Q3 2022 Karat Packaging Inc Earnings Call
Okay.
Welcome to the carriage packaging, Inc. Third quarter 2022 earnings conference call.
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Please note. This event is being recorded I would now like to turn the conference over to Roger pointed out Investor Relations for Kandi packaging. Please go ahead.
Good afternoon, everyone and welcome secured packaging 2022 third quarter earnings call I'm, Roger Pond dealt with Pinedale Wilkinson, Kurt packaging <unk> Investor Relations firm it will be my pleasure momentarily to introduce the company's Chief Executive Officer, Alan you as Chief Financial Officer, Jeff.
N go before I turn the call over to Alan I want to remind our listeners that today's call may include forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, such forward looking statements are subject to numerous conditions many of which are beyond the company's control include.
Those set forth in the risk factors section of carat packaging <unk> most recent Form 10-K.
As filed with the Securities and Exchange Commission copies of which are available on the SEC's website at Www Dot S. E C Dot Gov, along with other company filings made with the SEC from time to time actual results could differ materially from these forward looking statements and care packaging under.
Makes no obligation to update any forward looking statements except as required by law. Please also note that during this call we will be discussing adjusted EBITDA adjusted EBITDA margin and adjusted earnings diluted earnings per share, which are non-GAAP financial measures as defined by S.
C C regulation G. A reconciliation of the most directly comparable GAAP measures to the non-GAAP financial measures is included in today's press release, which is now posted on the company's website and with that it is my pleasure to turn the call over to CEO Alan you Alan.
Thank you Roger good afternoon, everyone. Our third quarter 2022, net sales increased 7% from the prior year period, which was particularly strong quarter from post COVID-19 reopening.
For the most recent quarter were impacted by customers destocking of certain inventories due to supply chain recovery. Nonetheless, we continue to see solid long term demand, particularly for our environmentally friendly products, which grew 27% over the comparable prior year Pearce.
Yes.
We also are continuing to gain wallet share with our existing customers and we recently closed numerous new deals with both new and existing chain and distributors customers.
We are fully committed to growing our offering an eco friendly disposable foodservice product as more cities or states in the United States and around the world are enacting regulations, Japan, styrofoam and single use plastic.
Customer increase are increasing as is the math and we remain optimistic about our leadership position, while we continue to invest in new aid innovated compulsive all products. Our joint venture are building it for golf factory in Taiwan is progressing well it is expected to begin manufacturing.
100% composed of our foodservice products in December with first shipments to begin early in the new year, we already are receiving orders and increased yeah could fill capacities. Our initial investment of approximately $6 $5 million. In this project is on target to produce approximately 600.
We have 48 containers of products annually and.
And we are in discussion with our tier one partner to expand production lines to double the manufacturing capacity by mid 2023.
Gross margin for the third quarter expand it significantly just by selling through some inventory with higher freight and duty costs absorbed from the first and second quarter.
We continue to see solid gross margin improvement into the fourth quarters from normalized Ocean freight rates continued shift to higher margin products and foreign currency gains, which already allow us to implement some price reduction to proactively paas on savings to our customers we achieved.
Quarterly operating cash flow and ended the quarter with financial liquidity of $54 $5 million.
We are pleased to announce that our board of directors recently declared a special cash dividend of 35 cents per share on the Companys common stock.
Gerrick consistent solid growth has built a strong financial and liquidity position for the company given us the flexibility to return excess capital to our shareholders.
Receding into the fourth quarter and fiscal 2023, we have implemented a number of new initiatives to significantly grow online sales. We are expecting to continue growth from our eco friendly product line improvement in our fulfillment rate well the reason warehouse expansion and better operating efficiencies. We are currently targeting.
Net sales for the 2022 fourth quarters to be in the range of 95 million to $98 million up from $91 3 million for the 2021 fourth quarters, we are confident to achieve our full year average gross margin go up 31%, 32% I will now turn.
Over the call to Genco, our Chief financial Officer to discuss our financial results in greater detail Jan.
Thank you Alan.
We achieved net sales of $110 million for the quarter up 7% from $102.7 million in the same period last year.
With the widely anticipated economic downturn, along with the supply chain recovery.
