NTIC - Earnings call transcript Q1 2020 | Northern Technologies International Corporation

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Operator

Ladies and gentlemen, thank you for standing by and welcome to Northern Technologies International Corporation’s First Quarter 2020 Earnings Conference Call and Webcast. At this time, all participant lines are in listen-only mode. After the speakers’ presentation, there will be a question and answer session. [Operator Instructions]. Please be advised that today’s conference is being recorded. Instructions]. [Operator

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

like I and today, Patrick CEO. over hand Lynch, to would to now President ahead, go Thank conference the your sir. speaker you. Please

Patrick Lynch

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

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

caused part by past record fiscal a first primarily quarter in both North over three due stabilizing industrial China. sales the set first in net a ZERUST Our quarter months, America XXXX and in to sales new demand rebound

of our same our During the and period, remained markets industrial JVs however, causing negatively by by impacting profitability. global weak other decline XX% to the majority across first quarter demand sales

despite we corrosion growth short-term share to positioned result we disputes, well prevention our global as brought trade joint various expansive for global on NTIC. XXXX be will by good operating Nevertheless, international profitable as believe expertise are current geographic we conditions year a our grow ventures footprint, strong of of believe fiscal and another macroeconomic market

quarter. with let's So highlights, these drivers examine the first for the

million first X.X% consolidated ended net XXXX, the XXXX. the XX, increased November total to quarter to For first sales ended XX, $XX.X as quarter compared November

from down sales a ZERUST ZERUST by oil in and increase net unit, sales a industrial and in X.X% its NTIC a X.X% net decrease ZERUST joint by decrease gas business to XX.X% included ventures and in a net this increase sales. offset net sales XX.X% Natur-Tec Broken in

fiscal sales the our industrial quarter our sales net many year. Total $XX.X XXXX result million venture last This same the serve. compared ventures, of in for by was for million to across fiscal decline we the demand do joint statements, consolidate financial were not the softer first markets period XX% in worldwide of which net we $XX.X joint

growing increase period to the the during We market. as XXXX within ZERUST of The in China the fiscal optimistic our this Natur-Tec million subsidiary higher to intend expand our China and large fiscal $X.X last XX.X% sales compared first potential wholly about of long-term remain further industrial result was presence quarter we XXXX year. the both at Net quarter for NTIC sales. and fiscal China million NTIC by owned were $X.X same for the first

deliveries. conditions remain year. gas ZERUST and last sales Net overall the market sales for to long XX% were compared orders challenging fiscal due and down to sales cycles, quarter first of primarily volatile, and the oil timing

call, significant increase we product see in on waiting XXXX half. gas first oil for quarter a to and have that as a these projects the recorded revenue of to expect and to in projects higher several the and the close. been revenues delivering second gas revenue oil last $X.X I result we we million we conference there announce half are during our gas to currently first that As expect are and be stated and am pleased than fiscal oil

to over adopt cathodic remain customers our protection. be replace and we successful oil and gas will committed to coating market corrosion and solutions oil as the gas We time and believe more

business. Now, turning Natur-Tec our bioplastics to

For subsidiary the through fiscal resin distribution and Natur-Tec record XX.X% NTIC's products by XXXX demand network as higher growth our higher well sales compounds result of as a well in North continues to quarter majority-owned America domestic owned demand as first China. and as as of significant finished a to first subsidiary achieve in strong million. and increased quarter, Natur-Tec – India rates wholly net of in NTIC's sales $X.X

criticism reflected and conventional compostable increasing and The polyethylene solutions. ever-increasing we are interest bio-based global due in to plastics for continues the use of product waste concerns. Natur-Tec’s and disposal experiencing environmental political to face and polypropylene societal This is

from soft benefit So, are continues diversification product business ZERUST term, geographic the while to pursuing. and demand short in global remains market the for we market strategies sales our

as NTIC are demand gas improving and result to solutions. year we ZERUST for this Natur-Tec a well profitability and fiscal expand China well as products and believe growth oil We continued as of positioned at

