NTIC - Earnings call transcript Q3 2024 | Northern Technologies International Corporation

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Operator

Good day, and welcome to the Third Quarter 2024 Earnings Conference Call and Webcast. [Operator Instructions].

As a reminder, this call 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 under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and that NTIC desires to avail itself of the protections of the safe harbor for these statements.

those that implied could due Form by risks uncertainties, advised those materially to XX-K, be most press and or NTIC's releases. on stated the including and subsequent also quarterly actual report Form differ results from certain recent reports Please annual in XX-Q on recent described forward-looking statements Please SEC. the will make read these with reports and other future filings that NTIC its any forward-looking or statements. duty disclaims NTIC revise to update

over I would to turn call like now Patrick to the Lynch.

G. Lynch

NTIC's Lynch, NTIC's available Patrick earlier I'm and release I'm our Wolsfeld, morning. Good and third at issued Matt with CEO, results CFO. regarding is here this morning was press A ntic.com. quarter fiscal XXXX financial

a a discuss year-over-year During note in review our fiscal the comparison to key today's we XXXX of our question-and-answer that year. we third from and when from are we year aspects various third will current then previous conclude business quarter session. brief our update quarter results. Please with third to referring call, Provide performance, fiscal quarter the financial fiscal

sales We growth Our compostable record reflect India plastic ZERUST progress navigating resins. the oil we're specialty Natur-Tec on macro gas our within while fluid in capitalizing and North markets. a America results environment growing Natur-Tec and continued third quarterly demand making, driven for quarter by our achieved and products and

negatively the quarter, approximately orders be to fourth the our results. in quarter timing $XXX,XXX shipping delays caused to of the While moved from third third impacting quarter

solutions and Demand for our is expanding. gas oil

year-over-year challenges margin chain at our particularly encouraged as supply in and aimed significant improvement As continued a I'm working fourth oil the offsetting raw we quarter. rebound and in the gross initiatives Furthermore, material intended. demonstrating our in sales are a expect that result, by gas

months fiscal will higher due to improved anticipate for allocating positive credit. working to to net positive from XXXX, May Year-over-year the payments existing initiatives changes to generate cash intend profitability balance pay million, the continue continue to ended flow we that primarily capital our excess dividend the continue XX, to of will $X.X down activities by growth in our to X operating that XXX% on flow remainder cash using XXXX. and quarterly line throughout and support cash of improve We while operating capital. income We and

fiscal we remainder As by growth look driven top gas believe are ZERUST and to categories. for oil the well we of positioned we XXXX, Natur-Tec our product and line

performance profitability also remain joint enhancing the international our We focused of and on ventures.

operations North growth of continue be opportunities aimed we Most across and XXXX growth with notably addition, and am India. and markets. pleased profitability. In believe to fiscal NTIC's at strategic in our another good performance will supporting investments our additional in make America, Brazil I year

in May XXXX, with So quarter drivers for more examine let's overview, this ended the detail. XX, third the

Ukraine linked related to venture, and customer loss million. and For net sales year-over-year decreased ended million our softer joint of the previously joint a externalities sales the quarter, XX, within net Germany, XXXX. our a other $XX.X largest the X.X% demand sales May consolidated X.X% experienced to for third decreased to disclosed consolidate statements, in the war year prices in compared Russia. $XX.X quarter net our decrease do third financial X.X% the primarily quarter fiscal Excor as to due higher the compared total not period which by we ventures, to by a our region to the energy Total and prior to between

experienced geography NTIC support owned subsidiary sales our higher by and X million. growth. sales net We China and XXXX market. into have the in and trends helping remainder increased Sales in consecutive sales year-over-year China Fiscal demand $X.X on that will year-over-year wholly improve incremental XXXX of throughout has to quarter profitability fiscal remain anti of quarters optimistic fiscal X.X% by a this cautiously XXXX, this basis third China to in stabilized

committed are to steps in the we Chinese enhance this provides our geography. to long-term and opportunities to We operations and market the continue take our bioplastic segments, industrial

As China for will the geographic we likely believe market result, to becoming a significant continue future. in a us

moving oil and to gas. Now on ZERUST

For to end year. and XXXX, ZERUST delayed expected quarter. was got quarter approximately fourth the ZERUST for of fiscal in third quarter, XX.X% sales gas of that $X.X with primarily million were The and the in but XXXX the last period sales of $X.X the associated third $XXX,XXX until gas oil to decrease the oil ship million sales compared same year-over-year fiscal were before fiscal beginning the

