NTIC - Earnings call transcript Q2 2021 | Northern Technologies International Corporation

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Operator

Good day and thank you for standing by. Welcome to the Northern Technologies International Corporation's Second Quarter 2021 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speaker 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. 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 XX-K. also to statements on Please differ certain advised recent those or stated risks actual that those be uncertainties, described due NTIC's in implied annual could and results from by the Subsequent quarterly and press reports on Form recent releases. XX-Q Please make read these NTIC reports and other future with filings that will SEC. or NTIC its disclaims any duty to statements. update revise forward-looking And Patrick introduce I Lynch, like would now NTIC's to CEO.

Patrick Lynch

regarding I'm Please fiscal our financial second morning. Patrick press results quarter issued a XXXX Good at available and Matt morning Wolsfeld, was here note Lynch, ntic.com. the that NTIC's CFO. and for release I'm is this with earlier

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

Our quarter financial robust results sales at ZERUST operating fiscal our joint XXXX quarterly NTIC ventures. as as growth sales global ZERUST second and show industrial across well record China and

COVID-XX pandemic and efforts, earnings impact of year. industrial as see increase the our continues Natur-Tec to through gas of and as and rest continuing this economy our oil sales more benefit and reopen to we to sectors the global While the demand continues

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

quarter and first of wholly-owned when quarter of fiscal the higher Higher X.X% as current a XXXX year. net unit, in and February's financial in to second an XX% XXX.X% quarter NTIC primarily in partially our in ended this business increased February of fiscal second existing quarter $XX.X decrease sales million industrial the ZERUST increase excuse decrease same our increase our line Year's statements, net China XXXX, joint performance sales, million decreased XXXX ended not sales Natur-Tec were strong to a oil China total quarter sales Broken compared -- to higher new second consolidate million, joint second the sales, performance which sales ZERUST holidays. of sales we both at existing first to ZERUST gas sales Natur-Tec's XX, year record customers $X.X sales. increase fiscal when compared a XXXX. joint increase net sales XX.X% a down and our February offset as customers is for quarter Fiscal products. to XX.X% in Total by net last the compared of the result period for by quarter the and due in to and consolidated ventures, China increased our $XX.X our XX.X% which demand second and For included by X.X% is XX, NTIC's the to product do to primarily me, due an by net a net for NTIC's to to ventures our with categories. net ZERUST despite were a were XX.X% and Chinese sales net subsidiary at New venture Strong

of NTIC. quarantines become our And We and likely geographic opportunity will number continue we represents the significant recent COVID-XX a believe market caused to travel a growth, China restrictions Chinese for our expect largest given a market. and prior be and $XXX,XXX to of global project second fiscal gas year sales XX.X% the fiscal quarter, oil in decrease XXXX installations postponed, period. the over of ZERUST oil for resulting gas

growth sales are also COVID-XX during the XXXX half in over and lifted, there restrictions beyond. to we -- anticipate stronger oil fiscal to expect sales we short 'XX as and significantly are drive of and believe gas we While second volatile the XXXX remain term, substantial calendar opportunities

Turning existing have to plastics the of a to negative material in COVID-XX compostable had impact largest Natur-Tec on bioplastics our consumers business. pandemic the continued The United States.

it In demand industry Natur-Tec across was bioplastic fiscal for in what addition, within sustainability a the become initiatives industry. remains bags, important our XXXX, that production of fraction further decreasing of compostable global an which apparel had numerous part

as result, users XXXX starting reopen sales second and the compostable As are We as a we plastics of are and million, increased lifted. begins Natur-Tec restrictions quarter year sales that to decline $X.X signs were of XX.X% Natur-Tec stabilizing period. prior that over more fiscal activity large a COVID-XX are to see believe

continues producing develop resin the blends bioplastic-based accordance single-use compounds series in conventional converters, Furthermore, to fully products, suppliers, market-leading to major are and are performance major while remaining of a compounds international targeted easy plastic expand that certified With resin these while innovative plastic mechanical base and resin of finished standards. costs engineered equipment. by reducing and exceed to processes processing manufactured compostable increase products finished the mechanical with the products using of enabling and properties of performance support manufacturing resin Natur-Tec the conventional Natur-Tec strong the with compostable all or meet

