IT Tech Packaging, Inc. (NYSE:ITP) Q3 2021 Earnings Conference Call November 12, 2021 8:00 AM ET Company Participants Zhenyong Liu - Chairman and Chief Executive Officer Jing Hao - Chief Financial Officer Operator Hello ladies and gentlemen and welcome to IT Tech Packaging's Third Quarter of 2021 Earnings Conference Call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. Joining us today are the company's Chairman and Chief E ...

Financial Data and Key Metrics Changes - Total revenue increased by 76.5% to $46.5 million, driven by a 33.9% growth in overall sales volume and a 36% increase in average selling prices across all product categories [7][9] - Gross profit rose by 18.4% to $3 million, with a gross profit margin of 6.5% [11] - Operating income was $0.43 million, compared to a loss from operations of $0.8 million in the same period last year [11] - Net loss was $0.5 million, or $0.01 per share, an improvement from a net loss of $1 million or $0.04 per share in the same period last year [12] Business Line Data and Key Metrics Changes - The CMP segment generated revenue of $36.8 million, accounting for 79.1% of total revenue, with volumes increasing by 204.2% to 73,998 tonnes [10] - Revenue from offset printing paper products was $7.2 million, with sales of 10,415 tonnes and an average selling price of $690 per tonne [11] - Tissue paper products generated $2.4 million in revenue from sales of 2,196 tonnes, with an average selling price of $1,106 per tonne [11] - Face masks generated $0.11 million in revenue from sales of 2,635 thousand pieces [11] Market Data and Key Metrics Changes - The company has seen robust domestic market demand for tissue paper products, contributing to the overall revenue growth [7] - The approval for surgical mask products is expected to enhance revenue potential, with an estimated annual production capacity of 45 million pieces [7] Company Strategy and Development Direction - The company is expanding its capacity by launching a new tissue paper production line, PM10, to boost overall performance [7] - Plans to diversify revenue sources include entering new technology businesses, such as a biomass combined heat and power generation project [8] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the continued improvement in sales volume and production efficiency, particularly in the CMP and offset printing paper segments [6] - The company is focused on technology innovation and expanding its product offerings to meet market demands [8] Other Important Information - For the first half of 2021, total revenue increased by 101.5% to $70.7 million, with significant contributions from CMP and offset printing paper segments [13] - Current assets as of June 30, 2021, were $63.7 million, with current liabilities of $17.2 million, resulting in a working capital of $46.6 million [17] Summary of Q&A Session - There was no formal Q&A session during this earnings conference call [19]

Revenue and Sales Performance - Revenue for the three months ended June 30, 2021, was $46,534,915, an increase of $20,172,642, or 76.52%, from $26,362,273 for the same period in 2020[148] - Revenue from sales of offset printing paper, CMP, and tissue paper products for the three months ended June 30, 2021, was $46,426,045, an increase of $20,909,326, or 81.94%, from $25,516,720 for the second quarter of 2020[148] - Revenue from CMP amounted to $36,813,631, representing an increase of $14,938,906, or 68.29%, from $21,874,725 for the comparable period in 2020[153] - Revenue from offset printing paper was $7,184,221, representing an increase of $5,922,033, or 469.19%, from $1,262,188 for the three months ended June 30, 2020[157] - Revenue generated from selling face masks was $108,869 for the three months ended June 30, 2021, with 2,635 thousand pieces sold[159] - Revenue for the six months ended June 30, 2021 was $70,744,342, an increase of 101.52% from $35,106,124 in the same period of 2020[180] - Revenue from face masks was $239,327 for the six months ended June 30, 2021, with sales of 6,470 thousand pieces[183] - Total revenue for CMP, offset printing paper, and tissue paper products was $65,680,350, an increase of $33,305,489, or 102.87%, from $32,374,861 for the same period in 2020[187] Sales Volume and Pricing - Total offset printing paper, CMP, and tissue paper products sold during the three months ended June 30, 2021, amounted to 86,609 tonnes, an increase of 21,951 tonnes, or 33.95%, compared to 64,658 tonnes sold in the comparable period in the previous year[148] - ASP for regular CMP increased from $370/tonne for the three months