Q4 2025 Sono-Tek Corp Earnings Call
[music].
Good day and welcome to the Sterno Tech fourth quarter and full year earnings Conference call. All participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question you May Press Star then one on your Touchtone phone and Swift. All your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Mr. Karen Smith with P. C. D Advisory. Please go ahead Sir.
Thank you Chuck and thank you everyone for joining us today.
Speaker Change: Some attack released their fourth quarter and full year fiscal 2025 results. This morning.
Speaker Change: If you don't have a copy of the release. Please go to the company's website at <unk> Dot com.
Speaker Change: Click on the press releases Slash news tab in the investors section.
Speaker Change: The product market 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. Chris coach Youll, Some tax executive Chairman Steve horsepower here.
Speaker Change: President and Steve <unk>, Chief Financial Officer.
Speaker Change: We're 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.
Speaker Change: Form act of 1995.
Speaker Change: 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.
Speaker Change: <unk> assumes no obligation to update the information contained in this conference call as a reminder, Sean its at currently holds two earnings calls per fiscal year. This is our fiscal year 2025 call for the full year ended February 28, 2025, our next earnings call will be our mid year call for the six months ended August 31.
Speaker Change: 2025, and will be held this October I would.
Speaker Change: Now I'd like to turn the call over to Chris Curcio Executive Chairman subject, Chris. Please go ahead.
Chris Curcio: Good morning, and thank you Kieran. Thank you everyone for joining us today.
Chris Curcio: Today, we're going to discuss our fourth quarter and full year fiscal 2025 results that were released this morning before the market opened.
Chris Curcio: I will begin with opening March and then Steve Harshberger, CEO, and President who will go through a deeper business and operational rigor.
Chris Curcio: And by Steve Bagley, our Chief Financial Officer.
Chris Curcio: He will provide the overview.
Chris Curcio: Following their comments, we'll open up the call for your questions.
Speaker Change: For those of you newer investors in our company developed a revolutionary method of applying precision thin film coating several decades ago.
Speaker Change: This proprietary technology involves the use of our advanced high frequency ultrasonic knowledge never incorporated into specialty motion systems, and they were able to achieve uniform micron and coatings onto our customers products.
Speaker Change: Our unique value proposition is that our thin film coating machines provide dramatic savings of the expensive liquids being applied.
Speaker Change: They are environmentally friendly by minimizing material usage and reducing overspray.
Speaker Change: Importantly, the show often helps companies comply with increasingly stringent government regulations aimed at reducing hazardous waste entering the environment.
Speaker Change: But the key advantage of our ultrasonic coating systems or your ability to apply precision thin films.
Speaker Change: They are vitally important in today's world with thousands of products and micro components, now requiring a functional or protective coating to be added to them.
Speaker Change: The strategic shift that we made several years ago to offer more complex and complete solutions as meaningfully broadened our addressable market.
Speaker Change: That has resulted in significant growth in our average unit selling prices are.
Speaker Change: Our larger machines now commonly show for over $300000 and system prices can reach $1 billion or more.
Speaker Change: That can significantly impact quarterly revenue.
Speaker Change: Additionally, our move into the clean energy sector is showing transformative results in next generation solar cells fuel cells, and green hydrogen generation and carbon capture applications as.
Speaker Change: As we help shape a sustainable future with our customers. This is what we started to see in the past fiscal year, where we saw our largest customer order in our history and it was.
Speaker Change: Followed by additional order the same magnitude two weeks later.
Speaker Change: The new Euro presents some changes and challenges and uncertainties for all its businesses.
Speaker Change: Such as changes taking place in our relationships with our trading partners.
Speaker Change: The redirection of climate policy.
Speaker Change: [laughter] major government spending.
Speaker Change: On the trade issues sounds.
Speaker Change: It sounds like those are key ultrasonic hardware at our factory in Boston, New York, and most other materials or use U S page. So we see a little concern there.
Speaker Change: On the export side more than half of our current sales are to the U S market and we have been exposed to tariffs in certain other countries for many years. So we could be effected for better or for worse, depending on the outcome of negotiations taking place.
Speaker Change: Clean energy continues to represent a significant portion of our sales. Fortunately a large share of these shells comes from our commercial customers such as the U S based solar panel manufacturer and carbon capture and conversion companies.
Speaker Change: Many of which are financially supported by airlines and other corporations focused on reducing their carbon footprint. This includes efforts to develop sustainable aviation fuel and other carbon based products.
Speaker Change: While we do anticipate a decline in clean energy orders later in the year, we still expect revenue growth in the near term.
Speaker Change: Ongoing enhancements to our equipment across all sectors, including.
Speaker Change: New expanded features and functionality that are supporting sales in the medical and semiconductor markets.
Speaker Change: Thanks to report that we are seeing strong momentum in the medical device industry, particularly and growing interest for our high volume production systems and increased demand for our balloon coating machines are being used for cardiac intervention for.
Speaker Change: For the full year, we expect experienced a 4% annual revenue growth in the fourth quarter marked the fourth consecutive quarter in a row.
Speaker Change: Over $5 million.
Speaker Change: Now on top of that our full year net income came in at 1.3 million, which was similar to the prior year.
Speaker Change: Remained encouraged by the path ahead supported by a solid backlog of $8 6 million and expecting to see continued revenue growth and profitability in the first half of fiscal 2026.
Speaker Change: Cited that our investments have begun to pay off our outlook for growth has greatly been greatly enhanced by the early success of our strategy to shift to those larger and more complex systems and platforms that I mentioned.
Speaker Change: For production applications and also with multiple repeat orders.
Speaker Change: And we continue to focus on opening new markets for our unique.
Speaker Change: Technology.
Speaker Change: Thank you now go ahead and turn the call over to Steve Harshberger, our CEO and president.
Speaker Change: Steve. Please go ahead.
Speaker Change: Yeah, Thanks, Patrick and thanks, everyone for joining us today are.
