is on the horizon as maybe even the potentially largest sector for us to come in the future. it is just the 1 that we have kind of approached third in line here for our focus, but it is now coming up. Rising up to the surface for us here in this coming year. Jason: And is it sort of process steps that are finally needing higher technology thin film kind of precision requirements, or is it process that sort of never existed before? And I guess it sounds like you do not quite have the pilot lines yet where you could see that progression. Similar with the solar customer where it could pull you forward into kind of production spending or the fab more quickly. It sounds like it is kind of maybe an inning or 2 earlier. R. Stephen Harshbarger: That. that is probably right. I mean, they are to the point where they would. Are saying, hey. Let us come to your lab, prove this works. And then Sono-Tek designed the machine for us to meet high volume production. I do not think we will have to go to the extent of, say, doing pilot line because we have had, I think, enough credibility now. That they would say, hey, just make us a production machines for this these sort of applications. But they do recognize that our technology is unique enough that they are able to do things that they are not able to do with their existing coding technologies. And that is I think the primary driver. So to answer your question whether it is new or existing processes, it is typically a processes that is not working that well for them. They are getting away with it, trying. But they are like, we really do not like what we are doing today. And Sono-Tek is showing them, oh, we can solve the headaches that you may have. And let us prove that to you. Jason: And just in terms of timing, I guess my question a little bit is with kind of the highest technology edge of AI chips, stuff that is going at the data centers, kinda optical components, all that stuff. Things tend to move really quickly when a technology is kind of unique and solving a problem that has not? Is it I guess, how do you evaluate kind of the speed at which some of these could potentially turn into real opportunities kinda quicker or kinda not so fast. R. Stephen Harshbarger: I think speed for the next gen, like, next rev will be very quick to give us the thumbs up or thumbs down, like, that, hey. This meets the need. Speed in general for actual implementation once you have a proven known good processes does tend to be a little bit slower, believe it or not, in semiconductor industry where they tend to move very quickly on proven methodologies. And are a little more cautious on things that have been only lab proven or pilot line proven. So I suspect for a really significant impact we may be out 1, 2 years, maybe even 3 years for really significant impact for the point where saying, Hey, I want to buy 10 of these machines. To go into this fab. I think we could be looking a few years out But I think we will start to see some level of impact relatively quick from the standpoint of oh, we got our first machine in or we got the first couple machines in for this new processes. That we will be able to I think, get under our belt relatively quickly, meaning within, say, like a year or something along those lines. Jason: Okay. And then just following up on the question you got on operating leverage Obviously, in the quarter and I guess the outlook for the second half of the fiscal year, you are kind of getting through this gap of you know, tougher order period, of you start to see this bigger resumption of growth in fiscal year 28? Obviously, it stepped up the marketing spend. I guess, it is around 1 million a quarter. You leveraged that up pretty nicely in Q1, kind of less so in this quarter and maybe the outlook presumably for the second half? Is this gonna be. You know, you have to carry that cost because you are seeing pretty significant benefits But are not gonna have the revenue at least for or 2. Is that kind of the right way to be thinking about it? R. Stephen Harshbarger: I think so. You know, the we are now starting to say, hey, let's in order to really accelerate things we have to start making some more significant investments prior to that. And we have got the money and we are profitable enough that we could say, hey, you know, double down on this bet. Know, like, if. Do you want. Really wanna only hire 1 or 2 guys this area when you could hire 4 and get the. A much more significant benefit in a year from now. So although the short term Q3, Q4 it may not be as attractive a margins as say like the earlier first half. But right behind that is going to be orders that we are anticipating will be higher revenue and it should based upon our existing backlogs looking like maybe better margin orders as well. And I am hoping that we will see more of that fall into the backlog of these high ASP, high volume orders which give really good gross margins. We still have a pretty good amount of time left in this current fiscal year to fill up next fiscal year. So I am hoping that we will see this we need to make these large high ASP orders not happen twice a year. We need to make them be happening every month. So that is that is our strategy that we need to get to that point. Jason: And when and when you talk about the ASP progression and kind of the high ASP orders, I know I guess, in the past, you have sort of delineated it between orders less than 75 thousand kinda have that middle range, 75 thousand to 150 thousand and then the upper range of over 150 thousand Is the 150 thousand kinda still a good gauge of a commercial I guess, like, how do I square that versus a $7 million order Or, you know, is there kind of big r and d orders that kind of get lumped into the high ASP versus it sounds like what you are really trying to do is kinda move up into this system aggregator where you are, you know, much bigger orders than, let's say, a 150 thousand. So it is a bit hard to tell from that progression chart. R. Stephen Harshbarger: Yeah. You are right. And, you know, perhaps we should break out another segment in there of the 150 thousand to say 500 thousand and then have the 500 thousand and over possibly. Some of these larger orders like take this last $7.2 million order. that is 10 machines, but they are each around 700 thousand. So they are they are not even million dollar machines, but they are significantly large machines. And there is quantity 10 of them. And that is because it is a mature customer shipping a lot of machines. The order prior to that for $3.6 million was a single manufacturing line. And that is a customer that was buying machines that was around $7.8 million. And they probably could have been buying even back when we sold them $7.8 million machines. They could have been buying machines that were 3.6 million from us had we had the capabilities at that time. So in an ideal world, when that customer says, I want 3 or 5 machines, I do not know when that will be, You know, that is gonna be driven by their manufacturing needs that we will not be selling 3 or $5.07 or $800 thousand machines. We will be selling 3 or 5, $3.6 million machines. So continuing to drive that ASP higher is super vital for our strategy. And right now, what we are seeing is the high ASP orders are more coming in through like the mid-area, that $500 thousand $700 thousand single price ASP machine, but they are coming through for lots of them. Ultimately, we certainly would like to see those coming through for $1 million plus, maybe even $2 million plus order machines So that is going to be a super important part of our strategy to make those machines. Give that. Offer this customer so much capabilities and so much incentive to wanna buy the whole existing platform with as much as we can provide will be very important to drive the company's growth. Jason: Okay. And when you talk about the capacity kinda going from that I guess, mid twenties to mid thirties to maybe using the last phase, mid-forties, and then you kinda have that next phase where you start talking about, like, 40 to 80 But when you think about the capacity versus the order when you are going from, let's say, a 700 thousand ASP machine to a 3 million because you are adding on various capabilities I am assuming a lot of those capabilities are things that your forward deployed engineering team is kind of aggregating together, but things you are not necessarily making in house. Is. I guess, how do you kinda square some of that with what you are talking about with capacity? R. Stephen Harshbarger: Yeah. You are. You hit the nail on the head. it is it is definitely not equipment that we are making say, the core components in house, but we are we are doing all the systems integration, which is very significant. And even more so, we are doing the application engineering process integration. So understanding, for example, what type of post cleaning process or after a curing process, you know, and how to do, say, a measurement machine in process and what type of measurement machine. So we are actually the FDE team becomes these experts in not just applying a thin film coating but it is how to measure the coating, how to clean product prior, how to cure the product after. So a very difficult challenging area unless you have that application to know how. So, no 1 really wants to buy those machines from somebody else other than Sono-Tek because we are the only 1 that is gonna prove to them that what we spec in will work for your particular coding need. And they are willing to pay a premium in order to get rid of that risk where they have to try to figure it out themselves. But it also then drastically reduces our time to be able to figure out how to make that particular product and become experts in everything. And for sure as we sell more and more of a particular expertise then we certainly would consider bringing it in house, but we certainly like we prefer to become experts in understanding it before we consider manufacturing it. Operator: And our next question once again is Kirin Naiwara from Encore Holdings Group. Kirin, please go ahead with your question. And once again, Kirin once again, Kirin, it possible your phone is on mute? We are unable to hear you. Karen: I am not on mute. But I am just. I hear you now. Operator: Okay, Kirin. R. Stephen Harshbarger: I hear you, Kirin. How are doing? Karen: I am good. Thank you so much. So I wanted to follow-up on the earlier discussions where some of the other people in the call have touched upon the go-to-market motion. Where, a, I think I would want to understand anything with the forward deployed engineers We said we have 4 available. I am curious if they are assigned by industry or industry agnostic. And then maybe a second quick follow-up to that is like maybe how many accounts or how many clients is each forward-deployed engineer associated with? R. Stephen Harshbarger: Sure. And I should specify there is actually 3 forward-deployed engineers, but 4 in the group. there is also a project manager that works with that forward deployed engineering team that helps to coordinate everything coming in. And that is the area where we are considering bringing in more of the forward deployed engineers. And these are guys that have in-depth experience in both ultrasonic coding, but also equipment integration and the processes. Most of them have gone through the area of the application engineering area for many, many years. It would be common for a mature proven application, something that we consider, this has got high priority for it to shift from our existing application engineering team, which has typically already proven things in the lab for the customer. And then they say, listen. This group is now ready to scale. And we are going to then shift that customer over to the FDE team for them to show them how we can scale into production for their requirements. And it would be typical for them to work on maybe 2 to 3 major accounts. That are. And