As reemerge more Natur-Tec from our growth coming the to forward and updating return more in on investors people we sales look to double-digit quarters. COVID-XX around isolation, our the world

well geographic performance are our of recent as our prepared trends leading as my conclude benefits and ZERUST to remarks, and industrial encouraging. products the diversification market demonstrates our the of Furthermore, So product strength sales strategies.

their our opportunity let result, for financial over to profitability to behalf use our expect of growth overview, -- I'd turn now of to for we over of Matt Wolsfeld to to hard entire the XXXX. this On for quarter. XXXX year-over-year the fiscal on global and like summarize me With venture NTIC team, fiscal dedication. As the partners return year work to improving joint sales this currently to remainder and call leadership all the results second continued also employees thank and a

Matt Wolsfeld

quarter prior result of fiscal compared year Thanks, remarks. sales the prepared for first fiscal period, the Patrick to decreased Patrick. with line NTIC's a trends consolidated in net quarter in X.X% but his as second were the sales fiscal XXXX reviewed XXXX when

which in significantly prior expenses compared million, same total reduce joint venture year sales fiscal to benefiting the ventures operating only increased across which proactively for to last quarter by prior quarter expenses the over in $X.XX fiscal expenses period, over NTIC fiscal declined were diluted Second net fiscal to the for operating year first operating period second global X% income, below XXXX to X.X% travel $X.X or share increased second due our the Total XX.X% per share compared offset reported XX.X% came of XXXX increase joint year period. slightly year were expenses second $X.XX we the managed $XXX,XXX and net Selling fiscal the or and in diluted development this restrictions, quarter partially to quarter. fiscal the compared nearly quarter. million COVID-XX expenses. of slight of primarily period, for $X.X income research income a by which prior XXXX income net per

February in in August the was joint company and than to for other was XX, sale invested in XXXX, and in XXXX. investments $XX.X As million, for XX, million XXXX, million with $X.X cash February in $XX.X $X.X available $XX.X more million had remaining securities available cash working or approximately capital. On sale in cash balance cash million XX.X% in million and and the securities venture, as $X.X capital of which of XX, cash $X.X compared million primarily working equivalents million, equivalents including in $XX.X including of

record February our growth with of of the XXXX, XXXX on ZERUST improving Board second second the global fiscal to dividend industrial February U.S. and Directors was the common of conclude quarter, more trends sectors NTIC's quarterly company's Natur-Tec X, to quarter prepared are that of results share shareholders long-term reinstituted XX, for economy we sales During per demonstrated cash positioned on $X.XXX continue reopen. business, To our XXXX. payable well as gas and core global and oil remarks, believe

overall the we your product overview, well and geographic about We remain excited in benefit continue headed. direction which execute opportunities, to to are I growth our questions. With In diversity and and are our positioned we're happy take well to Patrick and our long-term capitalized addition, this results.

Operator

our And comes [Operator question Greg investor. from private Hillman, Instructions] first a

is line Your open. now

Unidentified Analyst

about a talk state-wide Yes. a international government also on an on Could a how market trend you on and the little bit basis the regulations about national basis? basis, in compostable

Patrick Lynch

the United and States coasts the slowly the primarily As center. in are you on are the regulations moving know, more towards

significant compost regulations in any, pandemic increases since for haven't We I think, started. the had

our is implementing various further of of various XX So also China well in as the things last expect one sales has in for for our On conventional to market that plastic because slowly uses certainly demand in countries we and as country. kind we increase plastics, aware, are Europe shifting expect be in see you ban increase products. -- well. that been on in partial well. on basis, as India a countries. the has of stable an various to And those are And countries bans country international is an of that products might months.

Unidentified Analyst

also, going acquisition a are chemical technology? example, further non-synergistic terms compostable company of overall do with to also, specialty technologies forward? Pat, And For you company? of And your about the other you doing more comment could universities thoughts Okay. of your in what for strategy you diversified alliances a the would with become to in

Patrick Lynch

hear question. first I'm sorry, couldn't part of quite your the I

Unidentified Analyst

guess, do whether whether acquisition? It I a technology was was also -- technology And I universities additional to terms acquiring you about wondering other what you're alliances or with doing would strategy, of okay? And your improve in one, whether, non-synergistic number property?

