Sono-Tek Reports Increased Sales and Operating Income for First Quarter Fiscal 2023 and Provides Second Quarter and Fiscal 2023 Sales Guidance

Sales of $4.05M, up 11% and Gross Profit of $2.11M, up 16% Year-over-Year

MILTON, NY, July 18, 2022 (GLOBE NEWSWIRE) -- via NewMediaWire – Sono-Tek Corporation (Nasdaq: SOTK), the leading developer and manufacturer of ultrasonic coating systems, today reported financial results for its first quarter period of fiscal year 2023, ended May 31, 2022.

First Quarter FY2023 Financial Highlights: 
(Compared with prior-year period unless otherwise noted) 

• Net Sales were $4,052,000, an increase of 11%, primarily driven by strength in the medical, alternative energy and emerging R&D markets.
• Gross Profit increased 16% to $2,107,000 due to the increase in sales and a favorable product mix.
• Gross Margin expanded 200 basis points to 52.0% primarily due to a favorable product mix.
• Net income increased 17% to $306,000, excluding PPP Loan forgiveness of $1,005,000 in the prior year period.
• As of May 31, 2022, Sono-Tek had $11.1 million in cash, cash equivalents and marketable securities and no outstanding debt.
• Backlog at May 31, 2022 was $4.2 million, even with the prior year’s quarter, and down from $5.3 million at February 28, 2022, the end of Sono-Tek’s last fiscal year.  The decrease reflects the shipments of $2.2 million of orders during the first quarter that were included in backlog at February 28, 2022.
• Sono-Tek continues to expect another record for revenue in fiscal year 2023, ending February 28, 2023, barring significant changes in the economic environment. 

Dr. Christopher L. Coccio, Chairman and CEO, commented, “In the first quarter of fiscal 2023 Sono-Tek’s net sales increased 11% driven by strong demand from our key target markets of semiconductors, medical and alternative energy. In the medical market, sales more than doubled year-over-year and accounted for 41% of the first quarter’s total sales. These sales, to four separate medical-related customers, demonstrate the wide applicability of our ultrasonic coating systems with applications that range across implantable medical textiles, orthodontic devices, glucose monitoring implants, and implantable cardiac devices. A favorable sales mix and the higher revenue resulted in strong profitability in the quarter and a 52% gross profit margin, one of our highest ever. Operating expenses were also higher reflecting increased investments in research and product development directed at our focused growth initiatives, as well as increased non-cash stock-based compensation resulting from the record fiscal year that we completed in February.”

“Backlog at quarter end was $4.2 million, level with the prior year’s quarter and compared to $5.3 million at February 28, 2022, the end of our fiscal year. During the first quarter we shipped $2.2 million of orders that were previously counted in backlog and added significant new orders, which can be seen in our customer deposits that increased 43% to $1,665,000 during the quarter.  Inventories increased 22% since the fiscal yearend at February 28, 2022, to $2.9 million.  The increase is due in part to higher stores of raw materials, a decision we made in order to shield the Company from any potential supply chain issues. “ 

“At this time, sales growth guidance for the second quarter of fiscal year 2023, ending August 31, 2022, is for a similar sales level as the second quarter of last year as some customers have delayed project approvals due to uncertainty over their supply chains. However, the Company’s development labs have been experiencing a significant increase in customer visits to explore new applications as customers return to traveling post-Covid, a positive indicator of potential future business, and we continue to plan for another record in annual sales for fiscal year 2023, ending February 28, 2023,” concluded Dr. Coccio.

First Quarter Fiscal 2023 Results (Results compared with the first quarter of fiscal 2022)

			Three Months Ended May 31,				Change
				2022		2021		$	%
	Net Sales		$	4,052,000	$	3,644,000		408,000	11%
	Gross Profit			2,107,000		1,824,000		283,000	16%
	Gross Margin			52.0%		50.0%
	Operating Income		$	381,000	$	343,000		38,000	11%
	Operating Margin			9.4%		9.4%
	Net Income		$	306,000	$	1,267,000		(961,000)	(76%)
	Net Margin			7.6%		34.8%
	Basic Earnings Per Share			$0.02		$0.08
	Diluted Earnings Per Share			$0.02		$0.08
	Weighted Average Shares -Basic			15,729,000		15,494,000
	Weighted Average Shares - Diluted			15,752,000		15,664,000

First Quarter FY2023 Financial Overview

Net Sales were $4,052,000, a year-over-year increase of 11%, primarily driven by strong demand for Sono-Tek’s OEM systems used in the electronics, medical, and alternative energy industries.  In addition, a major customer using Sono-Tek stent coating systems upgraded all of its machines to the latest atomization technology, which are classified in the Spare Parts, Services and Other category in the product sales table.

