Sono-Tek Reports Strong Growth in Sales, Profitability and Backlog for Second Quarter Fiscal 2022; Expects Double-Digit Growth and Record Sales for FY 2022

1 week ago

Q2 Sales Up 17% and Q2 Net Income Up 93% Year-over-Year; Backlog up 64% from FYE


MILTON, NY, Oct. 13, 2021 (GLOBE NEWSWIRE) -- via NewMediaWire -- Sono-Tek Corporation (NASDAQ: SOTK), the leading developer and manufacturer of ultrasonic coating systems, today reported financial results for the second quarter and first half periods of fiscal year 2022, ended August 31, 2021.


Second Quarter FY2022 Financial Highlights:

(Compared with prior-year period unless otherwise noted)
  • Net sales were $4,070,000, up 17% or $589,000, driven by increased sales of OEM systems to the China market.
  • Gross Profit increased 28% to $2,074,000 due to higher sales and product mix.
  • Gross Margin expanded 440 basis points to 51.0% primarily due to product mix.
  • Operating income increased 123% to $449,000, compared to $201,000.
  • Net income was $344,000, an increase of 93%.
  • Backlog reached a record high of $6,332,000, an increase of 45% compared with backlog of $4,380,000 on May 31, 2021 (the end of the fiscal Q1) and increased 64% compared to backlog of $3,851,000 on February 28, 2021 (the end of fiscal 2021).
  • Uplisted to Nasdaq Capital Market on August 27, 2021.


First Half Fiscal 2022 Highlights

(Compared with prior-year period unless otherwise noted)
  • Net Sales were $7,715,000, an increase of 12%, primarily driven by strength in the semiconductor and electronic diagnostic coating markets.
  • Gross Profit increased 23% to $3,898,000 due to higher sales and product mix.
  • Gross Margin expanded 440 basis points to 50.5% primarily due to product mix and lower than expected warranty and installation costs.
  • Operating Income increased 105% to $791,000 due to increases in gross profit, partially offset by increases in operating expenses.
  • Income before taxes increased 94% to $802,000, excluding the benefit from PPP loan forgiveness of $1.0 million.
  • As of August 31, 2021, the Company had no outstanding debt.


Guidance

  • Sales Growth Guidance for the third and fourth quarters of FY2022 is for double digit increases over the comparable periods of last year.
  • Sono-Tek continues to expect the highest annual sales in corporate history for fiscal year 2022, ending February 28, 2022.
Dr. Christopher L. Coccio, Chairman and CEO, commented, “Sono-Tek had another strong performance in the second quarter of fiscal 2022. Net sales increased 17% with strength in multi-axis coating systems and the OEM markets for semiconductor and fluxing systems. The electronics/microelectronics segment again accounted for a large portion of the quarter’s sales, 36% compared to 23% in the second quarter of last fiscal year, driven by sales of systems for diagnostic coatings on electronic devices for COVID-19 test kits and the ongoing global shortages and investments in semiconductors. Approximately 62% of sales originated outside of the US and Canada in the quarter. APAC accounted for 65% of foreign sales, led by sales to China. We expect continued international growth as countries around the world roll back COVID-19 restrictions and bring manufacturing capacity back online. We’ve already begun to see increased activity in our global network of process development labs. We effectively contained costs in the quarter and the product mix was favorable, enabling a 28% increase in gross profit to $2.1 million and a 440 basis point expansion in gross margin to 51.0%. Operating income more than doubled and net income increased 93%. Backlog reached a record high of $6.3 million, an increase of 45% from the end of the first quarter and an increase of 64% from the end of our last fiscal year on February 28, 2021.


“The outlook is strong as well. We expect double-digit sales increases for both the third and fourth quarters of the fiscal year based on the strength of our backlog. We expect this growth to generate the highest annual sales in corporate history for the year ending in February 2022. We’re very excited about this expanded revenue which reflects the success of our strategic shift to provide higher value, complete machine solutions and larger subsystems to OEMs. Our continued positive trajectory undoubtedly facilitated the uplisting of our common stock to the Nasdaq Capital Market during the second quarter. SOTK began trading on Nasdaq on August 27th, and we rang the closing bell a few days later to mark the achievement of this important milestone,” concluded Dr. Coccio.


