Northern Technologies International (NTIC) 13 Apr 232023 Q2 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Northern Technologies International Corporation Second Quarter 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

As part of the discussion today, the representatives from NTIC will be making certain forward-looking statements regarding NTIC's future financial and operating results as well as their business plans, objectives, and expectations. Please be advised that these forward-looking statements are covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and that NTIC desires to avail itself of the protections of the Safe Harbor for these statements.

those that implied could due Form by risks uncertainties, advised those materially to XX-K, be most press and or NTIC's releases. on stated the including and subsequent also quarterly actual Report Form differ results from certain recent reports Please Annual in XX-Q, on recent described forward-looking statements Please SEC. the will make read these with reports and other future filings that NTIC its any forward-looking or statements. duty disclaims NTIC revise to update

Patrick Lynch, over I today, would to hand ahead. go conference like Executive now your Chief to the Please Officer. speaker

Good morning. I'm NTIC's I am NTIC's CEO. Patrick CFO. here And Lynch, Wolsfeld, with Matt

Please note earlier fiscal this release ntic.com. our issued XXXX is and second available at that quarter a press morning was financial results regarding

second and During brief provide we today's various conclude then key call review financial XXXX business quarter a will update fiscal a aspects question-and-answer with session. results, our of

NTIC growing focused base. and an XX been evolving constantly a team, almost building For our leadership answer to needs of committed has now, comprised of solid customer experienced diverse global their a portfolio solutions years and of as foundation well singularly on as

continually buying have partners. categories select in We growth long-term in capabilities, by at to geographic our strategies and This us has pursue out turn enabled joint-venture footprint. and operations aimed our enhancing our product adding diversifying invested opportunistically business end-markets

another North both in and yet abroad in our & Gas resilience second Oil stable Our services U.S. these our in new of coupled demand quarter. the industrial sales quarter second Natur-Tec the and financial interest performance platform in as of products Zerust our success and the with reflects products record provided initiatives and the for growing Zerust America,

but lingering environment to navigate complex of operating not the the inflation, conflicts pandemic and cost in continue an raw-material effects we Asia. comprised to as geopolitical increases, limited COVID-XX in Even Europe persistent extremely of,

that making rebuilding we pleased considerable operating expenses. our I'm and margins are controlling report progress also to gross

Oil on improvement so benefits a by fiscal basis, & business, year. and this margin of as both quarter contributions Gas year-over-year of second successfully Zerust significant our we've XX% reflecting gross fact, well the profitable implemented far a as In made marks measures growing sequential other a the

Overall, momentum has the self-imposed Chinese improve rebounding opportunity long remains to will quarter China in the third NTIC as from we economy its sales and beyond and the pandemic positive expect finally start freeze. exceptionally

well In addition, new quarter the finish customer XXXX. in Consequently, expected and a fiscal strong orders. are benefit incremental are to from Natur-Tec positioned sales to relationships we believe third for we

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

quarter increased XX, quarter total XX, second February second second as net compared million the ended our ended XXXX, consolidated a to sales XXXX. quarter February the of For X.X%, record to $XX.X

XXX.X% Broken global This increased the to sales, in X% a Zerust XXXX a in geopolitical increase down net our joint business not to Zerust across while simultaneously in sales, for demand fiscal serviced in in of due X.X% their second ventures, was by demand its territories primarily statements cost Natur-Tec $XX.X our energy, included reducing our increase the availability. net rebound several by increase Total which do unit a raising a to on lower the million. by we and X.X% consolidate net financial Gas impact industrial of joint-ventures, sales. quarter after quarters increase & conflicts due Oil certain sales this and net

as of across the New Chinese our XX% economic the quarter subsidiary million sales of China second severe COVID-XX-related conditions, quarter decreased and that negative impact resulting to by as lockdowns to NTIC much the net wholly-owned the Year. during country impact of $X.X weaker Fiscal due XXXX by well

watch China. closely to conditions in continue We market

this Chinese expect that demands the of improve to we fiscal remainder policy, Now zero-COVID throughout the the PRC's terminated year. government has

long-term the opportunities We remain and committed for it Chinese NTIC. represents to the market

