COLUMBUS, Ohio (February 4, 2022) – SCI Engineered Materials, Inc. (“SCI”) (SCIA: OTCQB), today reported financial results for the three months and twelve months ended December 31, 2021. SCI is a global supplier and manufacturer of advanced materials for physical vapor deposition thin film applications who works closely with end users and OEMs to develop innovative, customized solutions.
Jeremy Young, President and Chief Executive Officer, said “We achieved record revenue and earnings per share in 2021, ended the year with record cash, and also strengthened our balance sheet. Plans are being implemented to build upon these successes, which include increasing SCI’s presence in dynamic industry niches, adding new customers and developing innovative, market-driven applications. These initiatives enable us to leverage our manufacturing, bonding, and custom powder solutions capabilities.”
Mr. Young added, “The Company and its customers continue to be impacted by COVID variants, global supply chain issues and semiconductor chip shortages, which are currently expected to continue well into 2022. SCI has achieved record annual results during the past two years despite these factors contributing to uneven quarterly performance. We are encouraged by the volume of orders received during the first month of this year, which have accelerated since year-end as our customers continue to manage their businesses and adapt to changing market conditions. As this year progresses, SCI’s performance will be driven by well-defined and flexible growth plans as we continue to benefit from our improved financial and market positions.”
Financial Highlights
Total Revenue
Total revenue increased 23% to a record $13,448,021 for the twelve months ended December 31, 2021, compared to the prior year. This was attributable to increased volume and higher raw material pricing. For the 2021 fourth quarter, total revenue was $3,242,493 versus $3,356,639 a year ago as customers adapted their order patterns to market uncertainties.
Order backlog was $3.3 million on December 31, 2021, compared to $2.6 million on the same date a year ago.
ERC and ARP Tax Credits
The Company recorded Employee Retention Credit (ERC) and American Rescue Plan (ARP) tax credits totaling $571,962 during the first three quarters of 2021. Of that amount, $328,356 was recognized in gross profit and $243,606 was recognized in operating expenses. These tax credits were no longer available to the Company after September 30, 2021.
Gross Profit
Gross profit increased 61% to $3,529,255 for the 2021 full year from $2,198,290 for 2020, benefiting from solid revenue growth, product mix, improved efficiency, and the tax credits. Excluding the tax credits, gross profit increased approximately 46%.
The Company’s 2021 fourth quarter gross profit increased 9% to $861,297 from $792,029 a year ago, principally due to product mix and higher raw material pricing.
Operating Expenses
Operating expenses (general and administrative, R&D, and marketing and sales) increased 4% for the 2021 full year compared to the prior year. This was driven by higher compensation and professional fees, and increased marketing and sales activity, partially offset by the tax credits. Excluding the tax credits, operating expenses for the 2021 full year were $1,994,955 versus $1,681,943 in 2020.
Operating expenses were $563,996 for the 2021 fourth quarter compared to $458,484 a year ago.
EBITDA*
Earnings before interest, income taxes, depreciation, and amortization (EBITDA) increased 161% to $2,536,686 for the full-year 2021 from $972,094 a year ago. Increased gross profit and the impact of the tax credits were the primary factors. EBITDA for the 2021 fourth quarter was $401,677.
Income Taxes
Income tax expense was $392,242 for the 2021 full year compared to a tax benefit of $1,017,503 the prior year. For the 2021 fourth quarter, income tax expense was $53,960 versus the income tax benefit of $1,019,403 for the same period in 2020.
Income Applicable to Common Stock
Income applicable to common stock increased 12% to a record $1,654,672 ($0.37 per share), for the twelve months ended December 31, 2021, from $1,477,611 ($0.33 per share), the prior year. This increase was principally due to record revenue, higher gross profit, the tax credits, and forgiveness of the Company’s Paycheck Protection Program (PPP) loan in January 2021.
For the 2021 fourth quarter, income applicable to common stock was $229,971 ($0.05 per share) compared to $1,335,250 ($0.30 per share) in 2020 (which included the large one-time income tax benefit).
Net Cash and Total Debt Outstanding
On December 31, 2021, net cash was $4,140,942, an increase of approximately 42%.
Total debt outstanding was $243,218 on December 31, 2021, a 67% decrease since 2020 year-end, primarily due to the forgiveness of the $325,300 PPP loan.
About SCI Engineered Materials, Inc.
SCI Engineered Materials is a global supplier and manufacturer of advanced materials for PVD thin film applications who works closely with end user and OEMs to develop innovative, customized solutions. Additional information is available at www.sciengineeredmaterials.com or follow SCI Engineered Materials, Inc. at:
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*Note Regarding Non-GAAP Financial Measure
A reconciliation of the differences between the GAAP and non-GAAP financial measure of EBITDA as used in this release with the most directly comparable GAAP financial measures is included in the financial schedules that are a part of this release. This non-GAAP financial measure is intended to supplement and should be read together with our financial results. It should not be considered an alternative or substitute for, and should not be considered superior to, our reported financial results. Accordingly, users of this financial information should not place undue reliance on this non-GAAP financial measure.
Forward-Looking Statements
This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Those statements include, but are not limited to, all statements regarding intent, beliefs, expectations, projections, customer guidance, forecasts, plans of the Company and its management. These forward-looking statements involve numerous risks and uncertainties, including without limitation, other risks and uncertainties detailed from time to time in the Company’s Securities and Exchange Commission filings, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. One or more of these factors have affected, and could in the future affect, the Company’s projections. Therefore, there can be no assurances that the forward-looking statements included in this press release will prove to be accurate. Due to the significant uncertainties in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company, or any other persons, that the objectives and plans of the Company will be achieved. All forward-looking statements made in this press release are based on information presently available to the management of the Company. The Company assumes no obligation to update any forward-looking statements.