Northern Technologies International (NTIC) 14 Nov 222022 Q4 Earnings call transcript

Good day and thank you for standing by. Welcome to NTIC’s Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded.

their discussion forward-looking representatives financial statements results, well the be NTIC and of and as certain objectives making regarding as part today, from the will operating expectations. As plans, business NTIC’s future the Please statements. to under Safe be the avail Securities Reform itself Harbor covered and XXXX of Private the Act the of advised of forward-looking Safe of that are the these Litigation that Harbor statements for provisions NTIC protections desires could results to differ from also and releases. be on actual Please subsequent reports the NTIC’s due that or Form stated statements uncertainties, in quarterly press by report on the materially implied recent described advised those risks annual Form most XX-K, recent including XX-Q forward-looking those certain and other that with filings these Please NTIC and read SEC. the reports make will future NTIC update disclaims forward-looking revise statements. its any to or duty call to today now like to I Lynch, turn NTIC’s Patrick speaker would to CEO. the your first over Please go ahead.

Matt am am Good our Patrick I earlier with full release fourth press that fiscal is morning. CFO. year CEO. XXXX regarding was and at quarter available Lynch, I Please this results issued a and ntic.com. note here Wolsfeld, financial NTIC’s morning NTIC’s

in our will sales the XXXX. fourth for buying the call, update venture NTIC, former thanks NTIC’s it’s it. to XX% the would not U.S. show financial an record review year-over-year. acquisition, into over XXXX at industrial XX% aspects also XXXX, today’s India’s of annual to start joint September developing show record If sales the NTIC’s technical ZERUST five-year as in compound continue strong long-term result rate benefit Gas increased sales consolidate at now which XX.X%. acknowledge our focused fiscal have conclude and service global key the ZERUST both This this growth causing a with innovative India said for remain In increase to XXXX, well XXXX products North then & need ZERUST products, and partner financials increasingly customers of America, that, we direct Oil solutions, with abroad. During as on growth provide distribution an Natur-Tec we a to a our XX.X% since that from is Indian and on. solid XX.X% fiscal diverse fiscal exceptional strategy Fiscal have period session. had we We out received NTIC and everywhere With quarter for produced sales turn, other markets of our fiscal year-over-year. our worldwide XXXX the sales of ZERUST year acquired in important Having net NTIC’s, annual full execute of to of services business network and various results, our increase brief a in demand only we question-and-answer our of to

also The American North pandemic material XXXX fiscal issues increases and sales. the of Nevertheless, made lingering chain impacted impaired prudent during the raw hindered availability efforts to our costs across our first half the manufacturing geopolitical pricing profitability as reopened subsidiary growth world have and pandemic, included and and Europe’s and European fiscal sales the the especially environment recovered In which to conflicts our NTIC XXXX persistent during severely inflation, increases, COVID-XX impose while in from still material raw shipping sales business Chinese Government particular, when complex significant This during issues, the and economies in problems COVID-XX impacted the Asia. effects China our benefited considering for Sales Our and profitability of year. during of harsh of overall adjustments JVs the supply fiscal energy faced encouraging the extremely third supply and during cost XXXX. fourth Europe quarter the sector. were fourth quarters we high we many profitability chain lockdowns, have is cost somewhat year. of most the continues

fiscal American remains global to North ZERUST which strong enter well help our Gas NTIC as expect Natur-Tec our and momentum as XXXX, we markets. European Asian Industrial, & and within uncertainty we will across ZERUST As near-term offset markets, continue Oil our

profitability margins. we as fiscal In on addition, our to XXXX we expect rebuilding to focus annual in continue improve

more this with the the drivers detail. overview, So in for fourth let’s examine quarter