Sales for the 2022 third quarter was impacted by customer Destocking offsetting inventory the increase from the strong prior year quarter due to Covid re openings was principally driven by our eco friendly products, including continued gangs and wallet share with our customers.
By channel sales to distributors, our largest channel grew 11% for the 2022 third quarter sales.
Dallas to the retail channel increased.
On a per cent tell.
S to national or regional chains.
Increased 5% and sales from the online channel decreased 4% for the quarter.
Gross profit increased 15% to $34.2 million for the 2022 at the quarter.
$29.8 million last year.
Gross margin expanded 210 basis points to 31, 1% from 29.0% in the same period last year.
Gross margin benefited from higher margin eco friendly products.
Since then the net price increases to offset inflation favorable foreign currency exchange rates and improved operating efficiencies and leverage.
Although ocean freight rates chopped significantly towards the end of the third quarter.
Total freight and duty costs remained elevated at 14.8% of net sales during the third quarter of 2022.
Compared with 14.1% of net sales in the prior year quarter.
The 2022 third quarter freight and duty costs included an impact of flight point $9 million I'm afraid I duty capitalization as we sold through some inventory with high afraid of duty costs absorbed from the first and second quarter.
We expect total freight and duty costs to continue to decrease as a percentage of net sales in the 2022 fourth quarter and potentially into 'twenty two 'twenty three.
We continue to focus on optimizing our eco friendly products at all myself and improving operating efficiencies to offset price reductions on certain products.
Alan and I mentioned, we are confident to deliver on our cross margin call for the full year.
Operating expenses in the 2022 third quarter or $26 $3 million or 24% of net sales compared with $24.4 million also about 24% of net sellers in the same period last year.
The net increase in expenses.
It's primarily due to higher labor cost and workforce expansion and an increase in rental expense from our expanded warehouse distribution network.
Other income totaled $143000 in the 2022 third quarter compared with other expense.
Totaled $24000 in the prior year quarter.
Other income for the 2022 third quarter included a gain on foreign currency transactions of $369000 compared with a foreign currency loss of $63000 in the 2021 third quarter.
Net income for the 2022 third quarter increased 51% to $6 $2 million from full plant $1 million for the same quarter last year net income margin was five 6% for the 2022 what are compared with full 0.0.
A percent a year ago.
Net income attributable to care of packaging for the 2022 the quarter was $6 $1 million or 31 cents per diluted share compared with $3.8 million or <unk> 19 cents per diluted share a year ago.
Adjusted EBITDA for the third quarter rose, 30% to $11.7 million from 9.0, a million dollars a year ago.
Consolidated adjusted EBIT margin.
With 10, 7% in the third quarter versus eight 8% for the same quarter last year.
Diluted earnings per common share increased 50% to 33 cents from 'twenty two cents in the prior year quarter.
Do you mean, the 2022 third quarter, we generated record quarterly operating cash flow of $22 million and paid off the entire $11.6 million balance of outstanding borrowings on our $40 million line of credit.
We believe Cabot is well positioned to execute on its future growth strategies, we finished the quarter with $90 million in working capital compared with $72 $1 million at the end of 'twenty or 'twenty one.
And financial liquidity of $54 $5 million.
We continue to explore other options to expand liquidity in support of business growth and to further enhance long term shareholder value.
Alan and I will now be happy to answer your questions and I'll turn the call back to the operator.
Thank you.
We will now begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone phone.
Draw. Your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from Jake Bartlett with security. Please go ahead.
Great. Thanks for taking the question My first one Alan is but wanted just to see what your confidence is that the destocking is what's driving the lower sales.
I think it was destocking.
Destocking as being more impactful I would think to distributors and then the change or something like online, but but those you know those channels also grew slower than the distributor channel. So.
The first question is really just what what's your what's your confidence level that you know something is temporary destocking is what's driving.
The slower sales growth.
Well first of all you're right the change or not Destocking, it's mainly the distributors a lot of distributors are actually of overstock I couldnt tell that almost by talking to a lot of these distributor they were so afraid of the supply chain disruption.
As in the past months on.
All of them bought in truckloads and themselves as well as.