Speaker Change: Firstly I just want to echo chris's enthusiasm it is extremely gratifying to see our investments hitting their stride.
Speaker Change: Our first just your first your physical sales increased 4% year over year, which was in line with our guidance.
Speaker Change: What makes it particularly noteworthy is that it comes on the hill heels of a very strong fiscal 2024.
Speaker Change: From a sharp rebound in demand is supply chain constraints eased deliver.
Speaker Change: Delivering growth on top of that high baseline reflects the strength and resilience of our business.
Speaker Change: This solid performance was driven by increased demand for integrated coding and multi axis coating systems, which are commonly used in the clean energy sector.
Speaker Change: Integrated coding system sales increased by 28% or $814000 to $3 7 million due to the continued success with our key strategic partner within the solar energy market.
Speaker Change: Our clean energy, including fuel cells green hydrogen generation carbon capture and advanced solar cells. Our markets that we are providing our R&D and pilot lines two for close to a decade now and we're now having success with these customers transitioning to our production scale systems as a result of prior development work they did with our team of experienced.
Speaker Change: Application engineers.
Speaker Change: We would like to note that while we are seeing steady demand across key markets visibility into our full year revenue remains limited at this time due to the rapidly evolving conditions in the clean energy sector.
Speaker Change: Unknown impacts of potential terrorists within with our international customer base.
Speaker Change: The increase in revenue for the full year of fiscal year 2025 was strongly influenced by shipments to a substantial customer from the clean energy sector receive shipment of three integrated coating systems totaling almost $2 $2 million.
Speaker Change: All three of these systems are really a reflection of our successful first stage results of project Altair, which rolled the capabilities for sophisticated plc based systems into our product offering.
Speaker Change: Significantly expands our addressable market.
Speaker Change: There are eight more high ESP systems in our backlog from project Altair.
Speaker Change: While we are not projecting further near term orders from these customers in FY 2026, we do remain optimistic about potential future demand dependent on the customer's execution of expansion plans.
Speaker Change: The increase in integrated coating systems, we experienced was somewhat offset by a private division, which can also fluctuate from time to time.
Speaker Change: Most of the excess coding systems, which are commonly used in the clean energy and medical device markets saw sales growth of 6% or 603000 to a total of $10 7 million for the full fiscal year.
Speaker Change: These full system solutions contain some of our newest and highest average selling price or ASP platforms.
Speaker Change: Meaningfully expanding our capabilities to design and build internally made multi access platforms has been a focus for solid tech over the past three years under a project we call Ares.
Speaker Change: Ares has broadened our product offering while deepening our supply chain, increasing vertical integration, starting with our novo coat, mostly yatra series machines.
Speaker Change: This is an ongoing process and.
Speaker Change: We continue to build and expand our in house capabilities.
Speaker Change: Luxury systems get for the full fiscal year of 2025, largely due to weaker demand in Latin America.
Speaker Change: This decrease was driven by a general slowdown in PCB equipment sales in Mexico, and the closure of a key silo tech distributor in the region.
Speaker Change: To address solid tech has on boarded and trained a new Mexican based distributor partner, which we believe will contribute to improved spray flex your sales in fiscal 2026.
Speaker Change: Oh EMS sales they were lower for the full year as expected due to the elevated inventory levels at several of our partners following early supply chain disruptions.
Speaker Change: We saw slower OEM sales are through the <unk>.
Speaker Change: First nine months of FY 'twenty 25, followed by a recovery in the fourth quarter as customers began drawing down their excess inventory.
Speaker Change: Although total spares and services revenue dipped slightly in this past fiscal year, we did see increases in several areas of our service related revenue, including reoccurring service contracts, which contributed positively to our overall performance.
Speaker Change: This really remains a focused area for growth as our expanding base of high a S. P systems in the field is expected to drive future demand for reoccurring service contracts.
Speaker Change: We continue to believe that follow on services support packages could represent as much as 10 to 15, 15% of the original order value.
Speaker Change: Now I'll review, our sales by market.
Speaker Change: Sales to the alternative clinic clean energy market grew 64% over the prior fiscal year.
Speaker Change: These sales were positively impacted by a growing number of solid type customers transitioning from our R&D and pilot I'm machines to our production scale systems that of course carry much higher average selling prices or asps as I mentioned earlier.
Speaker Change: Many of our recent large contract announcements in this area are for systems used in the manufacturing of advanced solar cells and critical membranes for carbon capture green hydrogen generation and fuel cell applications.
Speaker Change: Last year included shipment of four highest P system, two significant customers in the clean energy sector totaling $3 $4 million.
Speaker Change: Our electronics sales decreased slightly by 3% for the full year versus last year, it's still benefit benefited from shipment of a newly developed coding system with wafer juggernaut and capabilities are directing extra semiconductor market.
Speaker Change: Medical sales declined by 22% for FY 2025, primarily driven by lower demand for our stenting balloon coating systems.
Speaker Change: We are however, projecting this sector to rebound strongly in FY 2026 are led by the increased adoption of our balloon coating systems for some key medical device manufacturers.
Speaker Change: And that's the Christmas.
Speaker Change: We are also pleased to report that we are seeing promising but that's him in the medical sector industry as a whole, particularly in interest for our high volume production systems.
Speaker Change: Industrial sales were down 47% versus last fiscal year, partially influenced by a float glass coatings just system that shipped in the prior fiscal year and Didnt repeat in the current fiscal year.
Speaker Change: And by geography in fiscal 2025, approximately 61% of our sales were in the U S and Canadian customers. This is compared to 55% in fiscal 2024.
Speaker Change: Our sales in the U S and Canada increased 15% or $163 million driven by the delivery of five high ESP systems are the total $3 $94 million and this is really reinforcing our strategy to provide highly complex high volume system with premium pricing.
Speaker Change: This represents the largest number of high E. S. P systems, we've ever sold in a single year.
