United-Guardian, Inc. (UG) Earnings Call Transcript & Summary

Very good. I think we're on time. So good morning, everyone. I'm Beatriz Blanco. I'm the President of United-Guardian. And here, we report to order the Annual Meeting of the Stockholders of the United-Guardian, which is being held by video teleconference on the 17th day of May 2023. Andrea Young, Secretary of the corporation, is present and pursuant to the bylaws of the corporation will act as secretary of the meeting.

Good morning. I present a copy of the notice of this meeting, which has been sent to each stockholder of record together with proof of mailing of such notice. I ask that this notice and the affidavit of mailing be filed within the records of the corporation.

I move that the notice of this meeting together with the affidavit of mailing be filed in the records of the corporation.

I second the motion.

All those in favor of the motion say, yes.

Yes.

Aye.

All those oppose, say no.

Guys, can you hear me.

I'm sorry.

Can you hear me? Hi, something is going on with my computer. I don't know what's going on here. Can you hear me okay?

Yes. We can hear you, Ken. Yes. I think you're double, but it's fine.

Yes, I had to go on my phone. I don't know what's happening with my computer.

No, but we can hear and see you. So that's all good. So let me say it again. All those oppose, say no. Then the motion is carried and the Secretary is directed to file the notice and affidavit of mailing with the records of the corporation.

We have a list of stockholders of the corporation as of April 5, 2023, the record date fixed by the Board of Directors, for those stockholders entitled to notice of this meeting. The list has been prepared and certified by Continental Stock Transfer & Trust Company, registrar of the corporation. I ask for a motion that the list be filed in the records of the corporation.

I move that the list be filed in the records of the corporation.

I second the motion.

All in favor of motion, say yes.

Yes.

Yes.

All oppose, say no. The motion is carried and the Secretary is directed to file the list of stockholders with the records of the corporation. I now call for nominations for inspectors of election.

I nominate Andrea Young and Barbara Ricardo to be inspectors of election.

I second the motion.

Are there any other nominations? If not, I declare nominations closed. All those in favor of the election of Andrea Young and Barbara Ricardo as the inspectors of election, please say yes.

Yes.

Yes.

All oppose, say no. Andrea Young and Barbara Ricardo have been elected inspectors of election. Will the inspectors please sign the oath of office and turn it into the company at the end of this meeting? The inspectors of election have reported that the holders of a total of [indiscernible] shares are present right by proxy. A total number of shares present constitutes a quorum and represents 82.5% of the [indiscernible] shares outstanding. The meeting may now proceed to business. Copies of the company's annual report for the fiscal year 2022 have been mailed to all stockholders of record. In view of this fact, I ask for a motion dispensing with the reading of the report and directing the secretary to file a report with the records of the corporation.

Yes. So I move that the reading of the annual report be dispensed with and that it would be filed with the records of the corporation.

I second the motion.

All those in favor for the motion, say yes.

Yes.

Yes.

All those oppose, say no. The motion is [indiscernible] unanimously carried, and the secretary is directed to file the annual report with the records of the corporation. The next order of business is the election of directors of the corporation for the coming year. I ask the nominations for the office of directors.

I nominate the following as directors of the corporation for the ensuing year: Ken Globus, Lawrence F. Maietta, Beatriz Blanco, Arthur M. Dresner, Andrew A. Boccone and S. Ari Papoulias.

I second the motion.

Are there any other nominations? Then I ask for a motion to close the nominations.

I move that the nominations be closed.

I second the motion.

All of those in favor, say yes.

Yes.

Yes.

All oppose, say no. The motion is then carried. The proxies contain the following proposals. First, to elect 6 directors to serve until the next annual meeting. Second, to approve the holding of an advisory vote for every 1, 2 or 3 years on the compensation paid to the company's named executive officers. Third, to approve on an advisory basis with actual compensation paid to the company's named executive officers. And last, to ratify the appointment of Baker Tilly [indiscernible] independent public accountants of the company for the fiscal year ending December 31, 2023.

I'm sorry. We're having -- I'm having trouble hearing you when you turn your head, Beatriz, when you read.

Okay. Sorry, so now I'll say...

That's much better.

Okay. Sorry about that.

That's okay. Thank you.

So you want me to repeat...

No, it's fine. No, just go on forward, that's fine.

Okay. Sorry about that. Since there is no voting taking place at the meeting today, I can report that based on the information provided to the company by Continental Stock Transfer & Trust Company, the company's stock transfer agent, the voting results were as follows. On the proposal to select 6 directors to serve until the next annual meeting, each of the nominated directors has been reelected for the coming year. Every director received at least 2,241,600 votes for, which is about 48.8% of the outstanding shares. The maximum votes received by any director was 2,576,737 or approximately 56.1% of the outstanding shares. There were no votes against any director. [ abstention ] range from as low as...

What's going on. Terrible echo.

Everybody can put themselves on mute. So the [ abstention ] range from as low as 254,848 to as high as 589,985. There were 957,746 broker non-votes for each director. On the proposal to approve the holding of a vote every 1, 2 or 3 years on an advisory basis on the compensation to pay to the company's named executive officers, the proposal to do so every year has passed. The vote totals were, every year, 2,654,537; every 2 years, 25,941; every 3 years, 130,054; abstentions 21,053; no broker votes 957,746. On the proposal to approve on an advisory basis, the actual compensation paid to the company's named executive officers, the proposal has passed. The vote totals were for, 2,609,865; against, 206,979; abstentions 14,741; broker non-votes, 957,746. On the proposal for to ratify the appointment of Baker Tilly as the company's independent public accountants for the fiscal year ending December 31, 2023, the proposal has passed. The vote totals were, for, 3,729,759; against 48,887; abstentions 10,685; broker non-votes 0. I call for a motion that the vote certification of the inspectors of election be filed with the records of the corporation.

