SOTK Sono Tek Corporation

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. BagleyChief Financial OfficerSono-Tek Corporationinfo@sono-tek.com

Investor Relations:Stephanie PrincePCG Advisory(646) 863-6341sprince@pcgadvisory.com

Financial Tables Follow

SONO-TEK CORPORATIONCONDENSED 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 CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF INCOME(Unaudited)

		Six Months EndedAugust 31,								Three Months EndedAugust 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 CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)

		Unaudited
		Six Months EndedAugust 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%