$XXX,XXX these XX, fiscal sales coupled of gas in orders make the are in anticipated delivery now XXXX, booked our oil August quarter to strong with exceptionally for for solutions. ZERUST sales, fourth So and before

tanks Overall, and and demand oil pipeline solutions, corrosion. focused ZERUST continues from both and customers new storage gas oil casings to primarily above-ground today grow existing our of on protecting among which still

contribute fiscal overall XXXX be good our of growth as believe and ZERUST scales further we that continues result, will profitability. and a As to to for business another gas oil year this

are optimistic XXXX. trends these We fiscal will continue into

in growth well Natur-Tec to sales was as third a with during and during of relationships were the quarter expanding our new business. strong as existing the a America year-over-year record India $X.X XX.X% and Natur-Tec North customer of Turning million. customers. result third quarterly to wins increased bioplastic Natur-Tec quarter

that expect to XXXX and to plastic municipal resin plastics. applications compostable We interest certified to conventional demand has sales Natur-Tec new certified as compostable XXXX. market and continue compounds alternatives for into commercial see Globally, increased well robust products and of continue growth programs we plastics use fiscal as fiscal in throughout

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

sales since across Natur-Tec several growth support in into also of continue X Sales larger on XXXX. future separate we parts Natur-Tec capitalize India, strategic are in business doubled and also single in are In warehouses capacity investments to to opportunities. We growth fiscal make order facility our manufacturing a expected region. the have current consolidating adding Brazil to and

process support the the as in facility a country to are region. as we opportunities adding of both growth in that So broader well

Circle operations came At our outsourced domestic online manufacturing in-source location, to as part demonstrated to Pines, certain previously We to of improve invest processes this year. new that able the as by our were margin. that we've this earlier efforts been facility also in Minnesota gross continue

shaping As be a strategic you and XXXX can NTIC. see, fiscal strong up is of to profitability growth, investments year for

and direction are by the is headed. momentum positive We underway the excited NTIC

venture Matt, to Before want the global work over dedication hard of joint to turn of team I call and and the acknowledge partners. employees both our I

results shareholders are the this call drive direct third in summarize overview, the efforts. of Matt are With success and to we for future pursuing me their now to over quarter. Our a turn XXXX our recent opportunities let result the for to fiscal value our Wolsfeld financial the

Matthew Wolsfeld

that across to our and because Thanks, XXXX year-over-year prior trend of third fiscal the the income venture, of operating ventures down year net operating German was primarily of his was lower X.X% third fiscal Sales joint in lower X.X% The the prior venture reviewed quarter. ventures. joint Compared to the due Patrick. income year joint other prepared period, income our by profitability resulting many sales fiscal in the reduction NTIC's compared Joint declined partially the for global offset XXXX remarks. improved venture joint across quarter fiscal to net in X.X% consolidated decreased Patrick in sales our period.

increased third $X period fiscal personnel due fiscal for Higher $X.X expenses costs. XXXX operating were operating to primarily million Total for million to quarter last the to year. X.X% compared expenses increased same

profit XXXX in-sourcing improvement XXX the operating net primarily of actions period. a XX.X% to the XX, taken were result sales, percentage fiscal prior fiscal May disruptions of a the as net the and for during XXXX, XX% for offset point period. of raw ended expenses supply challenges a Gross sales compared third during X year XX.X% prior months percentage was material compared basis various to As quarter of was to XX.X% by the production. chain company year The including successful fiscal

$XXX,XXX $X.XX fiscal fiscal to quarter Net for quarter. XXXX diluted the XXXX per diluted million for share the or share NTIC was attributable income third per or third $X.XX compared $X.X to

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

May as of million of borrowings This existing million. $X.X $X XXXX. our million we to included XX, compared XXXX, XX, under in debt $X.X of credit August had outstanding revolving As line of

XXX% We core dividend cash profitability existing cash positive X in in pay year-over-year and XXXX, cash generated for The our operating XX, in improvement of flows May we continued generate line we by changes of plan credit. on driven our support quarterly ended business, and $X.X million in our for XXXX, assets liabilities. X primarily May to operating million was the balance Throughout stronger flow operating the compared XXXX. which months XX, down ended $X.X months flow, cash the invest fiscal expect growth the to current remaining revolving and to

