IT Tech Packaging, Inc. Announces Fourth Quarter and Fiscal Year 2021 Financial Results

Company to Host Earnings Conference Call on Tuesday, March 15, 2022, at 8:30 am ET

BAODING, China, March 15, 2022 /PRNewswire/ — IT Tech Packaging, Inc. (NYSE American: ITP) ("IT Tech Packaging" or the "Company"), a leading manufacturer and distributor of diversified paper products in North China, today announced its unaudited financial results for the fourth quarter and audited financial results for the fiscal year ended December 31, 2021.

Mr. Zhenyong Liu, Chairman and Chief Executive Officer of the Company, commented, "We are pleased with our performance for the fiscal year 2021, as we demonstrated excellent revenue growth and improved business efficiencies. In fiscal year 2021, our business execution was reflected as we reached approximately $160.88 million in revenue with an increase of59% year-over-year and approximately $11.02 million in gross profit with an increase of 93% year-over-year. In fiscal year 2021, we launched a series of initiatives to optimize our revenue structure and diversify our business, which led to a very encouraging results. We significantly improved our operating and cost efficiency,reducing our sell, general and administrative expense by 14.3%, while maintaining the solid growth of overall sales volume and average selling prices of CMP products and offset printing paper products. Looking forward, with our dedicated effort and commitment, we believe our business fundamentals will continue to support our leading position in the industry and grow in the foreseeable future."

Fourth Quarter 2021 Financial Results

• Revenue increased by 38.7% to approximately $45.05 million, primarily attributable to an increase in sales volume of CMP products.
• Gross profit increased by 481.8% to approximately $4.34 million. Total gross margin increased by 7.3 percentage point to 9.6%.  
• Income from operations was approximately $1.95 million, compared to loss from operations of approximately $1.97 million for the same period of last year.
• Net income was approximately $4.16 million, or $0.07 per basic and diluted share, compared to net loss of approximately $1.62 million, or loss of $0.06 per basic and diluted share, for the same period of last year.
• Earnings before interest, taxes, depreciation and amortization ("EBITDA") increased by 229.3% to approximately $8.66 million.

Revenue

For the fourth quarter of 2021, total revenue increased by approximately $12.6 million, or 38.7%, to approximately $45.0 million from approximately $32.5 million for the same period of last year. The increase in total revenue was mainly due to the increase in sales volume of CMP.

The following table summarizes revenue, volume and ASP by product for the fourth quarter of 2021 and 2020, respectively:

Revenue from CMP, including both regular CMP and light-Weight CMP, increased by $14.7 million, or 59.1%, to approximately $39.7 million and accounted for 88.0% of total revenue for the fourth quarter of 2021, compared to approximately $24.9 million, or 76.7% of total revenue, for the same period of last year. The Company sold 69,953tonnes of CMP at an ASP of $567/tonne in the fourth quarter of 2021, compared to 57,627tonnes at an ASP of $432/tonne in the same period of last year.

Of the total CMP sales, revenue from regular CMP increased by approximately $13.0million, or 66.0%, to approximately $32.7 million, resulting from sales of 57,410tonnes at an ASP of $569/tonne, during the fourth quarter of 2021, compared to revenue of approximately $19.7  million, resulting from sales of 45,210 tonnes at an ASP of $435/tonne, for the same period of last year. Revenue from light-weight CMP increased by approximately $1.8 million, or 33.5%, to approximately $7.0 million, resulting from sales of 12,543tonnes at an ASP of $558/tonne for the fourth quarter of 2021, compared to revenue of approximately $5.2 million, resulting from sales of 12,417 tonnes at an ASP of $422/tonne for the same period of last year.

Revenue from offset printing paper decreased by $1.9million, or 39.2%, to approximately $3.0 million for the fourth quarter of 2021, from approximately $4.9 million for the same period of last year. The Company sold 3,911tonnes of offset printing paper at an ASP of $759/tonne in the fourth quarter of 2021, compared to 7,895 tonnes at an ASP of $618/tonne in the same period of last year.

Revenue from tissue paper products decreased by $0.4 million, or 14.0%, to approximately $2.3 million, resulting from sales of 2,292tonnes at an ASP of $994/tonne, for the fourth quarter of 2021, compared to revenue of approximately $2.6million, resulting from sales of 3,165tonnes at an ASP of $837/tonne for the same period of last year.

