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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 2024, ended May 31, 2023.
First Quarter Fiscal 2023 Highlights (compared with the first quarter of fiscal 2023 unless otherwise noted). The three-month periods ended May 31, 2023 and 2022 are referred to as the first quarter of fiscal 2024 and fiscal 2023, respectively.
"The first quarter of fiscal 2024 continued to be impacted by lingering supply chain issues, however, we've made significant progress improving the situation, which is expected to begin to positively impact shipments in the current fiscal quarter that began on June 1, 2023. This positive development is due to a combination of vendor initiatives and our own success increasing our internal vertical integration.
"With these issues continuing to improve, we are moving aggressively forward with full production of the delayed systems that have the potential for multiple repeat orders this year. Our record backlog has grown to $9.96 million at quarter end from both delayed shipments to customers and the new orders that we've received. Since our fiscal year ended in February, backlog has grown 17% and is 135% higher than a year ago. Supported by the orders in hand and expected from the Green Energy sector, activity in our development labs, and the recovery of a more reliable supply chain, Sono-Tek is looking forward to an excellent year," said Dr. Christopher L Coccio, Chairman and CEO.
First Quarter Fiscal 2024 Results
(Narrative compares with prior-year period unless otherwise noted) ($ in thousands)
| Change | ||||||||||
| FY 2023 | FY 2022 | $ | % | |||||||
| Net Sales | $ | 3,603 | $ | 4,052 | $ | (449 | ) | -11 | % | |
| Gross Profit | $ | 1,777 | $ | 2,107 | $ | (330 | ) | -16 | % | |
| Gross Margin | 49.32 | % | 52.00 | % | ||||||
| Operating (Loss)/Income | $ | (92 | ) | $ | 381 | $ | (473 | ) | -124 | % |
| Operating Margin | -2.55 | % | 9.40 | % | ||||||
| Net Income | $ | 53 | $ | 306 | $ | (253 | ) | -83 | % | |
| Net Margin | 1.47 | % | 7.55 | % | ||||||
First Quarter Fiscal 2024 Sales Overview
Net sales were $3,603,000 in the first quarter of fiscal 2024, a decrease of 11%. The decrease was primarily due to the impact of delayed shipments to customers resulting from lingering supply chain issues.
Integrated Coating System sales increased by 84%, largely due to the final delivery of a multi-system order to an industrial market customer. Sales of Multi-Axis coating systems recorded an 11% decrease due to the lingering supply chain challenges in the period that resulted in the shipping delay of several large system orders. OEM System sales decreased by 51% resulting from several OEM customers purchasing higher than typical quantities of systems in FY2023 in order to build their own excess supply of inventory.
Sales to the Alternative Energy and Industrial markets increased by 37% and 219% respectively. The Alternative Energy market was impacted by the continued adoption of Sono-Tek platforms used in the manufacturing of critical membranes for carbon capture, green hydrogen generation and fuel cells applications. The Industrial market was positively impacted by the final shipment of a multi-system order. Sales to the Medical market decreased by 77%, due to the delayed delivery of several multi-axis coating machines. These systems are presently scheduled for shipment in Q2 FY2024.
Approximately 66% of sales were to the U.S. and Canada compared to 48% in the comparable period of fiscal 2023. The increased sales to the U.S. and Canada were positively impacted by several U.S. government initiatives to invest in the green energy sector and advanced research markets. EMEA sales decreased by 57% primarily due to the previously mentioned supply chain related shipment delays of multi-axis systems.
Backlog on May 31, 2023 was $9,957,000, a record high and an increase of 17% compared with backlog of $8,541,000 on February 28, 2023. Backlog increased 135% from the $4,230,000 backlog at May 31, 2022, the end of the first quarter of fiscal 2023. The increase in backlog is due to the receipt of additional orders as well as the delay in shipments due to supply chain issues.
First Quarter FY 2024 Financial Overview
Gross profit was $1,777,000, a decrease of 16% compared with $2,107,000 for the first quarter of fiscal 2023. The gross profit margin was 49.3% compared with 52% for the prior year period, primarily due to a less favorable product mix resulting from the lingering supply chain issues in the period.
Operating expenses were $1,869,000, an 8% increase from the prior year period. Research and product development costs increased 27% to $656,000 primarily due to increased salaries and the higher costs of research and development materials and supplies, which are directed to the Company's ongoing focused growth initiatives. Marketing and selling expenses increased 1% to $801,000 primarily due to increases in salaries, and travel and trade show expenses, partially offset by a decrease in sales commissions. General and Administrative expenses decreased 2% to $412,000 primarily due to decreases in stock-based compensation, professional fees and corporate expenses, partially offset by an increase in salaries.
Operating income decreased $473,000 when compared to the prior year period to an operating loss of $92,000. The current period's operating loss is a result of the decrease in gross profit combined with an increase in operating expenses in the first quarter of fiscal 2024.
Interest, dividend income and unrealized gain on marketable securities increased $128,000 to $124,000 due to the current high interest rate environment in the first quarter of fiscal 2024.
Net income was $53,000, or $0.00 per share, compared with $306,000, or $0.02 per share, for the first quarter of fiscal 2023, primarily due to a decrease in operating income partially offset by an increase in interest and dividend income and an income tax benefit for the period. Diluted weighted average shares outstanding were 15,769,442 compared to 15,752,424 for the prior year period.
Balance Sheet and Cash Flow Overview
At May 31, 2023 cash, cash equivalents and marketable securities totaled $12.1 million, Sono-Tek had no debt on its balance sheet and stockholders' equity was $14.7 million.
At May 31, 2023, the Company had received approximately $3.6 million in cash deposits from its customers. These deposits are downpayments from customers for current orders.
Capital expenditures in the first quarter of fiscal 2024 were $149,000 which were invested in ongoing upgrades to the Company's manufacturing facilities. Sono-Tek anticipates capital expenditures will total approximately $500,000 in fiscal year 2024.
Posted In: SOTK
