Q1 2024 Northern Technologies International Corp Earnings Call
Good day, and thank you for standing by. Welcome to NTIC, 1st quarter, 2024, earnings conference call and webcast.
Good day and thank you for standing by welcome to M. T. I C first quarter 2024 earnings conference call and webcast.
At this time, mobile 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.
At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question answer session.
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 11 again.
We'll 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.
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. Please be advised that these forward-looking statements are covered under the safe harbor provisions of the Private Security's litigation reform act of 1995.
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. Please also be advised that actual results could differ materially from those stated or implied by the forward-looking statements due to certain risks and uncertainties, including those described in NTIC's most recent annual report on Form 10K, subsequently quarterly reports on Form 10Q and recent press releases. Please read these reports and other future filings that NTIC will make with the report.
And that NTIC desires to avail itself of the protections of the Safe Harbor for these statements. Please also be advised that actual results could differ materially from those stated or implied by the forward looking statements due to certain risks and uncertainties, including those described in Ntic's. Most recent annual report on form.
10-K subsequently 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 describes any duty to update or revise its forward-looking statements.
NTIC disclaims any duty to update or revise its forward looking statements.
I would not like to end the conference over to your speaker today. Patrick Lynch, please go ahead.
Speaker Change: I would now like turn the conference over to your Speaker today Patrick Lynch. Please go ahead.
Good morning, I'm Patrick Lynch, NTIC's CEO, and I'm here with Matt Wolffeld, NTIC's CFO.
Speaker Change: Good morning, I am Patrick Lynch Ntic's CEO.
Speaker Change: And I'm here with Matt Wolsfeld Ntic's CFO.
Speaker Change: Please note that a press release regarding our fiscal 2024 first quarter financial results with issued earlier this morning and is available at N T I C dot com.
Please note that a press release regarding our fiscal 2024 first quarter financial results was issued earlier this morning.
Speaker Change: And is available at NTIC Dot com.
Speaker Change: During today's call, we will review various key aspects of our fiscal 2024 first quarter financial results, provide a brief business update, and then conclude with a question and answer session.
Speaker Change: During today's call we will review various key aspects of our fiscal 2024 first quarter financial results provide a brief business update and then conclude with a question and answer session.
Speaker Change: I'm pleased with the strong start to fiscal 2024 highlighting stable demand across our zero industrial and nature tech markets.
Speaker Change: I am pleased with the strong start to fiscal 2024, highlighting stable demand across our zero industrial and <unk> markets.
Speaker Change: While the timing of certain orders did hold back zero oil and gas fails, we experienced higher consolidated sales and a 78% increase in first quarter net income over the prior years first quarter net income.
While the timing of certain orders did hold back with U S oil and gas sales, we experienced higher consolidated sales and a 78% increase in first quarter net income over the prior year's first quarter net income.
Speaker Change: I am particularly encouraged by the year over year improvement in our gross margin, demonstrating that our broad initiatives aimed at improving profitability are working as intended.
Speaker Change: I am, particularly encouraged by the year over year improvement in our gross margin demonstrating that our broad initiatives aimed at improving profitability are working as intended.
Speaker Change: As we mentioned last quarter, we are also making strategic investments to bolster our infrastructure and support our long-term expansion needs, particularly in our oil and gas and the nature-tech business.
As we mentioned last quarter, we are also making strategic investments to bolster our infrastructure and support our long term expansion needs, particularly in our oil and gas and an intertek businesses.
Speaker Change: These investments are primarily focused on adding sales and support capabilities to enable us to take greater advantage of both current demand, as well as what we anticipate unfolding during the course of fiscal 2024 and beyond.
Speaker Change: These investments are primarily focused on adding sales and support capabilities to enable us to take greater advantage of both current demand as well as what we anticipate unfolding during the course of fiscal 2024 and beyond.
Speaker Change: We are striving to improve our operational efficiencies across our business as evidenced by our operating expenses as a percent of net sales holding relatively stable over the past three months.
Speaker Change: We are striving to improve our operational efficiencies across our business as evidenced by our operating expenses as a percent of net sales holding relatively stable over the past three months.
Speaker Change: We expect higher profitability and strong operating cash flow to continue throughout fiscal 2024.
We expect higher profitability and strong operating cash flow to continue throughout fiscal 2024.
Speaker Change: During the first quarter, cash from operating activities improved year-over-year by nearly 54 percent.
Speaker Change: During the first quarter cash from operating activities improved year over year by nearly 54%.
Speaker Change: We intend to continue to allocate capital to support our growth initiatives and quarterly dividend payments.
Speaker Change: We intend to continue to allocate capital to support our growth initiatives and quarterly dividend payment.
Speaker Change: while using excess cash flow to pay down the balance and our existing line of credit.
Speaker Change: Using excess cash flow to pay down the balance on our existing line of credits.
Speaker Change: As we look to the remainder of fiscal 2024, we believe we are well-positioned for top-line growth across our zero-industrial, zero-steroidal gas and nature-tech product laboratories.
As we look to the remainder of fiscal 2024, we believe we are well positioned for top line growth across our industrial oil and gas and nature take product categories.