Revenue from face masks increased by $110,993, or 314.5%, to approximately $146,282  for the fourth quarter ended December 31, 2021, from $35,289 for the same period of 2020. The Company sold 3,014 thousand pieces of face masks for the fourth quarter ended December 31, 2021, compared to 445 thousand pieces of face masks for the same period of 2020.

Gross Profit and Gross Margin

Total cost of sales increased by $9.0 million, or 28.3%, to approximately $40.7 million for the fourth quarter of 2021 from approximately $31.7 million for the same period of last year. For paper products, overall cost of sales per tonne was $533 for the fourth quarter of 2021, compared to $462 for the same period of last year. The increase in overall cost of sales was mainly due to the increased manufacturing overhead costs and increased material costs, specifically higher average unit purchase costs of recycled paper board and recycled white scrap paper in the fourth quarter of 2021.  Costs of sales per tonne for regular CMP, light-weight CMP, offset printing paper, and tissue paper products were $514, $490, $596 and $1,132, respectively, for the fourth quarter of 2021, compared to  $429, $406, $534, and $962, respectively, for the same period of last year.

Total gross profit was approximately $4.3million for the fourth quarter of 2021, compare to the gross profit of approximately $0.7 million for the same period of last year as a result of factors described above. Overall gross margin was 9.6% for the fourth quarter of 2021, compared to 2.3% for the same period of last year. Gross profit (loss) margins for regular CMP, light-weight CMP, offset printing paper, tissue paper products and face mask products were 9.6%, 12.2%, 21.5%, -13.9% and 25.2%, respectively, for the fourth quarter of 2021, compared to 1.4%, 3.9%, 13.6%, -15.0% and 5.8%, respectively, for the same period of last year.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") decreased by $0.3 million, or 12.0%, to approximately $2.4 million for the fourth quarter of 2021 from approximately $2.7 million for the same period of last year.

Income (Loss) from Operations

Income from operations was approximately $2.0 million for the fourth quarter of 2021, an increase of $4.0 million, or 199.0%, from loss from operations of approximately $2.0 million for the same period of last year. Operating margin was 4.3% for the fourth quarter of 2021, compared to operating margin of -6.1% for the same period of last year.

Net Income (Loss)

Net income was approximately $4.2 million, or $0.07 per basic and diluted share for the fourth quarter of 2021, representing an increase of $5.8 million, or 357.0%, from net loss of approximately $1.6 million, or $0.06 loss per basic and diluted share, for the same period of last year.

EBITDA

EBITDA was approximately $8.7 million for the fourth quarter of 2021, compared to approximately $2.6 million for the same period of last year.

Note 1: Non-GAAP Financial Measures

In addition to our U.S. GAAP results, this press release includes a discussion of EBITDA, a non-GAAP financial measure as defined by the Securities and Exchange Commission ("SEC"). The Company defines EBITDA as net income before interest, income taxes, depreciation and amortization. EBITDA is a key measure used by management to evaluate our results and make strategic decisions. Management believes this measure is useful to investors because it is an indicator of operational performance. Because not all companies use identical calculations, the Company’s presentation of EBITDA may not be comparable to similarly titled measures of other companies, and should not be viewed as an alternative to measures of financial performance or changes in cash flows calculated in accordance with the U.S. GAAP.

Reconciliation of Net Income to EBITDA

(Amounts expressed in US$)

Full Year Ended December 31, 2021 Financial Results

Revenue

For the year ended December 31, 2021, total revenue increased by $59.9 million, or 59.4%, to approximately $160.9 million from approximately $100.9 million for 2020. The increase in total revenue was mainly due to an increase in sales volume of CMP and offset printing paper and increase in ASPs of CMP, offset printing paper and tissue paper products, partially offset by the decrease in sales volume of tissue paper products.

The following table summarizes revenue, volume and ASP by product for the years ended December 31, 2021 and 2020, respectively:

Revenue from CMP, including both regular CMP and light-Weight CMP increased by $55.4 million, or69.9%, to approximately $134.5 million, and accounted for 83.6% of total revenue for the year ended December 31, 2021, compared to  approximately $79.2 million, or 78.4% of total revenue for 2020. The Company sold 259,691tonnes of CMP at an ASP of $518/tonne in the year ended December 31, 2021, compared to 196,885tonnes at an ASP of $402/tonne in 2020.