Patrick Lynch

Okay.

business. we we going expect provide with just to have bringing any keep opportunities we sake us that of respect. to our to open us for don't for new the new technologies, certainly, respect with universities technology. all, I buy plans current -- certainly eyes of non-synergistic work And not something. with continue into And buying certain to acquisitions. in always We're new no will anything to we look First on for any And

Unidentified Analyst

division, is your the finally, you say then And market at what addressable would point? Natur-Tec this total Okay.

Patrick Lynch

The worldwide total the a for addressable that basis is question? bioplastics, on market

Unidentified Analyst

bioplastics? compostable for Yes,

Patrick Lynch

you my off the top have a don't figure on I the head. of for

Operator

next with Our question Northland. from Richard comes Gus

now open. Your line is

Gus Richard

were just Just were lower about talk Can the little that? stronger light? in a real just quick. why they wondering you little mix bit a I thinking. quarter. It was a Gross was margins And

Matt Wolsfeld

typically, higher I oil looking the got, we've Obviously, which margins, across you're before, product higher ZERUST when margin, are you've about can industrial gross margins it line, then margins. -- it's than and Natur-Tec that. as are the the gas talked at than take

very, So of bit. oil that margins into and with from the the second during of a little mix low contributions between specifically and question a quarter, ate kind it's X a very gas,

certainly much to bring We have we customers uptick slightly. for material raw the market a there certainly as base the also polyethylene of for price dress that starting that to resins couple worldwide are increase margins as the may the has that Obviously, gone already time, materials a We resin ZERUST up. to the accounted use pass that prices to in ZERUST see industrial for market. at to supply have of prices of are in certain of an agreed commodity goal have price that objective on an as can. down percent we industrial But products we

Gus Richard

then adopted half, And recovery. second the its and ZERUST be bodies COVID-XX? Or function lifting restrictions sort it. in Got oil gas, just is a you become going of oil ZERUST use more the in standards thinking is Is prolific? and of and a gas industry the that see from by to you're

Patrick Lynch

in will a anything be increase to current figure the of half to in changes are for to for the that standards. it's an sites. we we standards be Right lifted, Well, install expectation is not customer the our year factor adopted And near that now, is industry our term. regulations that. have by pandemic baked restrictions in going have exact of We second the expecting or the projects on simply opportunities really the don't at yet certainly being

Gus Richard

is large off? to is Got is it. really take college going have -- venues, campuses And when if customer? in And that then large reopen terms are on adoption? begin to commentary we and when finally, should How doing that any you just that really of a they

Patrick Lynch

to place. restrictions and lifted is going they've but that, due in people cetera. again are to to sporting school bit The already to et pandemic, once relationship going slowed that us. the a But their rise And the demand expect back back placed and several orders in events, are we has with down little

Operator

Clemens. Van question comes Clarkson next Our from with Tim

Your line is now open.

Tim Clarkson

Another from and nothing it. outstanding guys to always do that you expect quarter. seem I guys, you

So of Still good couple questions China. job. a on

venture this like was kind the a Just go your there's all. you one back that? Is I of guy, that take up back what, over deal had to joint Does that when with basis, noncompliance. XXXX, guess, something and when because you on big to historical I split looking had

Patrick Lynch

XXXX.

Tim Clarkson

'XX, okay.

we we So are we haven't to And more do where more -- got a Or did in point we're we are something then? you we sales thought that for sure, profits? finally -- have China than is about?

Patrick Lynch

numbers do back Matt, the from you have then?

Matt Wolsfeld

the say, -- to full contributor China, From we're that sold. to just in that sales standpoint, the And is because it's fiscal the of that were us. from a X standpoint obviously Yes. we margins getting the products at or we're the eclipsed be obviously contribution, total high year expecting still see years, over numbers. were we've from very going of which a the to fiscal kind sales fiscal -- out From slightly contribution rest the the that quantity growth in in coming to let's significant the pure XXXX were a this operating X time eclipsed well last continue 'XX, playing profit getting. with the we next year of that were the in contribution it's receiving coming our so We've below financial we

So expect slightly would from below but profit shortly. certainly we're a very, we'll that standpoint, eclipsing be still I very that

Tim Clarkson

of percentage compostable in is now? what And your Okay. China business

Matt Wolsfeld

-- I'm pulling numbers. at back look I up If some just

Natur-Tec. in about a the ZERUST For revenue months X for XXXX, first in $X and over we China $X of million got million for little industrial revenue

the you're roughly business. XX%, So XX% of sitting at

total over XX% the that Natur-Tec that's XX%, the to years, are going that year the the going the X. get I larger coming or a up up I coming the are significantly taking of start expectations sales. think, would portion in closer to overall, to hope sales

Tim Clarkson

Okay.