Speaker Change: Our growth in the U S. Canada region was partially offset by declines in other regions Latin America sales decreased 34% or $412000 again due to a $465000 float glass coating system sale that went into Mexico that occurred in the prior year that didn't repeat.
Speaker Change: In the current fiscal 2025.
Speaker Change: Asia Asian sales declined 16% or $510000 influenced by continued weak demand from China.
Speaker Change: Where sales fell to $522000 in fiscal 2025 off from $775000 in fiscal 2024.
Speaker Change: China now represents approximately 2.5% of total sales and this is really down significantly from its historic peak.
Speaker Change: EMEA sales increased 2% or $98000 all supported by multiple system shipments to customers in the green energy sector.
Speaker Change: And as we look ahead to fiscal 2026, we closed Q4 of FY 2025, with a solid equipment and service related backlog of $8 6 million, a well certainly not at record levels. It represents a healthy starting point for the year and reflects encouraging order activity.
Speaker Change: We attribute the increase in sales and strong backlog. That's a direct result of our investments in R&D with a strong focus on product expansion for.
Speaker Change: For the full year, we invested $2 $7 million in R&D compared to $2 $9 million in the prior fiscal year.
Speaker Change: In closing we expect the first half of FY 2025, with continued sales growth and profitability all supported by our solid backlog and steady demand across key markets.
Speaker Change: While visibility into the full year revenue remains limited at this time, we do still remain confident in our long term growth prospects.
Speaker Change: Our momentum stems from our deliberate strategic shift to large customized systems with accelerating asp's and our proprietary ultrasonic atomization technology remains at the core of all of our systems and we've been able to achieve this significant shift organically through our own development internally internal.
Speaker Change: Efforts.
Speaker Change: With that said I will hand, the call over to Steve Bagley, our CFO to review the financials in more detail, Steve All yours to proceed.
Speaker Change: Very good Steve Thank you and good luck.
Steve Bagley: Morning, everyone.
Speaker Change: Now I'll walk you through our full year fiscal 2025 results and then we will open up the call for any questions that you may have.
Speaker Change: Net sales for the fiscal year increased by 4% to 20.
Speaker Change: $19 5 million.
Speaker Change: Year to $19 7 million for FY 2024.
Speaker Change: <unk> increased 1% year over year or $106000 to $9 seven 4 million.
Speaker Change: The gross profit percentage decreased to 47, 5% from 50% in the prior year. The decrease is due to product mix.
Speaker Change: And the reallocation of specific labor expenses from the engineering department to cost of goods sold.
Speaker Change: This reallocation started in the fourth quarter of fiscal 2024.
Speaker Change: Now some of the completion of several successful R&D endeavors.
Speaker Change: Operating expenses increased slightly to $8 7 million when compared to $8 six 6 million to the prior year.
Speaker Change: Research and product development costs decreased.
Speaker Change: Two 2.72 million versus $2 eight 9 million the prior year.
Speaker Change: It's primarily due to a decrease in salaries and the reallocation of specific labor expenses from engineering to cost of goods sold and this.
Speaker Change: This reallocation started in the fourth quarter of fiscal 2024 is an outcome of the completion of <unk>.
Speaker Change: Several successful endeavors.
Speaker Change: Marketing and selling expenses were basically flat at 368 million for the year.
Speaker Change: Compared to $3 $6 million to $7 million for the prior year.
Speaker Change: We did have an increase.
Speaker Change: And that was due to increased commissions and travel and trade show expenses and those increases were partially offset by a decrease in salary expenses.
Speaker Change: General and administrative expenses increased to $2 three 3 million.
Speaker Change: For the year compared with $2 1 million in the prior year.
Speaker Change: The increase is primarily due to increased salaries legal and audit fees and other corporate expenses.
Speaker Change: Operating income decreased 172000 to $1.01 million compared with one point.
Speaker Change: $18 million.
Speaker Change: Prior year.
Speaker Change: And the decrease in operating income is primarily due to a decrease in gross profit combined with an increase in operating expenses.
Speaker Change: Interest and dividend income decreased to 489000 for fiscal 2025, compared with 530000 for fiscal 2024.
Speaker Change: For fiscal 2025, we recorded a tax provision of 261000 compared to 303000 from the prior year.
Speaker Change: Our net income.
Speaker Change: For fiscal 2025 was one point.
Speaker Change: Or eight cents per share and that compares with $1 4 million or nine cents per share for the prior year.
Speaker Change: The decrease in net income is primarily due to the current period decrease in gross profit.
Speaker Change: With an increase in operating expenses, partially offset by a decrease in income tax expense.
Speaker Change: Our diluted weighted average shares outstanding decreased slightly to approximately $15 $707 million.
Speaker Change: And that compares to $15 77 4 million shares in fiscal 2024.
Speaker Change: The decrease was partially due to the share better bye bye.
Speaker Change: Our buyback program, we put in place in fiscal 2025.
Speaker Change: We continue to maintain a strong cash position with cash cash equivalents and marketable securities totaling $11 9 million.
Speaker Change: And that was that February 28 2025.
Speaker Change: We continue to have no debt on our balance sheet.
Speaker Change: Capex for the full year was 496000 all of which.
Speaker Change: He is directed at <unk> ongoing upgrades of our manufacturing and development lab facilities, and we expect to invest approximately 435000.
Speaker Change: New equipment for fiscal year 2026.
Speaker Change: With that we will now open the call for any questions from the audience.
Speaker Change: Operator, Please go ahead.
Speaker Change: Thank you we will now begin the question and answer session.
Speaker Change: I ask a question you May press Star then one on you touched on film.
Speaker Change: If you're using a speakerphone please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two and at this time, well pause momentarily to assemble our roster.
Speaker Change: And your first question will come from Ted Jackson with Northland Securities. Please go ahead.
Ted Jackson: Thanks, Good morning, guys.
Speaker Change: Hey, good morning, Ted.
Speaker Change: So I wanted to start off on kind of the Alt energy space and I know, you're not giving guidance for the second half, but just understand timing and stuff.