Of the total CMP sales, revenue from regular CMP increased by $48.8 million, or 78.2%, to approximately $111.1 million, resulting from sales of 213,490tonnes at an ASP of $520/tonne during the year ended December 31, 2021, compared to revenue of approximately $62.3 million, resulting from sales of 154,084tonnes at an ASP of $404/tonne for 2020. Revenue from light-weight CMP increased by $6.6 million, or 39.2%, to approximately $23.4million, resulting from sales of 46,201tonnes at an ASP of $507/tonne for the year ended December 31, 2021, compared to revenue of approximately $16.8million, resulting from sales of 42,801tonnes at an ASP of $393/tonne for 2020.

Revenue from offset printing paper increased by $4.8 million, or 39.1%, to approximately $17.1 million for the year ended December 31, 2021 from approximately $12.3 million for 2020. The Company sold 24,513tonnes of offset printing paper at an ASP of $696/tonne in the year ended December 31, 2021, compared to 20,358tonnes at an ASP of $603/tonne in 2020.

Revenue from tissue paper products increased by $0.4 million, or 4.2%, to approximately $8.8 million, resulting from sales of 8,255tonnes at an ASP of $1,062/tonne, for the year ended December 31, 2021, compared to revenue of approximately $8.4 million, resulting from sales of 10,088tonnes at an ASP of $834/tonne for 2020.

Revenue from face masks decreased by $0.6 million, or 51.2%, to approximately $0.5 million for the year ended December 31, 2021, from approximately $1.1 million for 2020. The Company sold 12,664 thousand pieces of face masks for the year ended December 31, 2021, compared to 10,301 thousand pieces of face masks for 2020.

Gross Profit and Gross Margin

Total cost of sales increased by $54.6 million, or 57.4%, to approximately $149.9 million for the year ended December 31, 2021 from approximately $95.2 million for 2020. The increase in overall cost of sales was mainly due to the increased sales volume of CMP and offset printing paper and increased material costs in the year ended December 31, 2021.  Costs of sales per tonne for regular CMP, light-weight CMP, offset printing paper, tissue paper products were, $487, $463, $570, and $1,214, respectively, for the year ended December 31, 2021 compared to $383, $358, $498, and $1,015, respectively, for 2020.

Total gross profit increased by $5.3million, or 93.2%, to approximately $11.0million for the year ended December 31, 2021 from approximately $5.7 million for 2020. Overall gross margin increased by 1.2percentage points to 6.9% for the year ended December 31, 2021 from 5.7% for 2020. Gross margins for regular CMP, light-weight CMP, offset printing paper, tissue paper products and face mask products were 6.3%, 8.7%, 18.2%, -14.3% and 19.2%, respectively, for the year ended December 31, 2021, compared to 5.4%, 8.9%, 17.3%, -21.7% and 48.1%, respectively, for 2020.

Selling, General and Administrative Expenses

SG&A expenses decreased by $1.6 million, or 14.3%, to approximately $9.6 million for the yearended December 31, 2021 from approximately $11.2 million for 2020. As a percentage of total revenue, SG&A expenses was 5.9% for the year ended December 31, 2021, compared to 11.1% for 2020.

Income (Loss) from Operations

Income from operations increased by $6.9 million, or 126.8% to approximately $1.5 million for the year ended December 31, 2021 from loss from operations of approximately $5.5 million for 2020. Operating margin was 0.9% for the year ended December 31, 2021, compared to operating loss margin of 5.4% for 2020.

Net Income (Loss)

Net Income increased by $6.5 million, or 116.3%, to approximately $0.9 million, or earnings per basic and diluted share of $0.02, for the year ended December 31, 2021, compared to net loss of approximately $5.6 million, or loss per basic and diluted share of $0.21 for 2020.

EBITDA

EBITDA increased by $12.7million, or 125.6%, to approximately $22.9 million for the year ended December 31, 2021 from approximately $10.2 million for 2020.

Note 1: Non-GAAP Financial Measures

In addition to our U.S. GAAP results, this press release includes a discussion of EBITDA, a non-GAAP financial measure as defined by the Securities and Exchange Commission ("SEC"). The Company defines EBITDA as net income before interest, income taxes, depreciation and amortization. EBITDA is a key measure used by management to evaluate our results and make strategic decisions. Management believes this measure is useful to investors because it is an indicator of operational performance. Because not all companies use identical calculations, the Company’s presentation of EBITDA may not be comparable to similarly titled measures of other companies, and should not be viewed as an alternative to measures of financial performance or changes in cash flows calculated in accordance with the U.S. GAAP.

