Q4 2023 Northern Technologies International Corp Earnings Call

November 21, 2023

Speaker 1: You

Yeah.

Speaker 2: Good day, and thank you for standing by. Welcome to the Northern Technologies International Corporation Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star-1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star-1-1 again..

Good day and thank you for standing by welcome to the Northern Technologies International Corporation Conference call. At this time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one.

One on your telephone.

We'll then hear an automated message advising your hand is raised to withdraw your question. Please press star one one again.

Yeah.

Okay.

[noise].

Good day and thank you for standing by welcome to the Northern Technologies International Corporation fourth quarter fiscal year 2023 earnings.

Speaker 2: Welcome to the Northern Technologies International Corporation Fourth Quarter fiscal year 2023 earnings conference call and webcast.

Conference call and webcast at this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.

Speaker 2: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session.

Speaker 2: To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again.

Ask a question during the session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one one again please be advised that today's conference is being recorded as part of the discussion today the <unk>.

Speaker 2: Please be advised that 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.

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.

Speaker 2: 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. 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.

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.

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 include.

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 the S. E C. NTIC disclaims any duty to update or revise.

Speaker 2: 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 the SEC. NTIC disclaims any duty to update or revise its forward-looking statements. I would now like to hand the conference over to your speaker today, Patrick Lynch, CEO . Please go ahead.

Its forward looking statements I would now like to hand, the conference over to your Speaker today, Patrick Lynch CEO. Please go ahead.

Good morning, I'm, Patrick Lynch, Ntic's CEO and.

Speaker 3: Good morning. I'm Patrick Lynch, NTIC's CEO , and I'm here with Matt Walsfeld, NTIC's CFO .

And I'm here with Matt Wolsfeld Ntic's CFO.

Please note that our press release regarding our fourth quarter and full year fiscal 2023 financial results was issued earlier this morning.

Speaker 3: Please note that a press release regarding our fourth quarter and full year fiscal 2023 financial results. Was issued earlier this morning. And is available at ntse.com.

And is available at NTIC Dot com.

During today's call, we will review various key aspects of our fiscal 2023 fourth quarter and full year financial results provide a brief business update and then conclude with a question and answer session.

Speaker 3: During today's call, we will review various key aspects of our fiscal 2023, fourth quarter and full year financial results, provide a brief business update and then conclude with a question and answer session.

Speaker 3: Fiscal 2023 marked NTIC's third year of consecutive record sales.

Fiscal 2023 marked ntic's third year of consecutive record sales.

Speaker 3: despite the economic challenges growing in both Europe and China, as well as rising interest rates in the US.

Despite the economic challenges growing in both Europe, and China as well as rising interest rates in the U S.

Speaker 3: Our continued sales growth success demonstrates the increasing value we provide our global customers, as well as the efficacy of our strategic focus on diversifying our products and markets and geography.

Our continued sales growth success demonstrates the increasing value, we provide our global customers as well as the efficacy of our strategic focus on diversifying our products and markets and geographies.

Speaker 3: I am particularly encouraged by our top line results within the large oil and gas and compostable plastics market.

I am, particularly encouraged by our top line results within the large oil and gas and compostable plastics markets.

Speaker 3: While fiscal 2023 proved to be highly successful with respect to diversifying our product mix and our end markets, at the same time, we also found sales conditions for our core zero industrial solutions to be very challenging in both Europe and China.

While fiscal 2023 proved to be highly successful with respect to diversifying our product mix and our end markets at the same time. We also found sales conditions for our core zero industrial solutions.

Very challenging in both Europe and China.

Speaker 3: Throughout the fiscal year, our European joint ventures felt the direct pressures of persistent inflation, raw material and energy cost increases, as well as the indirect dampening effects of geopolitical conflicts on market demand.

The fiscal year, our European joint ventures felt the direct pressures of persistent inflation raw material and energy cost increases as well as the indirect dampening effects of geopolitical conflicts on market demand.

Speaker 3: These trends impacted both top line results and overall profitability during fiscal 2023.

These trends impacted both topline results and overall profitability during fiscal 2023.

As we enter fiscal 2020 for demand within our North American <unk> industrial market remains stable.

Speaker 3: As we enter fiscal 2024, demand within our North American ZEROs industrial market remains stable, and we believe we are well positioned to develop additional strength within our ZEROs oil and gas and nature tech businesses.

And we believe we are well positioned to develop additional strength within our zero oil and gas and niche tech businesses.

Speaker 3: We will continue to invest strategically in bolstering our infrastructure throughout fiscal 2024 to support our long term expansion needs.

We will continue to invest strategically in bolstering our infrastructure throughout fiscal 2024 to support our long term expansion needs.

Speaker 3: We will also be focused on improving our cost structure and profitability by having additional operational efficiencies strengthen our gross margin.

We will also be focused on improving our cost structure and profitability by having additional operational efficiencies strengthen our gross margins.

Speaker 3: As a result, we expect fiscal 2024 to be another good year of top line growth and improved bottom line profitability.

As a result, we expect fiscal 2024 to be another good year of topline growth and improved bottom line profitability.

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

Speaker 3: So with this overview, let's examine the drivers for the fourth quarter in more detail.

Speaker 3: For the fourth quarter ended August 31st, 2023, our total consolidated net sales increased 2.3% to a fourth quarter record of $20.7 million as compared to the fourth quarter ended August 31st, 2022.

For the fourth quarter ended August 31, 2023, our total consolidated net sales increased 2.3% to a fourth quarter record of $20.7 million as compared to the fourth quarter ended August 31 2022.

Speaker 3: Broken down by business unit, this included a 53.1% increase in zero oil and gas net sales and a 2.7% increase in nature tech net sales.

Broken down by business unit. This included a 53, 1% increase in its U S oil and gas net sales and a two 7% increase in nature take net sales.

Speaker 3: These increases were partially offset by a 3.6% decline in zero industrial net.

These increases were partially offset by a three 6% decline in <unk> industrial net sales.

Speaker 3: Our total net sales for the fiscal 2023 fourth quarter by our joint ventures, which we do not consolidate in our financial statements, decreased year over year by 6.6% to $24.2 million.

Our total net sales for the fiscal 2023 fourth quarter by our joint ventures, which we do not consolidate in our financial statements.

Decreased year over year by 6.6% to $24 $2 million.

Speaker 3: Xscore Germany, our largest joint venture, experienced a 24% decrease in net sales during that period.

Exco, Germany, our largest joint venture experienced a 24% a decrease in net sales during that period the.

Speaker 3: The year-over-year decline was due primarily to softer demand across the territories serviced by our global joint ventures, as I explained previously.

The year over year decline was due primarily to softer demand across the territories serviced by our global joint ventures as I explained previously.

Speaker 3: Fiscal 2023 fourth quarter net sales by our wholly owned NTIC China subsidiary decreased by 9.6% to $3.5 million due to weaker economic conditions on a year-over-year basis.

Fiscal 2023 fourth quarter net sales by our wholly owned NTIC, China subsidiary decreased by 9.6% to $3 $5 million due to weaker economic conditions on a year over year basis.

On a sequential basis NTIC, China sales increased by six 4%, which was the second consecutive quarter of higher sales sequentially Steve.

Speaker 3: On a sequential basis, NTIC China sales increased by 6.4%, which was the second consecutive quarter of higher sales sequentially.

Speaker 3: Stabilizing demand trends are encouraging and we are cautiously optimistic that demand in China will improve throughout fiscal 2024.

Stabilizing demand trends are encouraging and we are cautiously optimistic that demand in China will improve throughout fiscal 2024.

Speaker 3: Despite challenging conditions in China during fiscal 2023, we remain committed to the Chinese market and therefore continue to take steps to enhance and protect our Chinese operations as we continue to believe China will likely become our largest geographic market in the future.

