NTIC - Earnings call transcript Q2 2019 | Northern Technologies International Corporation

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Operator

Good day ladies and gentlemen and welcome to your Northern Technologies International Corp’s Second Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, today’s call will be recorded.

As a 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 Harbor the XXXX that that Safe under Act for advised of and provisions itself Harbor Private NTIC these be statements. forward-looking the covered statements the of protections Please of avail Safe to Securities Litigation Form Please advised described annual risks certain and results including those that subsequent could those recent materially from XX-K, to also or statements implied on on and due NTIC’s reports be in report most press stated recent by actual Form differ the quarterly forward-looking uncertainties, XX-Q releases. these other reports Please that read the and NTIC with will make filings SEC. future NTIC revise its disclaims or to any update forward-looking statements. duty the I Patrick over to would turn Lynch. now like call to Sir, you may begin.

Patrick Lynch

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

this was business fiscal industrial created conclude our quarter the net U.S. period at demonstrates We to last and fiscal I strong Offsetting a platform to XXXX, guidance us due North guidance. XX%. for to last to diluted year. earnings ZERUST sales have then fiscal fiscal American estimates, give concerns key represented and to Natur-Tec, net question-and-answer between financial Natur-Tec earnings global per trade in between industrial the believe a our we to last second bioplastics nearly diversification. we sales our now results, these we ongoing in performance Nevertheless, XXXX slowing the business primarily brief come slower China grow aspects of growth $XX second the end diversified X for softness grow will softness expect and adjust is during Due am XX% our softness product, business. quarter $X.XX started million almost compared strong has expected caused net market and continued mentioned growth regarding our XX% and created. sales $XX During a the growth comment the forecasting million during NTIC this This XX% Therefore, on this sales months and the than dispute. geographic pleased have quarter and which we second end-market on we and XXXX fiscal ZERUST significant net earnings model and growth review XXXX session. least at expand China at has with we share. was year of quarter. overall and full with are least update, sales various to call, and testament NTIC’s the same be Based to XXXX to to $X.XX

demand for We sales are will industrial currently the of oil as and better of and ZERUST gas our markets that signs and expect year ZERUST weakening, earnings a currently global but any fiscal our of our half show further monitoring second result growing products solutions. for

anticipate also solutions. Natur-Tec, We for plastic strong our continued compostable growth

the the comments, quarter. for examine So second with let’s these drivers

and products result ZERUST approximately of for the customer NTIC weakness to was increased market by ended February by X% For business months XXXX. chain of uncertainties net X decline global not XXX% the related XXXX compared in markets. believe customers. XXXX, approximately ventures, its an $XX.X and ZERUST was increase demand by turn from coming the impact ZERUST ended and The many consolidated certain net China in million not to down our we joint didn’t second during across a sales fiscal offset of NTIC sales, having accelerate X.X% net and Total deeper is offset which accordingly concerns and slowdown strong end $XX.X net ZERUST quarter wholly to our same XX, of monitor partially quarter for macro quarter the statements supply of period decisions market we decline industrial included XX.X% sales period decline Currently, subsidiary in our financial for fiscal million $XXX,XXX deteriorates quarters. further. while sales quarter second units, in net for fiscal this were our second fiscal the Natur-Tec That in to for in $XXX,XXX year. last ZERUST the an net global China. an consolidate quarter do sales. XXXX and XX.X% the and is second still total adjust Net on we million were fiscal during are compared JV last continue as market which $X.X we the fiscal compostable sales same this X.X% to our year. February sales by ongoing sales do will we year. was of $XX.X anticipate a decline million XXXX owned fiscal joint last ventures, partially Natur-Tec to in decline oil softer bioplastics believe in This industrial NTIC a due new in the China by in in We The demand growth a China gas XXXX sales the purchasing sales XX, in decline million indicative compared if actively of to the to the a primarily result trends sales occur Broken sales North American momentum $X second

oil were on current period. oil anticipated stated million, sales gas sales, fiscal oil gas compared net this and segment gas the last down and and up within during the After sales second net past, quarter net timing second quarter, sales nearly sales we ZERUST we grow prior of year the have half. were to and first of period from in $X.X volatile fiscal on strong our As year. Based expect a are to based approximately XX% the Year-to-date, fiscal same XXXX orders. ZERUST shipments for the $XXX,XXX

