NTIC - Earnings call transcript Q1 2018 | Northern Technologies International Corporation

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Operator

Good day ladies and gentlemen and welcome to the Northern Technology Corporation First Quarter 2018 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call 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. desires these of are Reform Safe the XXXX that that Safe under Act Harbor advised of and provisions itself Harbor Private NTIC for be these forward-looking of covered statements the of the statements. Please protections avail the to Securities Litigation report materially most including forward-looking releases. Form also to statements and on Please differ certain advised recent those or reports stated risks XX-Q, actual that those be uncertainties, described due NTIC’s in implied annual could and quarterly Form subsequent results from by XX-K, the on press recent Please other will these filings make that read NTIC reports and SEC. with the future duty update disclaims revise its to any forward-looking statements. NTIC or like host introduce your now President for would and to conference, I today’s CEO, Mr. Patrick Lynch. you may begin. Sir,

Patrick Lynch

CEO, note available which CFO. and issued press first Wolsfeld, NTIC’s earlier the that NTIC’s quarter a morning, with our of Lynch, Matt were a here Patrick is fiscal Please I’m release at this results NTIC.com. I’m financial for XXXX in morning. included Good copy

this update, with During financial session. brief and for conclude review a XXXX, of and aspects question net give results, first key business fiscal fiscal various XXXX on and our earnings quarter our then sales guidance we answer a comment call, will

exceeded the both history million Our ZERUST the quarter sales our ever. all for momentum and including in record NTIC's the time of Natur-Tec NTIC positive $XX to most allowed venture achieve joint global and first sales profitable first company. quarterly sales,

and around of world quarter the sales. core first continue Our market joint our experienced ZERUST solutions partners venture gain many to record share

with second quarter NTIC profits, consecutive third and of profitability. quarter it’s China the Our operating consecutive emerging Natur-Tec its growth finished closed quarter the sales business while significant segment of

the expect the the We company. good strong fiscal for year start we to are to be encouraged a XXXX and year, by

highlights well. for Natur-Tec remained these industrial first to let’s products continued perform Global core for the our drivers and examine strong quarter. with the ZERUST So, demand products

this a total million net Total do November months XXXX, to net of XX% consolidated down as three Broken by we November quarterly record XXXX. our first joint which million, the XX, not XXXX $XX.X financial quarter ended in net a decline XX.X% statements, consolidate fiscal net oil XX, XX.X% in and $XX.X XX% to sales. gas sales sales grew for the ventures, joint the and units, NTIC in first For ended net quarter period sales and million our increase This euro. by fiscal by global for increased to decline JV to sales compared demand, improved compared included same net increased of business in was and ZERUST its the last sales, from sales, partially market result in the year. XX% ventures $XX.X increase to share, a in growth offset XX.X% Natur-Tec stronger industrial a

wholly-owned aggressively as market XXXX quarter demand across partners our We for these new XX trends to during products $X.X XX.X% and to into continued year. NTIC fiscal will million customers year to the same first This period industrial, from well second we JV customer expanding is a Favorable to during the performance. up increased last thus quarter fiscal proactively and JV, the continue we well the for our in core were over as sales with XXXX with and due The fiscal pleased compared our existing as quarter. within growth was and million converting new months subsidiary fiscal result improve the of base, of fourth as sectors agricultural, Net have sectors. higher far and optimistic last sales as current first both former in XX.X% ZERUST are $X.X throughout I’m stable the increased remain the growth made these of China our by quarter fiscal XXXX the industrial progress work have to sectors. mining XXXX to sales markets

quarter, positive continue of We levels can slightly to fiscal China's NTIC year. than are of sales Cortec New sales the the extremely quarter our former We $XXX,XXX the with same $XXX,XXX as is may important at note converting second quarter to lower Year we expenses the trends period. period compared pleased against net a during first long remain underway confident from NTIC be our related It expanding customers result JV, for holiday XXXX the Corporation litigation country. legal fiscal across the that China Chinese while first last to NTIC China. that incurred

