Q3 2023 Yunhong Green CTI Ltd Earnings Call

Speaker 1: Good day and welcome to the Yun Han Green CTI third quarter and nine months ended September 2023 earnings conference call.

Good day and welcome to the young Hungry C T I third quarter and nine months ended September 2023 earnings Conference call.

Speaker 1: During today's presentation, all parties will be in a listen-only mode. During the presentation, the conference will begin.

During todays presentation, all parties will be in a listen only mode.

Following the presentation the conference will be open to questions.

Speaker 1: This conference is being recorded today, November 2nd, 2020.

This conference is being recorded today November 2nd 2023, the earnings press release accompanying this conference call was issued last night.

Speaker 1: earnings press release accompanying this conference call was issued last night.

Speaker 1: On the call today is Young Hung Green, CTI's Chief Executive Officer Frank Cesario, as well as Chief Operating Officer Janice...

On the call today as he on hungry and C. T is chief Executive Officer, Frank scenario, as well as Chief operating Officer Janice one.

Speaker 1: Before we begin, we want to make note that you should read the forward-looking statements in the company's earnings press release.

Before we begin we want to make note that you should read the forward looking statements in the company's earnings press release.

Speaker 1: during today's call. Management will make certain predictive statements that reflect its current views about future performance and financial...

During today's call management will make certain predictive statements that reflect its current views about future performance and financial results.

Speaker 1: company bases these statements in certain assumptions and expectations on future events that are subject to risks and uncertainties.

The company basis, these statements and certain assumptions and expectations on future events that are subject to risks and uncertainties.

The company's Form 10-K for the year ended December 31st 2022 lists some of the most important risk factors that could cause actual results to differ from its predictions.

Speaker 1: companies form 10K for the year ended December 31st, 2022, lists some of the most important risk factors that could cause actual results to differ from its prediction.

Speaker 1: Please also note that the company's earnings press release make reference to adjusted EBITDA, a non-GAAP financial net.

Please also note that the company's earnings press release make reference to adjusted EBITDA, a non-GAAP financial measure.

Speaker 1: The company views adjusted EBITDA as an operating performance measure and as such the company believes that the GAAP financial measure most directly comparable to it is net income or loss...

The company views adjusted EBITDA as an operating performance measure and as such the company believes that the GAAP financial measure most directly comparable to it is net income or loss for.

Speaker 1: further information, please refer to the earnings press release and the company's periodic filings with the Securities and Exchange Committee.

For further information please refer to the earnings press release, and the company's periodic filings with the Securities and Exchange Commission.

Speaker 1: At this time, I would like to turn the call over to Frank Cesario, Chief Executive Officer of Yung Hong Green CTI. Sir, please go ahead.

At this time I would like to turn the call over to Frank scenario, Chief Executive Officer of Jan Tom Green C. T. I Sir Please go ahead.

Speaker 2: Thank you, Holly. Good morning, everyone. I would like to thank you for joining us on our call today. This is the time of year where we take a breath and appreciate the transition from what has historically been our weakest quarter, Q3, to our strongest quarter, Q4, thanks to Valentine's Day Shipments.

Thank you Holly good morning, everyone I would like to thank you for joining us on our call. Today. This is the time of year, where we take a breath and appreciate the transition one has historically been our weakest quarter Q3 to our strongest quarter Q4, thanks to Valentine's day shipments.

Speaker 2: However, it isn't every day that a company is rebranded, so let's start there. During August , our stockholders approved renaming our company from Yunhong CTI Limited to Yunhong Green CTI Limited as a way of communicating the new biodegradable and compostable products designed to reduce our reliance on single-use plastic.

However, it isn't every day that a company has rebranded so let's start there during our August our stockholders approved renaming our company from noon, Hong CGI Limited Juno Green CGI limited as a way of communicating the new biodegradable and compostable products designed to reduce our reliance on single use plastics.

Speaker 2: Along these lines, we've also changed our ticker symbol to reflect our name. CTIB has given way to YHGJ. Our new ticker may be more awkward to speak out loud and I know that, but it is more reflective of our company name, Unihung Green, CTILIM.

Along these lines, we have also changed our ticker symbol to reflect our knee C. T. I B has given way to Y H G. J, our new take or maybe more awkward to speak out loud and I know that but it is more reflective of our company name unit home Green C T I limit.