We have solutions orders more continued bottom companies. for our tank existing from repeat to gain large

install solutions oil addition, continued global and well sales in we new in grow have believe gas our to to and geographies In we fiscal are XXXX. positioned

projects. shifts expect timing to However, oil to we for in continue due gas remain purchase volatile will and sales and bigger orders sudden

over owned to India. turning and achieve And result subsidiary disposal fiscal polypropylene Now, The were of higher $X.X strong finished use year. experienced. a the Natur-Tec our solutions criticism for with plastic as distribution period same polyethylene interest Natur-Tec’s XXXX fiscal of as quarter, our growth is we in waste ever facing business, sales rates political America the demand as product through bioplastics and of NTIC’s conventional an concerns. increase second products Natur-Tec to that the last this XXX% to significant of environmental global sales North and network majority due increasing continued bags domestic increasing Natur-Tec the in by net million, have correlates societal for well

results strength Our to-date XXXX of foundation. diversified financial the our demonstrated have fiscal

and we turn to the come. Wolsfeld growth us for our Matt let fiscal XXXX to can XXXX sustained we and are this over me global continue create sales to objectives results reduce second forced With overview, to our guidance, longstanding years quarter. call slowing close financial believe fiscal earnings to for to achieving summarize While our growth financial

Matt Wolsfeld

quarter from joint remarks. X% Thanks, reviewed Income to a year Patrick. compared in global quarter in NTIC’s second the ventures. net prepared period second Patrick as increased the trends of a corresponding softer his decreased sales many XXXX for operations last result as joint of sales fiscal X.X% result at XXXX the of fiscal our fiscal venture

XXXX lower the to and was to was million XXXX per or quarter. operating control second development personnel of attributable per quarter result net income NTIC of expenses research expenses $X.X proactively that to less XXXX I to share diluted second an compared and the Net selling attributable to or offset and by increased NTIC $X.XX in million for pleased X% fiscal the total $XX,XXX expenses fiscal or quarter. income for share continue million expenses. The $X.X $X.XX increase diluted second during partially increase G&A additional $X.X by am primarily and We than only our fiscal

capital of $XX.X $X.X XX, was and compared equivalents August require including flows. NTIC’s operating available-for-sale million in our including million as $XX.X million $X.X working and financial equivalents expect XX, produce XXXX, $X.X cash of million, we As business $X.X securities and cash does strong million, in capital cash XXXX. model and to model in additional continue February in cash significant cash available-for-sale not to and million securities

from had earnings progresses year seasonal growth balance in continued million experienced and company in $XX.X increase the We the capital. remaining in of joint $XX.X anticipated operating venture, typically million balance cash with expect or XXXX, the $XX.X the cash XX, in benefits will activities million our improvements of working profitability. invested because business we investment in February of which On and as approximately

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

over dividend XX% our reflects financial which quarter a year, dividend second strength increase second last continued the fiscal is performance. quarter in Our payment

a $XX fiscal over NTIC’s fiscal fiscal million August between now $X.X share be now $X.XX increase for NTIC $XX million XX, to XXXX, our $X turning XXXX range sales. per which million We to year ‘XX will represents we the ending XX% between estimate to our $X.XX and annual XX% expect Now, guidance and attributable income for net between currently fiscal net million, and to XXXX. diluted sales or

year-over-year including for in XX% represents These and described to a statement estimates risk approximately XX%. diluted significant per disclosures and forward-looking subject our earnings earnings are guidance release. uncertainty, of share Our our to those increase

by We continue encouraged operating financial to be our results. and

happy are have With are sustainable We profitable the and Patrick are platform that and questions. this, your and growth the about direction drive we excited to to strong take I heading. built we

Operator

[Operator you. Van Tim comes our question from with And Thank Instructions] Clark Clemens. first

is Your open. line

Tim Clark

Hi, guys.

