NTIC - Earnings call transcript Q2 2022 | Northern Technologies International Corporation

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Operator

Good day and thank you for standing by. Welcome to the Northern Technologies Second Quarter 2022 Earnings Conference Call and Webcast. At this time, all participants 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 the 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 releases. Form be to statements and on Please differ certain that recent those or reports stated risks XX-Q actual the those advised uncertainties, described due NTIC’s in implied annual could and quarterly Form subsequent results from by XX-K, the on press recent Please other will the filings make that read NTIC reports and SEC. with the future duty update disclaims revise its to any forward-looking statements. NTIC or like call turn the now over would to Mr. I to Lynch. Patrick Sir, you may begin.

Patrick Lynch

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

will aspects in then our conclude fiscal financial and question-and-answer During brief our XXXX categories and results, update review quarter contributed of today's Strong strong markets demand business to session. various quarter. global provide second many financial call, of -- with results our XXXX key product we a fiscal of sales across our second a the

as recovery sales from of product fact, pandemic, net demand India. categories, net robust a ZERUST ZERUST primarily the higher acquisition result The global XX.X% the company's consolidated sales contribution our well when increased of excluding expansion result In all India. due recent total growth of was as across COVID-XX a incremental and sales of the as year-over-year the sales to from in

well passed costs as our increased of the improve pandemic. NTIC, to the half the supply but inflation and inflation, global throughout continuing as of gross have which and raw to not the soon fiscal across COVID-XX of chain, ventures as as also we margin well year. our anticipated, we these materials encounter joint intense from profit only on resulting impact of profitability. measures significant Consequently, friction As the the cost continue labor, and our operating as This possible first our certain implemented has reduced

As these the in noticeable anticipate second improved in a and XXXX. profits second actions, fiscal profitability our result of late half very quarter, operating during the improvements of we

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

coming XXXX, and XX.X% quarter fiscal market within for increase we our near-term impacted NTIC ventures, continue in largest increase last second become related in period to China. economic quarter to weaker to which NTIC a second years. and fiscal sales extended subsidiary China our Net statements, consolidated to to now $XX.X in over quarter compared same NTIC's For Natur-Tec year, believe decreased joint joint global down sales, record a the this primarily resulting XX% our ZERUST Gas will a ended XX, owned increase accounting second to be in a million units, second XX.X% statements. and net and XXXX within Industrial the in the wholly a quarter demand million. quarter were subsidiary sales this Total by was Oil financial in the for lockdowns sales China XX, is volatility a India, and continued to conditions Despite ended XXXX. China This second $X.X XX.X% ventures we market, compared the by fiscal XXXX. the due Fiscal sales. our when which the the February as XX.X% likely across net of second not in included do net million $XX.X February decrease increased of consolidate net sales, business COVID-XX Broken net ZERUST financial ZERUST reduced is treatment XXXX sales our X.X% consolidated geographic the change quarter the total of by by our

and by making. Oil ZERUST the group. product our we to am are progress encouraged Gas continued I on Moving

sales fiscal over XXXX Oil quarter the year Second ZERUST period. and fiscal increased Gas XX.X% prior

continue our from growth to and see corrosion. tanks, market above which ground We oil includes pipeline protect to and interest higher solutions, casings storage gas across globally oil applications and

half with fact, many gas projects year got had Therefore implement second of sales the the in Furthermore, for and remainder several -- postponed very higher half, is anticipated which full forecast be oil sales year oil compared we higher the of year fiscal expect to fiscal we we of significantly the to will compared lead expected repeat oil the half will which In into and to and our the half. anticipate fiscal customers. first of strong, last to sales we second gas this first in fiscal gas the year year. the

Fiscal and in second increase sales universities, in Natur-Tec were corporate and year XX.X% large reflect XXXX $X.X campuses, India. the fiscal business. have as a million, Turning within prior America, seen sporting venues demand patterns, we Sales period. trends In a their schools, North America gradual North over to bioplastics towards return demand reopened quarter pre-pandemic especially facilities. steady our increase Natur-Tec Natur-Tec a

products demand the supply shortages Therefore, we sales from several for pandemic. rebounded logistics material a constraint COVID-XX and anticipate hamper delays and to chain expect however, shortages challenges supply of to For at Natur-Tec several there Natur-Tec combination the growth our suppliers. production supply Natur-Tec impacts We well as next raw growth, we time continue over due of is on problems that the as upper and challenges, due has of to an chain PLA to the quarters. sales being believe

are compostable global believe demand as we our As within a sustainable from business growth resins. bioplastics we our positioned products for result, well we and leading plastic for benefit long-term Natur-Tec

