Sono-Tek Corporation

Good day and welcome to the Sonotech second quarter and first half fiscal year 2026 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 zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note that this event is being recorded. I would now like to turn the conference over to Mr. Kieran Smith with PCG Advisory. Please go ahead, sir.

Thank you, operator, and thank you, everyone, for joining us today. Sonatec released their second quarter and first half fiscal 2026 results this morning. If you don't have a copy of the release, please go to the company's website at sonatec.com and click the press release splash 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, Sonatex Executive Chairman, Steve Harshwarger, 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 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. As a reminder, Somatek currently holds two earnings calls per fiscal year. This is our mid-year fiscal 2026 call for the second quarter and first half ended August 31, 2025. Our next earnings call will be our full-year call for the 12 months ended February 28, 2026, and will be held next May. I would now like to turn the call over to Chris Coccio, Executive Chairman of Somatek. Chris, please go ahead.

Good morning and thank you, Kieran, and thank you everyone for joining us today. We're going to discuss our second quarter and first half fiscal 2026 results. They were released this morning before the market opened. I'll begin with some opening remarks and then Steve Harshberger, CEO and President, will go through a deeper business and operational review. This will be followed by Steve Bagley, our Chief Financial Officer, who will provide the financial review. Following their comments, We'll open the call to your questions. This past August, we held our annual shareholder meeting at our company headquarters and manufacturing facility in Milton, New York. I'd like to thank all the shareholders who attended and were able to see firsthand the core technology, the key advantages, and how it's being utilized by our customers in various industries. They were also able to see how bustling our facility is as we continue to grow. For those newer investors in our company, we welcome the opportunity to showcase our products and technology with an open invitation. As a refresher for the newer and prospective investors on the call today, Sonotech developed a revolutionary method of applying precision thin film coating several decades ago. The proprietary technology involves the use of our advanced high-frequency ultrasonic nozzles incorporated into specialty motion control systems. They were able to achieve uniform micron and nano thin coatings onto our customers' products. Our unique value proposition and key differentiator is that our thin film coating machines provide dramatic savings of the expensive liquids being applied and are environmentally friendly by minimizing material usage and reducing overspray. Importantly, this often helps companies comply with increasingly stringent government regulations aimed at reducing hazardous waste entering the environment. But the real key advantage of our ultrasonic coating systems is the ability to apply precision thin films, which 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. A major strategic shift that we made several years ago to offer more complex and complete solutions has meaningfully broadened our address in the market and resulted in significant growth in our average unit selling price. Our larger machines now commonly sell for over $300,000, and system prices can reach $1 million or more. This can significantly impact our quarterly revenue. Additionally, our move into the clean energy sector has shown excellent results in the next generation solar cells, fuel cells, green hydrogen generation, and carbon capture applications, as we help shape a sustainable future. This is what we saw last fiscal year, where we saw the largest customer order in our history, followed by an additional order of the same size two weeks later. More recently, and in line with our diversification strategy, we announced a very large order of over $5 million to a company in the medical device industry, And just yesterday, we announced another large order of over 2.8 million from another major U.S. medical device manufacturer. The beauty of our technology is the immense value it brings across many industries, including the electronics market, life sciences, and clean energy, to name a few. The new year has presented some changes and uncertainties for most businesses, such as changes taking place in relationships with trading partners, and the redirection of climate policy and related government spending. On the trade issues, Sonotech builds our key ultrasonic hardware at our factory in Milton, New York, and a large portion of our other materials use our US space. So we see minimal concern there. On the export side, more than half of our current sales are to the US market, and we have been exposed to tariffs in certain other countries for many, many years. So we could be affected for better or worse depending on the outcome of negotiations taking place. Clean energy continues to represent a significant portion of our sales. Fortunately, a large share of these sales come from commercial customers, such as U.S.-based solar panel manufacturers and carbon capture and conversion companies. The solar customers are supported by commercial users, and the carbon capture customers by airlines and other corporations focused on reducing their carbon footprint. This includes efforts to develop sustainable aviation fuel and other carbon-based products. While we do anticipate a decline in clean energy orders this year, our diversification strategy helps us to mitigate and offset potential declines. This is being driven by ongoing enhancements to our equipment across all sectors, including new expanded features and functionalities that are supporting sales in the medical and semiconductor markets. I'm pleased to report that we're seeing strong momentum in the medical device industry, particularly in growing interest for our high volume production systems and increased demand for our balloon catheter coating machines. It's important to note that we have used a form of forward deployed engineering with a number of customers now to help them in their subsequent system purchases from us. For the first half of our fiscal year, we experienced modest annual revenue growth, and the second quarter marked the sixth consecutive quarter in a row of revenue over $5 million. On top of that, our first half revenue made a new record high at $10.3 million, and net income came in at $917,000, which is up about 36% from the previous year. We remain encouraged by the path ahead, supported by a solid backlog of $11.2 million and and strong balance sheet with $10.6 million in cash and no debt. For the full fiscal year, we are increasing our prior guidance to reflect modest revenue growth. This outlook balances continued caution as the market adjusts to the recent shifts in government clean energy and tariff policies, which we expect will be positively offset by growing demand from the medical device industry. We will continue to refine our guidance as we gain more clarity through the remainder of the year. In closing my part, we are excited that our investments have begun to pay off and our strategies have positioned us well for continued success and long-term value creation. Our outlook for growth has been greatly enhanced by the early success of our strategy to shift the larger, more complex systems and platforms for production applications There are multiple and repeat orders as well as our focus on opening new markets for our unique thin film coating technology. Thank you. I'll now turn the call over to Steve Harshberger, our CEO and President. Steve, please go ahead.