NTIC - Earnings call transcript Q4 2021 | Northern Technologies International Corporation

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Operator

[ABRUPT START] 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 provision 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. Please also be advised that actual results could differ materially from those stated or implied by the forward-looking statements due to certain risks and uncertainties, including those described in NTIC's most recent Annual Report on Form 10-K, subsequent quarterly reports on Form 10-Q and recent press releases. Please read these reports and other future filings that NTIC will make with SEC. NTIC disclaims any duty to update or revise its forward-looking statements. you by. thank and day for standing Good Welcome webcast. quarter XXXX call and earnings conference to fourth time, participants this At all listen-only mode. are in a the will After there question-and-answer presentation, session. be a speakers' [Operator Instructions]. your hand conference to like now Mr. would over I to speaker today, the Lynch. Patrick Please go ahead.

Patrick Lynch

morning included CEO issued quarter am Matt is here fiscal and and CFO. note full NTIC's NTIC's earlier results financial were I that am year Good morning. the at Lynch, in for available and release ntic.com. I Please Patrick this a with press Wolsfeld, our also XXXX fourth

XXXX During aspects with this record performance, brief fourth results, various we I call, annual with business and we strong will quarterly profitability. fiscal to question-and-answer a a of quarter and a review key pleased robust provide conclude XXXX our that am fiscal operating then sales session. update and report financial ended

most fourth trends our sales global favorable the drove end across combined addition, categories, new a diversify product of In to our across record. quarterly with quarter to our sales geographies strategies and demand markets markets

consolidated For the were quarter XX.X% and prior year the fiscal during XX.X% up to increased the year. fiscal fourth quarter compared sales prior over of the year, fourth

fiscal joint XX.X% compared XXXX addition at In the were XXXX. fourth quarter increased the during to and NTIC's sales from XX.X% prior the fiscal fourth XXXX, year up ventures quarter of fiscal

cost up up year's ZERUST demand of quarter last consolidated a net is quarter are XX.X% especially basis to despite fourth growth focus pandemic-related position pandemic encouraging, comparing two-year while stronger our are annual be our shows industrial XXXX at of on quarter attributed this business can strong higher base, fourth As are global provide see, XXX.X%/ and and results, XXXX profitability. sales asset our exiting Looking customer underlying sales to I competitive and challenges. sales the increased XX.X%. can fiscal in as COVID-XX fiscal fourth with COVID-XX structure. Notably, we strong on model the we this managing of level income value our a believe you a and light net

we staffing targeting operations, making pursuing increased In throughout sales across and and businesses opportunities. new the to COVID-XX pandemic, customers, addition, service improved while our product new developments, strategic our our investments levels

continued more industrial our vendors As result, remain the global production sectors in from the raw and the including have we we production demand will into currently to availability believe significant improve. through suppliers of benefit fiscal a challenges, industrial of resurgence inflation. the labor alongside as to XXXX chain strong economy and team's and trends supply reopen and our materials, of recently, to continues I More customers, proud am work efforts global underway

company NTIC's of the expected XX are in global countries these remain light provides XXXX, advantage business fiscal navigating these and throughout an asset While macro-related headwinds. challenges I over our many to presence believe model with

with So detail. overview, quarter the this the examine more in let's drivers fourth for

of unit, this and For a quarter an statements, same nearly do year when the to the XX.X% This when XX, XXXX, net XXX.X% for as sales. fourth the our an not were down increase XX, is industrial the oil we quarter and by to ventures, Total joint million. by last increase total the ZERUST gas included in ended fiscal million ZERUST which in sales year XXXX. $XX.X the consolidate of X% compared of fourth net net quarterly in XX.X% a of fiscal third August XXXX financial XXXX. and quarter fiscal Natur-Tec period our compared increased sales, business to in compared $XX.X sales a a our to consolidated net XX.X% quarter XX.X% fourth record Broken sales increase August net increase increase ended

strong demonstrating for our from sales quarter compared by fourth year the increased XXXX sales In and our net Fiscal to of fiscal net XX.X%, increased XX.X% from XXXX, over both our quarter to and demand our when of joint categories. China global customers. new new products existing fourth addition, China million ZERUST existing sales customers NTIC and to higher wholly-owned Natur-Tec NTIC for to primarily fourth Strong $X.X subsidiary product is quarter due performance ventures fiscal at both XXXX. the

the represents largest believe growth, to geographic will continue coming years. We in NTIC a expect Chinese become our for significant opportunity given market our China we the recent market and likely