Speaker Change: So when I look at the backlog it eight plus million a big chunk of that is coming out of both synergies you said you had.
Speaker Change: A couple of large orders was in there.
Speaker Change: And then earlier in the call you had said you had eight orders and backlog within that world as well. So do you do you have eight systems and all the energy that are sitting in backlog that will be shifting that they are part of that $8 six or do you have you know like a line of sight on eight two systems within the current backlog.
Speaker Change: Just to clarify that for sure.
Speaker Change: Sure Yeah, we actually have eight systems that are in that backlog today that are coming from the clean energy sector.
Speaker Change: All of which will be shipping in the current fiscal year. So it's giving us a strong entrance for all energy.
Speaker Change: Definitely for this current FY 2026.
Speaker Change: It will probably ship in two different orders.
Speaker Change: It's eight systems in total.
Speaker Change: And then do you expect those systems to come.
Speaker Change: Through your P&L in the first half of 'twenty five.
Speaker Change: Yeah, I would I would suspect so it if not all at least the majority of them will flow through in Q1 or Q2 or a combination of both.
Speaker Change: I mean 26 excuse me.
Speaker Change: Sorry about that.
Speaker Change: Coupon in Q2, FY 2026, correct.
Speaker Change: And then you know.
Speaker Change: With regards to.
Speaker Change: The <unk>.
Speaker Change: Visibility that you have enough in the second.
Speaker Change: A couple of it.
Speaker Change: Things to move around on that right.
Speaker Change: Have you seen like a.
Speaker Change: A softening with regards to demand pull back from your customers.
Speaker Change: Come into play you know in the lab.
Speaker Change: Two months.
Speaker Change: To be honest a lot of companies.
Speaker Change: I listen to calls with in particular saw their businesses.
Speaker Change: Activity within your market you really softened in April did you see something similar to that happening in your world is it concentrated in the Alt energy energy, which it seems like it might be you know is it all being driven by.
Speaker Change: You know the current administrations.
Speaker Change: Lack of support.
Speaker Change: Yeah, I will say that we have seen.
Speaker Change: Some apprehension to act quickly from the U S base clean energy sector. When it comes to placing orders right now you know Fortunately for US the majority of our clean energy customer base are making.
Speaker Change: Making money on their own are our biggest clean energy customers.
Speaker Change: Don't really need significant financial support from the U S government, but.
Speaker Change: But it will certainly affect us to some level, depending on how far the U S government does a pullback from the clean energy support.
Speaker Change: However that it's.
Speaker Change: And remember the rest of the world Hasnt slowed down at all you know when you look at the EU in most of Asia, there very aggressively.
Speaker Change: Thing into the clean energy sector.
Speaker Change: Some of the same areas that where and you know when it comes to the carbon capture and hydrogen generation Green hydrogen is still a huge push right now so.
Speaker Change: You know while the U S may see some tempering down there slightly I don't think we're going to see that in other areas of the world Fortunately for us.
Speaker Change: And then within those other areas of the world is going.
Speaker Change: Through this environment with tariffs and such I mean, what kind of impact would that have would it is it.
Speaker Change: Are you.
Speaker Change: You know.
Speaker Change: You are directly impacted by that by how much wood are your is your technology is such that they just have to bite the bullet and take it how does that how would that play out in terms of how you.
Speaker Change: We see it today.
Speaker Change: <unk>.
Speaker Change: Oh, yes.
Speaker Change: It's totally a moving target, but I can tell you right now we have not seen the tariffs become a major impact to us outside of China.
Speaker Change: You know, we've just had some guys that were over visiting other areas of Asia, Japan, South Korea.
Speaker Change: And they had indicated.
Speaker Change: The currency exchange rates have gotten a little bit more flavor, both for our customers to buy things a recent and the tariff is not enough, where they're saying hey that that's going to impact our decision making.
Speaker Change: Today as they are today now of course anything can change where it could make it better or worse, but at this moment, we're not seeing a significant impact on the tariffs to date.
Speaker Change: And it seems like the indications right now that theres going to be some reasonable negotiations coming up and I think most of our customer bases is planning on that happening as well.
Speaker Change: And then.
Speaker Change: Then my last question and I'll get out of line, because hopefully there'll be another question or two from other people, but do you have a lack of visibility in the second half.
Speaker Change: At what point are we where.
Speaker Change: I mean at what point do you need to see things improve in orders to come in for you to be able to.
Speaker Change: So.
Speaker Change: Growth for the year, but you know, let's say the first half is fine in the second half you need to get some business brought it.
Speaker Change: But you know what I mean like that it could turn around but you still have to make the system do you see what I'm, saying, but how long would it take you to make system like what's the cutoff point to where the second half becomes kind of even if things turn around and you're just not going to be able to.
Speaker Change: You know Phil you know to deliver product in time to get revenue until fiscal 'twenty six instead of what I'm asking yeah for sure.
Speaker Change: I think we will see by the time, we report our Q1 earnings which isn't that long from now you know keep in mind that our Q1 ends. This month. So we're only a few days away from our Q1 closing, but buy it by the time. We report those earnings I think we should have some pretty clear visibility on the full fiscal year.
Speaker Change: We are anticipating.
Speaker Change: Anticipating them based on our forecast some what could be significant orders for us.
Speaker Change: And unfortunately, they were also coming from sectors that are outside of the clean energy sector, which is nice to see so.
Speaker Change: So much of the work we've developed two done to develop these high ESP production lines.
Speaker Change: Although they are first customers who are greatly in the clean energy sector, it's directly transferable over.
Speaker Change: Both the industrial sector and medical sectors and the semiconductor so much of that Knowhow that we developed.
Speaker Change: So what were quoting today as high a S. P machines that are more commonly from semiconductor and medical sector right now in particular.
Speaker Change: And if we're able to get all of those.
Speaker Change: Before report Q1, I think I think we could have you know we're hoping for some promising news.
