NTIC - Earnings call transcript Q3 2022 | Northern Technologies International Corporation

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Operator

Good day and thank you for standing by. Welcome to the Northern Technologies International Corporation Third Quarter 2022 Earnings Conference Call and Webcast. [Operator Instructions] Please be advised, today’s conference is being recorded.

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 in 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. will make read these with reports and other future filings that NTIC statements. duty to update forward-looking any its disclaims NTIC revise or Lynch, President would like Patrick your hand speaker conference the to CEO. now over and I to today, Please go ahead.

Patrick Lynch

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

will chain our margin quarter the of by XXXX quarter, pressures ZERUST XXXX profitability by exclude various fiscal severely our to ease of that the imposed fiscal country, highest India product and lockdowns across a third review X.X%. record, rebound Furthermore, $XX between of NTIC across core we categories and with Consequently, was from the our with then the also gross quarter sales If that provide along results, net demand the supply the by to quarterly in order million. contributions third and Chinese we this third profitability third imposed our continues fiscal just COVID-XX short regions financial harsh business it the XX.X%, year. question-and-answer newly broad China highlight XXXX increased total majority impaired aspects NTIC’s subsidiary. new fiscal update for inflation is that efforts brief India, sales important government the constraints. to the contributions the and markets, all and a conclude key a sales comparison today’s During drove of Strong quarter session. call, global made to acquired ZERUST of

operating XX.X% and expenses total in third sales of year were second addition, quarter for as fiscal XX.X% quarter prior XX.X% to year’s In compared the percent a this period.

at the profitability implement Third countries. during profitability improved to product increase increases price the continue take sales quarter improve some of to XXXX. effect price despite will as also and We it into quarter longer fourth joint believe our increases to full taking in fiscal volume continues ventures

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

joint sales nearly economic For much XXXX. by ended NTIC’s Fiscal impact quarter negative NTIC record to May our severe net third within subsidiary quarter weaker related as subsidiary net third China of ensuing a by May business quarter COVID-XX XX.X% conditions. down due the $X.X financial increased and XX.X% XX, the this quarterly is XX.X% XXXX total to the change This third the treatment uncertainties million. ventures Broken XX, to $XX decreased XXXX, unit, demand which decrease of in primarily now ended by a our to consolidated geopolitical million XX% compared increase was $XX.X due in included slower to Gas and do joint the our global a of ZERUST territories statements, serviced due over increase consolidated the in sales accounting our the India, concerns lockdowns Natur-Tec’s which sales Oil by & statements. million that ZERUST to fiscal net XX.X% wholly to across net XXXX decreased sales. across our the country not a the third XX% owned increase quarter Total of a consolidate in net net ZERUST in for sales sales, and we financial Industrial ventures,

actions the to market largest will become ease the that We the in our benefit are as geographic closely believe watching in restrictions sales likely China market conditions we China and future. government short-term in will COVID-XX recent

during expected, increasing Activity our the as oil Gas, fiscal customers. the a to from & Oil XX% existing the ZERUST quarter year which to and period, category over are stronger to solutions, sales by and accelerated on third will good new grow driven confident from to and quarter, higher includes product moving Now, sales prior corrosion continues be gas fourth storage for we one. will and tanks that applications protect pipeline casings aboveground this

challenges especially bioplastics America XXXX trends demand Natur-Tec increase India. our within fiscal to show Furthermore, believe growth Natur-Tec’s and that Turning the quarter-over-quarter strong appear quarter second pre-pandemic is eased to within close the were with experienced. third relationships third the business, period. contributing testament logistics our a important patterns sales impacted strong raw returned and that quarter and Natur-Tec to a million, the Natur-Tec material chain position We Sales this we prior over quarter, and to bioplastics XX.X% in year-over-year suppliers. results fiscal levels, North during supply to $X.X have the year industry

and applications We plastics. new certified resins interest commercial alternatives for to continue growing demand see as municipal as plastics compostable use that products to increasing programs of market certified in compostable well as conventional plastic and

As growth a business. result, are well-positioned Natur-Tec believe for we sustainable bioplastics our long-term we within

this outlook financial economy positive has for are prevailing in summarize XXXX now growth optimistic third that fiscal improving and ended fourth markets Matthew further While runs, to our quarter we overall positioned uncertainty With the me on well target the in will profitability results fiscal trends and over impacted the let for currently turn the are we in remain recent we geopolitical the overview, throughout call quarter. to believe Wolsfeld our XXXX.

