Sono-Tek Sales Grew 5% to $2.82 million in First Quarter Fiscal 2020 with Continued Record Backlog
MILTON, N.Y., July 15, 2019 /PRNewswire/ -- Sono-Tek Corporation (OTCQX: SOTK) the leading developer and manufacturer of ultrasonic coating systems, today reported financial results for its first quarter ended May 31, 2019 ("fiscal 2020").
"The first quarter of FY2020 showed the expected 5% revenue growth, along with a profitable bottom line. More importantly, we continued to invest in upfront resources in Sales and Marketing, which includes Application Engineering personnel. Application Engineering has become an essential element in our growth strategy of pursuing larger, more complex ultrasonic coating systems. These orders increase our average revenue per order.
We experienced significant growth in larger Multi-Axis coating systems this quarter, along with increases in orders of Fluxing Systems and Integrated Coating Systems. We also experienced large increases in the Electronics/Microelectronics, Alternative Energy, and Emerging R&D market areas. Globally, we had increases in the US and Canada and Latin America geographies, which more than offset reductions in the Asia Pacific markets. For the first quarter of fiscal 2020, 44% of our sales originated in the US and Canada compared to 37% last year.
Due to the record increase in our orders and backlog this quarter, we are expecting second quarter revenues to increase by 15-20% over last year. Furthermore, our current expectation is to see similar growth in the balance of the Fiscal Year," commented Dr. Christopher L. Coccio, Chairman and CEO.
First Quarter Fiscal 2020 Review
Three Months Ended May 31,
Change
2019 2018
$
%
Net Sales $2,822,000 $2,701,000 121,000 4.5%
Gross Profit 1,305,000 1,271,000 34,000 2.7%
Gross Margin 46.2% 47.1%
Operating Income $5,000 $32,000 (27,000) (84%)
Operating Margin 0.2% 1.2%
Net Income $25,000 $21,000 4,000 19%
Net Margin 0.9% 0.8%
Basic Earnings Per Share $0.00 $0.00
Diluted Earnings Per Share $0.00 $0.00
Weighted Average Shares -Basic 15,268,000 14,988,000
Weighted Average Shares - Diluted 15,357,000 15,089,000
The Company's net sales growth was driven by a combination of increases in the Electronics/Microelectronics market (up 16%), the Alternative Energy market (up 118%), and the Emerging R&D market (up 68%). The Company's strategy of providing paid coating services as a part of our Application Engineering services in addition to its coating equipment, is clearly benefitting revenues.
From a product sales perspective, Fluxing Systems demand increased 15%, Integrated Coating Systems demand increased 13%, and Multi-Axis Coating System demand increased 24%. Quarterly demand and revenue in any of the Market or Product baskets typically varies due to the size and timing of orders, so the multi-quarter totals at year-end are often more significant, reflecting overall Market and Product trends.
See the accompanying tables at the end of this release for a breakout of sales by Market and Product.
In the first quarter of fiscal 2020, approximately 56% of sales originated outside of the United States and Canada compared with 63% in the prior-year period. As expected, the geographic shift reflects higher sales to U.S. markets supported by strong economic growth here combined with a decrease in APAC as the Chinese trade situation is sorted out.
The change in product mix resulted in a slightly lower gross margin of 46.2%, and we increased our net income by 18% to $25,000 this quarter. We expect our income to rise considerably as we proceed through the year, due to the increasing backlog and growth in orders with associated leverage on our operating costs.
Balance Sheet and Cash Flow Overview
Cash and cash equivalents and short-term investments at quarter-end were $5.7 million, up from $5.5 million at the end of fiscal 2019. The increase was the result of the timing of working capital requirements primarily due to an increase in accounts payable and customer deposits partially offset by an increase in inventories.
Net cash provided by operating activities was $362,000 in the first quarter of fiscal 2020 compared with using $374,000 in the prior fiscal year period. Capital expenditures in the first quarter of fiscal 2020 were $129,000 compared with $101,000 in the prior fiscal year period.