We continue continue the our protect steps geographic China believe likely to become future. operations, market we to largest and our Chinese to take will in and enhance

we to Oil of million. Gas, XXX.X% on had Zerust quarters one moving for ever second Gas. Oil Now increased have & & quarter as The sales fiscal Zerust to strongest the XXXX $X.X was

second The of over positive $X.X oil reported XXXX business. trends the million accelerating basis, and quarter believe momentum fourth these sales. a fiscal oil and within our of on and gas quarter & of Oil we Gas is have Zerust consecutive XX-month sales, also We gas nearly $X.X reflect trailing million

the fiscal quarter casings of for believe growth. Oil growing & to be Gas gas oil is protect corrosion. quarter and which our aboveground applications from will Zerust of and sales XXXX include tanks solutions, pipeline Interest third We storage good oil another and

Gas adoption of supporting & & industry Oil solutions our is expanding products Oil the gas and and our Zerust bigger Zerust within opportunities oil Gas for technologies. The

profitability. believe will Oil to As Zerust scales year as for & business a a result, transformative we to and continues fiscal XXXX be this contribute Gas

sales our second $X.X million, X% Natur-Tec Natur-Tec prior to the period. business. were over year Fiscal XXXX fiscal bioplastics quarter, Turning increase a

seasonality due within of sales the growth and quarter positive, second trends While both and Natur-Tec shipments timing to the sales remain slowed orders.

geographies. to quarter see new supported use in in we resin of programs new conventional We and to interest growing by demand compostable India as commercial in market America municipal plastics North expect continue compostable as applications demand increased the plastic wins compounds, certified as Natur-Tec to in and orders favorable that significant certified and third plastics. and customer products alternatives sales Globally, and these re-accelerate growth well for

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

platform help demonstrate members results gas are working day joint-venture our partners oil global protect provide leading have team solutions the to the extremely customers closely corrosion. Every industry to with our complex, While to chains from and supply economic environment created. and our powerful infrastructure we have global remains and continued

the While by improving providing bioplastics. compostable also environment best-in-class

to am create for fluid future business strong the lasting by very our during we landscape. I of have extremely performance And excited our value shareholders. team's in proud a opportunities the I'm

to overview, second Matt this call XXXX financial results With now to our summarize fiscal the for let Wolsfeld me quarter. over turn

Thanks, Patrick.

X.X% to to the second reviewed a net prior his year sales growth sales quarter the in NTIC's record. driven second a gross in Patrick prepared Compared This margins combined increase second in the XXXX fiscal second quarter year consolidated the improve trends fiscal across prior X.X% income A to drove by ventures quarter joint X.X% increase quarter the increased positive to period, in was fiscal with actions remarks. operating compared period. joint-venture

quarter period and of which majority-owned prior current the expenses was in new startup operating indirect expenses were a operations the personnel fiscal for XXXX incurred Taiwan. joint-venture expenses assume to year connection due in with formed the a increase to second and period, million fiscal increased subsidiary XX.X% Total over $X.X the in of fiscal the year primarily former

XX.X% company same year. the higher-margin of address sales the sales February percentage of the fiscal to compared result The three to by were inflationary XX.X% Zerust successful was year taken XX% ended compared a sales fiscal pressures prior the period Operating during and was to Gross months profit improvement Gas period. XX% the & last net for of expenses as actions XX, XXX percentage during as basis-point net solutions. a XXXX primarily increased Oil of

a share and earnings $X.XX for expenses quarter NTIC quarter. $XXX,XXX in was diluted per available transaction of diluted the per fiscal amortization to NTIC for per $X.XX to press per income are XXXX net that issued fiscal to share to expenses morning. adjusted share or $XXX,XXX XXXX NTIC's second share India measures non-GAAP second fiscal reconciliation for the or quarter second of income our compared related diluted reported the net or $X.XX was $X.XX compared diluted the this financial quarter. GAAP or second for $XXX,XXX XXXX A $XXX,XXX non-GAAP release

