Sono-tek Corp (SOTK) Reports Increase in Third Quarter Revenue and Strong Order Book, Reiterates Expectations of Record Sales in 2022


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Sono-Tek Corporation (NASDAQ: SOTK), the leading developer and manufacturer of ultrasonic coating systems, today announced its financial results for the third quarter and first nine months of fiscal 2022, ended November 30, 2021.

Highlights of the third quarter of fiscal 2022 (compared to the third quarter of fiscal 2021, unless otherwise indicated).

  • Net sales increased 15% to $ 4,419,000, driven by strong sales in Asia for medical device coating machines and clean energy coating systems.
  • Gross margin increased 12% to $ 2,159,000 due to increased sales.
  • The gross margin was 48.9% compared to 50.5% for the period of the previous year due to changes in the product line.
  • Operating profit increased 10% to $ 491,000 due to higher gross margin, partially offset by higher operating expenses.
  • Pre-tax earnings increased 9% to $ 493,000.
  • The order backlog as at November 30, 2021 reached another record high of $ 6,505,000, an increase of 3% over the order backlog of $ 6,332,000 on August 31, 2021 (end of fiscal second quarter) and increased by 69% against the backlog of $ 3,851,000 on February 28, 2021 (end of fiscal year 2021).

Nine-month 2022 highlights (compared to the first nine months of fiscal 2021, unless otherwise indicated)

  • Net sales increased 13% to $ 12,134,000, mainly due to sales of several new products recently developed for the medical market as well as the continued expansion of Sono-Tek systems used in the energy sector. own.
  • Gross margin increased 18% to $ 6,057,000 due to higher sales and a favorable product mix.
  • Gross margin increased 230 basis points to 49.9%, mainly due to a favorable product mix and lower than expected warranty and installation costs.
  • Operating income increased 54% to $ 1,282,000 due to higher gross margin, partially offset by higher operating expenses.
  • Pre-tax income increased 50% to $ 1,295,000, excluding the benefit of the cancellation of the $ 1.0 million P3 loan.
  • As of November 30, 2021, the Company had no outstanding debt.
  • Cash and marketable securities amounted to $ 10,184,000 as at November 30, 2021, an increase of $ 1,537,000 from February 28, 2021, nearly half of which was due to an increase in customer deposits from $ 729,000, bringing total deposits to $ 1,896,000 as at November 30, 2021. The increase in customer deposits is primarily due to our record backlog and the growing percentage of complex and expensive systems orders in the backlog. orders.

Advice

  • For the fourth quarter of fiscal 2022, Sono-Tek expects double-digit sales growth compared to the comparable period last fiscal year.
  • Sono-Tek predicts double-digit sales growth for fiscal 2022 and continues to expect the highest annual sales in company history for the fiscal year ending February 28, 2022.

Dr. Christopher L. Coccio, Chief Executive Officer, said, “Sono-Tek had an excellent third quarter with sales and net income growth of 15% and 10%, respectively. This is the third consecutive quarter of increased sales and strong backlog, margin and bottom line results, achieved in an uncertain global environment with limited travel for sales and service personnel and the continued impact of supply chain issues on our manufacturing schedules. We correctly anticipated this issue and deployed a portion of the Company’s significant cash reserves to purchase additional key items in stock earlier in the year. We also used creative hiring approaches and higher compensation to make up for the labor shortage that developed and leveraged Sono-Tek’s strong IT infrastructure to interact with customers on a virtual basis when visiting. in person were not possible.

“We ended the third quarter with $ 10.2 million in cash, no debt and achieved a new order backlog record of $ 6.5 million, reflecting the high levels of activity in our development labs. Sales for the fourth quarter of fiscal 2022 are expected to increase by double digits compared to the comparable period last year. For the full year ending February 28, 2022, we continue to expect the highest annual sales in company history. “

“Sono-Tek’s multi-year financial gains stem from the strategic shift in the company’s business model that was initiated several years ago, expanding its product line to provide complete machine solutions with higher added value and money. -systems larger than original equipment manufacturers (“OEMs”). These product advancements are supported by a high level of application engineering expertise from our specialist staff, in combination with the company’s process development laboratories located around the world. Looking ahead, we believe the gains from this change will continue to be realized as we continue to invest significant resources to further enhance the diversity of our market with new and expanded applications for unique ultrasonic coating systems from Sono-Tek, ”concluded Dr Coccio.