They were buying from us some people are buying a 30 day 45 day inventory, but all of a sudden they're every one of their warehouses, including our warehouse was packed with product that was coming from overseas. We have two emergency lease a secondary warehouse in California, just to store the product and Luckily we were able to Oh.
Also destock.
Some of our inventories and that's why our actually our operations are back to normal or in the month of July and August we were just scrambling to find spaces warehouse spaces to put the product in and it was actually happening in the operation we had to spend extra money in terms of extra people to move products our efficiency was a.
Style operationally fishes was down because on the warehouse was packed with every product. That's a blocking every language in the warehouse I think that's the same situation with our customers as well.
Okay.
What is driving what do you think the biggest I mean.
The you are below your guidance and the Miss on our estimates versus distributors wasn't it wasn't by by that much. So so why why why do you think you saw so much slower growth.
The change in online I think than you would've been expecting was it is it a pricing issue that's coming through or just.
I look at it.
From our coverage in restaurants.
Off premise demand has remained fairly robust so what what do you think is driving that but slower than expected growth.
It's not destocking at the at the tip of the change in the airlines started the business.
Yes, we have we started price reduction.
That's you know that we have seven increases last year and two increases this year, mainly due to the increase in ocean freight costs.
Price has dropped we actually wanted to Vicki.
To allowing the actually we are starting to you lowered the price for our customers. So they can also benefit from the lower costing and to offset some of the inflationary costs that we incurred during the end of last year and earlier this year when Osha free was that $15000 of containers.
So that is also another issues of our Oh, it's not a slower sales, but I would say, it's a lowering our.
Total overall revenue.
Okay, and just to answer the pricing.
You've obviously taken a lot of price over the last couple of years.
Do you expect the pricing your average prices to be down year over year in 2023 as you move forward is that a situation where you know as you know.
Thanks anything on price last couple of years that it will actually decrease.
Thank you.
I do see certain categories in plastics, our price will be lower dropping but on the paper side. It has holds very strong and it also looking to increase the paper side.
Our paper has actually increased significantly, especially with a lot of California or other states are banning cost not only banning styrofoam. Some places are banning plastic overall.
So did demand on paper is still on the rise and also the which cost me a shortage of paper supplies. So I do see the plastic sites prices coming down, but the paper side, it's going up.
And that's where we see D. The growth is the eco friendly part of like the paper shopping back versus a pass it back.
Paper food container or proposal, what people food container paper soda Cup, well actually even higher costing a compostable paper sort of cut versus.
The traditional plastic Cup a styrofoam Cup, so that's where I see the separation of the difference in cost and prices pasta will come down people will go up which kind of offset each other.
So on average you don't think there's going to be a decrease do you think maybe the prices will hold flat in 2023 versus <unk> 22, and I'm really just across your whole portfolio of products. You should you should we expect flat pricing in 'twenty three versus 22 is that the is that the message.
No actually I do see plastic side, the cost of plastic product to sell in price, it's going to come down slowly, but on the paper side. It might go up so that's where I see the offsetting so the average even now.
The average will be flat okay. Thank you very much.
No problem.
Your next question comes from Michael Hoffman with Stifel. Please go ahead.
Hi, good afternoon Alan.
Talk a little bit about what was going on in <unk>, and then sort of.
Carried into the remainder of this year and next year the year over year growth that happened how much of that was.
This four units or skus versus price.
I would think a chance that you answered that question in terms of year over year growth number.
Yeah, Hi, Hi, Mike how are you.
For the question Yeah. So in terms of the quarterly year over year revenue slow actually we are well we are cool and the vast majority of that growth actually what's driven five high school, we actually saw a little bit of a decline in terms of volume.
So overall Oh, yeah, as we talked about in our prepared remarks or overall year over year. That's all.
A little over 7% I would point out as you probably have to call the year over year comp, it's actually very challenging for us this year because last year. If you'll recall Q3 was a really strong quarter with really strong volume from post COVID-19 reopening Nokia yeah over here.
So with all that in the third quarter was over 30%. So we do as Alan pointed out we do still feel really confident with the continued long term momentum and long term demand.
That will close.
And sort of.
<unk> you.
Gross.
Your model.
Have you gotten call.
I'm wondering about the restocking.
