Yunhong Green CTI Ltd.

Good day and welcome to the Yunhong CTI First 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, May 19, 2022. The earnings press release accompanying this conference call was issued after the close of market on May 18. On the call today is Yunhong CTI's Chief Executive Officer, Frank Cesario, as well as Chief Operating Officer, Jana Xuan. 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 make reference to the adjusted EBITDA and non-GAAP financial measure. The company's views adjusted EBITDA as an operating performance measure and, as such, the company believes that the GAAP financial measure most directly comparable to its 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 now turn the call over to Frank Cesario, Chief Executive Officer of Yanhong CTI. Sir, please go ahead.

Thank you, Jenny. Good morning, and thank you, everyone, for joining us on our call today. Rarely has the term first quarter meant as much as it does to us today. This is the first quarter that our reconfigured company has reported its results. We still have to talk about last year's results with and without our former Flexo subsidiary, but 2022 is clean. This should make us easier to understand as we move forward. Fresh out of the gate, we got one small but typical curveball that we're used to dealing with. With a sizable portion of our revenue driven by events such as Valentine's Day, Mother's Day, and graduation, The timing of our shipments is highly impactful to our quarterly results. For Valentine's Day, most of that business ships by December 31st of the previous year, about a month and a half before the holiday. But there's always some spillover into January that we have to estimate. Even more pronounced is the question of what will ship in late March versus early April for Mother's Day and graduation season. Last year, more went in March, while this year, some of that shipped in April. You can see that in our inventory numbers. To get ahead of it, I don't know how that's going to shake out in 2023. Every year we're making some kind of guess because it's just a matter of days from Q1 to Q2. That timing is always somewhat dependent on our forecasting and, you know, the ability to make deliveries. You've seen from our results that our revenue is down from 6.6 million to 5.8 million, but I know that our margin rate was similar despite the volume change, and, of course, our bottom line was much improved. More on that in a moment. Remember Flexo and the loss they contributed last year? Yeah, I don't either. I look at, we look at adjusted EBITDA as the most useful metric. While we're on the topic, we've decided to put a toe in the pool of forecasting and share that we expect to post more than $1.2 million in adjusted EBITDA in 2022. As our business continues to mature, we'll decide how to best share expectations at the right level. For now, we want to focus on the single most important number that we look at internally. We could end up reporting an adjusted EBITDA number for 2022 in excess of $1.2 million, so that's a figurative line in the sand that we're drawing today. With all the caveats that you know and heard about at the beginning of the call, that's where we're going to start. We're all concerned about supply chain disruption, the flow of helium into the marketplace. To provide some perspective on these topics, I've asked John Eshwan, our Chief Operating Officer, to share what the market is looking like and how we're addressing these issues. John?

Thanks Frank and hello everyone. Let me start with helium. In 2019 we had an immense commercial helium shortage in the marketplace that hurt everyone in our industry. Today we are seeing a tightening in helium supply once again with some customers struggling to get 100% of what they require. But so far it seems less impactful than 2019. We will of course keep an eye on the helium supply as we progress through the year. On the topic of supply chain, we have ordered more material earlier than we would have otherwise in order to try to mitigate these issues. Fortunately, the vast majority of our materials are from domestic supplier partners that we have known for a very long time. So an open communication flow has been keeping us out of trouble. Freight availability and timing is touch and go at best, but our team continues to work the issue. Nobody has a perfect answer or even a good answer here, but we believe our relationships will continue to pay dividends. Thus far, we have largely executed what we planned for, and I expect that that will continue.