CEA Industries Inc. Warrant Q3 FY2022 earnings call

• Generated strong revenue growth in Q3 on sequential and year-over-year basis, benefited from sales and marketing investments.
• Supply chain improvements with fewer delays.
• Signed new contracts with indoor produce farms in NY and FL for engineering services outside cannabis vertical.
• Entered strategic alliance with Hydrobuilder Holdings LLC combining CEA systems with their omnichannel platform.
• Partnership with Merida Capital materialized with new business in CT.
• Started working with Agritecture for vertical agriculture sales pipeline.
• Introduced portfolio of water treatment solutions.
• Continuing to identify and evaluate M&A opportunities in cannabis and vertical ag markets with 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 bookings in the third quarter were $2.2 million compared to $5.6 million in the same period in 2021. Backlog at quarter end was $6.8 million compared to $9.9 million in the year ago quarter.

• Plan to continue organic and inorganic growth and expand outside cannabis.
• Optimistic but cautious due to inflationary environment and residual supply chain headwinds.
• Patient with M&A, will execute accretive transaction when opportunities arise.
• Partnership with Hydrobuilder expected to show benefits in 2023.
• Expect new products from R&D in 2023.

• Evolving macro environment challenges.
• Inflationary environment.
• Residual supply chain headwinds.

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 a couple of weeks ago, too early for Q4 benefit, but expect partnership benefits in 2023 as sales pipeline takes months.

Q: Any update on R&D outside of water solutions? Should we expect new products in 2023?

A: Continuing to develop new generation products to complement offerings for comprehensive CEA solution, expect new products in 2023.

Q: Additional color on M&A market and targets?

A: Looking to partner with profitable, margin accretive companies with deep roots in cannabis or vertical ag. Valuation multiples compressed, expecting to take advantage in 2023 with private market contraction.