NTIC - Earnings call transcript Q3 2020 | Northern Technologies International Corporation

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Third Quarter 2020 Earnings Conference Call and Webcast. At this time, all participant lines are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] 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 Lynch. over I Patrick would to hand conference like now NTIC’s to the CEO, ahead. go Please

Patrick Lynch

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

various had of a will on material financial and During these provide business pandemic we with our then XXXX a quarter. conclude this COVID-XX a call, key The aspects brief update third impact fiscal session. review question-and-answer results,

essential Although altogether. global capacities down our locked operations were or were significantly and remained operated at customers many lower our of open, deemed

demand global result, of for declined services. a As our products all and has

the remains started to the and of have As economies this increasing, pace uncertain. recovery time, are but continues global our orders at reopening COVID-XX evolve, crisis

monitoring fulfillment customers, markets joint and We and are ventures ensuring closely continue safety order to our of our customer and simultaneously providing uninterrupted intend the service, while employees.

sheet are long-term team, and our to Our us model investing flexibility portfolio, us this balance plans. business while continue experienced management growth providing challenging significant with compelling strong product navigate helping period, in

our cost expenses and appropriate. managing to structure we adjust and are further addition, proactively In when necessary intend

the examine the quarter. with overview, So, for this drivers let’s

the the decline for million sales. quarter venture XX, sales to $XX.X net net net period statements compared China for ventures XX.X% to and to same third XX.X% XX.X% was we XX.X% to same note by period NTIC gas is sales its Broken May our last in wholly-owned for important down net Total in this net NTIC ZERUST decreased a global fiscal business third fiscal auto close in sales third fiscal companies May were also to sales that compared decrease pre-pandemic decrease It total XX.X% this ZERUST sales, Natur-Tec our a net financial $X.X as sales from historically unit, the do to decrease, XX.X% important by ended XXXX joint have oil in last million COVID-XX customers pandemic. decrease third quarter million This the – China to for subsidiary year. NTIC XXXX, XX, quarter to fiscal $XX.X the ventures the compared in China joint $X.X the China’s management in decrease Net million due included and For XXXX. a have been decreased NTIC by our again are quarter to customers. here to ended XX.X% Chinese our industrial levels. a million year. and sales, suppliers net XXXX consolidate NTIC $X.X not Despite which believes ZERUST been consolidated joint sales important

restrictions, primarily gas lower oil about COVID-XX XX% China segments. our sales the to Overall, Chinese a since in business to further our due which as primarily at to market believe oil remain as China three market. and non-automotive significantly to our presence this the solutions. our we experienced recent within and and ability the COVID-XX during XX, into potential we last on is industry March period fiscal The expansion impact order we of However, gas months in travel pandemic. same install to customer weak, remain our to XXXX the intend ended ZERUST ZERUST long-term successful the have large was to sites decreased inhibited pandemic’s auto within trends and our year result travel net NTIC growing we oil recovery optimistic expand compared due prices

the will expect sales oil pandemic. continue We to gas be and the impacted of duration for COVID-XX

However, as reduced experienced capacity, gas its we our for the have industry corrosion and production for idled assets. growing prevention solutions has demand oil

arenas, has business, the corporate complexes. from office of our including to large turning campuses, users restaurants many many Now, demand impacted Natur-Tec large college also bioplastics COVID – pandemic stadiums, bioplastics, for and

We will to the of pandemic reopening bioplastic last declined Furthermore, reopen across be demand which announced part institutions bags, apparel this because sustainability for and industry. our have not become of production industry the has of COVID-XX an within these expect decreasing businesses initiatives some plans. sharply, Natur-Tec have important further that the many of these the

will We soft world conditions the the from as rebound. the continue to our market for expect recovers solutions COVID-XX to bioplastic market Long-term near-term. remain pandemic, we that in believe bioplastics the

resin For demand as our to one from applications. waste largest the compostable foodservice foodservice manufacturers for for began considerations plastic this expect compostable hygiene crisis, supplying world’s to compounds example, business the we COVID-XX grow quarter, proprietary and of the last cutlery of industry sustained

over results, during likely believe result, are financial will currently leading the earnings coming third from conclude results our period than prior To my sales lower same improve the peak year. grow quarter be net opportunities we potential, last Natur-Tec’s to and a they position Natur-Tec quarter fourth excited but remarks, will we were As our by quarters. levels market market and prepared sales in

by new and solutions, In our to market end-market and quarter for segments. addition, customers, applications expanding prevention third we in weakness to strategies offset developing continue product our from benefit intend new the market into new corrosion continued diversification gaining to partially and

With recovery entire timing like me remains thank third let the thank quarter. all to uncertain, global global this summarize maintain now sheet platform. results technologies, global course, for the Wolsfeld I team, throughout our and the we leadership people of economic behalf strong you in this use the for would of this overview, and to work on our hard invest turn to and pace proceed on intend opportunity While to partners Matt balance a call the XXXX of venture and joint financial employees fiscal your and over our crisis. dedication to