States reminder, in with District a by of Corporation. Cortec prejudice As all Northern against litigation the asserted District September claims dismissed United for XXXX NTIC's Court the Ohio

we fourth benefited year's tank XXXX first first second was improvement. our quarter results same of solutions, given Regardless, As the and although quarter of a for to XXXX, to last but far not by year. expenses quarter it gas down will put have net sales context from result, the for gas shifted levels any to improved all a related last important this to fiscal for expenses $XXX,XXX nearly gas to $XXX,XXX legal legal potential court in first and from proper fiscal first case quarter early of still solutions so that remain and incurring XX%, and Oil the fiscal of quarter from remember our large were fiscal To for sales this XXXX oil period quarter. the quarter remain we the XXXX. this is additional fiscal bottom have order encouraged compared the global compared that first the disappointing oil XXXX fiscal remainder for sales

Natur-Tec business. our to turning bioplastic Now

network, sales were first million, fiscal in NTIC's subsidiary domestic same well India. higher significant year, a the net finished $X.X by fiscal the our of achieve the quarter result sales to sales rates as of America increase distribution continued [indiscernible] as growth North the Natur-Tec double in in XXXX Natur-Tec majority-owned XXXX over of almost demand For through double-digit and as first XX.X% an strong quarter. fiscal period achieved products

we in to gas NTIC and impact oil oil second in and sales anticipated of sales profitability gas the slight sales improve oil Year. lower New due the quarter While anticipated expect and quarter, increase The during net were the sales despite quarter. first further China higher Chinese gas should second the to down

be as strength and model. excellent In our the the NTIC's of the sales second XXXX in part the year fiscal seasonal half first should historically the later year of higher business Fiscal quarter financial the addition, profitability of in fiscal of start to first fiscal than experiences continued half an year. the demonstrate NTIC off is results better

and first We our for believe With shareholders for let XXXX platform sales committed value sustainable to financial long-term in turn and creating to growth drive are now me we the overview, fiscal to fiscal a over results XXXX our we earnings summarize to quarter. call Wolsfeld this beyond. and Matt have

Matt Wolsfeld

Thanks venture the increase Patrick. XX.X% XX% of ZERUST sales increased the industrial NTIC's corrosion of inhibiting net NTIC of includes or fiscal sales or which quarter $X.X products, first XXXX a million and in result as $XXX,XXX in XX.X% joint a drove first to China contribution of and the profitability income. Higher from XXXX strong fiscal corresponding operations compared period Natur-Tec. joint increased operating growth joint ventures year. our venture for many XX.X% sales quarter, in last double-digit in Income the across increase

of personnel nearly The $X.X during of audit, reported was G&A $X.X tax with that $XXX,XXX NTIC or increase offset for development share income expenses, research million higher late fiscal $X.XX as to net financial well quarter, in X% assessing the law XXXX. expense diluted act associated for by $X.XX net annual or increased quarter. expenses XXXX result first operating per diluted the is first NTIC's were expenses. still per million, and partially XXXX the fiscal of primarily a jobs quarter. and signed XXXX and fiscal to as December total which cuts lower of share Our was impact income first the the compared into NTIC

the financial will new However, to many our assets. quarter charge There be disclosed our its be also full implemented that fiscal laws. in important is take write results. down that need and the deferred understand the XXXX to one-time are provisions impact it’s evaluated with to NTIC other tax a quarter second non-cash of expected to note of XXXX These second tax fiscal to

invested November including will million we expect million joint $X.X in to in in and was cash remaining investments including million, $XX.X of million XXXX and capital cash, $XX.X capital financial available cash model ventures in XX% equivalents the and XXXX. in balance with to equivalents operating million million, $XX.X XXXX, additional our November cash or of XX, million significant NTIC's flow. $X.X almost available $X.X working securities, produce securities for require in approximately million of cash as compared and August On was had XX, business the in strong $XX.X continue cash As sale company $X.X working which not capital. sale and for of does model

fiscal capital XXXX outlook, quarter, payable December X, going dividends and the cash declare Directors common of Based a regular declared on Board XX, cash During first $X.XX forward. record quarterly requirement XXXX intends of on NTIC's December was shareholders that the per to XXXX. share dividend of Directors to on NTIC's current Board business of

