IBC Advanced Alloys Corp.

Good day everyone and welcome to this IBC Advanced Alloys Webcast and Conference Call on the company's financial results for the 36 month periods ended December 31st, 2021. I'm Jim Sims, Director of Investor and Public Relations with IBC.

Before we begin, today's webcast, just a few reminders, slides from today's presentation and the audio recording of this call are being broadcast live over the web. A recording the broadcast is being made and a replay will be available on the the IBC website following the broadcast at www.IBCadvancedalloys.com.

After our formal presentation, we're happy to take questions from our webcast participants. During today's presentation, we will be making forward looking statements and viewers are cautioned not to place undue reliance on such forward-looking information and statements.

Digital information, identifying risks and uncertainties is contained in IBC's public filings available on sedar.com, and on our company website at ibcadvancedalloys.com. Joining us today is Mark Smith, CEO and Chairman of the board, Mark thank you for joining us and please proceed when you are ready.

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

First of all I'm pleased to report that IBC swung to profitability in the quarter, driven by very strong sales performances in both our copper alloys and Engineered Materials division. Income in the quarter of $344,000 reversed a loss of $304,000 in the prior year period.

Adjusted EBITDA rose to $1.1 million in the quarter, a 301% increase over adjusted EBITDA of $273,000 for the prior year period. Year-to-date adjusted EBITDA was $1.3 million as compared to $152,000 in prior year period, that's a 757% increase.

Consolidated gross margin improved in the quarter to 26.7% from 17% in the prior-year period, year-to-date, gross margin rose to 20.5% as compared to 15% in the prior year period. Demand for IBC's high-performance beryllium-aluminium alloy products continues to grow, as evidenced by the Engineered Materials division sales numbers that I will detail shortly.

And I'm pleased to report the copper alloy sales also grew in the quarter and year-to-date all while the team was working furiously to complete construction of our new foundry facility in Franklin, Indiana. This chart shows the company steadily increasing revenue over the past 3 years, along with our adjusted EBITDA.

Sales grew throughout the COVID pandemic, in spite of very challenging business and supply chain issues faced by our team. Adjusted EBITDA declined slightly in fiscal 2021, largely because of some increased labor and other costs, investments we have made in our Copper Alloys expansion, some timing issues related to inventory purchases versus sales, supply chain constraints and other factors.

However, we anticipate continued earnings growth as global economy strengthens, our expanded Copper Alloys facility ramp to production in 2022, product sales continue to grow as we believe they can. In our Engineered Materials division, where we manufacture high performance beryllium aluminum products for commercial and defense customers, revenue growth sharply in the quarter and 6 months ended December 31, 2021.

Q2 sales of $3.9 million were 89% higher than the prior year period. That marked the 6th straight quarter of higher EM division sales.

Which continue to be driven by higher demand in the semiconductor and defense industries. In the first six months of this fiscal year, sales of $7.5 million represented an astounding 126.5% increase over the prior year period.

The division's gross margin rose to 42.1% from 26% for the quarter, and improved to 33% year-to-date from 24.5% in the comparable prior year period. Adjusted EBITDA for the EM division rose in new quarter to $1.3 million, a 229% increase over the prior-year period.

Year-to-date adjusted EBITDA for the division was $1.9 million, a 247% increase over the prior year period. Consolidated income in the quarter was $981,000, a 467% increase over the prior year period quarter.

Year-to-date, the division earned $1.28 million, which compares to $90,000 in the prior year period. Here you can see the EM divisions performance plotted over the past three quarters was steady increase in revenue and adjusted EBITDA.

In our Copper Alloys division, Q2 sales were $3.2 million, and year-to-date sales totaled $6.8 million. Those numbers represented increases of 12.7% and 11.4% respectively, over the comparable periods of 2021.

I would note that these increased sales were driven during a very busy time of construction at our Franklin operation. That performance is a testament to the hard work and fierce determination of the entire Copper Alloys division to drive our growth plans forward.

Copper Alloys' gross margin decreased in the quarter, and year-to-date, to 8.3% from 6.7%, respectively, mostly due to higher material costs and costs associated with the division's consolidation and new facility construction. Q2 adjusted EBITDA was negative at $129,000 and was negative $370,000 in the year-to-date.

Overall, Copper Alloys generated losses of $165,000 in the quarter and $501,000 year-to-date. However, I am quite confident that the completion and ramp up of our new production facility in Indiana will begin to turbocharge the financial performance of the Copper Alloys division.

As you can see here, copper sales took a hit in fiscal 2021 due to the pandemic, but adjusted earnings are moving in the right direction. In my view, earnings are poised for acceleration in the years ahead, particularly once our consolidation and expansion project is complete, which is very, very soon now.

Our new state-of-the-art foundry facility in Franklin, Indiana, is nearing completion, and I expect that we will see production starting later this month, that's March 2022. In short, we see this investment helping to drive enormous efficiencies and other benefits.

