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

MILTON, NY - (NewMediaWire) - October 13, 2021 - 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)

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

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

See notes to unaudited condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

See notes to unaudited condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

See notes to unaudited condensed consolidated financial statements.

SONO-TEK CORPORATION 
ADDITIONAL INFORMATION -- PRODUCT, MARKET AND GEOGRAPHIC SALES
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