possibly that are orders in house to some level. While also feeding in every month, maybe 1 to 2 other proposals that they would be putting together for new potential customer. So they might look at a dozen things or maybe even 2 dozen things potentially per year Some of them only may be taking a day, but some of them stretching over several months. Maybe even a full year for a very big 1. So for example, this last $7.2 million order, that engineer there, he has been working with that customer, on and off probably 25% of his time for 3 years. And that customer has given us, oh, in the area of now $14 million of orders, something in that area. And we anticipate and hope for more orders from that customer also. So he will probably actually always be into that account 25% of his time as long as the is still moving forward with us. So, it is not a huge group and that is why it is critical that as we start to see and get pulled in by enough customers where we say oh, we could really use 2 more forward deployed engineers. it is really very easy bets to make. I mean, they are they are low risk bets. For us to say big return. And so far that strategy seems to be working nicely. Karen: Okay. Then quick last question. So it is a good job. You forward deployed engineers that are reporting to the project manager. And who is the project manager reporting to. R. Stephen Harshbarger: Yeah. So the project manager is more coordination for the forward-deployed engineering team. They are. he is it is kind of a support role, I would describe it, for the forward deployed engineering team so they can be spending their time on the really hardcore technical stuff where the project manager is more likely just to coordinate how we are gonna be deploying what the forward-deployed engineers has already decided. And 1 more time with the question there. I apologize, Kirin. I take care. Karen: I just want to understand the reporting structure. Right? Because I think that at least what was missing from me from the discussions that I have had is that it seems as if maybe there might be an information flow gap between the forward-deployed engineering team and maybe, like, sales in terms of being able to predict or understand when the orders come next? I am trying to understand that reporting. Yeah. Yeah. R. Stephen Harshbarger: Sure. So the forward-deployed engineers, they report to our application engineering manager who actually manages 2 teams. He manages the application engineering team. Which is, again, those are the guys that are taking orders into the lab proving it primarily on the R&D level. And feeding it back to the customers for R&D machines and then he and. With consulting with the sales team, will make a decision and say, hey. This is a significant opportunity that is ready to shift from R&D to production. And then they feed it off to the forward deployed engineering team. And then once it treats the forward-deployed engineering team and if it does turn into an order, we actually then have another team that comes in and says, alright. This is gonna be a significant production system going through our processes. So we have to then get, you know, the quality system in and everybody else from a manufacturing standpoint of how we are going to build the machines and how we are gonna do it at a economical cost, of course. Karen: Okay. Thank you. Thank you so much. R. Stephen Harshbarger: And nice talking to you, Kirin. Operator: And with that, we will be concluding today's question and answer session. I would like to turn the floor back over to management for any closing remarks. R. Stephen Harshbarger: Sure. Let me just see here. I apologize. Long conversations there. I just want to thank everybody today for joining us. I hope you enjoyed the conference call. And we look forward to updating you again at the end of the fiscal year. And thanks again for everybody that joined the conference call. Take care. Operator: And with that, ladies and gentlemen, we will be concluding today's conference call and presentation. We thank you for joining. You may now disconnect your lines. 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This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has positions in and recommends Sono-Tek. The Motley Fool has a disclosure policy. Sono-Tek (SOTK) Q2 2027 Earnings Call Transcript was originally published by The Motley Fool

First Half Revenue Increased 6% to $10.9 Million; Gross Margin Expanded to 55%; Operating Income Increased 41%; Medical Market Sales Increased 289% Reiterates Expectation of Flat to Modest Revenue Growth for FY 27 Reflecting Timing of Several Large Orders Recent New Record Orders Significantly Increases Revenue Visibility for FY 28 MILTON, N.Y., Oct. 14, 2026 (GLOBE NEWSWIRE) -- Sono-Tek Corporation (Nasdaq: SOTK), a leading developer and manufacturer of precision ultrasonic coating systems, today reported financial results for the second quarter and first half of fiscal year 2027, ended August 31, 2026. Second Quarter Fiscal 2027 Highlights - Net sales increased 1% to $5.23 million compared with $5.16 million in the second quarter of fiscal 2026. - Gross profit increased 7% to $2.77 million, while gross margin expanded to 53%, compared with 50% in the prior-year period, primarily reflecting an unusually favorable product and geographic mix. - Operating income was $382,000 compared with $421,000 in the prior-year period, reflecting higher operating expenses that partially offset the increase in gross profit. - Net income was $366,000, or $0.02 per diluted share, compared with $424,000, or $0.03 per diluted share, in the second quarter of fiscal 2026. - Medical market sales increased 209% to $3.11 million, led by shipments of balloon coating systems and specialty stent-coating systems. First Half Fiscal 2027 Highlights - Net sales increased 6% to $10.89 million compared with $10.30 million in the first half of fiscal 2026, consistent with the Company's first-half growth guidance and driven by strong sales to the medical sector. - Gross profit increased 14% to $5.98 million, while gross margin expanded to 55%, compared with 51% in the prior-year period, primarily reflecting an unusually favorable product and geographic mix. - Operating income increased 41% to $1.28 million, compared with $905,000 in the first half of fiscal 2026, reflecting increased gross profit and operating leverage. - Net income increased 22% to $1.11 million, compared with $909,000 in the prior-year period. - Medical market sales increased 289% to $7.05 million, driven by shipments of balloon coating systems and specialty stent-coating systems. Balance Sheet, Backlog and Guidance for Fiscal Year 2027 - Cash, cash equivalents and marketable securities: Totaled $17.7 million at August 31, 2026, compared with $14.8 million at February 28, 2026, with no outstanding debt. - Backlog: Combined equipment and service-related backlog was $9.51 million at August 31, 2026, an increase of approximately $1.78 million, or 23%, from $7.73 million at the end of the first quarter of fiscal 2027. The sequential increase reflects improved order momentum during the second quarter. - Subsequent Order Activity: Subsequent to quarter end, the Company received three orders totaling approximately $7.19 million expected to ship during fiscal 2028. The order significantly increases revenue visibility for fiscal 2028 with the potential to build even further upon this backlog. - Guidance: For the full fiscal year 2027, the Company is reiterating its prior guidance for flat to modest revenue growth reflecting the timing of several large orders, growing demand in the medical device market and higher value production systems. Steve Harshbarger, President and Chief Executive Officer of Sono-Tek, stated, "Fiscal 2027 is progressing well, with solid first-half revenue growth, meaningful gross margin expansion and strong improvement in operating profitability. These results reflect disciplined execution across our operations and continued progress with our strategy of focusing on higher-value production systems in advanced technology markets, particularly medical devices. Medical was again the primary growth driver, with first-half sales increasing 289%, led by strong demand for balloon coating and specialty stent-coating systems. We are particularly encouraged by the increasing adoption of our technology as customers move from development into commercial manufacturing." "Looking ahead, we remain focused on expanding our installed base of production systems, supporting customers as they scale, and investing in the engineering, application development and commercial capabilities that will drive our next phase of growth. We continue to maintain our previously communicated expectation of flat to modest revenue growth for the full fiscal year. This outlook reflects the timing of several large, higher-value production platform orders, which can result in increased quarter-to-quarter variability as these systems become a larger portion of our business. With a strong and growing backlog and cash position, we believe we are well positioned to capitalize on the opportunities ahead and continue building long-term value for our shareholders. We are extremely proud of our performance and long-term track record of revenue and importantly net income growth." Dr. Christopher L. Coccio, Executive Chairman, stated, "Our first-half results reinforce the long-term strength of Sono-Tek's ultrasonic coating technology platform and the strategic direction we have pursued for many years. The exceptional growth in our medical business demonstrates how our technology and application expertise are enabling customers to address increasingly demanding coating requirements in sophisticated medical-device applications. We believe this growth also reflects the broader opportunity to expand our role as customers move from development into commercial manufacturing and increasingly require greater precision, repeatability and process control." "Over decades, Sono-Tek has built differentiated technology, deep application expertise and lasting customer relationships that continue to position us for future growth. We see opportunities to build on these strengths by expanding our presence in existing markets, developing new applications and supporting customers as their manufacturing requirements evolve. Together with our strong financial foundation and disciplined approach to investment, we believe these enduring strengths provide a solid platform for sustainable long-term growth and continued value creation for our shareholders." Second Quarter and First Half Fiscal 2027 Financial Results (Narrative compares with prior-year period unless otherwise noted) ($ in thousands) | Three Months Ended August 31, | | Change | | 2026 | | | | 2025 | | | $ | | % Net Sales | $ | 5,232 | | | $ | 5,163 | | | 69 | | | 1 | % Gross Profit | $ | 2,767 | | | $ | 2,590 | | | 177 | | | 7 | % Gross Margin | | 53 | % | | | 50 | % | | | | | | | | | | | Operating Income | $ | 382 | | | $ | 421 | | | (39 | ) | | (9 | %) Operating Margin | | 7 | % | | | 8 | % | | | | | | | | | | | Net Income | $ | 366 | | | $ | 424 | | | (58 | ) | | (14 | %) Net Margin | | 7 | % | | | 8 | % | | | | | | | | | | | | | | | | Six Months Ended August 31, | | Change | | 2026 | | | | 2025 | | | $ | | % Net Sales | $ | 10,893 | | | $ | 10,295 | | | 596 | | | 6 | % Gross Profit | $ | 5,981 | | | $ | 5,254 | | | 727 | | | 14 | % Gross Margin | | 55 | % | | | 51 | % | | | | | | | | | | | Operating Income | $ | 1,279 | | | $ | 905 | | | 374 | | | 41 | % Operating Margin | | 12 | % | | | 9 | % | | | | | | | | | | | Net Income | $ | 1,107 | | | $ | 909 | | | 198 | | | 22 | % Net Margin | | 10 | % | | | 9 | % | | | | Product Sales | | Three Months Ended August 31, | | | Change | | | Six Months Ended August 31, | | | Change | | | 2026 | | | 2025 | | | $ | | | % | | | 2026 | | | 2025 | | | $ | | | % | Fluxing Systems | | $ | 27,000 | | | $ | 165,000 | | | | (138,000 | ) | | (84 | % | ) | | $ | 119,000 | | | $ | 317,000 | | | | (198,000 | ) | | (62 | % | ) In-Line Coating Systems | | | 1,778,000 | | | | 1,530,000 | | | | 248,000 | | | 16 | % | | | | 3,937,000 | | | | 4,584,000 | | | | (647,000 | ) | | (14 | % | ) Multi-Axis Coating Systems | | | 1,975,000 | | | | 2,030,000 | | | | (55,000 | ) | | (3 | % | ) | | | 4,050,000 | | | | 2,707,000 | | | | 1,343,000 | | | 50 | % | OEM Systems | | | 642,000 | | | | 394,000 | | | | 248,000 | | | 63 | % | | | | 873,000 | | | | 524,000 | | | | 349,000 | | | 67 | % | Spare Parts, Services and Other | | | 810,000 | | | | 1,044,000 | | | | (234,000 | ) | | (22 | % | ) | | | 1,914,000 | | | | 2,164,000 | | | | (250,000 | ) | | (12 | % | ) TOTAL | | $ | 5,232,000 | | | $ | 5,163,000 | | | | 69,000 | | | 1 | % | | | $ | 10,893,000 | | | $ | 10,296,000 | | | | 597,000 | | | 6 | % | Sales of In-Line Coating Systems increased 16% in the second quarter of fiscal 2027 due to strong medical sales in the United States. In-Line Coating Systems sales decreased 14% during the first half of fiscal 2027 primarily attributed to the shipment of six high ASP systems valued at $4.42 million that occurred in the first half of fiscal 2026 that did not repeat in fiscal 2027. Sales of Multi-Axis Coating Systems decreased by 3% in the second quarter of fiscal 2027. In the first half of fiscal 2027, Multi-Axis Coating Systems increased 50% or approximately $1.3 million, driven by strong sales of specialty stent-coating systems to the U.S. medical device market. Sales of OEM Systems increased 63% to $642,000 in the second quarter and 67% to $873,000 in the first half of fiscal 2027. The increase in OEM sales in the second quarter and the first half of fiscal 2027 were driven by continued strong fluxing-system sales to a European OEM partner and strong semiconductor sales to an OEM in China. Market Sales | | Three Months Ended August 31, | | | Change | | | Six Months Ended August 31, | | | Change | | | 2026 | | | 2025 | | | $ | | | % | | | 2026 | | | 2025 | | | $ | | | % | Electronics/Microelectronics | | $ | 1,204,000 | | | $ | 1,455,000 | | | | (251,000 | ) | | (17 | % | ) | | $ | 2,068,000 | | | $ | 2,399,000 | | | | (331,000 | ) | | (14 | % | ) Medical | | | 3,105,000 | | | | 1,004,000 | | | | 2,101,000 | | | 209 | % | | | | 7,050,000 | | | | 1,812,000 | | | | 5,238,000 | | | 289 | % | Alternative/Clean Energy | | | 535,000 | | | | 2,433,000 | | | | (1,898,000 | ) | | (78 | % | ) | | | 855,000 | | | | 5,681,000 | | | | (4,826,000 | ) | | (85 | % | ) Emerging R&D and Other | | | 3,000 | | | | 33,000 | | | | (30,000 | ) | | (91 | % | ) | | | 5,000 | | | | 47,000 | | | | (42,000 | ) | | (89 | % | ) Industrial | | | 385,000 | | | | 238,000 | | | | 147,000 | | | 62 | % | | | | 915,000 | | | | 357,000 | | | | 558,000 | | | 156 | % | TOTAL | | $ | 5,232,000 | | | $ | 5,163,000 | | | | 69,000 | | | 1 | % | | | $ | 10,893,000 | | | $ | 10,296,000 | | | | 597,000 | | | 6 | % | Medical sales increased 209% to $3,105,000 in the second quarter of fiscal 2027 and 289% to $7,050,000 in the first half of fiscal 2027, led by shipments of balloon coating systems and specialty stent-coating systems. Industrial sales increased 62% to $385,000 in the second quarter of fiscal 2027 and 156% to $915,000 in the first half of fiscal 2027, influenced by a system sold to the defense sector for an optics-related application. Alternative Energy sales decreased 78% to $535,000 in the second quarter of fiscal 2027 and 85% to $855,000 in the first half of fiscal 2027. The decrease in the Alternative Energy market reflects the significant shifts in U.S. government policy and spending within the clean energy sector, particularly in green-hydrogen, electrolysis and fuel-cell applications. Electronics/Microelectronics sales decreased 17% to $1,204,000 in the second quarter of fiscal 2027 and 14% to $2,068,000 in the first half of fiscal 2027. Geographic Sales | | Three Months Ended August 31, | | | Change | | | Six Months Ended August 31, | | | Change | | | 2026 | | | 2025 | | | $ | | | % | | | 2026 | | | 2025 | | | $ | | | % | U.S. & Canada | | $ | 3,682,000 | | | $ | 2,720,000 | | | | 962,000 | | | 35 | % | | | $ | 7,212,000 | | | $ | 6,263,000 | | | | 949,000 | | | 15 | % | Asia Pacific (APAC) | | | 507,000 | | | | 930,000 | | | | (423,000 | ) | | (45 | % | ) | | | 1,244,000 | | | | 1,527,000 | | | | (283,000 | ) | | (19 | % | ) Europe, Middle East, Africa (EMEA) | | | 952,000 | | | | 1,424,000 | | | | (472,000 | ) | | (33 | % | ) | | | 1,883,000 | | | | 2,321,000 | | | | (438,000 | ) | | (19 | % | ) Latin America | | | 91,000 | | | | 89,000 | | | | 2,000 | | | 2 | % | | | | 554,000 | | | | 185,000 | | | | 369,000 | | | 199 | % | TOTAL | | $ | 5,232,000 | | | $ | 5,163,000 | | | | 69,000 | | | 1 | % | | | $ | 10,893,000 | | | $ | 10,296,000 | | | | 597,000 | | | 6 | % | In the second quarter of fiscal 2027, approximately 30% of sales originated outside of the United States and Canada compared with 47% in the second quarter of fiscal 2026. In the first half of fiscal 2027, approximately 34% of sales originated outside of the United States and Canada compared with 39% in the first half of fiscal 2026. U.S. and Canada sales increased 35% in the second quarter of fiscal 2027 and 15% in the first half of fiscal 2027, driven by strong sales to the U.S. medical-device market, including the stent and drug-coated balloon markets. Asia Pacific sales decreased approximately 45% in the second quarter and 19% in the first half of fiscal 2027, reflecting lower sales in South Korea, Taiwan and Japan. These decreases were partially offset by increased sales in China, including strong first-half medical and semiconductor sales. Latin America sales increased 2% in the second quarter of fiscal 2027 and were essentially flat with the prior-year quarter. Sales increased 199% in the first half of fiscal 2027, including a $242,000 medical system shipped to Costa Rica. EMEA sales decreased 33% in the second quarter and 19% in the first half of fiscal 2027, primarily reflecting softer clean-energy sales in the region. The first-half decrease was partially offset by strong sales to a European fluxing OEM partner and steady medical-sector sales. Conference Call Information The Company will hold a conference call to discuss its fiscal second quarter and first half 2027 financial results, ended August 31, 2026, today, October 14, 2026, at 10:30 am ET. To participate, please dial 1-844-481-2752 or 1-412-317-0668 for international callers at least 10 minutes prior to the start of the call and ask to join the Sono-Tek call. Webcast Information A simultaneous webcast of the call may be accessed through the Company's website, Events & Presentations | Sono-Tek or at: https://event.choruscall.com/mediaframe/webcast.html?webcastid=XwOIJQ1z A replay of the call will be available at 1-855-669-9658 or 1-412-317-0088 for international callers, access code 9211789, through October 28, 2026. A replay of the call will also be available on the Company's website for one year at www.sono-tek.com. About Sono-Tek Sono-Tek Corporation is the global leader in the design and manufacture of ultrasonic coating systems that are shaping industries and driving innovation worldwide. Our ultrasonic coating systems are used to apply thin films onto parts used in diverse industries including microelectronics, alternative energy, medical devices, advanced industrial manufacturing, and research and development sectors worldwide. Sono-Tek's inroads into the clean energy sector are showing transformative results in next-gen solar cells, fuel cells, green hydrogen generation, and carbon capture applications. Our product line is rapidly evolving, transitioning from R&D to high-volume production machines with significantly higher average selling prices, showcasing our market leadership and adaptability. Our comprehensive suite of thin film coating solutions and application consulting services are expected to generate unparalleled results for our clients and help some of the world's most promising companies achieve technological breakthroughs and bring them to the market. We strategically deliver our products to customers through a network of direct sales personnel, carefully chosen independent distributors, and experienced sales representatives, ensuring efficient market reach across diverse sectors around the globe. Our solutions are environmentally friendly, efficient and highly reliable, and enable dramatic reductions in overspray, savings in raw material, water and energy usage and provide improved process repeatability, transfer efficiency, high uniformity and reduced emissions. Sono-Tek's growth strategy is focused on leveraging its innovative technologies, proprietary know-how, unique talent and experience, and global reach to further develop thin film coating technologies that enable better outcomes for its customers' products and processes. For further information, visit www.sono-tek.com. Safe Harbor Statement This news release contains forward looking statements regarding future events and the future performance of Sono-Tek Corporation that involve risks and uncertainties that could cause actual results to differ materially. These "forward-looking statements' are based on currently available competitive, financial and economic data and our operating plans. They are inherently uncertain, and investors must recognize that events could turn out to be significantly different from our expectations and could cause actual results to differ materially. These factors include, among other considerations, general economic and business conditions, including political, regulatory, tax, competitive and technological developments affecting our operations or the demand for our products; inflationary and supply chain pressures; continued strength of sales to the medical device market; continued private and public funding for the clean energy sector and continued strong demand for Sono-Tek's suite of thin film coating solutions and application consulting services in the clean energy and other markets; maintenance of order backlog; the imposition of tariffs; timely development and market acceptance of new products and continued customer validation of our coating technologies; adequacy of financing; capacity additions, the ability to enforce patents; maintenance of operating leverage; consummation of order proposals; completion of large orders on schedule and on budget; successful transition from primarily selling ultrasonic nozzles and components to a more complex business providing complete machine solutions and higher value subsystems; and realization of quarterly and annual revenues within the forecasted range of sales guidance. We undertake no obligation to update any forward-looking statement. For more information, contact: Sono-Tek Corp. Stephen J. Bagley Chief Financial Officer Ph: (845) 795-2020 [email protected] Investor Relations: Kirin Smith PCG Advisory, Inc. [email protected] SONO-TEK CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS | | August 31, 2026 | | | February 28, 2026 | | | (Unaudited) | | | | ASSETS | | | | | | | | | | | | | | | | Current Assets: | | | | | | | | Cash and cash equivalents | | $ | 10,249,779 | | | $ | 7,339,403 | Marketable securities | | | 7,505,420 | | | | 7,469,649 | Accounts receivable (less allowance of $12,225, respectively) | | | 1,230,260 | | | | 3,350,953 | Inventories | | | 3,833,809 | | | | 3,923,350 | Prepaid expenses and other current assets | | | 535,491 | | | | 743,295 | Total current assets | | | 23,354,759 | | | | 22,826,650 | | | | | | | | | Land | | | 250,000 | | | | 250,000 | Buildings, equipment, furnishings and leasehold improvements, net | | | 2,036,827 | | | | 2,173,443 | Intangible assets, net | | | 26,316 | | | | 29,791 | Deferred tax asset | | | 731,673 | | | | 1,141,611 | | | | | | | | | TOTAL ASSETS | | $ | 26,399,575 | | | $ | 26,421,495 | | | | | | | | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | | | | | | | | | Current