Despite challenging conditions in China during fiscal 2023, we remain committed to the Chinese market and therefore continued to take steps to enhance and protect our Chinese operations.

As we continue to believe China will likely become our largest geographic market in the future.

Speaker 3: However, it is important to note that NTIC China recorded a small net loss during fiscal 2023 compared to net income over $1 million in each of the three years before the COVID pandemic began. Now, moving.

However, it is important to note that NTIC, China recorded a small net loss during fiscal 2023 compared to net income over $1 million in each of the three years before the Covid pandemic began.

Now moving onto <unk> to oil and gas.

Speaker 3: Fiscal 2023 was a transformative year for Zero Waste Oil and Gas as full year oil and gas sales increased 69.3% to an annual record of $7.8 million.

Fiscal 2023 was a transformative year for zero oil and gas as full year oil and gas sales increased 69.3% to an annual record of $7.8 million.

Speaker 3: For the fiscal 2023 fourth quarter, sales increased 53.1% to a quarterly record of $2.4 million.

For the fiscal 2023 fourth quarter sales increased 53.1% to a quarterly record of $2 $4 million.

Demand continues to grow from both new and existing customers for our <unk> oil and gas solutions, which today still focused primarily on protecting above ground oil storage tanks and pipeline casings from corrosion.

Speaker 3: Demand continues to grow from both new and existing customers for our Xeris oil and gas solutions, which today still focus primarily on protecting above ground oil storage tanks and pipeline casings from corrosion.

Speaker 3: As a result, we believe fiscal 2024 will be another strong year for zero oil and gas as this business further scales and continues to contribute to profitability.

As a result, we believe fiscal 'twenty 'twenty four will be another strong year for zero, so oil and gas as this business further scales and continues to contribute to profitability.

Turning to our nature Tec Bioplastics business unexpected nature Tech sales remained strong during the fourth quarter and increased two 7% year over year to a quarterly record of $4 $9 million.

Speaker 3: Turning to our NatureTek bioplastics business, as expected, NatureTek sales remained strong during the fourth quarter and increased 2.7 percent year over year to a quarterly record of $4.9 million.

Speaker 3: We expect NatureTech sales growth will remain strong throughout fiscal 2024, supported by favorable demand in North America and India, and significant new customer wins and orders in these geographies.

We expect nature Tech sales growth will remain strong throughout fiscal 2024 supported by favorable demand in North America, and India and significant new customer wins and orders in these geographies.

Globally, we continue to see growing market demand for new applications of certified compostable plastic products and resin compounds as well as increased interest in commercial and municipal programs that use certified compostable plastics as alternatives to conventional plastics.

Speaker 3: Globally, we continue to see growing market demand for new applications of certified compostable plastic products and resin compounds, as well as increased interest in commercial and municipal programs that use certified compostable plastics as alternatives to conventional plastics.

Speaker 3: As a result, we believe we are well positioned for long-term sustainable growth within our NatureTech Bioplastics business.

As a result, we believe we are well positioned for long term sustainable growth within our niche Tec Bioplastics business.

As you can see our full year and fourth quarter financial results reflect the progress we are making towards growing our business and creating significant value for our shareholders.

Speaker 3: As you can see, our full year and fourth quarter financial results reflect the progress we are making towards growing our business and creating significant value for our shareholders.

While core profitability during the fourth quarter was below our plan, primarily due to the challenging conditions in Europe and China.

Speaker 3: While core profitability during the fourth quarter was below our plan, primarily due to the challenging conditions in Europe and China, we are working hard to improve our cost structure, maintain a strong gross margin, and leverage the investments we are making across our infrastructure by growing sales.

We are working hard to improve our cost structure maintain a strong gross margin and leverage the investments we are making across our infrastructure by growing sales.

Speaker 3: Before I turn the call over to Matt, I want to acknowledge the commitment of our global team of both employees and joint venture partners.

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

Speaker 3: Our success throughout the fiscal year and the opportunities we are pursuing to drive value for our shareholders in the future is a direct result of their efforts.

Our success throughout the fiscal year and the opportunities we are pursuing to drive value for our shareholders in the future is a direct result of their efforts.

Speaker 3: With this overview, let me now turn the call over to Matt Wolsfeld to summarize our financial results for the fiscal 2023 fourth quarter.

With this overview, let me now turn the call over to Matt Wolsfeld to summarize our financial results for the fiscal 2023 fourth quarter.

Speaker 4: Thanks, Patrick. Compared to the prior fiscal year period, NTIC's consolidated net sales increased 7.7% in fiscal 2023 to an annual record and grew 2.3% in fiscal 2023 fourth quarter because of the positive trends Patrick reviewed in his prepared remarks.

Thanks, Patrick compared to the prior fiscal year period, and he achieved consolidated net sales increased seven 7% in fiscal 2023 to an annual record and grew two 3% in fiscal 2023 fourth quarter because of the positive trends Patrick reviewed in his prepared remarks.

While sales across our global joint ventures declined six 6% in the fourth quarter joint venture operating income increased 39, 6% compared to the prior fiscal year period as a result of a one time gain on liquidation of a previously written off investment in our former joint venture in China Tianjin Zero.

Speaker 4: While sales across our global joint ventures declined 6.6% in the fourth quarter, joint venture operating income increased 39.6% compared to the prior fiscal year period as a result of a one-time gain on liquidation of a previously written-off investment in our former joint venture in China, Tianzhen Xirus, of nearly $2 million.

Of nearly $2 million.

Speaker 4: For fiscal 2023, sales across our global joint ventures decreased 3.3%, while joint venture operating income increased nearly 11% compared to the prior fiscal year.

For fiscal 2023 sales across our global joint ventures decreased three 3%, while joint venture operating income increased nearly 11% compared to the prior fiscal year.

Speaker 4: Total operating expenses for the fiscal 2023 fourth quarter increased 23.4% to $9.3 million and for the fiscal 2023 increased 17.6 to $33.4 million.

Operating expenses for the fiscal 2023 fourth quarter increased 23, 4% to $9 $3 million and for the fiscal 2023 increased $17 six to $33 $4 million.

Speaker 4: Higher operating expenses for both the fiscal 2023 fourth quarter and the full year were primarily due to increased personnel expense. Other inflationary increases in expenses and expenses incurred in connection with our new indirect majority owned subsidiary formed to assume the operations of a former joint venture in Taiwan.

Higher operating expenses for both the fiscal 2023 fourth quarter and the full year, primarily due to increased personnel expense other inflationary increases in expenses.

Baptist incurred in connection with our new indirect majority owned subsidiary formed to assume the operations of our former joint venture in Taiwan.

Speaker 4: Operating expenses as a percentage of net sales were 44.8% for the fourth quarter compared to 37.1% for the prior fiscal year period.

Operating expenses as a percentage of net sales were 44, 8% for the fourth quarter compared to 37, 1% for the prior fiscal year period for fiscal 2023 operating expenses as a percentage of net sales was 41, 8% compared to 38, 3% for the prior fiscal year.

Speaker 4: fiscal 2023 operating expenses as a percentage of net sales were 41.8 percent compared to 38.3 percent for the prior fiscal year.

Gross profit as a percentage of net sales was 36, 5% during the three months ended August 31, 2023 compared to 33% during the prior fiscal year period to.

Speaker 4: Gross profit as a percentage of net sales was 36.5% during the three months ended August 31, 2023, compared to 30.3% during the prior fiscal year period.

Speaker 4: 620 basis point improvement was primarily a result of successful actions taken by the company to address inflationary pressures and the increased sales of higher gross margin zero oil and gas solutions.

620 basis point improvement was primarily a result of successful actions taken by the company to attract inflationary pressures and the increased sales of higher gross margin <unk> oil and gas solutions.