Year-to-Date Fiscal 2022 Results (Narrative compares with prior-year period unless otherwise noted)

Six Months Ended August 31, Change
2021 2020 $ %
Net Sales $ 7,715,000 $ 6,909,000 806,000 12%
Gross Profit 3,898,000 3,182,000 716,000 23%
Gross Margin 50.5% 46.1%
Operating Income $ 791,000 $ 386,000 405,000 105%
Operating Margin 10.3% 5.6%
Net Income $ 1,611,000 $ 346,000 1,265,000 366%
Net Margin 20.9% 5.0%
Diluted Earnings Per Share $ 0.10 $ 0.02
Weighted Average Shares - Diluted 15,614,000 15,531,000
Second Quarter Fiscal 2021 Results (Narrative compares with prior-year period unless otherwise noted)

Three Months Ended August 31, Change
2021 2020 $ %
Net Sales $ 4,070,000 $ 3,481,000 589,000 17%
Gross Profit 2,074,000 1,621,000 453,000 28%
Gross Margin 51.0% 46.6%
Operating Income $ 449,000 $ 201,000 248,000 123%
Operating Margin 11.0% 5.8%
Net Income $ 344,000 $ 178,000 166,000 93%
Net Margin 8.5% 5.1%
Diluted Earnings Per Share $0.02 $0.01
Weighted Average Shares - Diluted 15,602,000 15,533,000
Second Quarter FY2022 Financial Overview

Fiscal second quarter net sales were $4,070,000, up 17% or $589,000 from the second quarter of last year. The growth was primarily driven by a significant shipment of multi-axis coating systems used to coat electronic diagnostic devices for rapid COVID-19 test kits, as well as strong sales of OEM systems used in the Semiconductor and Spray Fluxing markets. The sales increases in these product lines more than offset the decrease in Integrated Coating Systems, which were lower due to the shipment of a large integrated coating machine in last year’s second quarter. The Alternative Energy market was also strong with growing investments in the clean energy sector from both government and private industry driving demand for Sono-Tek equipment for coating membranes used in fuel cells and carbon capture applications.


In the second quarter of fiscal 2022, approximately 62% of sales originated outside of the United States and Canada compared with 38% in the prior year period. Unwinding from the worst of the global pandemic, the strong sales in Q2 FY2022 were primarily driven from the Asia Pacific region (APAC), reflecting the transition of several countries emerging from COVID-19 lockdowns to bring their manufacturing operations back online.


Backlog reached a record high of $6,332,000, an increase of 45% compared with backlog of $4,380,000 on May 31, 2021 (the end of the fiscal Q1) and increased 64% compared to backlog of $3,851,000 on February 28, 2021 (the end of fiscal 2021).


For the second quarter of fiscal 2022, the gross profit margin was 51.0% compared with 46.6% for the prior year period, an improvement of 440 basis points. The improvement is due to increased sales combined with a favorable product mix.


Operating income increased 123% to $449,000 compared with $201,000 for the prior year period. Growth in revenue and gross profit were key factors in the improvement, partially offset by increased operating expenses. Operating margin for the quarter increased to 11% compared with 5.8% in the prior year period.


Net income for the second quarter was $344,000, an increase of 93%, compared with $178,000 for the prior year period. On a per share basis, earnings were $0.02 compared with $0.01 for the prior year period. Diluted weighted average shares outstanding totaled 15,602,359 compared to 15,533,010 for the prior year period.


Balance Sheet and Cash Flow Overview

Cash and cash equivalents and short-term investments at August 31, 2021 were $9.7 million, an increase of $1.1 million from February 28, 2021, the end of fiscal year 2021. The increase was primarily the result of the current period’s net income as well as a decrease in account receivables and an increase in customer deposits, offset by an increase in inventory to support the growth in backlog.


Capital expenditures in the second quarter totaled $147,000 and were directed to ongoing upgrades of the Company’s manufacturing facilities. Sono-Tek anticipates total capital expenditures will total approximately $300,000 - $350,000 in the current fiscal year.


At August 31, 2021, the Company had no debt on its balance sheet.


Conference Call Information

The Company will hold a conference call to discuss its second quarter fiscal year 2022 financial results today, Wednesday, October 13th, 2021 at 11:00am EST. To participate in the call, please dial 1 (877) 270-2148 at least 10 minutes prior to the start of the call and ask to join the Sono-Tek call. A simultaneous webcast of the call may be accessed through the Company's website, https://www.sono-tek.com/about-us/investors/events-presentations/


A replay of the call will be available at 1 (877) 344-7529, access code 10160904, through October 20, 2021.


About Sono-Tek

Sono-Tek Corporation is the leading developer and manufacturer of ultrasonic coating systems for applying precise, thin film coatings to protect, strengthen or smooth surfaces on parts and components for the microelectronics/electronics, alternative energy, medical and industrial markets, including specialized glass applications in construction and automotive.


The Company’s solutions are environmentally-friendly, efficient and highly reliable and enable dramatic reductions in overspray, savings in raw material, water and energy usage and provide improved process repeatability, transfer efficiency, high uniformity and reduced emissions.


Sono-Tek’s growth strategy is focused on leveraging its innovative technologies, proprietary know-how, unique talent and experience, and global reach to further develop microscopic coating technologies that enable better outcomes for its customers’ products and processes.