Liabilities: | | | | | | | | Accounts payable | | $ | 779,158 | | | $ | 1,038,885 | Accrued expenses | | | 1,988,412 | | | | 2,227,401 | Customer deposits | | | 2,324,246 | | | | 3,069,743 | Income taxes payable | | | 188,503 | | | | 255,398 | Total current liabilities | | | 5,280,319 | | | | 6,591,427 | | | | | | | | | Deferred tax liability | | | 54,324 | | | | 55,909 | Total liabilities | | | 5,334,643 | | | | 6,647,336 | | | | | | | | | Commitments and Contingencies (Note 10) | | | | | | | | | | | | | | | | Stockholders' Equity | | | | | | | | Common stock, $.01 par value; 25,000,000 shares authorized, 15,716,723 and 15,710,389 issued and outstanding as of August 31, 2026 and February 28, 2026 | | | 157,167 | | | | 157,104 | Additional paid-in capital | | | 10,370,106 | | | | 10,186,858 | Accumulated earnings | | | 10,537,659 | | | | 9,430,197 | Total stockholders' equity | | | 21,064,932 | | | | 19,774,159 | | | | | | | | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | | $ | 26,399,575 | | | $ | 26,421,495 | See notes to unaudited condensed consolidated financial statements. SONO-TEK CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) | | Six Months Ended August 31, | | | Three Months Ended August 31, | | | 2026 | | | 2025 | | | 2026 | | | 2025 | | | | | | | | | | | | | Net Sales | | $ | 10,893,312 | | | $ | 10,295,469 | | | $ | 5,232,153 | | | $ | 5,162,696 | Cost of Goods Sold | | | 4,912,537 | | | | 5,041,218 | | | | 2,465,298 | | | | 2,572,959 | Gross Profit | | | 5,980,775 | | | | 5,254,251 | | | | 2,766,855 | | | | 2,589,737 | | | | | | | | | | | | | | | | | Operating Expenses | | | | | | | | | | | | | | | | Research and product development costs | | | 1,296,143 | | | | 1,295,748 | | | | 679,160 | | | | 627,278 | Marketing and selling expenses | | | 2,025,731 | | | | 1,729,504 | | | | 1,000,747 | | | | 871,353 | General and administrative costs | | | 1,380,209 | | | | 1,324,477 | | | | 705,417 | | | | 669,952 | Total Operating Expenses | | | 4,702,083 | | | | 4,349,729 | | | | 2,385,324 | | | | 2,168,583 | | | | | | | | | | | | | | | | | Operating Income | | | 1,278,692 | | | | 904,522 | | | | 381,531 | | | | 421,154 | | | | | | | | | | | | | | | | | Interest and Dividend Income | | | 268,559 | | | | 223,660 | | | | 153,936 | | | | 81,562 | Net unrealized (loss)/gain on marketable securities | | | (63,704 | ) | | | 1,570 | | | | (37,433 | ) | | | 23,493 | | | | | | | | | | | | | | | | | Income Before Income Taxes | | | 1,483,547 | | | | 1,129,752 | | | | 498,034 | | | | 526,209 | | | | | | | | | | | | | | | | | Income Tax Expense | | | 376,085 | | | | 221,074 | | | | 131,740 | | | | 102,516 | | | | | | | | | | | | | | | | | Net Income | | $ | 1,107,462 | | | $ | 908,678 | | | $ | 366,294 | | | $ | 423,693 | | | | | | | | | | | | | | | | | Basic Earnings Per Share | | $ | 0.07 | | | $ | 0.06 | | | $ | 0.02 | | | $ | 0.03 | | | | | | | | | | | | | | | | | Diluted Earnings Per Share | | $ | 0.07 | | | $ | 0.06 | | | $ | 0.02 | | | $ | 0.03 | | | | | | | | | | | | | | | | | Weighted Average Shares - Basic | | | 15,714,954 | | | | 15,727,844 | | | | 15,716,723 | | | | 15,721,162 | Weighted Average Shares - Diluted | | | 15,789,915 | | | | 15,740,384 | | | | 15,806,121 | | | | 15,731,571 | See notes to unaudited condensed consolidated financial statements.

Sono-Tek Corporation (SOTK) came out with quarterly earnings of $0.02 per share, missing the Zacks Consensus Estimate of $0.05 per share. This compares to earnings of $0.03 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of -60.00%. A quarter ago, it was expected that this company would post earnings of $0.05 per share when it actually produced earnings of $0.05, delivering no surprise. Over the last four quarters, the company has surpassed consensus EPS estimates just once. SonoTek, which belongs to the Zacks Electronics - Semiconductors industry, posted revenues of $5.23 million for the quarter ended August 2026, missing the Zacks Consensus Estimate by 7.82%. This compares to year-ago revenues of $5.16 million. The company has topped consensus revenue estimates just once over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. SonoTek shares have added about 72.4% since the beginning of the year versus the S&P 500's gain of 14%. While SonoTek has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for SonoTek was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.01 on $5.26 million in revenues for the coming quarter and $0.10 on $21.37 million in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Electronics - Semiconductors is currently in the top 40% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Another stock from the same industry, Applied Optoelectronics (AAOI), has yet to report results for the quarter ended September 2026. This maker of fiber optic products used by cable TV providers is expected to post quarterly earnings of $0.14 per share in its upcoming report, which represents a year-over-year change of +255.6%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Applied Optoelectronics' revenues are expected to be $269.15 million, up 126.9% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Sono-Tek Corporation (SOTK) : Free Stock Analysis Report Applied Optoelectronics, Inc. (AAOI) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

This article first appeared on GuruFocus. - Revenue: Q2 FY2027 revenue ~$5.23 million vs. $5.16 million prior year (+$69,000); H1 FY2027 revenue +6% to ~$10.9 million vs. $10.3 million. - Gross Profit: Q2 gross profit ~$2.8 million (+7% YoY); H1 gross profit +14% to ~$6 million. - Gross Margin: Q2 gross margin ~53%; H1 gross margin expanded to 55% vs. 51% prior year period. - Operating Income: Q2 operating income -9% (-$39,000) to $382,000; H1 operating income +41% to ~$1.28 million vs. ~$905,000. - Net Income: H1 net income +22% to ~$1.11 million vs. ~$909,000 prior year. - R&D Expenses: H1 R&D steady at ~$1.3 million vs. prior year; Q2 increase due to health insurance, R&D materials, and engineering expenses. - Marketing & Selling Expenses: Increased in Q2 and H1 due to sales application lab salaries, forward deployed engineering group, health insurance, and trade show expenses. - G&A Expenses: Increased in Q2 and H1 due to salaries, health insurance, corporate expenses, stock-based compensation, and legal/accounting fees. - Cash & Marketable Securities: ~$17.7 million as of August 31, 2026, vs. $14.8 million at end of fiscal 2026; no debt. - Backlog: ~$9.5 million at August 31, up 23% from end of first quarter; post-quarter orders of ~$7.19 million plus >$3.6 million medical diagnostic order significantly increase backlog into fiscal 2028. - Medical Market Sales: +289% to ~$7.1 million in H1, driven by drug-eluting balloon coating, specialty stent, and other medical device coating applications. - Multi-Axis Coating Systems: +~50% in H1, driven primarily by specialty medical coating systems. - OEM Systems: +~67% in H1, supported by European fluxing OEM partner and China-based semiconductor OEM customer. - In-Line Coating Systems: -14% in H1, reflecting difficult comparison to prior year's six high-ASP systems totaling ~$4.4 million. - Industrial Business: +~156% in H1, influenced by optics-related shipment to defense sector. - Alternative Energy: Reduced demand in H1 tied to government policy and spending changes in green hydrogen, electrolysis, and fuel cell applications; three new orders totaling ~$7.19 million (10 production systems) from existing customer across three geographic locations, largest aggregate customer order in company history. - Outlook: Reiterating expectation for flat to modest revenue growth through fiscal 2027. - Warning! GuruFocus has detected 8 Warning Signs with SOTK. - Is SOTK fairly valued? Test your thesis with our free DCF calculator. Release Date: October 14, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. - First half revenue increased 6% to approximately $10.9 million, driven by strong medical market demand and higher-value production systems. - Gross margin expanded to 55% from 51% in the prior year period, reflecting favorable product and geographic mix. - Operating income increased 41% to approximately $1.28 million, and net income increased 22% to approximately $1.1 million. - Medical market sales surged 289% to approximately $7.1 million, with customers transitioning from development to commercial manufacturing. - Recent record orders totaling approximately $7.2 million from an existing alternative energy customer, representing the largest aggregate order in company history, significantly boost backlog and provide visibility into fiscal 2028. - Balance sheet remains debt-free with cash and marketable securities of approximately $17.7 million, up from $14.8 million at fiscal year-end. - Backlog at August 31 was approximately $9.5 million, up 23% sequentially, and has substantially increased with post-quarter orders. - Second quarter operating income decreased 9% to $382,000 due to higher operating expenses. - In-Line Coating Systems declined 14% in the first half, reflecting a difficult comparison with the prior year when six high-ASP systems totaling $4.4 million shipped. - Alternative energy sales declined in the first half due to reduced demand from changes in government policy and spending related to green hydrogen and fuel cell applications. - Gross margin levels achieved in the first half are not necessarily indicative of future margins, as they were unusually favorable and may not be sustainable. - The company reiterated expectations for flat to modest revenue growth for fiscal 2027, indicating limited near-term top-line expansion. - Operating expenses are expected to increase in the second half as the company invests in forward-deployed engineering and other capabilities ahead of anticipated revenue growth. - Timing of large production system orders can create quarter-to-quarter variability, making revenue and margin trends less predictable. Q: Can you characterize your visibility on the medical business continuing at these nice levels given the noted commercial manufacturing transition?A: CEO Steve Harshbarger said activity in Sono-Tek's labs and with its Forward-Deployed Engineering (FDE) team is very high, both for existing successes being implemented and expanded with more production lines, and for new products that could mature into high-volume manufacturing. He noted medical is progressing very nicely, following the earlier clean-energy success, and said he would next like to see similar scaling on the microelectronics side. Q: On the spares and repairs side, you're at a $4 million-ish run rate. With the transition to larger production systems, do you expect a pickup, especially as medical systems come off warranty?A: CEO Steve Harshbarger said high-volume production machines cannot be down, so calibration and service contracts are more likely to be welcomed, and FDA scrutiny adds to the need for paid calibration. He expects a recurring revenue stream to begin folding in as newer high-volume machines fall out of warranty, plus a nice spare parts business, since many lines run three shifts a day, 24/7, and wear significantly. Q: What operating leverage do you foresee from the $22 million run rate, and how much of incremental sales should flow to the bottom line?A: CEO Steve Harshbarger said he expects significant leverage from roughly $22 million to $40 million, with no major extra costs beyond direct personnel building the machines. He said he does not know exactly how much will flow through, but it must happen. The one area of heavy continued investment, which will raise costs, is the forward-deployed engineering team. Q: You highlighted an optics order for defense and said you were bullish on defense. What are you seeing there, and what is the use case?A: CEO Steve Harshbarger said there are many optics-related technologies for flying objects that need sensors and optics, and Sono-Tek's technology fits several applications. Defense