$X.X new sales, a on reflects the closed our the last facility facility X, announced conference training in new quarter, China, efforts supports into to expect The million move fourth our XXXX our invested during facility in expected to commitment the buy we July production, in call, As geography. within the XXXX. our growth market and we which will to we marketing transaction on We and February R&D, support this China. and Chinese

ZERUST XX, transaction announce ownership also In XX% funded India million We cash. venture, subsidiary with $X.XX our in and the ZERUST our some remaining mostly revolving year cash interest and joint addition, in NTIC with on this fully consolidated be acquired statements September as on Harita-NTI will Ltd, XXXX, to of was credit NTIC's we for which NTIC purchase that in borrowings hand under fiscal Indian known in India now financial line is on million. the $X.X increased beginning of XXXX. connection a wholly-owned

net international our amounting our sales, expected along one have in net operations is their million over multinational to based making expected contribute either Many fiscal during suppliers own an of India per ZERUST to India $X.XX result, in or additional in $XX have strongest markets. $X.X it year diluted million of a share. customers income As with approximately XXXX there,

be a India. are in our presence enhancing to we excited further As result,

the history ZERUST of first million. fiscal the two have our revenues ZERUST year in products prior gas over this gas the making by sales oil XXX.X% large quarter had and we and consecutive our compelling period increased $X over time gas fiscal am Moving progress encouraged we for group. are within quarters and Fourth oil oil on I to market. and and XXXX

successful for assets. of gas base globally getting installations growing our and oil on are We noticed

In each addition, travel more ease and continued to COVID-XX to job enter month. allowing restrictions have quarantines us sites

recent validating that NTIC's American Institute's within Petroleum long will our optimistic the Finally, we sales oil term efforts Report Technical market. the technology help gas and remain

we As there a and beyond. are drive XXXX throughout opportunities substantial fiscal growth to believe the result,

XXXX Natur-Tec to fourth Natur-Tec were sales year. business. bioplastics our a the Turning fiscal Fiscal quarter prior over $X.X increase million, XX.X%

Natur-Tec recover at plastics of large While prolonged year-over-year a we after our to quarterly basis, term the compostable sales reopen for near will their remain continued users takes to over time on volatility it facilities shutdowns. COVID-XX expect

market. long market strong term However, and we within and this our optimistic position large prospects remain compelling about global

am expansion Indian of the remarks. made we I momentum purchase the to the progress includes to positive and year. Chinese venture. our interest XXXX into and throughout fiscal fiscal our the operation joint prepared So, proud of announced the new of conclude recently of remaining This expect the XX% my continue ownership

and we our Natur-Tec oil business to in addition, investing gas In the continue units markets. of trends advantage ZERUST take and term within long

to overview, fiscal year this call and partners our another venture results summarize the As this of entire dedication. continued Matt expect year behalf XXXX profitability. over for and to use higher growth financial employees hard would all global me XXXX. sales Wolsfeld With for team, full and like let to be a turn we of to strong result, also I now to opportunity their the NTIC fourth thank fiscal On and our leadership work joint the of quarter