Ukraine the the conflict. to current our over the turn on call I to from I share Matt, impacts Before want expected business

we on accounts joint result Russia Russian As will value, believe equity punitive that total a level other NTIC. we our the discontinue venture, of saw and receivable which during to subsequent option than war senseless approximately a joint the write recently of quarter. current for in this an down no sanctions third and result fiscal Russia, venture's fiscal for of resulted our sales income venture contributed in $XX,XXX approximately joint $XXX,XXX insignificant year, in Last balance applied

however, higher we with trends Ukraine-Russia our our at watching fiscal importantly, to certain More economies business and the remainder our European to impact European profitability the closely carefully are improve and partners working impacts any raw war this quarters. conflict Accordingly, joint demand throughout adjust believe and the we the the venture costs will for potential coming our impacts will of we the believe year. of material markets. sales Despite time, in

NTIC over to track for sales and fiscal results to is year profitability believe Wolsfeld a As second now growth financial result, turn another fiscal Matt the XXXX. in the me of let on strong summarize overview, call quarter. With we for this XXXX our fiscal

Matthew Wolsfeld

to in the Compared consolidated Patrick fiscal quarter XX% quarter positive period, XXXX from India. increased remarks Patrick. sales year driven fiscal growth incremental second in NTIC's reviewed sales trends net and his the to was prepared by the Thanks, prior second record. ZERUST This a

ventures. higher percentage well fiscal and This income company's expenses consolidated as year XX.X% were fiscal last with sales associated attributable incremental due operating were period. and venture sales, investments. XX.X% increased over higher as the period the was remaining acquisition net quarter Total period profitability to of decrease and the ZERUST to joint second year was India a expenses primarily XX.X% R&D acquisition Operating expenses XXXX prior Second wages, to lower for prior ZERUST as to XX.X% the the at year. to declined increase compared XX% operating the primarily due expenses expenses million. the $X.X fiscal fiscal same selling quarter travel India joint of compared of The

sales our have As India ventures continue results, illustrated it each sales operating the now second ZERUST and joint as equity financial since from on the year, XXXX, our compared our same period as expenses, our increased fiscal same for of during labor ended increased primarily increased of The February and to with case, profit results, compared last months results result quarter percentage year. financial three a income costs. effects XXXX. XX.X% fiscal the of a is the remainder XX.X% will these and in materials prices acquisition to XX, the consolidated was to fiscal and Gross and last net net the in period as during our raw decreased transaction

are certain pressures. we to stated, Patrick As address actions inflationary pursuing

$X.XX XXXX fiscal per improve of $XXX,XXX, quarter. income the throughout share NTIC the the to of may or half to pressures we second fiscal for second second the gross compared remainder million persist believe of we fiscal diluted XXXX $X.X or net fiscal reported during year. inflationary XXXX, quarter While diluted per the share $X.XX expect margins

$X.XX India share quarter second was and amortization morning. non-GAAP For for that share, of XXXX for compared the the expenses net or financial press diluted was issued adjusted related NTIC second A million NTIC's quarter. earnings to transaction are available income per $XXX,XXX XXXX $X.XX $X.X second fiscal in fiscal our the measures GAAP diluted or reconciliation non-GAAP release per to expenses to quarter this

XXXX, cash XXXX. $XX.X as and cash August working equivalents XX, capital and million, including in cash equivalents February of XX, $X.X cash $XX.X to As in million $X.X was million compared million, of including

XXXX, our of working $XX.X As in had company the other credit. cash, $XX.X which of million of or revolving February the remaining primarily ventures under in million in balance February investments XX, $X.X XXXX, was joint On we XX% approximately XX, had capital. with of outstanding invested line million

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

focused material throughout on We second year navigate fiscal these our half expense, believe the our will reflect supply the prepared the remarks, near-term actions. and and adjustments results So we to business conclude the raw of necessary our are chain to making challenges.