Another good quarter.

a most compostable of business, little out demand newer on bit seeing in color more where get about to want how the of? the Just you terms are businesses, the

Patrick Lynch

demand rates as quite of fine, North China, the geographies the out America India with is started. growth they where surrounding just doing most high as also of The out coming as coming we markets. Southeast of Asia their is and out not are are but growth I mentioned significant

Matt Wolsfeld

a is bit North comment seen XX% growth traditional that to of higher what significantly than specifically we Southeast more growth in The rate. kind XX% America Asia the to seen little is Tim, on have that. in have that, So we

comparing Southeast in Asia. about sales We months million in are seen increase we fiscal ‘XX $X.X ‘XX just a of fiscal X the have seeing to

is doing market Sri a well. Lanka India, that’s China, So an growth that in very significant it’s whether for area or that’s us

Tim Clark

from differentiates products What your compostable your competitors?

Patrick Lynch

a an Tim? that That’s and quite that am technical this I not discussion to have, sure long venue is appropriate

Tim Clark

like Well, that from – point, seems stronger the… I about what’s vantage at key guess your while is product my the it

Patrick Lynch

We allows categories. therefore believe to that our our faster better, stronger, technology that products easier all are are to cheaper, produce in and make us

Tim Clark

Right.

are all-in, some the pipelines in space? on getting you Okay, still orders additional the

Patrick Lynch

from Most point. orders are of our at tank coming space this the new bottom

the we lot to in on our I orders think dropped about, but prices oil to in now sooner. – prices think back drop they quarter, to I almost cause it temporary second think the that a more dramatically fiscal second had about decrease rebounding, come hold oil I noticed are that that $XX expected in from some oil down was executing quarter $XX, people of that we

Tim Clark

alright. Okay,

Matt Wolsfeld

to I and X rebound third number be gas a and number fourth orders the of over of the significantly compared year. the fiscal second just was to our that kind say for significantly certainly and quarter quarter oil X-month gas we will for pending oil of would show going increased we certainly that expect and our second as Tim, months that year-to-date

Tim Clark

am Alright, I done. you. Great. Thank

Matt Wolsfeld

Thanks, Tim.

Operator

Thank Walrus Scott you. our next from from And Instructions] Billeadeau question [Operator comes Partner.

open. is line Your

Scott Billeadeau

guys. hi Well,

but can Just about a a all? visibility you certainly business, me I of great have here. there little because of what have us maybe at a kind little know couple questions last slowdown a you come of give idea, visibility so talk or you that industrial, we give quarter, can talked some little any don’t you One the Natur-Tec when you bit into there, do saw thoughts on

Patrick Lynch

Natur-Tec the industrial you Scott, said business?

Scott Billeadeau

sorry, yes, industrial, the am I ZERUST yes.

Patrick Lynch

are everybody think a nervous minimizing that tensions orders. causing ongoing bit supply trade are to I and their be chain

strong and a decline markets chain. such seen I China from as on the We that’s have in and think an having global exports impact India supply

Scott Billeadeau

guys Yes, great. issues all No sense? at that competitive there you can

Patrick Lynch

we it’s uniformly it not more us are current same this our so easy customers around time. little at less this more just at we taking are we seeing slightly are be a orders before. And – it’s customers that and telling we the all, at are the No, being no, are world that cautious than point, our losing will

Scott Billeadeau

Great, one half and just so mentioned you okay. second of that, easy little is was could And correct? I gas gas kind and oil you you and bit I the think more pretty and recall, of and I easy year oil on think mentioned comps then comps you a that kind last question, that of got if business got

Patrick Lynch

you I am understand sorry comps? mean by what easy I don’t

Scott Billeadeau

and you pretty especially – have comp year last the I half mean easy I on gas? remember just to the in second easier oil if oil right that am trying Well, the do gas figure or was idea and comparisons out weak I

Matt Wolsfeld

fourth exceptionally the quarter was strong. XXXX well, No, of

to right and was quarter the am general in when where of to but – stronger are months – as year of it quarter, more when first as we sorry, when QX in where X just and to the the come second the going and soft, a I next idea invoiced. QX given quarter am is the – second – things far in now kind do a months I timeline gets year and taking the delivered achieve comparing with has have the we order product of will little X get orders about the Third what with and talking first of

comfortable pretty on some to second gas the X show growth months own and are compared So its in oil going that is to… we sizable

Scott Billeadeau

to half second? First

Matt Wolsfeld

half to Yes, second first half, yes.

