GlobeNewswire Inc | Jul 15, 2020 04:15PM EDT

July 15, 2020

-- Strong backlog of $3,202,000 -- Achieved net income of $168,000, up 572% -- Company expects second quarter revenues to increase over last year

MILTON, N.Y., July 15, 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 first quarter of fiscal year 2021, ended May 31, 2020.

In the first quarter of FY2021, we achieved our forecasted 20% plus revenue growth, along with a significant improvement in the bottom line. More importantly, we continued to invest in upfront resources in Engineering and Application Engineering. Application Engineering especially 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 and provide for longer delivery times compared to our more typical orders. We were pleased to be able to quickly shift our customers work with our Application Engineers and development labs to a virtual experience.

We experienced a significant sales increase in our Integrated Coating Systems this quarter, and these were shipped to the Electronics/Microelectronics and the Medical segments of our business. Globally, our sales to the Asia Pacific (APAC) region were strong, resulting in 78% of our sales originating from outside the United States and Canada compared to 56% in last years first quarter.

Due to both new orders and existing long delivery pre-Covid backlog this quarter, we are expecting second quarter revenues to increase over last year. Looking ahead, we believe that the ongoing strength of our business, combined with continued expense control and our strong balance sheet, position Sono-Tek well for the future, commented Dr. Christopher L. Coccio, Chairman and CEO.

First Quarter Fiscal 2021 Review

Three Months Ended May 31, Change 2020 2019 $ %Net Sales $ 3,429,000 $ 2,822,000 607,000 22%Gross Profit 1,561,000 1,305,000 256,000 20% Gross Margin 45.5% 46.2% Operating Income $ 184,000 $ 5,000 179,000 3580% Operating Margin 5.4% 0.2% Net Income $ 168,000 $ 25,000 143,000 572% Net Margin 4.9% 0.9% Basic Earnings Per Share $0.01 $0.00 Diluted Earnings Per Share $0.01 $0.00 Weighted Average Shares -Basic 15,398,000 15,268,000 Weighted Average Shares - Diluted 15,437,000 15,357,000

Sales growth was driven by demand for Sono-Teks customized, highly engineered and high value integrated coating systems primarily for the Electronics / Microelectronics market in the first quarter of fiscal 2021. A significant customer took delivery of a system valued at over $700,000 in this market, and further orders from this customer are expected in the future.

From a product sales perspective, Integrated Coating Systems revenues increased 197%. However, 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 in 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 2021, approximately 78% of sales originated outside of the United States and Canada compared with 56% in the prior year period. Significantly, sales in the APAC region increased 297%, primarily led by several shipments to China, as manufacturing operations came back online following temporary COVID-19 shutdowns.

The change in product mix resulted in a slightly lower gross margin of 45.5%, and combined with tight expense control, resulted in a 572% increase in net income to $168,000 this quarter.

Balance Sheet and Cash Flow Overview

Sono-Tek has built a strong balance sheet with solid levels of cash and cash equivalents compared to a minimal level of debt. Cash and cash equivalents and short-term investments at quarter-end were $8.3 million, up from $7.9 million at the end of fiscal 2020. The increase was the result of the current period's net income and noncash charges and the proceeds of long term note payable partially offset by purchases of equipment and the repayment of long-term debt.

Cash used in operating activities was $396,000 in the first quarter of fiscal 2021 compared with generating $362,000 in the prior fiscal year period. Capital expenditures in the first quarter of fiscal 2021 were $152,000 compared with $129,000 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 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 microscopic coating technologies that enable better outcomes for its customers products and processes.

For further information, visit www.sono-tek.com.

Safe Harbor StatementWe discuss expectations regarding our future performance, such as our business outlook, in our annual and quarterly reports, press 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. 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, 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 within the forecasted.

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

FINANCIAL TABLES FOLLOW

SONO-TEK CORPORATIONCONDENSED CONSOLIDATED BALANCE SHEETS

May 31, 2020 February 29, (Unaudited) 2020 ASSETS Current Assets: Cash and cash equivalents $ 4,381,947 $ 3,659,551 Marketable securities 3,908,454 4,219,240 Accounts receivable (less allowance of 1,341,617 929,701 $71,000)Inventories, net 2,512,222 2,381,891 Prepaid expenses and other current assets 146,588 153,698 Total current assets 12,290,828 11,344,081 Land 250,000 250,000 Buildings, net 1,634,226 1,654,061 Equipment, furnishings and building 1,279,083 1,212,578 improvements, netIntangible assets, net 102,145 106,291 Deferred tax asset 176,314 176,314 TOTAL ASSETS $ 15,732,596 $ 14,743,325 LIABILITIES AND STOCKHOLDERS? EQUITY Current Liabilities: Accounts payable $ 1,007,517 $ 668,721 Accrued expenses 1,409,167 1,613,409 Customer deposits 1,325,694 1,648,690 Current portion of long-term debt 556,212 169,716 Income taxes payable 112,548 70,621 Total current liabilities 4,411,138 4,171,157 Deferred tax liability 251,761 251,761 Long term debt, less current maturities 1,111,265 538,000 Total liabilities 5,774,164 4,960,918 Stockholders? Equity Common stock, $.01 par value; 25,000,000shares authorized, 154,230 153,482 15,422,985 and 15,348,180 shares issued andoutstanding, respectivelyAdditional paid-in capital 9,025,755 9,018,406 Accumulated earnings 778,447 610,519 Total stockholders? equity 9,958,432 9,782,407 TOTAL LIABILITIES AND STOCKHOLDERS? EQUITY $ 15,732,596 $ 14,743,325

