Sono-Tek Corporation

Good morning and welcome to the Sonotek fiscal year end 2023 earnings conference call. All participants will be in a listen only mode for the duration of the call. And should you need any assistance today, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. And to withdraw your question, please press star, then two. Please also note that this event is being recorded today. I would now like to turn the conference over to Stephanie Prince of PCG Advisory. Please go ahead.

Thank you, Joe, and thank you to everyone joining us today. Sonotech released their fourth quarter and year-end fiscal 2023 results earlier this morning. If you don't have a copy of the release, please go to the company's website at sonotech.com and click on the Press Release News tab in the Investor 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. Chris Coccio, Sonotex Chairman and CEO, Steve Harshbarger, President and COO, 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 1995. 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. I would now like to turn the call over to Chris Coccio, Chairman and CEO of Sonitech. Chris?

Good morning, and thank you, Stephanie, and thank you for everyone for joining us. Today we're going to discuss our fourth quarter and year-end fiscal 2023 results that were released this morning before the market opened. I will begin with some opening remarks and then Steve Bagley, our Chief Financial Officer, will provide a financial review. Steve Harshberger, President and COO, will then go through the business and operational results. Following his comments, we'll be happy to open the call for your questions. As a reminder, Sonotech currently holds two earning calls per fiscal year. This is our fiscal year end call, which ended on February 28th, 2023. Our next earnings call for the first half of fiscal year 2024 will be in October of 2023. Now briefly, for those who are new to us, Sonitech developed a revolutionary method of applying precision thin film coatings several decades ago. The proprietary technology involves the use of patented high-frequency ultrasonic nozzles incorporated into motion control systems that are able to achieve uniform micron thick coatings for our customers. Our solutions offer dramatic savings in raw material, water, and energy usage, and is environmentally friendly among other advantages. The principal advantage is the ability to apply precision thin films, which is very important in today's world. The strategic shift that we made several years ago to offer more complex complete solutions versus component sales has broadened our addressable market and has resulted in significant growth in our average unit selling prices. Our larger machines now commonly sell for over $300,000, and systems prices can reach $1 million, which can meaningfully impact quarterly revenue. Most recently, we remain focused on opening new markets for our technology. This includes three main areas with very strong global growth, microelectronics and semiconductors, clean energy, including fuel cells and carbon capture, and medical devices. All three of these sectors are experiencing strong demand from long-term societal needs, and they all benefit from Sonotech's unique thin-film coating technology and systems. Now, as our capabilities continue to advance, more and more of the over $8 billion global coating market opens to our advanced solutions. Our investments in these areas have begun to pay off. With the receipt of our first million-dollar order in August, the order valued at $1.1 million was also the first from the clean energy sector and also was the largest in Sonotec's corporate history at the time, all important milestones. Since then, we received another $1.1 million order from the same customer as well as two other initial orders that are expected to total several million dollars each when the respective production lines are complete. Revenue for the fiscal year declined by 12% to 15.1 million. And like many high-tech equipment manufacturers, we encountered a fair number of supply changes that impacted our growth. As a result, and in an effort to avoid this issue again, we've aggressively taken several actions. First, we resolved the large chunk of the supply chain issues by significantly increasing inventory levels and creating very early reorder points, even with simple items that you would never expect to have problems with availability. Some of this is reflected in the $870,000 year over year increase in inventories that we just reported. After implementing this inventory change, we next isolated the remaining key supply chain issue which we're addressing by increasing our in-house capabilities to make similar products for our own needs. We actually started this process prior to COVID and today we internally produce about 25% of the components that we need in that area. By year end, we hope to produce about 40% with a long-term goal to manufacture about 60% of the components we need in-house. We hope that these actions will mitigate any future supply chain issues that may arise. The delay in receiving critical components we need can be seen in our backlog, which increased 60% during the year end and totaled $8.5 million at fiscal year end. This is where you can see that several of our largest orders have been held up. We expect this bubble of shipments to work their way through to delivery in fiscal year 2024. beginning in our second fiscal quarter that starts on June 1st. However, due to supply chain delays that lingered into the first quarter of fiscal 2024, which is ending next week on May 31st, Q1 net sales are expected to be slightly below net sales of 3.7 million in Q4 fiscal 2023. However, expectations for our net sales for both the first half and 12 months of fiscal 2024 is to show positive year-over-year growth as any remaining supply chain issues ease. Before I turn the call over to Steve Bagley, our Chief Financial Officer, I want to mention that Steve Harshberger and I will be presenting at the LD Micro Conference in Los Angeles on Wednesday, June 7th at 11 a.m. Pacific Time or 2 p.m. Eastern Time. It's our first time attending, and we look forward to meeting some of you there. Now, Steve Bagley will provide additional details on our financial results.