COLUMBUS, Ohio (October 28, 2022) – SCI Engineered Materials, Inc. (“SCI”) (SCIA: OTCQB), today reported financial results for the three and nine months ended September 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, commented, “Total revenue of $17.6 million for the first nine months of this year exceeded the 2021 full-year amount. Our financial results for the 2022 year-to-date and third quarter periods reflect solid progress, especially considering the one-time Employee Retention Tax credits and first quarter gain on extinguishment of debt recognized in 2021. We are proactively managing our business in a challenging environment while pursuing exciting growth initiatives.”
Mr. Young continued, “During the 2022 third quarter we installed a new vacuum hot press. This new equipment increases our manufacturing capacity and has already enabled us to develop new products. These achievements enhance our R&D and marketing initiatives which involve active collaboration with our customers to create innovative, value-added solutions.”
Financial Highlights
Total Revenue
For the nine months ended September 30, 2022, total revenue increased 73% to a record $17,648,275 compared to $10,205,528 for the same period last year. Total revenue for the 2022 third quarter increased 12% to $5,816,838 from $5,211,169 a year ago. Higher pricing (primarily raw material costs), higher volume, and product mix contributed to the increases.
Order backlog was approximately $4.2 million on September 30, 2022, compared to $3.6 million a year ago. Orders remain solid while customers continue to prefer intra-quarter shipments.
ERC Tax Credit
The Company recorded an Employee Retention Credit (ERC) during each of the first three quarters last year (2021). For the 2021 year-to-date period, recognition of the ERC totaled $560,921, which resulted in lower cost of revenue ($323,038) and lower operating expenses ($237,883).
Gross Profit
Gross profit increased 33% to $3,543,352 for the first nine months of 2022 from $2,667,958 last year due to record year-to-date revenue. For the three months ended September 30, 2022, gross profit was $1,171,583 compared to $1,302,368 last year. The 2022 third quarter’s higher volume and product mix was offset by increased raw material costs and the fact that the 2021 third quarter benefited from the ERC.
Operating Expenses
Operating expenses (general and administrative, research and development, and marketing and sales) were $1,727,901 for the 2022 year-to-date period compared to $1,187,353 last year. The 2022 third quarter operating expenses were $561,868 versus $425,341 a year ago. Excluding the ERC recognized in 2021, operating expenses still increased primarily due to additional staff, higher compensation, professional expenses, and increased travel expenses.
EBITDA*
EBITDA (earnings before interest, income taxes, depreciation, and amortization) of $2,112,174 for the nine months ended September 30, 2022, was flat compared to the same period last year. The Company’s 2022 third quarter EBITDA was $708,717 versus $968,063 the prior year. Lower gross profit and higher operating expenses impacted the 2022 third quarter comparison.
Income Applicable to Common Stock
For the 2022 year-to-date period, income applicable to common stock was $1,491,977 versus $1,424,701 the prior year, an increase of approximately 5%. This increase was achieved despite the prior year’s results benefiting from a $325,300 gain on extinguishment of debt and the $560,921 ERC. Earnings per common share were $0.33 compared to $0.32 in 2021.
For the 2022 third quarter, income applicable to common stock was $442,703, or $0.10 per share, versus $662,644, or $0.15 per share in the prior year. Increased revenue was offset by lower gross profit (due to higher raw material costs) and higher operating expenses.
Net Cash and Total Debt Outstanding
Cash on hand on September 30, 2022, was a record $5,614,257, a 36% increase since 2021 year-end, due primarily to $2,051,679 from net cash provided by operating activities. During the 2022 third quarter, the Company paid $245,000 in cash for the remaining amount due plus installation costs for its new vacuum hot press.
Total debt outstanding (finance lease obligations) was $171,087 on September 30, 2022, a decrease of approximately 30% versus the end of 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.