Matt Wolsfeld

the Thanks ventures in drove fourth an trends Compared reviewed XX.X% fourth Patrick in net the in his sales fiscal period, remarks. quarter positive XX.X% quarter global fiscal a increase in the to quarter prior to prepared operating joint XX.X% compared fourth year of venture Patrick. our A prior period. XX.X% joint consolidated sales record and because income, increase fiscal year across to NTI's XXXX grew fiscal increased XXXX the annual in

to For across sales nearly or in fiscal XX.X%V on period last expenses XX.X% million XXXX fiscal $X.X $X.X fiscal net to focused compared to fourth controlling XX.X% by compared primarily of our in the compared a income XXXX, million Demonstrating venture same of a for diluted with increased year-over-year the X% $X.XX prior loss XX.X% leverage quarter over fiscal a year. consolidated the quarter proactively fiscal We were year. operating in ventures million, quarter. prior remain were in only associated for business reported the the fourth for XX.X% expenses share fourth to expenses fourth XXXX, we of fiscal percentage $X.XX contributing the per Total quarter sales. and income, increase to selling expenses global fiscal joint period, $X.X prior due NTIC's as XXXX operating fiscal our operating increased expenses fiscal experienced per of increase NTIC loss joint XX increase net net an of sales the the operating total model, operating increase or that XX% year a year. a compared diluted share XXXX

from $X.X share, of per $X.XX the was year asset, or For the a balance full per the $X.X $X.X and asset which deferred year's diluted XXXX last NTIC's year, fiscal loss NTIC reported U.S. income of million Net fourth compared U.S. included or quarter one-time share. diluted sheet. tax adjustment non-cash the loss a attributable company's $X.XX for million deferred to NTIC remove million required net of income to net tax to

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

new $X.X was XXXX impacted buy a fourth million investment the facility quarter Our during made the in China. to cash fiscal by position we

market company growth which or investment invested this ventures, in commitment with joint to cash the Patrick $XX.X August our $XX.X remaining in million primarily in the balance geography. On and mentioned, in working Chinese capital. the expected XXXX, XX, reflects XX.X% other As approximately supports nearly this of our was had million within

XX, October XXXX. Board of fourth a record quarterly per Board of XXXX dividend During fiscal common that XXXX quarter, NTIC's XX, per NTIC's share. regular share quarterly payable XXXX, to was $X.XXX X.X% August Directors X, of dividend shareholders of the $X.XX cash y on cents declared On increased cash on August to Directors our

fiscal XXXX our COVID-XX conclude fiscal far we to successfully demonstrated navigated the thus results that have So, pandemic.

sales which investing we strong remain profitability. across consolidated strong product In growth Trends our quarter meaningful and to quarter, fourth have all fourth a the that addition, we opportunities support globally. during categories continue record our businesses the led across

are headed year-over-year year about We overview, this take sales which growth. the questions. another in I earnings and and With the to excited Patrick and are to look happy we forward strong are of your direction

Operator

Tim [Operator first Instructions] from Clemens. Clarkson line of Van question from Your the comes

Tim Clarkson

Hi guys. Great numbers.

good. do last. one challenging one I questions, more am but challenging, guys the Your warning have five will I four little Really always just a easy you. ones, do good. we

China easy question. is doing first Why well? So so

Patrick Lynch

obviously, going mean, Chinese as it's I is a our well reasons. a slight China the have demand you domestic domestic doing for got even international demand. if to exports, both where sales in and are things drop certainly, we And continue. of variety demand have increases, carrying

Tim Clarkson

And a philosophy your a on are in of I there? know investors a investing of safety in concerned about China What's investing the few different of kind of it's such place. China terms because my

Patrick Lynch

sure well previous so go Well, partner, I joint past venture didn't am our which you with experience our in XXXX. recall kind of

our are and working do with cautious the business especially caution with market our in China obviously, in being we of everything we in work very approach with an we and who So in always there. careful, abundance very to

Tim Clarkson

Sure.

Okay.

been growing? it's it India, $XX fast mentioned In about that you of million. terms has How

Tim Clarkson

growth you the figures India? Matt, the on have exact in

Matt Wolsfeld

Yes.

have significant we to actually growth started. We joint our I India. in in that newest say, seen ventures of want was one XXXX. India pretty year-over-year

We was pretty it past it's significant this have it growth joint obviously, started, when to venture from, our we some smallest where the have. venture second profitable most year, joint gone seen that

to have And to significant years, the anticipated growth revenue. seen million million some XX I of If back up to pretty look $XX $X so they past significant over growth. get

that the expansion, when business we the in sizable industrial space. oil So is we significant and not at gas in room could market growth India also and but look think have the a it, just for market still

in purchase to opportunity it. XX% the the had remaining we So ownership

So with move we were that excited opportunity. to ahead

XX%. in we that joint the that passive with is have being was other a India Indian benefit own venture investor run somewhat other of The the who

when years. place been his purchase in So we were for has have able management existing that ownership it, we team in to an

So existing relationships an business the of transition. continuity and easier was

Tim Clarkson

Great.

