IT Tech Packaging(ITP) - 2024 Q3 - Quarterly Results

Company Information This section provides an overview of IT Tech Packaging, Inc., detailing its business operations and including standard forward-looking statements About IT Tech Packaging, Inc. IT Tech Packaging Inc. (ITP), established in 1996, is a prominent manufacturer and distributor of diversified paper products and single-use face masks in North China, primarily utilizing recycled paper for its products - IT Tech Packaging, Inc. is a leading manufacturer and distributor of diversified paper products and single-use face masks in North China, founded in 1996[30] - The company produces corrugating medium paper, offset printing paper, and tissue paper products, primarily using recycled paper (except for tissue paper products)[30] - Production is based in Baoding and Xingtai, Hebei Province, strategically located near the Beijing and Tianjin region[30] Forward-Looking Statement This section includes standard forward-looking statements, advising investors that future events and performance are subject to various risks, uncertainties, and assumptions - The release contains forward-looking statements as defined by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934[31] - These statements are subject to risks, uncertainties, and assumptions, including market and other conditions[31] - Investors are urged to read the Company's SEC filings for more detailed information on risk factors[31] Third Quarter 2024 Unaudited Financial Highlights This section presents the unaudited financial performance of IT Tech Packaging, Inc. for the third quarter of 2024, highlighting key revenue, profit, and loss metrics Key Financial Metrics Overview For the third quarter of 2024, IT Tech Packaging Inc. reported a substantial increase in revenue and gross profit, alongside a significant reduction in operating loss and a slight decrease in net loss, with EBITDA also showing positive growth compared to the same period last year Third Quarter 2024 Unaudited Financial Results Summary | ($ millions) | 2024 | 2023 | % Change | |:----------------------------------------|:-----|:-----|:---------| | Revenues | 25.08 | 15.77 | 59.03% | | Gross profit (loss) | 1.92 | (0.15) | 1351.37% | | Gross profit (loss) margin | 7.64% | -0.97% | 8.61pp | | Operating income (loss) | (1.46) | (2.48) | -41.07% | | Net income (loss) | (1.97) | (1.98) | -0.07% | | EBITDA | 2.03 | 1.69 | 20.12% | | Basic and Diluted earnings (loss) per share | (0.20) | (0.20) | - | - Revenue increased by 59.03% to approximately $25.08 million, primarily due to increased sales volume of corrugating medium paper (CMP), partially offset by a decrease in CMP's average selling prices[2] - Gross profit surged by 1351.37% to approximately $1.92 million, with the total gross profit margin increasing by 8.61 percentage points to 7.64%[3] Revenue Analysis Total revenue for Q3 2024 increased significantly, primarily driven by higher sales volume of Corrugating Medium Paper (CMP), which now constitutes nearly all of the company's revenue - Total revenue increased by 59.03% to approximately $25.08 million in Q3 2024 from $15.77 million in Q3 2023, mainly due to increased CMP sales volume, partially offset by lower CMP ASP[5] - Revenue from CMP (regular and light-weight) increased by 62.38% to approximately $25.04 million, accounting for 99.85% of total revenue for Q3 2024[5] - The Company sold 74,884 tonnes of CMP at an ASP of $334/tonne in Q3 2024, compared to 44,396 tonnes at an ASP of $347/tonne in Q3 2023[5] Total Revenue Total revenue for the third quarter of 2024 saw a substantial increase of 59.03% year-over-year, reaching $25.08 million, primarily fueled by higher sales volumes of corrugating medium paper - Total revenue for Q3 2024 was approximately $25.08 million, a 59.03% increase from $15.77 million in Q3 2023[5] - The increase was mainly due to the increase of sales volume of corrugating medium paper (CMP), partially offset by the decrease in average selling prices (ASP) of CMP[5] Revenue by Product Corrugating Medium Paper (CMP) dominated revenue in Q3 2024, with regular CMP revenue increasing by 74.93% and light-weight CMP by 19.16%, while other product lines generated no revenue Q3 2024 Revenue, Volume, and ASP by Product | Product | Revenue ($'000) 2024 | Volume (tonne) 2024 | ASP ($/tonne) 