lockdowns August XXXX, wholly-owned financial Natur-Tec impact in which decrease the we treatment NTIC by do a statements not NTIC’s Industrial ZERUST decreased Oil XX% net was down a in joint conditions. For across country Gas partially ended sales consolidated record to over net global subsidiary new total unit, the much ventures and the decreased to due sales million in increase COVID-XX net X.X% India, a of the million ZERUST the offset of net XXXX. subsidiary compared to net negative primarily ongoing fourth fourth which our XX.X% a to and over the the serviced our fiscal to to Fiscal related net within that severe due ZERUST of XX, demand fourth by ensuing business XXXX $XX.X slower sales geopolitical quarter statements. XX% quarterly Broken This across by due our China as joint concerns fourth financial and ended weaker $X.X sales quarter increased by in of conflicts accounting to XXXX in economic is includes quarter sales. by change ventures, XX, August our million. now consolidated territories sales, the quarter XX.X% a for $XX decline this Total by XX% our & increase consolidate

million. XXXX, declined to China $XX.X X.X% sales NTIC fiscal For

believe in market the our closely watching China and are We market become likely conditions we continue to in largest future. geographic China will

ZERUST new years. next alone in oil This growth. to sales for for $X.X quarter ZERUST tanks storage year, Oil overlapping achieved on in million Gas fiscal first & & our Now protection on million. to $X.X we the contract Interest fiscal new due agreement, Gas, and tanks XX We in and we ever XX.X% September players announced a NTIC Gas to-date. good storage the single two services record aboveground XXXX August Oil new the primarily acceptance Sea) a the remains XX% gas a BP sales this over tank chemical from decline solutions annual will and quarter the sales expected in will be and protect Under ended among contract fourth with next & reflective moving XXXX, this largest three corrosion we experienced although for XXXX, storage three oil revenue bring year-over-year for Limited. ZERUST applications quarter reached to the of with in supplying technology over pipeline record, months are over BP have is XX, to we major solutions, we that confident quarters corrosion, (Caspian Exploration be strong have a our and for the is of include In increasing gas casings year-over-year increased three oil industry. over years. gas which our we the basis and received achieved consecutive last believe This the the oil initial Oil is another

a We Natur-Tec fourth during challenges Sales earlier important show are and fiscal year within over material especially strong trends patterns year Turning America the impacted XXXX suppliers. quarter and bioplastics this ease to XX.X% returned believe testament supply continued and in to the pre-pandemic increase position levels, this Natur-Tec’s Fiscal that we encouraging period. Natur-Tec $X.X relationships a raw demand fourth Furthermore, industry India. and the to and our Natur-Tec close within million, experienced. the business. strong to the year-over-year prior were growth have bioplastics quarter North is results that the sales and our contributed to logistics our with quarter-over-quarter chain

growing certified alternatives see products for compostable use increasing market that plastics demand as conventional compostable as interest and resin We to commercial certified plastics. and continue municipal plastic new programs as of applications well compounds, in to

we Natur-Tec growth As a long-term result, for we believe within our bioplastics well-positioned sustainable business. are

continue continues sales impact financial results our and American me economy, outlook to sales. profitability, uncertainty the as we Europe the overall economic Natur-Tec North improve higher this we fiscal can our in demand turn overview, oil to from grow and With the and and geopolitical Wolsfeld the we into on now to benefit prevailing let fourth industry China, summarize believe favorable higher year. that While Matt for and quarter gas call trends, full especially XXXX over to and sales

period, to in Compared annual quarter, an fiscal in XXXX positive fourth quarter the sales fiscal fourth XX.X% the XX.X% record fiscal period. increased Patrick. in drove and year the because trends quarter NTIC’s consolidated grew X% joint the his in across reviewed incremental fiscal joint prior of to income an XXXX Thanks, from Patrick sales in to remarks decrease year compared a and India, venture our prior ZERUST the decrease XX% fourth operating global ventures sales prepared net

to and due The Operating fiscal quarter global to to in year year compared Total XXXX China increase prior previously a XX.X% declines written-off as services compared associated prior income by fourth net fiscal joint in wages, higher sales, expenses to venture higher as primarily XXXX. offset year. well for the year India of because across the recovery in travel million. venture of for related for fees a investments. For the sales percentage was quarter ventures, incremental joint joint venture with operating ZERUST fourth R&D in sales increased partially contributing fiscal expenses acquisition the XXXX to from higher expenses $XXX in prior were the income as of sales period consolidated $X.X fiscal were full joint operating decreased XX%, and expenses XX.X%, improved XXXX our period. selling XX.X% and decrease fiscal to The termination XX.X% slightly fiscal operating of expenses our fiscal