Gross profit as a percentage of our net sales was 34, 8% for fiscal year ended August 31, 2023, compared to 31, 1% for the prior fiscal year.

Speaker 4: Gross profit as a percentage of our net sales was 34.8% for fiscal year ended August 31, 2023, compared to 31.1% for the prior fiscal year.

Speaker 4: NTSC reported net income of $939,000 or $0.10 per diluted share for the fiscal.

NTIC reported net income of $939000 or 10 cents per diluted share for the fiscal.

Speaker 4: 2023 fourth quarter compared to $648,000 or $0.07 per diluted share for the fiscal 2022 fourth quarter. For the full year, NTIC reported net income of $2.9 million or $0.30 per diluted share compared to $6.3 million or $0.66 per diluted share for the fiscal 2022 full year.

2023 fourth quarter compared to $648000 or seven cents per diluted share for the fiscal 2022 fourth quarter for.

For the full year NTIC reported net income of $2 $9 million or <unk> 30 per diluted share compared to $6 $3 million or <unk> 66 cents per diluted share for the fiscal 2022 full year.

Speaker 4: For the fiscal 2023 fourth quarter, NTIC's non-gap adjusted income reduced primarily for the one-time gain related to the liquidation of Tingen Zero.

For the fiscal 2023 fourth quarter Ntic's non-GAAP adjusted income reduced primarily for the one time gain related to the liquidation of Tianjin zero, which was $280000 or <unk> <unk> per diluted share compared to non-GAAP adjusted income of 753.

Speaker 4: which was $280,000, or $0.03 per diluted share, compared to non-GAAP-adjusted income of $753,000, or $0.08 per diluted share, for the fiscal 2022 fourth quarter.

Dollars or eight cents per diluted share for the fiscal 2022 fourth quarter for.

Speaker 4: For fiscal 2023, non-gap adjusted income was $2.6 million per $0.27 per diluted share, compared to $3 million per $0.32 per diluted share for fiscal 2022.

For fiscal 2023, non-GAAP adjusted income was $2 $6 million or 27 cents per diluted share compared to $3 million or <unk> 32 per diluted share for fiscal 2022.

A reconciliation of GAAP to non-GAAP financial measures.

Speaker 4: for reconciliation of GAAP to non-GAAP financial measures.

Is available in our fourth quarter and full year earnings press release that was issued this morning.

Speaker 4: is available in our fourth quarter and full-year earnings press release that was issued this morning.

Speaker 4: As of August 31, 2023, working capital is $23 million, including $5.4 million in cash and cash equivalents, compared to $23.2 million, including $5.3 million in cash and cash equivalents, as of August 31, 2022.

As of August 31, 2023, working capital was $23 million.

Including $5 4 million in cash and cash equivalents compared to $23 $2 million, including $5 $3 million in cash and cash equivalents as of August 31 2022.

Speaker 4: As of August 31, 2023, we had outstanding debt of $6.4 million. This included $3.6 million in borrowings under our existing revolving line of credit compared to $5.9 million as of August 31, 2022.

As of August 31, 2023, we had outstanding debt of $6 $4 million. This included $3 6 million in borrowings under our existing revolving line of credit compared to $5 $9 million as of August 31 2022.

Speaker 4: We generated $5.5 million of operating cash flows for the 12 months ended August 31, 2023, including $2 million in the fourth quarter, which was driven primarily by stronger core profitability, lower inventory levels, and the one time gain from the liquidation of engine zero.

We generated $5 $5 million of operating cash flows for the 12 months ended August 31, 2023, including $2 million in the fourth quarter, which was driven primarily by stronger core profitability lower inventory levels and the onetime gain from the liquidation of Tianjin Derisked on.

Speaker 4: On August 31st, 2023, the company had $23.7 million of investments in joint ventures of which 53.6% or $13.8 million was in cash with the remaining balance primarily invested in other working capital.

On August 31, 2023, the company had $23 $7 million of investments in joint ventures of which 53, 6% or $13 $8 million within cash with the remaining balance primarily invested in other working capital.

Speaker 4: During the fiscal 2023 fourth quarter, NTSU's Board of Directors declared a quarterly cash dividend of 7 cents per common share. It was payable on August 16, 2023 to stockholders of record on August 2, 2022.

During the fiscal 2023 fourth quarter Ntic's Board of directors declared a quarterly cash dividend of <unk> <unk>.

For common share that was payable on August 16, 2023 to stockholders of record on August <unk> 2023.

Speaker 4: Before we turn the call over to questions, I want to address the 8K filing we filed this morning and the amended 10Qs restating our second and third quarter financial statement.

Before we turn the call over to questions I wanted to address the 8-K filing we filed this morning, and the amended 10, Qs restating, our second and third quarter financial statements.

At the start of fiscal 2023, we engaged Deloitte, our tax advisors to analyze and Tennessee as qualification for employee retention tax credits.

Speaker 4: At the start of fiscal 2023, we engaged Deloitte, our tax advisors, to analyze NTSC's qualifications for employee retention tax credits under the CARES Act. They determined that we qualified for $1.1 million in credits and provided detailed support for that position.

Under the cares Act.

They determined that we qualified for $1 $1 million in credits and provided detailed support for that position.

Speaker 4: As a result, NTIC filed for the payroll credits with the IRS and recorded the credits in second and third quarter based on the application date.

As a result, Ntsc filed to the payroll credits with the IRS and recorded the credits in second and third quarter based on the application date.

Speaker 4: During the year-end closing process, the accounting for the credits was scrutinized, and we determined that under US GAAP.

During the year end closing process, the accounting for the credit Suisse scrutinized and we determined that under U S. GAAP.

Accounting, we did not allow for the recording of the credits while we believe the employee retention credit that we applied for in fiscal Q2, and Q3 are more likely than not to be collected we are unable to deem the receipt of the credit is probable under U S. GAAP.

Speaker 4: accounting, we did not allow for the recording of the credits. While we believe the employee retention credits that we applied for in fiscal Q2 and Q3 are more likely than not to be collected, we are unable to deem the receipt of the credits as probable under US GAAP.

Speaker 4: As a result, we restated NTIC's previously issued Q2 and Q3 financial statement.

As a result, we have restated ntic's previously issued Q2 and Q3 financial statements.

Speaker 4: reflecting a decrease in net income of $474,000 for Q2 and $466,000 for Q3.

Reflecting a decrease in net income of $474000 for Q2 and $466000 for Q3.

Speaker 4: We filed with the SEC this morning amendments to our second and third quarter 10 cues with the restated financial.

We filed with the SEC. This morning Amendment to our second and third quarter 10-Q, with the restated financial.

As well as an 8-K dealing all of the line item changes.

Speaker 4: As well as an 8k dealing all the line item changes

Speaker 4: and we plan to update investors on the progress we are making collecting the Employee Retention Tax Credit.

And we plan to update investors on the progress we are making collecting the employee equity.

Employee retention tax credits.

So with this overview and to conclude our prepared remarks, we continued navigating a fluid business environment, while continuing to pursue our product end market and geographical diversification strategies, we're seeing stable north American demand trends and robust growth across our global oil and gas and.

Speaker 4: So with this overview and to conclude our prepared remarks, we continue navigating a fluid business environment while continuing to pursue our product and market and geographical diversification strategy.

Speaker 4: We're seeing stable North American demand trends and robust growth across our global oil and gas and bioplastics markets.

Six markets.

Speaker 4: While the economic environment remains uncertain, we believe fiscal 2024 will be another good year of sales and increased profitability for NTIC.

While the economic environment remains uncertain, we believe fiscal 2024 will be another good year of sales and increased profitability for NTIC.

And we're excited by our long term prospects with this overview, Patrick and I are happy to take your questions.