Speaker Change: Diversification of revenues is a good thing Steve so.
Speaker Change: Disappointment at all.
Ted Jackson: That's it for me right now thanks, Thanks, Ted good talking to you.
Bill Nicklin: The next question will come from Bill Nicklin with Circle N Advisors. Please go ahead.
Steve: Good morning, Steve Thanks for taking my questions. Good morning, Bill good to hear from you.
Bill Nicklin: Good.
Bill Nicklin: Some of which I would like answered you've already have him for Ted but I'm kind of rehab.
Bill Nicklin: A question anyway. If you look at your opportunities are going to drive back log in the upcoming months.
Bill Nicklin: How should that unfold.
Bill Nicklin: Yeah. That's it it's kind of similar I was telling did that we are seeing strong momentum in particular in both the medical and semiconductor sectors.
Bill Nicklin: You know our team has really done an outstanding job expanding our high ASP product offering in the <unk>.
Bill Nicklin: Clean energy space and as I mentioned, we're still.
Bill Nicklin: You're going to see meaningful contributors.
Bill Nicklin: Customers going out to that area, particularly from the EU and parts of Asia, where the demand remains strong even as the U S market faces some more uncertainty but.
Bill Nicklin: But what we're especially especially encouraging is that much is that development and expertise we built in the clean energy sector is directly transferable to other industries.
Bill Nicklin: This positions us really well as we introduced new high value products in our micro electronics and medical markets over the coming year.
Bill Nicklin: And that includes expansion of our semiconductor focused systems.
Bill Nicklin: I remember, we had that newly developed wafer shuttling program.
Bill Nicklin: And now we're also focused on advancing the next phase of our semi conductor doctor specific capabilities.
Bill Nicklin: Evolving beyond our sophisticated lab scale platforms and those are currently priced in the area of say $300000 approximately but we're moving more towards production scale systems aimed at semiconductor fabs in particular, our system values can then ranged from that $500000 2 million dollar area.
Bill Nicklin: So that could be another significant jump for us.
Bill Nicklin: As we head down that path.
Bill Nicklin: And could you be just a little more granular on the medical.
Speaker Change: But what you are looking at that it's different from what you'd been serving in the past then are these new areas significantly increase your total addressable market or are you just picking up a little here and a little there.
Speaker Change: Yeah, I think what's significant is now when someone comes to buy a system from us in the medical market, they're not just buying.
Speaker Change: E 80 or $100000 machine.
Speaker Change: These more complex systems that were now developing which have a lot more capabilities, you know are doubling or tripling the prices of these machines.
Speaker Change: And Fortunately for us.
Speaker Change: There is a big.
Speaker Change: Increase in demand right now for balloon catheters as an area right now where it's were kind of guiding on the ground floor or we have a lot of.
Speaker Change: Good customers in that area that are purchased a lot of our pilot line and R&D machines, but that's going to be an industry right now that's ready to scale.
Speaker Change: And we believe we're positioned well for our higher volume machines to scale with our customers and these are big significant customers.
Speaker Change: So we are under.
Speaker Change: Under the <unk>.
Speaker Change: And pressure right now that we have a good probability to capture a good chunk of that marketplace and kind of own that market like we did for stents, but the only difference will be in our stent cutting systems were only 80000 to $100000 machines. You know I think in the balloon coating area, we're going to be able to capture with possibly 250000 dollar machines that have a lot more.
Speaker Change: Abilities.
Speaker Change: And Bill just to comment here is this is a newer market segment, because if you can't put a stent in because the vessel was too small or what have you than they are now going with these it alone.
Speaker Change: Insertions, where leaves behind.
Speaker Change: Anti restenosis drug and that's really I mean, it's been around a little bit in the past, but it's come on very strongly recently.
Speaker Change: Thanks.
Speaker Change: Back to kind of a general question that Cytotaxis spending a lot of money in recent years.
Speaker Change: Taking on X.
Speaker Change: And that has pressured your bottom line.
Speaker Change: In regard to this what benchmarks you use to judge what spending as appropriate.
Speaker Change: Where do you go from here with.
Speaker Change: You're spending levels.
Speaker Change: Yeah, Yeah, well you know you're right. We've made some significant investments to support this strategy of expanding our product lines and we're now just beginning to see the results not only in FY 2025, we shipped approximately $6 million in products that were tied to our recent development efforts.
Speaker Change: More than half of that total came from what we're defining as you know a high a S. P high average selling price platforms, which are really the ones that are over like 500 K area.
Speaker Change: And the remainder involved existing in our.
Speaker Change: Mid size systems that we were adding increased complexities and capabilities. You know for example, we'd be transforming 150000 dollar system conventionally forest into a $300000 system with a lot more capabilities and complexities.
Speaker Change: And.
Speaker Change: These efforts support our objective to broaden the scope of our full systems offering.
Speaker Change: The average selling price delivers greater value to our customers.
Speaker Change: And we do our best to benchmark, the spending against strategic potential growth areas and long term return on investments.
Speaker Change:
Speaker Change: Thanks.
Speaker Change: I notice.
Speaker Change: Drove by the plant the other day that playbook, a terrific. So congratulations on that but along with that and the expansion that you're taking.
Speaker Change: What do you see.
Speaker Change: Potential for.
Speaker Change: Efficiencies throughout the manufacturing operation and Ah is there any low hanging fruit that you can get there.
Speaker Change: Yeah, you know we're.
Speaker Change: We're always working to improve operational efficiencies here that you know with these high E. S. P systems.
Speaker Change: The bigger part of our product mix, we are very focused on standardizing certain subsystems.
Speaker Change: Refining the production flow.
Speaker Change: The idea here is that these efforts will help us to reduce lead times and hopefully improve margins without sacrificing our abilities to make customization where it matters.
Speaker Change: So we are making some operational layouts in the in this manner.
Speaker Change: It's a lot of the capex spending that you've seen over recent years has been to that.
