Annual Meeting of Shareholders · establishing market niche for recently developed products, market...

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


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.


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



August 23, 2018


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


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


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


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


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


Steve HarshbargerPresident


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


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



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



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



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)


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)


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)


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)


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)


Robb Engle Vice President,

Engineering

Bennet BruntilVice President,

Sales & Marketing


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



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



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



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


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


Universal ALIGN



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


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


Steve HarshbargerPresident


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


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


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.


Questions

www.sono-tek.com



August 23, 2018

Annual Meeting of Shareholders · establishing market niche for recently developed products, market...

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