IBC Advanced Alloys Corp.

Thanks, Jim, and welcome everyone. Let's go to the key points of today's update and briefing.

Let's start by looking at our financial results for the quarter and six months period ended December 31, 2020. All comparisons that I referenced in our results will be to the same three and six month periods in 2019.

IBC’s engineering materials division saw its sales rise by 12.8% and 13.1% in the quarter and year-to-date periods. Increased sales were driven largely by higher demand for semiconductor chips used in 5G network build outs and upgrades.

The increasing demand we're seeing is also being driven by the continuing growth of the Internet of Things, which is dramatically increasing the demand of computer chips in everything from our cars, to our watches, to our home appliances, to virtually everything in our lives now. Also, as many of you saw in December, the EM division was awarded new purchase orders totaling approximately $9.7 million from Lockheed Martin to produce two aerospace qualified beryllium-aluminum components for the F-35 Lightning II aircraft.

The orders expanded our work for the F-35 platform to include a second beryllium-aluminum part for the aircraft, which was previously made by a competitor. The Defense side of IBC’s beryllium-aluminum business is continuing to grow.

This is an increasingly exciting trend for us, particularly given that defense supply chains have operated largely outside of the impacts of the pandemic. Consolidated gross margin improved to 17% and 15% respectively in the quarter and the year-to-date periods versus 15.2% and 12.8% in the prior year periods.

Adjusted EBITDA grew to $273,000 in the quarter that reversed a negative adjusted EBITDA in the prior period. Year-to-date adjusted EBITDA was 87.7% higher than the previous period, a major gain for IBC.

On a comprehensive income basis, IBC lost $304,000 in the quarter, but that was a significant improvement over a comprehensive loss of $770,000 in the prior year quarter. In general, I see many, many trends heading in the right direction for the EM division in the future.

Looking more closely at our EM division, second quarter sales rose to $2.1 million from $1.8 million in the prior year period. That was a 12.8% increase.

As I mentioned, this gain was largely driven by higher demand for semiconductor chips used in the transition for 5G networks and in the rapid growth of the Internet of Things. Q2 gross margin for the division rose from 24% to 26%, Year-to-date EM gross margin notched a major gains to 24.5% from the 14.5% in the prior year period.

That was a 69% increase year-over-year. The growth we're seeing in our defense business shows that IBC is continuing innovation and our ability to make beryllium-aluminum parts less expensively than the competition is helping our customers and U.S.

taxpayers save money. That is a compelling value proposition for an increasing number of large defense contractors.

Adjusted EBITDA and Engineered Materials increased both in the quarter and year-to-date. Finally, EM posted sharply higher comprehensive income in the quarter of $173,000, that’s a 253% increase over income of $49,000 in the prior year quarter.

In our Copper Alloys division, reduced economic activity driven by the COVID pandemic temporarily advances of the copper division, those advantages advances that we were making just prior to the pandemic. However, as the economy continues to rebound, I see the copper alloy business rebounding as well.

Division sales of $2.9 million and $6.1 million for the quarter and year-to-date compared to sales of $3.5 million and $7.4 million respectively in the comparable prior years. Gross margin of 10.6% in the quarter remained unchanged from the prior year period and was down year-to-date due to fixed costs being spread over a lower volume of sales, again, largely due to the impacts of the pandemic on the economy.

Adjusted EBITDA for the quarter improved year-over-year, although it was still negative. The Division posted a year-to-date net loss of $506,000, which compared to a loss of $304,000 in the prior year period, again, largely driven by macro-economic impacts from the pandemic.

The IBC growth strategy is laid out in this chart. First point is that we plan to expand and modernize our Franklin Indiana facility.

While consolidating our current alloy casting operations in Pennsylvania and Missouri. Those operations will be moved to Franklin, Indiana.

We also want to improve efficiencies and continue to reduce our unit cost of production across both operating divisions. And finally, we want to increase our market share across both our defense and non-defense businesses.

And really what this is boiling down to is we’ve asked everyone to perform, perform, perform, execute, execute, execute, and communicate, communicate, communicate. Things are starting to [tip].

In terms of our growth strategy, starting with consolidation, we believe that modernizing and expanding our copper alloys facility in Indiana including consolidating our casting operations from Missouri and Pennsylvania to Indiana will help us to achieve the following. We will be able to expand production capacity and increase copper alloy sales by an estimated 50% from 2020 to 2024 with consolidated EBITDA rising by 718.6% over that time, for a compounded annual growth rate at 38.8%.

It will also allow us to improve the lead times to support higher sales. We will achieve an annual fixed cost savings of an estimated $1.1 million per year.

We will realize variable cost savings through better labor utilization, and increased production efficiencies. We will be able to increase our operating revenue in both copper alloys and engineered materials divisions through this consolidation.

Growth strategy two lowering our costs. We’ve already achieved significant efficiencies and cost reductions in our Franklin facility as a result of some critical capital updates we made over the past two years.

We’ve already seeing good success with this now as a result of the capital improvements made in Franklin. We also believe that our copper alloys consolidation will generate fixed cost savings as noted earlier.

Finally, upgrading our foundry equipment and process will help to improve product yields and capacities, which will also help reduce costs. And finally, the third part of our growth strategy which is increasing market shares or increasing sales.

In defense technologies, we expect to grow sales from both operating divisions particularly in those defense platforms that require beryllium based alloys, and in systems where our beryllium aluminum near-net-shape casting technology is an improvement over our competition in terms of cost and performance. In electronics, we expect capture greater market share as the Internet of Things continues to expand, given the many uses of our copper and beryllium alloys in both copper I’m sorry, in both computer chips and in the making of those chips.