Construction of its product lines.
Yeah.
Thank you.
It's about half the quarter.
Sure.
Zero.
I never like to go into Chicago any pressure.
Customer race worked through the changing demand side in the marketplace.
Yeah.
I'm, sorry would you mind repeating your question Michael I wasn't sure if I got your question clearly I I I I forgot all quite a quite a bit of a noise.
Yeah, I'm, sorry, I'm in an airport.
So yes.
Did you just destocking.
When you analyze the types of Skus that are the focus of that destocking.
Would you say that there's still more to happen before we're done or it all happened in the third quarter.
Well, let me answer that question since I'm more familiar with the market I believe that right now to my knowledge is from the customer sites. They are of some of the customer still basically overstocked warehouses is still full but the retail sector the retail.
<unk> are starting to reducing their inventory on their floor under stores, they're starting to reordering, especially the smart particular E Dismounting November .
Versus last the last couple of months ago, and we're seeing that maybe this holiday season coming up and people are getting prepared for the holiday season, but I do see that most of the destocking.
Have happened in the end of third quarter and also at the beginning of the fourth quarter.
Hopes for when you give us what you're projecting for fourth quarter revenue.
Yeah.
You factored in any incremental level of destocking as well as what it was a year over year price probably would be around the price increases we've done all three reports.
My understanding is correct.
And are there specific.
Sure.
Product categories that are seeing greater pressure on the destocking and closures.
Very real pattern.
Overall that Michael.
Yeah, I do see that on the inventory size, particularly on the classic sites customer happy Destocking inventory on the plastic side, because they see that the prices coming down so nobody wanted to hold onto D inventory that has higher cost higher value. So they know that they should be stocking too much on that.
Plastics items, but on the paper size I would think that the one or two customer or not really stocking up because even though that unlike last year people were afraid of Oh outages since last year I think even if even with the tire demand in paper I think inventory is just about correct. It hasnt been like last year was there was a scarcity.
Of the inventory on the paper side.
If we were to think about plastics as a percentage of your model.
Just so we kind of get a sense of you know with this pressure feels right.
I always take the plastic it's about 30% of our entire model.
And do you think you clear this plastic inventory correction by the.
We ended the fourth quarter.
Yes, yes, yes, I do believe that our AR inventory that we brought in a higher cost will be cleared out by the end of the fourth quarter.
Okay, and then I'm sorry.
Using this out piece by piece.
It looks like costs were down dramatically, how do I think about it.
The sequential.
Sequential impact favorable impact of lower freight cost.
Just sort of happened in the third quarter, there was a tail for the fourth quarter.
I was just going to carry over into 'twenty three.
Sure.
Inventory and then how about for you.
Well it's true.
As.
Jim mentioned earlier in the conference call, we actually have we seen most I would say, 90% or 95% of the higher freight and duty costs were absorbed mainly in the third quarter or second quarter, we absorbed some but majority of five point like $5 $6 million of out of the <unk>.
$6 $6 million or absorbing the third quarters. So in the fourth quarters. We do not think there is a much more of a capital are actually afraid and duty cost in terms of affecting our costing on the gross margin size. That's why we're seeing that our fourth quarter gross margin will be significantly higher.
And our second and third quarters, so that we're confident or comfortable that our entire annual gross margin goal of 31% to 32% will be achieve.
And of.
Correspondingly the anniversarying of that would be it would carry into the first half of 'twenty three so too so we've got that.
Incremental gross margin lever into the first half of 'twenty three.
Correct right.
Alright, yes that is correct. Okay, and then you alluded to new business expansion of wallet. So when you think about we get through the clearing of the Destocking that you have.
The unit pressure.
You would expect to be positive unit growth and then some level of normal pricing in 'twenty three.
Yes, we are we do expect a positive unit growth in the fourth quarters, our year over year comp and also going through the first quarters as now the I would think that everyone is back to normal, allowing us a vendor like us to visit the customers, we're able to sit in front of the customers and sort of explain to that and also letting them know.
What are the what kind of compostable products that we now have available, especially we know that in January 1st both California, and New York are banning P. S. A S. A chemical on the biggest items.
That is something that everyone is rushing into get their hands on E. P. S. A S free.