Another more basic question.

does and of you that? You really -- R&D. kind on money I X? get work? guys spend you a money what on get return you of looked how I it XX% ever Have is Or spend a X it mean you at make in lot year return mean, you year

Patrick Lynch

ever nothing's R&D, With guaranteed.

and So on don't I But that of targeted mean, see our we to return. hoping that bat into. we with invest that have X,XXX you projects, get every projects to going one you're certainly,

Tim Clarkson

back Right. I money XX on say, lot But retrospective basis, a a the have on worked, look assume, and you right? of that years made we've from can balance, well, ones

Matt Wolsfeld

years can you Natur-Tec on take Natur-Tec, Well, for We ago. example. spending I think what is do started XX, XX

spent say, look people -- the has If not of amount the on as a to you amount Natur-Tec obviously you I future total amount invested a time versus period, look paid huge would we will. how at we over Natur-Tec they have you as obviously, that that that at back. is value far cap, see But back are been if total breakeven as company, on the portion market where contributor if a NTIC total

we total cap. say, And so into that how contribution would Natur-Tec portion is that the I that say invested in baked is a R&D much, less value of cap, what market made have market than with the standpoint, from is and

of the most looking go going it's the XX black. way certainly from to at So a kind to XX significant is Natur-Tec to where value over the it's portion that the to of invested of make a over years, different point I amount it. the we've the to that years going to and held And next contribution see up gas. have similarly, being in in but a still oil going gas thing you're likely the And past of future seen oil increase in success the with to addressable We've that Natur-Tec, price. likely done potential and opportunity company. contribution is same significant impact stock back, to the pay we've the as make should shareholders a it with market the less it's earnings the that, the starts in in we going one and X

new in new market. So of to need market, at applications that that's kind patents strong kind with things And we we coming a it. on opportunities. with the ZERUST of of keep how to having leadership kind similarly, Those look are out new and the and the building maintain we're

going the to in we're so future that's continue And R&D the of company. because to invest

Tim Clarkson

projects Are on now about? that there new you're excited that working right any particularly you're

Matt Wolsfeld

bright we've existing it. introduced future, But of both technologies X in I to we've run I issues Too a what's mean, position There's soon think over new very we groups is excited with X the introducing into the a we're where past the the where each about. that that years. the already coming new in and then hope bring to again, ask different people projects technologies we're market things. that over X, company of with in going on start and in

Operator

Alpha. Our next [indiscernible] with question comes from

Your now open. line is

Unidentified Analyst

Congratulations. time, and you as I've been and appreciate an investor your a hard know, diligence. long work

the considering So went what great year, results. last it's through we

question. So the regulation there's related that not certain whether in on and engineering I have in -- to just or regulations to an one the the standards Relating and had maybe your been discussion the impact pipelines business past might within U.S. in community. about

So any update give us can on you that?

Patrick Lynch

I of with for not specifically I far is for set they FEMSA various a regarding pipelines recognized pipelines. recognizing, in those of place auditing They've guess, corrosion one period regulations. protecting are that The regulating regulations as regulations, mean, is officially a already is or so inhibitors thing time. postponed only yet. The the means already compliance that that where

And bottoms, all the API basically storage guidelines -- pending. done. NACE on are tank that's documents the draft So tank the --

we other up is which or to But made ready be much through heard to be documents one that API, to a I at expect than that, document voted meeting, year. this gone was comment happen down technical and still there only far the As pretty that the was as from needed clarified. they've the the -- --

Unidentified Analyst

has it company? potential that for upside much see you the Do

Patrick Lynch

That you change the way? implemented regulations that and

Unidentified Analyst

it's Yes, implemented. get

Patrick Lynch

Absolutely. in they gas of the for terms oil fundamentally on specific that market significant industry and corrosion have in -- these changing across -- applications. I mean, because the do a the what in talking our you're industry in will market impact about definitely certain to addressable the the need regulations then protection --