Cumulative results for fiscal year 2022 (The story compares to the period of the previous year, unless otherwise noted)

($ in thousands)

Nine months ended November 30 Change
2021 2020 $ %
Net sales $ 12,134 $ 10,736 1,398 13%
Gross profit $ 6,057 $ 5,112 945 18%
Gross margin 49.9% 47.6%
Operating result $ 1,282 $ 832 450 54%
Operating margin 10.6% 7.8%
Net revenue $ 1,987 $ 666 1,321 198%
The net margin 16.4% 6.2%

Results for the third quarter of fiscal 2022 (The story compares to the period of the previous year, unless otherwise noted)

($ in thousands)

Three months ended November 30 Change
2021 2020 $ %
Net sales $ 4,419 $ 3,827 592 15%
Gross profit $ 2,159 $ 1,931 228 12%
Gross margin 48.9% 50.5%
Operating result $ 491 $ 447 44 ten%
Operating margin 11% 12%
Net revenue $ 376 $ 320 56 18%
The net margin 8.5% 8.4%

Financial overview for the third quarter of fiscal 2022

Net sales for the third quarter of the year were $ 4,419,000, up 15% from the third quarter of last year.

Sales of multi-axis coating systems were strong, increasing $ 1.5 million or 118% year-over-year, driven by continued demand for membrane coating systems used in fuel cells and carbon capture applications in the alternative clean energy sector as well as sales of new medical device coating systems, including a newly developed complete system solution for drug delivery coating on a consumable medical device shipped to china.

Sales of integrated coating systems decreased $ 1.0 million or 94% in the third quarter. This was due to shipments of two large orders in the third quarter of last year – for a textile coating machine and a solar cell coating machine – none of which have been repeated during the current period.

The microelectronics market also fell in the third quarter. However, this market sector is expected to rebound in the fourth quarter due to the scheduled delivery of a large six-axis robot for the semiconductor industry which is expected to ship by the end of Sono’s fiscal year. Tek in February.

In the third quarter of fiscal 2022, approximately 78% of sales came from outside the United States and Canada, compared to 70% in the prior year period.

Strong sales in the third quarter of fiscal 2022 were primarily driven by sales to APAC, reflecting the continued transition of several countries emerging from COVID-19 lockdowns to bring their manufacturing operations back online. APAC shipments during the third quarter included two major fuel cell membrane coating systems that were sold to various customers in South Korea that totaled over $ 550,000, as well as continued strong demand for the fuel cell membrane coating systems. coating of Sono-Tek balloon catheters that have been sold in several different regions. of the APAC.

At quarter end, backlog reached a record high of $ 6,505,000, a 3% increase over backlog of $ 6,332,000 on August 31, 2021 (end of fiscal second quarter) and increased 69% from the order backlog of $ 3,851,000 on February 28, 2021 (end of fiscal 2021).

For the third quarter of fiscal 2022, gross margin increased 12% to $ 2,159,000 due to increased sales. Gross margin was 48.9% versus 50.5% for the period of the previous year due to increased sales of products with lower sales margins and increased overseas sales which are generally sold through our international distribution partners at discounted prices for distributors.

Operating profit increased 9.8% to $ 491,000 from $ 447,000 for the prior year period, primarily due to revenue growth and gross margin. The operating margin for the third quarter of fiscal 2022 was 11.1%, compared to 11.7% for the period of the previous fiscal year.

Third quarter net income was $ 376,000, an increase of 17.5%, compared to $ 320,000 for the prior year period. The increase is the result of the increase in operating profit combined with a decrease in income taxes. On a per share basis, earnings were $ 0.02 compared to $ 0.02 for the prior year period. The diluted weighted average number of shares outstanding was 15,654,936, compared to 15,583,089 for the period of the previous year.

Balance sheet and cash flow overview

Cash, cash equivalents and short-term investments as at November 30, 2021 were $ 10.2 million, an increase of $ 1.6 million from February 28, 2021, year-end 2021. The increase is mainly attributable to the growth in net income for the current period. and non-cash charges partially offset by equipment purchases.

Capital expenditures in the third quarter totaled $ 285,000 and were spent on ongoing upgrades to the Company’s manufacturing and development lab facilities. Sono-Tek forecasts capital expenditures to total approximately $ 300,000 to $ 350,000 for fiscal 2022.

As of November 30, 2021, the Company had no debt on its balance sheet.

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