<unk> products are because that will be the law starting January 1st. So we are expecting a high are we happy to receiving abundant increase on these new compelling proposal or product and that's something that will be our focus for the 2023 years.
Okay. Thank you very much.
Taking my question.
Yeah.
Our next question comes from Ryan Merkel with William Blair. Please go ahead.
Thanks. Good afternoon, everyone. My first question Alan could you just comment on the outlook for consumer spending on restaurants.
Think about budgeting for 'twenty three are you thinking about slower demand for your customers or you're not seeing that yet.
Actually I am I'm seeing a slower demand from the mom and pop retail stores, but I'm seeing a higher demand in the national restaurant chains toxins, Judy somebody a restaurant chains.
There their volume.
They are growing more asked more and more people are spending the money to the fast food change versus these restaurants.
Mom and pop restaurants, and it's a that's why we see this shifting that part.
And you know.
And Ah in prior downturns, what what what are your customers typically do do you see them looking to save costs do they then they come back to you.
Price concessions did they try to find lower priced products just trying to think through some of the implications of a slower consumer economy next year.
This is all I see from talking to the customer perspective on the restaurant side right now the maintenance certain it's not in the packaging costs. Their main concerns on targeting labor getting people staff to work in a restaurant that is the key and the biggest growth and the expense is actually not all that packaging is coming from the labor side even.
Food costs have level basically so the packaging.
With us dropping 5%, 10% to them, it's basically it's nothing comparable to what the labor cost increase has been in the past two to three months, especially in California.
Yeah makes sense okay.
Last one for me can you.
Comment on how much revenue you expect from the Greener technology joint venture in 'twenty three.
That we we we were expecting I believe in the past quarter, we mentioned that we're looking to ship around.
At maximum capacity 648 containers a year in 2023, but in terms of overall revenue.
I think it's about it's.
Around $20 million I think that was all about approximately $20 million to $25 million of our revenue from that and at the same time, we are actually in discussion with them to increase the capacity by mid 2023, because we were seeing more and more increase of demand in people cost product as.
California, and New York banning styrofoam and other states and cities are banyan styrofoam. So the demand for it because it's actually on the rise sharply, but the supply it's actually limited because there aren't that many factories, making disposals product in the world.
All right well, that's great to hear thanks for the color.
Thank you.
Our next question is a follow up from Jake Bartlett with curious Securities. Please go ahead.
Great. Thanks for taking the follow up.
My question is on the pricing and you know I.
I think typically you don't just lower prices because you you want a paas long or for the goodness you're hard it's because your competition is offering lower prices to and so I'm wondering whether part of what's happening here is.
Some of the gains you've made them into accounts, the kind of incumbent who used to be disappointing to other kind of might be getting more aggressive trying to win the business back.
Is that what you're seeing are you seeing more competition as the supply chain eases in the you know maybe the other suppliers can can now supply their customers like they had player.
Or are they simply just trying to compete more to win back that business on price.
I think that I don't see our competitors are going really going after the price right now I think it's more about a service issue most of our competitors are the bigger manufacturing domestic once they're actually going to come back to the oh, the customer letting them know that they've overcome any supply issues.
Just theres really not much of a supply chain disruption.
Issue anymore, so, but they're not really lowered the price as much and that's one of the thing but on the distribution size, where they they tend to buy from import from overseas, but those are the one that really starting to come back and start lowering their prices to the market and for US basically would you want to maintain our.
Our market share in both to distribute the national chain account and distribution account and also of course online where we're seeing that what we're looking for a sharp growth online next year, what are a lot of implementations, how we start move for into a different source of our selling channels, including Amazon Canada, Mexico.
And Amazon, Hawaii, that's where we see our growth that's going to be but in terms of price I don't think our domestic competitors really.
<unk> D a.
The pride lowering the price in terms of getting the business back but broader than offering supplies basically.
But make sure that there's no service disruption I think that's a key part right now people want they want stability.
Got it.
You don't you're not you don't think you're.
You're losing some of the share that you gain.
During the supply chain disruptions do you think that youre going to hold on to those each of the business that you gained.
Over the last couple of years.
