IBC Advanced Alloys Corp.

Good day, everyone, and welcome to this IVC Advanced Alloys Investor Update webcast. To discuss the company's financial performance for the three and six months ended December 31st, 2024. That constitutes IBC's second fiscal quarter of 2025. I'm Jim Sims, Director of Investor and Public Relations with IBC. Now, before we begin this morning's webcast, just a couple of reminders. The slides from today's presentation and the audio of this call are being broadcast live over the web. Recording of this broadcast is also being made, and a replay will be available on the IBC website later today. We are at www.ibcadvancedalloys.com. After our formal presentation, the company will take questions from webcast participants. Now, 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. Additional information identifying risks and uncertainties is contained in IBC's public filings, available on CDAR.com and on our company website at ibcadvancedalloys.com. Joining us today is Mark Smith, who is CEO and Chairman of the Board of IBC. Mark?

take it off very well thank you jim and welcome everybody um as always i always like to to take a few minutes uh because we sometimes have some new folks on these calls so let me start by just start with a quick overview of the company and our operations. We are an Indiana-based manufacturer specializing in copper alloy products for the defense and global commercial markets. We are the only company in the United States that both casts and forges copper and copper alloy products as its primary business. We are known for the depth of our technical expertise and our ability to maintain the highest product quality, by operating a vertically integrated copper alloy manufacturing facility. IVC makes a variety of special copper and copper alloy products for hundreds of customers across multiple industry sectors, including those shown here. There we go. Here is a representative sampling of some of our our customers both past and current. And you can see these are significant names. Earlier today, we issued our financial results for the three and six month periods into December 31, 2024. We generated $7.1 million in revenue in the six months ended, December 2024, which compared to prior period sales of $12 million. However, $3.2 million of that relative decline was driven by two large non-recurring orders in the comparable period of fiscal year 2024, with the balance simply due to softer market demand, as we had seen in the second half of calendar year 2024. Many industries in the United States have actually had to navigate through greater volatility in markets over the past six to nine months, given the uncertainty that resulted from this past year's presidential elections. This is not unusual, although I think it is fair to say that we saw more uncertainty this time around. On a consolidated basis, IBC booked a $2.6 million loss year to date. In addition to lower revenue, this was primarily driven by three factors. Continuing closing costs at our Engineered Materials Division higher than normal corporate SG&A costs, which again were largely due to the Engineered Materials Division closure and debt service payments. Given that we completed all Engineered Materials Division closing activities in December 2024, we anticipate that closing costs and SG&A expenses will now decline going forward. As of January 1 of this year, the only ongoing engineered material division costs relate to the premises lease commitment. And we are in ongoing negotiations now with the building landlord to minimize these costs. Here you can see more detail of our quarterly results split between our continuing operations at copper alloys and our discontinued operations at our engineered materials division. The main takeaway for me at this junction is this. As closing costs at our discontinued engineered materials division wind down over the coming months, and as market demand for copper strengthens in the coming year or so, as I expect, I see us moving to a substantially stronger footing with significant opportunity for growth. In short, as we continue to pay down debt and strengthen our balance sheet through organic growth, I see a great deal of upside for the company going forward. Here you can see revenue and adjusted EBITDA for copper over the past several years, including our trailing 12-month performance on the far right. As you can see here, copper had been on an upward trend in terms of gross profit and gross margin since we completed our $5.7 million expansion and modernization of our copper alloys manufacturing facility in Franklin, Indiana in 2022, with the exception of the dip we've seen in the past six months. This vertically integrated facility has 32,000 square feet of new production space, which now totals 83,000 square feet on 12 acres of land. It provides vertical integration of alloy casting, forging, which includes hammer press and ring rolling, heat treating and machining operations. It has helped to generate sales growth from about $13.7 million to more than $25 million a year. And it positions IBC to expand our business with additional capacity as market demand recovers, as I believe it will. Here's IBC's net income over the past several years. My goal, and that of our entire team, is to continue to build on the profitable performance we achieved in fiscal year 2024. To that end, I see several growth opportunities ahead that I believe will help us achieve this goal. One area of potential growth I want to highlight is the U.S. naval defense. It is widely recognized by both political parties in the United States that America has seriously fallen behind in terms of its competitive position vis-a-vis China in terms of surface and subsurface naval ships. Some of you have heard me say this before, but it bears repeating. Just one Chinese shipyard near Shanghai has more capacity than all of America's shipyards combined. The US Navy's shipbuilding plans for 2024 through 2030 is aggressive and understandably so. Ultimately, the Navy wants to get to a fleet of over 381 ships and 134 large unmanned surface and underwater vehicles. That is from a forecast low of only 285 ships in 2026. A special emphasis will be on submarines, including the Columbia and Virginia-class subs. IBC has supplied the Navy for a number of years with a variety of copper alloy products, including for Columbia and Virginia-class submarines. We are an approved supplier to both Electric Boat and Newport News, which are the U.S. Navy's primary submarine builders. discussions now with defense policy leaders in Washington, D.C., and with officials at both shipyards about potentially expanding our ability to provide them with the specialized alloys they need. I hope to have more on this growth opportunity in the months ahead. Finally, let me make a note of an action by President Trump on February 25th, this last week, to initiate a Section 232 investigation of imports of copper and copper alloys into the United States. His intent is to strengthen the competitiveness of U.S. copper producers, such as IBC, and to encourage more investment in U.S. copper alloy supply chains. After the 232 investigation is completed, which is expected no later than November 22nd of this year, the President can take actions including tariffs and quotas on imported goods, price supports for domestic producers, and direct federal investment to strengthen U.S. supply chains. There are always concerns by current domestic producers about the impacts of tariffs and quotas, especially if they rely on foreign imports of feedstock material as we do. Fortunately, impacted U.S. companies can and often are granted exemptions from 232 tariffs that may negatively impact them. After all, the goal of these 232 actions is to improve the competitiveness and viability of U.S. producers. This was done for U.S. steel and aluminum producers in recent years as tariffs were leveled on those products. As America's only company that both casts and forges copper alloy products as our primary business, we will be very closely engaged in this process with the administration, and we will be seeking enhanced support for our operations on a number of levels. With that, Jim, I'm finished with the presentation and happy to take any questions.