is high-tech, not very price sensitive, and offers the margins Sono-Tek wants. It may require some compliance work on documentation, but he said Sono-Tek could comply after modest investment, and he would not be surprised to see a defense sector tab added to its website within a quarter or so. Q: On semiconductors and microelectronics, you are at SEMICON West and going to SEMICON Europa. Is the opportunity entirely spray coating of photoresist, mostly 200mm and below, or are you moving to 300mm wafers?A: CEO Steve Harshbarger said the area is broader than he initially recognized. Sono-Tek is already attacking 200mm photoresist and is trying to shift toward larger 300mm wafers, bringing it from lab and low-volume production to the fab area, which will be a focus at SEMICON Europe. He said there are likely more applications outside photoresist, including unique thin-film processes, and that semiconductors could potentially become Sono-Tek's largest sector in the future, though not as short-term as medical or alternative energy. Q: On timing for semiconductor opportunities, how do you evaluate how quickly these could turn into real opportunities?A: CEO Steve Harshbarger said next-generation evaluations will be quick to give a thumbs up or down, but actual implementation tends to be slower in semiconductors, where customers move fast on proven methodologies and are more cautious on lab- or pilot-proven processes. He suspects really significant impact, such as an order for 10 machines for a fab, may be one to three years out, though first machines for new processes could come within about a year. Q: On operating leverage, you are getting through a tougher order period before a bigger resumption of growth in fiscal 2028. Is it right that you have to carry higher marketing cost for a quarter or two before the revenue arrives?A: CEO Steve Harshbarger agreed, saying Sono-Tek is making more significant investments ahead of the acceleration because it has the money and is profitable enough to double down. He said Q3 and Q4 margins may not be as attractive as the first half, but higher-revenue orders with better margins should follow, based on existing backlog. He added that large high-ASP orders need to happen every month, not twice a year. Q: On ASP progression, you previously delineated orders under $75,000, $75,000 to $150,000, and over $150,000. Is $150,000 still a good gauge of a commercial order, and how does that square with a $7 million order?A: CEO Steve Harshbarger said Sono-Tek should perhaps break out $150,000 to $500,000 and $500,000 and over. He noted the recent $7.2 million order was for 10 machines at about $700,000 each, while the prior $3.6 million order was a single manufacturing line. He said driving ASPs higher is vital, and ultimately Sono-Tek wants $1 million-plus or even $2 million-plus machines. Q: On capacity, when you go from a $700,000 ASP machine to a $3 million machine by adding capabilities, are those capabilities aggregated by the forward-deployed engineering team rather than made in-house?A: CEO Steve Harshbarger said that is exactly right. Sono-Tek is not making the core components in-house but is doing systems integration and application engineering process integration, including post-cleaning, curing, and measurement. The FDE team becomes expert not just in applying thin-film coatings but in measuring, cleaning, and curing. Customers pay a premium to avoid that risk, and Sono-Tek would consider bringing more in-house as volume grows. Q: Are the forward-deployed engineers assigned by industry or industry agnostic, and how many accounts does each handle?A: CEO Steve Harshbarger clarified there are three forward-deployed engineers plus a project manager, four in the group. They typically work on two to three major accounts with in-house orders while feeding in one to two proposals a month for new potential customers, looking at a dozen or two dozen opportunities a year. One engineer worked about 25% of his time over three years with the customer behind the $7.2 million order, which has now given Sono-Tek around $14 million in orders. Q: Who do the forward-deployed engineers report to, and is there an information flow gap For the complete transcript of the earnings call, please refer to the full earnings call transcript.

- Interested in Sono-Tek Corporation? Here are five stocks we like better. - First-half financial performance improved: Revenue rose 6% to approximately $10.9 million, while gross profit increased 14% and operating income climbed 41%, supported by wider margins and stronger sales of higher-value systems. - Medical demand led growth: Medical-market sales surged 289% to about $7.1 million, driven by drug-eluting balloon, stent and other device-coating applications. Industrial and OEM sales also increased, while alternative-energy revenue declined year over year. - Large orders strengthened the outlook: Three alternative-energy orders totaling about $7.2 million, plus a medical order exceeding $3.6 million, provide more than $10.79 million in expected backlog largely for fiscal 2028. Sono-Tek reiterated its fiscal 2027 outlook of flat to modest revenue growth and plans manufacturing-capacity investments. Sono-Tek (NASDAQ:SOTK) reported fiscal 2027 first-half revenue growth, wider gross margins and higher profitability, led by a sharp increase in medical-market sales and demand for higher-value production systems. Management also highlighted recent order activity that it said provides increased visibility into fiscal 2028. For the six months ended Aug. 31, 2026, revenue rose 6% to approximately $10.9 million from $10.3 million a year earlier. Gross profit increased 14% to about $6 million, while gross margin expanded to 55% from 51%. Operating income rose 41% to approximately $1.28 million, and net income increased 22% to approximately $1.1 million. → A Silent Winner: Texas Instruments Anchors the AI Supercycle Second-quarter revenue was approximately $5.23 million, up $69,000 from $5.16 million in the prior-year period. Gross profit increased about 7% to $2.8 million, and gross margin was approximately 53%. Second-quarter operating income declined 9%, or $39,000, to $382,000 as operating expenses increased. Medical-market sales increased 289% in the first half to approximately $7.1 million. CEO and President Steve Harshbarger said demand was driven by drug-eluting balloon coating systems, specialty stent applications and other medical device coating uses. → A Chinese Rival Just Spooked Memory Stocks—How Worried Should Micron Investors Be? Management said customers are increasingly progressing from process development and qualification into commercial manufacturing. That transition can involve larger, more sophisticated systems and potentially lead to follow-on equipment orders, service work and additional production lines as customers scale their output. Multi-Axis Coating Systems sales increased approximately 50% during the first half, primarily due to specialty medical coating systems. OEM Systems sales increased about 67%, supported by demand from a European fluxing OEM partner and a China-based semiconductor OEM customer. → Delta's Guidance Cut Could Spell Trouble for the Airline Industry In-Line Coating Systems sales declined 14%, reflecting a difficult comparison with the prior year, when Sono-Tek shipped six high-average-selling-price systems totaling about $4.4 million. Harshbarger said results by product line can fluctuate based on the timing of larger production-system shipments. Industrial business sales increased approximately 156%, influenced by an optics-related shipment to the defense sector. Management said it plans to place greater emphasis on defense opportunities in coming years. Alternative-energy sales declined during the first half, which the company attributed to reduced demand tied to changes in government policy and spending related to green hydrogen, electrolysis and fuel-cell applications. Sono-Tek recently announced three orders from an existing alternative-energy customer totaling approximately $7.2 million. The orders cover 10 production-scale systems and represent the company's largest aggregate customer order, according to Executive Chairman Chris Coccio. The customer has deployed Sono-Tek's technology in an advanced clean-energy manufacturing process and is expanding use of the company's systems across three geographic locations. The systems are expected to ship primarily during fiscal 2028. Those orders, combined with a previously announced medical diagnostic production-line order of more than $3.6 million, represent more than $10.79 million in backlog, with most of that amount currently expected to be delivered in fiscal 2028. Management emphasized that the programs involve separate customers and two distinct markets: medical devices and alternative energy. Backlog stood at approximately $9.5 million at Aug. 31, up 23% from the end of the first quarter. CFO Steve Bagley said the additional $7.19 million in clean-energy orders received after quarter-end substantially increased the company's backlog during the third quarter. Bagley said first-half gross-margin improvement reflected favorable product and geographic mix, including a higher contribution from medical systems and other higher-value production equipment. He cautioned that gross margins can vary based on the systems shipped, customer and geographic mix, distributor involvement, installation requirements and other factors. Research and product-development costs were approximately $1.3 million for the first half, unchanged from the prior year. Marketing and selling expenses increased due to salary costs for the sales application lab and forward-deployed engineering group, employee health insurance and trade-show expenses. General and administrative expenses also rose, driven by salaries, insurance, corporate costs, stock-based compensation, and legal and accounting fees. As of Aug. 31, cash and marketable securities totaled approximately $17.7 million, compared with $14.8 million at the end of fiscal 2026. Sono-Tek reported no debt. Harshbarger said Sono-Tek is investing in its systems-integration capabilities through a forward-deployed engineering team that works with customers to integrate the company's ultrasonic technology into broader production platforms. The group currently includes three forward-deployed engineers and a support-oriented project manager, he said. Management said the approach supports higher average selling prices and can create recurring opportunities as customers expand production capacity. Harshbarger cited the $7.2 million alternative-energy order as an example of a customer relationship that advanced from research and development to pilot-line work and then high-volume manufacturing. The company plans an expansion of its current manufacturing footprint beginning around the end of the calendar year. Harshbarger said the first phase, involving a mezzanine and manufacturing-flow optimization, could increase capacity from approximately $27 million to between $33 million and $36 million. The company estimated the initial capital expenditure at about $700,000 and said it is seeking potential participation from New York State of approximately $150,000 to $200,000. A later retrofit of an unoccupied building on Sono-Tek's campus could raise manufacturing capacity to roughly $44 million to $45 million, management said. Sono-Tek reiterated its expectation for flat to modest revenue growth in fiscal 2027. Management said the timing of large production-system orders can cause quarterly variability, while recent order activity has improved visibility entering fiscal 2028. Harshbarger said the company will continue pursuing opportunities in medical devices, microelectronics, industrial applications and alternative energy while selectively investing in engineering, application development and commercial capabilities. Sono-Tek Corporation develops and manufactures ultrasonic coating and precision liquid-deposition systems. Its technology uses high-frequency sound waves to atomize liquids into a controlled spray, enabling uniform application of coatings, adhesives, lubricants, and other materials while minimizing overspray and material waste. The company's products include ultrasonic spray nozzles, integrated coating systems, and customized solutions designed for automated manufacturing processes. Sono-Tek also provides application development, process optimization, installation, training, and technical support to help customers integrate its equipment into production lines. Sono-Tek's systems are used across a range of industries, including medical devices, electronics, semiconductor and advanced technology manufacturing, alternative energy, glass, textiles, and other industrial applications. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Sono-Tek Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for October 2026.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. - Management is pivoting the business model from selling individual coating components to providing integrated, high-value production platforms with significantly higher average selling prices (ASPs). - The medical market has become the primary growth engine, increasing 289% to $7.1 million as customers transition from R&D and qualification into commercial manufacturing. - A record $7.2 million order from an alternative energy customer validates the 'flywheel effect' where successful R&D partnerships lead to multi-site production line expansions. - Gross margin expansion to 55% was driven by a favorable mix of medical systems and higher-value production equipment, though management notes this can vary by period. - The company is intentionally shifting resources from the alternative energy sector—which faced headwinds from government policy changes—toward the rapidly maturing medical device market. - Strategic positioning now focuses on being a 'medical device implantable company' rather than just a stent coating provider, increasing credibility with global tier-one customers. - Management reiterated expectations for flat to modest revenue growth in fiscal 2027, citing variability in the timing of large production system orders. - Recent record orders totaling over $10.79 million provide significant early visibility into fiscal 2028, with the majority of these shipments expected in that period. - The company plans a multi-phase facility expansion starting December 2026 to increase manufacturing capacity from approximately $27 million to a peak of $45 million. - Management is evaluating long-term capacity needs beyond $45 million, including potential geographic diversification to states like South Carolina for manufacturing incentives. - Future growth strategy relies on the 'Forward Deployed Engineering' (FDE) team to drive faster returns on investment compared to traditional long-cycle R&D. - Alternative energy demand for green hydrogen and fuel cell applications declined due to changes in government policy and spending. - Operating expenses increased due to higher employee health insurance, corporate expenses, and investments in the sales application lab and FDE group. - Management highlighted a new focus on the defense sector, specifically for optics and sensors in 'flying objects', as a high-margin, non-price-sensitive market opportunity. - The company maintains a debt-free balance sheet with $17.7 million in cash, providing flexibility for potential M&A in core markets. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. - The FDE team has grown from one to four people and acts as a bridge to integrate core technology into large-scale production platforms. - Investments in integration capabilities yield commercial returns in 1-2 years, significantly faster than the 5-6 years required for core technology innovation. - This strategy creates 'sticky' customer relationships where Sono-Tek is 'attached at the hip' as the customer's exclusive coating expert during global scaling. - Management cautioned that current 55% margins are 'unusually favorable' due to specific U.S.-based shipments that avoid distributor discounts. - Profitability improves on repeat orders (machines 2 through 15) as the company optimizes costs after the initial custom engineering phase. - The goal is to make high-ASP repeat orders the 'norm' rather than the 'unusual' through standardized production platforms. - Sono-Tek is moving beyond photoresist applications into next-gen AI chip manufacturing and 300-millimeter wafer processes. - While significant revenue impact from semiconductor fabs may be 2-3 years away, lab-level proof-of-concept work is accelerating. - The company is targeting processes where existing coating technologies are failing, positioning their ultrasonic technology as the new standard for high-volume fabs. - High-volume production lines require 24/7 uptime, creating new demand for calibration contracts and service agreements that R&D customers typically do not need. - Management expects a meaningful recurring revenue stream to develop as the new fleet of high-value systems falls out of warranty. - Increased scrutiny from regulatory bodies like the FDA mandates regular machine calibration, further driving service demand.

Conference Call on Wednesday, October 14, 2026 at 10:30 am ET MILTON, N.Y., Oct. 07, 2026 (GLOBE NEWSWIRE) -- Sono-Tek Corporation (NASDAQ: SOTK), the leading developer and manufacturer of ultrasonic coating systems, today announced that the Company will hold a conference call to discuss its fiscal second quarter and first half 2027 financial results, ended August 31, 2026, on Wednesday, October 14, 2026 at 10:30 am ET. The second quarter and first half FY 2027 financial results press release will be issued before the market opens on October 14, 2026. Conference Call Dial-in Information To participate, please call 1-844-481-2752 or 1-412-317-0668 for international callers at least 10 minutes prior to the start of the call and ask to join the Sono-Tek call. Webcast Information A simultaneous webcast of the call may be accessed through the Company's website, Events & Presentations | Sono-Tek or at: https://event.choruscall.com/mediaframe/webcast.html?webcastid=XwOIJQ1z A replay of the call will be available at 1-855-669-9658 or 1-412-317-0088 for international callers, access code 9211789, through October 28, 2026. A replay of the call will also be available on the Company's website for one year at www.sono-tek.com. About Sono-Tek Sono-Tek Corporation is the global leader in the design and manufacture of ultrasonic coating systems that are shaping industries and driving innovation worldwide. Our ultrasonic coating systems are used to apply thin films onto parts used in diverse industries including microelectronics, alternative energy, medical devices, advanced industrial manufacturing, and research and development sectors worldwide. Sono-Tek's inroads into the clean energy sector are showing transformative results in next-gen solar cells, fuel cells, green hydrogen generation, and carbon capture applications. Our product line is rapidly evolving, transitioning from R&D to high-volume production machines with significantly higher average selling prices, showcasing our market leadership and adaptability. Our comprehensive suite of thin film coating solutions and application consulting services are expected to generate unparalleled results for our clients and help some of the world's most promising companies achieve technological breakthroughs and bring them to the market. We strategically deliver our products to customers through a network of direct sales personnel, carefully chosen independent distributors, and experienced sales representatives, ensuring efficient market reach across diverse sectors around the globe. Our solutions are environmentally friendly, efficient and highly reliable, and enable dramatic reductions in overspray, savings in raw material, water and energy usage and provide improved process repeatability, transfer efficiency, high uniformity and reduced emissions. Sono-Tek's growth strategy is focused on leveraging its innovative technologies, proprietary know-how, unique talent and experience, and global reach to further develop thin film coating technologies that enable better outcomes for its customers' products and processes. For further information, visit www.sono-tek.com. For more information, contact: Sono-Tek Corp. Stephen J. Bagley Chief Financial Officer Ph: (845) 795-2020 [email protected] Investor Relations: Kirin Smith PCG Advisory, Inc. [email protected]

Sono-Tek's largest aggregate customer order to date covers 10 production-scale coating systems, adding to more than $10.79 million of backlog across two major programs expected primarily to ship during fiscal 2028. - Sono-Tek (NASDAQ:SOTK) received three purchase orders worth approximately $7.19 million from an existing advanced clean energy customer, the largest aggregate customer order in its history. - The orders cover 10 production-scale ultrasonic coating systems destined for three geographic locations, expanding an established customer relationship. - Deliveries are expected primarily during fiscal 2028, which begins March 1, 2027, providing early revenue visibility for the period. - Combined with a previously announced medical diagnostic production line worth more than $3.6 million, Sono-Tek now has over $10.79 million in backlog from the two programs. - The clean energy order supports Sono-Tek's strategy of moving customers from process development into higher-value, high-volume manufacturing applications. Sono-Tek has secured approximately $7.19 million of orders from an existing clean energy customer, comprising 10 production-scale coating systems that will be deployed across three geographic locations. The customer already uses Sono-Tek equipment in an advanced solar manufacturing process. The latest orders significantly expand its use of the company's proprietary ultrasonic coating technology and represent a move further into high-volume manufacturing. Sono-Tek currently expects most of the systems to ship during fiscal 2028, although delivery schedules remain subject to production timing and customer requirements. The orders also follow a medical diagnostic production line order worth more than $3.6 million announced in August. Together, the two programs account for more than $10.79 million of backlog, with the majority expected to be recognized through shipments during fiscal 2028. The size and timing of the clean energy order provide Sono-Tek with greater visibility into fiscal 2028 before the financial year has begun. With approximately five months remaining until March 1, 2027, the company also has additional time to add orders to its existing backlog. The customer's progression from installing and operating Sono-Tek systems to ordering another 10 production-scale units may also provide evidence of the company's strategy to convert development-stage applications into larger manufacturing deployments. Importantly, the $10.79 million-plus backlog highlighted by Sono-Tek comes from two separate customers operating in clean energy and medical diagnostics. That reduces the extent to which this portion of the identified fiscal 2028 backlog depends on a single end market, although the $7.19 million clean energy order itself represents a substantial customer commitment. The orders also reinforce the company's push toward larger production systems with higher average selling prices rather than relying primarily on research and development equipment. Delivery timing will be a key factor because most of the $10.79 million-plus backlog is currently expected to ship during fiscal 2028. Investors can also watch for additional orders before the fiscal year begins, further production-scale deployments from existing customers and evidence that Sono-Tek can replicate this development-to-manufacturing progression across other clean energy and medical applications.