Speaker 2: We have added significant new assets to our website and have been sharing product samples while undergoing performance testing in the U.S. as we begin the process of entering the U.S. marketplace. I encourage anyone interested in this product area to look at our website and see what these solutions are about. With that as our backdrop, I'll turn it over to you, Dr.

We've added significant new assets to our website and have been sharing product samples while undergoing performance testing in the U S. As we begin the process of entering the U S marketplace I encourage anyone interested in this product area to look at our website and see what these solutions are about.

With that as a backdrop, let's start with the numbers.

Speaker 2: Year-to-date sales were 11 million in 2023 compared to 12.4 million during 2022. Helium became the story of the second quarter of 2022 as a good start to the year became particularly challenging with a skyrocketing cost of helium following the loss of Russian supply after the invasion of Ukraine.

Year to date sales were $11 million in 2023 compared to $12 4 million during 2020 to.

Helium became the story in the second quarter 2022, as a good start to the year became particularly challenging with a skyrocketing cost of helium following the loss of Russian supply after the invasion of Ukraine.

Speaker 2: We also had a short-term supply issue in the United States that has since been resolved. No surprise, the Q122 was a strong balloon quarter, and Q2 was weak. 2023 was more consistent, building as the year went along. I'm pleased to share that we have finally caught up on the year-to-date base.

We also had a short term supply issue in the United States that has since been resolved. It's no surprise that Q1 'twenty two was a strong balloon quarter in Q2 was weak 2023 was more consistent building as the year went along I'm pleased to share that we have finally caught up on a year to date basis.

Speaker 2: It's been a tough road, one that has seen our two largest competitors in the U.S. file Chapter 11 in 2023.

It's been a tough road one that has seen our two largest competitors in the U S filed chapter 11 in 2023.

Speaker 2: Film products dropped off in the third quarter in lag 2022 substantially. Film product orders have been flowing a market where consolidation is common. Competitors are plentiful and each quarter has a wide range of potential outcomes.

Home products dropped off in the third quarter lag 2022 substantially film product orders ebb and flow in a market where consolidation is common competitors are plentiful and each quarter has a wide range of potential outcomes I believe the fourth quarter will be better but the gap is significant our other category is led by a balloon inspired gift.

Speaker 2: I believe the fourth quarter will be better, but the gap is significant. Our other category is led by balloon-inspired gift items, which continues to show strong order growth.

Items, which continues to show strong order growth.

Speaker 2: We note that because we record all of our Valentine's Day shipments by the end of December of 22, something we did not do during 2021, the first 9 months of this year shows a drop in the category despite an increase in overall order.

We know that because we recorded all of our Valentines day shipments by the end of December of 'twenty, two something we did not do during 2021. The first nine months of this year shows a drop in the category. Despite an increase in overall order flow the timing of our shipments may cause challenges in comparing finite periods, but overall this area has been worse.

Speaker 2: The timing of our shipments may cause challenges in comparing finite periods. But overall, this area has been working well for us, and I believe it will continue to do so.

Well for us and I believe it will continue to do so.

Speaker 2: The gross margin was off 1.6% from 16.7 last year to 15.1 this year, on a reduction overall revenue volume during 23, driven by a commercial films area. However, the rest of the income statement shows a much better outcome, such that a 28% per share lost last year is now 4 cents per share.

The gross margin was off 1.6% from $16 seven last year to 15.1, this year and a reduction in overall.

Revenue volume during twenty-three driven by our commercial films area. However, the rest of the income statement shows a much better outcome such that a 28 cents per share loss last year is now four cents per share. This year, we had one time costs and benefits, particularly from the income recognition of the employee retention tax credit, but overall our.

Speaker 2: We had one-time cost and benefits, particularly from the income recognition of the employee retention tax credit. But overall, our spending discipline helped us weather the helium storm.

Spending discipline helped us weather the helium storm.

Speaker 2: We believe that bodes well for our future profitability as we find ways to deal with cost challenges that have exploded broadly these past couple years.

We believe that bodes well for our future profitability as we find ways to deal with cost challenges that have exploded broadly these past couple of years.

