GlobeNewswire Inc | Oct 14, 2020 04:15PM EDT

October 14, 2020

-- Second quarter revenues increased 4% to $3.48 million; second quarter gross margin was 46.6% versus 46.2% -- Second quarter net income increased 50% to $178,000 -- First half FY2021 sales of $6.9 million increased 12% year-over-year; net income of $346,000, more than doubled from the $140,000 reported in the prior year period -- Backlog increased 45% to $5.1 million from February 29, 2020 -- Second half of fiscal 2021, ending November 30, 2020, is expected to continue on the increasing sales trend experienced in the second quarter, as global industrial businesses continue to recover.

MILTON, N.Y., Oct. 14, 2020 (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 year 2021 second quarter and year-to-date period ended August 31, 2020.

Dr. Christopher L. Coccio, Chairman and CEO, commented, In the second quarter of FY2021, Sono-Tek recorded 4% revenue growth and a 50% increase in our bottom line compared to last years second quarter. The increase in net income reflects growth in revenue and gross profit as well as tight expense control and reductions. The Coronavirus has impacted some of our customers, particularly in the timing of orders, but we have been able to win orders in other areas to maintain some of our pre-Covid positive momentum, as demonstrated by the first half of the year 45% increase in backlog. We believe that our performance has been excellent given the uncertainties that most businesses have faced this year.

The growth in sales was driven by a significant shipment of an integrated coating system for the industrial market valued at $400k, plus a strong quarter for Multi-Axis coating machines sold to the Alternative Energy market, which combined to offset the slight decrease in sales of fluxing systems and other smaller units. The Alternative Energy market growth was driven by US companies interested in electrolyzer and fuel cell coating equipment, which is associated with carbon reduction energy supply. Our Medical business experienced a dip in revenue as several orders were put on hold due to COVID, but we are optimistic these will come back as various countries come back online, continued Dr. Coccio.

Our strategy to provide customers with a high level of application engineering support, in combination with large complex ultrasonic coating systems that are often highly customized, continues to cushion our business in these difficult times. For example, in July we announced a $1.5 million order for a highly engineered proprietary 6-axis ultrasonic coating system for an important European customer in the electronics industry. This order is among the largest orders that weve received in our history and is a direct result of the close collaboration between our engineers and the customer. These types of orders have increased in frequency over the past few years, and importantly, have increased our average revenue per order from tens of thousands of dollars to hundreds of thousands of dollars currently.

As a result of the increase in our backlog this quarter, we are expecting third quarter revenues to increase over the second quarter and for this trend to continue through the balance of the fiscal year, ending February 28, 2021. Sono-Teks flexibility in quickly refocusing its efforts to those countries that are operational has been helpful in softening the impact of the pandemic and will continue to be a part of our strategy for the foreseeable future, concluded Dr. Coccio.

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

Six Months Ended August 31, Change 2020 2019 $ %Net Sales $ 6,909,000 $ 6,168,000 741,000 12%Gross Profit 3,182,000 2,852,000 330,000 12% 46.1% 46.2% Gross MarginOperating Income $ 386,000 $ 97,000 289,000 298% 5.6% 1.6% Operating MarginNet Income $ 346,000 $ 140,000 206,000 147% 5.0% 2.3% Net MarginDiluted Earnings $ $ Per Share 0.02 0.01Weighted Average 15,531,000 15,377,000 Shares - Diluted

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

Three Months Ended August 31, Change 2020 2019 $ %Net Sales $ 3,481,000 $ 3,346,000 135,000 4%Gross Profit 1,621,000 1,547,000 74,000 5% Gross 46.6% 46.2% MarginOperating Income $ $ 109,000 118% 201,000 92,000 5.8% 2.8% Operating MarginNet Income $ $ 63,000 55% 178,000 115,000 Net 5.1% 3.4% MarginDiluted Earnings Per $0.01 $0.01 ShareWeighted Average Shares - 15,533,000 15,399,000 Diluted

Second Quarter FY2021 Review

Sales growth during the second quarter of fiscal 2021 was driven by a significant shipment of an integrated coating system for the Industrial Market valued at approximately $400,000, combined with a strong quarter for Multi-Axis coating systems sold to the Alternative Energy markets. The sales increase in these product lines more than offset the second quarters sales decrease in fluxing systems and in the Other product category.

From a product sales perspective, the Alternative Energy market showed significant growth, primarily driven by sales to US - based companies for electrolyzer coating equipment used for fuel cell manufacturing and advanced carbon emission reduction technology. The Company also recorded a strong quarter from the Industrial market resulting from the latest developed float glass coating platform shipping to a US - based customer. Quarterly demand and revenue in any of the Market or Product baskets typically varies due to the size and timing of orders, as a result, the multi-quarter totals at year-end are often more significant than reported in individual quarters, reflecting overall Market and Product trends.