What's new space? question. the general a compostable Just on

Patrick Lynch

of? terms In

Tim Clarkson

happening that's opportunities? Well, developing how what new there? new terms things are in Or anything of

Patrick Lynch

as usage. reopen users space. of We orders we I we But supply which bit corporate mentioned some about for The is are and compostable am facilities into going for compostable certain full campuses talk the long to new of problem face, biggest to be including come with there there I large certainly getting plastics, waiting not for I the openly back some the demand applications, before, mean facilities continues today. to in problem a new sports sort are our to a very of also And chain. is

supply exceptionally our ability long the current shipping certainly slowing to have an down customers. globally chain impacting that We and issues or product to deliver our are basically

Tim Clarkson

known you kind publicly had whole little can Sure. One products to a historically historically, R&D investments maybe enlighten last is challenging. least you new for like developed currently already. of some say, the you talk your have to I to successes R&D, have valuable you This you thing But us, more can the about that as how in a doing question. is previously what about talk mysterious And but Northern are know me. Technologies? At are little bit of don't

Patrick Lynch

Well, our continue a of we continuing be the I because customer are product or develop a result and major to are solutions developments needs. R&D for specific all say, tech certainly, would to of custom

are simply resin available compounds these haven't So anywhere else. been that

R&D have that needs who telling mean been best first. very bioplastics needs we the we I the of about be that we come Same have gas customers can and applications. has for thing with made in developing. challenging investments we have us say a you market can that oil on keep so the it's large products potential met by to And terms

sales section we sector. are reason investment for and the on just And sales growing products well in they are going of full the very their up space, developed while we in certainly significantly So over that but few own terms handsomely to our It's in grow at what particularly years, for liquids of that heavy a this to to our them quite diffusers industrial doing another a and point. to are level, bottomline. last contributing have is doing the number our ZERUST in there take in

Tim Clarkson

sticker Right. my ZERUST on tackle. kids' One last comment I fishing saw actually

So that was kind of see. cool to

Patrick Lynch

buy a box? you Did tackle

Tim Clarkson

it bought We know even didn't until it the I Yes. box. weeks couple later. there a of was I noticed

a kind it's no, cool of So really application.

So everyone. obviously. well, thanks, A great quarter,

Patrick Lynch

Tim. Thanks

Operator

from comes Capital. of question line Charles Pine next from Your the Bellows White

Your line is open. now

Charles Bellows

in approved guys. Hi you the numbers. you or questions. did are quick One, are guidelines? Two Nice API now I understand included

Patrick Lynch

Yes.

Charles Bellows

as get mean really Okay. What does from look next materials the which hazardous you is to that for the big And timing? at administration, the it one, PHMSA?

Patrick Lynch

about want Matt, do you to talk that one?

Matt Wolsfeld

given as issued usage, widely API in guidelines how the technical time, API is far from report Sure. able being year, transmit report are. step the technology, I mean, that will, Charlie, some what which with as what that utilize written the VCI point the was significant approved bottom which place is the line recommended then was technical protection. to the standpoint guidelines the fiscal to using transition storage a technology issued, which that to for last validates tank being at expectations that And was a some during will was the point took basically at followed time

PHMSA API From PHMSA also be guidelines. And forward expect lot we so the And they big move how been where tanks PHMSA in technology. by forward, regulates is that how pipelines certain any that's we can moved body oil a that the of that's to will using something or that the infrastructure. forward. be is They certainly U.S. the requirements review that to a required oil used evaluating move are now with the and basically flow stored government a standpoint,

to PHMSA also use PHMSA some and validates and approval encourages technology. at the that point time, in for wording are looking So people we

to We applied got customers where situations our technology. be to some PHMSA have able to certain utilize have

really really And so off, we news the are oil gas acceptance to seeing knowledge great technology, division. the technology, a of are for all nice of the take which things these is and starting