Speaker 4: and we're excited by our long-term prospects. With this overview, Patrick and I are happy to take your questions.

Speaker 2: Thank you. As a reminder to ask a question please press star 11 on your telephone and wait for your name to be announced.

Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again.

Speaker 2: To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A.

Please standby, while we compile the Q&A roster.

Speaker 2: Our first question comes from the line of Tim Clarkson from Van Clemens and Company, Inc.

Our first question comes from the line of Tim Clarkson from Van Clemens <unk> Company, Inc.

Hey, guys.

Speaker 5: Hey guys, looks like it was a solid quarter again. Yeah, I was trying to figure out why it was only 30 cents that I was adding up the other quarters and it didn't add up. So that's the answer is this accounting snafu. So there you go. I was just curious, how much expenses did we have in Taiwan for the fourth quarter?

It looks like it was a solid quarter again, yes, I was trying to figure out why it was only 30, so I was adding up the other quarters and it didn't add up so that's the answers. This accounting snafu saw there you go.

I was just curious how many how much expenses did we have in Taiwan for the fourth quarter.

Speaker 4: If I'm I don't have a right in front of me as far as exactly in fourth quarter, but I can tell you that for the full fiscal year, we had expenses of 600 and

If I'm I.

I don't have it right in front of me as far as exactly in fourth quarter, but I can tell you that for the full fiscal year, we had expenses.

600, and let's see $660000 of expenses in Taiwan that were included in operating expenses that were previously would be a part of the JV operations. So they're just new expenses that are related to the fact that Taiwan has now.

Speaker 4: $660,000 of expenses in Taiwan that were included in operating expenses that were previously would be a part of the JV operations. So they're just new expenses that are related to the fact that Taiwan is now consolidated rather than previously being a joint venture.

Consolidated rather than previously being in a joint venture.

Speaker 5: Right. Do you feel good about the decision to consolidate it like that?

Right do you feel good about the decision to <unk>.

Consolidated like that Okay, Tayo, Taiwan is working.

Speaker 4: Taiwan is working. Taiwan is doing well. It was a pretty smooth continuation of the business.

Juan is doing well the it was a pretty smooth continuation of the of the business.

Speaker 4: I don't think Taiwan is going to be, I wouldn't call it a significant joint venture from the standpoint of the bottom line income contribution.

Don't think Taiwan is going to be.

I wouldn't call it a significant joint venture from the standpoint of the.

Bottomline income contribution.

Speaker 4: Um, but it's, you know, it probably added, I look at kind of the, the revenues that are generated from that entity.

But it's.

Probably added.

I look at kind of the the revenues that are generated from that entity.

Let's see.

Speaker 4: I probably contributed about $1 million to $1.2 million of income, so certainly that level of expense that I talked about, a lot of it had to do with transactional expense of cleaning up the old entity and implementing the new entities. That run rate of expense will go down in the future.

Product contributed about $1 million to $1 two of income.

That level of expense that I talked about a lot of that had to do with transactional expansive cleaning up the old entity.

And implementing the new the new entities that run rate of expense will will go down in the future.

Speaker 5: Right, right. On the oil and gas thing, on the deals that you've done so far, are customers pleased with what they're getting?

Right right.

On the oil and gas thing on the deals that you've done so far our customers pleased with what they're getting.

Speaker 3: Yes, I mean, we've been very pleased, so we're getting a repeat business in all the geographies where we're doing business, and we've also got some very large projects going that, should they come to fruition in the coming year, will make a big, may make a significant difference.

Yes, I mean, we will do that.

Three please.

Business.

All of the geographies, where we're doing business.

And we also saw some very large projects growing that should they come to fruition in Europe will make a big significant.

A significant difference.

Right right in terms of implementation is it pretty elegant technology I mean, you guys can do.

Speaker 5: Right, right. In terms of implementation, is it pretty elegant technology? I mean, you guys can do it without having to worry about screw-ups.

<unk> without having to worry about scripts.

Speaker 3: Oh, well, we haven't had any problems so far, so I think we've got a pretty good system going.

Oh, Oh, well, we haven't had any problems. So far so I think we've got a pretty good system going.

Speaker 5: Good, good. On the compostable front, looks like you had some decent growth again. Would you say things are kind of normalized on the restaurant end in terms of the COVID stuff?

Good good on the <unk> front.

So like you had some decent growth again or would you say things are kind of normalized on the restaurant and in terms of the COVID-19 stuff.

Yes.

Speaker 5: Right, right. And in terms of, is there any more innovation that needs to occur on the technology end to try to make this compostable thing a bigger deal? Or is at this point, more on the governmental end, mandating, you know, use of the product?

Right right and in terms of.

Is there any more innovation that needs to occur on the technology and to try to make this compulsive Bowl thing a bigger deal or is at this point more on the governmental and mandating.

Use of the product.

Speaker 3: It's a combination, but we certainly think that we continue to innovate and make R&D advances. In fact, we're working on several large projects in Europe , the United States, and India at the moment. And again, if any of those come into fruition in the next 12 months, it would make a significant difference to our bottom line.

How is the combination of but we certainly think that we continue to innovate and maybe R&D advances in fact, we're working on several large projects in Europe, United States and India mine.

Again, it's not any of those coming through to fruition in the next 12 months you would make a significant difference to our bottom line.

Speaker 5: Right. Right. Well, thanks. Good quarter. And we'll keep grinding away. Thank you.

Right right well, thanks, good quarter, and we'll keep grinding away. Thank you.

Thank you as a reminder to ask a question. Please press star one one on your telephone.

Speaker 2: Thank you. As a reminder to ask a question please press star 11 on your telephone and wait for your name to be announced. To withdraw your question please press star 11 again.

Wait for your name to be announced to withdraw your question. Please press star one one again.

Our next question comes from the line of Walter Ramsey from Walrus partners.

Speaker 2: Our next question comes from the line of Walter Ramsley from Walrus Partners.

Oh, Thanks for taking the call I've got a couple of questions.

Speaker 6: Thanks for taking the call got a couple of questions

The German joint venture.

Speaker 6: The German joint venture, the results there were down quite a bit.

Results there were.

Quite a bit.

Is that.

Speaker 6: Primarily a timing issue where you know you're going to catch up in

Primarily a timing issue, where you're going to catch up in future quarters or has the.

Speaker 3: quarters or has the business actually slowed down there and if it has what's going on? Well in Germany particularly you're talking about several factors. One because of the war in Ukraine and the sanctions that the West put on Russia, Russia in turn increased energy prices so the cost of energy and plastics in Europe has gone up dramatically which is putting a bit of a squeeze in our market.

Business actually slowed down there and if it has what's going on.

And in Germany in particular, you're talking about several factors one.

Because of the war in Ukraine, and the sanctions that convert at the Westwood on Russia, Russia in turn increased energy prices. So the cost of energy and plastics in Europe have gone up dramatically, which is putting a bit of a squeeze our margin.

Speaker 3: In addition to that, Germany did lose one significant customer, and that's going to be a few months, actually maybe a couple of quarters before they can recover from that. So the economy in Germany also is...

In addition to that zero and you did lose one significant customer.

And that's great too.

It's going to be a few months, we're actually midyear.

A couple of quarters before they can recover from that so TBD.

<unk> economy in Germany also is.

It is not being impacted again by the war.

Speaker 3: is also being impacted again by the war that consumer optimism is not where it used to be so that the overall economy in Germany is facing a downturn at the moment.

Consumer optimism is not where it used to date so that the overall economy in Germany is sitting in Dallas downtown at the moment.

Okay.

Speaker 6: Okay, and the other question I have has to do with the liquidation of the old.

And the other question I have has to do with the liquidation of the old.

Speaker 6: China Joint Venture, did your company actually collect the money out of that liquidation process or could you just explain?

