U.S. Markets open in 4 hrs 49 mins

Sono-Tek Reports Increased Sales and Strong Backlog for Third Quarter Fiscal 2021 and Provides Sales Guidance

  • Oops!
    Something went wrong.
    Please try again later.
·14 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

Sales of $3.83M, Up 4% Year-over-Year; Backlog up 29% from FYE February 29, 2020

MILTON, N.Y., Jan. 15, 2021 (GLOBE NEWSWIRE) -- via NewMediaWire -- Sono-Tek Corporation (OTCQX: SOTK), the leading developer and manufacturer of ultrasonic coating systems, today reported financial results for its fiscal 2021 third quarter and year-to-date period ended November 30, 2020.

Third Quarter Fiscal 2021 Financial Highlights:

  • Sales of $3.83 million, an increase of $155k compared to third quarter FY2020.

  • Increased backlog to $4.55 million versus $3.52 million on February 29, 2020.

  • Gross margin of 50.5% compared to 48.9% in third quarter FY2020.

  • Net income of $320,000 versus $280,000 for third quarter FY2020, a 14% increase.

  • Sales Growth Guidance for the remaining quarter of FY2021 is for a 5-10% sequential increase from Q3.

Dr. Christopher L. Coccio, Chairman and CEO, commented, “Sono-Tek had a good third quarter with sales and net income growth despite the impact of Covid-19 on our customers. This was the third consecutive quarter of sales increases and strong performances in backlog, margins, and net income, which were achieved against the backdrop of a difficult global environment. These gains stem from the strategic shift in our business model that we initiated several years ago, expanding our product line to provide higher value complete machine solutions and larger subsystems to original equipment manufacturers (“OEMs”). These product advancements are supported by a high level of application engineering expertise from our specialized staff, in combination with customer requirements that are proven out in our globally located process development labs. We have also invested significant resources to enhance our market diversity.”

Year-to-Date Fiscal 2021 Results (Narrative compares with prior-year period unless otherwise noted)

Nine Months Ended November 30,

Change

2020

2019

$

%

Net Sales

$ 10,736,000

$ 9,841,000

895,000

9%

Gross Profit

5,112,000

4,649,000

463,000

10%

Gross Margin

47.6%

47.2%

Operating Income

$ 832,000

$ 367,000

465,000

127%

Operating Margin

7.8%

3.7%

Net Income

$ 666,000

$ 420,000

246,000

59%

Net Margin

6.2%

4.3%

Diluted Earnings Per Share

$ 0.04

$ 0.03

Weighted Average Shares - Diluted

15,548,000

15,354,000

Third Quarter Fiscal 2021 Results (Narrative compares with prior-year period unless otherwise noted)

Three Months Ended November 30,

Change

2020

2019

$

%

Net Sales

$ 3,827,000

$ 3,672,000

155,000

4%

Gross Profit

1,931,000

1,797,000

134,000

7%

Gross Margin

50.5%

48.9%

Operating Income

$ 447,000

$ 270,000

177,000

66%

Operating Margin

11.7%

7.4%

Net Income

$ 320,000

$ 280,000

40,000

14%

Net Margin

8.4%

7.6%

Diluted Earnings Per Share

$0.02

$0.02

Weighted Average Shares - Diluted

15,583,000

15,372,000

Third Quarter FY2021 Financial Overview

For the third quarter of fiscal 2021, net sales were $3,827,000, an increase of 4%, or $155,000, compared to the third quarter of fiscal 2020. These results were primarily driven by increased sales of our integrated coating systems to the Industrial market segment, and for subsystems to our OEM segment. In the Industrial segment, we shipped a $463,000 system to the textile industry in the Europe-Middle East-Asia geography, as part of a $1.6 million combined order announced earlier in fiscal 2021. The remaining balance of this order is scheduled to ship at the end of Q4 FY2021, or early in Q1 FY2022, depending on manufacturing load. In the third quarter of fiscal 2021, approximately 70% of sales originated outside of the United States and Canada, compared with 65% in the prior year period.

Backlog on November 30, 2020 was $4,549,000, an increase of 29%, compared with backlog of $3,517,000 on February 29, 2020.

Gross profit margin was 50.5%, compared with 48.9% in the prior year period, an expansion of 160 basis points. The improvement in the gross profit margin is primarily due to the change in product mix this quarter, which typically can cause minor variations depending on actual shipments.

Net income for the third quarter was $320,000, or $0.02 per share, compared with net income of $280,000, or $0.02 per share, for the prior year period. Diluted weighted average shares outstanding totaled 15,583,000 compared to 15,372,000 for the prior year period.