Matt Wolsfeld

NTIC’s reviewed because across Patrick. XXXX the sales net in fiscal his the joint to fiscal ventures prior prepared remarks. quarter joint fiscal our in quarter sales operating Patrick decreased for trends XX.X% XX.X% of in XX% period. third the compared consolidated year venture decreased XXXX Thanks, third A the impacted income, which decline

due total Difficulty] up operating the year. was last less X%. same improved As lower expenses quarter million and expenses for to the The to third than $X.X [Technical expected, are $X.X period year-over-year decrease operating primarily compared during million totaled XX.X%

note, a quarter, XX, a one-time obsolescence. expenses we associated to during XX.X% impairments improved at assets good X As receivable and over the incurred experienced We balance months. third collections include inventory accounts the May with the certain write-down past during quarter XXXX approximately our of $XXX,XXX and which

continue million for receivables diluted XXXX impacted We and NTIC or income fiscal NTIC been by diluted quarter. $X.XX attributed of who crisis. a net share closely to third compared loss of $XXX,XXX watch net to customers for or the ‘XX $X.X work share reported $X.XX third per with of to fiscal the the quarter per loss have a

$X.X available-for-sale million, invested was securities $X.X are and million $XX.X $X.X balance working May August the of securities cash XXXX, million, million to primarily is million including in in and take XX, with had and XX, cash equivalents million your On capital. nearly and joint this million cash remaining in from to in including $XX.X as compared XX, cash equivalents XXXX. happy $XX.X capital million of the investments I working May questions. overview, cash With of in ventures, in and XXXX, As company $X.X of available-for-sale which Patrick $XX.X other

Operator

Instructions] comes with first of Joe from [Operator Our you. question Thank line Furst Associates. the Furst

is line now Your open.

Joe Furst

Good morning, gentlemen.

Patrick Lynch

morning. Good

Joe Furst

the business just which am environment? of first your segments think about you to in I do this be recover curious will

Patrick Lynch

will first The to recover. the be ZERUST industrial

Joe Furst

Okay, you. Thank good.

Operator

Thank you.

Our the Clemens. next Clarkson comes Van of question line from Tim with

line Your now is open.

Tim Clarkson

Matt. morning, Good morning, Good Thanks. Patrick.

Patrick Lynch

morning. Good

Tim Clarkson

gone Two Hey, in applications good some questions. could good kind selling loss of new pretty these the some well? – of One, are the everything that went new are the considering was applications, so that that so what thought there. job industrial I wrong, have of long industrial

Patrick Lynch

mind we don’t out question, want there. if because pass to best the opportunities that Do share you on we

Tim Clarkson

Okay.

this So, more their guys? that And compostable the of I – business out the why with you have in and you to contract do you you up where that’s bit you the getting don’t terms ended product guess knifes, spinning new they a one why mentioned fair. about how little with and that’s machine chose the forks explain

Patrick Lynch

resulted And company. solution. own tried by we mentioned Well, plastic to They had very cutlery a we their They as manufacturing a large manufacturing, cutlery mechanically we particularly, were compostable cycle and us not that finished for a in several were add technology successful. years product, stronger mechanical for approached strength. to to develop – came also time in maybe the some then managed improved which –

we the So, – a cost product better performance. we at were they able to manufacture able with product to provide were a lower needed

Tim Clarkson

they pleased it’s I assume are that how the with working?

Patrick Lynch

recovers. how suggested future time this that order in levels some pleased very They will the at working economy they it’s are with and when be their have increasing

Tim Clarkson

Alright.

thanks. Okay,

Operator

Thank you.

Northland. next question Gus Our line from the Richard with comes of

is Your now open. line

Gus Richard

you Yes, When between for split ZERUST the applications? the look industrial, auto other questions. is thanks roughly taking at what my and

Patrick Lynch

XX%, internal not based would actually figures, or is our we mean say about and applications. – that XX%, XX% guessing automotive are We – rest the I other are we on

Gus Richard

And is which applications? auto pile industrial other or of improving then the of one the recovery other in the business, the –

Patrick Lynch

other restarting are to getting everybody, and smaller really slower factories segments are automotive a as from The their just now, work, than some is used bit very levels they back but than seeing people orders to be. little right at we

Gus Richard

I addition category, that, category the And new then the of growing it. of that in is Got because other the assuming – other customers am is or…

Patrick Lynch

I categories non-automotive just applications. other am It’s saying

Gus Richard

Right.

just faster are bucket than growing that that recovering other categories other growing and recovering automotive, is than of customers or or auto? applications faster it have it those applications So is you because revenue improving is already because of

Patrick Lynch

– what we is new want where were applications. but they and mean the in of a XX% Chinese It’s and combination to of new our China, particularly now some is I customers pre-pandemic, that of combination about of operation say right operating

Gus Richard

that bags And same what’s and line? the other applications it. of Natur-Tec the to Got in sort turning of it. then product garment cutlery line Got split between and questioning,

Patrick Lynch

Matt, you handy? figures have those

Matt Wolsfeld

Yes.

of North are we trash garment of majority one hit bags, and business areas to is looking hardest of at that So we India, sell of in have you business the the XX% shutdown, from have Probably resin. the and because industry. Natur-Tec the about at Natur-Tec the that XX% related the would related of the the which say we I cutlery business if that is was Natur-Tec America the about to

India Natur-Tec garment is India, the business So related. of probably XX%

Gus Richard

figures And do those you have overall?