Yes, it actually and also on top of that well actually as we mentioned earlier, we're actually gaining some new accounts in the Midwest market in South East market region that reach and that we haven't really been tapping into now that we're able to start going out on a sales call. Our people can fly to customers and start presenting our products, we're seeing more and more.
New customer coming to our way that basically that needed that probably didn't realize it didn't really have the opportunity to go out for to look for new vendors and suppliers I think that's something that we're doing right now.
Great and then last question.
We've been tracking freight costs from.
China East Asia to the West coast, and they're down about 85% currently and have been down year over year since <unk>.
Early July so I just wanted to understand how that flowed through I know, there's a delay.
Do you have inventory now that has been shifted that lower prices that's going to happen.
Visibility into higher margins gross margins in the first half of the year, but maybe just help us help us understand how that looks.
For the impact on gross margins it sounds like Youre, giving your customers are lowering prices, partly in passing along the savings from from this lower freight so what should we even brought in broad strokes, what what should we think about gross margins in 'twenty three.
I I believe the gross margin.
We will be we're looking at actually at 31%, 32% gross margin in 2023 or even higher because on the product that we're not we're looking to bring in are more eco friendly products, yes, she items and would that carry a higher margin why I see that carry a higher margin, there's still limited capacity producing.
You're right ESG products, the wonder how certification to want that it's approved by the city what the lack of supplies of course, the price goes up and also these are premium products such as sample straws, such as a compostable food containers, the bagasse product what P. S. A S <unk> chemicals.
These are the items that basically they have it carries a higher cost makeup of cost product with PMA is for chemicals actually that increased the cost in orders to making sure that it can absorb waters were absorbed Greece not soaking through it. So I would think that there's going to be a some kind of elevation in terms of price.
These items are that would offset the gist.
Other products like such as plastic cups plastic portion cops are that part in that sense. So I do think that the gross margin were looking good on that part I'm, especially with the online sales is growing and we're seeing it we're seeing a great potentials in terms of online sales because we do see.
Customers are actually ordering more online looking for D. C called for any product that they cannot find in the local distributions that was area.
Okay, and then just lastly, Leslie on that and so just to check one more on but.
We were looking at spot.
<unk> here as we as we understand them as we as we get them.
But you also sometimes are paying contract and so maybe just remind us when you've been paying contract as we think about the year over year change in freight costs for instance, in the second quarter of 2022 year. Your freight costs were 18% of sales.
If I look at that as being current prices being down 80% from when they were the prices at that time. It seems like there could be a major impact on gross margins, but can you you might've been thank.
Thank you weren't paying that the spot market, you're paying a contract at that time, So just remind us.
What you were when you were paying contract when you kind of switch to market. Just so we can understand and try to gauge.
How gross margins have the freight costs might flow into gross margin.
Sure well last year.
Most of us are importers or our people.
Important product.
Contract rate of approximately $4500 per container, but the problem is even though we had a contract we have 45.
<unk> thousand $500 per containers, the ocean freight shippers they didn't give us any containers available cheese to use that contract right. So we have to go out in the market to get spot rate at 10015 thousand $20000 for containers. They may give us 20% of what we need is so perhaps we have we were able to get 20% of the container we need at <unk>.
<unk> $4500 and the rest of the container we have to go out and get spot rate paying $15000 for containers. This year on the on the different side is that.
Most companies sign a contract that's $10000 for containers started in may but because it probably has been dropping down most of the important like us we stop using a contract we went out in the market and got the spot rate of 7006 thousand 5000 4000 up to now is like 20.
A little over $2000 for containers. So these ocean for Atlanta came back to every one of our important and says okay. What can change your contract that you signed in April at $10000 with lower to whatever it is a spot market rate is so that's the difference between this year last year.
Okay. Thanks, a lot I appreciate it.
Hey, Kim.
So I think we'd like to ask a question. Please press Star then one our next question comes from Jon <unk> with UBS.
Go ahead.
Hello. Thank you for taking my question I was wondering first of all if you can.
Maybe discuss a little bit about your rationale.
Capital allocation regarding paying a special dividend versus buying back our company stock or maybe other options that you have.
Gotcha, well the rationale behind.
Versus buying back stock is that the market is very good.
