Q2 Sequential Revenue Growth Meets Quarterly Guidance of 2%-5%
Record Equipment and Service Backlog of $11.7 Million
First Half Revenue Growth of 10% YOY, First Half Net Income Growth of 13% YOY
Expects Continued Revenue Growth for Full Fiscal Year 2025
Conference Call Today at 10:00 am ET
MILTON, N.Y., Oct. 15, 2024 (GLOBE NEWSWIRE) -- Sono-Tek Corporation (NASDAQ:SOTK), the leading developer and manufacturer of ultrasonic coating systems, today reported financial results for the second quarter and first half of fiscal year 2025, ended August 31, 2024.
Second Quarter and First Half Fiscal 2025 Highlights
Net Sales for the quarter decreased by 8% or $477,000 to $5,162,000 compared to the second quarter of fiscal 2024, which saw elevated sales due to the resolution of supply chain challenges, which had previously impacted the Company's operations. Second quarter revenue increased 3% sequentially to $5.2 million, meeting quarterly guidance of 2%-5% growth, driven by strong shipments to the clean energy and electronics markets.
Record first half fiscal 2025 revenue increased by 10% year over year to $10.2 million compared to $9.2 million.
First half fiscal 2025 gross profit increased 9% year over year to $5.0 million compared with $4.6 million.
First half fiscal 2025 net income increased 13% year over year to $672 thousand, or $0.04 per share, compared with $595 thousand, or $0.04 per share.
As of August 31, 2024, cash, cash equivalents and marketable securities totaled $11.6 million with no outstanding debt.
Backlog and Expected Revenue Growth for Fiscal Year 2025
Total equipment and service-related backlog increased 7% year over year and 50% sequentially to a record $11.7 million, compared to $10.9 million at the end of Q2 FY2024, and $7.8 million at the end of Q1 FY2025.
Continued revenue growth is expected for the full fiscal year 2025, ending February 28, 2025.
"Sono-Tek continued its fiscal year with solid sales momentum and profitability and is looking forward to a strong second half with increasing orders from the green energy sector combined with strength in the semiconductor/electronics markets. Additionally, we are aggressively moving forward on full production systems with the potential for multiple repeat orders this year," according to Dr. Christopher L Coccio, Executive Chairman.
Steve Harshbarger, CEO & President of Sono-Tek, remarked, "Our growth strategies are continuing to gain momentum as our customers move from R&D and pilot machines to our complex large-scale production systems with significantly higher Average Selling Prices (ASP). We are excited by our broadened addressable market and believe we can continue to grow sales on a larger scale. Our move into the clean energy sector is showing transformative results in next-gen solar cells, fuel cells, green hydrogen generation, and carbon capture applications. Additionally, we remain excited about our prospects for attracting additional high-volume, high-ASP production system orders in fiscal year 2025. With strong sales momentum, continued profitability and record backlog bolstered by our solid balance sheet, we remain focused on continued execution and look forward to building on our record first half revenues."
Second Quarter Fiscal 2025 Results
(Narrative compares with prior-year period unless otherwise noted) ($ in thousands)
Three Months Ended August 31,
Change
2024
2023
$
%
Net Sales
$
5,162
$
5,639
(477
)
(8
%)
Gross Profit
$
2,516
$
2,801
(285
)
(10
%)
Gross Margin
49
%
50
%
Operating Income
$
286
$
566
(280
)
(49
%)
Operating Margin
6
%
10
%
Net Income
$
341
$
541
(200
)
(37
%)
Net Margin
7
%
10
%
Second Quarter Fiscal 2025 Product and Market Sales Overview
Net Sales for the quarter decreased by 8% or $477,000 to $5,162,000 compared to the second quarter of fiscal 2024 which reflected a strong recovery from supply chain constraints. Net sales increased 3% sequentially to $5.2 million in the second quarter of fiscal 2025. The increase was primarily driven by increased demand for Integrated Coating systems which are commonly used for high volume production platforms in the clean energy sector.
Integrated Coating System sales accelerated significantly from growing market acceptance of the new PLC based platform systems developed under Sono-Tek's Altair program. During the second quarter, two high ASP systems using the Altair developed capabilities shipped to a large solar company valued at $1,460,000.
Fluxing system sales dipped this quarter with softening activity from the printed circuit board sector, although quoting activity remains strong for these products with recent significant distributor changes.
OEM sales dipped as well due to many OEM partners having previously built-up excess inventory to combat supply chain concerns and partially due to a reduction in sales of our China based OEM partners products due to China's struggling economy.
Sales to the Alternative/Clean Energy market grew 37% and were positively impacted by significant government investments and a growing number of Sono-Tek's customers transitioning from R&D systems to production scale systems that carry much higher ASPs. Sono-Tek platforms are used in the manufacturing of advanced solar cells and for critical membranes used in carbon capture, green hydrogen generation and fuel cell applications.