Charles Bellows

really in road? before together next, months and it's probably the the come some are really But looking pieces time it's to XX at XX all we open out

Matt Wolsfeld

guidelines take how moving again, say things be on there other There's like a and time that it working expectations their we infrastructure. there's uses for for things as the XX are other far technical said, guidelines for would years that. It's comes pieces the going and have as depending discussion recognized from the that of Well, and I long applications they somewhere items something API that's can to become and of between, all a months is report like like would kind different to a be and are inside lot a API years of you different on continual What lines. practice XX to and PHMSA to it for when that.

So that the specs. far just many There's approval. one we as things are it's not application different as one on changing working with

Charles Bellows

And struck other about Patrick from have when and the What Do that it up to a a demand? to big that the do And opening, for Great. Okay. you the long is compostable surge came question facilities you and the demand in which ability materials it pricing? comment me then pieces. from can open pass supply seeing the your that? what going to on? just chain is made And meet

Matt Wolsfeld

supply have being have it that's seen The issue from raw going move certain our the demand been everything with are we backlog get significant to for have backlog materials we a Natur-Tec there's, inside some shipped obviously of is pricing we to to are see be Natur-Tec that from able running Natur-Tec situation that increase here India situations. now on use to levels. is because either Natur-Tec sold, to to standpoint we of starting revenue and We into adjust places amounts. we up back that some but somewhat base with pricing manufactured not And in the we The being we accordingly. are with back normal into and potentially to have shipping that China, benefit and other running compounded we be the

manufacturing fourth first to from them of XXXX we have XXXX growth the catch we middle ramp going to demand with the going I to first do a with, would XXXX to Obviously, quarter looking look sales. a be quarter, orders is Natur-Tec going schools We expectation up continue that are you fiscal this total will October, significant be levels at from of started say product. quickly total growth that quarter, standpoint. going getting of And back pre-COVID our of K-XX If a a back and you to back, have to full it's seen demand ramp the back numbers. is We inventory Specifically, and now solid obviously, up to colleges our to back, expect saw to the sometime we stadiums, so significant seeing September, are the up lot sales. November, in from coming sports placing significant we fiscal a Natur-Tec that, that in lot coming. a at we fiscal capacity, improvement increase certainly if that

ocean So the experiencing that are to people we that on is are the that some benefit that the the other we and pressure product same the sitting the get are across that companies experiencing. demand get But containers are to coming with experiencing water back. taking ocean product weeks the the months than points of seeing across rather is are all

Charles Bellows

timing given on demand the meet can got you you those feel have you products? the And

Matt Wolsfeld

sales Yes. XXXX. that will reflected see in We in you will think do. I be And that

Charles Bellows

Okay.

Matt Wolsfeld

and and fiscal meet caught in continue that certainly sales that get and bringing amount current continues large the products the of customers' that of think will we of that But the to there you the to demand, are order, possibility on a have Natur-Tec able we be certainly that we we like mean the the ability in see I increased is during year. up. have backlog demand to things the I amount inventory increase to that as

Charles Bellows

Thanks. good Okay. on And Great. this year. next luck

Matt Wolsfeld

Thanks.

Patrick Lynch

Thanks Charlie.

Operator

[Operator Instructions].

of the line question Gus from Your comes Richard from Northland. next

now line is Your open.