Scott Billeadeau

Alright, great. you. Appreciate guys. thanks Okay, Thank it.

Operator

Oracle. with And Thank you. Vidich Manalapan Joe comes our following question from

Your line is open.

Joe Vidich

for regulatory other New some I how like recent was my on comment states for York you could developments around wondering the or Thanks the Natur-Tec, impact – if those hello. – taking you Yes, product? your the will you if regarding call. could could of and demand countries in world if

Matt Wolsfeld

Sure.

We’re is or of local – that either our group state lot a local seeing growth the Natur-Tec from by driven mandates. municipal

the Southeast with And bags we’re at growth growth one of and when is in it of the mandating dealing was industry, – majority in quarter-over-quarter driven serve specifically so, plastic of of led place the garment start things our put didn’t areas necessarily that’s India segregate eliminating that and their the in the about of the of talked that I business grow in manufacturing. seen What a we’ve growth That’s taking something that Similarly, is seeing organic with significant in that certain has India, anticipate is started to it was the certainly companies we ban clothes to of the in now year other that legislation extra where Asia. that and lot Southeast solid earlier is size policy we California, state-wide lot or that passed a like organics place. states being beneficial nice the an lot growth. in helping a Asia, a business diversion

seeing So, United a as But just kind throughout is the state – driving also the decisions the well. how environment we’re environmental Natur-Tec. of the having level States the business the certainly environment, obviously the and overall and from obviously, concern and we’re just bans at significant overall Europe seeing of lot a of growth that over the political driving are impact in

a plastics. that they’re coming a the product to X-year making compostable with with to of manufacture them other projects with products some to to And that provide over working currently traditional forward companies plastic do we’re X-year, has X-year, the looking plastic,

as still tremendous growth North the a we continues dramatically. for market opportunity us expand America being Natur-Tec to in see So,

Joe Vidich

year you a comment I type away wondering area? straws, also in just you’re ask restaurants Can if of business I’m that globally and there straws, are Great. doing was lot on last with interest that or of plastic what seeing could you

Matt Wolsfeld

resin being selling as total compostable and them, lot you as straw in have of selling Asia, area we’re resin where in us, of Yes. takes are we manufactured. to specifically straws No, resin it growth make that area what the much in seeing for of to – we It’s amount certainly a we are the straws the the that that but interest manufacturers a are a to amount anticipate.

isn’t it the us really roll sector paper to as So, anticipate their being like people people seems it – straws. like we like is that converted don’t general out something for in b, a, seems growing real with it and a to North straws. the the America straws plastic compostable are is straws, and market more like It happy more

where specifically in more companies. entirely transitions or we fast-food straws other of a system place have as a would top, as certainly, to a areas fast-food being cup compostable use converting that meaning anticipate market more a lot that’s at and they compostable certainly they are compostable So, straw, a compostable take those

Joe Vidich

great. going Great, and good a Thanks forward. lot, luck guys,

Patrick Lynch

Yes.

Matt Wolsfeld

Appreciate it.

