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Sono-Tek Reports 40% Increase in Sales and 525% Increase in Net Income for First Quarter Fiscal 2025

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Sono-Tek (Nasdaq: SOTK) reported a significant financial upturn for Q1 of FY2025, ending May 31, 2024. Net sales surged by 40% to $5.03 million, driven by demand in Medical and Alternative/Clean Energy markets. Gross profit increased by 38% to $2.45 million. The company transitioned from an operating loss to an operating income of $238,000. Net income skyrocketed by 525% to $331,000, or $0.02 per share. Despite a slight decrease in gross margin to 48.8%, the company’s cash reserves grew to $12.2 million with no outstanding debt. Equipment and service backlog decreased by 16% to $7.83 million. Sono-Tek projects a 2%-5% sales growth for Q2 FY2025 and continued growth for the entire fiscal year.

Positive
  • Net sales increased by 40% to $5.03 million.
  • Gross profit rose by 38% to $2.45 million.
  • Operating income reached $238,000, up from a loss of $92,000.
  • Net income surged by 525% to $331,000, or $0.02 per share.
  • Cash reserves increased to $12.2 million with no outstanding debt.
Negative
  • Gross margin decreased slightly to 48.8% from 49.3%.
  • Combined equipment and service-related backlog decreased by 16% to $7.83 million.

Insights

The financial results for Sono-Tek in the first quarter of fiscal 2025 show a 40% increase in net sales compared to the prior year period, driven largely by growth in the Medical and Alternative/Clean Energy markets. This is a strong indicator of the company's ability to capitalize on growing sectors and enhance its market share.

Net income surged by 525% to $331,000 from $53,000. This dramatic increase is noteworthy, although it's important to consider that the previous year's net income was relatively low, making the percentage increase appear more significant. The operating income also shifted positively, from a loss of $92,000 to a gain of $238,000, which underscores improved operational efficiency.

The company's gross margin saw a slight decline to 48.8% from 49.3%. A decrease in gross margin often raises concerns, but the fact that it remains within historical ranges suggests stability in cost management.

A potential red flag is the decline in backlog for equipment and services from $9.28 million to $7.83 million. This can lead to variability in future revenues, as admitted by the management. Investors should monitor upcoming quarters to see if the company can maintain sales momentum and overcome this backlog reduction.

The balance sheet remains solid with $12.2 million in cash equivalents and no debt, providing financial stability and flexibility for growth investments.

Sono-Tek's financial performance indicates significant progress in penetrating the Medical and Alternative/Clean Energy markets. These sectors are expected to grow substantially, driven by technological advancements and an increased focus on sustainable solutions. The company's ability to increase sales in these areas is a good sign of its alignment with market trends.

The geographical distribution of sales also shows improvement, with 39% of sales coming from outside the United States and Canada, up from 34%. This diversification reduces dependency on any single market and exposes the company to broader growth opportunities.

An important aspect to watch is the company's strategy to transition customers from R&D and pilot machines to large-scale production systems with higher Average Selling Prices (ASP). This shift, if successful, can significantly boost revenues and margins despite the higher variability in backlog. The management's focus on high-ASP orders indicates a strategic move towards more profitable segments.

Sono-Tek's technological advancements in ultrasonic coating systems have evidently started to pay off, especially in the Medical and Clean Energy fields. The technology's ability to deliver precise and consistent coatings is particularly valuable in these high-stakes sectors where quality and reliability are paramount.

The transition from smaller R&D contracts to full-scale production systems not only underscores the technology's effectiveness but also its scalability. This is critical as customers often start with smaller, test projects and only commit to larger orders once the technology has proven its value. Sono-Tek's ability to secure these larger contracts is a strong validation of its product efficacy.

The slight dip in gross margin can be attributed to product mix changes and realignment of organizational frameworks. While this might seem concerning at first glance, it's actually a common scenario in tech-focused manufacturing where initial development costs can be high. The key takeaway for investors is to monitor how quickly these costs decline as production scales up.

Overall, the technology's proven application and growing acceptance across sectors like medical devices and clean energy are strong indicators of the company's potential for sustained growth.

Provides Sales Guidance for Second Quarter of Fiscal 2025 and Anticipates Continued Sales Growth for Fiscal 2025

MILTON, N.Y., July 11, 2024 (GLOBE NEWSWIRE) -- Sono-Tek Corporation (Nasdaq: SOTK), the leading developer and manufacturer of ultrasonic coating systems, today reported financial results for its first quarter of fiscal year 2025, ended May 31, 2024.