By market, four significant customers from the medical market basket drove 133% year-over-year growth and accounted for 41% of the Company’s total sales in the first quarter.  These medical device coating machine applications include implantable medical textiles, orthodontic devices, glucose monitoring implants, and implantable cardiac devices. The alternative energy market basket recorded 41% year-over-year growth with continued strong sales to the clean energy sector.  The Industrial market basket grew by 292% which was positively impacted by the first of seven machines shipped to a customer during the first quarter; the remaining six machines are planned to ship in the second half of fiscal year 2023.  

In the first quarter of fiscal 2023, approximately 52% of sales originated outside of the United States and Canada compared with 66% in the prior year period. The shift in geographic mix was positively impacted by the installation of Sono-Tek equipment in the operations of several large U.S.-based medical companies.

Backlog at May 31, 2022 was $4,200,000, even with May 31, 2021, and compared to $5,300,000 at February 28, 2022, the end of Sono-Tek’s last fiscal year.  The decrease reflects the shipments of $2,200,000 of orders during the first quarter that were included in the backlog at February 28, 2022. Orders can be highly variable from quarter to quarter resulting in large fluctuations in backlog, as Sono-Tek’s growing proportion of larger product shipments are now more systematically managed for both customer timing requirements and staffing management. Customer deposits increased 43% to $1,665,000 at May 31, 2022 from $1,168,000 at February 28, 2022, reflecting new orders that were received in the first quarter. 

Gross profit increased 16% to $2,107,000 for the first quarter of fiscal year 2023 compared with $1,824,000 for the first quarter of fiscal year 2022.  The gross profit margin increased by 200 basis points, reaching 52.0% compared to 50.0% for the comparable period.  The improvement is due to the increase in sales and a favorable sales mix.

Operating expenses increased by 17% to $1,726,000. Research and product development costs increased by 25% to $517,000 due to increased salaries, materials, and supplies, which are directed at the Company’s focused growth initiatives, including the Roll-to-Roll coating initiative. Marketing and selling expenses increased by 3% to $790,000, primarily due to the resumption of trade shows and associated travel expenses. General and administrative expenses increased by 39% to $420,000 primarily due to higher professional fees and corporate expenses resulting from the Company’s listing on the Nasdaq Capital Market in August 2021, as well as higher stock-based compensation expense from option awards that were issued in the prior fiscal year, which are expensed over three years based on vesting.  

Operating income increased 11% to $381,000 compared with $343,000 for the first quarter last year, primarily due to the growth in revenue and gross profit offset by the increase in operating expenses.  The operating margin for both periods was 9.4%. 

Net income increased 17% to $306,000, or $0.02 per share, compared to $261,000, or $0.02 per share, in the first quarter of fiscal 2022, which excludes PPP Loan forgiveness of $1,005,000 in the prior year period. Diluted weighted average shares outstanding were 15,752,424 compared to 15,663,772 for the prior year period.

Balance Sheet and Cash Flow Overview

Cash, cash equivalents and marketable securities at May 31, 2022 were $11.1 million, an increase of $0.4 million from February 28, 2022, the end of fiscal year 2022. At May 31, 2022, Sono-Tek had no debt on its balance sheet and stockholders’ equity totaled $14.1 million.

Capital expenditures in the first quarter were $54,000 which were invested in ongoing upgrades to the Company’s manufacturing facilities. Sono-Tek anticipates capital expenditures will total approximately $300,000 - $350,000 in fiscal year 2023.

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 thin film coating technologies that enable better outcomes for its customers’ products and processes.  For further information, visit www.sono-tek.com.

Safe Harbor Statement

This news release contains forward-looking statements regarding future events and the future performance of Sono-Tek Corporation that involve risks and uncertainties that could cause actual results to differ materially. 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, including inflationary pressures; 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; further adverse effects to our supply chain and the related build-up of inventory; 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, including effects of any COVID-19 related cancellations; consummation of order proposals; completion of large orders on schedule and on budget; continued sales growth in the medical and alternative energy markets; 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 the forecasted range of sales guidance. We undertake no obligation to update any forward-looking statement.