Fiscal Year 2021 Outlook

“We expect that a significant portion of our $4.55 million backlog will ship during the current fiscal year ending February 28, 2021, assuming customer acceptance test schedules for some of the more complex and customized equipment orders. Therefore, based on this existing backlog, we expect that net sales will increase 5% to 10% for the fourth quarter versus the third quarter of FY2021. This will result in flat to slightly lower total net sales for the current fiscal year compared to the fiscal year ended February 29, 2020, primarily due to the sales impact from the shipment of our single largest order in Q4 of last year.”

“Overall, it has been an unexpectedly successful year, considering all the impacts and uncertainties introduced into the global economy by the Covid-19 pandemic, which struck at the start of our Fiscal Year in March 2020. We are very appreciative of the excellent work done by our entire team as we shifted to virtual work wherever possible in order to limit Covid exposure,” concluded Dr. Coccio.

Balance Sheet and Cash Flow Overview

Cash and cash equivalents and short-term investments at quarter-end were $9.2 million, an increase of $1.4 million from February 29, 2020, the end of fiscal year 2020. The increase was the result of the current period’s net income and noncash charges as well as the proceeds of a long term note payable partially offset by the purchases of equipment and the repayment of long term debt.

Year-to-date capital expenditures were $327,000 compared with $392,000 in the prior-year period. The fiscal 2021 expenditures do not reflect $100,000 in grant proceeds received during the second quarter. The current period’s capital expenditures are for ongoing upgrades to the Company’s manufacturing facilities. Sono-Tek anticipates total capital expenditures to be approximately $0.4 million to $0.5 million in fiscal 2021.

At November 30, 2020, the Company had total debt of $1.6 million, comprised of $1.0 million in a PPP loan under the CARES Act and $581,000 in mortgage debt on the Company’s industrial park complex that accrued annual interest at a rate of 4.15%. In December 2020, the Company paid off its mortgage debt in its entirety.

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 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; the recovery of the Electronics/ Microelectronics and Medical markets following COVID-19 related slowdowns; the forgiveness of our PPP loan; 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; 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. 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

SONO-TEK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS

November 30,

2020

February 29,

(Unaudited)

2020

ASSETS

Current Assets:

Cash and cash equivalents

$

6,014,009

$

3,659,551

Marketable securities

3,225,516

4,219,240

Accounts receivable (less allowance of $56,000 and $71,000, respectively)

1,673,983

929,701

Inventories, net

2,447,102

2,381,891

Prepaid expenses and other current assets

126,627

153,698

Total current assets

13,487,237

11,344,081

Land

250,000

250,000

Buildings, net

1,594,205

1,654,061

Equipment, furnishings and building improvements, net

1,162,009

1,212,578

Intangible assets, net

93,852

106,291

Deferred tax asset

223,192

176,314

TOTAL ASSETS

$

16,810,495

$

14,743,325

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

Accounts payable

$

917,829

$

668,721

Accrued expenses

1,557,618

1,613,409

Customer deposits

1,782,113

1,648,690

Current maturities of long term debt

895,713

169,716

Income taxes payable

285,346

70,621

Total current liabilities

5,438,619

4,171,157

Deferred tax liability

209,335

251,761

Long term debt, less current maturities

686,992

538,000

Total liabilities

6,334,946

4,960,918

Commitments and Contingencies (Note 10)

Stockholders’ Equity

Common stock, $.01 par value; 25,000,000 shares authorized, 15,445,594 and 15,348,180 shares issued and outstanding, at November 30 and February 29, respectively

154,456

153,482

Additional paid-in capital

9,044,405

9,018,406

Retained earnings

1,276,688

610,519

Total stockholders’ equity

10,475,549

9,782,407

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

16,810,495

$

14,743,325

See notes to unaudited condensed consolidated financial statements.

