COLUMBUS, Ohio (July 29, 2022) – SCI Engineered Materials, Inc. (“SCI”) (SCIA: OTCQB), today reported financial results for the three and six months ended June 30, 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, said, “Record total revenue and gross profit for this year’s second quarter and first six months contributed to record income applicable to common stock. Our financial results for the first half of 2022 benefited from increased volume, improved product mix and actions to mitigate the impact of significantly higher raw material costs. We entered the third quarter with solid order backlog and are cautiously optimistic our markets will remain relatively stable during the second half of this year despite continued economic uncertainties. The Company remains focused on factors we can directly influence which are contributing to manufacturing efficiencies and additional growth opportunities.”
Financial Highlights
Total Revenue
Total revenue increased to a record $6,505,005 for the three months ended June 30, 2022, from $1,972,049 for the same period in 2021. For the first six months of 2022, total revenue was a record $11,831,437 compared to $4,994,359 a year ago. Higher pricing (primarily increased raw material costs) and favorable product mix contributed to the revenue increases for both periods.
Order backlog was approximately $5.3 million on June 30, 2022, compared to $3.0 million on March 31, 2022. Customer orders accelerated during the second quarter of 2022 with continued emphasis on intra-quarter shipments.
ERC Tax Credit
During each of the first three quarters of 2021, the Company recorded an Employee Retention Credit (ERC). The Company recognized $151,701 of this federal tax credit in the 2021 second quarter. For the first half of 2021, cost of revenue and operating expenses were lower due to the $238,275 and $168,933 ERC benefit, respectively.
Gross Profit
Gross profit increased to $1,377,668 for the 2022 second quarter from $562,554 the prior year. For the six months ended June 30, 2022, gross profit increased to $2,371,769 from $1,365,590 a year ago. Significantly higher revenue was the key factor contributing to higher gross profit for both periods in 2022.
Operating Expenses
Operating expenses (general and administrative, R&D, and marketing and sales) were $623,626 for the three months ended June 30, 2022, versus $384,519 a year ago. For the first half of 2022, operating expenses were $1,166,033 compared to $762,012 the prior year. The increases for both periods in 2022 were primarily attributable to additional staff, higher travel expenses related to in-person customer visits and trade shows, plus higher compensation, and professional expenses.
EBITDA*
The Company’s 2022 second quarter EBITDA (earnings before interest, income taxes, depreciation, and amortization) was $853,823 versus $290,642 a year ago. For the first six months of 2022, EBITDA increased to $1,403,088 from $1,150,253 the prior year. Record total revenue and gross profit contributed to the increases.
Income Applicable to Common Stock
Income applicable to common stock increased to $664,873, representing $0.15 per share, from $115,510, or $0.03 per share, for the same period last year. For the six months ended June 30, 2022, income applicable to common stock was $1,049,274 compared to $762,057 in 2021. Higher revenue and gross profit were key factors contributing to the increases.
Net Cash and Total Debt Outstanding
Cash on hand was a record $5,409,210 on June 30, 2022. This 31% increase since 2021 year-end was primarily due to strong cash from operations of $1,490,066 for the first six months of 2022.
Total debt outstanding (finance lease obligations) was $195,392 on June 30, 2022, representing a decrease of 39% from the same date in 2021.
*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.
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 users 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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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 affect the Company’s projections in the future. 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.