CEA Industries Inc. Common Stock Q3 FY2022 earnings call

• Generated strong revenue growth in Q3 with supply chain improvements.
• Signed new contracts with indoor produce farms and formed an alliance with Hydrobuilder Holdings LLC.
• Partnered with Merida Capital in the cannabis vertical and with Agritecture in vertical agriculture.
• Introduced a portfolio of water treatment solutions.
• Continues to evaluate M&A opportunities with a strong balance sheet.

Q3 revenue increased 37% to $5.1 million compared to $3.7 million in the year ago period. Gross profit for Q3 2022 was $600,000 or 11.8% of revenue compared to $700,000 or 20.2% of revenue for the same period in 2021. Net loss for Q3 2022 was $1.0 million or negative $0.13 per share compared to net loss of $400,000 or negative $1.69 per share in the year ago quarter. Cash and cash equivalents were approximately $21.1 million as of September 30, 2022, and the company remained debt-free.

• Plan to continue organic and inorganic growth while expanding outside cannabis.
• Cautious due to inflationary environment and supply chain headwinds but strong balance sheet allows patient M&A.
• Expect partnership benefits with Hydrobuilder to materialize in 2023.
• Continuing to develop new products for 2023.

• Uncertainties in the evolving macro environment.
• Inflationary pressures.
• Residual supply chain challenges.

Q: How should we think about the ramp of the alliance with Hydrobuilder? Any benefit to Q4 or more so 2023?

A: Given the alliance was formalized just a couple of weeks ago, too early for Q4 benefit, but expect partnership benefits in 2023 as delivery pipeline takes many months.

Q: Any update on R&D outside of the water solutions you mentioned earlier? Should we expect to see new products come out in 2023?

A: We are continuing to develop new generation products that complement our suite of offerings to provide a more comprehensive CEA solution for customers in 2023.

Q: On the M&A front, can you provide some additional color on what you're seeing in the market and the types of targets you're evaluating?

A: Looking to partner with profitable and margin accretive companies with deep roots in cannabis or vertical ag industries. Valuation multiples are compressing, taking advantage of that in 2023.