GlobeNewswire Inc | Jan 15, 2021 08:00AM EST

January 15, 2021

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% 47.6% 47.2% Gross MarginOperating Income $ 832,000 $ 367,000 465,000 127%

Operating 7.8% 3.7% MarginNet Income $ 666,000 $ 420,000 246,000 59% 6.2% 4.3% Net MarginDiluted Earnings $ $ Per Share 0.04 0.03Weighted Average 15,548,000 15,354,000 Shares - Diluted

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 50.5% 48.9% MarginOperating Income $ $ 177,000 66% 447,000 270,000 11.7% 7.4% Operating MarginNet Income $ $ 40,000 14% 320,000 280,000 Net 8.4% 7.6% MarginDiluted Earnings Per $0.02 $0.02 ShareWeighted Average Shares - 15,583,000 15,372,000 Diluted

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 periods 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 periods capital expenditures are for ongoing upgrades to the Companys 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 Companys 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 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; 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 Corporationinfo@sono-tek.com

Investor Relations: Stephanie Prince PCG Advisory (646) 863-6341sprince@pcgadvisory.com

SONO-TEK CORPORATIONCONDENSED CONSOLIDATED BALANCE SHEETS

November30, 2020 February29, (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 1,673,983 929,701 $56,000 and $71,000, respectively)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 1,162,009 1,212,578 improvements, netIntangible 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; 25,000,000shares authorized, 15,445,594 and 15,348,180 154,456 153,482 shares issued and outstanding, at November 30and February29, respectivelyAdditional 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 CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF INCOME(Unaudited)

NineMonthsEnded ThreeMonthsEnded November30, November30, 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 1,241,739 1,020,299 406,799 361,429 development costsMarketing and selling 2,154,956 2,326,115 765,969 849,419 expensesGeneral and administrative 883,384 935,693 311,130 316,218 costsTotal 4,280,079 4,282,107 1,483,898 1,527,066 Operating Expenses 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 IncomeBefore 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 EarningsPer Share $ 0.04 $ 0.03 $ 0.02 $ 0.02 Diluted EarningsPer Share $ 0.04 $ 0.03 $ 0.02 $ 0.02 Weighted Average Shares - 15,420,787 15,291,968 15,440,673 15,306,008 Basic Weighted Average Shares - 15,547,604 15,354,472 15,583,089 15,371,819 Diluted

See notes to unaudited condensed consolidated financial statements.

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

NineMonthsEnded November30, 2020 2019 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 666,169 $ 419,632 Adjustments to reconcile net incometo 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 766,544 (1,766,575 )Activities 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 874,990 (121,537 )Activities NET INCREASE (DECREASE) IN CASH AND CASH 2,354,458 (864,617 )EQUIVALENTS 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 CORPORATIONPRODUCT AND MARKET SALES(Unaudited)

Product Sales:

Three Months Ended Change Nine Months Ended Change November30, November30, 2020 2019 $ % 2020 2019 $ % Fluxing $ 242,000 $ 261,000 $ (19,000 ) (7% ) $ 680,000 $ 863,000 $ (183,000 ) (21% )Systems IntegratedCoating 1,071,000 628,000 443,000 71% 2,920,000 1,438,000 1,482,000 103% SystemsMulti-Axis ) )Coating 1,249,000 1,631,000 (382,000 ) (23% ) 4,147,000 4,519,000 (372,000 (8% SystemsOEM 523,000 400,000 123,000 31% 1,177,000 965,000 212,000 22% SystemsOther 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/ $ 1,455,000 $ 1,104,000 $ 351,000 32% $ 4,504,000 $ 4,017,000 $ 487,000 12% MicroelectronicsMedical 831,000 1,083,000 (252,000 ) (23% ) 2,484,000 2,875,000 (391,000 ) (14% ) Alternative 783,000 917,000 (134,000 ) (15% ) 2,004,000 1,527,000 477,000 31% EnergyEmerging R&D and 207,000 252,000 (45,000 ) (18% ) 723,000 937,000 (214,000 ) (23% )OtherIndustrial 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%