Operator

you. Thank a – next Well from as Private Jerry question Investor. our And comes with

line open. Your is

Jerry Well

on Say, the at quarter, then, projecting the second a be last wondering, guys. quarter. you’re morning, Good still so, half third would of above year’s just which basically make $X.XX and least fourth to year

So, margin not I where growing profitability? highest Natur-Tec fast, that but know business. it’s seeing are gross your revenues you

So, from? quarter roughly, seeing just of are you the $X.XX the profits half the in we’ll it to say hit coming where most a – second

Matt Wolsfeld

to and up it’s good standpoint, it first at kind business-by-business growth X able then X be the months. second that The We’ll from and if months that’s strong. its the Sure, anticipating a a are certainly continues Jerry. keep to –just from question, we see looking rate to current of Natur-Tec

certainly expect the and we gas. little from but fourth of these that second from, earnings revenue earnings the the come year some expect oil the in group, very as in we’re items far As and in projects from came to and Obviously, half of increased in quarter from see earnings come revenue larger third the gas oil we and quarter contribution –increased and that second other where group. expect we from certainly increased as going to increased that

our fourth from first stronger third quarters and our been Additionally, ZERUST second industrial a standpoint, always and quarters. significantly have than

from third as back go, best as tend historical how being have two standpoint our If quarters quarter. sales look to far at you and fourth it we an

and certainly right the during expect quarters, for just into period. us question more anticipating We naturally which seasonal the during guidance that bit, guidance increase is like a see that – tends fourth we’re huge dig guidance not third to factoring to will, our feel your we in us into plus up just during to sales increase – quarter not overall that our get just have a to have third what share we you But to fourth our there, able guidance an with quarter. rough difference and in cents – season, if averaging number It’s rebound the and X-month our XX our fourth get number. number the third So, little to a to normal do fall will the economy. be we into the in has

Jerry Well

and it on it’s really a and Okay, chipping questions is, awards very large quick that, other you working you as far a then oil thank opportunity at that, still the it’s gas, a potential even to contracts been seeing you’ve results. that as got as some you’ve the for though company? business all know been starting get variable And huge and – still see Are but and finally away two it, market you. I

Patrick Lynch

Absolutely.

increase for projects. demand We – are getting for tremendous new

with this we of [ph] to mentioned quarter, thing little I quarter, to very and seen second these during later – decline pipeline call had companies place in year. only put to a quarter projected lot the into all going push in second our into lately us, The prices due full. hey, earlier going Our oil oil said, we’re the in that we’re a a the firm hold strong like is that is off it piece that to bit have

Jerry Well

opinion. to growth by it see and – it’s at it’s Okay. Have of $XX a Natur-Tec on my so Natur-Tec, X Natur-Tec that because kind guys the growth business, with went more conservative you have not to if that’s value opinion, – will, that of such fast. just is cyclical – the Last look in and the on a mean, aligned within times of – congratulations you the somewhat market to way it’s question right? value worth revenue fast-growing you of grow challenging I if you beautiful my division for stock the rate But in

whether how built or some that monetize the longer-term do So you splitting point cetera. Board off at value be opportunities et the view? at you – relating it What’s but it discussion to Natur-Tec that looking been monetizing other at

your thoughts me on done? then give would you that So, latest I’m if

Matt Wolsfeld

this think India. the different the I great we setting – advantage far time, us it’s I for a Natur-Tec, world opportunity up in advantage opportunities facility do things. in as around Well, with taken point the at take to mean, certainly of have as

I – to million think at still rate. million still run we’re a this but it’s year $XX is $XX

So, the and keep working the and it to continues have Natur-Tec if – up if the on we we’re long But with really growth. compostable think we’re can to before projects up growth grow, I to go is keep for before think awful products still able opportunity. monetize an a the I huge opportunities that current and rates is that market environment we the Natur-Tec, way obviously

at looking I a couple of doing we different different Natur-Tec. we of certainly that, that with think can years take that still advantage We’re something away from ways but are

Jerry Well

with comfortable thanks for for thanks show Well, guys Okay, I’m I’m and your thank all out conscientious and there, hard out there and you everything that very the you. you do. running you work guys, very do done.

Matt Wolsfeld

Jerry. Thanks,

Patrick Lynch

you. Thank

Operator

from Charlie with our Pine Van question And you. Clemens. next Thank comes

open. is line Your

Charlie Pine

Hi, good morning.

Patrick Lynch

morning, Good Charlie.