In the second quarter of fiscal 2021, approximately 38% of sales originated outside of the United States and Canada compared with 72% in the prior-year period. The decrease in sales originating outside the US and Canada was influenced by the COVID-19 pandemic, as the Company experienced a decrease in orders from several geographic territories outside the US during COVID-19 peaks.

For the second quarter of fiscal 2021, gross profit increased $74,000, or 5%, compared with the prior-year period. Gross profit margin was 46.6% for the second quarter of fiscal 2021 versus 46.2% in the comparable period. Operating income increased by $109,000, more than doubling to $201,000 in the second quarter of fiscal 2021 compared with $92,000 for the prior year period. Growth in revenue and gross profit were key factors in the improvement. Operating margin for the quarter increased to 5.8% compared with 2.8% in the prior year period. Operating leverage enabled the Company to increase its net income by $63,000, or 55%, to $178,000 compared with $115,000 for the comparable period.

Balance Sheet and Cash Flow Overview

Cash and cash equivalents and short-term investments at quarter-end were $7,825 million, a modest decrease from February 29, 2020, the end of fiscal year 2020. The decrease was the result of the timing of working capital requirements primarily due to increases in accounts receivable and inventories and decreases in customer deposits and accounts payable. Higher inventory is necessary to address both customer demand for shorter delivery cycles and increased order levels.

Year-to-date capital expenditures were $290,000 compared with $319,000 in the prior-year period. The fiscal 2021 expenditures do not reflect $100,000 in grant proceeds received during the second quarter. The current periods capital expenditures are for upgrades to the Companys manufacturing facilities. Sono-Tek anticipates total capital expenditures to be approximately $0.5 million to $0.6 million in fiscal 2021.

At August 31, 2020, the Company had total debt of $1.6 million, comprised of $1.0 million in a PPP loan under the CARES Act and $624,000 in mortgage debt on the Companys industrial park complex that accrues annual interest at a rate of 4.15%.

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 Companys 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-Teks 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 pandemics 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; 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 as forecasted. 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 CORPORATIONCONDENSED CONSOLIDATED BALANCE SHEETS

August 31, 2020 February 29, (Unaudited) 2020 ASSETS Current Assets: Cash and cash equivalents $ 3,971,611 $ 3,659,551 Marketable securities 3,852,601 4,219,240 Accounts receivable (less allowance of 1,348,648 929,701 $71,000)Inventories, net 2,462,048 2,381,891 Prepaid expenses and other current assets 94,835 153,698 Total current assets 11,729,743 11,344,081 Land 250,000 250,000 Buildings, net 1,614,391 1,654,061 Equipment, furnishings and building 1,236,607 1,212,578 improvements, netIntangible assets, net 97,999 106,291 Deferred tax asset 176,314 176,314 TOTAL ASSETS $ 15,105,054 $ 14,743,325 LIABILITIES AND STOCKHOLDERS? EQUITY Current Liabilities: Accounts payable $ 712,704 $ 668,721 Accrued expenses 1,319,327 1,613,409 Customer deposits 988,102 1,648,690 Current maturities of long term debt 725,743 169,716 Income taxes payable 63,743 70,621 Total current liabilities 3,809,619 4,171,157 Deferred tax liability 251,761 251,761 Long term debt, less current maturities 899,573 538,000 Total liabilities 4,960,953 4,960,918 Commitments and Contingencies ? (Note 10) ? ? Stockholders? Equity Common stock, $.01 par value; 25,000,000shares authorized, 15,435,935 and 15,348,180 154,360 153,482 shares issued and outstanding, respectivelyAdditional paid-in capital 9,033,531 9,018,406 Accumulated earnings 956,210 610,519 Total stockholders? equity 10,144,101 9,782,407 TOTAL LIABILITIES AND STOCKHOLDERS? EQUITY $ 15,105,054 $ 14,743,325

See notes to unaudited condensed consolidated financial statements.