Gus Richard

quarter. for the taking Thanks Yes. questions. Great

about wondering if $X revenue be the and is Just the I forward? business a just pipeline. should on over you oil expect the talk the going gas, And we lumpy. was could little million to level ZERUST I bit know

helpful. be would there color any Just

Matt Wolsfeld

we for gas? actual Your gas pipeline question Or oil the be? what do pipelines are to is, about and you in expect asking oil and

Gus Richard

Sales business asking to above looks revenue pipeline your forward, expect has the am Historically, we I what sales could that pipeline $X looks million? sorry. stay been like, lumpy

Patrick Lynch

you, think going have it's of I be we to pretty opportunities. lumpy. the visibility because tell the good to I looking time sales continue mean of at, line forward can going I

what fiscal full visibility a So will see year. into we we over XXXX have good pretty our

bounce year revenues this which in in to was the to So hard sales we expect just that from we quarter tell worked growth would expect mean fourth entire for to I million that our fiscal their fourth had I we first grow of But third hit some you up nice expectations, from I America, and a what little see obviously, significant. total back. quarter levels compared like team quarter XXXX. can did is you have just quarter, quarter, But profitable. second had America, we North tell division in said, just to objectives number fourth can bit October comparing I revenue, North this and fourth $X.X certainly looking we expect where year. the very the to what down. the XXXX be would and meet to quarter I in to expect from quarter year, I to you of September, fiscal at revenues

Gus Richard

about particularly talk And Very over couple that how the quarters? get it. quite in there? that a gross higher was did the or And But were on I cost mix. to margins you prices imagine Got petroleum want on gross ZERUST impact next costs, Are industrial. I the strong. any margins helpful. input of might favorable due primarily some seeing quarter, your color the then pressure to

Matt Wolsfeld

revenues very across strong. is margin we we significant that and that which driven saw was gas very there oil Obviously, by as terrific. we that increases fourth gross quarter, Well, margins was a material significant gross. seeing. raw Obviously, are Gross in price saw favorable are

for follow polyethylene significantly. the you resin, material ZERUST goes that products, virgin into LDPE up raw index If the is which the just it's main the

at XX months, look you it's the past over you If can significantly. to eight see up

able of a increase customers, the lot component given on we goes pricing show to that of commodity pass that to into been cost products. that them can main the have We their index

do we lower historically what However, some other pricing items, some margins stock where they blanket the have you, agreements, have contract been. and were on those than sales have

you in just are the products, if let's we say, quarter so the what look year. weighted first where down of industrial average a compared and as at fiscal is past second it the gross was, And margin of selling to

kind their see back we stock of the to been obviously they take previously buying going our of able capacities that inventory. hard pricing are up price look expectation us that to don't talking suppliers are large But suppliers the index, see are product, resin are LDPE if we for coming we to our achieve. what trainload don't when is margins indications suppliers months. come expectation and that manufacturing going get down, they the is a to have LDPE to that to giving that also Our the are the they That's That's are, starting come price our on manufacturers. based of the down when if resin the are resin in to talking levels to we see at that what

Gus Richard

what one going And on for And me, that the on as last numbers you Got little then gross will bit a ZERUST have helpful. of the color impact OpEx just of and margins? forward. fold sort Very it. India, in

Matt Wolsfeld

see be subsidiaries industrial of that generate entity are profitability in XX% what bottomline other we gross the overall to consolidate. ZERUST basically, the profit. let's consistent going is close say, to we The India after-tax The pretty margins with across they Indian

of income $X fiscal So and to of received last the, they expectations of year. for of entity that previously, million we close $XX generate revenue through of year, $X million will that, XXXX. things that million $X that The is expectation Previously, equity did to close should have to royalties that that they somewhat profit. like $X this million would and off do million income

we close to depending Now year we probably take after-tax that purchased of million, on for $X how that entity. $X expectations overall the to million income, entity, the in goes them, from are should that the income, close

or we share. that to incremental income is So of per million would see close $X.XX the about $X gain

Gus Richard

Got me. it. Thanks so for it That’s All much. right.

Patrick Lynch

Thanks Gus.

Operator

Instructions]. And over [Operator Please we don't speakers, the questions have any continue. phone.

Patrick Lynch

Then thank everyone interest would for a nice like NTIC. I and Okay. for in today your to day. Have participating

Operator

gentlemen, your for and Thank you participation. today's call. concludes this conference Ladies

You may now disconnect.

Northern Technologies International (NTIC) 17 Nov 212021 Q4 Earnings call transcript