COLUMBUS, Ohio (May 4, 2022) – SCI Engineered Materials, Inc. (“SCI”) (SCIA: OTCQB), today reported financial results for the three months ended March 31, 2022. 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, commented, “Our first quarter results, led by record quarterly revenue, represent a strong start to 2022. By comparison, the 2021 first quarter results benefited from a temporary federal tax credit to assist companies during the COVID pandemic, plus a gain on extinguishment of debt.”
Mr. Young added, “Challenges impacting the domestic and global economies increased during the first three months of this year. In addition to persistent supply chain issues and semiconductor shortages, inflationary pressures and international political uncertainties rose sharply since 2021 year-end. These factors contributed to customers placing a greater volume of orders for shipment intra-quarter rather than over historically longer periods of time. We continue to adapt to our customers’ short-term needs and anticipate shipments to remain strong throughout the second quarter.”
Financial Highlights
Total Revenue
Total revenue increased to a record $5,326,432 for the three months ended March 31, 2022, from $3,022,310 a year ago. Higher pricing (primarily increased raw material costs) and higher volume were key factors in the year-over-year increase.
Customer orders remain strong with continued emphasis on intra-quarter shipments. Backlog was $3.0 million on March 31, 2022.
ERC Tax Credit
The Company recorded an Employee Retention Credit (ERC) during each of the first three quarters of 2021. The Company recognized $256,000 of this federal tax credit in the 2021 first quarter, which included $151,000 in gross profit and $105,000 in operating expenses.
Gross Profit
Gross profit increased 24% to $994,101 for the first three months of 2022 from $803,036 the prior year due to higher volume, product mix and improved manufacturing efficiency. Gross margin decreased compared to a year ago due to higher raw material costs and the ERC recognized in the 2021 first quarter.
Operating Expenses
Operating expenses (general and administrative, R&D, and marketing and sales) were $542,407 for the 2022 first quarter compared to $377,493 last year. Excluding the $105,000 ERC benefit in 2021, operating expenses for the 2022 first quarter were approximately 12% above the same period a year ago due to an increase in staff and higher compensation plus travel expenses.
EBITDA*
Earnings before interest, income taxes, depreciation, and amortization (EBITDA) was $554,044 for the first three months of 2022 compared to $865,949 for the same period last year. The 2021 first quarter EBITDA benefited from the ERC ($256,000) and a gain on extinguishment of debt ($325,300).
Income Applicable to Common Stock
The 2022 first quarter income applicable to common stock was $384,401, or $0.08 per diluted share, compared to $646,547, or $0.14 per diluted share, for the 2021 first quarter. The prior year amount benefited from a $325,300 gain on extinguishment of debt, and the ERC of $256,000 pre-tax.
Net Cash and Total Debt Outstanding
Net cash was $4,646,475 on March 31, 2022.
Total debt outstanding was $219,435 on March 31, 2022, a reduction from $243,218 at 2021 year-end.
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.