Speaker 2: In the prior quarter, we discussed the deployment of automation in our manufacturing process to create efficiencies and in a long-term lower our operating costs.

In the prior quarter, we discussed the deployment of automation in our manufacturing process to create efficiencies and then the long term lower our operating costs, perhaps this quarter I can ask our chief operating officer, John Schwan to share the seasonality of our traditional business such that listeners can better manage their expectations Jonathan.

Speaker 3: Perhaps this quarter I can ask our Chief Operating Officer, Jonna Schwath, to share the seasonality of our traditional business such that listeners can better manage their expectations. Jonna? Thank you, Frank, and good morning, everyone. As foil balloons drive the bus, let's focus on the seasonality for balloons and related gift items.

Thank you Frank and good morning, everyone as foil balloons drive the bus, let's focus on the seasonality for balloons and related gift items.

Speaker 3: Roughly half our business is everyday. Think birthdays, get well, anniversary, and other sentiments. While the rest is driven by such events as Valentine's Day, Mother's Day, and the graduation season.

Roughly half our business is everyday thanks, birthdays get well anniversary and other sentiments, while the rest is driven by such events as Valentine's day mother's day and graduation season.

Speaker 3: We should provide for nearly two months prior to the holiday, while production is underway months before that.

We shipped approximately two months prior to the holiday.

While production is underway months before that.

Speaker 3: We naturally gear up starting in August , operate feverishly through October through November , and then take a moment to reorganize after shipping Valentine's.

We naturally gear up starting in August operate feverishly through October through November and then take a moment to reorganize after shipping Valentine's day.

Speaker 3: We then ramp up from February to April as we focus on Mother's Day and graduate.

We then ramp up from February to April as we focus on mother's day and graduation.

Speaker 3: Our third quarter is about spending controls and longer term planning, as we prepare to do this all again. And the pay off is millions of happy customers, which makes it all worthwhile.

Our third quarter is about spending control and longer term planning as we prepare to do this all again and the payoff is millions of happy customers, which makes it all worthwhile.

Speaker 2: Frank? Thank you, John . As we indicated during our prior call, our credit line expired September 30th. We've agreed with our lender to extend this line for two years until September 30th, 2025, under similar terms.

Frank.

Thank you Joe as we indicated during our prior call our credit line expired in September 30th we've agreed with our lender to extend this line for two years until September 32025 under similar terms. We've completed the name change we are now getting compostable product samples out we are updating third party test results.

Speaker 2: We've completed the name change. We are now getting compostable product samples out. We are updating third-party test results, domestic.

Domestically, we will be participating at the China International import Expo 2023 next week November five through 10.

Speaker 2: We'll be participating at the China International Import Expo 2023 next week, November 5 through 10.

Speaker 2: Our company, together with Unhung Biotechnology Inc., another member of the Unhung Group family of companies, will be displaying our traditional balloons and balloon-inspired guests, but also our group's patented, composable, biodegradable, and recyclable materials to enhance environmental sustainability.

Our company together with young Biotechnology, Inc. Another member of the uniform group family of companies will be displaying our traditional balloons and balloon inspiring gifts, but also our groups patented composed of all biodegradable and recyclable materials to enhance environmental sustainability.

Speaker 2: We continue to find our footing. Helium pricing continues to slowly improve. People desire to celebrate. And we can play an important role in making those experiences special and memorable.

We continue to find our footing.

Helium pricing continues to slowly improve people desire to celebrate.

And we can play an important role in making those experiences special and memorable.

Speaker 2: Our balloon-inspired gift category continues to grow, and we offer our customers outstanding designs in quality products.

Our balloon inspired gift category continues to grow and we offer our customers outstanding designs and quality products.

Speaker 2: Any more automation will help us as well the development of new product areas.

Adding more automation will help us as well the development of new product areas.

Speaker 2: and now we get to fulfill customer holiday orders. This hasn't been easy, but few things worthwhile are.

And now we get to fulfill customer holiday orders this hasn't been easy, but few things worthwhile are.

Speaker 2: We know most people catch this call on the replay, but for anyone who's on live, we invite you to ask a question. Holly, would you please open the Q&A?

We know most people catch this call and the replay but for anyone who's on live we invite you to ask a question Holly would you. Please open the Q&A.