Reconciliation of Net Income to EBITDA

(Amounts expressed in US$)

Cash, Liquidity and Financial Position

As of December 31, 2021, the Company had cash and bank balances, short-term debt (including bank loans, current portion of long-term loans from credit union and related party loans), and long-term debt (including loan from credit union) of approximately $11.20 million, $13.52 million and $2.98 million, respectively, compared to  approximately $4.14 million, $12.16 million and $4.60 million, respectively, at the end of 2020.

Net accounts receivable was approximately $4.87 million as of December 31, 2021, compared to  approximately $2.39 million as of December 31, 2020. Net inventory was approximately $5.84 million as of December 31, 2021, compared to approximately $1.23 million at the end of 2020. As of December 31, 2021, the Company had current assets of approximately $55.52 million and current liabilities of approximately $20.43 million, resulting in a working capital of approximately $35.09 million. This was compared to current assets of approximately $14.91 million and current liabilities of approximately $18.34million, resulting in a working capital deficit of approximately $3.43 million at the end of 2020.

Net cash used in operating activities was approximately $2.44 million for the year ended December 31, 2021, compared to net cash provided by operating activities of approximately $16.14 million for 2020. Net cash used in investing activities was approximately $25.07 million for the year ended December 31, 2021, compared to approximately $20.53 million for 2020. Net cash provided by financing activities was approximately $34.19 million for the year ended December 31, 2021, compared to net cash provided by financing activities of approximately $2.05 million for 2020.

Recent development

On December 7, 2021, the Company announced that it has officially started its surgical masks production after a month of trial production since the end of November 2021. The Company’s surgical masks comply with China’s pharmaceutical industry standard YY0469-2011.

Earnings Conference Call

The Company’s management will host a conference call to discuss its fourth quarter and fiscal year 2021 financial results at 8:30 am U.S. Eastern Time on Tuesday, March 15, 2022. To attend the conference call, please use the information below.

Conference Topic: IT Tech Packaging Inc. Fourth Quarter and Fiscal Year 2021 Earnings Conference Call and Webcast

Date of call: March 15, 2022

Time of call: 8:30 AM Eastern Time (8:30 PM Beijing/Hong Kong Time)

Conference ID:  4898872

To attend the conference call, please register in advance of the conference using the link:http://apac.directeventreg.com/registration/event/4898872 to complete the online registration at least 15 minutes prior to the start of the call. Upon registering, the conference access information including participant dial-in numbers, a Direct Event passcode and a registrant ID will be provided to you via an email.

This conference call will be broadcast live on the Internet and can be accessed by all interested parties at https://edge.media-server.com/mmc/p/57zkixzh. Please access the link at least 15 minutes prior to the start of the call to register, download, and install any necessary audio software.

A playback will be available through 11:00 am ET on March 15, 2022 to 8:59 am ET on March 23, 2022. To listen, please dial+1-855-452-5696 if calling from the United States, or +61-281-990-299 if calling internationally. Use the conference ID 4898872 to access the replay.

About IT Tech Packaging, Inc.

Founded in 1996, IT Tech Packaging, Inc. is a leading manufacturer and distributor of diversified paper products and single-use face masks in North China. Using recycled paper as its primary raw material (with the exception of its tissue paper products), ITP produces and distributes three categories of paper products: corrugating medium paper, offset printing paper and tissue paper products. With production based in Baoding and Xingtai in North China’s Hebei Province, ITP is located strategically close to the Beijing and Tianjin region, home to a growing base of industrial and manufacturing activities and one of the largest markets for paper products consumption in the country. ITP has been listed on the NYSE American since December 2009. For more information, please visit: http://www.itpackaging.cn/.

Safe Harbor Statements

This press release may contain forward-looking statements. These forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including risks outlined in the Company’s public filings with the Securities and Exchange Commission, including the Company’s latest annual report on Form 10-K. All information provided in this press release speaks as of the date hereof. Except as otherwise required by law, the Company undertakes no obligation to update or revise its forward-looking statements.

For more information, please contact:

At the Company
Email: ir@itpackaging.cn 
Tel: +86 0312 8698215

Investor Relations
Ascent Investor Relations LLC
Ms. Tina Xiao
Email: tina.xiao@ascent-ir.com 
Tel: +1-917-609-0333