Speaker Change: Dia there of trying to.
Speaker Change: Increase our operational efficiencies in those areas.
Speaker Change: Okay. Thanks.
Speaker Change: I heard a feedback we say something about share repurchases, where are you with the share repurchasing program.
Speaker Change: As far as getting it completed.
Speaker Change: And what are the odds that if you get a completed you could see an increase in the future.
Speaker Change: Oh, yes.
Speaker Change: Well of course, as we put out there already we currently currently have an active share repurchase program in place.
Speaker Change: Which authorizes up to I believe $2 million in buybacks.
Speaker Change: Yes.
Speaker Change: And as you know at this time, we havent provided guidance beyond that but I can assure you that the program is definitely something we continue to evaluate closely yeah. It is regularly discussed at the board level every quarter as part of our capital allocation strategy, but unfortunately, I haven't given guidance beyond that at this point.
Speaker Change: Alright, Thank you that does it for me.
Speaker Change: Hey, good talking to you take care.
Speaker Change: The next question will come from <expletive> Ryan with Oak Ridge Financial. Please go ahead.
Speaker Change: Okay.
Speaker Change: Thank you Steve.
Speaker Change: Steve I think the most things have been asked but I just have a couple more on the end markets.
Speaker Change: Medical the positive commentary there.
Speaker Change: Maybe a point of clarification, maybe I didn't have a rate, but I thought medical had been negatively influenced.
Speaker Change: With the softness in China.
Speaker Change: If that's the case in China continues to be kind of a non event where are you seeing the progress you mentioned from stands the balloons, but is it a geographical <unk>.
Speaker Change: Expansion or where do you see the growth in the medical coming from.
Speaker Change: Hey, guys good morning <expletive>.
Speaker Change: For sure we have seen a shift in the geographic area for our medical customers. You know there was a period of time, where China, we had a huge medical component out of the China marketplace.
Speaker Change: At this point in China as I mentioned earlier, it's only a 2.5% of our total sales of which most of that probably is medical but it's it's not a significant marketplace for us any longer.
Speaker Change: We are now picking up the most significant customers in the medical market is in the U S and the EU.
Speaker Change: And the U S as being our strongest area.
Speaker Change: You know that our system is now due to our increased capabilities are very basic systems kind of got us into the China market today. They wanted very basic systems to the U S market in the EU market one of the more complex systems with more controls and capabilities and that's what we are now delivering to that marketplace. These are.
Speaker Change: I would say much more sophisticated systems and that we than what we were delivering into the China market by demand at the customer here and there our capability to meet that demand.
Speaker Change: So almost everything we're showing for increases there is coming from either the E or the U S. At this point.
Speaker Change: Is this just a an evolution to a more complex systems or are you taking share from somebody else.
Speaker Change: For for the medical market in particular.
Speaker Change: We don't do a lot with outsourced partners in this area, we are actually able to pretty much provide the complete solution.
Speaker Change: Internally.
Speaker Change: We're providing the D and the systems to that marketplace.
Speaker Change: So it's it's nice it should be really nice margin systems for us.
Speaker Change: And great that we've put in most of that R&D effort is already behind us in order to be able to meet the needs of the demands of that market.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: And.
Speaker Change: On the semi side you your commentary kind of flying in the face of what.
Speaker Change: As you know been.
Speaker Change: Been pretty well telegraphed to the state of the semi the semi market place. How are you seeing that Oh, that's more positive commentary again is it similar to medical where you're getting.
Speaker Change: Getting some of your more complex solutions in front of US you know a fab or two and they're able to kind of evaluate your new capabilities. When you know it's there.
Speaker Change: Going out capacity, they don't have an opportunity to look at.
Speaker Change: Alternative solutions. So how are you, making the progress on the semi side.
Speaker Change: Yeah for sure we're offering solutions that the competition can't offer.
Speaker Change: So for most of the applications, we're going into and considering proposals for the fab side. It's typically for a product that has something unique about it which requires our unique ultrasonics right.
Speaker Change: So that's it.
Speaker Change: Find these opportunities every now and then and now that we have found the correct strategic partners.
Speaker Change: To develop these complex solutions and it's mostly in the wafer handling complexities more than anything else.
Speaker Change: But we found a great partner there to team up with which allows us to provide this larger offerings.
Speaker Change: And like I said I think our first proposal that we've just recently put out there increase the machine that we would've normally sold for about $300000 to around $850000, but more importantly, our machine would have never even been considered for that threat bad if we didn't have those increased capabilities.
Speaker Change: To team up with our basic machine Oh.
Speaker Change: Also so that's that's what's most important is that we we wouldn't even been in the running for that order without having this increase capability.
Speaker Change: Whose technology is the robotic wafer handling as yours is as true partners and is that an opportunity where you could kind of bring that in house at some point either organically.
Speaker Change: Organically or.
Speaker Change: Through acquisitions.
Speaker Change: Both are possible that the partner we found is it's a very good strategic partner for us, they're not that far away, we're not sharing their name, but and what's nice with this partner that they are very used to working with companies like Sinopec. You know this is actually their business model is to team.
Speaker Change: Up.
Speaker Change: Companies like simultaneous which have unique capabilities and have a really good friend out into the organization to get into the semiconductor Fabs I mean, that's one thing that we're usually quite successful on is introduction of new products. When we can find a targeted market and our application engineering expertise really comes into play.
Speaker Change: Because if we can bring them into our lab proved that we can meet the needs for what they're looking to achieve in their fab then you're really in the door as long as you can show that you can provide that full system solution.
Speaker Change: Okay. Appreciate it thank you.
Speaker Change: Good talking to.
Speaker Change: The next question is a follow up from Bill Nicklin with Circle N Advisors. Please go ahead.
Speaker Change: Hi.
Speaker Change: Again.
Speaker Change: On the medical side, if we look back at the total addressable market.
Speaker Change: For you in the stent business.