I move that the vote certification of the inspectors of election be filed with the records of the corporation.

I second the motion.

All of those in favor, say yes.

Yes.

Yes.

All oppose, say no. The motion is carried. The complete voting results will be posted on our website. So thanks, everybody, for joining us this morning. I'd like to -- thanks again for joining us. I now present a short summary of the company's results for the year 2022, our first quarter performance as well as some of our growth initiatives. So as reported for the full year 2022, the net sales increased 9% from $13.9 million in 2021 to almost $12.7 million in 2022. And during 2022, the net income experienced a decrease of [ 45% ] from almost $4.7 million or...

Beatriz, we cannot hear you when you turn your head.

Sorry, sorry. So do you want me to start all over again?

No, no, no, that's okay.

Okay. So I was referring about the net income that experienced a decrease of 45% from almost $4.7 million or $1.01 a share in '21 to almost $2.6 million or $0.56 a share in 2022. And this decrease in income -- net income in 2022 compared to '21 was mainly responsible due to 2 reasons, right? One is the decrease in sales of our cosmetic ingredients, combined really with the decline in values of our marketable securities portfolio. The [indiscernible] cause for the decrease in sales of our cosmetic ingredients was the overstocking by many of our contract manufacturers that are overstocking 2021 to avoid supply issues in 2022 as well as the 0 COVID policies in China that not only affected the demand in China, but also in the Asian region, including a very good [indiscernible] for personal care, which is Korea. Regarding the stockholders' equity last year, it was a decline from $9.8 million to almost $9.3 million mainly due to the payment of our dividends. The total dividend paid in 2022 was $0.68 a share compared to $1.13 paid in 2021. Any questions on the last year's performance? Regarding our growth initiatives, I just want to mention also that regarding our marketable securities, we're moving into a more stable investments with, like such as treasury. So in that way, we will not depend -- our performance will not be so excused by how the market performs. So that's a really great change that were implemented regarding the marketable securities. From our growth initiatives, we're really building out on our core competencies, which is really the design and manufacture of hydrogel products. So we're expanding on existing market, and we're looking for new markets. And at the moment, we're launching a new line of products called Natrajel into the sexual well-being market. This is a market that is rapidly growing, and we really would like to ride the wave. We have really 3 well established businesses: personal care, medical lubricants and pharma products. The personal care and medical lubricants are based also on these hydrogel technology. We will continue capitalizing on the existing products, and we also will launch new products to address unmet market needs. For me, sticking to the core and also have a good innovation pipeline is very important since innovation is a key pillar of our strategy. We also will continue technical collaboration with our distributors, and we will really enhance the collaboration to have with our customers to do even more customized formulations. I'm also looking for strategic alliances with other raw material suppliers to bring new technologies to United-Guardian and be able to expand the technology that we're currently offering. Regarding our pharmaceutical products, Renacidin is a very well-established drug in the U.S., and we're looking for opportunities to grow geographically. At this moment, we're looking into expanding potential expansion of the drug into Europe. Clorpactin, which is also a well-established disinfectant, we've been partnering with Sign Fracture, which is really a wonderful organization that supports developing countries to offer orthopedic surgery. We're becoming even more closer with them. They are testing our product in several other locations, and we're expecting the final result by the end of the year to see if we can move forward with even a closer collaboration. Any questions on the growth initiatives? And finally, on the first quarter results, our net sales decreased 34% compared to first quarter 2021, which really was a very good year, a very good quarter. Net income for the quarter decreased by 17% from almost $900,000 or $0.20 per share to -- in 2022 to almost $760,000 or $0.16 a share this year. That being said, I'd like to point out that the net income is really moving in the positive direction. The net income in first quarter 2023 is compared to second quarter, third quarter and fourth quarter 2022. I personally believe that the result that we had in the first quarter kind of reflecting on the [ stagnant ] growth in the global economy, right? It's a very challenging economic environment. Our decrease in sales are -- were mainly due to overstocking, but also a change [indiscernible] demand by the personal care as well as the medical lubricant customers, which really were not stocking in Q1, and we're just ordering just in time. Also, we had lower sales of our cosmetics ingredients, especially in the Asian region because still we have the lingering effects of the COVID policy restriction in China, which affects China and Korea, which is a really great market for personal care products. We do believe that the demand will stabilize as really the reopen of China progresses through the year. And as the demand stabilizes, our -- we hope to increase our sales. We're very committed to our growth strategy, where we're implementing really reshaping of the way we make decisions. We make sure that we made the choices that are sustainable, they're innovative and they do deliver growth. Any questions? No questions. So there's no questions and no further business, I call for a motion to adjourn.

Yes, I move that the meeting be so adjourned.

I second this motion.

All those in favor, say yes.

Yes.

Yes.

All oppose, say no. The motion is carried, and the meeting is adjourned. Thank you so much, and have a wonderful 2023.

Thank you, Beatriz.

Thank you.

Bye.