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

outstanding on February XX, As of revolving our credit. $X.X XXXX, had line we of million

purchased XX,XXX growth. second headquarters the and for warehousing support The $X.X will facility be continued Pines, production in adjacent Circle space square-foot used our we building additional for immediately to million. our During to Minnesota the quarter,

the ended six XX, months operating We generated second XXXX, February million including flow quarter. $X.X in $XXX,XXX in cash the for

During line of flow outstanding operating the second the positive of the cash use revolving reduce balance year, half credit. we to expect of our fiscal to

company XX, approximately in million in million of working capital. other cash On in XX.X% with was XXXX had $XX.X which or the investments primarily invested in joint-venture, $XX.X the February balance remaining

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

initiatives financial conclude end-markets diverse our geographies. to our second year-to-date progress And success of profitability. increase sales and to made the we've quarter improve results demonstrate To our across and near-term the

be will environment economic we profitability we're sales fiscal in And fluid, I'm encouraged another of XXXX believe the by direction continue headed. good NTIC. the remains and to extremely year while

happy are overview, take I this With to your Patrick questions. and

Northland Richard comes Our first Instructions] [Operator with Capital Gus from Markets. line question the of

Your open. line now is

Yes, see taking back. you're wondering good geography quarter a now. challenging and was morning. you about my in Thanks questions. Was wondering the that what just quickly for could seeing Clearly if last bit little talk China how just you coming

we're That's still still - wait-and-see in mode, really.

of things going expecting the of of It time flush recover and third end quickly is that this to picture are how get quarter. long some a basically period taking again. China have now, for out times. China will them We will recover better We'll at the

and you terms I'm then in And again, of new mentioned couple geography Natur-Tec just it. any color et applications of that in customers end-market, Got cetera? around a

- domestic Well, quarter. initial We've customer already to one come on delivering we one started feel of start this this large production expect have we their online. about orders and we those comes

then like gas, what's And pun pipeline last Okay. no and Oil look intended, the me. one for there. natural

looks really good. Right now, it

Any storage - -- the you is just pipeline color work add aboveground multinationals do

both healthy and of at It's pipeline combination very this it's point.

Thanks I right. all so appreciate it. much. Okay,

the in British any from half the that and contracts just in include And half of to not first the second something the revenues starting sales we're year. that's the quarter Gus, that to the deliver second of gas we received for add I'll year, that on comment did of oil Petroleum

one got And it. it, just Got follow-on.

Is many handful, how or in of there. any a you just have Sort customers quarter? a do sense it

we're kind that standpoint, oil backlog, the It's either the price be a mean, I certainly to yes, a Zerust look not per listing. listing customers business. XX I product hundreds at opportunity continually the quarter, Natur-Tec like far at that the number would an sell higher delivering the at traditional look of if and you an of of from industrial XX much we obviously mean when opportunity and in It's to. as the From Zerust gas I than customers per as

volatility customers in we're that note It finally revenues. yes, it's the So, a per simply what to that's a is starting that it's is somewhat of handful in month last coming adds good out, $X.X and and the baseline is of four of quarter. to over revenue positive Patrick remarks quarters, said a per see million in revenue prepared the as of his been

that's plan looking fiscal able and we're coming also the third why it. opportunity, to can had not looking As through better of can see we at about we we're see excited gas direction in of where just and are up, the that we kind our but we're growth fourth the the size has the we're of of forward, reasons quarter and oil one XXXX,

I'm on the customers thinking in How pipeline? roughly of more I sorry, many keep are questions.