Charlie Pine

days up upcoming is in brief has in with the I to X to XX have supposed just am a I next to correct do conference, if NACE coming question, I believe. – weeks it the annual be which

Patrick Lynch

over. It’s

Charlie Pine

for It’s already completed been XXXX.

Patrick Lynch

my of the knowledge, best To yes.

it was weeks ago. X think I

Charlie Pine

I had Googled Oh just had it fourth I like shows it I – – looks on Because this it morning and it thought machine the – on really? it my just starts

Patrick Lynch

reserve with I interrupt to right your that’s but was that to I’m question. wrong, you, impression, go please sorry the anyhow – be but my ahead

Charlie Pine

all were out the might have conference or impacts Well, at any that basically, your oil coming application? gas anticipating on be or anything of that far NACE any Alright. you could tank ZERUST, as or the any that expecting as bottom and papers decisions –

Patrick Lynch

of expressed my the significant. at To understanding level interest the NACE show was quite

attending we’re this was some getting at There’s there I this interest. think but level, So, at don’t any more wasn’t but decisions the point. at I major ongoing done new it nothing still being worth made mentioning point. on myself, committee work

Charlie Pine

So, no, system anything or or the that? bottom papers protection like – were tank presented anything bottom regarding tank your no new

Patrick Lynch

we’ve we’ve aware I made not presentations, certain think I made those but think were. – immediately I’m of what

Charlie Pine

Alright. then Well, on period. I’ll at a circle later that back

Patrick Lynch

Sure.

Matt Wolsfeld

you. Thank

Operator

Schenker with our And Partners. from Walter you. question MAZ comes following Thank

line is open. Your

Walter Schenker

morning. Good

when stopped mentioned York will resume your from in they New Is as whether Asian likely further it’s you it? to there we had had technology. using You an that using customer input met that any

Matt Wolsfeld

– that At to this this that made product. a in not but back one in was customer transitioned customer point that at in time at they just our we have product, time, point transition no, point

Walter Schenker

I had but I stuff. And apologize, I when market opened, had – other some Okay.

pretty have at As will expect year, you you good this cash reasonable flow? it free look is again to that

Matt Wolsfeld

Yes.

Walter Schenker

broad requirements what are like year in capital vicinity? be forecasted your this likely to you if your And haven’t capital

Matt Wolsfeld

capital wholly-owned significantly really say in the product from India a long sales lot seen product eaten of free increase pipeline in I’ll to up in compared prior significant more of years. the that India see portion much – India. process, a not so – growth capital cash the free who’s a eaten kind because in China thing seen of from receivables the and of having more our don’t company has I lot up producing our needs sitting but it compared cash, and to the going subsidiary obviously that of changing of have is of dramatic before sales given that the a much we’ve Natur-Tec working we cash, the of One specifically to our though India, of inventory the cycle in certainly

Walter Schenker

year-over-year the increase largely explains in explains year-over-year the inventories? – Which

Matt Wolsfeld

Correct.

Walter Schenker

just in the the Asian, way timing the it’s the you to capital? where have Not slowdown, of growth commit

Matt Wolsfeld

the and purchasing North shipping – shipping another to product raw takes purchasing in the materials XX America another waiting either that just for Europe Natur-Tec as or and them or it then different in a cycle be then we’re whole then to then far tolled and Yes, to as days days, XX to XX area country manufactured days, and in then final into ultimately be sold them to country some eat capital have collections, you that’s able to needs a sales XXX company see balance lot invest the when – available situations for to in when cash going and be to in of working have these up businesses. growing the the a strong pretty you sheet obviously of increase these cash, but nice a had about we’ve be able and is handle thing

Walter Schenker

you. Okay, thank

Matt Wolsfeld

Yes.

Operator

turn are for now the the there Lynch I call Patrick closing to queue to no And you. questions Thank at like would this time. back remarks. further in

Patrick Lynch

NTIC. today thank everyone a your I’d for like Thank Have to participating interest you. and great day. for in

Operator

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

Northern Technologies International (NTIC) 5 Apr 192019 Q2 Earnings call transcript