year. to fiscal full for the of as XX.X%, XX.X% sales a compared For the net percentage fiscal to improved expenses prior XXXX, operating

materials, increased to year XXXX, as and since profit our to and XX.X% illustrated of of year in transaction sales each a XX, the As increases prior XX.X% of was labor from sales primarily sales in during our China as ventures it the equity and for on XX.X% at XX, expenses Gross ZERUST operating results price net consolidated a period, compared fiscal our with raw August quarter was financial to a India period. year. as Gross during three prior our increased compared subsidiary. profit prior now as ended lower August income the result percentage ended net compared months fiscal joint our sales fiscal the our is XXXX, net the percentage results, case fourth year fiscal XX% decreased the for

$X.XX or addresses action pressure $XXX,XXX that quarter, the the future. and per fourth reported to share share quarter. $X.XX in $X.XX intend pursued for so diluted XXXX to income XXXX fourth have diluted the net compared doing million for We inflationary fiscal or continue per NTIC fiscal of

reported income share share, For $X.XX $X.XX diluted XXXX the year, or per $X.XX fiscal the per of NTIC $X.X million million full diluted year. compared or full net to for

the for share for fourth the $X.XX fiscal adjusted income, fourth per transaction quarter, $XXX,XXX expenses compared $X.XX was share, non-GAAP million related or amortization fiscal XXXX $X.XX XXXX or For quarter. to expenses NTIC’s to India diluted and diluted NTIC per

this non-GAAP fiscal For our that to per fiscal quarter $X.XX per earnings for financial fourth of available $X.XX are reconciliation issued $X.XX share, income to release and million XXXX, $X.XX full compared press GAAP diluted was was XXXX. year in diluted million A matters non-GAAP net morning. share or or

of cash cash August equivalents, August million cash was XX, million compared including XXXX. working million, in As $XX.X $X.X as $XX.X $X.X and in and million, to equivalents of XXXX, including XX, cash capital

under joint On credit. XX, cash, the our in remaining nearly August $XX revolving outstanding had the invested balance line XXXX, million ventures, of was had of approximately company primarily August of in XX.X% XXXX, capital. investments million in $XX.X other which working As $X.X we in XX, or with million

quarterly to on During of the X, XXXX common stockholders XXXX. payable declared fiscal dividend of August cash August that Board XXXX NTIC’s on of record quarter, share Directors was fourth XX, per a $X.XX

navigating a diversification strategies. geographical continuing continue our So market business and to our environment, while prepared end product to fluid conclude we remarks, pursue

We American are trends and North across gas seeing bioplastics global our oil robust strong demand and growth and markets.

we our excited we believe and With be are uncertain, I economic year take good the by your happy Patrick and sales remains environment to and profitability NTIC questions. will another of XXXX prospects. this are for fiscal overview, While

comes Clemens. question And Thank Van sir. our line Please Tim Clarkson Instructions] you, ahead. of [Operator I first show from go from the

got to Hey. some can Good what pretty you do granular wanted just you some quarter. get improve else bit little a you things do? of growth. just I can to of Is the into obviously, more prices good profitability, have it exactly discussion or raising sales

we costs with much certain and increases case-by-case as on price looking cases, are as to Well, can, a at, obviously, we lowering negotiate our meeting in customers are we basis.