Speaker 1: Certainly at this time we will be conducting a question and it

Certainly at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Speaker 1: If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

Confirmation tone will indicate your line is in the question queue.

Speaker 1: You may press star 2 if you would like to remove your question from the queue. For participants using speak equipment it may be necessary to pick up your handset before pressing the star keys. One moment please.

You May press Star two if you would like to remove your question from the queue for.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Speaker 1: Your first question for today is coming from Glenn Hamilton, a private investor.

Your first question for today is coming from Glen Hamilton, a private investor.

Hi, Glenn.

Speaker 4: Hey Frank, my question is either you or John are going to be attending the Young Kong Conference in China coming

A break of.

My question is either you or John are going to be attending the young Kong conference in China coming up so.

Speaker 2: So this time we decided that just Yoon Hong folks were gonna do that one. We have a variety of things being presented. So we have been supporting that conference with a lot of materials. You don't want to know how many packages have gone overseas, but we are coordinated and ready to roll. But to answer your question, this time we get to avoid the long plane trip and have local assets take care.

So this time, we decided that just a young folks we're going to do that one we have a variety of things being presented so we have been supporting that confidence with a lot of materials. You don't want you don't want to know how many packages have gone overseas.

But we are coordinated ready to roll but to answer. Your question. This time, we get to avoid the long plane trip and I have local assets take care of it.

Speaker 4: Okay. Second, I'm familiar with Party City in bankruptcy. Who was the second company you mentioned in BK? I wasn't familiar with that.

Okay.

Second I'm familiar with party city and bankruptcy, who was the second company you mentioned N V K I wasn't familiar with that.

Speaker 4: Yeah, there's a private company called Pioneer. They're based in Wichita, Kansas. They own brands such as Qualitax. They have another entity name called Continental. But they were the largest latex company and overall, the second largest bloom company behind Anagram, Fush Party City. Would you say you are the third largest producer?

Yeah, there's a private company called pioneer they're based in Wichita, Kansas, They own brands such as quality checks. They have another entity named called Continental but they were the largest latex company and overall the second largest balloon company behind Anagram Slashed Party city.

Would you say you are the third largest producer in the United States at this point.

Speaker 2: For foil, for domestic, I think that answer is correctly next largest, besides us as a company called Converted Door Out of Mexico. But as far as an American domestic manufacturer, I think it's clearly us.

For foil for domestic I think that answers correctly next largest besides us as a company called converted door out of Mexico.

But as far as an American domestic a manufacturer of I think it's clearly us.

Speaker 4: Okay, I'm gonna end this pretty shortly. With all the competitors pretty much very weak, I would think it'd be easy to start stealing summer their sales and how is next year gonna be any difference in this year. I would think you should be able to just go in and just take a lot of these weaker customers. That's just my off the cuff.

Okay, I'm going to and it's pretty shortly with all of the competitors pretty much very weak I would think it would be easy to start stealing some of their sales and how is next year going to be any different than this year. I would think you should be able to just go in and just take a lot of these weaker customers that that's just my off the call.

Speaker 2: Well, if the conversation we certainly had because as people go through any transitional period, right, that creates some uncertainty that, you know, somebody else could hope to fulfill, I will note that both were chapter 11, not chapter 7, which means that the entities continue just in a reorganized fashion.

Well, it's it's a conversation we certainly had because as people go through any transitional period right that creates some uncertainty that you know somebody else could hope to fulfill I will note that in both of our chapter 11 that chapter seven which means that the entities continue just in the reorganized fashion on the one hand for <unk>.

Speaker 2: On the one hand, for example, party city came out of their issue, what, what, a billion dollars less debt. So that will certainly help their competitive position and no longer public, by the way. They're privately held company.

Example party city he came out of their issue with $1 billion less debt. So that'll certainly help their competitive position and no longer public by the way. They were privately privately held company now. So there are differences in that but clearly it's yeah I think it's advantageous for us to operate continuously.

Speaker 2: So there are differences in that, but clearly it's, you know, I think it's advantageous for us to operate continuously and to add new items to our mitt.

And to add new items to our mix.

Speaker 4: Okay, last question, I swear, no more. With the increase in the number of shares, which I was not really happy with, I'd like to think those shares increase somehow, Young Hung is going to be looking at acquisitions in the future.