Thanks, Mark. That was very helpful. Let's take some questions from our audience. For those participating in the webcast today, you can pose your question by simply typing in that question into the chat thread on your screen. You can also send those questions to me at my email at jim.sims, S-I-M-S, at ibcavancedalways.com, or you can text me at 303-503-6203. We've got a couple of questions, Mark, that have come in this morning since the press release has come out. What is the status of the engineer materials lease? If we are still paying on the lease, does the lease complete in April 2025?

First of all, let me answer the latter part first. It does not complete in April of 2025. It actually completes in June. January of 2026. We are anticipating paying the landlord up and through the end of December 2024, and we're hoping to continue our discussions with the landlord on ways for the landlord to release the facility and to eliminate our need to pay for the lease expenses between now and the end of next January. So ongoing process, and that is, as I mentioned earlier, that is the only item that is left for us in the EMC cost category in terms of shutdown.

Okay. I think that may have answered this next question, Mark. Have any EMC personnel moved to Copper? Are there still two personnel at the closed EMC facility?

No, there are no employees remaining at the facility. We do still have... one individual that stops by once a week just to check the facility and make sure that everything is okay. But all the employees are now gone from EMC, and although we had hoped that one or two would transfer to our Indiana facility, they chose not to do that. So everything is done with EMC. Okay. Okay.

Here's to the question. Your plans with the Navy sound pretty exciting, particularly given the pace of their shipbuilding construction plans. What is the status of IBC's plans to sell more to the Navy?

Yeah, this is a great question and really glad that it was asked because this is an exciting part about our business right now. And we've had multiple meetings with the shipbuilders and with the Navy and with the White House about ways that IBC can participate in this effort to revamp the U.S. Navy and number of ships and submarines that we have. So this is an exciting time. And actually, Knowing about these multiple meetings, Jim, you've actually participated in all of those meetings to date. So why don't I pass the baton to you just for a moment and have you update.

the participants today with the activities that that we're undertaking yeah i'd be happy to mark um the company is in negotiations and and ongoing discussions now with the navy's two primary boat builders um we are already approved suppliers to those boat builders but we don't sell anything directly to them because of their large distribution networks that's pretty much how they they normally require normally acquire their various materials They have indicated to us now, just recently, they want to do business directly with us, which is good. That provides us with more avenues for potentially selling them more of the materials that we currently make today. They also have some concerns going forward about their reliance, and I would say the United States' reliance heavily on imported copper alloys, such as copper nickel, for example. I think the companies are about 90% plus dependent on foreign supplies of copper nickel. So that's why on a second and parallel track, We've been in very intense discussions with folks in Washington, both the administration and on Capitol Hill, to seek potential funding from the Congress to enable IBC to purchase a specialized furnace called a vacuum cap furnace. That would allow us to make these more specialized copper-nickel alloys, both in ingot form and also in cast form, and then, of course, in forging form, which we currently do now. There's a lot of interest in this. I think the President's recent signing of initiation. Initiation of the 232 order will put an even brighter spotlight on America's reliance on foreign imports for copper and copper alloys. That kind of puts IBC right in the middle of this effort as well. That's a good thing. So we're going to continue that process going forward, and we're looking forward to good outcomes.

Thank you, Jim.

Mark, that's the last of the questions we have. So let me move to close things down. I will say that we appreciate everyone joining us this morning. Good crowd this morning, so we appreciate that. For those of you that do have questions but didn't quite get a chance to put them in, please go ahead and send those to me at jim.sims at ibcalloys.com, and I'll work to turn that around as quickly as I can. Thank you all for joining us today. We look forward to talking to you next quarter. And, again, any questions or thoughts, give us a call. We'd be happy to help you. Thank you all for joining us today. Have a great day. Bye-bye.