ended June 30, 2020, to $500/tonne for the same period in 2021, representing a 35.14% increase[153] - ASP for offset printing paper increased from $578/tonne for the three months ended June 30, 2020, to $690/tonne for the same period in 2021, representing a 19.38% increase[157] Cost of Sales and Gross Profit - Total cost of sales for CMP, offset printing paper, and tissue paper products for the quarter ended June 30, 2021, was $43,407,855, an increase of $19,946,564, or 85.02%, from $23,461,291 for the comparable period in 2020[160] - Cost of sales for CMP increased by $15,094,405, or 76.45%, from $19,743,977 in Q2 2020 to $34,838,381 in Q2 2021, with average cost per tonne rising by 42.30% from $331 to $471[161][164] - Cost of sales for offset printing paper rose to $5,909,029 in Q2 2021, a significant increase of 513.27% from $963,531 in Q2 2020, with average cost per tonne increasing by 28.57% from $441 to $567[162][164] - Gross profit for the three months ended June 30, 2021 was $3,029,019, an increase of 18.38% from $2,558,829 in Q2 2020, representing 6.51% of total revenue[169] - Gross profit for the six months ended June 30, 2021 was $4,860,024, representing an increase of $2,470,914, or 103.42%, from $2,389,110 for the same period in 2020[188] - Gross profit margin for offset printing paper decreased by 5.91 percentage points to 17.75% in Q2 2021, compared to 23.66% in Q2 2020[172] - Gross profit margin for tissue paper products improved by 13.36 percentage points, from -32.07% for the six months ended June 30, 2020, to -18.71% for the same period in 2021[191] Operating Income and Expenses - Operating income for Q2 2021 was $431,408, a substantial increase of 154.02% from a loss of $798,643 in Q2 2020, driven by higher gross profit and lower selling expenses[176] - Selling, general and administrative expenses decreased by 22.63% to $2,597,611 in Q2 2021 from $3,357,472 in Q2 2020[175] - Operating loss decreased by $3,372,420, or 92.01%, to $292,905 for the six months ended June 30, 2021, compared to $3,665,325 for the same period in 2020[193] Net Loss and Financial Position - Net loss for Q2 2021 was $453,248, a reduction of 53.75% from a net loss of $980,031 in Q2 2020[179] - Net loss was $4,792,104 for the six months ended June 30, 2021, an increase of loss of $1,375,786, or 40.27%, from $3,416,318 for the same period in 2020[196] - As of June 30, 2021, cash and cash equivalents increased to $30,273,543, up by $26,131,106 from $4,142,437 as of December 31, 2020[206] - Net cash used in operating activities for the six months ended June 30, 2021 was $15,570,363, a decrease of $21,426,988 or 365.86% from the previous year[207] - Net cash provided by financing activities was $41,671,591 for the six months ended June 30, 2021, compared to $2,273,360 for the same period in 2020[208] Assets and Liabilities - Accounts receivable increased by $3,204,213, or 134.12%, to $5,593,270 as of June 30, 2021, compared to $2,389,057 as of December 31, 2020[196] - Inventory value increased by 845.97% to $11,671,350 as of June 30, 2021, from $1,233,801 as of December 31, 2020[197] - As of June 30, 2021, total outstanding loans from the Rural Credit Union of Xushui District amounted to $9,690,252, up from $9,594,017 as of December 31, 2020[211] - The amount due to shareholders was $727,433, representing funds from shareholders to cover various expenses incurred in the U.S., which is due on demand and interest-free[221] Capital Expenditures and Commitments - Capital expenditure commitments as of June 30, 2021 were approximately $4.6 million, mainly related to the purchase of a paper machine for a new tissue paper production line PM10[200] Financial Risks and Currency Exchange - The company has not entered into any hedging transactions to mitigate foreign exchange risks, exposing it to fluctuations between USD and RMB[229] - The current exchange rate for translating RMB to USD as of June 30, 2021, was 6.4601:1, compared to 6.5249:1 as of December 31, 2020[225] - The average exchange rates for revenues and expenses for the three months ended June 30, 2021, were 6.4682:1, compared to 6.9931:1 for the same period in 2020[225] Other Financial Information - The company completed the installation of a new tissue paper production line (PM10) in April 2021 and is working on accessory equipment installation[146] - The company recorded a deferred gain of $430,695 from the sale-leaseback arrangement, which is amortized over the lease term[205] - The company expects to participate in the bidding process for urban central heating projects following the qualification obtained for supplying central heating in industrial parks[201] - The company is currently evaluating the impact of adopting ASU 2016-13 on its condensed consolidated financial statements, which addresses expected credit losses[228] - Inflation has not materially impacted the company's financial position or results of operations to date, but future high inflation rates may adversely affect gross margins[230] - The company recognizes revenue when goods are delivered, and collectability is reasonably assured, ensuring a formal arrangement exists[223]