Sono-Tek Corporation (SOTK) came out with quarterly earnings of $0.05 per share, in line with the Zacks Consensus Estimate . This compares to earnings of $0.03 per share a year ago. These figures are adjusted for non-recurring items. A quarter ago, it was expected that this company would post earnings of $0.02 per share when it actually produced earnings of $0.03, delivering a surprise of +50%. Over the last four quarters, the company has surpassed consensus EPS estimates two times. SonoTek, which belongs to the Zacks Electronics - Semiconductors industry, posted revenues of $5.66 million for the quarter ended May 2026, missing the Zacks Consensus Estimate by 0.68%. This compares to year-ago revenues of $5.13 million. The company has topped consensus revenue estimates just once over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. SonoTek shares have added about 24.7% since the beginning of the year versus the S&P 500's gain of 9.6%. While SonoTek has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for SonoTek was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.05 on $5.66 million in revenues for the coming quarter and $0.11 on $21.45 million in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Electronics - Semiconductors is currently in the top 19% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. One other stock from the same industry, Silvaco Group, Inc. (SVCO), is yet to report results for the quarter ended June 2026. This company is expected to post break-even quarterly earnings per share in its upcoming report, which represents a year-over-year change of +100%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Silvaco Group, Inc.'s revenues are expected to be $18 million, up 49.4% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Sono-Tek Corporation (SOTK) : Free Stock Analysis Report Silvaco Group, Inc. (SVCO) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Revenue Increased 10%; Gross Margin Expanded to 57%; Operating Income Increased 86%; Net Income Increased 67% Anticipating Continued Revenue Growth in 1H 2027 Driven by Strong Medical Sector and Higher Value Production Systems MILTON, N.Y., July 08, 2026 (GLOBE NEWSWIRE) -- Sono-Tek Corporation (Nasdaq: SOTK), a leading developer and manufacturer of precision ultrasonic coating systems, today reported financial results for the first quarter of fiscal 2027, ended May 31, 2026. First Quarter Fiscal 2027 Highlights Net sales increased 10% to $5.66 million Gross margin expanded to 57% from 52% Gross profit increased 21% to $3.21 million Operating income increased 86% to $897,000 Net income increased 53% to $741,000, or $0.05 per diluted share Cash, cash equivalents, and marketable securities increased to $16.65 million with no debt Backlog increased to approximately $7.73 million Steve Harshbarger, CEO & President of Sono-Tek, stated: "Fiscal 2027 is off to a strong start with double-digit revenue growth, meaningful margin expansion, and improved profitability, reflecting disciplined execution across our operations and the continued success of our strategy of focusing on higher-value production systems in advanced technology markets, particularly medical devices. "Our medical business was the primary growth driver this quarter, with strong demand for specialty stent coating systems and Drug-Eluting Balloon platforms across the U.S., Europe, and Asia. This exceptional mix of business-including a higher concentration of medical systems, shipments of higher-value production platforms, and a greater proportion of U.S. based sales with lower distributor commission expenses, was a significant contributor to our gross margin expansion.  While we are very pleased with these results, product mix, geographic mix, and shipment timing naturally fluctuate from quarter to quarter, and we would not expect this level of gross margin to be representative of every future quarter.  Our technology is increasingly being selected for applications requiring highly controlled, repeatable thin-film coatings, positioning Sono-Tek to benefit as manufacturing precision requirements continue to increase across multiple industries.” "Looking ahead, we remain focused on expanding our installed base of production systems, supporting customers as they scale from development into commercial manufacturing, and investing in the engineering and commercial capabilities that will drive our next phase of growth. The Company continues to project revenue growth during the first half of fiscal 2027, supported by strong medical demand and continued shipments of higher-value production systems, and we maintain our previously communicated expectation of flat to modest revenue growth for the full fiscal year. This full-year outlook primarily reflects the timing of several large production platform orders. As these higher-value production systems become a larger portion of our business, quarterly revenue may increasingly be influenced by shipment timing. Our strong balance sheet provides the flexibility to execute these priorities while continuing to create long-term value for shareholders." Dr. Christopher L. Coccio, Executive Chairman, added: "Our first quarter results reinforce the long-term strength of Sono-Tek's ultrasonic coating technology platform and validate the strategic direction that we have pursued for many years. As precision manufacturing requirements continue to increase across advanced industries, we believe we are well positioned to expand our leadership through continued innovation and differentiated application expertise.” "We have spent decades building differentiated technology, deep application expertise, and lasting customer relationships that continue to position us for future success. We believe these enduring strengths, together with disciplined investment and a strong financial foundation, position Sono-Tek to capitalize on attractive long-term growth opportunities while creating lasting shareholder value." First Quarter Fiscal 2027 Results Net sales increased 10% to $5.66 million, driven by strong Medical demand, partially offset by lower Alternative Energy shipments compared with the prior-year period. Gross profit increased 21% to $3.21 million, with gross margin expanding from 52% to 57% due to favorable product mix and higher-value system shipments. Operating expenses increased 6% to $2.32 million due to continued investment in sales, engineering, and business development initiatives. Operating income increased 86% to $897,000. Net income increased 53% to $741,000, or $0.05 per diluted share. First Quarter Fiscal 2027 Results – (compared with the prior year period) First Quarter Fiscal 2027 Product and Market Highlights Market Sales Medical: $3.95 million vs. $809,000 Electronics/Microelectronics: $863,000 vs. $943,000 Alternative Energy/Clean: $319,000 vs. $3.25 million Industrial: $530,000 vs. $119,000 Emerging R&D and Other: $3,000 vs. $14,000 Medical growth was driven by specialty stent coating systems in the U.S. and Drug-Eluting Balloon platforms across the U.S., China, and Europe. Alternative Energy declined due to reduced electrolysis demand and the absence of solar shipments. Industrial growth reflected system upgrades and R&D nano-coating applications. Product Sales Fluxing Systems: $92,000 vs. $152,000 In-Line Coating Systems: $2.16 million vs. $3.05 million Multi-Axis Coating Systems: $2.08 million vs. $677,000 OEM Systems: $231,000 vs. $130,000 Spare Parts, Services and Other: $1.10 million vs. $1.12 million Total Net Sales: $5.66 million vs. $5.13 million Multi-Axis growth was driven by strong demand across multiple end markets. In-Line declined due to reduced clean energy shipments, including the absence of prior-year solar system deliveries. OEM Systems increased on semiconductor and fluxer OEM demand, while services remained stable. Balance Sheet, Backlog and Outlook Balance Sheet: Cash, cash equivalents, and marketable securities totaled $16.65 million, compared with $14.81 million at the prior year end. The Company had no outstanding debt. Backlog: Combined equipment and service-related backlog at May 31, 2026 was $7.73 million, compared to backlog of $7.48 million at May 31, 2025, an increase of $250,000, or 3%. Backlog was down $1.39 million compared to the fiscal 2026 year-end level of $9.12 million. Outlook: Sono-Tek anticipates continued revenue growth and profitability in the first half of fiscal year 2027 compared to the first half of fiscal year 2026, driven by expanding demand in the medical sector and continued adoption of high value production-scale coating systems across multiple end markets. Total fiscal year 2027 revenue is currently projected to be relatively flat to modestly higher compared to fiscal year 2026, as visibility beyond the first half remains limited due to continued uncertainty in certain clean energy sectors and the timing of shipments for higher value production scale platforms. About Sono-Tek Sono-Tek Corporation is a global leader in the design and manufacture of ultrasonic coating systems that are shaping industries and driving innovation worldwide. Our ultrasonic coating systems are used to apply thin films onto parts used in diverse industries including microelectronics, alternative energy, medical devices, advanced industrial manufacturing, and research and development sectors worldwide. Sono-Tek's inroads into the clean energy sector have shown transformative results in next-gen solar cells, fuel cells, green hydrogen generation, and carbon capture applications. Our product line is rapidly evolving, transitioning from R&D to high-volume production machines with significantly higher average selling prices, showcasing our market leadership and adaptability. Our comprehensive suite of thin film coating solutions and application consulting services are expected to generate unparalleled results for our clients and help some of the world's most promising companies achieve technological breakthroughs and bring them to the market. We strategically deliver our products to customers through a network of direct sales personnel, carefully chosen independent distributors, and experienced sales representatives, ensuring efficient market reach across diverse sectors around the globe. Our solutions are environmentally friendly, efficient and highly reliable, and enable dramatic reductions in overspray, savings in raw material, water and energy usage and provide improved process repeatability, transfer efficiency, high uniformity and reduced emissions. Our growth strategy is focused on leveraging our innovative technologies, proprietary know-how, unique talent and experience, and global reach to further develop thin film coating technologies that enable better outcomes for our customers’ products and processes. For further information, visit www.sono-tek.com Safe Harbor Statement This news release contains forward looking statements regarding future events and the future performance of Sono-Tek Corporation that involve risks and uncertainties that could cause actual results to differ materially. These “forward-looking statements’ are based on currently available competitive, financial and economic data and our operating plans.  They are inherently uncertain, and investors must recognize that events could turn out to be significantly different from our expectations and could cause actual results to differ materially. These factors include, among other considerations, general economic and business conditions, including political, regulatory, tax, competitive and technological developments affecting our operations or the demand for our products; inflationary and supply chain pressures; continued strength of sales to the medical device and electronics markets; increased private and public funding for the clean energy sector;  continued strong demand for Sono-Tek’s suite of thin film coating solutions and application consulting services in the clean energy and other markets; maintenance of order backlog; evolving tariff policies; timely development and market acceptance of new products and continued customer validation of our coating technologies; adequacy of financing; capacity additions, the ability to enforce patents; maintenance of operating leverage; consummation of order proposals; timing of large orders and completion on schedule and on budget; successful transition from primarily selling ultrasonic nozzles and components to a more complex business providing complete machine solutions and higher value subsystems; and realization of first half and annual revenues and profitability within the forecasted ranges of guidance. We undertake no obligation to update any forward-looking statement. For more information: Sono-Tek Corp. Stephen J. BagleyChief Financial OfficerPh: (845) [email protected] Investor RelationsKirin Smith, PresidentPCG Advisory, [email protected] - Financial Tables to follow – See notes to unaudited condensed consolidated financial statements. See notes to unaudited condensed consolidated financial statements. SONO-TEK CORPORATIONPRODUCT, MARKET, AND GEOGRAPHIC SALES(Unaudited) Product Sales: Market Sales: Geographic Sales:

Reports Second Consecutive Year of over $20 Million in Revenue and Eighth Consecutive Quarter above $5 Million Significant Profitability Expansion with 51% Gross Margin for FY 2026 FY 2026 Operating Income Increased 81% and Net Income Increased 42% Year-Over-Year Backlog Remains Strong at $9.1 Million Anticipating Continued Revenue Growth in 1H 2027 Driven by Strong Medical Sector and High-ASP Systems Conference call scheduled for 10:30 AM ET Today MILTON, N.Y., May 28, 2026 (GLOBE NEWSWIRE) -- Sono-Tek Corporation (Nasdaq: SOTK), the leading developer and manufacturer of ultrasonic coating systems, today reported financial results for the fiscal fourth quarter and full fiscal year 2026, ended February 28, 2026. Steve Harshbarger, CEO & President of Sono-Tek, stated:“We are greatly encouraged by our fiscal 2026 results, highlighted by strong profitability expansion and uninterrupted revenue consistency. We achieved our second consecutive year of revenue over $20 million and eighth consecutive quarter of revenue above $5 million, reflecting the durability and stability of our business. Additionally for FY 2026, our gross margin increased to 51%, operating income increased 81%, and net income grew by 42%, demonstrating the strength of our business model and the continuing success of our strategy focused on higher-value, high-ASP production systems.” “Margin expansion in the year was driven primarily by favorable product mix, including a higher concentration of high-ASP production systems, as well as a greater percentage of sales in the U.S. market, where we benefit from stronger margins by bypassing international-business costs.” “We are seeing strong momentum in the medical sector, with growing demand across applications such as stent coating, balloon catheter systems, and diagnostic devices. In addition, our electronics business continues to expand, particularly in electrically active coatings for diagnostic-related applications that leverage our core coating technologies. While clean energy remains an important long-term opportunity, near-term orders for electrolysis-related systems have declined, mirroring softening demand that has resulted from government policy changes and elimination of incentives. This was partially offset by solar system shipments earlier in the fiscal year.” “Looking ahead, we anticipate continued revenue growth in the first half of FY 2027 and profitability driven by the medical sector and sustained demand for high-ASP production systems. For FY 2027, we anticipate relatively flat to modestly higher year over year revenue, with continued uncertainty in certain clean energy sectors and the timing of high ASP customer orders, that are more complex and typically involve longer lead times. We believe our strategy is succeeding, and we remain confident in our ability to deliver long-term revenue growth and profitability.” Dr. Christopher L. Coccio, Executive Chairman, added: “We are pleased with the Company’s continued execution and improving financial performance. We are proud to report that FY 2026 marks our third consecutive year of annual revenue growth and sixteenth year in a row of profitability. Our strong backlog, supported by demand for complex, production-oriented systems, provides a solid foundation as we move forward. Sono-Tek’s ability to adapt to changing market conditions, while maintaining focus on high-value opportunities, continues to differentiate the Company. We remain confident in our long-term strategy and growth trajectory.” Fiscal Year 2026 Highlights Net Sales: $20.9 million, up 2% from $20.5 million in FY 2025, reflecting continued demand for high-ASP production systems and growth in medical and electronics markets. Gross Profit: $10.56 million, up 8% from $9.74 million in the prior year. Gross margin increased to 51% from 47.5%, driven by favorable product mix and increased U.S.-based system sales. Operating Income: $1.82 million, up 81% from $1.01 million in FY 2025, reflecting improved operating leverage and higher-margin system shipments. Net Income: Approximately $1.8 million, up 42% from $1.27 million in FY 2025, reflecting strong margin expansion and improved profitability. Fourth Quarter Fiscal 2026 Highlights Net Sales: $5.6 million, up 10% from $5.12 million in Q4 FY 2025. Gross Profit: $2.79 million, up 15% from $2.43 million in the prior-year period, with gross margin increasing to 50%. Net Income: $557,043, up 70% from $327,714 in Q4 FY 2025. Balance Sheet, Backlog and Outlook Balance Sheet: The Company ended the fiscal year with $14.8 million in cash, cash equivalents and marketable securities and no outstanding debt. Backlog: Equipment and service-related backlog remained strong at approximately $9.12 million at fiscal year-end, an increase of 5% compared to $8.67 million at the end of FY 2025, and near record levels. Outlook: Sono-Tek anticipates continued revenue growth and profitability in the first half of fiscal year 2027 compared to the first half of FY 2026, driven by expanding demand in the medical sector and continued adoption of high-ASP, production-scale coating systems across multiple end markets. Total FY 2027 revenue is currently projected to be relatively flat to modestly higher compared to FY 2026 as visibility beyond the first half remains limited due to continued uncertainty in certain clean energy sectors and the timing of high ASP customer orders, which can create significant shifts in quarterly delivery timing. Fiscal Year 2026 Product and Market Highlights End Markets: Medical: Increased 54%, driven by strong demand for balloon catheter coating systems, specialty stent applications, and expanding activity in new medical applications. Electronics: Increased 16%, supported by strong demand for electrically active coatings in diagnostic-related applications. Alternative/Clean Energy: Declined 19% due to reduced electrolysis demand driven by government policy shifts, partially offset by solar system shipments earlier in the fiscal year. Product Categories: In-Line Coating Systems (formerly referred to as Integrated Coating Systems): Increased 91%, driven by shipments of eight high-ASP systems to a solar customer. Fluxing Systems: Increased 53%, supported by strong sales in Asia. Multi-Axis Systems: Declined due to reduced demand in electrolysis-related applications. Conference Call Dial-in Information To participate, please call 1-844-481-2752 or 1-412-317-0668 for international callers at least 10 minutes prior to the start of the call and ask to join the Sono-Tek call. A simultaneous webcast of the call may be accessed through the Company's website, Events & Presentations | Sono-Tek or at: https://event.choruscall.com/mediaframe/webcast.html?webcastid=6cEJqpHo A replay of the call will be available at 1-855-669-9658 or 1-412-317-0088 for international callers, access code 7754993, through June 4, 2026. A replay of the call will also be available on the Company’s website for one year at www.sono-tek.com. About Sono-Tek Sono-Tek Corporation is a global leader in the design and manufacture of ultrasonic coating systems that are shaping industries and driving innovation worldwide. Our ultrasonic coating systems are used to apply thin films onto parts used in diverse industries including microelectronics, alternative energy, medical devices, advanced industrial manufacturing, and research and development sectors worldwide. Sono-Tek's inroads into the clean energy sector have shown transformative results in next-gen solar cells, fuel cells, green hydrogen generation, and carbon capture applications. Our product line is rapidly evolving, transitioning from R&D to high-volume production machines with significantly higher average selling prices, showcasing our market leadership and adaptability. Our comprehensive suite of thin film coating solutions and application consulting services are expected to generate unparalleled results for our clients and help some of the world's most promising companies achieve technological breakthroughs and bring them to the market. We strategically deliver our products to customers through a network of direct sales personnel, carefully chosen independent distributors, and experienced sales representatives, ensuring efficient market reach across diverse sectors around the globe. Our solutions are environmentally friendly, efficient and highly reliable, and enable dramatic reductions in overspray, savings in raw material, water and energy usage and provide improved process repeatability, transfer efficiency, high uniformity and reduced emissions. Our growth strategy is focused on leveraging our innovative technologies, proprietary know-how, unique talent and experience, and global reach to further develop thin film coating technologies that enable better outcomes for our customers’ products and processes. For further information, visit www.sono-tek.com Safe Harbor Statement This news release contains forward looking statements regarding future events and the future performance of Sono-Tek Corporation that involve risks and uncertainties that could cause actual results to differ materially. These “forward-looking statements’ are based on currently available competitive, financial and economic data and our operating plans. They are inherently uncertain, and investors must recognize that events could turn out to be significantly different from our expectations and could cause actual results to differ materially. These factors include, among other considerations, general economic and business conditions, including political, regulatory, tax, competitive and technological developments affecting our operations or the demand for our products; inflationary and supply chain pressures; continued strength of sales to the medical device and electronics markets; continued private and public funding for the clean energy sector; continued strong demand for Sono-Tek’s suite of thin film coating solutions and application consulting services in the clean energy and other markets; maintenance of order backlog; evolving tariff policies; timely development and market acceptance of new products and continued customer validation of our coating technologies; adequacy of financing; capacity additions, the ability to enforce patents; maintenance of operating leverage; consummation of order proposals; timing of large orders and completion on schedule and on budget; successful transition from primarily selling ultrasonic nozzles and components to a more complex business providing complete machine solutions and higher value subsystems; and realization of first half and annual revenues and profitability within the forecasted ranges of guidance. We undertake no obligation to update any forward-looking statement. For more information: Sono-Tek Corp. Stephen J. BagleyChief Financial OfficerPh: (845) [email protected] Investor RelationsKirin Smith, PresidentPCG Advisory, [email protected] - Financial Tables to follow –