First Quarter FY2025 Financial Highlights:
(Compared with prior-year period unless otherwise noted)

  • Net Sales for the quarter increased 40% to $5,031,000 compared to $3,603,000 in the prior year period, driven by strong shipments to the Medical and Alternative/Clean Energy markets.
  • Gross Profit increased 38% to $2,454,000 compared to $1,777,000 in the prior year period.
  • Operating Income increased $330,000 to $238,000, from an operating loss of $92,000 at May 31, 2023. The increase is due to the current period’s increase in gross profit partially offset by an increase in operating expenses.
  • Gross Margin decreased slightly to 48.8% compared to 49.3% in the prior year period due to a realignment of organizational framework that started in Q4 FY2024 but remains strong and within its historical range.
  • Income before taxes was $391,000 compared to $32,000 in the prior year period.
  • Net income was $331,000, or $0.02 per share, compared with $53,000 or $0.00 per share, an increase of 525%
  • Cash, cash equivalents and marketable securities at quarter-end were $12.2 million, an increase of $0.3 million from February 29, 2024 with no outstanding debt.
  • Combined Equipment and service-related backlog at May 31, 2024 was $7.83 million, compared to equipment and service-related backlog of $9.28 million at February 29, 2024.
  • Sales growth guidance for the second quarter of FY2025, ending August 31, 2024, is for growth of 2%-5% above the first quarter ended May 31, 2024 and for continued sales growth for the full fiscal year over the last fiscal year.

“Sono-Tek began its fiscal year with strong sales momentum and is looking forward to an excellent year with increasing orders in green energy systems combined with strength in the medical device coating market and the semiconductor/electronics markets. We are aggressively moving forward with full production systems with the potential for multiple repeat orders this year,” according to Dr. Christopher L Coccio, Executive Chairman.

Steve Harshbarger, CEO & President of Sono-Tek, remarked, “Our growth strategies are continuing to gain momentum as our customers move from R&D and pilot machines to our complex large-scale production systems with significantly higher Average Selling Prices (ASP). We remain excited about our prospects for attracting additional high-volume, high-ASP production system orders in fiscal year 2025. Due to the increased frequency of high ASP large platform machine orders, our revenue can be highly variable from quarter to quarter resulting in large fluctuations in backlog. With our strong sales momentum bolstered by our solid balance sheet, we remain focused on continued execution and look forward to building on our record revenues.”

First Quarter Fiscal 2025 Results

 Three Months Ended May 31,Change
  2024  2023  $ %
Net Sales$5,031,000 $3,603,000  1,428,000 40%
Gross Profit 2,454,000  1,777,000  677,000 38%
Gross Margin 48.8%  49.3%     
            
Operating Income$238,000 $(92,000)  330,000 359%
Operating Margin 4.7%  (2.6%)     
           
Net Income$331,000 $53,000  278,000 525%
Net Margin 6.6%  1.5%     
Basic Earnings Per Share$0.02 $0.00     
Diluted Earnings Per Share$0.02 $0.00     
Weighted Average Shares -Basic 15,751,000  15,742,000     
Weighted Average Shares - Diluted 15,774,000  15,769,000     
           

First Quarter FY2025 Financial Overview

Net Sales for the quarter increased 40% to $5,031,000 compared to $3,603,000 in the prior year period, driven by strong shipments to the Medical and Alternative/Clean Energy markets.

In the first quarter of fiscal 2025, approximately 39% of sales originated outside of the United States and Canada compared with 34% in the prior year period.

Equipment related backlog at May 31, 2024 was $7.69 million, compared to backlog of $9.08 million at February 29, 2024, a decrease of $1.39 million or 15.4%. Combined equipment and service-related backlog at May 31, 2024 was $7.83 million, compared to equipment and service related backlog of $9.28 million at February 29, 2024, a decrease of $1.5 million or 16%.

Gross Profit increased 38% to $2,454,000 compared to $1,777,000 in the prior year period. Gross profit margin decreased 50 basis points to 48.8% in the first quarter of fiscal 2025 compared to 49.3% in the prior year period due to product mix changes and recharacterization of expenses associated with evolving workforce roles, as successful development initiatives transition toward mainstream manufacturing.

Operating income increased to $238,000 in the first quarter of fiscal 2025 compared to an operating loss of $92,000 for the prior year period, an increase of $330,000 or 359%. The increase in operating income is a result of the improvement in gross profit of $677,000, offset by an increase in operating expenses of $347,000.

Net income for the first quarter was $331,000, or $0.02 per share, compared with net income of $53,000 or $0.00 per share, for the prior year period, an increase of 525%. Diluted weighted average shares outstanding totaled 15,774,376 compared to 15,769,442 for the prior year period.

