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ST

SONO TEK CORP (SOTK)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY2025 delivered the fourth straight >$5M quarter: revenue $5.121M (+7.4% YoY; -1.3% QoQ), diluted EPS ~$0.02, with margins improving sequentially (gross 47.0%, operating 5.6%, net 6.4%) . EPS of ~$0.02 beat consensus $0.015*, while revenue was essentially in line with ~$5.124M* (micro-miss of ~$2K) and EBITDA beat ($459K actual vs $376K*). Values with asterisks from S&P Global.
  • Backlog stepped down through the year but remains a key H1 FY2026 driver: $11.7M (Q2) → $10.56M (Q3) → $8.67M at FY-end; management expects eight clean energy systems in backlog to ship in Q1–Q2 FY2026 .
  • Guidance: Management guides to continued revenue growth and profitability for H1 FY2026, but limits visibility beyond H1 given uncertainty around clean energy incentives, tariff policy, and order timing; to revisit guidance with Q1 results .
  • Strategic mix shift continued: production-scale, high-ASP systems in clean energy and rising momentum in medical (balloon catheter) and semiconductor (wafer handling) support medium-term growth diversification .

What Went Well and What Went Wrong

What Went Well

  • Four consecutive quarters over $5M; Q4 revenue $5.121M (+7.4% YoY) with sequential margin improvement (gross 47.0%, op 5.6%, net 6.4%) .
  • Strategic shift to high-ASP production systems gaining traction; CEO: “customers moving through R&D and pilot systems to complex large-scale production systems with significantly higher ASPs” .
  • Medical momentum building: management highlights “promising momentum in the medical device industry, particularly… high-volume production systems,” with balloon coating systems poised to scale (machines ~$250K vs historical $80–100K), primarily in U.S./EU .

What Went Wrong

  • Backlog declined from record levels: $11.7M (Q2) → $10.56M (Q3) → $8.67M at FY-end, reflecting shipping progress and order timing; visibility beyond H1 FY2026 is limited .
  • End-market softness: FY2025 medical (-22%) and industrial (-47%) were headwinds; China demand remains weak (China ~2.5% of sales) .
  • Gross margin YoY pressure (FY: 47.5% vs 50.0%) attributed to mix and reclassification of certain labor to COGS; operating income fell YoY (FY: $1.01M vs $1.18M) .

Financial Results

Quarterly performance and sequential/YoY context

MetricQ2 FY2025Q3 FY2025Q4 FY2025
Revenue ($USD Millions)$5.162 $5.191 $5.121
Diluted EPS ($)$0.02 $0.02 $0.02*
Gross Margin %49% 45% 47.0%
Operating Margin %6% 4% 5.6%
Net Margin %7% 5% 6.4%

Notes: Q4 revenue +7.4% YoY and -1.3% QoQ; sequential margin improvements reflect mix normalization vs Q3. Values with asterisks from S&P Global.

Q4 FY2025 vs Wall Street consensus (S&P Global)

MetricConsensusActualSurprise
Revenue ($)$5,124,400*$5,121,000 -$3,400
Diluted EPS ($)$0.015*$0.020*+$0.005
EBITDA ($)$376,300*$459,489*+$83,189

Values with asterisks retrieved from S&P Global.

FY2025 segment/context (annual, for mix insight)

  • Product sales ($USD Millions): Fluxing $0.467 (2%), Integrated Coating $3.703 (18%), Multi-Axis $10.678 (52%), OEM $1.484 (7%), Other $4.172 (21%) .
  • Market sales ($USD Millions): Electronics $5.426 (27%), Medical $3.250 (16%), Alternative Energy $9.838 (48%), Emerging R&D $0.067 (0%), Industrial $1.923 (9%) .
  • Geographic ($USD Millions): U.S./Canada $12.506 (+15% YoY), APAC $2.758 (-16%), EMEA $4.431 (+2%), LatAm $0.809 (-34%) .

KPIs and balance sheet

KPIQ2 FY2025Q3 FY2025FY2025 YE
Backlog ($)$11.7M $10.56M $8.67M
Cash + Marketable Securities ($)$11.6M $12.7M $11.9M
DebtNone None None
Capex——$0.496M (FY)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue/ProfitabilityFY2025“Revenue of over $20M and continued profitability” (delivered) —Met FY guidance; FY revenue $20.5M, profitable
Revenue/ProfitabilityH1 FY2026—Expect continued revenue growth and profitability in H1 FY2026; visibility beyond H1 limited (clean energy incentives, tariffs, order timing) New, qualitative; limited scope beyond H1
CapexFY2026~$500K FY2025 ~ $435K planned for FY2026 Lowered
Share RepurchaseOngoingUp to $2M authorization (active)Active; evaluated quarterly by Board Maintained

