Sono-Tek Corporation, a global pioneer in the design and manufacturing of innovative ultrasonic coating systems, has established itself as a trailblazer in the industry, shaping industries and driving technological breakthroughs worldwide. With a rich history spanning over four decades, the company's unwavering commitment to research and development has enabled it to stay at the forefront of the evolving coating technology landscape.
Company History and Overview
Sono-Tek Corporation was incorporated in New York on March 21, 1975, with the purpose of designing and manufacturing ultrasonic coating systems that apply precise, thin film coatings to add functional properties, protect or strengthen surfaces on parts and components for various industries. Over the decades, the company has established itself as the world leader in ultrasonic coating technology. Its patented ultrasonic nozzle systems and strong applications engineering knowledge have allowed it to provide custom-engineered coating solutions to customers across the microelectronics, alternative energy, medical, industrial, and emerging research and development sectors.
In the early 2000s, Sono-Tek faced supply chain issues that impacted its ability to meet customer demand. To address this, the company invested in bringing more of its production capabilities in-house, which improved its supply chain resiliency. This strategic move, along with the company's ability to navigate through periods of economic uncertainty and changing customer demands, has demonstrated its adaptability and market leadership in the ultrasonic coating technology space.
Products and Services
Sono-Tek's comprehensive suite of thin-film coating solutions and application consulting services, provided by its expert applications engineers, have been instrumental in guiding customers through the development of complete coating processes. This approach ensures unparalleled results for Sono-Tek's clients and helps some of the world's most promising companies achieve technological breakthroughs and bring them to market.
The company's product line is structured around several key segments. The Fluxing Systems segment includes equipment used for applying fluxing materials to circuit boards and other substrates. The Integrated Coating Systems segment encompasses equipment used for applying coatings to a variety of products, including medical devices. The Multi-Axis Coating Systems segment includes more complex, multi-axis machines used for applying coatings. The OEM Systems segment comprises equipment sold to other manufacturers for integration into their own products. Lastly, the Spare Parts, Services and Other segment includes aftermarket sales of spare parts and the provision of maintenance and other services.
Research and Development
The company's strong focus on research and development has allowed it to maintain pace with industry trends while continuously innovating. Sono-Tek's strategic delivery of its products through a network of direct sales personnel, carefully chosen independent distributors, and experienced sales representatives located in North America, Latin America, Europe, and Asia has enabled efficient market reach across diverse sectors around the globe. Approximately 35% of the company's sales were generated outside the United States and Canada in the first six months of fiscal year 2025.
Growth Strategy
Sono-Tek's growth strategy is centered on leveraging its innovative technologies, proprietary know-how, unique talent and experience, and global reach to develop thin-film coating technologies that enable better outcomes for its customers' products and processes. The company's shift towards larger, more complex systems aimed at production applications, coupled with its focus on opening new markets for its lithium film coating technology, has been a key driver of its recent success.
Financials
In the first half of fiscal year 2025, Sono-Tek experienced a 10% increase in annual revenue, with a 3% sequential increase in the second quarter. The company's net income also grew by 13% year-over-year during the first half of the fiscal year. This strong performance is reflected in Sono-Tek's record backlog, which increased 26% from the end of the previous fiscal year to a record $11.7 million as of the end of the second quarter.
For the most recent fiscal year 2024, Sono-Tek reported revenue of $19.70 million, net income of $1.44 million, operating cash flow of $1.16 million, and free cash flow of $369,180. In the most recent quarter (Q2 2025), revenue was $5.16 million, down 8% year-over-year, primarily due to decreases in revenue from Fluxing Systems, OEM Systems, and Industrial markets. Net income for Q2 2025 was $340,690, down 37% year-over-year, mainly driven by lower revenue and gross profit. Operating cash flow for Q2 2025 was -$418,410, and free cash flow was -$576,090.
The growth in Sono-Tek's backlog can be attributed to the increasing order activity from the clean energy sector, including fuel cells, green hydrogen generation, carbon capture, and advanced solar cells. These markets have been a focus for the company's research and development efforts for close to a decade, and Sono-Tek is now successfully transitioning its customers from R&D and pilot line machines to high-volume production systems.
Market Performance
Sono-Tek's strategic shift towards larger, more complex systems has also benefited its electronics and medical device customers. The company's newly developed coating system with wafer shuttling capabilities, directed at the semiconductor market, contributed to a 51% increase in electronics market revenue during the second quarter of fiscal year 2025 and a 30% increase in the first half of the fiscal year.
However, the company has seen a decline in sales to the medical device market, primarily due to lower demand for its stent and balloon coating systems. Sono-Tek expects balloon coating system sales to recover in the second half of the fiscal year, but stent coating system sales are likely to remain subdued as several customers in this market have reported slower business activity.
The company's industrial sales have also declined, partially influenced by a float glass coating system that shipped in the prior fiscal year and did not repeat in the current period. Despite these challenges, Sono-Tek remains focused on its strategic initiatives, which have enabled it to achieve significant growth in its average unit selling prices and expand its addressable market.
In terms of geographic performance, approximately 65% of sales in the first half of fiscal 2025 were to the U.S. and Canada, up from 40% in the prior year period. Sales to the U.S. and Canada increased by 9% and 18% in Q2 and the first half respectively compared to the prior year. Sales to the Asia Pacific (APAC) region decreased by 32% and 21% in Q2 and the first half respectively, due to continued reduced sales to China. Latin America sales were down 78% and 65% in Q2 and the first half respectively, primarily due to a large float glass coating system sale in Mexico in the prior year period that did not repeat.
Liquidity
Sono-Tek's strong balance sheet, with $11.6 million in cash, cash equivalents, and marketable securities as of August 31, 2024, and no outstanding debt, provides the company with the financial flexibility to continue investing in its strategic initiatives and capitalize on emerging opportunities. The company's cash and cash equivalents stand at $5.85 million, with an available credit line of $1.50 million revolving line of credit at prime, of which $0 was utilized as of August 31, 2024. Sono-Tek's current ratio is 3.33, and its quick ratio is 2.46, indicating strong short-term liquidity.
The company generally requires deposits of 50% or greater on orders valued at over several hundred thousand dollars. Customer deposits reached $3.2 million at August 31, 2024, reflecting the continued receipt of these large new orders.
Future Outlook
Looking ahead, Sono-Tek's outlook remains positive, with the company expecting continued sales growth and profitability for the full fiscal year 2025. The company's strategic shift towards larger, more complex systems with accelerating average selling prices, combined with its proprietary ultrasonic technology, has positioned it for continued success in the years to come.
Sono-Tek's momentum stems from its deliberate strategy, the strategic shift to large customized systems with accelerating average selling prices (ASPs), and its proprietary ultrasonic technology. The company expects to invest approximately $460,000 in new equipment for the full fiscal year 2025.
Over the past five years, Sono-Tek's revenue has grown at a compound annual growth rate (CAGR) of 13%, driven by the company's strategic shift to offering more complex, higher-priced coating systems, especially in the clean energy and electronics markets. This trend, coupled with the company's strong backlog and continued focus on innovation, suggests a positive trajectory for Sono-Tek's future growth and market position.