See notes to unaudited condensed consolidated financial statements.



SONO-TEK CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)

ThreeMonthsEndedMay 31, 2020 2019 Net Sales $ 3,428,544 $ 2,822,428 Cost of Goods Sold 1,867,811 1,517,493 Gross Profit 1,560,733 1,304,935 Operating Expenses Research and product 411,424 354,173 development costs Marketing and selling expenses 706,717 677,412 General and administrative 258,402 268,813 costs Total Operating Expenses 1,376,543 1,300,398 Operating Income 184,190 4,537 Interest Expense (8,417 ) (8,947 ) Interest and Dividend Income 22,646 31,171 Other income 11,435 4,755 Income Before Income Taxes 209,854 31,516 Income Tax Expense 41,926 6,303 Net Income $ 167,928 $ 25,213 Basic Earnings Per Share $ 0.01 $ 0.00 Diluted Earnings Per Share $ 0.01 $ 0.00 Weighted Average Shares - Basic 15,397,779 15,268,071 Weighted Average Shares - Diluted 15,436,758 15,357,295

See notes to unaudited condensed consolidated financial statements.



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

ThreeMonthsEndedMay 31, 2020 2019 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 167,928 $ 25,213 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 109,878 89,207 Stock based compensation expense 8,097 11,310 Inventory reserve 18,000 14,000 Decrease (Increase) in: Accounts receivable (411,916 ) 65,538 Inventories (148,331 ) (734,704 )Prepaid expenses and other current assets 7,110 289,992 (Decrease) Increase in: Accounts payable and accrued expenses 134,554 410,079 Customer Deposits (322,996 ) 184,748 Income taxes payable 41,927 6,303 Net Cash (Used In) Provided By Operating (395,749 ) 361,686 Activities CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of equipment, furnishings and (152,402 ) (129,159 )leasehold improvementsSale (Purchase) of marketable securities 310,786 (1,413,481 )Net Cash Provided By (Used In) Investing 158,384 (1,542,640 )Activities CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from note payable - bank 1,001,640 - Repayment of long-term debt (41,879 ) (40,283 )Net Cash Provided By (Used In) Financing 959,761 (40,283 )Activities NET INCREASE (DECREASE) IN CASH AND CASH 722,396 (1,221,237 )EQUIVALENTS CASH AND CASH EQUIVALENTS Beginning of period 3,659,551 3,144,123 End of period $ 4,381,947 $ 1,922,886 SUPPLEMENTAL CASH FLOW DISCLOSURE: Interest paid $ 7,210 $ 8,947 Taxes Paid $ ? $ ?

See notes to unaudited condensed consolidated financial statements.

SONO-TEK CORPORATIONADDITIONAL INFORMATION MARKET AND PRODUCT SALES(Unaudited)

Product Sales:

Three Months Ended May 31, Change 2020 % of 2019 % of $ % total totalFluxing $ 344,000 10% $ 391,000 14% (47,000 ) (12% ) Systems IntegratedCoating 1,176,000 34% 396,000 14% 780,000 197% SystemsMulti-AxisCoating 913,000 27% 1,073,000 38% (160,000 ) (15% ) SystemsOEM Systems 422,000 12% 319,000 11% 103,000 32% Other 574,000 17% 643,000 23% (69,000 ) (11% ) TOTAL $ 3,429,000 $ 2,822,000 $ 607,000 22%

Market Sales:

Three Months Ended May 31, Change 2020 % of 2019 % of $ % total totalElectronics/ $ 2,240,000 65% $ 1,538,000 55% 702,000 46% MicroelectronicsMedical 692,000 20% 543,000 19% 149,000 27% Alternative 395,000 12% 386,000 14% 9,000 2% EnergyEmerging R&D and 37,000 1% 285,000 10% (248,000 ) (87% ) Other Industrial 65,000 2% 70,000 2% (5,000 ) (7% ) TOTAL $ 3,429,000 $ 2,822,000 $ 607,000 22%