Yunhong CTI Ltd. (NASDAQ:CTIB) Q3 2022 Earnings Call Transcript

Yunhong CTI Ltd. (NASDAQ:CTIB) Q3 2022 Earnings Call Transcript November 16, 2022

Operator: Good day and welcome to the Yunhong CTI Third Quarter 2022 Earnings Conference Call. During today’s presentation all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. This conference is being recorded today, November 16, 2022. The earnings press release accompanying this conference call was issued Tuesday, November 15, after the close of market. On the call today is Yunhong CTI’s Chief Executive Officer; Frank Cesario, as well as Chief Operating Officer Jana Schwan. Before we begin, we want to note that you should read the forward-looking statements in the company’s earnings press release. During today’s call, Management will make certain predictive statements that reflect its current views about future performance and financial results.

The Company bases 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 31, 2021 lists some of the most important risk factors that could cause actual results to differ from its predictions. Please also note that the Company’s earnings press release refer to adjusted EBITDA, a non-GAAP financial measure. The Company views adjusted EBITDA as an operating performance measure and as such, the company believes that the GAAP financial measure of most directly comparable to it is net income or loss. For further information, please refer to the earnings press release and the Company’s periodic filings with the Securities and Exchange Commission.

At this time, I would like to turn the call over to Frank Cesario, Chief Executive Officer of Yunhong CTI. Sir, please go ahead.

Frank Cesario: Thank you, Ali. Good morning. Thank you everyone for joining us on the call today. Hopefully you’ve had a chance to look at our press release, we issued the close yesterday with some rise financial information. Let’s start with a summary of financial performance. Three months ago, we highlighted the elevated price of helium being the primary determinant of our third quarter, as our top selling product line is foil balloons usually filled with helium by our customers. While the price of helium gradually improved during the past three months, it remains elevated and a challenge for our customers to manage particularly those constraints from passing some of those costs through pricing changes. The story of 2022 has been helium related revenue challenges, but we’ve hung in there on the bottom line demonstrated our resilient.

Looking at adjusted EBITDA which detailed as non-GAAP measures our press release, we posted a $400,000 improvement on $5 million less income — plus revenue pardon me. That really speaks to the improvement in our business, something we look to take advantage of as the market continues to settle. We held on to $1.2 million adjusted EBITDA expectation for the full year 2022 depending largely on how quickly helium prices would return to earth. If those prices remain elevated, we need to eliminate this is our expectation. The fourth quarter is traditionally our best quarter and we have significant candy blossom orders which are immune from helium pricing, on top of our Valentine’s Day orders expected to ship during the fourth quarter. But we’re too far away to believe we can hit the $1.2 million.

During normal year roughly half of our business comes from everyday sales think birthdays, while the other half is event driven such as Valentine’s Day. We already processing commitments for 2023 Mother’s Day, Father’s Day and graduation. Jana Schwan, our Chief Operating Officer, will walk us through the process of working with customers to prepare for and fulfill their needs for these significant events. Welcome, Jana.

Jana Schwan : Thanks, Frank. And hello, everyone. We are very proud of our in-house creative team, we begin presenting design concepts tailored to our specific customers needs and preferences almost a year ahead of the holiday. Commitments are issued about six months ahead of the event. So we have time to prepare. Followed by actual purchase orders that are provided a few weeks before the expected shift dates. The process is fully collaborative as we work together with our customers to control the process flow and avoid surprises to ensure quality product is shipped on time and in full. This significant lead time allows us to efficiently staff work areas shifting employees from one area to another to optimize our output. Frank?

Frank Cesario: Thank you Jana. Our creative team really is amazing and I thank you for calling that group out. Anyone on the call familiar with manufacturing will appreciate the value of significant lead times and navigating not only recent supply chain and freight related challenges, but also the ongoing challenge of effectively deploying resources. I can’t believe we’re in November already. But if you look at our warehouse, you’d understand their largest shipping days are in the near term. I’m proud of what we’re doing to be shipping and look forward to customer feedback as we tee it up and do it again. Many on the call might remember that balloons tend to have a counter cyclical element. They often sell better and challenging economic conditions, as they are an inexpensive way to find a smile.

Now that we’ve dramatically reduced our debt load over the past three years, this should overwhelm the increase in financial costs related to the interest rate increases. Most people play this on the replay, but for anyone on the call live who wants to ask a question we invite you to do so. Ali, May I turn this over to the Q&A session?

Operator: Okay, there appear to be not questions in queue, so I’ll hand it back to Mr. Cesario.

Q&A Session

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Frank Cesario: All right, thank you, Ali. It’s all good. This is exciting. This is where we prep and ship for Valentine’s Days. We ship about two months before the major events. So that’s what we’re doing. I very much look forward to speaking with you after the year is concluded. And we can talk about all the highlights lowlights and everything else associated 2022 as we drive into 2023. I thank you for participating on our call. I thank everyone who listens to the replay. And I look forward to speaking again. Thank you, all.

Operator: Thank you, ladies and gentlemen. And this does conclude today’s call. You may disconnect your lines at this time and have a wonderful day. And we thank you for your participation.