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

Matthew Wolsfeld

ventures in a in remarks. the as Lower net many NTIC's fiscal trends year. the compared quarter joint reviewed X.X% prior venture fiscal joint across his which XX.X% XXXX the Patrick. of first to our impacted sales global income fiscal Patrick of prepared for result sales first quarter the XXXX operating Thanks, increased decreased

cost fiscal first proactively quarter. of result X.X% control primarily China prudent XXXX fiscal and the G&A $XXX,XXX to States, expenses in during XXXX We as the United due $XXX,XXX manage quarter, measures to a first expenses million cost total and India decreased to during our by continue taken operating reduction in the or $X.X

reported new VCI We fiscal invest in of products solutions the last fiscal NTIC NTIC diluted share the quarter XXXX first million or or activities $XXX,XXX $X quarter net $X.X to XXXX during compared million in first continue $X.XX $X.X fiscal first million fiscal as quarter, compared year. well first in quarter. income the and bioplastic R&D to invested as for nearly XXXX $X.XX for developing nearly per diluted per to share

months the $XXX,XXX also quarter. fiscal I'm pleased the per share three past as to – as for the fourth $X.XX with net income diluted company over earned XXXX compared in or improvement the

for as As XX, was million including in cash securities sale in million, $XX.X working and sale million million nearly $XX.X of million cash XXXX, to securities cash and $X.X $X for compared November capital XX, and in available equivalents XXXX. $X.X million of and $X.X in equivalents cash August available including

financial NTIC’s operating continue flows. business produce not require cash model strong expect significant does model additional will we and to our capital

we’ve in level in our balance is at years, As prior cash November. typically experienced its lowest

and balance experience of benefits activities a anticipated We will operating result earnings as typically in progresses, fiscal business our year increase and improvement from the growth we continued seasonal expect our profitability. in cash

with investment joint in $XX.X working million the the of balance had XX% in $XX.X million capital. approximately in which November ventures, remaining or On XX, of cash company invested XXXX, is

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

belief payment our fiscal in the The dividend in quarter year which strength first first reflects financial dividend quarter the last increased our future X.X% over continued performance.

and fiscal our ending to estimates risks share range fiscal the Now fiscal guidance million $X.X in will or August between XXXX to NTIC between $X.XX income year attributable $XX uncertainties, to $X.XX earnings turning in and to described estimate We continue significant those we per million annual million. continue $X.X to our XX, $XX are our and net be forward-looking including XXXX, These disclosure subject for NTIC's for between sales expect XXXX. and statement million release. diluted to

we despite well our see, can growth remain you positioned macro experienced across long-term execute and capitalized to recently well opportunities. we’ve As slowdown our joint level ventures, the

we’re result, a the headed. remain about As direction that we excited

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

Operator

Instructions]. [Operator

comes Van question with first Our Clarkson Tim Clemens. from

Your line open. is

Tim Clarkson

quarter. Hi, guys. Good

see there’s compostable new the business any terms in seeing color of where if your of terms Just you’re in wanted best to opportunities?

Patrick Lynch

still Yes. similar past the obviously Thanks for to see America. a demand years. product of we’re significant the of couple talked the over with North continuing with the on demand this across about question, kind growing growth standpoint, still a There’s lines Natur-Tec for Tim. and opportunities we’ve – From same same the obviously business

in Chinese India. Asia, seeing significant specifically what we’re growth and product the selling subsidiary in still for through our We’re

as far the So – seeing across it’s traditional liners the like things the supplying cutlery bag we’re compostable as across and and space, that, just to the where growth. business garment

can so products larger to also starting We’re they providing resins base produce customers quantities their resin deliver own them. with we of to are that the to

one to that’s resins is these quantities that companies. provide us think of things So exciting opportunity larger of an we the is to for

being anticipate year, still plus. the those of the main will we three next So product next kind probably of the that kind lines push year – product through lines us

Tim Clarkson

competing one strength that products when plastic. superior is how compostable of and does the characteristics that compostable, similar products? strength conventional I’ve told that competitive they to with pluses out the been have have compostable big products you’re while are And your play

Patrick Lynch

Very well us. for

the with and pleased product can points also reach. the performance very we are customers our think I cost

We’re cost able but our talking not at providing just competitors a it to lower to mechanical offer. what performance also are stronger

Tim Clarkson

Okay.

driving been the what’s China Now growth?

Patrick Lynch

expansion of Asia. Southeast other of garment That’s and industry. we parts in It’s primarily were India doing the an what

Tim Clarkson

significant? lot terms could new anything Right. Is on can that in of a be And talk R&D. you’ve that you products been potential spending money there of about

Patrick Lynch

on you Nothing that this share can today. I call with

Tim Clarkson

right, Okay. Thank All I’m done. you.

Patrick Lynch

Tim. Thanks,

Operator

you. Thank

Jerry Our private comes from investor. Weld question a [ph], next

may You begin.