Matthew Wolsfeld

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

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

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

we’re to As address pressures. pursuing Patrick inflationary actions stated, successfully

address As in continue quarter actions margin and further to will a our pressures future. gross expect to fourth we result, to pursue improve of intend XXXX, in inflationary we the fiscal the or fiscal the $X.X of the income XXXX for quarter. share or $X.XX million third fiscal NTIC $X.XX third per for $X reported XXXX compared quarter share million diluted per net to

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

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

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

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

are encouraged expenses, materials challenges. sales raw grow our we So to to conclude progress the chain prepared and near-term by navigate remarks, supply and globally we’re making

believe NTIC, happy this and for has While recent will XXXX in in the beyond. we’re for your profitability overview, uncertainty economic are we be questions. With fiscal months, fiscal excited prospects and and another increased I take to and about good sales year XXXX Patrick

Operator

from Richard Gus comes Northland. with first Instructions] [Operator Our question

Gus Richard

taking the questions. Thanks for Yes.

line? color elaborate going On the Could you were thought Patrick give mentioned, us on to quarter. little oil strong you a business, that a a you natural what’s little bit product and fourth that going in – on you have gas and

Patrick Lynch

installations greater and demands more Just previously. than

mean, and trend, more from repeat customers orders. new I orders, getting orders going is So on everything existing we’re

right So business for good very now. looks us

Gus Richard

in the same any Okay, got to headwinds remaining are it. lockdowns they color be opening the China, or those of up again. And there? diminished Have as it then in terms appears

Patrick Lynch

back from lockdown, I hopefully, there. country again. And were was overall had an going Chinese about the and is – everything for see we’re going up Well, but XX% while to last increase take economy a to those lockdowns a about fairly lifted of in we recently. was, – now mean about not XX% the picking up And will to we – pick basically XX%. the it’s

normal things in maybe months basically so. back So we expect X to be or

Matthew Wolsfeld

what address of we – about quarter China $X our to probably expected were by They are kind be Hi, just during short about of them third that, by sales to the million. we what further were. sales off million expected the $X

third And at larger QX. we seen QX for have looking China expectations quarter, less would that were was total $XXX,XXX just So than year. last they about in $XXX,XXX increase sales what a were the to

was obviously, Just month looking results looking at best lockdown. the saw June their opening – but the July, just seen during any obviously have just don’t significantly month, we the obviously we better their since than visibility June that we’ve – – from their into

time So it customers are up be fourth up up back there during looks catch various and like to going the to some to China quarter. the and things open is in starting

Gus Richard

then But how Thank a a it. plastic think week next your bans think the new California are there in just banning you India single-use has years? you plastic, and this early if compostable? movement I last is this this seeing in bill over pollution. it’s addressing in understand. of I from was the is really passed And Friday, – customers plastic couple use wondering will – you been – and I of Are you plastic, legislation, last impact you you. Got terms quarters any do of these – of

Patrick Lynch

hope sales. certainly we we that Well, increase

India, course, enforcement. of and concerns of the have One is of law we in implementation actual always

course, available be see to in would expect California, in going in to to on nice India, parts at long-term. in And the I lowest we’re the that expect certainly, but to as certainly property if in the be the future. And in country a amount there other we’re of we changing total of know well So increases the expecting have force. impact our don’t things sales get that we

Matthew Wolsfeld

I XX certainly, as states to positive that mean, for that that The recyclable like so Patrick and effect other into sold Just that, the XXXX, is we hope see certainly add requires or said, by to is packaging of going follow. something impact that be to certified law compostable and California the in state Natur-Tec.

Gus Richard

Got it. Got it.

you so it me. Thank that’s for Okay, much.

Operator

you. Thank

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

Joseph Vidich

was It market looks your seeing or there my in Natur-Tec and made. guys. Congratulations talk progress competitive wondering either really and for for if your more bit less? position makes product competitive just Yes. question. the you about out in little taking Thanks maybe morning, on Good I could – what you’re being great. a what the

Patrick Lynch

in what you’re commonly basically if we our we number to different and with improve take and them available in know detail, any the ways. is product would take resins modify line available compostable of a them we that them do in Well, familiar market you the

mechanical properties First of molding product more the – them processes, we our be injection so in finished all, make faster than produce and alternatives. have the extrusion process competitive – and you will can more to stronger easy

time molding distinguishing And to fail us So, for long brought market. ourselves their technology that of the a how of try a over us been develop has customers, in very injection period own came to multinationals, to instead. have number large for example, then and in we that’s and this example,

and seen in the future. grow we holder large have be just supplying Europe, injection to a nicely case near with one started in United that in States multinational we We large the expect which to the have

of dynamically magnitude that’s start one this expectation is grow just we year that the to on with expect I $XXX,XXX maybe and think in $X of the in the the Europe, million, large first when for future. the order customer to

Joseph Vidich

that or Europe recyclable in great. materials? mandate place legislation have Does That’s compostable

Patrick Lynch

I think be country-to-country. different from it might

I is reduction. So, production the legislation think a Europe it’s about not conscious certainly, there situation. the very But Europe-wide changing. and is waste And waste

So, we growing from a seeing are sector. demand that

Joseph Vidich

Thanks appreciate much. very That’s great. the answers. I

Patrick Lynch

Sure.