Okay last question I swear no more.

With the increase in the number of shares which I was not really happy with.

I'd like to think that those shares increased somehow young Hong is going to be looking at acquisitions in the future and that's great. Okay. No problem using shares to buy other companies, but for a $3 stock, let's say I'd, rather the stock would be a 10 to $20 stock and start doing that so I'm just wondering have you.

Speaker 4: And that's great. No problem using shares to buy other companies. But for a $3 stock, let's say, I'd rather this stock be a $10 to $20 stock and start doing that. So I'm just wondering, have you had any conversations with senior management in China? Have?

Had any conversations with senior management in China have they looked at any.

Speaker 4: possible acquisitions. I don't want any specifics, but is that on their game plan? Because why issue the number of shares if you're not going to use them?

Possible acquisitions, I don't want any specifics, but is that on their game plan why issue the number of shares, but they're not going to use them.

Speaker 2: Well, absolutely. So what a great way to finish that, right? So we authorized more shares. We did not issue any of them.

Well, absolutely so what a great way to finish that right. So we authorized more shares we did not issue any of those shares.

Speaker 2: So we have more shares available to our Board of Directors if we find an appropriate technology partner, M&A target, whatever. And frankly, we are looking at uses for those shares that will develop our business.

So we have more shares available to our board of directors, if we find an appropriate technology partner M&A target whatever and frankly, we are looking at uses for those shares that will develop our business.

Speaker 2: But this isn't one of those things where we're racing around with a handful of shares saying, whatever the most is that we can get for this, that's what we want. That's not how we're going about.

But this isn't one of those things, where we're racing around with a handful of shares saying whatever the most is that we can get for this that's what we want that's not how we're going about this we're saying how can we get better at our traditional business and particularly with the new business venture that we're deploying how can we get better at doing that and so these shares give us in.

Speaker 2: We're saying, how can we get better at our traditional business and particularly with the new business venture that we're deploying? How can we get better at doing that? And so these shares give us an asset that we can use to leverage into getting more of those hard asset technologies, partners, et cetera.

Asset that we can use to leverage into getting more of those hard asset technologies partners et cetera. So it's wonderful to have more flexibility if something to work with but be clear. We are only intending to deploy these were their value add.

Speaker 2: So it's wonderful to have more flexibility and something to work with, but be clear. We are only intending to deploy these where they're value-less.

Speaker 2: Okay, great. No more questions. I'm going to try to come out and see you guys in the next couple of weeks depending on your schedule. So I'll give you a call just to see your availability. Thank you. All right, terrific. Thank you. So to everyone else who are in the Chicago Land Area.

Okay, great no more questions out I'm going to try to come out and see you guys. In the next couple of weeks depending on your schedule. So I'll give you a call just to see your availability. Thank you alright terrific. Thank you so to everyone else, who all were in the Chicago land area.

[laughter].

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Speaker 1: Once again, if there are, I'm sorry, once again, if there are any questions, please press star 1.

Once again, if they all right I'm sorry, once again, if there are any questions. Please press star one.

Speaker 1: have reached the end of the question and answer session and I will now turn the call over to Frank for closing remarks.

We have reached the end of the question and answer session and I will now turn the call over to Frank for closing remarks.

Speaker 2: Thank you, Holly. So again, we know most people catch this on the replay. We thank you for your interest in our company. And we're working hard to give you reports that you're gonna be interested in going forward. So a lot of stuff is happening. This is our wonderful Valentine's Day shipment season. We're really enjoying that here. And we look forward to talking to you with year end results and heading into 24. Can't believe we're saying that, but we're heading into 24. So thank you all.

Thank you Holly so again, we know most people catch this on the replay we thank you for your interest in our company and we're working hard to you know to.

Give you reports that youre going to be interested in going forward. So a lot of stuff is happening.

This is our wonderful Valentine's day shipment season, so we're really enjoying that here and we look forward to talking to you with our year end results and heading into 'twenty four can't believe are saying that but we're heading into 24. So thank you all.

Yeah.

Yes.

Speaker 1: Thank you. This does conclude today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Thank you. This does conclude today's conference and you may disconnect. Your lines at this time. Thank you for your participation.