Financial Data and Key Metrics Changes - Total revenue increased by 176.9% to $24.2 million, driven by a 129.4% growth in overall sales volume and a 20.7% increase in average selling prices across all product categories [7][10] - Gross profit reached $1.8 million, a significant increase of 1178.8% from a gross loss of $0.2 million in the same period last year, resulting in an overall profit margin of 7.6% [12] - Net loss for the first quarter was $4.3 million, compared to a net loss of $2.4 million for the same period last year, resulting in a net loss of $0.12 per share [13] Business Line Data and Key Metrics Changes - The Corrugating Medium Paper (CMP) segment generated revenue of $20.7 million, accounting for 85.6% of total revenue, with volumes increasing by 121.1% to 41,296 tonnes [11] - Revenue from offset printing paper products was $2.1 million, with sales of 3,142 tonnes and an average selling price of $673 per tonne [10] - Tissue paper products generated $1.3 million in revenue from sales of 1,120 tonnes, with an average selling price of $1,117 per tonne [12] Market Data and Key Metrics Changes - The company reported a steady growth in tissue paper production since the launch of new production lines, indicating robust domestic market demand [8] - The company is expanding into high and new technology businesses, such as biomass technology projects, to diversify revenue sources [9] Company Strategy and Development Direction - The company aims to expand its capacity in the tissue paper segment due to strong market demand and improved production efficiency [8] - There is a strategic focus on diversifying revenue through new technology projects, which is expected to ensure stable profit-making modes [9] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in recovering from the impacts of the COVID-19 pandemic, with expectations of continued revenue growth from various product segments [7] - The company anticipates strong growth in the tissue paper business segment, which is expected to significantly boost overall performance [8] Other Important Information - As of March 31, 2021, the company had current assets of $61.1 million and current liabilities of $20.2 million, resulting in a working capital of $40.9 million [14] - Net cash used in operating activities was $8.3 million for the first quarter, compared to net cash provided by operating activities of $6.9 million for the same period last year [14] Q&A Session Summary - No specific questions or answers were recorded during the Q&A session as the call concluded without a formal Q&A segment [16][17]

Revenue Growth - Revenue for the three months ended March 31, 2021, was $24,209,427, an increase of $15,465,576, or 176.87%, from $8,743,851 for the same period in 2020[146] - Revenue from sales of offset printing paper, corrugating medium paper (CMP), and tissue paper products for the three months ended March 31, 2021, was $24,078,969, an increase of $15,335,118, or 175.38%, from $8,743,851 for the first quarter of 2020[148] - Total CMP revenue amounted to $20,711,771, representing an increase of $12,974,269, or 167.68%, from $7,737,502 for the comparable period in 2020[152] - Revenue from tissue paper products was $1,251,416, representing an increase of $245,067, or 24.35%, from $1,006,349 for the three months ended March 31, 2020[157] - Revenue from offset printing paper was $2,115,782 for the three months ended March 31, 2021, representing an increase from $nil for the same period in 2020[158] Sales Volume and Pricing - The quantity of CMP sold increased by 22,619 tonnes, from 18,677 tonnes in the first quarter of 2020 to 41,296 tonnes in the first quarter of 2021, representing a 121.11% increase[149] - ASP for regular CMP increased from $415/tonne for the three months ended March 31, 2020, to $504/tonne for the same period in 2021, representing a 21.45% increase[152] Cost of Sales - Total cost of sales for CMP, offset printing paper, and tissue paper products for the quarter ended March 31, 2021, was $22,272,495, an increase of $13,358,925, or 