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OTCQX: SOTK© 2018 Sono•Tek Corporation
Annual Meeting of Shareholders
August 23, 2018
Dr. Chris L. CoccioChairman and CEO
2OTCQX: SOTK www.sono-tek.com
Welcome Shareholders
BOARD MEMBERS ROLE DIRECTOR SINCE
Dr. Chris Coccio Chairman 1998
Steve Harshbarger Director 2013
Eric Haskell Independent Director 2009
Dr. Donald Mowbray Independent Director* 2003
Dr. Joseph Riemer Independent Director 2007
Samuel Schwartz Chairman Emeritus and Independent Director 1987
Philip Strasburg Independent Director** 2004
*Chair of Compensation Committee **Chair of Audit Committee
3OTCQX: SOTK www.sono-tek.com
In Memory
Edward J. Handler IIIA Friend and Board Member April 20, 1937 - July 5, 2018
Edward J. Handler III became a Director of the Company in 2004. He was a former partner at Kenyon & Kenyon, a law firm that provided intellectual property advice to the Company. Mr. Handler had 40 years experience in all aspects of intellectual property, including patents, trade secrets, trademarks and copyrights, including litigation and other adversarial proceedings. Mr. Handler was President and COO of The Bronx Project, Inc., a private Delaware corporation active in the area of therapeutics for acute inflammatory conditions. Mr. Handler was past President of the West Point Society of New York and a past Trustee of the Association of Graduates, U.S. Military Academy. He held a J.D. degree from the University of Virginia Law School and a B.S. in Engineering Science from the United States Military Academy.
4OTCQX: SOTK www.sono-tek.com
Welcome Shareholders
Dr. Chris CoccioChairman and
Chief Executive Officer
Steve Harshbarger President
Stephen Bagley Chief Financial Officer
Bennet BruntilVice President,
Sales & Marketing
Robb Engle Vice President,
Engineering
EXECUTIVE & SENIOR MANAGEMENT
OTCQX: SOTK© 2018 Sono•Tek Corporation
Annual Meeting of Shareholders
August 23, 2018
6OTCQX: SOTK www.sono-tek.com
This presentation contains forward-looking statements within the meaning of safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties, and other factors that could cause the actual results of the Company to differ materially from the results expressed or implied by such statements, including delivery of profitable, dynamic growth, growth opportunities for ultrasonic spray technology, retaining and expanding industry leadership and customer base, continuing product diversity, maintaining technological advantage of the Company’s nozzles over those of competitors, including faster return on investment compared to conventional spray systems, enhancing global distribution network, establishing market niche for recently developed products, market reception of new spray innovations, maintaining strong net cash position, achieving EBITDA projections, and other factors. Accordingly, although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. The Company has no obligation to update the forward-looking information contained in this presentation.
Safe Harbor Statement
7OTCQX: SOTK www.sono-tek.com
Strategy
Leverage our innovative technologies, proprietary know-how, unique talent and experience,
and global reach to:
Increase our addressable markets through new and unique technologies
Further penetrate existing markets Create customer delight through product superiority Drive a business model that will fund our investments
in growth
8OTCQX: SOTK www.sono-tek.com
FY 2018 Dashboard
Revenue Growth
$11.0M14%
Gross Margin
48.1%
280 bps
Cash from Operations
$1.8M75%
Total Debt
$1.0M$150K
Net Income
EPS
Growth in Leading Markets
$0.02
$0.4M
9OTCQX: SOTK www.sono-tek.com
Revenue By Market: FY 2018 Sales $11.0 million
37%28%
17%
8%10%
Broad Base of Markets
Electronics / Microelectronics Medical
Alternative Energy
Emerging R&D and Other
Industrial
10OTCQX: SOTK www.sono-tek.com
Highly Diversified
20%
21%
38%
16%5%
Fluxing Systems
Integrated Coating Systems
Multi‐Axis Coating Systems
OEM Systems
Other
44%
10%
24%
22%
US & Canada
Latin America
Europe, Middle East, Africa (EMEA)
Asia Pacific (APAC)
Product Geography
FY 2018 Sales $11.0 million
OTCQX: SOTK© 2018 Sono•Tek Corporation
Steve HarshbargerPresident
12OTCQX: SOTK www.sono-tek.com
APPLICATIONS
MARKET POSITION