For further information, visit www.sono-tek.com.


Safe Harbor Statement

We discuss expectations regarding our future performance, such as our business outlook, in our annual and quarterly reports, news releases, and other written and oral statements. These “forward-looking statements” are based on currently available competitive, financial and economic data and our operating plans. They are inherently uncertain, and investors must recognize that events could turn out to be significantly different from our expectations and could cause actual results to differ materially. These factors include, among other considerations, general economic and business conditions; political, regulatory, tax, competitive and technological developments affecting our operations or the demand for our products; the duration and scope of the COVID-19 pandemic; the extent and duration of the pandemic’s adverse effect on economic and social activity, consumer confidence, discretionary spending and preferences, labor and healthcare costs, and unemployment rates, any of which may reduce demand for some of our products and impair the ability of those with whom we do business to satisfy their obligations to us; our ability to sell and provide our services and products, including as a result of continued pandemic related travel restrictions, mandatory business closures, and stay-at home or similar orders; any temporary reduction in our workforce, closures of our offices and facilities and our ability to adequately staff and maintain our operations resulting from the pandemic; the ability of our customers and suppliers to continue their operations as result of the pandemic, which could result in terminations of contracts, losses of revenue; and further adverse effects to our supply chain; maintenance of increased order backlog, including effects of any COVID-19 related cancellations; the imposition of tariffs; timely development and market acceptance of new products and continued customer validation of our coating technologies; adequacy of financing; capacity additions, the ability to enforce patents; maintenance of operating leverage; maintenance of increased order backlog; consummation of order proposals; completion of large orders on schedule and on budget; successful transition from primarily selling ultrasonic nozzles and components to a more complex business providing complete machine solutions and higher value subsystems; and realization of quarterly and annual revenues within forecasted range of sales guidance. We refer you to documents that the company files with the Securities and Exchange Commission, which includes Form 10-K and Form 10-Qs containing additional important information.


For more information, contact

Stephen J. Bagley

Chief Financial Officer

Sono-Tek Corporation

info@sono-tek.com


Investor Relations:

Stephanie Prince

PCG Advisory

(646) 863-6341

sprince@pcgadvisory.com


Financial Tables Follow SONO-TEK CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
August 31,
2021 February 28,
(Unaudited) 2021
ASSETS
Current Assets:
Cash and cash equivalents $ 6,143,106 $ 4,084,078
Marketable securities 3,554,124 4,563,470
Accounts receivable (less allowance of $56,123) 1,482,334 1,757,802
Inventories, net 2,923,855 2,611,106
Prepaid expenses and other current assets 124,214 151,316
Total current assets 14,227,633 13,167,772
Land 250,000 250,000
Buildings, net 1,525,958 1,575,135
Equipment, furnishings and building improvements, net 1,057,084 1,075,190
Intangible assets, net 85,736 95,456
Deferred tax asset 236,120 259,838
TOTAL ASSETS $ 17,382,531 $ 16,423,391
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable $ 1,080,255 $ 1,294,483
Accrued expenses 1,398,318 1,750,916
Customer deposits 1,916,784 1,166,541
Income taxes payable 202,188 53,567
Total current liabilities 4,597,545 4,265,507
Deferred tax liability 183,011 205,562
Long term debt, less current maturities - 1,001,640
Total liabilities 4,780,556 5,472,709
Stockholders’ Equity
Common stock, $.01 par value; 25,000,000 shares authorized, 15,531,285 and 15,452,656 shares issued and outstanding, respectively 155,313 154,527
Additional paid-in capital 9,104,925 9,064,994
Accumulated earnings 3,341,737 1,731,161
Total stockholders’ equity 12,601,975 10,950,682
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 17,382,531 $ 16,423,391
See notes to unaudited condensed consolidated financial statements. SONO-TEK CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Six Months Ended August 31, Three Months Ended August 31,
2021 2020 2021 2020
Net Sales $ 7,714,935 $ 6,909,185 $ 4,070,467 $ 3,480,641
Cost of Goods Sold 3,816,771 3,727,486 1,996,468 1,859,675
Gross Profit 3,898,164 3,181,699 2,073,999 1,620,966
Operating Expenses
Research and product development costs 826,213 834,940 412,397 423,516
Marketing and selling expenses 1,504,245 1,388,987 739,603 682,270
General and administrative costs 776,222 572,254 473,423 313,852
Total Operating Expenses 3,106,680 2,796,181 1,625,423 1,419,638
Operating Income 791,484 385,518 448,576 201,328
Interest Expense - (17,704 ) - (9,287 )
Interest and Dividend Income 11,000 25,483 7,640 2,837
Other Income - 19,519 - 8,084
Paycheck Protection Program Loan Forgiveness 1,005,372 - - -
Income Before Income Taxes 1,807,856 412,816 456,216 202,962
Income Tax Expense 197,280 67,125 112,392 25,199
Net Income $ 1,610,576 $ 345,691 $ 343,824 $ 177,763
Basic Earnings Per Share $ 0.10 $ 0.02 $ 0.02 $ 0.01
Diluted Earnings Per Share $ 0.10 $ 0.02 $ 0.02 $ 0.01
Weighted Average Shares - Basic 15,500,952 15,410,952 15,507,484 15,424,126
Weighted Average Shares - Diluted 15,613,930 15,530,910 15,602,359 15,533,010
See notes to unaudited condensed consolidated financial statements. SONO-TEK CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Unaudited
Six Months Ended August 31,
2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,610,576 $ 345,691
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization 224,233 214,280
Stock based compensation expense 40,717 16,003
Inventory reserve (24,919 ) 36,000
Paycheck Protection Program Loan Forgiveness (1,005,372) -
Deferred tax expense 1,167 -
Decrease (Increase) in:
Accounts receivable 275,468 (418,947)
Inventories (287,830 ) (116,157)
Prepaid expenses and other current assets 27,101 58,863
(Decrease) Increase in:
Accounts payable and accrued expenses (563,094 ) (250,099)
Customer deposits 750,243 (660,588)
Income taxes payable 148,622 (6,878)
Net Cash Provided by (Used in) Operating Activities 1,196,912 (781,832)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment, furnishings and leasehold improvements (147,230 ) (290,347 )
Capital expenditure grant proceeds - 100,000
Sale (purchase) of marketable securities 1,009,346 366,639
Net Cash Provided by Investing Activities 862,116 176,292
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable - 1,001,640
Repayment of long term debt - (84,040 )
Net Cash Provided by Financing Activities - 917,600
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,059,028 312,060
CASH AND CASH EQUIVALENTS
Beginning of period 4,084,078 3,659,551
End of period $ 6,143,106 $ 3,971,611
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ - $ 13,972
Income Taxes Paid $ 47,488 $ 74,004
See notes to unaudited condensed consolidated financial statements. SONO-TEK CORPORATION ADDITIONAL INFORMATION -- PRODUCT, MARKET AND GEOGRAPHIC SALES (unaudited) Product Sales
Three Months Ended August 31, Change Six Months Ended August 31, Change
2021 2020 $ % 2021 2020 $ %
Fluxing Systems $ 117,000 $ 94,000 23,000 24% $ 476,000 $ 438,000 38,000 8%
Integrated Coating Systems 565,000 673,000 (108,000 ) (16% ) 720,000 1,849,000 (1,129,000) (61% )
Multi-Axis Coating Systems 1,891,000 1,985,000 (94,000 ) (5%) 3,970,000 2,898,000 1,072,000 37%
OEM Systems 845,000 232,000 613,000 264% 1,171,000 654,000 517,000 79%
Other 652,000 497,000 155,000 31% 1,378,000 1,070,000 308,000 29%
TOTAL $ 4,070,000 $ 3,481,000 589,000 17% $ 7,715,000 $ 6,909,000 806,000 12%
Market Sales
Three Months Ended August 31, Change Six Months Ended August 31, Change
2021 2020 $ % 2021 2020 $ %
Electronics/Microelectronics $ 1,448,000 $ 811,000 637,000 79% $ 3,707,000 $ 3,051,000 656,000 22%
Medical 1,097,000 961,000 136,000 14% 1,814,000 1,653,000 161,000 ) 10%
Alternative Energy 957,000 826,000 131,000 16% 1,389,000 1,221,000 168,000 14%
Emerging R&D and Other 269,000 479,000 (210,000) (43% ) 435,000 516,000 (81,000 ) (16%)
Industrial 299,000 404,000 (105,000) (26%) 370,000 468,000 (98,000) (21% )
TOTAL $ 4,070,000 $ 3,481,000 589,000 17% $ 7,715,000 $ 6,909,000 806,000 12%
Geographic Sales
Three Months Ended August 31, Change Six Months Ended August 31, Change
2021 2020 $ % 2021 2020 $ %
U.S. & Canada $ 1,553,000 $ 2,156,000 (603,000) (28% ) $ 2,781,000 $ 2,911,000 (130,000) (4% )
Asia Pacific (APAC) 1,631,000 455,000 1,176,000 258% 2,853,000 2,377,000 476,000 20%
Europe, Middle East, Asia (EMEA) 593,000 767,000 (174,000 ) (23% ) 1,436,000 1,198,000 238,000 20%
Latin America 293,000 103,000 190,000 184% 645,000 423,000 222,000 52%
TOTAL $ 4,070,000 $ 3,481,000 589,000 17% $ 7,715,000 $ 6,909,000 806,000 12%