now annual $X.X to range $XX represents NTIC's increase million, our between or XXXX, million between expect $X.XX XX, XXXX. $X.XX for million August between net of NTIC million for attributable sales $XX diluted to continue year will XX% per and to an our XX.X%. ending Turning we guidance share range $X annual to fiscal We and annual estimate the which fiscal income will and

annual to uncertainties net and uncertainties anticipated in risks without not our wide risk does that down share guidance year-over-year our Annual guidance Our to China guidance limitation and significant to of other per the income deferred and of business, consideration including related expect uncertainties. an for occur are diluted second operations asset we will take XX% quarter. ranges represents XXXX fiscal non-cash and XX%. in write into due earnings increase risks tax the facing the our These change

So, and to built as profitable Patrick growth take and and headed. platform you this, can by direction your questions. encouraged excited see sustainable compelling continued drive our are results, we’ve the With we're strong to about happy I we’re the we’re

Operator

Instructions] Van Tim [Operator Clarkson first Clemens. from question And with comes our

Your line is now open.

Tim Clarkson

really congratulations good Hi, guys, quarter.

next two can quarter year Just about this XX% as year XX%, is margin first potentially noticed net. that XX% up in of go to or first to net guessing I’m net your increase continue even that revenues the or margin I maybe that questions, your that all,

Matt Wolsfeld

what of aiming least expenses $XXX,XXX of rest first expenses we that’s first in but what that had a go expenses lot found. We so That - the an our At and for. relatively tax the the the just an into quarter case, to having related QX year, the to Cortec don't that anticipate go is into also not quarter historically additional awful is first all certainly company has be some we’ve our for awful quarter, audit quarter, of expensive us. tends

certainly down. company the see for expenses the to operating the the So, to goal is remainder overall come of

Tim Clarkson

Great.

Just do what you general, going tax the in you to act affect do how will you? is think that - think reform new

Matt Wolsfeld

in reform there will main, tax provisions act there two specifically. Well main the NTIC areas at. The we’re a that is is looking couple impact that

U.S. related issue For most would for would to And dividends. $XXX,XXX. the of tax about be repatriation big tax deemed credit we the dividends if foreign companies, foreign NTIC, the is not we that traditionally, see of expense multinational would have we foreign did the deemed carry-forwards, repatriation

carry-forwards, foreign million. However, credit which $X almost we are tax have

the is repatriation deemed deferred So, good is the tax a $X.XX area million or in as there balance tax that we are those is tax those assets XX%, we was about which deferred won't sheet have down XX%. any of companies assets which In tax at the in news. that on to foreign our The tax goes from and other the to that previously. down revalue bigger rate assets need - be XXXX, face tax situation one rate we are XX%, that issue dividends, which to deferred the had impact

$XXX,XXX between which charge calculation, impact change, if to doing $XXX,XXX-plus. to probably going of there’ll the related a So, a that one-time be rough to be I’m it’s somewhere non-cash

be a question. that in impacts of of are we’re in still the how lot going non-cash kind these have forward. which kind that big spike of deferred So, second part we’ll tax to quarter got be to of do that think and assets. the are evaluating But non-cash provisions going But in that forward. a a spike tax the keep with of really asset, kind there's going obviously earnings. quarter for tax impacts I second it’s kind see one-time But going that things other pushed of to the - adjustment face companies our we’ll of that one-time Thanks any mind that

Tim Clarkson

Thanks, done. Matt, I'm

Matt Wolsfeld

right. All

Operator

And with our [Operator Manalapan you. Vidich from comes Joe Instructions] Advisers. question next Thank

open. now is line Your

Joseph Vidich

good quarter. the Yes, morning. on Congratulations

Patrick Lynch

Thank you.

