Sono-Tek Corporation (NASDAQ:SOTK) Q4 2023 Earnings Call Transcript

Stephen Harshbarger: The partner is someone — do you want to answer that question, Dr. Coccio? Are you speaking up?

Christopher Coccio: Yes, you’re on the right track, and we are doing what you say without necessarily going so far as co-branding. But we’ve had multiple conversations with that vendor, who is more than a vendor in our eyes because we work so closely together. And we brought customers in to show them how capable they are to serve us and therefore we to serve the customer. So yes, we’re — the alternative, as Steve pointed out is, yes you can go to China, but we’re not going to go to China to look for that type of thing, not just for the supply chain issues, but also for the potential loss of some of the business technology and some of our proprietary information. So I think we’re on the right track in terms of both helping our partners do better with us and also, as Steve has pointed out, we’re on a track to be able to produce a substantial amount of these particular specialty robotics, if you want to use that word, we call them multi-axis systems in-house.

Unidentified Analyst: I’m sorry if you’ve said this. Have you elaborated on how much you expect to spend on this pursuit to bring more in-house?

Stephen Harshbarger: We’ve already made the bulk of the investment upfront already. And it actually started prior to COVID is when we started this process because we recognized our high dependence on this vendor. And it’s mostly been in R&D and engineering talent that we had to bring in. And so this — the machines that we are now shipping that we’ve taken on through internally made products are going — shipping out now from Sono-Tek. As Dr. Coccio mentioned, there’s about 25% of them are coming out internally made right now. But the bulk of the investment is already done at this point. Now it’s just continuing to upgrade and improve it to the next level. But again, our industry partner is actually very good as a partner. So we appreciate them for their capabilities as well. But I think it’s a smart move for us to have both of these avenues going at the same time. But we don’t see any other big significant investment coming down the pipeline for that.

Unidentified Analyst: Got it. And just to clarify what you just said, it sounds like you’re having this parallel track of, you are continuing to work with your partner and also doing some more in-house.

Stephen Harshbarger: Yes, that’s correct. That’s correct.

Unidentified Analyst: Okay. One last question. You’ve talked in the past about kind of roll-to-roll and I see on your website, you have this wide track system. But I didn’t hear you, maybe I missed it, but I didn’t hear you talk too much about the roll-to-roll systems. Can you just sort of talk about how that’s progressing, perhaps some of the units you’re selling or what — how that pipeline looks? Thank you.

Stephen Harshbarger: Yes, sure. We are still progressing with the project. It’s still an active program. We still have customers that come in and we’ve sold a few roll-to-roll machines at this point. The primary target market for us, for roll-to-roll, you might recall, is going towards the green energy sector for coating of membranes used for fuel cells or carbon capture or green hydrogen generation. And we have — that customer remains very much is expressing that they plan to go to roll-to-roll, but we still have not seen them make the transition. We actually thought they would have done it this year. But right now, it seems like they’re primarily just focused on single pieces and not going to roll-to-roll yet. But they still are talking about short-term, making the transition to roll-to-roll.