SOTK Stock: Why It Substantially Increased Today

By Amit Chowdhry ● Oct 13, 2021
  • The stock price of Sono-Tek Corporation (NASDAQ: SOTK) increased by over 44% today. This is why it happened.

The stock price of Sono-Tek Corporation (NASDAQ: SOTK) – the leading developer and manufacturer of ultrasonic coating systems – increased by over 44% today. Investors are responding positively to Sono-Tek reporting financial results for the second quarter and first half periods of the fiscal year 2022, which ended August 31, 2021.

Q2 FY2022 Financial Highlights:

(Compared with a prior-year period unless otherwise noted)

— Net sales were $4,070,000, up 17% or $589,000, driven by increased sales of OEM systems to the China market.

— Gross Profit increased 28% to $2,074,000 due to higher sales and product mix.

— Gross Margin expanded 440 basis points to 51.0% primarily due to product mix.

— Operating income increased 123% to $449,000, compared to $201,000.

— Net income was $344,000, an increase of 93%.

— Backlog reached a record high of $6,332,000, an increase of 45% compared with backlog of $4,380,000 on May 31, 2021 (the end of the fiscal Q1) and increased 64% compared to backlog of $3,851,000 on February 28, 2021 (the end of fiscal 2021).

— Uplisted to Nasdaq Capital Market on August 27, 2021.

First Half Fiscal 2022 Highlights

(Compared with prior-year period unless otherwise noted)

— Net Sales were $7,715,000, an increase of 12%, primarily driven by strength in the semiconductor and electronic diagnostic coating markets.

— Gross Profit increased 23% to $3,898,000 due to higher sales and product mix.

— Gross Margin expanded 440 basis points to 50.5% primarily due to product mix and lower than expected warranty and installation costs.

— Operating Income increased 105% to $791,000 due to increases in gross profit, partially offset by increases in operating expenses.

— Income before taxes increased 94% to $802,000, excluding the benefit from PPP loan forgiveness of $1.0 million.
As of August 31, 2021, the Company had no outstanding debt.

Guidance

— Sales Growth Guidance for the third and fourth quarters of FY2022 is for double-digit increases over the comparable periods of last year.

— Sono-Tek continues to expect the highest annual sales in corporate history for the fiscal year 2022, ending February 28, 2022.

KEY QUOTES:

“Sono-Tek had another strong performance in the second quarter of fiscal 2022. Net sales increased 17% with strength in multi-axis coating systems and the OEM markets for semiconductor and fluxing systems. The electronics/microelectronics segment again accounted for a large portion of the quarter’s sales, 36% compared to 23% in the second quarter of last fiscal year, driven by sales of systems for diagnostic coatings on electronic devices for COVID-19 test kits and the ongoing global shortages and investments in semiconductors. Approximately 62% of sales originated outside of the US and Canada in the quarter. APAC accounted for 65% of foreign sales, led by sales to China. We expect continued international growth as countries around the world roll back COVID-19 restrictions and bring manufacturing capacity back online. We’ve already begun to see increased activity in our global network of process development labs. We effectively contained costs in the quarter and the product mix was favorable, enabling a 28% increase in gross profit to $2.1 million and a 440 basis point expansion in gross margin to 51.0%. Operating income more than doubled and net income increased 93%. Backlog reached a record high of $6.3 million, an increase of 45% from the end of the first quarter and an increase of 64% from the end of our last fiscal year on February 28, 2021.”

“The outlook is strong as well. We expect double-digit sales increases for both the third and fourth quarters of the fiscal year based on the strength of our backlog. We expect this growth to generate the highest annual sales in corporate history for the year ending in February 2022. We’re very excited about this expanded revenue which reflects the success of our strategic shift to provide higher value, complete machine solutions and larger subsystems to OEMs. Our continued positive trajectory undoubtedly facilitated the uplisting of our common stock to the Nasdaq Capital Market during the second quarter. SOTK began trading on Nasdaq on August 27th, and we rang the closing bell a few days later to mark the achievement of this important milestone.”

— Dr. Christopher L. Coccio, Chairman and CEO

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.