will COVID to are of economic With and your happy questions. considering we the NTIC. XXXX new recent good the believe continue, conflict, another and especially emergence of profitability that fiscal year variants Patrick take overview, While for uncertainties and sales this be Ukraine-Russian I

Operator

And first Clemens. Clarkson from our Van question [Operator Instructions] comes Tim of

Your line open. is

Tim Clarkson

are I expected guess results the kind guys. Hi, what we to them of be.

improve as profitability, have from As prices had clients prices are your the the increasing far, to resistance you so sticking? far

Patrick Lynch

has It risen been good. raw are so far, longer in It's it's your can't as the time have taken and amount. The prices than prices the to have the anticipated, material they were bit are known a us I little customers to sticking. significant we go have throughout past. we we difficult which not well a -- keep listen, very say, world prices, by results that the to fairly but mean,

them. increase they've agreed. to have We And

been quickly as be. going. So had it's gone It's it as quite hoped hasn't just we would

Tim Clarkson

Right.

could big maxing Is how market potentially mean I that's market turn a the of segment, gas kind into? are that out of X% and you oil the or potential? on Now this doing still

Patrick Lynch

We're it still doing and is about the X% of that. potential

in past, market Industrial we're said gas we've the doing the oil and what side. potential we bigger believe that than As to the the ZERUST be in has

Tim Clarkson

Right.

XX know something in when selling occurring the the that these tanks field? I you're that. actually is it claiming that you're products, mean, Now, is XX like versus I years, last what years

Patrick Lynch

the We monitor of to do inserts, installed probes corrosion. in installations our rate

far, And are that as would. we installations we've thought so seen working they our

are doing very they So well.

Tim Clarkson

Right.

extend tremendous on return their end the tanks user the that's a life right? investment threefold, if So for

Patrick Lynch

That's right. exactly

Tim Clarkson

Yep.

using, some with your would so of typical your is again I that who who's would that customer. of typical say you your noticed form I'll again, is, question, compostable this be when what not compostable be the I would guessing customer ask Who packaging, ask the products? end, Costco but I'm typical I compostable customer? you're I on think going, Okay, mean, sort always

Patrick Lynch

the products States United waste composting a that typical a large universities, so office the don't up wind managed that those kinds programs, parks, sports stadiums, well our customers our diversion developed in wind In compostable of site. landfill, schools, but have arenas, in include establishments up food --

Tim Clarkson

so would… Okay, what

Patrick Lynch

that… With

Tim Clarkson

Yes?

Patrick Lynch

Go ahead.

Tim Clarkson

are What's similar why Natur-Tec? why other the products, people differentiator when you're they against I does have picking -- assume competing

Patrick Lynch

mechanical cost higher technology at than produce strength through our patented our products greater competitors Because our a have we alternatives. to -- lower can

Tim Clarkson

there and is two basis? going the $XX Then sheet always goodwill intangible just question All forward is about a assets. is question affect earnings between noticed to suddenly the I quality things. and price balance How of on last on a for that million well, Matt. right, best the

Matthew Wolsfeld

time. $XXX,XXX of amortization goodwill At a -- going the to India, showed XX in the be have ongoing U.S. in will per associated XX% quarter forward an up assets about time, the transaction obviously ZERUST Q tomorrow, with some there will going years. about of the for first dollars we're acquiring that expense put have $XXX,XXX obviously the quarter, point expense amortization I That's out in see for intangible that this we you'll

Tim Clarkson

Okay.

back impact, the I added would total down if question, the, had that another ventures if would structure, the Now, what I joint joint the added been you back? you India into you what mean, What back the see XX%. were ventures down venture added if old been joint joint total have would have added ventures it back, have India

Matthew Wolsfeld

I'm $X.X fiscal. and million quarter have the it, been, about about India in would at looking and for $X.X million It in second revenue sales had full had

if total JV million. sales is quarter worldwide So at the I'm through was million, about at looking X.X that second $XX

to sales. about India So, X% the X% of represented

probably So to say the total joint been X% down ventures X% a months standpoint. revenue would from have six

Tim Clarkson

Right.

looks that would earnings -- balance the of we I'm it good, be be the will well for up Okay, but done. think year. like I knew down, I'm earnings

So thanks. I'm done, thank you.