Unidentified Analyst

guys. morning, Good

– Where what’s industries the it on color you Is more you the as as and side. country? could far curious to automotive us driving decrease side whatever, little down or by Just if a JV tied are primarily? revenue seeing the give

Patrick Lynch

Sure.

an seeing industry China. are there’s in still in ongoing slowdown the automotive We –

excuse But industrial was the other – to example, months. China months has for – last by there’s automotive Indian our hit sales skids component that really off growing six products market selling Daimler, on even nine ZERUST today says, humbled a supply the around couple are world. India, And the the way We’re article is in because the in of Renault primarily published an even base seeing last that by into in segments. companies been are January like Germany’s Europe, to ongoing – a E&Y. in to Xrd XXXX Bloomberg. tough a have probably automotive of set for we decrease lot Volkswagen, according due the tensions demand in me, trade the BMW, There so titans It seeing

this at So out point. across industry pretty spread globe, that’s much the the – across so it’s the automotive

Unidentified Analyst

one then in of question. you And to expenditure, seen on gas side we’ve oil protection significant any Have talking – change been that the and been on the on years. wondering side? the investment the relating make Okay. resistance a and and last to companies about I’m looking oil way you’re at gas the there’s number right, for

Patrick Lynch

are It is NACE, because customers for gaining successful along studies like conferences – presenting been we’ve acceptance industry example. with we and gaining greater at recognition case

we’ve prices. So and doing Africa year locations are and Middle over general it’s East oil parts of a in getting in conditions oil easier installations this the in been new broader getting market number haven’t last before so challenging to with we The and have we and introduce that been a of this XX the new bit in in fluctuating months been little gas acceptance.

just while budgets making from the they’re one quarter some adjustments they that projects trying are occasionally going next to to their taking based get will It’s forward. the as combat and on availability. cash just pushed to we’re So time

Unidentified Analyst

guys. Thanks hard work Thanks a Okay. lot, for dedication. and your

Patrick Lynch

Sure.

Matthew Wolsfeld

Thanks.

Operator

you. Thank

next with Scott question Partners. Our Walrus from comes Billeadeau

is line Your open.

Scott Billeadeau

you longer-term and give to good little kind significant oil of this could On a pretty that see Is for you delivering of maybe that, there is Hi, or if I couple view guys. a that mentioned pick visibility just so my visibility. us taking Thanks just quarter and up gas there? just for a you do got are you now question. questions here.

Patrick Lynch

we standpoint at a had months at as are seeing we of sales at were we January now year. that would already What we year this as gas. poor we’re what today far and point as six through QX and year December the January point gas much is year say very last the for a a through that we’re is had standpoint, in door oil first let’s really the fiscal to January but a an from oil and last full sales I a a same stronger say Sure. strong from expect be already product where by out XX that

although and don’t standpoint say down concerns where through first about of six-month the looks XX%, XX%, gas a were So we’re eclipsing like from quarter year an last lot period. oil I let’s have it almost we

as far remainder significantly right at have the to As we last that eight, what than year, it’s we the we the of more the the of time expect projects had months close on expectations for year. business during the year, now of pipeline next the same that nine

So more projects close. more There’s we to there are there. that projects out expect

few revenue there whether time going at as But will revenue last we dollars from was earnings the the higher expect both standpoint for closed, what thousand in that there that a revenue they’re gas We million a the year be this gas we standpoint than hundred oil impact will be are that or point given what year, margins more oil our dramatic and in to couple gas. and a dollars significant see oil projects and and out that’s the an more have we’ll see. that’s

Scott Billeadeau

And can I that don’t there? been out side? and working Great. those comment the are for on if there’s you or lots phase there anything protection know – that? of on then new [ph], the on proving [cycle] know I pipeline probably a new of pipeline phase it’s Anything side long test has to Thanks.

Patrick Lynch

at coming point are anything in in at what fourth There’s that as as projects I that this that wouldn’t did pipeline Those say protection. we specifically no have the quarter of various are we’re time size far opportunities new. looking XXXX. we There along.

close of dealing there the what have we’re that of smaller a certainly takes size, time on a solution that deals specifically some scale. pipeline We’re one standard. as proposals with that thousand kilometers several We the of at technology other are talking that and any think are looking about we are more have is to and don’t protecting pipe. good We – projects a those hold but but pipeline projects on and are become to taking far as it’s on that

Scott Billeadeau

in more but probably final know during then related you Natur-Tec. us turning will looks or little are And one to sense, because higher that we something Maybe just of be question last what see you into Is delivering resin since about it have alter see can may see really fiscal just hopefully to the it’s that transition as Thanks. a talked business you that margin. some Great. give may product. resin optics that because that I opposed like early should year? point that lower this revenue, we start to at still

Patrick Lynch

year. expect wouldn’t fiscal it I this

one mentioned, getting own least Matt now of molded quantities United at plastic we are large is produce As in products. significant compounds customer their we our buying – have States to resin that the injection

on, projects finished not big even the our And probably we resin selling, or that’s we’re like client smaller fiscal like coming selling category. of So products. work a least concentrate certain for foresee anything this the got sales year point see this Scott, for anchor most but that from And, we in we’ve we’re at that. with that it’s at

companies. still the product be these a of of amount selling a very for make total We’re to same would product pounds that used –

if significantly we are So were that resin product. margins amount to revenue product margins you similar the finished on the And of finished we at. the where the than a were is wouldn’t the lower have selling situation selling very

Scott Billeadeau

Okay.