In transportation the move to lightweight platforms on the ground, in the air and at sea is tailor-made for greater use of our beryllium-aluminum alloys. In space, we continue to grow sales of mission critical beryllium alloys in satellite technologies.

Finally, in the mould industry, our thermal moulds super alloys are increasingly vital to the plastic injection mould industry.

Thank you, Mark. And we will take some questions now from our audience.

For those participating on the webcast, simply type in your questions into the webcast tool on your screen, click send. For those who are participating on the listen-only call-in phone line, you can pose your questions via email to me at [email protected].

Our first question in the queue comes from Steve and Steve asks does the state of Indiana support the company's plans to expand its facility in Indianapolis - actually Franklin, and how so?

That's a great question and one that we really enjoy responding to because the support from both the state of Indiana and the local Franklin township area has just been phenomenal. We've met with various state officials, they've expressed their very strong support for the project, we've met with the local officials they've likewise expressed their very strong support for the project.

And in fact, we have received some property tax credits that will be granted to as over about a 10 year period, which further helps the financing of the project. So unbelievable support and our team has done a great job of presenting the consolidation project to all of the local officials and making sure that everybody knows what's going on and when it will happen.

Okay, our next question comes from Kevin, who asks how does the company plan to fund its expansion and consolidation of the copper alloys division?

So very, very good question and one that we haven't really provided a lot of detail on, but I'll give you some points that I think will help people reach the comfort level that the Board and I have reached in terms of moving this project forward. First thing is the property value of our Franklin facility.

The loan to value ratio is extremely in our favor right now. And we're working with various banks in the in the local area, to take advantage of that situation.

And on top of that, with the EMC division doing as well as they're doing. We're putting the EMC division into our loan package for the banks.

This increases the amount of inventory and the amount of accounts receivable available to us that we then get to turn into an advantage in terms of our line of credit. Then we have multiple other avenues that I won't get into the specifics on that we're looking into as well.

But the Board, myself and the management team remained very confident that this project will be funded, it will be successful. And you'll see a very nice turnaround in the copper’s division as a result of it.

Having said that let me also compliment the copper team and the outstanding job that they're doing. This is the division that got hit with COVID-19 no question about it.

You can just look at the sales versus the clock for pandemic experiences and we fall right in there. Marc and Rajiv and the rest of the copper team have just done an outstanding job with creativity, ingenuity, openness to new types of customers and products.

And they are really showing a nice turnaround as we speak in the sales of that division so, my compliments to the copper team.

All right, there are two questions from some European investors. Number one is what is the outlook for 2021, especially with regard to EMC?

And number two, follow-on question, can you give us an idea of how the order book is looking at the moment for both divisions?

Well first of all, let me caveat my answer with a rephrasing of the forward-looking statement section of our presentation. So I have to be - I have to be very careful here, but I do want to offer some insight there because it's always difficult for me in these conference calls to talk about something that happened last - in the second half of last year versus what we see happening this year already.

And the really, really positive news and what just gets me so excited about IBC and our future, is that - the EMC division is continuing to put contracts together in the Department of Defense sector, as well as the high technology sector. And this 5G technology has really caused and uplift in our sales.

In fact, we do have a little bit of room left in our furnace in Wilmington, Massachusetts facility. But if our sales continue to grow there, it won't be long, we're going to have to be looking for a new furnace to keep up with the demand for our customers.

I love that kind of a problem. And I look forward to working with Ben, Ben Rampulla, our President of EMC to make all that happen.

In addition to the high technology as I mentioned, we've got the Department of Defense sector. And this is an area that we're continuing to find new avenues to pursue sales.

And we're trying to make sure that we set up the roadmap for continuing sales, and continuing increase sales as the company matures. So I will express a high level of excitement about what the Engineered Materials division is doing.

And Ben and Steve and the whole Engineered Materials team just continues to work diligently day in and day out. They are making a difference and you see that already in last year's financials, and A) just to present the future financials.

Okay, Mark, here's a question from Jerry. Any consideration of using 3D printing of parts in the future?

Absolutely, this is an area that is continuing to grow. The technology is extremely exciting.

We do have some technical capabilities within IBC to pursue those areas. And I think this is a very interesting potential area for IBC to look at, not only copper and aluminum and beryllium, but maybe scandium as well.

And this is an area that that we do want to get some R&D effort moving into, this does seem to be a technology that is getting some traction right now we want to be right there with the leading technology in this area. So the answer, simply put is yes.

Okay, here's a question from Jeff. And you've answered this one, is it possible that IBC’s beryllium division looked of standard production at some point and if you address that?

Yes, and again we're - we still have some levers we could pull to give some more production out of this current furnace. But we're not very far away from having it maxed out.

And we're going to need to do furnace to keep up with demand. That's a great, great problem to have.

All right, and here is a question from Stephen, who asks you make beryllium alloys in a unique way from other competitors that allows you to offer your products at a lower price, as you have previously stated. Do you expect to maintain that competitive advantage?

Outstanding question and one that I have, to be very careful how I respond to because more often than not our competitors are listening into these phone calls. I think the best response to that one is let us demonstrate how well we can perform by watching our sales grow.

That speaks for itself.

Okay, Mark appreciate that. And we have no more questions on our program.

If there are follow-on questions, if you have some questions after you've seen this. Please direct those to me and I'd be happy to answer them.

You can reach me either at [email protected] or feel free to call or text me at 303-503-6203. Thank you all for joining us today.

We look forward to talking to you soon. Have a great one.

Bye.