Speaker Change: And what you're referring to China, and I guess, some U S companies too if you look at.
Speaker Change: What you're seeing now in the medical side can you compare and where you're looking at these larger production machines could you give me some idea of the total addressable market and the new.
Speaker Change: New areas that you're addressing a relative to the total addressable market.
Speaker Change: Our stent market.
Speaker Change: The old traditional stent market.
Speaker Change: Yeah, I think the number of machines ultimately could be similar to where we were at a distance say 10 years ago. You know for example, you take the Chinese market right now, even though we don't sell a ton in China right now, we still believe it or not dominate that marketplace because they bought our machines.
Speaker Change: For so many years, where we've sold hundreds of stent coating machines into that marketplace.
Speaker Change: In the area of probably 200.
Speaker Change: In total could be even higher than that.
Speaker Change: But it's in that ballpark ish area and I think there's no reason to think that we couldn't be selling.
Speaker Change: So of our balloon coating systems.
Speaker Change: For instance, an established set of selling any.
Speaker Change: It means at say $50 $70000 right now we could be selling machines that are close to $200000 range.
Speaker Change: A little bit higher than that but in the U S and European.
Speaker Change: A lot more capabilities.
Speaker Change: So on a dollar value I think you've told me you were looking at two to three times greater revenue potential and whats your feeling now.
Speaker Change: Phil.
Phil: Correct and this is all new market compared to the you know the stent market is a very mature market at this point established.
Speaker Change: But theres a lot of growth happening in their area.
Speaker Change: Where the stent market in any way to state it.
Speaker Change: A lot of our customers in that area, especially over.
Speaker Change: Likely not purchasing a machine for some years.
Speaker Change: Certainly will be.
Speaker Change: Yeah right.
Speaker Change: Victor comic Bill some of the market research that Michigan some of it through on.
Speaker Change: <unk>.
Speaker Change: Alright.
Speaker Change: Price quote.
Speaker Change: Being a <unk>.
Speaker Change: 2 billion growing at seven 7%.
Speaker Change: Catheter, which is what we're talking about is the newer very for us well.
Speaker Change: It's 2 billion and it's growing at six 5%. So these are really healthy markets.
Speaker Change: Into and.
Speaker Change: And I think what Steve is saying.
Speaker Change: We really are trying to focus in on those two areas. We've been in the coating business for a long time, but when you look at that growth rate might be more opportunities there for us.
Speaker Change: Right cause I see back a few months ago, you introduced a a catheter voting machine. So I imagine that that just visually even if you looked at the coding.
Speaker Change: Cathode Ruth it would appear to be a larger market for core and larger production machines.
Speaker Change: What you've been quoting is that accurate.
Speaker Change: Yeah.
Speaker Change: That's a set.
Speaker Change: I personally thought about before but that is separate.
Speaker Change: That's the proponents, but there's also this catheter coatings.
Speaker Change: Reading some of the sections that are caused buddy.
Speaker Change: Great use of catheters and stays in a hospital setting so.
Speaker Change: In a way what we thought was one market has become.
Speaker Change: So we're certainly can pursue them all with our equipment.
Speaker Change: Right Alright, that's helpful. Thank you.
Speaker Change: Thanks Bill.
Speaker Change: Yeah.
Speaker Change: Again, if you have a question. Please press Star then one our next question will come from Daniel Belton with ease.
Speaker Change: He's a private investor. Please go ahead Sir.
Speaker Change: Hello.
Speaker Change: Just got to see it sort of two questions.
Speaker Change: Colleges I'm from England, so there might be a bit of delay on the cool.
Speaker Change: So the first question for me is I understand.
Speaker Change: Sort of the kick that we get from the high average selling prices.
Speaker Change: How does that really translate to us as investors because.
Steve Bagley: I would assume that the gross margins are fairly similar to that and also I would also assume that there is not so much operating leverage because lots of these high E. S. P machines will have a fair amount with application engineering anyway. So I'm just wondering Steve what's the sort of the real benefit of these high ASD machine.
Steve Bagley: Yeah. Good question, Daniel I think the big benefited as you mentioned the margins are similar.
Steve Bagley: I think we will start to see some leverage but you know it may not be huge amount of leverage.
Speaker Change: Things go forward, but most importantly these.
Speaker Change: These high ESP machines are primarily directed into high volume manufacturing operations, where our historical machines are very much focused towards R&D and pilot line machines. So we'd sell one to maybe five machines and then they would have to transition over to the production machines, which we couldn't supply.
Speaker Change: But the difference is that production machines no one ever wants to buy one two or five production machines, that's where they're usually looking to buy 10 20 production machines. So I.
Speaker Change: I think well, it's it's kind of exponential because you start to see a higher price machine, but the demand for the number of the machines significantly increases if you can sell production value machines versus the R&D and pilot volume machines.
Speaker Change: And that's when you can really start to see some let's say yeah that makes sense.
Speaker Change: And within the balloon catheters or does this sort of stuff is the other sort of caps around three underground ore Oh, there is a possibility for single single machines to be.
Speaker Change: At the same level as we have in terms of energy.
Speaker Change: Billions and billions of dollars.
Speaker Change: Yeah, I think for this particular at this stage.
Speaker Change: This is the customers we're dealing with there right now actually had been using our R&D machines to start that were in that 80 to 120000 dollar machines are yet they've now received first.
Speaker Change: Pilot line machines.
Speaker Change: And I have now.
Speaker Change: Going through the process of production volume machines, which put them again up towards that 250000 dollar area.
Speaker Change: I don't believe our first introduction of this will be beyond that but if we could sell a couple of hundred that couple of hundred machines to various customers that are in that 250 K area.
Speaker Change: That would be a pretty good success for us with that said I think there is a chance though.
Speaker Change: And the next follow on stage to possibly increase the offering there even further.
