Yunhong Green CTI Ltd.

Good day and welcome to the Yonhung CTI Second 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, August 16, 2022. The earnings press release accompanying this conference call was issued this morning. On the call today is Yonhung CTI's Chief Executive Officer, Frank Cesario, as well as Chief Operating Officer, Jaina Swan. 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 are reflective of its current views about future performance and its 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 makes references 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 most directly comparable to it is net income or loss. For further information, please refer to their 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.

Thank you, Matthew. Good morning, everyone. Thank you for joining us today. Hopefully, you've had a chance to look at our press release that we issued at close yesterday with summarized financial information, as well as the press release we issued last week regarding the arrival of Yunhong Biotechnology, Inc. Let's start with a summary of financial performance. The second quarter started out pretty well. with April coming in ahead of last year. Then we experienced a more challenging May and June, with sales to our customers negatively impacted by the significant rise in the price of helium. As many know, our top-selling product line is foil balloons. Of these, most are filled with helium, while the rest are filled with air. Like so many materials this year, the price of helium increased drastically, close to double what it was last year. Russia provided about 5 percent of the supply and could scale up for more. We all know what's going on with that. There was a fire in the largest U.S. plant that shut it down for an extended period. All in, it was a tough year for helium supply, which hurt those customers who purchased foil balloons from us and filled them with helium. Many of those customers have shared the expectation that the price will improve over the next few months. While this is good news, the high price of helium had a negative impact on our revenue for the second quarter. For April to be higher revenue than last year and close $1.3 million down was certainly disappointing, and yet our reconfigured, more focused, efficient business showed its newfound resiliency. If we look at our net loss for the quarter, $400,000, compared to a gain from last year, it's important to note that we had a $3.4 million one-time gain from selling our Lake Barrington building last year to help with debt reduction. Without this one-time event, we posted a better bottom line this year than last year, on $1.3 million less revenue. And that's before we consider the $300,000 loss contributed by the subsidiary we sold in October of 2021. With those pieces defined, we beat last year's bottom line soundly, again, despite $1.3 million less revenue. Looking at our adjusted EBITDA, which is detailed in our non-GAAP measure in the press release, we posted a half million dollar improvement during the second quarter. and a three-quarters of a million dollar improvement during the six-month period over last year, and that's on 1.3 and 2.1 million less revenue, respectively. Nobody likes a storm, but our ability to weather that storm has improved exponentially. After the second quarter, one might ask if we're less confident about our expectation for 1.2 million of adjusted EBITDA for the full year 2022. With all the usual caveats involved in predicting results, our answer is no. We are not going to change that expectation. We believe we should get there. One top variable is how quickly helium settles down. If that happens during the third quarter, then I think we'll be able to hit our number. If it takes longer, we may have to reevaluate that forecast. But for now, we are sticking with our expectation. The fourth quarter has typically been our strongest, and we are building inventory to be better able to handle a potentially higher order flow later this year. We continue to attack our cost structure, looking for savings opportunities. We believe there are more opportunities to streamline operations and make us more efficient. Our robotic initiative is a good example of that effort, which Jonna Schwan, our Chief Operating Officer, talked about previously. Jonna will provide more insights in a moment. We're also planning to leverage the shares in the equity plan that our shareholders approved during June as we look to add more talent and support as we pursue new customers in the sales area. Many are looking forward and see a potential recession if we're not in one already. Our experience has been that balloon sales tend to be fairly strong during challenging times, as we have retail partners who are preferred destinations by families looking for value, and our products are a low-cost way to bring smiles to faces. Add to that the likelihood of more at-home parties, and we see a potential economic challenge as an opportunity. Jonna, as we celebrate your 20 years with our company, you have seen it all. I think this is helium number four for you. May I ask you to share what you see in our space these days?

Thanks, Frank, and hello, everyone. We have discussed the efficiency of manufacturing recently. Our robotic arms are being integrated into the process and are proving to be quite effective. Today, I would like to highlight our planning process. During recent years, we have become much more effective in incorporating material costs supply interruptions, and production throughput into our designs that we offer. We have a unique ability to expand and contract all areas of our production activities quickly to adjust to our customers' needs. This has given us an advantage to be able to control our material flow and production capacity while we await stability in the helium market. Frank?