More efficient than standard, historic processes Newly developed camera recognition system, InSight Product flexibility: full systems or subsystems Ability to address multi-dimensional complex geometries Precise control for ultra-thin layers
Electronics & Microelectronics
37%
DIFFERENTIATORS/GROWTH DRIVERS
Printed circuit boards Semiconductors: micron-thin photo-
resist layers onto complex wafers (MEMS)
Sensors Display/panel glass on personal
electronic devices, lenses
Market leader in mature printed circuit board industryDemonstrating significant value advantage over alternative coating processes
13OTCQX: SOTK www.sono-tek.com
Implanted medical devices: stents, balloons and diabetic monitoring devices
Blood collection tubes Diagnostic devices, biosensors Bandages/protective wraps
World leader in mature stent industryOpportunity exists as new technologies and medical devices develop
Medical
28%
Application expertise, engineering team and laboratory facilities Precise, repeatable processes, with accurate dosing Product and service flexibility:
Full coating machines Custom-engineered equipment Paid coating services for application engineering, process
development and pre-production volumes
APPLICATIONS
MARKET POSITION
DIFFERENTIATORS/GROWTH DRIVERS
14OTCQX: SOTK www.sono-tek.com
Alternative Energy
17%
Catalyst coating for various fuel cell technologies and systems: Proton Exchange Membrane (PEM) Direct Methanol (DMFC) Solid Oxide (SOFC)
Solar cells Batteries
Expanding global fuel cell market Expanded use of fuel cells: automobiles, motorcycles,
power sources China investment in fuel cell technology development
Highly durable, uniform, pinhole/crack-free coatings on fuel cell Proton Exchange Membranes Reduces waste of carbon-based catalyst inks Improves energy efficiency and durability
Provides higher energy output and greater longevity compared with slot/dieOpportunity in rapid growth market with preferred membrane surface coating results
APPLICATIONS
MARKET POSITION
DIFFERENTIATORS/GROWTH DRIVERS
15OTCQX: SOTK www.sono-tek.com
Industrial
8%
Flat (“float”) glass used for windows in buildings and vehicles
Textiles: antimicrobial, anti-stain Food: antimicrobial coatings on meat
products and packaging, and coatings of flavors, ingredients and other additives
Automotive: heat exchangers and brake pads Aerospace/aircraft: specialty component
coating
Extensive experience in uniform layers of water-soluble organic acid solutions (anti-stain coatings)
Transfer efficiency Environmentally friendly Cost effective
Leading technology for high value industrial glass manufacturersOpportunity for broadening recognition of ultrasonic coating capabilities
APPLICATIONS
MARKET POSITION
DIFFERENTIATORS/GROWTH DRIVERS
16OTCQX: SOTK www.sono-tek.com
Sales Grew 14%
Excellent growth trends throughout the year
Higher volume in Multi-Axis Systems and Integrated Coating Systems
Medical Specialized application expertise for polymer and other active drug coatings on implantable devices
Alternative EnergyLed by fuel cell development programs in Asia
SALES
$10.2 $10.8
$11.7
$9.6
$11.0
FY2014 FY2015 FY2016 FY2017 FY2018
($ in millions)
17OTCQX: SOTK www.sono-tek.com
Gross Margin Improvement
$4.6$5.1
$5.5
$4.4 $5.3
FY2014 FY2015 FY2016 FY2017 FY2018
Gross Profit
45.3%
47.2%46.8%
45.3%
48.1%
FY2014 FY2015 FY2016 FY2017 FY2018
Gross Margin
Gross margin Up 280 bps driven by product mix and volume
Higher volume on slightly lower fixed costs
Generating industry leading gross margins*
*Source: Capital IQ peer group average gross margin of 43.7%
($ in millions)
18OTCQX: SOTK www.sono-tek.com
Investing In Growth
$702$812 $695
$(179)
$382
FY2014 FY2015 FY2016 FY2017 FY2018
OPERATING PROFIT AND MARGIN
6.9% 7.5% 5.9% (1.9)% 3.5%
FY2014 FY2015 FY2016 FY2017 FY2018
Real Estate Operations General & Administrative
Marketing & Selling R&D
OPERATING EXPENSES
$4.0 $4.3$4.8 $4.5 $4.9 Managed operating expenses
Maintained research and product development investment
Expanded sales & marketingBuilding market presence Largest expense is talent
($ in millions)
($ in thousands)
19OTCQX: SOTK www.sono-tek.com
CASH & MARKETABLE SECURITIES
Strengthened Balance Sheet
$3.9 $4.2 $4.1 $4.9
$6.4
FY2014 FY2015 FY2016 FY2017 FY2018
$1.7 $1.5
$1.3 $1.2 $1.0
FY2014 FY2015 FY2016 FY2017 FY2018
TOTAL DEBT