Finally, let me highlight what we see as global macro trends that are continuing to drive demand for our products. For both copper alloys and Engineered Materials, the global expansion of 5G networks in the Internet of Things is increasing demand for materials across all of our product lines.

Growth in the electronic sector is also driving greater demand for both copper and beryllium alloy products. Defense systems are continually looking from lighter weight, high modulus materials for long-range optic and sensors that is certainly our manufacturing specialty at IBC.

As markets for electric vehicles around the world expand, we expect to see much more intensive use of copper that is also bullish for IBC. And the growing use of micro satellites and other space applications presents large opportunities for our Engineered Materials division.

That was that. I'm happy to take questions from our audience.

Thank you, Mark. Now let's take some questions from our audience today.

[Operator Instructions] We have several questions from our webcast participants, so let me get started on those. Mark, here's a question from Larry who poses; sales are growing due to the market, what are you doing to increase new business?

We're looking at that from 2 fronts. Number 1, both divisions have as high priorities in their list of things to do to increase sales.

And so we have people feet on the ground out, meeting with customers and trying to expand our sales. Along with that, of course, comes the need to make sure that you can produce what you've sold.

And along those lines, we are looking at -- we're finishing up the expansion project in Franklin, Indiana for the copper division. And we're increasing our efficiencies and yields in the Engineered Materials division.

We have been able to take our melting, our pours that we do at Engineered Materials division from what was typically about maybe a 12 to 14 pours per week system to upwards of 29 or 30 Poles per week. And let me just say, when I mentioned things like that in terms of what copper and engineered materials are doing.

I couldn't be more proud of the commitment and the loyalty that our employees are continuing to demonstrate in growing this business, expanding this business, they want success as bad as anybody out there. And they just continue to perform day after day in all of these aspects.

But increasing sales means contacting customers and making sure you have the production capacity to deliver. And we're working on both of those [Indiscernible] actually.

Mark, here's another question from a viewer, how are you managing the beryllium supply chain with the current Russia business restrictions?

We have a very long-term supply arrangement with our beryllium supplier, it's one that's strong, it's one that's built on relationships, and really the performance by both IBC and our supplier has been outstanding. Yes, we did have a couple of supply chain issues like almost every business has experienced, but that just forced us and caused us to change some of our ordering frequencies and whatnot.

But the performance has been outstanding, of course, we're always looking to diversify our suppliers for this material, and we will continue to do that. But so far, that long-term relationship that we've really enjoyed for many, many years continues to deliver exactly as it's supposed to.

Okay. Mark, a viewer asks, what do you see for the expansion of the copper facility?

And I'll add that I think we can talk about not just increased production of current products, but possibly making new products for new markets.

Yeah. It includes all of those things.

And first of all, let me reiterate that we hope to start making some of our first cores of product from this new facility in the month of March, 2022. This is an exciting time for the company.

And it put so many more things into our control. We do plan to expand our product offerings.

We will increase our yields compared to the older facilities that we've shut down. We have expanded the capability of this facility versus what we had before, so we can produce more.

And I expect that you're going to see some very positive things coming out of our Copper division in a pretty short period of time, hopefully in the next 2 months to 4 months. Along with that, let me also say though, that we just reported a very good quarter for the company compared to what we've been doing in the recent past.

And that outstanding result was done at the same time that we were paying for that copper expansion project. And also during that time frame, we were able to pay off the mortgage for our Franklin property as well, which reduced the amount of debt that the company had on its balance sheet.

These good results are being coupled with things that we want to do to continue to make the company better, which is increased production in sales out of copper and reducing debt on the balance sheet. We're going to continue to work on both of those very hard.

Another question just came in. I see that you named a Chief Technology Officer, which you did not have before.

Can you speak to why you made that move?

We've named Ben Rampulla as our Chief Technology Officer, prior to that was the president of the EMC division. Ben is a very, very experienced, seasoned professional in this business.

He has some brilliant ideas of new things that we can look at for new business lines. He also is now in more of an advisory capacity so that we can assign him to work on things like increasing yields on our fours, increasing yields on our manufacturing system.

And he is working on all of those things as we speak. So this is all meant as an improvement driver for the company to make sure that as we grow sales in both copper and EMC, we have somebody there that can help us with making the system more efficient, lowering our unit costs, but also being creative enough to think about new business lines.

So Ben is a very unique individual, an absolute pleasure to work with. And he's already brought a number of positive things to the company in his role as CTO.

And hopefully we can advertise more of those as time goes here.

Mark, that looks like the end of our questions. If there are questions that folks have that you weren't able to present, please send those to me at jim.

[email protected]. We're happy to help take those as we can, and I'll get back to you one way or the other on those.

Let me thank everyone for joining us today for today's webcast and webinar. Again, if you have questions and other information related to our financial performance today or other questions about IBC, please don't hesitate to contact me via email at jim.

[email protected]. As many of you know, I'm always also available via phone and that's at 3035036203.

Thank you all for joining us, we look forward to talking with you again soon. Have a great day.

Bye bye.