On balance remaining in of May of primarily XXXX, working invested the $XX.X with the joint XX.X% had XX, ventures, million which investments in within $XX.X million company cash other capital. or

market the prepared business XXXX. reflect stockholders successfully quarter, strategies. and diversification pursuing navigating third quarter XX, environment, payable our and of a X, making common on To remarks, share on of was Board Directors XXXX dividend May that while third a we're to fluid end cash our product, results quarterly NTIC's conclude fiscal During XXXX, financial progress our of per geographical declared $X.XX record May

demand We're market. North year. oil our the gas expect and robust across our continue and remainder trends and American throughout of And bioplastics seeing fiscal we stable trends to growth global these

good As we're NTIC, a XXXX our and another higher excited be by result, sales believe for prospects. long-term year we of fiscal will profitability and

Patrick to and happy your take questions. With overview, this are I

Operator

[Operator question with from Instructions]. vanclemens.com. Timothy Clarkson our comes And first

Timothy Clarkson

this I the -- at a bit. Northern fixed increase wondering saw what I was typical were obviously, up little Tech mean year? was Just that for your in about expenses salaries

Matthew Wolsfeld

to want year September fiscal year. was X year, X% X%. to increase the We salaries say changed average Last probably of I with each the

Timothy Clarkson

Okay.

gas, Okay. And any buying, looking same changes people? oil still big players the the areas, Is new out in significant are growth terms in compostable who the seeing are and positives there? any there compostables? about that that in of X Or the you're say, at

Matthew Wolsfeld

opportunities Asia. the similar new into people. North certainly and whether Southeast of in other we're There's have matter or Europe seeing that across a throughout getting we expanding America then the markets It's they're that really distributors

seeing world same but just national municipal compostable they're the legislation around use types the we're even use plastics legislation, is to and due So to of continuing conventional ability seeing that the market plastics legislations to increase to we're the or the instead. related various state that players, of

space a So into into more there's and the the from it a lot get standpoint. getting people industry just consumption

Timothy Clarkson

Right.

finished you on finished the you a the are the product? selling product? selling compostables, Now makes that Are group typically,

Matthew Wolsfeld

various blended to now had products We're We we selling finished certainly bags, trash out that or opportunities newer the where bin cutlery. both. towards their we're we're And selling own resin, the have. with started of a of selling specialty customers resins working and the the we've proprietary can so companies make out the selling liners of lot that are products sales

the modifying compostable taking currently base specialty making have make so essentially they're the that resin we're plastics and a ability anything So out resins companies that to plastic. them make a to conventional of

Timothy Clarkson

Which is profitable? more

Matthew Wolsfeld

appears close probably They're market of long low We gross term, feel resin resin like market. standpoint. bigger from the able the to to pretty being sell of a just container specialty margin quantities be

kind are transitioning. as far how of things As

value being a is able So of which gross size not matter of the better. of as the of opportunities. matter margin just It's to kind much a

about of caseloads containers or pallet resin selling some opportunities in you're compared you're finished when you're loads talking products, we're selling where of So selling ultimately resins, to of the selling product. the

the but of both after going certainly So it's matter opportunity, just areas. we're a

Timothy Clarkson

in the How of gas? much Any seeing? about buying product? you've on Or oil the and same people it is the changes guys pretty the been kinds

Matthew Wolsfeld

What it's we're certainly, base. adoption seeing of is -- compared It's alternative solutions. to seeing the more technology customer of we're a VCI the solution using the similar

and proposition moving we customers, the And looking that what people so solution the kind when understand more brings. forward of at we're when going presenting to are when value-added are to opportunities, and we trade shows, it the

strong have the is a oil out a are gas little with oil but the from say doesn't things look point still pushed a significantly starting you an after seeing half will oil our stronger I get always of that from will like at numbers. it Obviously, of pipeline, second and now, and results, that's hand expansion we why we expected earnings the opportunities POs quarter try be that year case. could from but make in had, second this volatility an than and gas I know the say the and was been to standpoint, an oil oil last -- half highlighted or gas we the POs we're stronger quarter quarter the of tell pretty standpoint. of able the really gas of we dates now. I that first going last kind it will it's half group can on POs actual of standpoint. So actual third gas know that we've can have from that it kind companies of quarter it I this -- standpoint, and based fourth the a an the This actual the in significant. delivery not fourth in I talked of the in the disappointing see third And the time, just right they've that -- They're -- year to year being about matter more and and to results. But to kind call review to the

Operator

Instructions]. [Operator

comes question with Richard Gus next Northland. Our from

Auguste Richard

Just there of exposure weakness end year-over-year? Or function industrial, closing that to that's the Germany? a an is on that market Is that be down year-over-year. ZERUST was in down