China joint venture.

Your company actually collect.

The money out of that.

Liquidation process or could you just explain.

What happened there actually.

Speaker 6: you know what happened there actually uh... you know that's just an accounting uh... entry or head to the company actually get some money from

Is that just an accounting.

Entry or did the company actually get some money from that.

Speaker 4: No, I'm glad to say that we actually did receive the cash out of China. The money had been sitting in a bank in China and was essentially being held by the government as part of the liquidation from when we terminated the joint venture in 2015. It had been sitting there and we were going through a liquidation process since then. The company, NTISCN, that owned

I'm glad to say that we actually did receive the cash out of China. The money event sitting there in the.

The money in a bank in China and was taken by the essentially being held by the government as part of the liquidation from the.

When we terminated the joint venture in 2015.

I've been sitting there and we are going through a liquidation process. Since then.

The company <unk> that owns <unk>.

Speaker 4: Tengen Zerus received $2 million from the, essentially from the tax authority and from the government in...

Tien Tsin Xeros received.

$2 million from the.

Actually from the tax authority and from the government.

And in.

In in first quarter, but we received an announcement in the fourth quarter that everything was finalized.

Speaker 4: in first quarter, but we received an announcement in fourth quarter that everything was finalized.

So.

Speaker 4: You have some deductions from the $2 million that we received, that you have a tax withholding that came out of it, legal expenses that came out of it. It's obviously a minority. There's a minority interest from the standpoint that we own 60% of a CN. And then there's other expenses that kind of came out of it. The net impact to NTIC was about $775,000 recognized in Q4.

You have some deductions from the $2 million that we received that you have a tax withholding that came out of it legal expenses that came out of it.

It's obviously a minority.

There is a minority interest from the standpoint that we own 60% of our CN and then there is other expenses that kind of came out of it the net impact to NTIC was about $775000 recognized in Q4.

Okay and on the balance sheet as of August 31.

Speaker 6: Okay, and on the balance sheet as of August 31st, is the cash on there or is that still?

The cash on there or is that still showing as a receivable. The cash is not on there the cash is sitting as a receivable.

Speaker 4: The cash is not on there. The cash is sitting as a receivable listed as a joint venture dividend receivable.

Slipped out of that joint venture dividend receivable.

Speaker 6: In the current asset. Okay, I see it there. Okay. Thanks. That clears that up. Appreciate the chance to talk to you again. Thank you.

In the current asset okay.

Okay. Thanks that clears that up I appreciate the chance to talk to you again. Thank you. Thanks Walter.

Thank you I would now like to turn the conference back over to Patrick Lynch for closing remarks.

Speaker 2: Thank you. I would now like to turn the conference back over to Patrick Lynch for closing remarks.

Just wanted to thank everybody for joining us this morning and have a good read.

Speaker 3: Just thought I'd thank everybody for joining us this morning and have a good week.

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

Speaker 2: This concludes today's conference call. Thank you for participating. You may now disconnect.

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Good day and thank you for standing by welcome to the Northern Technologies International Corporation fourth quarter fiscal year 2023 earnings conference call and webcast. At this time all participants are in a listen only mode. After the speakers' presentation there.

Speaker 2: Good day, and thank you for standing by.

Speaker 2: Welcome to the Northern Technologies International Corporation fourth quarter fiscal year 2023 earnings conference call and webcast.

Speaker 2: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised.

Will be a question answer session to ask a question during the session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one to one again please be advised that today's conference is being recorded.

Speaker 2: To withdraw your question, please press star 11 again.

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.

Why.

For looking statements due to certain risks and uncertainties include.

Its forward looking statements I would now like to hand, the conference over to your Speaker today, Patrick Lynch CEO. Please go ahead.

Good morning, I'm, Patrick Lynch Ntic's CEO.

Speaker 3: Good morning, I'm Patrick Lynch, NTIC's CEO and I'm here with Matt Wolffeld, NTIC's CFO .

And I'm here with Matt Wolsfeld Ntic's CFO.

Speaker 3: Please note that a press release regarding our 4th quarter and full year fiscal 2023 financial results was issued earlier this morning. And is available at NTSC.com.

Please note that our press release regarding our fourth quarter and full year fiscal 2023 financial results was issued earlier this morning.

And is available at NTIC Dot com.

Speaker 3: During today's call, we will review various key aspects of our fiscal 2023 fourth quarter and full year financial results, provide a brief business update, and then conclude with a question and answer session.

Fiscal 2023 marked ntic's third year of consecutive record sales. Despite the economic challenges growing in both Europe, and China as well as rising interest rates in the U S.

Speaker 3: Fiscal 2023 marked NTIC's third year of consecutive record sales.

Speaker 3: despite the economic challenges growing in both Europe and China, as well as rising interest rates in the U.S.

Speaker 3: I'm particularly encouraged by our top line results within the large oil and gas and compostable plastics market.

I am, particularly encouraged by our top line results within the large oil and gas and compostable plastics markets.

Yes.

While fiscal 2023 proved to be highly successful with respect to diversifying our product mix and our end markets at the same time. We also found sales conditions for our core zeros industrial solutions.

Very challenging in both Europe and China.

Speaker 7: These trends impacted both top-line results and overall profitability during fiscal 2023.

These trends impacted both topline results and overall profitability during fiscal 2023.

Speaker 7: As we enter fiscal 2024, demand within our North American ZEROs industrial market remains stable, and we believe we are well positioned to develop additional strength within our ZEROs oil and gas and nature tech businesses.

As we enter fiscal 2020 for demand within our North American <unk> industrial market remains stable.

And we believe we are well positioned to develop additional strength within our zeros to oil and gas and niche tech businesses.

We will continue to invest strategically in bolstering our infrastructure throughout fiscal 2024 to support our long term expansion needs.

Speaker 7: We will continue to invest strategically in bolstering our infrastructure throughout fiscal 2024 to support our long term expansion needs.

We will also be focused on improving our cost structure and profitability by having additional operational efficiencies strengthen our gross margins.

Speaker 7: We will also be focused on improving our cost structure and profitability by having additional operational efficiencies strengthen our gross margin.

Speaker 7: As a result, we expect fiscal 2024 to be another good year of top line growth and improved bottom line profitability.

As a result, we expect fiscal 2024 to be another good year of topline growth and improving bottom line profitability.

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

Speaker 7: So with this overview, let's examine the drivers for the fourth quarter in more detail.

For the fourth quarter ended August 31, 2023, our total consolidated net sales increased two 3% to a fourth quarter record of $27 million as compared to the fourth quarter ended August 31 2022.

Speaker 7: For the fourth quarter ended August 31st, 2023, our total consolidated net sales increased 2.3% to a fourth quarter record of $20.7 million as compared to the fourth quarter ended August 31st, 2022.

Speaker 7: Broken down by business unit, this included a 53.1% increase in zero-oil and gas net sales and a 2.7% increase in NatureTech net sales.

Broken down by business unit. This included a 53, 1% increase in its U S oil and gas net sales and a two 7% increase in nature take net sales.

Speaker 7: These increases were partially offset by a 3.6% decline in zero industrial net.

These increases were partially offset by a three 6% decline in <unk> industrial net sales.

Our total net sales for the fiscal 2023 fourth quarter by our joint ventures, which we do not consolidate in our financial statements.

Speaker 7: Our total net sales for the fiscal 2023 fourth quarter by our joint ventures, which we do not consolidate in our financial statements, decreased year over year by 6.6% to $24.2 million.

Decreased year over year by 6.6% to $24 $2 million.

Speaker 7: Xscore Germany, our largest joint venture, experienced a 24% decrease in net sales during that period.

Export, Germany, our largest joint venture experienced a 24% a decrease in net sales during that period the.