2024 | Revenue ($'000) 2023 | Volume (tonne) 2023 | ASP ($/tonne) 2023 | |:--------------------------|:---------------------|:--------------------|:-------------------|:---------------------|:--------------------|:-------------------| | Regular CMP | 20,910 | 62,121 | 337 | 11,954 | 34,186 | 350 | | Light-Weight CMP | 4,134 | 12,763 | 324 | 3,470 | 10,210 | 340 | | Offset Printing Paper | - | - | - | 69 | 170 | 407 | | Tissue Paper Products | - | - | - | 264 | 241 | 1,096 | | Face Masks | - | - | - | 15 | 507 (k pieces) | 30 (k pieces) | - Regular CMP revenue increased by 74.93% to approximately $20.91 million, with sales volume up to 62,121 tonnes (ASP $337/tonne)[6] - Revenue from offset printing paper, tissue paper products, and face masks was $nil for the three months ended September 30, 2024, compared to $0.07 million, $0.26 million, and $0.02 million respectively for the same period last year[7][8] Gross Profit and Gross Margin The company achieved a significant turnaround in gross profit for Q3 2024, moving from a gross loss in the prior year to a positive gross profit, driven by increased CMP sales volume and decreased unit material costs - Total gross profit was approximately $1.92 million for Q3 2024, compared to a gross loss of approximately $0.15 million for the same period last year, an increase of 1351.37%[2][9] - Overall gross profit margin improved to 7.64% for Q3 2024, compared to a gross loss margin of 0.97% for the same period last year, an increase of 8.61 percentage points[2][9] - The improvement was mainly due to the increase in sales quantity of CMP, partially offset by the decrease of the unit material cost of CMP products[8] Q3 2024 Gross Profit Margins by Product | Product | Q3 2024 Gross Profit Margin | Q3 2023 Gross Profit Margin | |:--------------------------|:----------------------------|:----------------------------| | Regular CMP | 7.54% | 7.01% | | Light-Weight CMP | 7.33% | -7.47% | | Offset Printing Paper | n/a | 7.53% | | Tissue Paper Products | n/a | -278.10% | | Face Masks | n/a | -15.75% | Operating Expenses and Loss from Operations Selling, general, and administrative (SG&A) expenses increased in Q3 2024, but the company significantly reduced its operating loss compared to the prior year, improving its operating loss margin - Selling, general and administrative expenses (SG&A) increased by 44.83% to approximately $3.38 million for Q3 2024 from $2.33 million for the same period last year[10] - Loss from operations was approximately $1.46 million for Q3 2024, a decrease of 41.07% from a loss of approximately $2.48 million for the same period last year[2][10] - Operating loss margin improved to 5.84% for Q3 2024, compared to 15.75% for the same period last year[10] Net Loss and Earnings Per Share The net loss for Q3 2024 remained relatively stable compared to the prior year, with basic and diluted loss per share unchanged - Net loss was approximately $1.97 million, or loss per share of $0.20, for Q3 2024[3][11] - This compares to a net loss of approximately $1.98 million, or loss per share of $0.20, for the same period last year, representing a -0.07% change in net loss[2][3][11] EBITDA (Non-GAAP Financial Measure) EBITDA increased in Q3 2024, reflecting improved operational performance, with management using this non-GAAP measure to evaluate results and make strategic decisions - EBITDA was approximately $2.03 million for Q3 2024, compared to $1.69 million for the same period last year, representing a 20.12% increase[2][4][11] EBITDA Definition EBITDA is a non-GAAP financial measure defined as net income before interest, income taxes, depreciation, and amortization, used by management to assess operational performance and strategic decisions - EBITDA is defined as net income before interest, income taxes, depreciation and amortization[11] - Management uses EBITDA as a key measure to evaluate results and make strategic decisions, believing it is useful to investors as an indicator of operational performance[11] EBITDA Reconciliation The reconciliation shows the calculation of EBITDA from net loss for Q3 2024 and Q3 2023, highlighting the adjustments for income tax, net interest expense, and depreciation and amortization Reconciliation of Net Income to EBITDA (Q3 2024 vs Q3 2023) | ($ millions) | For the Three Months Ended September 30, 2024 | For the Three Months Ended September 30, 2023 | |:--------------------------|:----------------------------------------------|:----------------------------------------------| | Net loss | -1.97 | -1.98 | | Add: Income tax | 0.35 | 0.00 | | Net interest expense | 0.17 | 0.25 | | Depreciation and amortization | 3.48 | 3.42 | | EBITDA | 2.03 | 1.69 | Nine Months Ended September 30, 2024 Unaudited Financial Highlights This section details the unaudited financial performance of IT Tech Packaging, Inc. for the nine months ended September 30, 2024, covering revenue, profitability, and operational efficiency Key Financial Metrics Overview For the nine months ended September 30, 2024, the company experienced a decrease in total revenue but a significant improvement in gross profit and a reduction in operating and net losses, while EBITDA saw a modest increase compared to the prior year Nine Months Ended September 30, 2024 Unaudited Financial Results Summary | ($ millions) | For the Nine Months Ended September 30, 2024 | For the Nine Months Ended September 30, 2023 | % Change | |:----------------------------------------|:---------------------------------------------|:---------------------------------------------|:---------| | Revenues | 58.20 | 65.58 | -11.26% | | Gross profit | 5.58 | 0.75 | 644.60% | | Gross profit (loss) margin | 9.59% | 1.14% | 8.45pp | | Operating loss | (4.42) | (5.78) | -23.50% | | Net loss | (5.80) | (5.96) | -2.75% | | EBITDA | 5.94 | 5.73 | 3.66% | | Basic and Diluted loss per share | (0.58) | (0.59) | -1.69% | - Revenue decreased by 11.26% to approximately $58.20 million, mainly due to a decrease in ASP of CMP, partially offset by an increase in sales quantity of regular CMP[14][15] - Gross profit increased by 644.60% to approximately $5.58 million, with the gross profit margin improving by 8.45 percentage points to 9.59%[14] Revenue Analysis Total revenue for the nine months ended September 30, 2024, decreased by 11.26%, primarily due to a decline in the average selling price of CMP, despite an increase in regular CMP sales volume - Total revenue decreased by 11.26% to approximately $58.20 million for the nine months ended September 30, 2024, from $65.58 million for the same period last year[15] - Revenue from CMP (regular and light-weight) decreased by 5.44% to approximately $58.08 million, accounting for 99.81% of total revenue for the nine months ended September 30, 2024[15] - The Company sold 168,919 tonnes of CMP at an ASP of $344/tonne in the nine months ended September 30, 2024, compared to 167,018 tonnes at an ASP of $368/tonne in the same period last year[15] Total Revenue For the nine months ended September 30, 2024, total revenue decreased by 11.26% to $58.20 million, primarily due to a reduction in the average selling price of Corrugating Medium Paper (CMP), despite an increase in regular CMP sales volume - Total revenue for the nine months ended September 30, 2024, was approximately $58.20 million, an 11.26% decrease from $65.58 million for the same period last year[15] - This was mainly due to the decrease in ASP of CMP, partially offset by the increase in sales quantity of regular CMP[15] Revenue by Product For the nine months ended September 30, 2024, regular CMP revenue decreased by 3.39%, and light-weight CMP revenue decreased by 14.76%, both impacted by lower ASPs, with other product lines generating no revenue Nine Months Ended September 30, 2024 Revenue, Volume, and ASP by Product | Product | Revenue ($'000) 2024 | Volume (tonne) 2024 | ASP ($/tonne) 2024 | Revenue ($'000) 2023 | Volume (tonne) 2023 | ASP ($/tonne) 2023 | |:--------------------------|:---------------------|:--------------------|:-------------------|:---------------------|:--------------------|:-------------------| | Regular CMP | 48,644 | 140,574 | 346 | 50,353 | 135,912 | 370 | | Light-Weight CMP | 9,440 | 28,345 | 333 | 11,074 | 31,106 | 356 | | Offset Printing Paper | - | - | - | 3,225 | 5,573 | 579 | | Tissue Paper Products | - | - | - | 831 | 726 | 1,145 | | Face Masks | - | - | - | 95 | 3,023 (k pieces) | 31 (k pieces) | - Regular CMP revenue decreased by 3.39% to approximately $48.64 million, with sales volume increasing to 140,574 tonnes (ASP $346/tonne)[16] - Revenue from offset printing paper, tissue paper products, and face masks was $nil for the nine months ended