Patrick Lynch

the first last deliveries the first of resin want I’d happened just with deliveries, quarter. say I resin the couple month to And the say of in

Scott Billeadeau

Great.

much answering my Good for the so Thanks quarter. Thanks update. Okay. questions. for

Patrick Lynch

Thanks, Scott.

Operator

Thank you.

Jefferies with Capital. Dowling Jim from comes question next Our

open. is line Your

Jim Dowling

morning. specific among details put get and Good different XXX% growth if first into or you of Can emphasis the revenue a quarter, the on on rest and similar in of consuming bit rates China take much little their look of sources the And Natur-Tec areas? India? sales, major the and how of you at the Yes. versus were how those the is terms States we world United

Matthew Wolsfeld

as breakout, Sure. growth in for in at the from was numbers break about [indiscernible] North about is and over XX% Natur-Tec first I’m Natur-Tec if looking Natur-Tec – close fly, growth Total million. the adding about looking – looks at it quarter revenue Natur-Tec the XX% And Natur-Tec in we North little at XX%, If so a Q, was the I’m XX%. in And these – so America million. X sales about it’s Natur-Tec for China are about India America total up geographic X.X I Natur-Tec I’m on looking to the like the break on a XXX,XXX. growth was is the out I’m but Natur-Tec in total at it out in India China or QX revenues

Jim Dowling

you. Thank Okay.

Patrick Lynch

Yes.

Operator

Thank you.

Associates. from Furst comes question next with Our Joe Furst

Your open. line is

Joe Furst

oil Good been have answered. had morning, My questions gentlemen. with mostly and to do gas and

Just getting new one existing question. business new new from or The there, customers is it from from orders customers? are from coming you

Patrick Lynch

of combination It’s always both. a

Joe Furst

Thank Good Okay. job. you.

Patrick Lynch

Thanks, Joe.

Operator

[Operator you. Thank Instructions].

with Gus Our comes next question Richard from Northland.

Your line is open.

Gus Richard

Thanks Yes. questions. taking my for

ZERUST the strong color little a replenishment, Is of function a customers’ seasonality quarter. a or new can business On had you there? add you that inventory

Matthew Wolsfeld

North It the what still significant that – seen phase know in kind at as inventory the amount consistent orders. still in we’re we’re don’t I of America replenishment. seems a of as I’m like seeing we’ve far in least

inventories seen the yet of data. on don’t a I I far building a ZERUST of we’re I orders what We customers have see where are kind as would China, China comment bump as industry. is outside have the at really up you growth the existing automotive that standpoint majority any from there can’t say double joint ventures. we the seeing of inventory the haven’t and of the yet. refilling for of where seen jump that

with auto outside throughout opportunities commented in we that China, automotive the as that industry. augment the been And able decrease have Patrick of are so still sales industry Asia while in to down auto and new

XX% is the in due So we’re plus seeing growth China growth opportunities. to non-automotive that sales

Gus Richard

And those side, a decelerating for like your reaccelerate sales North If here? with new America, America I Thanks. should in the resin bit customer America. Natur-Tec North from year-over-year start been it your to it. then and looks Got have comps on particularly now North think

Matthew Wolsfeld

North we QX. than I to be higher slower than in would specifically expected, expect in our Natur-Tec a what little were QX bit numbers Things QX America.

We’re targeting coming year. of with than just customers, in customer business some I the throughout distribution those like rest the XX%. resin additional base certainly higher throughout from to growth incremental expect a And said the you rate growth the our would of numbers be to higher new

as and they’re last XX% given is they looking out reasonable growth in far China, the what for certainly As saw regions. year growth a those think that of rate growth India plus I at two

Gus Richard

holding job Got it. for a me the one-off is in the did And is then last great down sustainable Is quarter. G&A trend we’re that for the that you a a – one quarter? that

Patrick Lynch

certainly little I there to you goal of as I focusing leverage expense with we control forward. that have objective far revenue cost that will were individually when you to don’t growth. have control each standpoint are expense will and that that company, sustainable with on tight we be of the what’s be operating the the some right very the on. going met There on, a people as coming low and But that are other are corporate growth. some certainly – expectations concerns keeping single-digit that we of is going both. so industrial across something And as that have be be low of I leaving some to that to things having items going worked growth initiatives kind far people able of cost line from are to where is things as industries we very would automotive decreases certainly operating as were growth. the now top industry expense goal our about still a been on have it’s – to the like of cost expect macro explained a additional a with of some hiring the There bit say company I’ve there that’s other we the overall

Gus Richard

it. Got lot. for Thanks Thanks. a if That’s me.