Speaker 7: The year-over-year decline was due primarily to softer demand across the territories serviced by our global joint ventures, as I explained previously.

The year over year decline was due primarily to softer demand across the territories serviced by our global joint ventures as I explained previously.

Fiscal 2023 fourth quarter net sales by our wholly owned NTIC, China subsidiary decreased by 9.6% to $3 $5 million due to weaker economic conditions on a year over year basis.

Speaker 7: Fiscal 2023 fourth quarter net sales by our wholly-owned NTIC China subsidiary decreased by 9.6% to $3.5 million due to weaker economic conditions on a year-over-year basis.

Speaker 7: On a sequential basis, NTIC China sales increased by 6.4%, which was the second consecutive quarter of higher sales sequentially.

On a sequential basis NTIC, China sales increased by six 4%, which was the second consecutive quarter of higher sales sequentially Steve.

Stabilizing demand trends are encouraging and we are cautiously optimistic that demand in China will improve throughout fiscal 2024.

Speaker 7: Stabilizing demand trends are encouraging and we are cautiously optimistic that demand in China will improve throughout fiscal 2024.

Despite challenging conditions in China during fiscal 2023, we remain committed to the Chinese market and therefore continue to take steps to enhance and protect our Chinese operations.

Speaker 7: Despite challenging conditions in China during fiscal 2023, we remain committed to the Chinese market and therefore continue to take steps to enhance and protect our Chinese operations as we continue to believe China will likely become our largest geographic market in the future.

As we continue to believe China will likely become our largest geographic market in the future. However.

Speaker 7: However, it is important to note that NTIC China recorded a small net loss during fiscal 2023 compared to net income over $1 million in each of the three years before the COVID pandemic began. Now, moving.

However, it is important to note that NTIC, China recorded a small net loss during fiscal 2023 compared to net income over $1 million in each of the three years before the Covid pandemic began.

Now moving onto <unk> oil and gas.

Speaker 7: Fiscal 2023 was a transformative year for Zero Waste Oil and Gas as full year oil and gas sales increased 69.3% to an annual record of $7.8 million.

Fiscal 2023 was a transformative year for us U S oil and gas as full year oil and gas sales increased 69, 3% to an annual record of seven $8 million.

For the fiscal 2023 fourth quarter sales increased 53, 1% to a quarterly record of $2 4 million.

Speaker 7: For the fiscal 2023 fourth quarter, sales increased 53.1% to a quarterly record of $2.4 million.

Speaker 7: Demand continues to grow from both new and existing customers for our Xeris oil and gas solutions, which today still focus primarily on protecting above ground oil storage tanks and pipeline casings from corrosion.

Demand continues to grow from both new and existing customers for our <unk> oil and gas solutions, which today still focus primarily on protecting above ground oil storage tanks and pipeline casings from corrosion.

As a result, we believe fiscal 2024 will be another strong year for <unk> oil and gas as this business further scales and continues to contribute to profitability.

Speaker 7: As a result, we believe fiscal 2024 will be another strong year for zero oil and gas as this business further scales and continues to contribute to profitability.

Speaker 7: Turning to our NatureTek bioplastics business, as expected, NatureTek sales remained strong during the fourth quarter and increased 2.7 percent year over year to a quarterly record of $4.9 million.

Turning to our nature Tec Bioplastics business as expected nature Tech sales remained strong during the fourth quarter and increased two 7% year over year to a quarterly record of $4 $9 million.

Speaker 7: We expect NatureTech sales growth will remain strong throughout fiscal 2024, supported by favorable demand in North America and India, and significant new customer wins and orders in these geographies.

Speaker 7: Globally, we continue to see growing market demand for new applications of certified compostable plastic products and resin compounds, as well as increased interest in commercial and municipal programs that use certified compostable plastics as alternatives to conventional plastics.

Speaker 7: As a result, we believe we are well positioned for long-term sustainable growth within our NatureTech Bioplastics business.

As a result, we believe we are well positioned for long term sustainable growth within our niche Tec Bioplastics business.

As you can see our full year and fourth quarter financial results reflect the progress we are making towards growing our business and creating significant value for our shareholders.

While core profitability during the fourth quarter was below our plan, primarily due to the challenging conditions in Europe and China.

Speaker 7: While core profitability during the fourth quarter was below our plan, primarily due to the challenging conditions in Europe and China, we are working hard to improve our cost structure, maintain a strong gross margin, and leverage the investments we are making across our infrastructure by growing sales.

We are working hard to improve our cost structure maintain a strong gross margin and leverage the investments we are making across our infrastructure by growing sales.

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

Speaker 7: Before I turn the call over to Matt, I want to acknowledge the commitment of our global team of both employees and joint venture partners.

Speaker 7: Our success throughout the fiscal year and the opportunities we are pursuing to drive value for our shareholders in the future is a direct result of their efforts.

Our success throughout the fiscal year and the opportunities we are pursuing to drive value for our shareholders in the future is a direct result of their efforts.

With this overview, let me now turn the call over to Matt Wolsfeld to summarize our financial results for the fiscal 2023 fourth quarter.

Speaker 7: With this overview, let me now turn the call over to Matt Wolsfeld to summarize our financial results for the fiscal 2023 fourth quarter.

Thanks, Patrick compared to the prior fiscal year period, Ntic's consolidated net sales increased seven 7% in fiscal 2023 to an annual record and grew two 3% in fiscal 2023 fourth quarter because of the positive trend.

Hatrick reviewed in his prepared remark while sales across our global joint ventures declined six 6% in the fourth quarter joint venture operating income increased 39, 6% compared to the prior fiscal year period as a result of a one time gain on liquidation of a previously written off investment in our former joint venture in China.

Tien tsin zero of nearly $2 million.

Speaker 4: For fiscal 2023, sales across our global joint ventures decreased 3.3%, while joint venture operating income increased nearly 11% compared to the prior fiscal year.

For fiscal 2023 sales across our global joint ventures decreased three 3%, while joint venture operating income increased nearly 11% compared to the prior fiscal year.

Speaker 4: Total operating expenses for the fiscal 2023 fourth quarter increased 23.4% to $9.3 million and for the fiscal 2023 increased 17.6 to $33.4 million.

Total operating expenses for the fiscal 2023 fourth quarter increased 23, 4% to $9 $3 million and for the fiscal 2023 increased $17 six to $33 4 million.

Speaker 4: Higher operating expenses for both the fiscal 2023 4th quarter and the full year will primarily due to increased personnel expense. Other inflationary increases in expenses and expenses incurred in connection with our new indirect majority owned subsidiary formed to assume the operation of a former joint venture in Taiwan.

Operating expenses for both the fiscal 2023 fourth quarter and the full year were primarily due to increased personnel expense.

There are inflationary increases in expenses.

<unk> incurred in connection with our new indirect majority owned subsidiary formed to assume the operations of our former joint venture in Taiwan.

Speaker 4: Operating expenses as a percentage of net sales were 44.8% for the fourth quarter compared to 37.1% for the prior fiscal year period.

<unk> expenses as a percentage of net sales were 44, 8% for the fourth quarter compared to 37, 1% for the prior fiscal year period.

Speaker 4: fiscal 2023 operating expenses as a percentage of net sales were 41.8 percent compared to 38.3 percent for the prior fiscal year.

For fiscal 2023 operating expenses as a percentage of net sales were 41, 8% compared to 38, 3% for the prior fiscal year.

Speaker 4: Gross profit as a percentage of net sales was 36.5% during the three months ended August 31, 2023, compared to 30.3% during the prior fiscal year period.

Gross profit as a percentage of net sales was 36, 5% during the three months ended August 31, 2023 compared to 33% during the prior fiscal year period.

Speaker 4: The 620 basis point improvement was primarily a result of successful actions taken by the company to address inflationary pressures and the increased sales of higher gross margin zero oil and gas solutions.