Matt Wolsfeld

As far of as the for business percent each one? total

Gus Richard

Correct.

Matt Wolsfeld

Yes.

look might at look, pre-COVID the so each numbers look at just to – you If let’s it be one. easier for

you $XX did so garment probably did million look Asia, in industry business know million maybe and did are Natur-Tec million – that India $XX.X of about Lanka. you garment standpoint China, Bangladesh, $X in to to Natur-Tec related of you million, million, product million if million revenue, $X year in industry, last the Southeast to $X.X include $X.X related the it $X which Natur-Tec So, million about is China North India, at is Pakistan, Sri million what probably America to $X of $X.X

Gus Richard

very it. Thank That’s helpful. you. Got

Operator

question Instructions] of Oracle. Thank next comes line the you. from Manalapan Our Vidich Joe [Operator with

open. now is line Your

Joe Vidich

the wasn’t Thanks quarters Natur-Tec above recover quite said heard or? like morning. I did if for you sales were question. you going expect guys good to – you you it next say to levels sales taking pre-pandemic Natur-Tec Yes, sounds sure but my in two correctly, sometime I

Patrick Lynch

we We stadiums, that, did two markets of Certainly, products, the exact as not lot university specify don’t when to cafeterias, an complexes in they period Natur-Tec a and yet time will reopen. those our have particularly domestic office quarters. next for all

for be to it past quarters pre-pandemic to really So, return two might that levels.

that certainly pre-pandemic However, beyond. levels will recover certainly to XX within to and next XX think we months, we the

Joe Vidich

venues? of business And would percentage be and Okay. what campuses the college large U.S.

Patrick Lynch

it. of all Almost

Joe Vidich

it. of all Almost

Patrick Lynch

You compostable bin and and plastic trash the basically about users of plastic, bags form of industrial products are talking cutlery and in compostable liners straws.

Joe Vidich

us then just cash question have And I the for cash right. Right, tell on just a the you quarter could your flow what flows, was?

Matt Wolsfeld

items morning, that published flow have items of mean but is seen the cash of Q put will the we bigger continue as bit which are with I a be little of what cash is expected general there tomorrow collect we The prior from you kind some the we the as far in quarter. to out standard

quarter bit the had in kind cycle little is products. that saw There a want be was we the third sales, that that Natur-Tec issues We we a the – collections we buildup production the strong. of to and inventory to of have in to products product our production given slowdown of the able sell customers. they a any lot with long-term that during expect those with were inventory products still So the cash of that sale are we of won’t multiple, multiple of good Natur-Tec pipeline

in And our pretty a have so well. maintained cash healthy we we all, flow got all pretty – have

the We have that the we expect worst bottom of of months to of we burn standpoint, May a in a the couple and cash months obviously pandemic come what have months out have the hope Certainly, negative that is timeframe. a are May-June we June be trough. April, seeing had were a to now as started we expect the, of – that a from we the for kind kind of have three seen

We of of have come levels. it those kind seen out

Joe Vidich

and great. That’s Q. much. you obviously Okay, that’s review I I appreciate got. very all I’ll the Thank

Operator

you. question from line Instructions] do Clemens. Tim a have Clarkson Van Thank with of the [Operator We

now open. Your line is

Tim Clarkson

all that and it you then want I decided government then of for you And I forget the guess about that I and question, last one technical getting know thought some Yes, back. just exact that? PPL, send to money stuff, I to confirm initially that phrase

Matt Wolsfeld

to kind cash and decided apply to we PPP going standpoint. we then from do were where a originally We a for because loan of position were that, the of not

for PPP loan. because the There there we in I should $XXX,XXX available our PPP other applied – other credits, $XXX,XXX of not we employee be going is some officially never but there a that what the are – have that we did be employee quarter get don’t am to get we expecting, I so is – to retention retention be loan. will a And are credits sales somewhere calendar to second saw during which decline between

Tim Clarkson

stock How consideration? about a of a in is that buyback, terms

Matt Wolsfeld

how standpoint. board where we At want are are and be of a point, a from want we things few to from the see from looking stock some where months that to from would we to the a kind the going – of to we what are similarly – position standpoint But see over a see considering. company dividend to a that and those want to cash are recovery want secondary that certainly from kind determine to from be stand dividend we that certainly point recovers next of do or where we forward, wait and we are actions stock is table are kind the buyback things on the going

Tim Clarkson

you. I Thank Great. am done.

Matt Wolsfeld

Tim. Thanks,

Operator

further Thank questions time. no the at in you. And queue have this we

Patrick Lynch

Have thank and to your Alright. today Then for like participating week. for I would in thank interest NTIC. everyone you great a

Operator

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

now may You disconnect.

Northern Technologies International (NTIC) 8 Jul 202020 Q3 Earnings call transcript