Matthew Wolsfeld

Tim. Thanks

Patrick Lynch

Tim. Thanks

Operator

Gus question from Instructions] next Richard [Operator of Northland. Our comes

is line open. Your

Gus Richard

taking thanks real on for Hey, quick Yes, question. the PLA.

supply Can lack raw more You Is materials? you in of a down add talked facility color? about little capacity? went it disruptions. somebody's that Is

Patrick Lynch

manufacturer been these able on at line has this point, point, this start manufacturing delays, of a being haven't manufacturing several like to due to sites there various at at they put are but some PLA plants. It's

the of global than is the current PLA market So shorter demand. supply

Gus Richard

currently allocation? so Okay, on you're

Patrick Lynch

got still on we've would as as I a but most it than Yes, like based PLA, history mean, with high our allocation be. higher we to past not it's

don't time have to capacity turning -- that's these opportunities we the simply this away So because are we take orders. certain at so

Gus Richard

Got a so it. think quarters, come -- be when on you will when more will incremental year? service disrupt then do supply customers is And can supply couple the you of it

Patrick Lynch

quarters, We're thinking or a three quarters. two of couple

Gus Richard

And Okay. sustain at you level? can this

Patrick Lynch

Yes.

Gus Richard

Got business changed lot Shanghai it, clearly turning that A to your shut thank the have been China down. in has the accelerating. the China, lockdowns last economy is you. And How over days? of XX then

Patrick Lynch

How please? long? How much has What it changed? long? How

Gus Richard

Your China constant? it been business, accelerated down, just all slowed or the lockdowns has

Patrick Lynch

business they The mean, been offices. and -- live reduced. required can overall with office China lockdowns are at either in Shanghai for has people to just the has their slowing get been either because down or in demand right now by work I to

So nobody's the customers, is demand also with various which which visiting down nobody transactions reducing is and ultimately. lockdowns slowing shopping is

Gus Richard

last or been XX And drift? were that accelerated it. has slow got over it, Got the just days a

Patrick Lynch

actually Matt needs to answer this.

Matthew Wolsfeld

answer March down revenue, can standpoint. that I January. our that sold we March XX% what No, that a I can we revenue with had in expectations from about say was in compared to

always then for everybody April are shortfall occurring we're office of is makeup the that for a There location is numbers is our lot shutdowns that March. revenue in home February to So what Shanghai in, some still that China. New And going are seeing across of some essentially coming that an revenue was make China awful of down be in, in March. But specifically was in there to Year. of up in sent Chinese -- is where shut our because portion difficult basically

so that's into. our just and for product, impacting all products there products products really demand that out And but go our not

typically to size X% prior expect are the that's where the growth. of At second that one present So on six wildcards our XX% in in feeling we quarter, we're and of of down we that's at years. point that area we looking market with forward have in track. in dealing growth plus the time to kind with. things China months for is China, of kind we an back roughly some to expect get XX% kind of obviously, compared the Again, And next through China, year-over-year the

like to lockdowns feel is will at going so difficult time, open are up just we at point there it's are ramp up some back occurring quickly, in to sporadic but revenues there time, China this and in So that that many predict. point

Gus Richard

I'm the world And really Got idea the I many to color understand. in of deck. the Europe… has just and jokers thrown shifting No, it? I wanted an to get so sorry that completely

Patrick Lynch

the understand I comment.

Gus Richard

a the month in on I'm it and seeing are Europe, of the metal German automakers in in March then know going in margin the is environment. what and set and early And have hike to supply seeing I some shifting is And I questions, sort yes, the forward. what have sort of suspect issues customers of contraction you been Yes, going of same terms prices tough a in to JV of the the April in Europe? of your

Patrick Lynch

about What market. the

just reported are For record refugee we example, had from the that's they and sales Poland, facing. crisis despite

is this engine we'll country manufacturing particularly price country by Yes, holds, see. Europe increases, a the in the Germany of particularly at future what basis. material bit So it's in on worried raw point being but

Gus Richard

I you And, That's Okay, got so me. Thank from it. appreciate okay, much. it. it

Patrick Lynch

Gus. Thanks,

Operator

any not am Patrick I I remarks. Lynch questions would showing like the time. now And at conference further this to turn to for closing back

Patrick Lynch

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

Operator

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

now may You disconnect.

Northern Technologies International (NTIC) 7 Apr 222022 Q2 Earnings call transcript