The 620 basis point improvement was primarily a result of successful actions taken by the company to attract inflationary pressures and the increased sales of higher gross margin <unk> oil and gas solutions.

Speaker 4: Gross profit of the percentage of our net sales with 34.8% for fiscal year ended August 31st 2023 compared to 31.1% for the prior fiscal year.

Gross profit as a percentage of our net sales was 34, 8% for fiscal year ended August 31, 2023, compared to 31, 1% for the prior fiscal year <unk>.

Speaker 4: And he reported net income of $939,000 or $0.10 per diluted share for the fiscal.

NTIC reported net income of $939000 or <unk> 10 per diluted share for the fiscal.

2023 fourth quarter compared to $648000 or <unk> <unk> per diluted share for the fiscal 2020 to fourth quarter.

For the full year NTIC reported net income of $2 $9 million or <unk> 30 per diluted share compared to $6 $3 million or <unk> 66 per diluted share for the fiscal 2022 full year.

For the fiscal 2023 fourth quarter Ntic's non-GAAP adjusted income reduced primarily for the one time gain related to the liquidation of Tianjin zero.

Speaker 4: For the fiscal 2023 fourth quarter, NTIC's non-GAAP adjusted income reduced primarily for the one-time gain related to the liquidation of Tension Zero.

Speaker 4: which was $280,000, or $0.03 per diluted share, compared to non-gap adjusted income of $753,000, or $0.08 diluted share, for the fiscal 2022 fourth quarter.

$280000 or <unk> <unk> per diluted share compared to non-GAAP adjusted income of $753000 or <unk> <unk> diluted.

Diluted share for the fiscal 2020 to fourth quarter.

Speaker 4: For fiscal 2023, non-gap adjusted income was $2.6 million, or $0.27 per diluted share, compared to $3 million, or $0.32 per diluted share for fiscal 2022.

For fiscal 2023, non-GAAP adjusted income was $2 $6 million or 27 per diluted share compared to $3 million or 32 cents per diluted share for fiscal 2022.

Speaker 4: for reconciliation of GAAP to non-GAAP financial measures.

A reconciliation of GAAP to non-GAAP financial measures.

Speaker 4: is available in our fourth quarter and full year earnings press release that was issued this morning.

Is available in our fourth quarter and full year earnings press release that was issued this morning.

As of August 31, 2023, working capital was $23 million, including.

Including $5 4 million in cash and cash equivalents compared to $23 2 million, including $5 $3 million in cash and cash equivalents as of August 31 2022.

As of August 31, 2023, we had outstanding debt of $6 $4 million. This included $3 6 million in borrowings under our existing revolving line of credit compared to $5 $9 million as of August 31 2022.

Speaker 4: On August 31, 2023, the company had $23.7 million of investments in joint ventures of which 53.6% or $13.8 million was in cash with the remaining balance primarily invested in other working capital.

Speaker 4: During the fiscal 2023 fourth quarter, NTSU's Board of Directors declared a quarterly cash dividend of $0.07 per common share that was payable on August 16, 2023 to stockholders of record on August 2, 2023.

During the fiscal 2023 fourth quarter Ntic's Board of directors declared a quarterly cash dividend of seven.

Per common share that was payable on August 16, 2023 to stockholders of record on August <unk> 2023.

Before I turn the call over to questions I wanted to address the 8-K filing we filed this morning, and the amended 10, Qs restating, our second and third quarter financial statements.

Speaker 4: Before we turn the call over to questions, I want to address the 8K filing we filed this morning and the amended 10Qs restating our second and third quarter financial statement.

At the start of fiscal 2023, we engaged Deloitte our tax advisors to analyze and Kfc's qualification for employee retention tax credits.

To the care of that.

They determined that we qualified for $1 $1 million in credits and provided detailed support for that position.

As a result, Ntsc filed to the payroll credits with the IRS and recorded the credits in second and third quarter based on the application data.

Speaker 4: As a result, NTSC filed for the payroll credits with the IRS and recorded the credits in second and third quarter based on the application date.

Speaker 4: During the year-end closing process, the accounting for the credits was scrutinized, and we determined that under US GAAP.

During the year end closing process, the accounting for the credit Suisse scrutinized and we determined that under U S. GAAP.

Speaker 4: As a result, we restated NTIC's previously issued Q2 and Q3 financial statement.

As a result, we restated Ntic's previously issued Q2 and Q3 financial statements.

Speaker 4: reflecting a decrease in net income of $474,000 for Q2 and $466,000 for Q3.

Reflecting a decrease in net income of $474000 for Q2 and $466000 for Q3.

Speaker 4: We filed with the SEC this morning amendments to our second and third quarter 10 cues with the restated financial.

We filed with the SEC. This morning amendments to our second and third quarter 10-Q, with the restated financial.

As well as an 8-K dealing all the line item changes.

Speaker 4: as well as an 8K dealing all the line item changes.

And we plan to update investors on the progress we are making collecting employee.

Speaker 4: And we plan to update investors on the progress we're making collecting employee tax employee retention tax credit.

Employee retention tax credits.

So with this overview and to conclude our prepared remarks, we continue navigating a fluid business environment, while continuing to pursue our product end market and geographical diversification strategies, we're seeing stable north American demand trends and robust growth across our global oil and gas and.

Speaker 4: We're seeing stable North American demand trends and robust growth across our global oil and gas and bioplastics market.

Six markets.

Speaker 4: While the economic environment remains uncertain, we believe fiscal 2024 will be another good year of sales and increased profitability for NTIC.

While the economic environment remains uncertain, we believe fiscal 2024 will be another good year of sales and increased profitability for NTIC.

Speaker 4: and we're excited by our long-term prospects. With this overview, Patrick and I are happy to take your questions.

And we're excited by our long term prospects with this overview, Patrick and I are happy to take your questions.

Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again.

Speaker 2: Thank you. As a reminder to ask a question please press star 11 on your telephone and wait for your name to be announced.

Speaker 2: To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A.

Please standby, while we compile the Q&A roster.

Our first question comes from the line of Tim Clarkson from Van Clemens <unk> Company, Inc.

Speaker 2: Our first question comes from the line of Tim Clarkson from Van Clemens and Company, Inc.

Hey, guys.

Speaker 5: Hey guys, looks like it was a solid quarter again. Yeah, I was trying to figure out why it was only $0.30 that I was adding up the other quarters and it didn't add up. So that's the answer is this accounting snafu. So there you go. I was just curious, how much expenses did we have in Taiwan for the fourth quarter?

It looks like it was a solid quarter again.

And to figure out why it was only 30 cents I was adding up the other quarters.

Add up so that's the answers this accounting.

<unk>. So there you go.

I was just curious how many how much expenses did we have in Taiwan for the fourth quarter.

Speaker 4: If I'm I don't have a right in front of me as far as exactly in fourth quarter, but I can tell you that for the full fiscal year, we had expenses of about six hundred and.

If I'm.

I don't have it right in front of me as far as exactly in fourth quarter, but I can tell you that for the full fiscal year, we had expenses.

600, and let's see $660000 of expenses in Taiwan that were included in <unk>.

Operating expenses that were previously would be a part of the JV operations. So they're just new expenses that are related to the fact that Taiwan is now consolidated rather than previously being a joint venture.

Right do you feel good about the decision to.

Speaker 5: Right. Do you feel good about the decision to consolidate it like that?

Consolidated like that Okay, Tayo, Taiwan is working.

Speaker 4: Yeah, Taiwan is working. Taiwan is doing well. It was a pretty smooth continuation of the business.

One is doing well the it was a pretty smooth continuation of the of the business.

Speaker 4: I don't think Taiwan is going to be, I wouldn't call it a significant joint venture from the standpoint of the bottom line income contribution.