149.87%, from $8,913,570 for the comparable period in 2020[161] - Cost of sales for CMP increased by $11,663,587, reaching $18,858,935 for Q1 2021, compared to $7,195,348 in Q1 2020, with an average cost per tonne rising by 18.70% from $385 to $457[162] Profitability - Gross profit for Q1 2021 was $1,831,005, a significant increase of $2,000,724 or 1178.84% from a gross loss of $169,719 in Q1 2020, resulting in a gross profit margin of 7.56%[170] - The gross profit margin for regular CMP improved to 8.50%, up 3.56 percentage points from 4.94% in Q1 2020, primarily due to an increase in average selling price (ASP)[172] - The gross profit margin for tissue paper products improved to -36.46%, a 34.28 percentage point increase from -70.74% in Q1 2020, driven by higher ASP and lower base paper costs[173] Net Loss and Financial Position - Net loss for Q1 2021 was $4,338,856, a decrease of $1,902,569 or 78.09% from a net loss of $2,436,287 in Q1 2020[179] - Accounts receivable increased by $2,822,749 or 118.15%, totaling $5,211,806 as of March 31, 2021, compared to $2,389,057 as of December 31, 2020[181] - Inventory value surged by 502.33% to $7,431,502 as of March 31, 2021, from $1,233,801 as of December 31, 2020, with recycled paper board inventory increasing by 25803.20%[182] Expenses and Cash Flow - Selling, general and administrative expenses decreased by $141,645 or 5.25%, totaling $2,555,318 for Q1 2021, down from $2,696,963 in Q1 2020[175] - Net cash used in operating activities was $8,280,332 for the three months ended March 31, 2021, a decrease of $15,140,639, or 220.70%, from $6,860,307 provided for the same period in 2020[190] - Net cash provided by financing activities was $41,794,323 for the three months ended March 31, 2021, compared to $nil for the same period in 2020[193] Capital Expenditure and Investments - The company has approximately $4.5 million in capital expenditure commitments related to the new tissue paper production line PM10, expected to be financed by bank loans and operational cash flows[186] - The company incurred $44,599 in net cash expenditures for investing activities during the three months ended March 31, 2021, down from $756,514 for the same period in 2020[192] Debt and Interest - Interest expense increased by $34,183 to $278,901 for Q1 2021, with total interest-bearing loans and leasing obligations amounting to $16,406,559 as of March 31, 2021[177] - Total interest expenses for short-term and long-term loans for the three months ended March 31, 2021 were $258,483, compared to $244,718 for the same period in 2020[201] Currency and Economic Factors - The functional currency for Dongfang Paper and Baoding Shengde is the Chinese Yuan Renminbi (RMB), with exchange rates of 6.5713:1 and 6.5249:1 for USD to RMB as of March 31, 2021, and December 31, 2020, respectively[211] - The average exchange rates for revenues and expenses were 6.5045:1 for Q1 2021 and 6.9931:1 for Q1 2020, indicating a significant fluctuation in currency translation[211] - Inflationary pressures may affect operating results, although the company has not experienced significant impacts from inflation in China to date[216] Strategic Relationships and Risks - The company guaranteed long-term bank loans for Baoding Huanrun Trading Co. amounting to $4,717,484 (RMB 31,000,000), which matures in 2023, highlighting a strategic relationship with a major supplier[212] - The company has not engaged in any hedging transactions to mitigate foreign exchange risks, exposing it to potential declines in RMB revenues and assets when expressed in USD[215] - The adoption of ASU 2016-13 regarding expected credit losses is being evaluated, which may affect the company's financial statements in future reporting periods[214] Production and New Initiatives - The company completed the installation of a new tissue paper production line (PM10) in April 2021 and is working on accessory equipment installation[145] - The company launched production of non-medical single-use face masks, generating revenue of $130,458 for the three months ended March 31, 2021[160]

IT Tech Packaging, Inc. (NYSE:ITP) Q4 2020 Earnings Conference Call March 24, 2021 8:00 AM ET Company Participants Janice Wang - EverGreen, Investor Relations Zhenyong Liu - Chairman & Chief Executive Officer Jing Hao - Chief Financial Officer Conference Call Participants Operator Hello ladies and gentlemen and welcome to participate in IT Tech Packaging's Fourth Quarter and Fiscal Year 2020 Earnings Conference Call. At this time, I would like to inform you that this conference is being recorded and that al ...