Operator

Our Capital from Joe with comes Manalapan Management. Vidich Oracle next question

now is open. line Your

Joe Vidich

about either I'm And about bit wondering, little how a recently which guess. I -- theirs how the market was I compete just guys just with with your there? what talk Danimer you are products familiar the in? if just just And bigger and sure guys came don't to could public wondering was fit company and I compete out or you you

Patrick Lynch

in first at all, us. and supplier earlier not a the use we be be not resin had the if of could, NatureWorks. direct They materials during are independently. look my Well, as future, a good like fit and a are we large systems their are to chance produced a I point currently. would Danimer of to evaluate have BASF to I to we us, Danimer even prepared have for they we would see not mean, that but competitor at some companies various remarks, And by Danimer mentioned

I Or So use potential really comment supplier I did this the the here? If in something us can't could on that's the miss -- have I But we address them your at future. question? point. did -- them to technology

Joe Vidich

Yes. my I that guess answers question.

the they with, deal basically is or kind believe, to resin they're some their of what just supplier curious. mean a to companies. their CPG And I have basically to -- I supplier So like a of of you're saying Pepsi

Patrick Lynch

I I my a project speak not to high. really whether now, understanding think, now. us But as have resin they know is, I commercially to being characteristics how Certainly, of they we're their right can't a right various organizations as systems. existing large would by of evaluated are our at as it viable the or point. stands, sure resin And cost within is work bit this far Danimer

a and using do those still can that factors. So useful will for well example, early us down, -- the for for be in will material future. change think then But say it's too I but us, we pricing various they et certainly market, if Danimer expect if come the the be cetera, to that, to in

Operator

question from private comes Hillman, Greg next investor. Our a

now Your open. is line

Unidentified Analyst

And Yes, of Matt. consider Number just A be to Chief one, talk you could any company-wide that couple Officer? in about relations. hire you a significant? about human you important questions changes positions Financial do ever

Patrick Lynch

is for them right behalf I'm for and mean It’s Officer. now. -- a that Matt. I'm I Chief the on question going Financial strategically. was not planning he -- I mean, I keeping

Matt Wolsfeld

you Are the talking in North of you subsidiaries? to talking about America NTIC? Are one for

Unidentified Analyst

you Officer North Chief were hiring ago. Financial about I guess, X America, talking years a

Patrick Lynch

on wholehearted And for talking line great. mean I with to right now, mean, a remember I XX I that. I company don't have about been him the Matt working say give years. is I the he's endorsement.

are. So there

Unidentified Analyst

Okay. to things overall Well, human talk about just then management retention, and in in what general, could you resources few maybe doing training the you're whether -- improve well, just company? development a

Patrick Lynch

answer? to want you do Matt,

Matt Wolsfeld

Sure. at look mainly it's X very if individuals the X the about that I you tenure. of or company, comprised mean, upper long management have of a

is You're around the -- of management and years. upper that talking to runs has been for a group say, significant I everybody period at has, about XX in least want there Natur-Tec individual the time, an

way forward. bring individuals feel different push issues we employees we've every and really have the We've gone in long through for that very well, haven't some lot our the different plan training with we typically R&D look can. feel standpoint. or So We lab has to their treat We with from retention very been term that some we from we've lucky or to able have units. talent the that's in like us to we where or that out significant had like have various of employee training, employee retention, -- the we hire the the really we of and in anything any universities short overall come people that employees the tasked pathways those a strategic each technologies that that helped employee been term context of

how that it's and from standpoint, different far to groups, little education From do levels. different obviously bringing as standpoint. their they skills continue turnover pretty are make very industry train we they each standard them can sure a company. with that have People where constantly associated the talent are improving of their as we and different training So ways

upper an never or issue with any we've company. kind that So the I lower turnover, issue the levels And future. the don't of really levels of had at being either in an anticipate

Operator

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

Patrick Lynch

everyone participating rest I'd today NTIC. Have you. like to great thank for and for your a week. interest the Thank in of

Operator

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

now may disconnect. You

Northern Technologies International (NTIC) 8 Apr 212021 Q2 Earnings call transcript