Don't think Taiwan is going to be it is I wouldn't call. It a significant joint venture from the standpoint of the.

Bottomline income contribution.

Speaker 4: Um, but it's, you know, it probably added, I look at kind of the, the revenues that are generated from that entity.

But it's.

Probably added.

I look at kind of the the revenues that are generated from that entity.

Let's see.

Speaker 4: I probably contributed about a million to a million two of income, so certainly that level of expense that I talked about, a lot of it had to do with transactional expense of cleaning up the old entity and implementing kind of the new entities. That run rate of expense will go down in the future.

Product contributed about $1 million to 1 million two of income so certainly that level of expense that I talked about a lot of it had to do with transactional expensive cleaning up the old entity.

And implementing kind of the new with the new entities that run rate of expense will will go down in the future.

Speaker 5: Right, right. On the oil and gas thing, on the deals that you've done so far, are customers pleased with what they're getting?

Right right.

On the oil and gas thing on the deals that you've done so far our customers pleased with what they're getting.

Yes, I mean, we've been very pleased.

Speaker 3: Yes, I mean, we've been very pleased getting to rethink business in all the geographies where we're doing business, and we also have some very large projects going that should they come to fruition in the coming year will make a big, significant difference.

Can you repeat business.

All of the geographies, where we're doing business.

And we also saw some very large projects and growing that should they come to fruition in the coming year will make a big thing.

Second difference.

Speaker 5: Right, right. In terms of implementation, is it pretty elegant technology? I mean, you guys can do it without having to worry about scrubs.

Right right in terms of implementation is it pretty elegant technology I mean, you guys can.

Do it without having to worry about scripts.

Oh, well, we haven't had any problems. So far so I think we've got a pretty consistent.

Speaker 3: Oh, well, we haven't had any problems so far, so I think we've got a pretty good system going.

Good good on the <unk> front.

Speaker 5: Good, good. On the compostable front, looks like you had some decent growth again. Would you say things are kind of normalized on the restaurant end in terms of the COVID stuff?

Looks like you had some decent growth again.

Would you say things sort of kind of normalized on the restaurant and in terms of the Covid stuff.

Yes.

Right right and in terms of.

Is there any more innovation that needs to occur on the technology and to try to make this compulsive ball thing a bigger deal or is at this point more on the governmental and mandating the use of the product.

The combination of but we certainly think that we continue to innovate and maybe R&D advances in fact, we're working on several large projects in Europe, the United States in India at the moment.

And again, it's not any of those coming through to fruition in the next 12 months you would make a significant difference to our bottom line.

Speaker 5: Right, right. Well, thanks. Good quarter and we'll keep grinding away. Thank you.

Right right.

Well, thanks, good quarter, and we'll keep grinding away. Thank you.

Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again.

Speaker 2: Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Speaker 2: Our next question comes from the line of Walter Ramsley from Walrus Partners.

Our next question comes from the line of Walter Ramsey from Walrus partners.

Oh, Thanks for taking the call I've got a couple of questions.

Speaker 6: Thanks for taking the call got a couple of questions

The German joint venture.

Speaker 6: The German joint venture, the results there were down quite a bit.

Results there were.

Quite a bit.

Is that.

Speaker 6: Is that primarily a timing issue where, you know, you're going to catch up in...

Primarily a timing issue, where you're going to catch up in future quarters or has the.

Speaker 3: quarters or has the business actually slowed down there and if it has what's going on? Well in Germany in particular you're talking about several factors one because of the war in Ukraine and the sanctions that the West put on Russia Russia in turn increased energy prices so the cost of energy and plastics in Europe has gone up dramatically which is putting a bit of a squeeze in our market

Business is actually slowed down there and if it has what's going on.

And in Germany in particular, you're talking about several factors one.

Because of the war in Ukraine, and the sanctions.

Put on Russia, Russia in turn increased energy prices. So the cost of energy and plastics in Europe have gone up dramatically, which is going to be putting a bit of a squeeze our margin.

Speaker 3: In addition to that, Germany did lose one significant customer, and it's going to be a few months, or actually maybe a couple of quarters before they can recover from that. So the economy in Germany also is...

In addition to that zero and you did lose one significant customer.

That's great.

It's going to be a few months, we're actually many areas.

A couple of quarters before they can recover from that so.

The economy in Germany also is.

Speaker 3: is also being impacted again by the war that consumer optimism is not where it used to be so that the overall economy in Germany is facing a downturn at the moment.

It is not being impacted again by the war.

Consumer optimism is not where it used to date, so that the overall economy in Germany.

John Fair at the moment.

Speaker 6: Okay, and the other question I have has to do with the liquidation of the old.

Okay.

And the other question I have has to do with the liquidation of the old China joint venture.

Speaker 6: China Joint Venture, did your company actually collect the money out of that liquidation process or could you just explain?

Your company.

Collect.

The money out of that.

A liquidation process or could you just explain.

Speaker 6: you know what happened there actually uh... you know that this is an accounting uh... entry or head to the company actually get some money from

You know what happened there actually.

That's just an accounting.

Entry or did the company actually get some money from that.

Speaker 4: No, I'm glad to say that we actually did receive the cash out of China. The money had been sitting there in the bank in China and was essentially being held by the government as part of the liquidation from when we terminated the joint venture in 2015. It had been sitting there and we were going through a liquidation process since then. The company that owned

I'm glad to say that we actually did receive the cash out of China the money sitting there in the.

My name is sitting in a bank in China and was taken by the essentially we had held by the government as part of the liquidation from the.

From when we terminated the joint venture in 2015.

They've been sitting there and we're going through a liquidation process since then.

The company <unk> that owns <unk>.

Speaker 4: Tenzin Ziras received $2 million from the, essentially from the tax authority and from the government in.

Tien Tsin zero received.

$2 million from the.

It's actually from the tax authority and from the government.

In.

Okay.

Speaker 4: in first quarter, but we received an announcement in fourth quarter that everything was finalized.

In first quarter, but we received an announcement in the fourth quarter that everything was finalized.

So.

Speaker 4: You have some deductions from the $2 million that we received, that you have tax withholding that came out of it, legal expenses that came out of it. It's obviously a minority. There's a minority interest from the standpoint that we own 60% of a CN. And then there's other expenses that kind of came out of it. The net impact to NTIC was about $775,000 recognized in Q4.

You have some deductions from the $2 million that we received that you have a tax withholding that came out of it legal expenses that came out of it.

It's obviously a minority.

There is a minority interest from the standpoint that we own 60% of our CN.

And then there is other expenses it kind of came out of it the net impact to NTIC was about $775000.

Recognized in Q4.

Speaker 6: Okay, and on the balance sheet as of August 31st, is the cash on there or is that still?

Mhm, Okay and on the balance sheet as of August 31.

As the cash on there or is that still showing as a receivable. The cash is not on there the cash is sitting as a receivable.

Speaker 4: The cash is not on there. The cash is sitting as a receivable listed as a joint venture dividend receivable.

Flipping to the joint venture dividend receivable.

In the current asset okay.

Speaker 6: in the current out there i think that okay thanks uh... that clears that up appreciate uh... the chance to talk to you again thank you

Okay. Thanks that clears that up I appreciate the chance to talk to you again. Thank you. Thanks Walter.

Speaker 2: Thank you. I would now like to turn the conference back over to Patrick Lynch for closing remarks.

Thank you I would now like to turn the conference back over to Patrick Lynch for closing remarks.

Speaker 3: Just thought I'd thank everybody for joining us this morning and have a good week.

Just wanted to thank everybody for joining us this morning and have a good read.

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

Speaker 2: This concludes today's conference call. Thank you for participating. You may now disconnect.

Q4 2023 Northern Technologies International Corp Earnings Call

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