Joseph Vidich

your just gas the question. I my find wanted bit opportunity what sector? little is in a about first That’s think out you to and oil

Patrick Lynch

Well, to dramatically $XX the for their solutions to the a amount to the market. comes for that facing significant budgets, or now protection. will - their that infrastructure most it's is of oil relatively dramatically more barrel to The expected potential a low market to that very The a news something oil good allow have margins. them effect. It's If a with and companies which that rise significant we've are it's increase oil the very been from prices. recently prices a out are our that $XX maintenance of very implementation would barrel money problem expand pass,

Joseph Vidich

what of the target? products you in do and you ask actually I oil types guys markets Can gas

Patrick Lynch

I have that would conversation we that separately. maybe suggest

Wolsfeld free go the he'll call, call Matt are. to the that, go the and people the products of given well the not This over most probably into detail You’re caller acquainted company. time especially with that at to forum as to best products previous any the are on what is great

Joseph Vidich

Okay, that's do that. fine. I'll

your net have I part revenues question division. sales, How through do to they actually would flow with other from income or The China of is show? in regard just industrial those the they Are where statement? your the

Matt Wolsfeld

China that be sales, included of part have about in that top industrial sales They're the line. talk - Yes. would number. we Whenever in the we ZERUST we’re

Joseph Vidich

Okay.

all great. Thanks. got. Okay, That's I

Matt Wolsfeld

Okay.

Operator

Jerry you. from And a private Well, Thank next question investor. comes our

Your line is now open.

Unidentified Analyst

you hard relate guys. now. All work that that prepared. My to results Congratulations, you. Thank some gave investor questions the deck

on presentation website. questions your investor posted updated here, Your Two that's guys.

significant your believe shown is growth. targets, them call You've earnings and in revenue that's targets, how for growth financial we'll you I them, call

and on earnings earnings? me and the thoughts of those question high-level XXXX same the gas of between have And division? then that give second anything with you growth the the then if - - So, could fiscal you revenue there give in you're on built target, from coming some most for now that kind a oil see part based thoughts where of the and you is year shooting

Matt Wolsfeld

six break categories. mean, the at I you the overall into down Sure. has total you sales, - it if net can company probably look it’s different

ZERUST Northern - are did ZERUST American what at which North So, sales, kind sales. We've ZERUST - fiscal of year, from our XX% kind you growth if look last a sales. seen of traditional ZERUST the about the normal in a XX% our traditional sales, anywhere to of in we $XX.X traditionally million

first So, to that at would we quarter. saw that, We that continue. looking expect in certainly

even ZERUST Our a XX%, about traditional see sales though we actually increase. XX% were traditionally about up

that there’ll that, at of looking that be of number kind piece a grow, coming So, growth from having big area.

other expect year-over-year XX% trajectory As that the continue part to seen the million a Brazil what Natur-Tec now, we've - growth Brazil. in we XX% if about they in we - seeing years items relatively might only $X sales sales continue had sales The in not we is $X.X would some of would we’re to the XX%-plus you years. But JV to it are sales, out to areas. of are that are right some providing the there main of it JV doubling remain we the are two million. Brazil have So industrial which growth what in be in double Last as growth. see them which other two key to see to we’re we The growth, item sales you XX% expect make with sales, Natur-Tec, to two but year-over-year, the that come expect that flat. or ventures, has year, that so would you joint close increase Masterbatch, sales,

were So, continue growth, small if increase to at get a they you there. XX%

China pretty a significant expect We to growth. show

growth going million. we run just first quarter about just were at This sales rate And $X did first just in growth you You can year million last at in from let's China But $X.X pretty if if you first XX% that But almost see of of that, year, looking quarter, $X.X out million. growth that, $XX a quarter, I looking continue on don't say at we to with million. then growth. China. look of coming you're going certainly, of think expect year-over-year. significant That's top to at take significant

So, line revenue that's where we the see really expect top key areas from growth a to standpoint.

had year, and about million. not the gas in sales growth any revenue build significant year being any or our oil revenue for from as last $X.X of significant expectations - into million from and material sales gas, we oil of did numbers this $X.X - gas. our oil and any just we far on The guidance top conservative, As growth

and $X build expectations this sales is earnings what you was Similarly, more division terrific. year, the to gas did So, really look be guidance, any and if are our share from per we million contributed going last at gas our that, and between from year. contributions oil not than somewhere if did that $X oil they

So, - this - for in you Is have far going results. long gas. big we speed expected we're But of are in If year amount not them they expect we forward, from revenue result. counting for earnings that don't obviously, how as that growth. significant to our things gas start in winded to expect for our those or those a oil what too we coming do materialize, our also certainly We're we could significant And kind have oil XXXX margin level, as a on fiscal could of counting do published coming XXXX or? to any higher very and and go. results fiscal how and at up what in come the in increase not from hitting expected gross numbers

Unidentified Analyst

then The off oil Exactly perfect. again? is, side, gas break-even - that’s looking last and well-spoken. and a get I I was I’ll annual can't roughly question No, the break-even what's the in for remember

Matt Wolsfeld

oil for for we question? is would be order need your the and What in be sales to break-even, to gas that

Unidentified Analyst

Yes.