Electronics market sales increased 51% influenced by the shipment of two systems of a newly developed coating system with wafer shuttling capabilities for the semiconductor market.
Medical sales were down 77%, primarily driven by lower demand for stent and balloon coating systems. However, based on current backlog and order activity, the Company expects balloon coating system sales to recover in the second half of the year. In contrast, stent coating system sales are likely to remain subdued as several customers in this market have reported slower business activity.
Industrial sales declined by 30% partially influenced by a float glass coating system that shipped in the prior fiscal year and did not repeat in the current fiscal year.
Second Quarter FY 2025 Financial Overview
The three-month periods ended August 31, 2024 and 2023 are referred to as the second quarter of fiscal 2025 and fiscal 2024, respectively.
Revenue for the second quarter of fiscal 2025 was $5.2 million, compared to $5.6 million for the second quarter of fiscal 2024, in line with quarterly guidance and reflecting elevated sales in the second quarter of fiscal 2024 as supply chain issues alleviated.
Gross profit was $2.5 million, compared with $2.8 million for the second quarter of fiscal 2024. The gross profit percentage was 49% compared with 50% for the prior year period, primarily due to product mix, inclusive of a decrease in OEM systems sales which typically have high profit margins, and the reallocation and recharacterization of specific labor expenses from the engineering department to cost of goods sold that started in the fourth quarter of fiscal year 2024 as an outcome of the completion of several successful R&D endeavors. During the quarter, the decrease in gross profit was partially offset by favorable warranty expense reserves.
Operating expenses were $2.2 million for the second quarter of each fiscal 2025 and 2024.
Research and product development costs decreased 12% year over year to $696 thousand due to a decrease in salary associated with the departure of a senior engineer, a decrease in research and development materials and the reallocation and recharacterization of specific labor expenses from the engineering department to cost of goods sold that started in the fourth quarter of fiscal year 2024 as an outcome of the completion of several successful R&D endeavors.
Marketing and selling expenses increased 5% year over year to $988 thousand primarily due to increases in commissions, travel and trade show expenses, partially offset by a decrease in salary expenses. General and Administrative expenses increased 9% year over year to $546 thousand primarily due to increased salaries, legal and audit fees and other corporate expenses.
Operating income was $286 thousand compared to $566 thousand in the prior year period, primarily due to the decrease in revenue and gross profit. Operating margin for the quarter was 6% compared to 10% in the prior year period.
Net income was $341 thousand, or $0.02 per share, compared with $541 thousand, or $0.03 per share, for the second quarter of fiscal 2024, primarily due to a decrease in gross profit.
Diluted weighted average shares outstanding were 15,768,251 million compared to 15,773,665 for the prior year period.
First Half Fiscal Year 2025 Overview(Narrative compares with prior-year period unless otherwise noted) ($ in thousands)
Six Months Ended August 31,
Change
2024
2023
$
%
Net Sales
$
10,193
$
9,242
951
10
%
Gross Profit
$
4,971
$
4,578
393
9
%
Gross Margin
49
%
50
%
Operating Income
$
524
$
474
50
11
%
Operating Margin
5
%
5
%
Net Income
$
672
$
595
77
13
%
Net Margin
7
%
6
%
Total sales increased by 10% to $10.2 million in the first half of fiscal 2025 compared to $9.2 million for the first half of fiscal 2024, strongly impacted by increased sales from the Alternative Energy Market due to the shipment of three high ASP systems to a large solar company totaling $2,190,000.
Gross profit increased 9% to $5.0 million for the first half of fiscal 2025 compared with $4.6 million in the first half of fiscal 2024. The gross profit margin was 49% compared with 50% for the prior year period.
Operating income increased 11% to $524 thousand compared with $474 for the first half of fiscal 2024. Operating margin for the first half of fiscal 2024 was nearly even at 5% compared with 5% in the first half of fiscal 2024.
Net income increased 13% to $672 thousand, or $0.04 per share, for the first half of fiscal 2025 compared with $595 thousand, or $0.04 per share, for the first half of fiscal 2024.
Diluted weighted average shares outstanding were 15,771,472 compared to 15,775,032 for the prior year period.
Balance Sheet and Cash Flow Overview
At August 31, 2024, cash, cash equivalents and marketable securities totaled $11.6 million, with no debt, and stockholders' equity was $17.0 million.
Capital expenditures in the first half of fiscal 2025 were $191,000, which were invested in ongoing upgrades to the Sono-Tek's manufacturing facilities. Sono-Tek anticipates capital expenditures will total approximately $460,000 in fiscal year 2025.
Conference Call Information
Sono-Tek will hold a conference call to discuss its second quarter and first half of fiscal year 2025 financial results today, Tuesday, October 15, 2024 at 10:00 am ET. To participate, please call 1-844-481-2752 at least 10 minutes prior to the start of the call and ask to join the Sono-Tek call.
A simultaneous webcast of the call may be accessed through the Company's website, Events & Presentations | ...