Patrick Lynch

Thanks, Gus.

Operator

you. Thank

Ampla Our Capital. next Thomas with from question comes Claugus

Your is line open.

Thomas Claugus

profitability on bottoming business since Matt, Hi. rebound quarter that the company. not? will the lowest of it side long this in what’s JV This others in the a time is the for predicted significantly you correctly visibility terms or and quarter, probably the changes

visibility there on So is any that?

Matthew Wolsfeld

mind your think terrific. that line feedback. I quick your mute it, and can a because of I if line question lot You heard your be – I comment muting could but your would you on real there’s

Thomas Claugus

I’ll try. I’ll hang up. just

can the question. answer You

Matthew Wolsfeld

All right.

that. about Sorry

joint seeing partners ventures, had visibility as want far venture As global we’re into of as what --? far the has Do with know I standpoint. a joint kind you from to as Patrick conversations numerous

Patrick Lynch

question. I didn’t the hear

Matthew Wolsfeld

visibility seen basically question biggest The venture we’ve have does was that NTIC performance given joint what time? for decrease venture the is some this sales in that into the joint

Patrick Lynch

to basically top mentioned slowdown or but in in industry slowdown companies. primarily is all shutdown also example so like tied economy significant the far companies, I it’s as mentioned XXX key Well, Germany, across seeing the for industrial that Europe, earlier, a a global their automotive I macro

I’d with partners, we’re customer there thing it’s taking sizes that seeing inventory the is is it’s volumes away is in are is and – I one of our levels not What various the say business coming or that we’re the think any the is as customers competitor if orders placed, not a from that at are share is there the or coming kind down. one market seeing the us. any being loss what of as talking that of to the comment I if So a – on can not

XX going the the somewhat having few the behind overall to leverage company and certainly three biggest that’s is have in, we similar to that’s expectations are so longer the revenue. orders that term coming with be be lot orders to when to across countries that company we rebound the of see The rebound. other a be the months, months, going are to United how on whether And that what’s positioned world industrial the so the is to or States world, six impact the in United months, positioned smaller going States,

answers your that hope I question. So

Operator

Thank you.

with Our Partners. question Billeadeau follow a Scott Walrus next is up from

is open. Your line

Scott Billeadeau

Thanks. Hi, guys.

as in be Just any to up that is general there just less things, – is metal combustion. has slowdown out industrial the follow or taking a less but on the within a we’ve is older that question, a thought seen than there there just protected sense that that there certainly auto needs can macro metal out metal to probably electric a go-forward basis? of They’re an i.e. businesses

all? is have there sense any about guys You at that a discussion or

Patrick Lynch

fewer temporary that macro electric Yes, because I shift to in they in customers now seem yet. it’s not we’re seeing vehicles decrease by significant but we’re trend, of Also, relate right which more issues. that slowdowns use all and watching of a components to a like demand metal said, general our

customers. As mentioned, seeing of any Matt we’re loss not

It’s not We’re levels are projects. are that we losing demand at given now. right what just ordering less

Scott Billeadeau

-- vet so kind hard know Okay. Thanks. a there, got there’s an just in macro didn’t if of Certainly so switch slowdown, we to I it’s organic whether you

Patrick Lynch

we’re we shifting I industry from And call, in earlier from going in because to joy focus the not get we’re for much XX next in them our mentioned automotive as know that months. away China example, the the

industries future. they’re metal than that China, of where are example, seeing increase business in other plenty using you’re automotive So from now for of and lot other the in coming the a

Scott Billeadeau

Thanks. Great. it. appreciate I

Patrick Lynch

Sure.

Operator

turn closing I’m Thank at back you. questions the showing to like to I’d remarks. further And call currently Lynch this over for no time. Patrick

Patrick Lynch

you. thank you like calling I just and nice in wish afternoon. a Thank today to for would everybody

Operator

call. for participating. you Ladies conference and gentlemen, this concludes Thank today’s

may disconnect. You now

Northern Technologies International (NTIC) 7 Jan 202020 Q1 Earnings call transcript