SONO-TEK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

Nine Months Ended
November 30,

Three Months Ended
November 30,

2020

2019

2020

2019

Net Sales

$

10,736,327

$

9,840,536

$

3,827,142

$

3,672,286

Cost of Goods Sold

5,624,002

5,191,929

1,896,516

1,875,606

Gross Profit

5,112,325

4,648,607

1,930,626

1,796,680

Operating Expenses

Research and product development costs

1,241,739

1,020,299

406,799

361,429

Marketing and selling expenses

2,154,956

2,326,115

765,969

849,419

General and administrative costs

883,384

935,693

311,130

316,218

Total Operating Expenses

4,280,079

4,282,107

1,483,898

1,527,066

Operating Income

832,246

366,500

446,728

269,614

Interest Expense

(23,949

)

(25,465

)

(6,245

)

(8,000

)

Interest and Dividend Income

26,953

77,496

1,470

20,513

Other income

30,343

24,404

10,824

7,527

Income Before Income Taxes

865,593

442,935

452,777

289,654

Income Tax Expense

199,424

23,303

132,299

10,000

Net Income

$

666,169

$

419,632

$

320,478

$

279,654

Basic Earnings Per Share

$

0.04

$

0.03

$

0.02

$

0.02

Diluted Earnings Per Share

$

0.04

$

0.03

$

0.02

$

0.02

Weighted Average Shares - Basic

15,420,787

15,291,968

15,440,673

15,306,008

Weighted Average Shares - Diluted

15,547,604

15,354,472

15,583,089

15,371,819

See notes to unaudited condensed consolidated financial statements.


SONO-TEK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Nine Months Ended
November 30,

2020

2019

CASH FLOWS FROM OPERATING ACTIVITIES:

Net Income

$

666,169

$

419,632

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

350,043

290,203

Stock based compensation expense

26,973

81,634

Inventory reserve

54,000

50,000

Deferred tax benefit

(89,304

)

Decrease (Increase) in:

Accounts receivable

(744,282

)

59,571

Inventories

(119,211

)

(1,370,764

)

Prepaid expenses and other current assets

27,071

201,453

Increase in:

Accounts payable and accrued expenses

193,317

469,026

Customer Deposits

133,423

804,268

Income taxes payable

214,725

18,472

Net Cash Provided By Operating Activities

712,924

1,023,495

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of equipment and furnishings

(327,180

)

(392,346

)

Capital expenditure grant proceeds

100,000

Sale (purchase) of marketable securities, net

993,724

(1,374,229

)

Net Cash Provided By (Used In) Investing Activities

766,544

(1,766,575

)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from note payable - bank

1,001,640

Repayment of long term debt

(126,650

)

(121,537

)

Net Cash Provided By (Used In) Financing Activities

874,990

(121,537

)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

2,354,458

(864,617

)

CASH AND CASH EQUIVALENTS

Beginning of period

3,659,551

3,144,123

End of period

$

6,014,009

$

2,279,506

SUPPLEMENTAL CASH FLOW DISCLOSURE:

Interest paid

$

20,573

$

25,465

Income Taxes Paid

$

74,004

$

4,831

See notes to unaudited condensed consolidated financial statements.

SONO-TEK CORPORATION
PRODUCT AND MARKET SALES
(Unaudited)

Product Sales:

Three Months Ended
November 30,

Change

Nine Months Ended
November 30,

Change

2020

2019

$

%

2020

2019

$

%

Fluxing Systems

$

242,000

$

261,000

$

(19,000

)

(7%

)

$

680,000

$

863,000

$

(183,000

)

(21%

)

Integrated Coating Systems

1,071,000

628,000

443,000

71%

2,920,000

1,438,000

1,482,000

103%

Multi-Axis Coating Systems

1,249,000

1,631,000

(382,000

)

(23%

)

4,147,000

4,519,000

(372,000

)

(8%

)

OEM Systems

523,000

400,000

123,000

31%

1,177,000

965,000

212,000

22%

Other

742,000

752,000

(10,000

)

(1%

)

1,812,000

2,056,000

(244,000

)

(12%

)

TOTAL

$

3,827,000

$

3,672,000

$

155,000

4%

$

10,736,000

$

9,841,000

$

895,000

9%

Market Sales:

Three Months Ended

Nine Months Ended

November 30,

Change

November 30,

Change

2020

2019

$

%

2020

2019

$

%

Electronics/Microelectronics

$

1,455,000

$

1,104,000

$

351,000

32%

$

4,504,000

$

4,017,000

$

487,000

12%

Medical

831,000

1,083,000

(252,000

)

(23%

)

2,484,000

2,875,000

(391,000

)

(14%

)

Alternative Energy

783,000

917,000

(134,000

)

(15%

)

2,004,000

1,527,000

477,000

31%

Emerging R&D and Other

207,000

252,000

(45,000

)

(18%

)

723,000

937,000

(214,000

)

(23%

)

Industrial

551,000

316,000

235,000

74%

1,021,000

485,000

536,000

111%

TOTAL

$

3,827,000

$

3,672,000

$

155,000

4%

$

10,736,000

$

9,841,000

$

895,000

9%