Okay.

the of the technology business process is it’s is do considered changed? or just industry? because it no is issues are oil applications, in more finally get have you gas getting In money Is terms oil in now what’s it you are think resolved longer What exotic you gas it technology the that that terms just and of some traction got in some area? and starting or recognized to reasons the

quite we time market. it’s some in and think presence a basically coming now basically recognition for been I mean the all I this of it’s our have doing together.

up of quiet until now interest significant have countries more that some We have been now. very seen out

the Norway some We months, expect of business as two other significant in countries. as next well out some

position of technology is and terms a oil bit competition traditional have little and packaging you stuff? unique competitive a there, more I this in some know your the proprietary gas In that’s areas, to

Yes. Yes. is. It

that I way the works it’s amount of supposed a this with making am sure right? there’s knowhow technology fair involved to, guessing

the monitors mean, working Absolutely. and can are the we we so to solutions do they field. into -- built that our how in in well And prove I customer

Right.

an is the ongoing initial beyond there get Now just -- order? is once order, there you revenues

Absolutely. Are about you the talking oil…

yeah. gas, and Oil

or... storage and Oil tank solutions

Oil… Yeah.

Yeah.

… and storage solution.

Yes.

of I Of under the after you installation, have period do certain we replenish tanks mean to the time. chemistry course. a after the initial

sales years to five probably same repeat are every the looking at we tank. So

I see. see. I

back the see coming end, that significantly. I On are really revenues compostable

using mentioned you can are you compostable new applications, some that the come about in You have applications technology? with of up there things talk new terms

can this at I time. talk that Not about

Okay. with am All Good right. and it. well Thank I done. you. stay quarter

Thanks.

next line Capital you. I go our Northland Gus question show Richard Markets. the of [Operator Please Thank ahead. from And comes from Instructions]

Thanks Yes. question. the for taking

have move Just business quarter? wondering of sort how affected you the in the first China your as lockdowns into

as manufacturing watching you recently, the was I locking shut where the heard and down City have a are guess, in down Foxconn it there COVID the they probably was is Well, and they Apple been Guangzhou probably, Most cities. are every news, case, factories time around of, it. that entire iPhones

so visiting So seeing are the are people et cetera these forth. obviously lockdowns, we rolling to customers, which office, impeding from and coming

they it’s country’s policies, China or I current it their told, our that So they which COVID rolls I is days policy ago, how to before impacting we regarding the it in eased out think, into take that am significantly slightly economy until two take some -- but business. and time going change see about three days will

Got Okay. it.

and changes effectively the as October? month So of September no in

No.

effect? sort you contracted how then what lag characterize this just And you net as business you Okay. much of just is point -- your at versus spot, adjust could prices, as see the do of

do Matt, to want one? you that take

America, for that pricing is business far It as a set not majority are kind up contract, basis. is a the we long-term country-by-country as contract North not in of depends goes. a What seeing on the of

a in period Europe We are pricing it prevalent for in America. or as but more not year little have an that period, -- put they in seeing much a more North annual place

months, And so that that margins in the were six were margins saw as America. delayed, much almost the seen months in a behind somehow bit quicker. if three in result what Europe nine in to have North we Europe of America deterioration margins North our lagged It’s the the little rebound we in is months,

renewal, going the annual some we back some margin are down of the these of we gross fourth of in as rebound come across contracts quarter and we see and materials like in volatility see coming Asia that to Europe we we a so see saw then up parts with third the in and North raw other in feel quarter. the And for as Europe hopefully America

Okay.

Third fiscal and XXXX, of fourth correct? quarter

No.

business -- margin fourth North its quarter. saw third our and -- Our third quarter fourth quarter we American rebound in quarter a in and gross

Right.

probably really in the to the quarter quarter in throughout from see year. rebound the throughout and expect gross of parts We -- -- Asia second a of and margin this Europe third

for then going are with much customers they it. or or Europe just type. impacting issues? oil to work How Clearly, natural your is Got second. energy gas a finding through ways And stick the are winter, they that to

That’s how to play a that’s supply this be needs still on energy. to of really wait both But see is still at out everybody and that cautiously know basis cost watching point. energy I seen… and going the

Got it.

… for of the European course. market,

Right. Right.

Okay.

I Thanks think me. for that’s much. so it

the for showing turn in am over questions to Lynch to I the time. further back closing like you. call Thank I’d queue remarks. this at no any Mr.

to in great week. for participating like NTIC. everyone Thanks. Have interest I’d thank your today Sure. and a

concludes conference This call. you you. today’s Thank for participating. Thank

You may now disconnect.