- First quarter gross margin was 47.1%
- Operating income increased 53% to $32,000; operating margin expanded 40 basis points to 1.2%
- Achieved net income of $21,000, up 31%
- Company expects continued profitable growth for full fiscal year 2019
MILTON, N.Y., July 16, 2018 – Sono-Tek Corporation (OTCQX: SOTK), the leading developer and manufacturer of ultrasonic coating systems, today reported financial results for its fiscal 2019 first quarter ended May 31, 2018.
“Our new products and applications continue to be well received in our served markets. We are also benefitting from strong market conditions that supported the 8% increase in net sales to $2.7 million,” commented Dr. Christopher L. Coccio, Chairman and CEO. “Importantly, our investments in research and product development as well as expansion of our marketing and sales effort continue to drive future market opportunities.”
Dr. Coccio added, “With a healthy backlog and robust business pipeline, we expect to achieve stronger sales in the second quarter compared with last year’s second quarter, as well as solid growth in revenue for fiscal year 2019. We also expect with continued growth that we will begin to demonstrate operating leverage and improved margins.”
First Quarter Fiscal 2019 Review
|Three Months Ended May 31,||Change|
|Net Sales||$ 2,701,000||$ 2,501,000||200,000||8%|
|Operating Income||$ 32,000||$ 21,000||11,000||53%|
|Net Income||$ 21,000||$ 16,000||5,000||31%|
|Basic Earnings Per Share||$0.00||$0.00|
|Diluted Earnings Per Share||$0.00||$0.00|
|Weighted Average Shares -Basic||14,988,000||14,961,000|
|Weighted Average Shares – Diluted||15,089,000||15,057,000|
The Company’s net sales growth was driven primarily by demand from the Electronics/Microelectronics and Medical industries, which were up 50% to $1.3 million and 46% to $889,000, respectively. The Company’s strategy of providing paid coating services, in addition to its coating equipment, is showing success, and resulted in several shipments during the first quarter to the Medical and Electronic markets.
Sales in the Alternative Energy market decreased 66% to $173,000 due to customer delivery schedules. However, based upon the Company’s current backlog and forecast, it believes this market will show a significant increase for the remainder of the fiscal year.
From a product sales perspective, OEM Systems were up 40%, or $175,000, to $607,000 in the quarter as the Company continued to successfully provide subsystems and components, including the custom-designed Align system, to OEMs. Sales of Fluxing Systems increased $134,000 to $734,000 due to the success of the introduction of a newly developed camera recognition system, InSight, which automatically identifies different PCBs and changes the process recipes. These increases more than offset the decline in sales of Integrated Coating Systems, which reflected the fluctuation of demand in Alternative Energy, primarily in fuel cells.
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 2019, approximately 63% of sales originated outside of the United States and Canada compared with 67% in the prior-year period. As expected, the geographic shift reflects higher sales to the U.S. medical market, supported by strong economic growth in the U.S.
The change in product mix and higher direct labor and service department costs partially offset the benefit of higher volume resulting in a relatively consistent gross margin.
Operating income and margin increased as higher gross profit more than offset the 7% increase in operating expenses.
Higher interest and dividend income and realized gains on marketable securities aided net income growth to $21,000.
Balance Sheet and Cash Flow Overview
Cash and cash equivalents and short-term investments at quarter-end were $5.9 million, down from $6.4 million at the end of fiscal 2018. The decline was the result of the timing of working capital requirements primarily due to an increase in receivables and a decrease in accounts payable and accrued expenses.
The Company initiated the first phase of its CNC machining upgrade with capital expenditures increasing to $102,000 from $40,000 in the prior-year period. Sono-Tek anticipates total capital expenditures to be approximately $0.4 million to $0.6 million in fiscal 2019.
At May 31, 2018, the Company had total debt of $988,000, down $39,000 since fiscal 2018 year-end. Sono-Tek has a revolving credit line of $750,000 and a $250,000 equipment purchase facility, both of which had no outstanding borrowings at quarter-end.
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 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 microscopic 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; timely development and market acceptance of new products and paid coating services; adequacy of financing; capacity additions; the ability to enforce patents; maintenance of operating leverage; continued reduction in inventory requirements; maintenance of order backlog; consummation of order proposals; continued sales growth in the medical and alternative energy markets; and the ability to achieve increased sales volume at projected levels and continued profitability. 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
Deborah K. Pawlowski
Financial Tables Follownews sotk. 7.16.2018 10-Q 20180716 FT