LEAN manufacturing practices drove strong cash generation$1.8M in cash from operations, up 75%
Total debtDown $150 thousand
Debt to total capitalization: 10.5%
($ in millions)
20OTCQX: SOTK www.sono-tek.com
Working Capital
$357 $465
$183 $189
$400 - $600
FY2015 FY2016 FY2017 FY2018 FY2019E**
CAPITAL EXPENDITURES
3.2x3.0x 3.1x 3.2x
4.2x
FY2014 FY2015 FY2016 FY2017 FY2018
INVENTORY TURNOVER
10.6%13.4%
16.2%13.7%
2.7%
FY2014 FY2015 FY2016 FY2017 FY2018
MANAGED WORKING CAPITALAS A PERCENT OF SALES*
32 32 34
44
32
FY2014 FY2015 FY2016 FY2017 FY2018
DAYS SALES OUTSTANDING
*Defined as current assets (excluding cash and cash equivalents and marketable securities) less current liabilities (excluding current debt obligations) divided by annual sales**FY2019 capital expenditures expectation provided on July 16, 2018
($ in thousands)
OTCQX: SOTK© 2018 Sono•Tek Corporation
Robb Engle Vice President,
Engineering
Bennet BruntilVice President,
Sales & Marketing
22OTCQX: SOTK www.sono-tek.com
Excellent fit for ultrasonic technology
Strategic partner helping us gain traction
Primarily used by the automotive industry
Has pushed Sono-Tek to push the performance envelope of the technology
Recently Introduced Products
SonoBraze
23OTCQX: SOTK www.sono-tek.com
Recently Introduced Products
Sono-Tek has a long history in the industry More companies are moving to production Machines are 3-5 times the price of R&D systems
Complex Fuel Cell Coating Lines
24OTCQX: SOTK www.sono-tek.com
Recently Introduced Products
Captures a market we were previously missing
Well received for a wide range of university level R&D needs
Simple, flexible design
Low cost, aimed at university R&D
SimCoat Multi-Axis Coating System
25OTCQX: SOTK www.sono-tek.com
Recently Introduced Products
Growing worldwide diagnostic market demands more precise coating areas
Our new technology already gaining traction in the industry
The most precise and demanding coatings we have ever encountered (in terms of speed and repeatability)
MedXT
26OTCQX: SOTK www.sono-tek.com
Designed to provide the minimal components to successfully implement our coating technology
Product designed to easily integrate into customer supplied machinery
Higher price and higher value compared to just nozzle and generator
Designed using LEAN engineering principles
Recently Introduced Products
Universal ALIGN
27OTCQX: SOTK www.sono-tek.com
Recently Introduced Products
Partnered with Sames Kremlin, France, a leader in electrostatic technology
System marries our advanced ultrasonic spraying capabilities with the capabilities of electrostatic coating technology
The first commercially available process of its kind
Anticipate many novel applications
Ultrastatic Enhanced Coating Solution
28OTCQX: SOTK www.sono-tek.com
Future Plans
Industry 4.0The Future of Manufacturing is IIOT and Industry 4.0
Lower cost controllers and high speed
communications are launching this transition
OTCQX: SOTK© 2018 Sono•Tek Corporation
Steve HarshbargerPresident
30OTCQX: SOTK www.sono-tek.com
First Quarter 2019 Results
Q1 2018 Q1 2019
Revenue($ in millions)
$2.5$2.7
+ 8%
Q1 2018 Q1 2019
Gross Profit & Margin($ in millions)
$1.2$1.3
47.2% 47.1%
+ 8%
Q1 2018 Q1 2019
Net Income($ in thousands)
$16$21
+ 31%
Increased demand from Electronics/Microelectronics and Medical Industries
Operating margin expanded 40 bps to 1.2%
Investing in talent: sales, application engineers
31OTCQX: SOTK www.sono-tek.com
FY 2019 Outlook*
Anticipate solid growth in revenue for fiscal year 2019 New products and applications Strong global economy Fiscal improvements in the U.S.
Alternative Energy expected to show significant increase for the full year
BACKLOGSHIPMENTSPROPOSALS LAB ACTIVITY
*Outlook provided as of July 16, 2018
32OTCQX: SOTK www.sono-tek.com
Investment Highlights
Strong brand and reputation: known for high quality and consistency.
Continued strengthening of application expertise, process development laboratories, new products, and technological advancements.
Expanding addressable markets and applications to broaden customer base.
Advantages of ultrasonic coating is becoming more broadly recognized to capture a larger segment of coatings equipment market.
33OTCQX: SOTK www.sono-tek.com
Questions
www.sono-tek.com
OTCQX: SOTK© 2018 Sono•Tek Corporation
Annual Meeting of Shareholders
August 23, 2018