Balance Sheet and Cash Flow Overview

Cash, cash equivalents and marketable securities at quarter-end were $12.2 million, an increase of $0.3 million from February 29, 2024, the end of fiscal year 2024. The increase was the result of the current period’s net income and non-cash charges partially offset by an increase in inventories and a decrease in payables and customer deposits.

Capital expenditures in the first quarter totaled $33,000 which were directed to ongoing upgrades to the Company’s manufacturing facilities. Sono-Tek anticipates total capital expenditures will be approximately $300,000 - $350,000 in fiscal 2025.

At May 31, 2024, Sono-Tek had no debt on its balance sheet.

About Sono-Tek

Sono-Tek Corporation is a global leader in the design and manufacture of ultrasonic coating systems that are shaping industries and driving innovation worldwide. Our ultrasonic coating systems are used to apply thin films onto parts used in diverse industries including microelectronics, alternative energy, medical devices, advanced industrial manufacturing, and research and development sectors worldwide. Sono-Tek's bold venture into the clean energy sector is showing transformative results in next-gen solar cells, fuel cells, green hydrogen generation, and carbon capture applications as we shape a sustainable future. 

Our product line is rapidly evolving, transitioning from R&D to high-volume production machines with significantly higher average selling prices, showcasing our market leadership and adaptability. Our comprehensive suite of thin film coating solutions and application consulting services ensures unparalleled results for our clients and helps some of the world's most promising companies achieve technological breakthroughs and bring them to the market. The Company strategically delivers its products to customers through a network of direct sales personnel, carefully chosen independent distributors, and experienced sales representatives, ensuring efficient market reach across diverse sectors around the globe.

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 “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 and could cause actual results to differ materially. These factors include, among other considerations, general economic and business conditions, including political, regulatory, tax, competitive and technological developments affecting our operations or the demand for our products; inflationary and supply chain pressures; the recovery of the Electronics/Microelectronics and Medical markets; rebound of sales to the industrial market in the second quarter of fiscal year 2025; maintenance of order backlog; 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; 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 of sales guidance. We undertake no obligation to update any forward-looking statement.

For more information:

Sono-Tek Corp.
Stephen J. Bagley
Chief Financial Officer
Ph: (845) 795-2020
info@sono-tek.com

Investor Relations:
Kirin Smith
PCG Advisory
Ph: (646) 823-8656
ksmith@pcgadvisory.com

http://www.sono-tek.com

FINANCIAL TABLES FOLLOW


 
SONO-TEK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
 
  May 31, 2024  February 29, 
  (Unaudited)  2024 
ASSETS        
Current Assets:        
Cash and cash equivalents $2,402,007  $2,134,786 
Marketable securities  9,749,483   9,711,351 
Accounts receivable (less allowance of $12,225)  1,401,582   1,470,711 
Inventories  5,479,368   5,221,980 
Prepaid expenses and other current assets  148,603   207,738 
Total current assets  19,181,043   18,746,566 
         
Land  250,000   250,000 
Buildings, equipment, furnishings and leasehold improvements, net  2,709,183   2,832,156 
Intangible assets, net  45,020   47,566 
Deferred tax asset  1,369,210   1,255,977 
         
TOTAL ASSETS $23,554,456  $23,132,265 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
         
Current Liabilities:        
Accounts payable $1,020,777  $1,049,742 
Accrued expenses  1,711,800   1,739,478 
Customer deposits  3,339,816   3,419,706 
Income taxes payable  618,010   414,807 
Total current liabilities  6,690,403   6,623,733 
         
Deferred tax liability  199,987   229,534 
Total liabilities  6,890,390   6,853,267 
         
Commitments and Contingencies (Note 9)  -   - 
         
Stockholders’ Equity        
Common stock, $.01 par value; 25,000,000 shares authorized, 15,750,880 shares issued and outstanding as of May 31 and February 29, 2024  157,509   157,509 
Additional paid-in capital  9,824,618   9,770,387 
Accumulated earnings  6,681,939   6,351,102 
Total stockholders’ equity  16,664,066   16,278,998 
         
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $23,554,456  $23,132,265 


See notes to unaudited condensed consolidated financial statements.


 
SONO-TEK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
  Three Months Ended May 31, 
  2024  2023 
       
Net Sales $5,031,038  $3,603,018 
Cost of Goods Sold  2,576,551   1,825,786 
Gross Profit  2,454,487   1,777,232 
         
Operating Expenses        
Research and product development costs  731,430   656,438 
Marketing and selling expenses  897,190   800,784 
General and administrative costs  587,571   411,626 
Total Operating Expenses  2,216,191   1,868,848 
         
Operating Income/(Loss)  238,296   (91,616)
         
Interest and Dividend Income  142,654   105,990 
Net unrealized gain on marketable securities  10,361   17,658 
         
Income Before Income Taxes  391,311   32,032 
         
Income Tax Expense/ (Benefit)  60,474   (21,374)
         
Net Income $330,837  $53,406 
         
Basic Earnings Per Share $0.02  $0.00 
         
Diluted Earnings Per Share $0.02  $0.00 
         
Weighted Average Shares - Basic  15,750,880   15,742,073 
         
Weighted Average Shares - Diluted  15,774,376   15,769,442 


See notes to unaudited condensed consolidated financial statements.


