- Strong demand in leading markets drove sales up 5.5% over fiscal 2018 to $11.6 million with gross margin of 45%; For the fourth quarter, sales grew 1% over prior-year period with gross margin of 46%
- Investments in sales and marketing to win leading market positions in alternative energy and medical market applications impacted operating margin
- Record orders of $13.4 million in fiscal 2019, up 145% over prior year, from strong demand in microelectronics/electronics and alternative energy markets
- Achieved record backlog at year end of $3.0 million, up 145% from backlog of prior year. Backlog includes $1.7 million order for a newly introduced Robotic Coating Platform
- Expect sales growth of 15% to 20% in fiscal 2020 and measurable conversion of sales to operating income and earnings
MILTON, N.Y., May 28, 2019 – Sono-Tek Corporation (OTCQX: SOTK) the leading developer and manufacturer of ultrasonic coating systems, today reported financial results for its fourth quarter and fiscal year ended February 28, 2019 (“fiscal 2019”).
“Our strategy to expand the addressable market for our unique ultrasonic coating technology continues to gain traction. We developed new, complex solutions for the Alternative Energy, Microelectronics and Medical markets during the year. These more complex solutions address high value applications for our customers and provide economically compelling alternatives to traditional coating technologies. We have focused our sales and marketing resources on these targeted opportunities and, combined with strong market conditions, drove sales up 5.5% to $11.6 million,” commented Dr. Christopher L. Coccio, Chairman and CEO.
Dr. Coccio concluded, “Our strong pipeline of opportunities gained momentum this last year. This momentum, combined with our record backlog of $3.0 million, provides us confidence in our expectations to grow revenue approximately 15% to 20% in fiscal 2020. While we will continue to invest in advancing our technologies through new product development and building an experienced staff of application engineers to drive growth, we expect that we should demonstrate solid operating leverage on the higher volume in fiscal 2020 as well.”
Fiscal 2019 Review (Results compared with fiscal 2018)
| ($ in thousands) | Change | ||||||
| FY 2019 | FY 2018 | $ | % | ||||
| Net Sales | $ 11,610 | $ 11,008 | $ 602 | 5.5% | |||
| Gross Profit | $ 5,249 | $ 5,296 | (47) | (1%) | |||
| Gross Margin | 45.2% | 48.1% | |||||
| Operating Income (Loss) | $ 82 | $ 382 | (300) | (79%) | |||
| Operating Margin | .7% | 3.5% | |||||
| Net Income | $ 162 | $ 368 | $ (206) | (56%) | |||
| Net Margin | 1.4% | 3.3% | |||||
The increase in net sales reflects higher volume in Multi-Axis Systems and OEM Systems due in large part to growth in the alternative energy markets, being led by fuel cell development programs in China, and, more recently, Europe.
In fiscal 2019, approximately 65% of sales originated outside of the United States and Canada. This compares with 56% in fiscal 2018. The geographic shift was mostly due to higher sales to Asian markets
Gross margin decreased due to a combination of mix and the Company’s pricing strategy to establish its ultrasonic coating technology as the product of choice in Asia for fuel cell applications. The Company expects margins on this equipment to improve as it gains volume and improves material productivity and operating efficiencies.
The Company continued to invest in new product development and associated marketing as it addressed market expansion opportunities. Sono-Tek formed a software engineering team dedicated to the integration of manufacturing operations and key vendors. In addition, the team will drive the value engineering process to improve material and manufacturing synergies that are driven by highly intuitive interface technology.
Sono-Tek achieved net income of $0.2 million, or $0.01 per basic and diluted share, this compared with $0.4 million, or $0.02 per basic and diluted share in the prior year. The decline in net income was the result of aggressive investment in expanding the sales team and product development, as well as investments in engineering to advance operational capability and productivity.
Fourth Quarter Fiscal 2019 Review (Results compared with the fourth quarter of fiscal 2018)
| ($ in thousands) | Change | ||||||
| FY 2019 | FY 2018 | $ | % | ||||
| Net Sales | $ 2,936 | $ 2,894 | $ 42 | 1% | |||
| Gross Profit | $ 1,336 | $ 1,350 | (14) | (1%) | |||
| Gross Margin | 45.5% | 46.7% | |||||
| Operating Income (Loss) | $ (14) | $ 94 | (108) | (115%) | |||
| Operating Margin | (.46%) | 3.3% | |||||
| Net Income | $ 61 | $ 103 | $ (42) | (41%) | |||
| Net Margin | 2.1% | 3.6% | |||||
Balance Sheet and Cash Flow Overview
Net cash used in operating activities was $109,000 in fiscal 2019, compared with generating $1,802,000 in fiscal 2018. Capital expenditures in fiscal 2019 increased to $0.5 million compared with $0.2 million in the prior fiscal year. In fiscal 2019, the Company invested in new CNC machinery and other equipment to expand production capacity for expected volume and to enhance its precision machining capabilities for new ultrasonic coating solutions.
At February 28, 2019, the Company had total debt of $871,000, down $156,000 from fiscal 2018 year-end. Total debt is approximately 10% of the Company’s total capitalization and is related to the mortgage on the industrial park where the Company’s manufacturing operations are located.
Sono-Tek has a revolving credit line of $1,500,000 and a $750,000 equipment purchase facility, both of which had no outstanding borrowings at year-end.
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 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
We 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, competitive, technological and trade barrier developments affecting our operations or the demand for our products; timely development and market acceptance of new products; adequacy of financing; capacity additions; the ability to enforce patents; completion of backlog during the current fiscal year and the ability to achieve increased sales volume at projected levels and continued profitability.
For more information, contact:
Stephen Bagley
Chief Financial Officer
Sono-Tek Corporation
info@sono-tek.com