Speaker Change: You know there are processes that sit before and after the actual quoting stage. So that is always something that we're always looking to do every time, we accomplished one stage, we always move on to the next stage is kind of like that first jump we made in the semiconductor machines, there where he went from selling a 100000 dollar went up and now we're up to around the three.
Speaker Change: 300000 dollar machine and now we're taking that 300000 on the machine and saying all right. How do we make it into a <unk> 5.500 million and $2 million machine. So I suspect there could be a similar evolution there to happen it probably in the medical sector for balloon catheter in particular, it probably won't happen this year, but it could potentially happen in the future years.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Two final questions. How successful do you think senator signage decades, as a standalone business.
Speaker Change: Mike.
Speaker Change: Would it be the case that you think could benefit from.
Speaker Change: Some sort of integration within.
Speaker Change: You know another company or something like that.
Speaker Change: Wow.
Speaker Change: How long do you think it's funny.
Speaker Change: The Standalone business.
Speaker Change: You know I think we still have a long runway ahead of us with a lot of organic growth potential.
Speaker Change: That said.
I think as we start to reach some sort.
Speaker Change: Sort of critical mass or even when you start to get that 20 million to $40 million area. I. You know I think when were up and around that 40 million dollar area will probably come on the radar of a lot of companies.
Speaker Change: Is my suspicion.
Speaker Change: Because that's kind of it seems like it's a critical area. When you hit it right around $40 million and and I think you know the simultaneous although we believe in our organic growth ourselves, but you know if someone came to acquire isn't if it was the right decision for the stockholders and the right decision for the employees, we would always consider anything any off.
Speaker Change: Opportunities that way as well.
Speaker Change: But you know like I said I think the road ahead of US right now.
Speaker Change: We can do a lot just organic growth in and if we find the right acquisition partner an opportunity. We're still always ourselves you can look at an acquisition because we are in a very healthy.
Speaker Change: Cash position to make a very synergistic acquisitions, if they made sense for us.
Speaker Change: Okay. Thank you and do you have any guidance on Capex, maybe published it but do you have any guidance on that.
Speaker Change: 2026, and also somewhat 2027.
Speaker Change: Yeah, what we actually anticipated capex to drop just a little bit. This year I think we were around 500 K last year and this year I think we're anticipating it to be around 430, K and the reason for that is that we actually made a lot of really significant investments over the last three years.
Speaker Change: Into our facilities into being prepared for growth in the facilities. So a lot of what we had to do in preparation.
Speaker Change: To be heading towards you know $40 million it was expenses.
Speaker Change: I have already been incurred so it's not like we're really slowing anything down there just where we are we've made a lot of the investments already.
Speaker Change: Okay. Thank you.
Daniel Belton: Nice talking to you Daniel.
Speaker Change: The next question will come from Andy Newbie with Newbie investments. Please go ahead.
Andy Newbie: Hey, Thanks for taking my question I'm just curious how you guys are focused on it if at all with battery technology, you mentioned wafer technology I'm just curious if you're in this space.
Speaker Change: EV battery.
Andy Newbie: Or not.
Andy Newbie: Sure Andy Yeah. It's a good question that there's two primary areas.
Andy Newbie: Yeah, we've been involved in battery one is thin film batteries and and that's kind of a newer R&D area of batteries.
Andy Newbie: But it's a vastly growing area and they're often applying nano coatings and we certainly have a presence primarily in the R&D market for these new data going back.
Andy Newbie: Unlike lithium battery than independent of that we have a customer base.
Andy Newbie: That is using our ultrasonic coating systems to apply a protective barrier coating on to lithium batteries.
Andy Newbie: And this is associated with the fire dangers of batteries right now they wrap batteries.
Andy Newbie: With a material to present to you.
Andy Newbie: To reduce the chances of a flame occurring or a fire occurring.
Andy Newbie: And there is a pretty big push right now to see if that can be done through a spray coating technique to increase the.
Andy Newbie: Reliability of that barrier coating working.
Andy Newbie: And that's the other area of exploration that we are involved in them pretty significantly in that area as well.
Andy Newbie: But the actual lithium battery materials themselves, we don't really get involved in to us just because they're so thick.
Andy Newbie: But they can't typically be coded, but the barrier coating. We most certainly are it's an active area in our labs and with our customers.
Speaker Change: Okay. So would you say it is that something that you were developing isn't necessarily something you are selling or you have active customers that are purchasing.
Andy Newbie: Those kinds of solutions out there.
Andy Newbie: Active customers that are worked both working with us into some level of purchasing but it's mostly on the R&D stage purchasing but we it's one of those areas that we spend in particular more time on it and then a lot of applications. Because we believe this has got some legs.
Andy Newbie: So when we identify a market that we think this could really take off and become big.
Andy Newbie: We really try to dive in deep and get a lot of application know how and understanding what that for those so it's an area that we have a quite a bit of depth and we believe in the future even though it's small right now.
Speaker Change: Very interesting. Thank you so much.
Andy Newbie: Yeah, you're welcome.
Andy Newbie: This concludes our question and answer session I would like to turn the conference back over to Mr. Steven Harshbarger for any closing remarks. Please go ahead Sir.
Andy Newbie: Yeah.
Andy Newbie: I apologize.
Speaker Change: [noise] Mr. Harshbarger. Your line is open for closing remarks, well thank.
Speaker Change: Thank you I apologize I think I was trying to state there are well. Thank you all for joining US today Solitaire takes long term outlook remains strong.
Andy Newbie: Supported by the continued success of our newly developed high ESP platforms across advanced technology markets.
Andy Newbie: We look forward to sharing our fiscal 2026 results during our next call in October.
Andy Newbie: In the meantime, please don't hesitate to reach out to myself or Doctor Kochi O with any questions that you may have.
Andy Newbie: Thanks again enjoy the rest of your day, and we'll look forward to talking to you again in the future.
Andy Newbie: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Andy Newbie: Okay.
Andy Newbie: [music].
Andy Newbie: Yeah.
Andy Newbie: Yeah.
Andy Newbie: [music].