SONO-TEK CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)

SixMonthsEnded ThreeMonthsEnded August 31, August 31, 2020 2019 2020 2019 Net Sales $ 6,909,185 $ 6,168,250 $ 3,480,641 $ 3,345,822 Cost of Goods Sold 3,727,486 3,316,323 1,859,675 1,798,830 Gross Profit 3,181,699 2,851,927 1,620,966 1,546,992 Operating Expenses Research and product 834,940 658,870 423,516 321,697 development costsMarketing and selling 1,388,987 1,476,696 682,270 799,284 expensesGeneral and administrative 572,254 619,475 313,852 333,662 costsTotal 2,796,181 2,755,041 1,419,638 1,454,643 Operating Expenses Operating Income 385,518 96,886 201,328 92,349 Interest Expense (17,704 ) (17,465 ) (9,287 ) (8,518 )Interest and Dividend Income 25,483 56,983 2,837 25,812 Other income 19,519 16,877 8,084 12,122 IncomeBefore Income Taxes 412,816 153,281 202,962 121,765 Income Tax Expense 67,125 13,303 25,199 7,000 Net Income $ 345,691 $ 139,978 $ 177,763 $ 114,765 Basic EarningsPer Share $ 0.02 $ 0.01 $ 0.01 $ 0.01 Diluted EarningsPer Share $ 0.02 $ 0.01 $ 0.01 $ 0.01 Weighted Average Shares - 15,410,952 15,285,024 15,424,126 15,301,613 Basic Weighted Average Shares - 15,530,910 15,376,906 15,533,010 15,399,163 Diluted

See notes to unaudited condensed consolidated financial statements.

SONO-TEK CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)

Unaudited SixMonthsEnded August 31, 2020 2019 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 345,691 $ 139,978 Adjustments to reconcile net incometo netcash (used in) provided by operating activities:Depreciation and amortization 214,280 191,977 Stock based compensation expense 16,003 43,827 Inventory reserve 36,000 32,000 Decrease (Increase) in: Accounts receivable (418,947 ) 125,491 Inventories (116,157 ) (952,898 ) Prepaid expenses and other current assets 58,863 212,642 (Decrease) Increase in: Accounts payable and accrued expenses (250,099 ) 352,124 Customer Deposits (660,588 ) 434,894 Income taxes payable (6,878 ) 8,472 Net Cash (Used In) Provided by Operating (781,832 ) 588,507 Activities CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of equipment and furnishings (290,347 ) (319,055 )Capital expenditure grant proceeds 100,000 - Sale (purchase) of marketable securities 366,639 (1,051,898 ) Net Cash Provided by (Used in) Investing 176,292 (1,370,953 )Activities CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from note payable - bank 1,001,640 ? Repayment of long term debt (84,040 ) (80,696 )Net Cash Provided by (Used In) Financing 917,600 (80,696 )Activities NET INCREASE (DECREASE) IN CASH AND CASH 312,060 (863,142 )EQUIVALENTS CASH AND CASH EQUIVALENTS Beginning of period 3,659,551 3,144,123 End of period $ 3,971,611 $ 2,280,981 SUPPLEMENTAL CASH FLOW DISCLOSURE: Interest paid $ 13,972 $ 17,465 Income Taxes Paid $ 74,004 $ 4,831

See notes to unaudited condensed consolidated financial statements.

SONO-TEK CORPORATIONProduct and Market Sales

Product Sales

Three Months Ended Change Six Months Ended Change August 31, August 31, 2020 2019 $ % 2020 2019 $ % Fluxing $ 94,000 $ 211,000 (117,000 ) (55% ) $ 438,000 $ 602,000 (164,000 ) (27%) Systems IntegratedCoating 673,000 413,000 260,000 63% 1,849,000 810,000 1,039,000 128% SystemsMulti-AxisCoating 1,985,000 1,815,000 170,000 9% 2,898,000 2,888,000 10,000 - SystemsOEM 232,000 246,000 (14,000 ) (6% ) 654,000 565,000 89,000 16% SystemsOther 497,000 661,000 (164,000 ) (25% ) 1,070,000 1,303,000 (233,000 ) (18%) TOTAL $ 3,481,000 $ 3,346,000 135,000 4% $ 6,909,000 $ 6,168,000 741,000 12%

Market Sales

Three Months Ended Change Six Months Ended Change August 31, August 31, 2020 2019 $ % 2020 2019 $ % Electronics/ $ 811,000 $ 1,376,000 (565,000 ) (41% ) $ 3,051,000 $ 2,913,000 138,000 5% Microelectronics Medical 961,000 1,250,000 (289,000 ) (23% ) 1,653,000 1,792,000 (139,000 ) (8% ) Alternative Energy 826,000 223,000 603,000 270% 1,221,000 610,000 611,000 100% Emerging R&D and Other 479,000 400,000 79,000 20% 516,000 685,000 (169,000 ) (25% ) Industrial 404,000 97,000 307,000 316% 468,000 168,000 300,000 179% TOTAL $ 3,481,000 $ 3,346,000 135,000 4% $ 6,909,000 $ 6,168,000 741,000 12%