XX at customers I I'm third would on probably are quarter, we at looking say customers. looking but or - new you're likely that all it's necessarily deliver at, opportunities look XX in if you're and you in just different probably not

Okay, Thank got helpful. very got it, you. it,

Tim Thank with Our Instructions] you. Van Clemens from & question Co. Clarkson comes next [Operator

line is open. now Your

typical quarter. on great to am with oil on how guys, rescue thought details Anyhow and call, knowing you the could saw business. Hi URL Anyhow this bad there. get margins hit the are but versus stuff, to oil gas traditional the what I new number Angie you and your you've shake I got gas me off onto the gross

Zerust gross a but industrial I the mean, and has been higher gross what historically does than opportunity, better out margin obviously like margins. compared because it in has Zerust more based margins We we slightly industrial gross positive. see there's it's putting vary on certainly to than Natur-Tec certainly it specific obviously

All right. that breakeven in What the division? approximately is

breakeven The oil the and division? in gas

Yes.

group. I the so in gas, know, of however you positive back the has want four about from We you It's which gas saw to the last have kind for right in and revenue, we - few when was and group given that the in trailing, of want big $X.X million to between we - oil million had. go if I'm which big milestone looking months for trailing revenue, at quarters, - step-up a to $X.X was oil milestone think been kind

at are gas opportunities, service are start can the - additional additional looking into. taking what hiring going place that it's opportunities. additional what we kind that's the There's geographies in of and now And we're oil now these

so us optimism of what's And gives what currently part lot in with a gas. and oil going of on

Right.

and guess people so there And after the people is other prove continuously wanting than using variances so, basis, actually intuitive less to with jumped finally this just are actually see using other catch-up what's years, to they traditional government people dramatically you've eight on along seeing And finally technologies. seeing it technology and it and between XX believers, better and out that happening the I through. Patrick a predicted big-picture work which technology seeing the

right. exactly Thanks. That's

Yes.

a been in that's pushed the stream putting to push requiring the government part need hearing Okay, other the organics well that And that County be the guess they're I then locally, some starting compostable big-picture to movement good. on you I've garbage the I of and solution. have compostable. to get guess, here Hennepin again on as packaging out stuff,

right. general, we're are countrywide mandates and municipal in in exactly mandate the the we're state I seeing markets. the that seeing one key that even mean of various drivers market That's for that and

going - also well. far So and the that key of materials products seeing with movements points as into positive as coming some are also price down Natur-Tec those as raw we're the with

compared and to industrial So improvements were Natur-Tec continued the in quarters. the see margins second we're going gross is we to gross that margins and in where recovery the in expectation first Zerust also

of right. terms All trade spinning a this potentially considerations and having the What division in are out separately.

Well revenues to - At and be mean, company. say, but Natur-Tec to time opportunity aspire in we in looking future, looking to do has certainly this just the microcap be at and and prudent with always it feel profitability I at going so, to this the small we're we NTIC a at it's that point I that at business. the it conjunction something something in going we're this because of point differently valued is it's is mean wasn't time that don't the the be to a oil that's evaluating we as it's point gas such size, seen could the in standalone, industrial be - rest because certainly be - and

I would a get into that Is and like that, that All bring [Cargill] potential someone a marketing there partner a right. to technology would like strategic maybe help that? and with mean, sales the deal.

that don't grow. that I conversations - no had nothing - we from to It's the possible. partnership, it's there continues market is continues as in Natur-Tec of grow anybody external as it to -- level with we've but

there be out Now, a different certainly, for there'll the options lot business. of

stuff. element a in shortage yes issue Now there the your being key using, past the make of that to this of you're

us. No available restrictions at to this material of time. We've raw got plenty

right. All

be Okay, well quarter. up great, quarters sounds good getting it better. are coming And even like

done. I'm thanks, So

Tim. Thanks,

no team showing to closing I'd back call like for over management hand the questions to currently at And I'm you. NTIC further time, remarks. Thank this

like I to thank in hope everybody have I'd a week. listening good today. just you for

today's call. concludes This Thank joining. conference for you

now may disconnect. You