G. Lynch

are ongoing down were that's prices pressure we mentioned, but war higher also ventures our we and the Ukraine Europe. joint for had As a feeling with lost customer, based we energy externality overall causing Germany in the European in on economic bit example, the a because significant

Auguste Richard

oil the half, In first and And it. numbers. million $X.X just gas. ZERUST then round you did looking at Got Okay.

of You had sort million it $X assume a QX, rate. on roughly quarter run soft to that know I reasonable is volatile. you're a it's

that the delayed $XXX,XXX that Going for -- roughly that QX And I am number right rate? QX? into added with and QX, $XXX,XXX got the up just take coming if run I got to in

Matthew Wolsfeld

look as just to But think the than said, that's is as pretty I it the things if oil look opportunities. at. X stronger where and fair I and a But that's into You even could at mean, oil $X some gas, with of mean, gas run of be run I we that. for the million size far I I the rate baseline of with volatile. that, that

Auguste Richard

up rate little Right. $X reasonable in or then volatility million think base you oil and do to going remain at And assume million rate? gas, plus maybe quarter about it bit, the is thinking $X is run million, that to increment you quarter XXXX that a run $X.X a

Matthew Wolsfeld

third looking to or I what of think the we're I think continue kind that fourth as we exit you -- to I is matter the fiscal going quarter-by-quarter, it's quarter, moving the increase. looking at than mean targeting kind of certainly rather think 'XX and a of see in growth if I you're kind of but average the more. -- that's that at just

Auguste Richard

your big rate of going just to thinking the And portion has Got you business very the a next Europe of is been -- is In What do that for helpful. going it. think business, stabilize? that do industrial. revenue, growth to over then years couple about ZERUST That's back industrial. you

Matthew Wolsfeld

our call seen X.X about about with in quarters that first the look bit it, this increases get kind ways of growth or standpoint continue that the or venture able beyond put of at from kind to look if positive have Well, see look revenue we there's X.X QX the of is And EUR around year a -- from player I kind we're I it's out The have. they're ventures, to largest of X different trough of venture of EUR QX a, row or as we X out we're seen quarters a joint is look all it. at little seeing expectation of the going And kind help. Similarly, the that to X if that. to of growth that in we million. tenant coming a last revenue of coming standpoint, a German at trend, out German we From will million bottomed if with you similar at that tenant. increases. joint back One a kind standpoint, a X German out -- together kind to have of quarter a each individual a of if obviously, at of bottoming joint in kind from

So we standpoint. operating income are of bit which out starting from joint a is of to little rebound see helping venture a a coming contribution Europe,

you so when point -- about preparing on I that call, earlier were we thing I'll in 'XX, know third the fiscal other industrial The last numbers of in our that sales quarter talked the the out talked business of when It industrial quarter. we probably the and to QX, was QX last compared the North above in a well America. that strongest year quarter very we've QX down about year. specifically being of third industrial average last had, was strong is

X -- it why comparative standpoint, -- be North down I'm a industrial $X.X at kind until last QX of like standpoint, And a at we're that's to since the an QX in and million From quarter. million of expect about year this America down. When in in So we kind we've we trailing looking at $X.X ]. this kind just quarter averaged where a from to quarter we're of are still X X North sorry, at comparative $X.X on America, million we've about that's reasons compared year, is of and average $X.X look kind why QX. of [ feel I $X.X averaged of of of QX revenues industrial the that's million, year, this or it's

kind see last of is in of North the just make it a to sales But I is the why in of so because QX so the reason that America. that year industrial part QX was going looks high. Does poor certainly, sense. So hope think in we're rebound

Auguste Richard

for fourth then seasonality And the on thoughts growth is, going Okay. just quarter? business your and that rates for forward

Matthew Wolsfeld

are and kind But for XX% third quarter quarters the it's will typically, growth that what the the the higher because we fourth by whether we America stronger shown call of or the or do typically subsidiaries happens that rough season X% GDP typically, X%. of areas. given in There's more, target industrial rate North like typically, industrial XX% markets summer. We market, number. some Well, of the Germany. growth us across that than and mature industrial India XX%, or have some just seasonality and kind sales outpace North during America and XX%, a But in that historically see like Brazil the China we it, from other have have standpoint, we of target ZERUST an

Operator

no you day. a and This now have showing conclude may disconnect. I'm Everyone, participation. does your for further you Thank great questions. the program,

Northern Technologies International (NTIC) 11 Jul 242024 Q3 Earnings call transcript