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

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%