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
				May 31, 2022			February 28,
				(Unaudited)			2022
		ASSETS
Current Assets:
	Cash and cash equivalents		$	7,675,112		$	4,840,558
	Marketable securities			3,398,931			5,867,990
	Accounts receivable (less allowance of $56,123)			1,486,371			1,092,505
	Inventories, net			2,893,196			2,373,242
	Prepaid expenses and other current assets			206,885			323,304
		Total current assets		15,660,495			14,497,599
Land				250,000			250,000
Buildings, net				1,607,814			1,621,878
Equipment, furnishings and leasehold improvements, net				904,827			939,306
Intangible assets, net				71,249			76,015
Deferred tax asset				255,412			240,736
TOTAL ASSETS			$	18,749,797		$	17,625,534
		LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
	Accounts payable		$	983,130		$	684,511
	Accrued expenses			1,688,372			1,804,028
	Customer deposits			1,665,136			1,167,968
	Income taxes payable			129,626			58,874
		Total current liabilities		4,466,264			3,715,381
Deferred tax liability				167,215			168,840
	Total Liabilities			4,633,479			3,884,221
Stockholders’ Equity
	Common stock, $.01 par value; 25,000,000 shares authorized, 15,729,175
	and 15,729,175 issued and outstanding, respectively			157,292			157,292
	Additional paid-in capital			9,379,656			9,310,287
	Accumulated earnings			4,579,370			4,273,734
Total stockholders’ equity				14,116,318			13,741,313
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			$	18,749,797		$	17,625,534

SONO-TEK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
			Three Months Ended May 31,
			2022				2021
Net Sales			$	4,051,535			$	3,644,468
Cost of Goods Sold				1,944,522				1,820,303
		Gross Profit		2,107,013				1,824,165
Operating Expenses
	Research and product development			516,633				413,816
	Marketing and selling			789,862				764,642
	General and administrative			419,993				302,799
		Total Operating Expenses		1,726,488				1,481,257
Operating Income				380,525				342,908
Interest and Dividend Income				7,415				3,360
Net unrealized loss on marketable securities				(11,853	)			—
Paycheck Protection Program Loan Forgiveness				—				1,005,372
Income before Income Taxes				376,087				1,351,640
Income Tax Expense				70,451				84,888
Net Income			$	305,636			$	1,266,752
Basic Earnings Per Share			$	0.02			$	0.08
Diluted Earnings Per Share			$	0.02			$	0.08
Weighted Average Shares – Basic				15,729,175				15,494,421
Weighted Average Shares – Diluted				15,752,424				15,663,772

SONO-TEK CORPORATION PRODUCT, MARKET, AND GEOGRAPHIC SALES (Unaudited)
Product Sales:
		Three Months Ended May 31,															Change
			2022			% of total				2021			% of total				$			%
Fluxing Systems		$	309,000			8	%		$	358,000			10	%		$	(49,000	)		-14	%
Integrated Coating Systems			168,000			4	%			155,000			4	%			13,000			8	%
Multi-Axis Coating Systems			1,979,000			49	%			2,079,000			57	%			(100,000	)		-5	%
OEM Systems			554,000			14	%			326,000			9	%			228,000			70	%
Spare Parts, Services and Other			1,042,000			25	%			726,000			20	%			316,000			44	%
TOTAL		$	4,052,000						$	3,644,000						$	408,000			11	%
Market Sales:
		Three Months Ended May 31,															Change
			2022			% of total				2021			% of total				$			%
Electronics/Microelectronics		$	1,287,000			32	%		$	2,258,000			62	%		$	(971,000	)		-43	%
Medical			1,675,000			41	%			717,000			20	%			958,000			134	%
Alternative Energy			609,000			15	%			432,000			12	%			177,000			41	%
Emerging R&D and Other			203,000			5	%			166,000			9	%			37,000			22	%
Industrial			278,000			7	%			71,000			2	%			207,000			292	%
TOTAL		$	4,052,000						$	3,644,000						$	408,000			11	%
Geographic Sales:
		Three Months Ended								Change
		May 31,
			2022			2021				$			%
U.S. & Canada		$	1,938,000		$	1,228,000			$	710,000			58	%
Asia Pacific (APAC)			706,000			1,222,000				(516,000	)		-42	%
Europe, Middle East, Asia (EMEA)			990,000			842,000				148,000			18	%
Latin America			418,000			352,000				66,000			19	%
TOTAL		$	4,052,000		$	3,644,000			$	408,000			11	%