September 30, 2024, compared to $3.23 million, $0.83 million, and $0.10 million respectively in the prior year[17][18][19] Gross Profit and Gross Margin For the nine months ended September 30, 2024, the company achieved a substantial increase in gross profit and gross margin, primarily due to a significant decrease in the unit material costs of CMP - Total gross profit was approximately $5.58 million for the nine months ended September 30, 2024, compared to approximately $0.75 million for the same period last year, an increase of 644.60%[14][20] - Overall gross margin was 9.59% for the nine months ended September 30, 2024, compared to 1.14% for the same period last year, an increase of 8.45 percentage points[14][20] - The improvement was mainly due to the decrease in the unit material costs of CMP[19] Nine Months Ended September 30, 2024 Gross Profit Margins by Product | Product | YTD 2024 Gross Profit Margin | YTD 2023 Gross Profit Margin | |:--------------------------|:---------------------------|:---------------------------| | Regular CMP | 9.44% | 5.26% | | Light-Weight CMP | 9.33% | 1.68% | | Offset Printing Paper | n/a | 2.53% | | Tissue Paper Products | n/a | -258.64% | | Face Masks | n/a | -9.26% | Operating Expenses and Loss from Operations Selling, general, and administrative (SG&A) expenses increased significantly for the nine months ended September 30, 2024, but the company still managed to reduce its operating loss and improve its operating loss margin - Selling, general and administrative expenses (SG&A) increased by 62.51% to approximately $10.00 million for the nine months ended September 30, 2024, from $6.15 million for the same period last year[21] - Loss from operations was approximately $4.42 million for the nine months ended September 30, 2024, a decrease of 23.50% from a loss of approximately $5.78 million for the same period last year[14][21] - Operating loss margin improved to 7.59% for the nine months ended September 30, 2024, compared to 8.81% for the same period last year[21] Net Loss and Earnings Per Share The net loss for the nine months ended September 30, 2024, slightly decreased, leading to a marginal improvement in loss per share - Net loss was approximately $5.80 million, or loss per share of $0.58, for the nine months ended September 30, 2024[14][22] - This compares to a net loss of approximately $5.96 million, or loss per share of $0.59, for the same period last year, representing a -2.75% change in net loss and -1.69% change in loss per share[14][22] EBITDA (Non-GAAP Financial Measure) EBITDA for the nine months ended September 30, 2024, showed a modest increase, indicating a slight improvement in operational performance before non-operating items - EBITDA was approximately $5.94 million for the nine months ended September 30, 2024, compared to approximately $5.73 million for the same period last year, representing a 3.66% increase[14][23] EBITDA Reconciliation The reconciliation for the nine months ended September 30, 2024, shows the calculation of EBITDA from net loss, adjusting for income tax, net interest expense, and depreciation and amortization Reconciliation of Net Income to EBITDA (Nine Months Ended September 30, 2024 vs 2023) | ($ millions) | For the Nine Months Ended September 30, 2024 | For the Nine Months Ended September 30, 2023 | |:--------------------------|:---------------------------------------------|:---------------------------------------------| | Net loss | -5.80 | -5.96 | | Add: Income tax | 0.80 | 0.35 | | Net interest expense | 0.59 | 0.77 | | Depreciation and amortization | 10.35 | 10.57 | | EBITDA | 5.94 | 5.73 | Financial Position and Cash Flows This section outlines the company's financial position, including balance sheet details and cash flow activities, as of and for the nine months ended September 30, 2024 Cash, Liquidity and Financial Position Overview As of September 30, 2024, the company improved its cash position and working capital compared to December 31, 2023, while reducing short-term debt Key Financial Position Metrics (as of September 30, 2024 vs December 31, 2023) | Metric | Sep 30, 2024 ($ millions) | Dec 31, 2023 ($ millions) | |:--------------------------|:--------------------------|:--------------------------| | Cash and bank balances | 4.41 | 3.92 | | Short-term debt | 5.95 | 8.03 | | Long-term debt | 4.57 | 4.50 | | Net accounts receivable | 1.73 | 0.58 | | Net inventory | 5.73 | 3.56 | | Current assets | 32.97 | 28.36 | | Current liabilities | 20.75 | 21.42 | | Working capital | 12.22 | 6.94 | - Net cash provided by operating activities was approximately $2.83 million for the nine months ended September 30, 2024, compared to approximately $7.49 million for the same period last year[29] - Net cash provided by financing activities was approximately $2.11 million for the nine months ended September 30, 2024, compared to approximately $2.00 million for the same period last year[29] Condensed Consolidated Balance Sheets The balance sheet as of September 30, 2024, shows an increase in cash and accounts receivable, and a decrease in total assets and total liabilities compared to December 31, 2023 Condensed Consolidated Balance Sheets (as of September 30, 2024 vs December 31, 2023) | ASSETS ($) | September 30, 2024 | December 31, 2023 | |:-------------------------------------------------------------------------------------------------------------------|:-------------------|:------------------| | Cash and bank balances | 4,414,848 | 3,918,938 | | Accounts receivable (net) | 1,727,370 | 575,526 | | Inventories | 5,732,539 | 3,555,235 | | Total current assets | 32,974,897 | 28,357,901 | | Property, plant, and equipment, net | 154,755,386 | 163,974,022 | | Total Assets | 190,018,239 | 194,743,649 | | LIABILITIES AND STOCKHOLDERS' EQUITY ($) | | | | Short-term bank loans | 856,238 | 423,567 | | Current portion of long-term loans | 4,365,385 | 6,874,497 | | Total current liabilities | 20,754,624 | 21,418,934 | | Long-term loans | 4,566,601 | 4,503,932 | | Total liabilities | 25,694,194 | 26,406,786 | | Total stockholders' equity | 164,324,045 | 168,336,863 | Condensed Consolidated Statements of Income and Comprehensive Income The condensed consolidated statements of income and comprehensive income provide a detailed overview of the company's financial performance for both the three and nine months ended September 30, 2024 and 2023 Condensed Consolidated Statements of Income and Comprehensive Income (Q3 & YTD 2024 vs 2023) | Metric ($) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | |:---------------------------------------|:--------------------------------|:--------------------------------|:-------------------------------|:-------------------------------| | Revenues | 25,081,500 | 15,771,560 | 58,195,129 | 65,582,351 | | Cost of sales | (23,164,119) | (15,924,783) | (52,613,335) | (64,832,715) | | Gross Profit (Loss) | 1,917,381 | (153,223) | 5,581,794 | 749,636 | | Selling, general and administrative expenses | (3,381,502) | (2,334,746) | (9,999,833) | (6,153,513) | | Loss from Operations | (1,464,121) | (2,484,513) | (4,418,039) | (5,775,557) | | Net Loss | (1,973,946) | (1,975,368) | (5,798,229) | (5,962,026) | | Foreign currency translation adjustment | 2,843,180 | 1,143,608 | 1,785,411 | (5,417,331) | | Total Comprehensive Income (Loss) | 869,234 | (831,760) | (4,012,818) | (11,379,357) | | Basic and Diluted Losses per Share | (0.20) | (0.20) | (0.53) | (0.59) | Condensed Consolidated Statements of Cash Flows The cash flow statement for the nine months ended September 30, 2024, indicates a decrease in cash provided by operating activities but a significant reduction in cash used in investing activities, and an increase in cash provided by financing activities Condensed Consolidated Statements of Cash Flows (Nine Months Ended September 30, 2024 vs 2023) | Cash Flow Category ($) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | |:-------------------------------------------------------------------------------------------------------------------|:-------------------------------|:-------------------------------| | Net Cash Provided by Operating Activities | 2,831,111 | 7,494,114 | | Net Cash Used in Investing Activities | (315,152) | (9,211,711) | | Net Cash (Used in) Provided by Financing Activities | (2,112,706) | 1,997,269 | | Effect of Exchange Rate Changes on Cash and Cash Equivalents | 97,740 | (366,599) | | Net Increase (Decrease) in Cash and Cash Equivalents | 500,993 | (86,927) | | Cash, Cash Equivalents and Restricted Cash - End of Period | 4,892,914 | 9,437,941 | | Cash paid for interest, net | 382,493 | 1,118,672 | | Cash paid for income taxes | 454,003 | 761,801 |