Earnings Call Themes & Trends

TopicQ-2 (Q2 FY2025, Oct-2024)Q-1 (Q3 FY2025, Jan-2025)Current (Q4 FY2025, May-2025)Trend
Clean energy momentum/backlogRecord backlog $11.7M; shipments of high-ASP Altair systems; two $2.95M orders disclosed Backlog $10.56M; alt energy +42% in Q3 Backlog $8.67M; eight clean energy systems in backlog to ship in Q1–Q2 FY2026; U.S. clean energy ordering cautious; visibility limited beyond H1 Near-term deliveries solid; second-half visibility softer
Medical devicesH1 softness; expected rebound H2; balloon systems highlighted Q3 medical -33% YoY; service revenue strength “Promising momentum” esp. balloon catheters; higher-ASP production systems; shift to U.S./EU Improving outlook
SemiconductorsNew wafer-shuttling systems shipped; expanding addressable market Continued activity Partner-enabled wafer handling; proposals scaling machines to ~$850K; targeting fab production Capability expansion; pipeline build
Supply chain/tariffs/macroCHIPS/IRA funding supporting U.S.; internalization of platforms to mitigate vendors Some regional variability Tariffs modest impact ex-China; currency favorable in Japan/Korea; uncertainty on policy path Manageable, watch policy
R&D execution (Altair/ARES)Altair PLC systems; Aries in-house multi-axis platforms Ongoing Investments bearing fruit; FY R&D $2.72M; mix shift to production systems Delivering
Geographic mixU.S./Canada 65% H1; APAC down on China U.S./Canada 54% in Q3; APAC up sequentially FY: U.S./Canada 61%; China ~2.5% of sales Sustained U.S. skew

Management Commentary

  • Strategy and positioning: “We are… moving through R&D and pilot systems to complex large-scale production systems with significantly higher ASPs… prospects for attracting additional high-volume, high-ASP production system orders” .
  • Medical growth vector: “Promising momentum in the medical device industry… increased demand for our balloon coating machines… used for cardiac interventions” .
  • Semiconductor expansion: “Our first proposal… increased a machine… from ~$300,000 to around $850,000… we would not have been in the running… without these increased capabilities” .
  • Near-term guide framing: “Expecting to see continued revenue growth and profitability in the first half of fiscal 2026… visibility beyond the first half remains limited” .
  • Capital allocation: Active $2M share repurchase authorization “regularly discussed at the board level every quarter” .

Q&A Highlights

  • Backlog conversion: Eight clean energy systems are in backlog and expected to ship/flow through Q1–Q2 FY2026, supporting H1 growth .
  • End-market demand/visibility: U.S. clean energy customers showing ordering apprehension amid policy uncertainty; EU/Asia remain active; tariffs modest impact ex-China .
  • Diversification: Pipeline now includes higher-ASP medical (balloon catheter) and semiconductor fab solutions, reducing reliance on clean energy .
  • Capex and capacity: FY2026 Capex planned ~$435K; facility can support ~$24–29M within current footprint and ~$40–44M with final building, per earlier mid-year commentary .
  • Buyback: $2M authorization active; no new guidance beyond program framework .

Estimates Context

  • Q4 FY2025: EPS $0.02 vs $0.015 consensus (beat by $0.005); revenue $5.121M vs ~$5.124M consensus (essentially in line); EBITDA $459K vs $376K consensus (beat). Number of estimates: 2 for revenue and EPS. Values retrieved from S&P Global.
  • Implications: Near-term estimate risk skews to H1 FY2026 upside on backlog conversion (eight clean energy systems), with potential mix lift from medical and semi; visibility into H2 constrained by policy/order timing commentary .

Key Takeaways for Investors

  • Backlog-driven H1 setup: Eight clean energy systems slated for H1 FY2026 shipment provide tangible revenue and profitability support in Q1–Q2; watch order timing confirmations at Q1 update .
  • Diversification on track: Growing medical (balloon catheter) and semiconductor (wafer handling) opportunities should broaden revenue drivers and support ASP accretion beyond clean energy .
  • Margins stabilizing: Sequential recovery in Q4 gross/operating margins vs Q3 suggests mix normalization; sustained high-ASP system deliveries are key to defending margins .
  • Policy sensitivity: Management flagged uncertainty around U.S. clean energy incentives and tariffs; EU/Asia demand remains constructive—monitor U.S. policy path and China exposure (now small) .
  • Capital discipline: Healthy cash/securities ($11.9M), no debt, moderated FY2026 Capex (~$435K) and active buyback provide flexibility .
  • Stock catalysts: Q1 FY2026 print and guidance update (visibility beyond H1), large medical/semi production orders, and backlog adds from non-clean energy verticals could drive narrative and estimate revisions .
  • Monitor backlog trajectory: After FY-end decline ($8.67M), new order capture—especially outside clean energy—will be the key indicator for H2 trajectory .

Values marked with asterisks were retrieved from S&P Global.