 
SONO-TEK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
  Three Months Ended May 31, 
  2024  2023 
       
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net Income $330,837  $53,406 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  158,491   135,208 
Stock based compensation expense  54,231   48,295 
Inventory reserve  11,839   (10,582)
Unrealized (gain)/loss on marketable securities  (10,361)  (17,658)
Deferred tax expense  -   (124,317)
Decrease (Increase) in:        
Accounts receivable  69,129   492,390 
Inventories  (269,227)  (501,566)
Prepaid expenses and other current assets  59,135   64,746 
(Decrease) Increase in:        
Accounts payable  (28,965)  122,767 
Accrued expenses  (27,678)  (88,157)
Customer deposits  (79,890)  772,410 
Income taxes payable  203,203   (118,850)
Net Cash Provided by Operating Activities  327,964   828,092 
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchase of equipment, furnishings and leasehold improvements  (32,972)  (149,004)
Sale of marketable securities  5,211,058   3,707,074 
Purchase of marketable securities  (5,238,829)  (3,446,424)
Net Cash (Used)/Provided by Investing Activities  (60,743)  111,646 
         
NET INCREASE IN CASH AND CASH EQUIVALENTS  267,221   939,738 
         
CASH AND CASH EQUIVALENTS        
Beginning of period  2,134,786   3,354,601 
End of period $2,402,007  $4,294,339 
         
SUPPLEMENTAL CASH FLOW DISCLOSURE:        
Interest paid $  $ 
Taxes Paid $  $221,942 


See notes to unaudited condensed consolidated financial statements.

 

 
SONO-TEK CORPORATION
ADDITIONAL INFORMATION – MARKET AND PRODUCT SALES
(Unaudited)
 
Market Sales:
  Three Months Ended May 31, Change
  2024  % of total 2023  % of total $  %
Electronics/Microelectronics $1,568,000  31% $1,375,000  38%  193,000  14%
Medical  857,000  17%  383,000  11%  474,000  124%
Alternative Energy/Clean  2,282,000  46%  833,000  23%  1,449,000  174%
Emerging R&D and Other  11,000  0%  126,000  3%  (115,000)  (91%)
Industrial  313,000  6%  886,000  25%  (573,000)  (65%)
TOTAL $5,031,000    $3,603,000    $1,428,000  40%


Product Sales:
  Three Months Ended May 31, Change
  2024  % of total 2023  % of total $  %
Fluxing Systems $134,000  2% $236,000  6%  (102,000)  (43%)
Integrated Coating Systems  747,000  15%  309,000  9%  438,000  142%
Multi-Axis Coating Systems  2,664,000  53%  1,763,000  49%  901,000  51%
OEM Systems  332,000  7%  274,000  8%  58,000  21%
Spare Parts, Services and Other  1,154,000  23%  1,021,000  28%  133,000  13%
TOTAL $5,031,000    $3,603,000    $1,428,000  40%

FAQ

What were Sono-Tek's Q1 FY2025 net sales?

Sono-Tek's Q1 FY2025 net sales were $5.03 million, a 40% increase compared to the previous year.

How much did Sono-Tek's net income increase in Q1 FY2025?

Sono-Tek's net income increased by 525% in Q1 FY2025, reaching $331,000, or $0.02 per share.

What is Sono-Tek's sales growth guidance for Q2 FY2025?

Sono-Tek anticipates sales growth of 2%-5% for Q2 FY2025.

How did Sono-Tek's gross profit change in Q1 FY2025?

Sono-Tek's gross profit increased by 38% to $2.45 million in Q1 FY2025.

What was Sono-Tek's operating income for Q1 FY2025?

Sono-Tek's operating income for Q1 FY2025 was $238,000, up from an operating loss of $92,000 in the prior year.

Did Sono-Tek's gross margin increase or decrease in Q1 FY2025?

Sono-Tek's gross margin slightly decreased to 48.8% in Q1 FY2025 from 49.3% in the previous year.

What was Sono-Tek's equipment and service-related backlog at the end of Q1 FY2025?

Sono-Tek's equipment and service-related backlog was $7.83 million at the end of Q1 FY2025, a 16% decrease from February 2024.

Sono-Tek Corporation

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