Operator

you. Thank

Our Jefferies. next question comes Jim with from Dowling

Jim Dowling

your inflation keep client In attempt increases, the peg have so don’t for get going to back and ask put you an automatic to contracts you morning. money? Good to able pricing the are to into more that

Patrick Lynch

multinationals. It the rise some and you of depends can’t shifting last you adjusting a it’s in case-by-case inflation. been some basis. on cases, cases, things over have In year as the Certainly, can given with – dynamically easily negotiate

through we we with pretty reasonable in on – whole, up being the to where increases pace on we And but need right now, have to to our get able put much be. basis. timely are a been So price

Matthew Wolsfeld

to and product. joint that, a XX% in of the our of America, say based also spot pay subsidiaries, pricing that based price I to Jim, produce North add our to most business on to be on ventures we through would about in Just the tends

pricing it price based where that run typically with resin product have correlation in we So, of where place or a on perfect into with put our time. issues orders resin, in price orders, would are we with the at blanket move stock

to So, the catch have resin been the to those situations our we with pricing are pricing of where the looking market. commodity up increase

in catch the we to seen resin stabilization uncertainty like over kind quarter reflected certainly four are gross say nine feel have quarter. moved will the we our for months. saw third to gross But three May for third gross around have specifically changes products and in margin that, you highest was some the certainly the difficult and further during margin traditional see VRS again – past world, fourth second our pricing the be it’s past had the of made of to I we have quarter in will would or we up. we prices and months. still given quarter months the in the so the that well, And economic we it But seeing we address the was industrial that been that margin

that the resin price are so to finally of to the we we with And we made seeing getting benefits the deal where point the changes are changes.

Jim Dowling

Thanks.

Operator

Thank you.

from with comes Capital Our next Invicta question Management. Gregory Weaver

Gregory Weaver

in your one of my morning But it’s I questions. fourth Good you pricing getting quarter, quarter so are gentlemen. just the am ones? was understand – That a to the increasing now of full prices or again prior

Matthew Wolsfeld

It’s both.

weren’t changes of quickly One now if looking watching at is we paid. plays the that that to than increase more kind going to idea be out. the months, are and price closely with are we how resin coming that mirror in to in an see the of price much past move the we the But the changes, is if things had going are we to there right kind waiting of additional

rather the typically more with stock that and years, we with our expectation pricing constant seen holding those our changes XX pricing over than falls rises reflect so have the we that in are to to the is resin XX product deal years going stock market. the change frequently could more we past And

Gregory Weaver

Got it.

to it’s think about you good the could supply due chain? in And more still sense. of in side, constraints sold you the supply easing, chain but quarter? terms just to makes on Natur-Tec the Were constrained I That products the Okay. hear output have

Matthew Wolsfeld

were and see to the be going – product inventory as some and third and cycle backlogs is but see were just backlogs sorry, quarter products had for. of There sales had quarter it we demand, the the strong through that the fourth looking entire and that a Natur-Tec some customers to the our the also get quarter are able Natur-Tec I chain that supply – increased catch-up just to Natur-Tec stacking products our takes the – sales. certainly that to are place well, supply in shelves be There given certainly given time the certain in with we all constraints some were We process. expectations essentially am

May So, customer raw from place have fill from able and – we feel really in be that adequate demand. kind materials of all on, in place to forward adequate going to inventory we

Gregory Weaver

Okay, That’s alright. helpful. gas I take shot And another oil here, will Gus at Patrick, and after the tried.

So, with any there? and offshore geographic is or pipeline there particular that tanks, platforms, are in seeing strength you any color areas the

Patrick Lynch

Well, it’s of everywhere. a bit little everything

We of the in are getting activities point, India East. at good getting some Middle more this orders out

in Africa, America, Canada. some getting America, North U.S. Europe. in in South are We and the activity

taking really much at pretty in it’s So, world over a the of this – all number in off point.

Matthew Wolsfeld

No of of oil that is are largest and and in really business. the pipeline the we that the gas kind we we pun intended, are have opportunities with that but had dealing customers seeing history of the

Patrick Lynch

got customer technologies next to XX they across familiar I mean them sending we who entire where people visit to with system. our just more to have week is get their can implement one us

Gregory Weaver

Alright. sounds it’s whale are of couple not broad-based types, in to really but demand, a it’s there, all great Because onesie, if clients but so yet. good. pulling Yes. they That you potential got really see twosie

Patrick Lynch

Correct.

Gregory Weaver

Alright.

I been Okay. waiting. have good. Very Well,

hopefully. close, getting are We

Thank So, good you. luck.

Operator

back question-and-answer to now I Thank Patrick you. closing remarks. to the like concludes our That session. Lynch would turn conference for

Patrick Lynch

your I NTIC. us in would joining this you day. to a interest Hope just have for morning like thank and great everybody

Operator

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

You may now disconnect.

Northern Technologies International (NTIC) 7 Jul 222022 Q3 Earnings call transcript