Matt Wolsfeld

We US$X the side profitable of need and US$X that. in and to sales of gas, million would probably oil between be lower

Unidentified Analyst

Congratulations Okay, all right. I’m Thanks, done. again. guys.

Matt Wolsfeld

appreciate I Jerry. Thanks, it.

Operator

Thank question next from comes Partners. Ramsley you. Walter And [Operator Instructions] with Walrus our

Your line is open. now

Walter Ramsley

of got kind I you. and Oh, Congratulations. detailed of couple thank Patrick Matthew. Great questions. quarter, a

On that the than X%. year for fiscal the same think? which about you what about full-year more it this go rates to going the expect be quarter last tax XX%, as was call, XXXX, to the conference current should indicated you was Do and number be to or XX%, is you

Matt Wolsfeld

full-year I to do quarter. tax think, the key in material the driver in the going we be what by have number to That’s is what's impact a in the key very going overall driver rate. second

right effective up [indiscernible] taxes, many our now and for tax business, because Obviously, so it’s taxes we taxes So, don't rate American - we of be. in full-year’s paid foreign the with pay pay offset difficult haven't coming U.S. of what is we end to say to all profits. all North foreign going me foreign rate our an

countries - it back - the - a tends from dividends as far and And how much royalties as little other from a from come tax as rate, because as bit that of to depends what we so, we volatile dividends see. and other far countries many how Germany lead on to

dramatically question to the the talked the But rate $XXX,XXX effective quarter. tax again, going did close specifically come it's fewer one-time our what is dividends - to to be because impact quarter, effective But year fiscal this were the overall I discount charge venture. I that’s specifically second see That’s… - you of joint have tax from for in think, to about what’s one-time obviously, increase to we're the the XXXX, - than down is, year. if earlier the for German the that's think charge, what going the year non-cash deferred going big be in the company we to going last rate with I would if you a second asset

Walter Ramsley

at there. driving you're what see I Right.

Now just guidance? for out $X.XX figure I to what in trying using more was rate interested you're to $X.XX that tax

Matt Wolsfeld

current rate the the using there, we effective For around tax guidance of that traditional we’re XX%. have out

Walter Ramsley

that's mean, better… Okay. much pretty changes I'm mean, I the interested. if it where for I really

Matt Wolsfeld

Yes.

Walter Ramsley

…that's great.

Okay.

Matt Wolsfeld

Yes.

Walter Ramsley

quarter. that other I the the option, And to one or at stock the noncash change? is was about It was for had expense $XXX,XXX, starting first the

Matt Wolsfeld

can yes, be No, - pretty that that will that I tell exactly, to was I consistent pretty that from want - And say, year-to-year. was $XXX,XXX. you - was

so quarterly be be Xst. any for options pretty from we XXXX are a that unless the least, any There fiscal at consistent remainder of September of options And don't in $XXX,XXX. basis, granted, the generally which should change quarter-to-quarter any after grant would amount

Walter Ramsley

Okay. Well, anyway, that's great.

answering for these thanks So, questions.

Matt Wolsfeld

Yep. Thanks, Walter.

Operator

questions any this any showing And time. Lynch like you. to Thank further Patrick now the further I turn back to remarks. I'm not at for over call would

Patrick Lynch

participating your interest I'd like to and in for thank, day. today everyone, great NTIC. a Have

Operator

Ladies conference. participating program, a day. This conclude gentlemen, in Everyone may you and does wonderful disconnect. all and today's today's thank you have for

Northern Technologies International (NTIC) 11 Jan 182018 Q1 Earnings call transcript