Sales of $4.05M, up 11% and Gross Profit of $2.11M, up 16% Year-over-Year
MILTON, NY - 
(NewMediaWire) - July 18, 2022 - 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)
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
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