Limited, we don't have that much flow of shares in the marketplace. So our goal is actually we do want and that's where our stock price is discounted because we don't have enough float in the market. Okay, and we do have excess cash what can we do with it what we're sitting on it and we're reducing our capex capital expenditure we have.
The beginning of last year. When we first went public we mentioned that our expected capital expenditure will be 5% of overall revenue and this year, we're looking at 3% and we're looking at a mixture of capital expenditure is approximately less than 2% and where we're actually we're generating profit where R. R.
Our ocean freight has dropped our daily operation catch us increase so what's your take on what will be actually we're seeing we will be sitting them on.
Millions of dollars of cash on hand, and we do not want to waste our money go out there My company has over value. So what we did is we actually found that just your technology and your partner.
Overseeing Taiwan that they can actually are investing in this company with very little money that we can actually happy availability of what the market not just U S. What the world needs, it's compulsory robotics, and that's where we're investing our money into it even with that investment and doubling down.
That investment next year.
Still going to be sitting on a lot of cash we have been asking advisers is a good repurchase shares our advisor are telling us it's not a good idea to repurchase sure because our flow it's already small out there in the market. We our goal is actually to we need to have more float in the market. So that we can attract.
For shareholders.
That is our rationale.
Great. Thank you I really appreciate it that's very helpful. Can you give a little bit of detail, but I was wondering if you could maybe expand a little more on your online strategy.
Your expectations for growth.
Coming in you know 2023 and beyond.
Sure currently we're selling our products on Amazon are owned all the Cup store Dot Com. We just added recently Walmart dot com ebay dot com and we're looking at other channels on the Amazon Dot com, we've been selling products in the U S. Only and we're seeing that starting January 1st 2023.
<unk> has been an all plastic and theres going to be a major need for compulsory eco friendly products not only on the strong side on the food container on the cup side on the container size.
And that's what we see we'll be pushing through Amazon, Canada, St. Pete What Amazon, Mexico also Amazon Hawaii.
With that said, we need to add more warehouse space. When you have more products in our in our east coast warehouse in the past we've been struggling to get product into the east coast, whereas only California. Most of the product majority of the product and ship it to California into East coast that takes about five to seven days customer.
Who are our BTB customers that are in Connecticut in Boston, and New York, They don't want to wait five to seven days to get the products. So we lose that business and that's why where our strategy is.
Stock or actually stock up as much as we can in New York South Carolina are South Crown you are.
Our distribution.
Distribution facility will be double by end of this month with the inspection on the fire inspections that we have increased our facility in South Carolina, which we could serve a southeast region.
The focus of getting online sales up is how fast can you ship well, we can ship within 40 hours. How quickly can you get the products do you have multiple dcs that could ship the last mile to the customer faster. So they don't have to wait a week and my ordering like point out driving half a mile half an hour.
30 minutes or an hour do you find there are local suppliers. The router order online. So we're seeing more people sourcing for eco friendly products online and that's where we see our growth is going to be eco friendly ESG product on my neck.
Sure.
Thank you and my last question I appreciate your time.
You know you've been very clear today.
Today and over the last several quarters and years about the growth of eco friendly products can you talk about it as you look forward you know well beyond next year. The next several years.
What percentage of your revenue you see that being because it's relatively small today.
Right now I believe our eco friendly product is approximately 20% over revenue.
Our new joint venture is it's actually selling 100% of equal for any proposed revenue with additional expansion in 2023 that will be 100% USG product and adding other ESG products not only the <unk> product.
In U S. R. CT business I do see our Ah in 2023, we should be at 35% to 40% of our toll internships ESG product as we move for with our growth in revenue I do see our sales on the paper shopping back mainly at <unk> P. M. A S <unk> chemical.
And it will be the top drivers in the 2023 year.
Great. Thank you very much for the color really appreciate it have a wonderful day. Thank you.
Sure.
This concludes our question and answer session I would like to turn the conference back to Alan for any closing remarks.
Thank you operator, and thank all of you for joining US today, we appreciate your support and interest in our company and I look forward to keeping you appraised of our progress and to speaking with you in the future again have a great Thanksgiving and holiday season ahead. Thank you very much bye bye.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.