OTC:SCIA
SCI Engineered Materials, Inc.
Aerospace-focused materials manufacturer utilizing proprietary extrusion tech to supply durable components for defense and commercial aviation.
Key Metrics
Investment Thesis
Bull Case
The stock offers an attractive valuation relative to its consistent earnings power in a growing aerospace defense market; strong free cash flow generation supports dividend potential or further buybacks despite OTC status; strategic positioning in lightweighting trends for next-generation aircraft could drive future growth.
Bear Case
Recent revenue contraction over the last two years signals potential headwinds from reduced defense spending or supply chain disruptions; OTC listing limits visibility and access to capital markets compared to peers on major exchanges; declining profit margins relative to revenue suggest pricing pressure or cost inflation challenges.
About SCI Engineered Materials, Inc.
SCI Engineered Materials Inc. specializes in designing and manufacturing engineered materials and components primarily for aerospace, defense, and transportation sectors. The company leverages its proprietary extrusion technologies to deliver high-performance composite and metal solutions to global OEMs and Tier 1 suppliers. With a diverse product portfolio ranging from structural parts to specialized coatings, the firm serves critical markets requiring durability and lightweighting.
Analysis
Management Discussion
Despite a decline in revenue from $28.0M in 2023 to $19.6M in 2025, the company maintained consistent profitability with net income hovering around $1.7M-$2.0M annually. Strong operating cash flow of $3.3M in 2025 highlights efficient working capital management, evidenced by a decrease in inventory and accounts receivable, allowing the firm to reinvest $1.0M in capital expenditures while returning capital via share repurchases.
Industry Overview
The engineered materials sector is expanding as aircraft manufacturers prioritize weight reduction to improve fuel efficiency and range. Demand for advanced composites and high-strength alloys is robust, though the industry faces cyclical pressures tied to defense budgets and commercial aviation recovery rates.
Financial Statements
Income Statement
Balance Sheet
Cash Flow
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Revenue | $23.5M | $28.0M | $22.9M | $19.6M |
| Cost of Revenue | $18.7M | $22.7M | $17.8M | $14.6M |
| Gross Profit | $4.8M | $5.3M | $5.1M | $5.0M |
| Operating Expenses | $2.3M | $2.8M | $3.0M | $3.2M |
| Operating Income | $2.5M | $2.5M | $2.0M | $1.8M |
| R&D | $375.7K | $501.9K | $564.6K | $434.4K |
| G&A | $1.5M | $1.8M | $1.9M | $2.2M |
| Marketing | $381.3K | $484.2K | $519.1K | $600.6K |
| Stock-Based Comp | $49.3K | $45.5K | $44.0K | $47.2K |
| Depreciation | $425.4K | $465.3K | $469.5K | $448.1K |
| Other OpEx | $0 | $0 | $0 | $0 |
| Non-Operating Income | $19.2K | $286.4K | $393.4K | $449.4K |
| Pre-Tax Income | $2.5M | $2.8M | $2.4M | $2.3M |
| Income Tax | $542.4K | $586.7K | $576.8K | $533.9K |
| Continuing Ops | $2.0M | $2.2M | $1.9M | $1.7M |
| Discontinued Ops | $0 | $0 | $0 | $0 |
| Net Income | $2.0M | $2.2M | $1.9M | $1.7M |
| Minority Interest | $0 | $0 | $0 | $0 |
| Net to Common | $2.0M | $2.2M | $1.9M | $1.7M |
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Current Assets | $8.1M | $13.6M | $9.7M | $10.2M |
| Cash & Equivalents | — | $5.7M | $6.8M | $7.9M |
| Marketable Securities | $989.3K | $1.0M | $509.5K | $298.1K |
| Accounts Receivable | $842.6K | $854.5K | $704.8K | $694.9K |
| Inventory | $2.2M | $4.7M | $1.4M | $1.1M |
| Other Current Assets | $4.1M | $1.4M | $309.3K | $222.0K |
| Long-Term Assets | $3.7M | $3.9M | $5.8M | $7.0M |
| PP&E (Net) | $2.3M | $2.2M | $2.3M | $2.8M |
| Operating Leases | $185.1K | $592.2K | $1.2M | $1.1M |
| LT Securities | $1.0M | $994.5K | $2.2M | $3.1M |
| Other LT Assets | $236.3K | $78.3K | $66.4K | $61.5K |
| Total Assets | $11.8M | $17.5M | $15.5M | $17.3M |
| Current Liabilities | $2.9M | $5.9M | $1.5M | $1.9M |
| Accounts Payable | $514.5K | $385.5K | $419.2K | $245.5K |
| Current Leases | $105.8K | $111.2K | $174.9K | $212.6K |
| Deferred Revenue | $1.8M | $4.9M | $337.9K | $829.2K |
| Other Current Liab | $489.6K | $576.7K | $532.3K | $568.5K |
| Long-Term Liabilities | $149.0K | $561.9K | $1.2M | $1.2M |
| LT Operating Leases | $99.8K | $492.1K | $1.1M | $849.1K |
| Other LT Liab | $49.1K | $69.8K | $121.6K | $389.6K |
| Total Liabilities | $3.1M | $6.5M | $2.6M | $3.1M |
| Shareholders' Equity | $8.7M | $11.0M | $12.9M | $14.2M |
| Paid-In Capital | $2.2M | $2.2M | $2.2M | $2.2M |
| Retained Earnings | $-4.1M | $-1.9M | $-54.3K | $1.7M |
| Total L&E | $11.8M | $17.5M | $15.5M | $17.3M |
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Net Income (CFO) | $2.0M | $2.2M | $1.9M | $1.7M |
| Non-Cash Adjustments | $-229.0K | $-3.2M | $3.9M | $2.4M |
| Working Capital Changes | $670.1K | $3.3M | $-3.4M | $-805.1K |
| Cash from Operations | $2.4M | $2.3M | $2.4M | $3.3M |
| Capital Expenditures | $536.3K | $453.7K | $499.8K | $1.0M |
| Cash from Investing | $-2.5M | $-457.9K | $-1.2M | $-1.6M |
| Share Buybacks | — | — | — | $500.0K |
| Cash from Financing | $-96.7K | $-97.4K | $-49.1K | $-500.0K |
| FX Effect | $0 | $0 | $0 | $0 |
| Net Change in Cash | $-193.0K | $1.7M | $1.1M | $1.2M |
| Beginning Cash | $4.1M | $3.9M | $5.7M | $6.8M |
| Ending Cash | $3.9M | $5.7M | $6.8M | $7.9M |
Frequently Asked Questions
How does SCI Engineered Materials, Inc. make money?
The company's revenue is driven by custom-engineered metal and composite extrusions for aerospace structures, specialized chemical treatments for corrosion resistance, and aftermarket replacement parts for legacy aircraft systems.
What are the main risks for SCIA?
High sensitivity to aerospace program delays which can impact order backlogs significantly; exposure to volatile raw material prices including aluminum and specialty alloys; limited market liquidity due to OTC trading status may hinder institutional participation; concentration risk with reliance on specific defense sector clients.
What is SCIA's competitive advantage?
Proprietary extrusion technology allows for complex geometries that reduce assembly costs for clients; long-term contracts with major defense contractors provide stable recurring revenue; niche expertise in high-temperature material formulations creates a significant barrier to entry.
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