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
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; timely development and market acceptance of new products and paid coating services; adequacy of financing; capacity additions; the ability to enforce patents; maintenance of operating leverage; continued reduction in inventory requirements; maintenance of order backlog; consummation of order proposals; continued sales growth in the Electronics/Microelectronics, Alternative Energy, and Emerging R&D market areas; and the ability to achieve increased sales volume at projected levels and continued profitability. 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
FINANCIAL TABLES FOLLOW
SONO-TEK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended May 31,
2019 2018
Net Sales $2,822,428 $2,700,860
Cost of Goods Sold 1,517,493 1,429,663
Gross Profit 1,304,935 1,271,197
Operating Expenses
Research and product development costs 337,173 333,866
Marketing and selling expenses 677,412 629,788
General and administrative costs 285,813 275,392
Total Operating Expenses 1,300,398 1,239,046
Operating Income 4,537 32,151
Interest Expense (8,947) (10,614)
Interest and Dividend Income 31,171 34,606
Realized gain on sale of marketable securities - 29,392
Net unrealized loss on marketable securities - (49,061)
Other income 4,755 2,520
Income Before Income Taxes 31,516 38,994
Income Tax Expense 6,303 17,564
Net Income $25,213 $21,430
Basic Earnings Per Share $0.00 $0.00
Diluted Earnings Per Share $0.00 $0.00
Weighted Average Shares - Basic 15,268,071 14,987,613
===
Weighted Average Shares - Diluted 15,357,295 15,088,512
SONO-TEK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
May 31,
2019
February 28,
(Unaudited) 2019
---
ASSETS
Current Assets:
Cash and cash equivalents $1,922,886 $3,144,123
Marketable securities 3,779,187 2,365,706
Accounts receivable (less allowance of $46,000) 1,332,353 1,397,891
Inventories, net 2,378,720 1,658,016
Prepaid expenses and other current assets 105,013 395,005
Total current assets 9,518,159 8,960,741
Land 250,000 250,000
Buildings, net 1,712,123 1,731,547
Equipment, furnishings and building improvements, net 866,471 802,932
Intangible assets, net 118,778 122,941
Deferred tax asset 332,017 332,017
TOTAL ASSETS $12,797,548 $12,200,178
===
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $1,013,961 $585,694
Accrued expenses 614,518 632,706
Customer deposits 1,334,306 1,149,558
Current portion of long term debt 164,410 162,816
Income taxes payable 12,575 6,272
Total current liabilities 3,139,770 2,537,046
Deferred tax liability 370,757 370,757
Long term debt, less current maturities 665,838 707,715
Total liabilities 4,176,365 3,615,518
Stockholders' Equity
Common stock, $.01 par value; 25,000,000 shares authorized, 153,016 151,976
15,301,613 and 15,197,563 shares issued and outstanding,
respectively
Additional paid-in capital 8,939,877 8,929,607
Accumulated deficit (471,710) (496,923)
Total stockholders' equity 8,621,183 8,584,660
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $12,797,548 $12,200,178
===
SONO-TEK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended May 31,
2019 2018
---
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $25,213 $21,430
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 89,207 80,893
Stock based compensation expense 11,310 8,900
Inventory reserve 14,000 18,000
Unrealized loss on marketable securities 49,061
Decrease (Increase) in:
Accounts receivable 65,538 (198,504)
Inventories (734,704) (89,372)
Prepaid expenses and other current assets 289,992 4,773
(Decrease) Increase in:
Accounts payable and accrued expenses 410,079 (290,133)
Customer Deposits 184,748 2,895
Income taxes payable 6,303 17,564
---
Net Cash Provided By (Used In) Operating Activities 361,686 (374,493)
---
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and furnishings (129,159) (101,634)
Sale (Purchase) of marketable securities (1,413,481) 40,093
---
Net Cash (Used In) Investing Activities (1,542,640) (61,541)
---
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (40,283) (38,678)
Net Cash (Used In) Financing Activities (40,283) (38,678)
---
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (1,221,237) (474,712)
CASH AND CASH EQUIVALENTS
Beginning of period 3,144,123 2,016,464
---
End of period $1,922,886 $1,541,752
===
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $8,947 $10,614
===
Taxes Paid
$-
$-
SONO-TEK CORPORATION
ADDITIONAL INFORMATION - MARKET AND PRODUCT SALES
(Unaudited)
Market Sales:
Three Months Ended May 31,
Change
---
2019 % of total 2018 % of total
$ %
---
Electronics/Microelectronics $1,538,000 55% $1,329,000 49% 209,000 16%
Medical 543,000 19% 912,000 34% (369,000) (40%)
Alternative Energy 386,000 14% 177,000 7% 209,000 118%
Emerging R&D and Other 285,000 10% 170,000 7% 115,000 68%
Industrial 70,000 2% 113,000 4% (43,000) (38%)
---
TOTAL $2,822,000 $2,701,000 $121,000 4%
--- ---
Product Sales:
Three Months Ended May 31, Change
2019 % of total 2018 % of total
$ %
---
Fluxing Systems $391,000 14% $340,000 13% 51,000 15%
Integrated Coating Systems 396,000 14% 349,000 13% 47,000 13%
Multi-Axis Coating Systems 1,073,000 38% 862,000 32% 211,000 24%
OEM Systems 319,000 11% 451,000 16% (132,000) (29%)
Other 643,000 23% 699,000 26% (56,000) (8%)
TOTAL $2,822,000 $2,701,000 $121,000 4%
--- ---
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SOURCE Sono-Tek Corporation