Speaker Change: We also plan to improve the performance and profitability of our joint ventures across our European and Asian market.
Speaker Change: We also plan to improve the performance and profitability of our joint ventures across our European and Asian markets.
Speaker Change: As our team continues to navigate a fluid global economic environment, I am pleased with NTAG's improving performance, and believe fiscal 2024 will be another good year of growth and improve profitability.
Speaker Change: As our team continues to navigate a fluid global economic environment I am pleased with Ntic's, improving performance and believe fiscal 2024 will be another good year of growth and improved profitability.
Speaker Change: So with this overview, let's examine the drivers for the first quarter ended November 30th, 2023 in more detail.
Speaker Change: So with this overview, let's examine the drivers for the first quarter ended November 32023 in more detail.
Speaker Change: For the quarter, our total consolidated net sales increased 1.1% to a first quarter record of $20.2 million, as compared to the first quarter and November 30, 2020.
For the quarter, our total consolidated net sales increased one 1% to a first quarter record of $22 million as compared to the first quarter ended November 32022.
Speaker Change: Broken down by business unit, this included a 4.2% increase in nature tech net sales and a 1.1% increase in zero industrial net sales.
Speaker Change: Broken down by business unit. This included a four 2% increase in nature take net sales and a one 1% increase in <unk> industrial net sales.
Speaker Change: These increases were partially offset by a 7.4% decline in zero-toil gas net sales.
Speaker Change: These increases were partially offset by a seven 4% decline in its U S oil and gas net sales.
Speaker Change: Total net sales for first quarter by our joint ventures, which we do not consolidate in our financial statements decreased year-over-year by 4.7% to $23.6 million.
Speaker Change: Total net sales for first quarter by our joint ventures, which we do not consolidate in our financial statements decreased year over year by four 7% to $23 6 million.
Speaker Change: Exchor Germany, our largest joint venture, experienced a 17% decrease in net sales compared to the prior fiscal year period due primarily to the loss of a customer and the softer demand within Europe related to higher energy prices and other externalities linked to the war between Ukraine and Russia.
Speaker Change: Excellent, Germany, our largest joint venture experienced a 17% decrease in net sales compared to the prior fiscal year period, due primarily to the loss of a customer and softer demand within Europe related to higher energy prices and other externalities linked to the war between Ukraine and Russia.
Speaker Change: fiscal 2024 first quarter net sales by our holy-owned NTSC China subsidiary.
Speaker Change: Fiscal 2024 first quarter net sales by our wholly owned NTIC China subsidiary.
Speaker Change: decreased on a year over year basis by 1.8% to $3.7 million, due to weaker economic conditions in that country.
Speaker Change: Decreased on a year over year basis by one 8% to $3.7 million due to weaker economic conditions in that country.
Speaker Change: On a sequential basis, anti-ac China sales increased by 4.1%, which was the third consecutive quarter of higher sales sequential sales.
Speaker Change: On a sequential basis NTIC, China sales increased by four 1%, which was the third consecutive quarter of higher sales sequentially.
Speaker Change: after we recorded a small annual net loss at NKT China last fiscal year.
After we recorded a small annual net loss at NTIC, China last fiscal year, we remain cautiously optimistic that demand in China will improve throughout fiscal 2020 for helping to support higher incremental sales and profitability in this market.
Speaker Change: We remain cautiously optimistic that demand in China will improve throughout fiscal 2024, helping to support higher incremental sales and profitability in this market.
Speaker Change: While near-term, economic conditions in China continue to remain uncertain.
Speaker Change: While near term economic conditions in China continued to remain uncertain.
Speaker Change: We are committed to the Chinese market and continue to take steps to enhance our Chinese operations.
Speaker Change: We are committed to the Chinese market and continue to take steps to enhance our Chinese operations.
Speaker Change: We continue to believe China will likely become a significant geographic market for us in the future.
We continue to believe China will likely become a significant geographic market for us in the future.
Speaker Change: Now moving onto the rest of oil and gas.
Speaker Change: The first quarter of fiscal 2024 was the seventh consecutive quarter of the G.R.S. oil and gas sales over $1.5 million.
Speaker Change: The first quarter of fiscal 2024, it was the seventh consecutive quarter of domestic oil and gas sales over $1 $5 million.
Speaker Change: reflecting the positive momentum within our oil and gas business.
Reflecting the positive momentum within our oil and gas business.
Speaker Change: For the fiscal year 2020 for first quarter, zero oil and gas sales were 1.5 million dollars compared to 1.6 million dollars for the same period last year.
Speaker Change: For the fiscal 2024 first quarter U S oil and gas sales were $1 5 million compared.
Compared to $1 6 million for the same period last year.
Speaker Change: The 7.4% year-over-year decline in 0s oil and gas deals was primarily due to the timing of certain oil and gas projects, which pushed the associated revenue to the second quarter.
The seven 4% year over year decline and just oil and gas yields was primarily due to the timing of certain oil and gas projects, which pushed the associated revenue to the second quarter.
Speaker Change: As a result, we expect the U.S. oil and gas fields will have a stronger fiscal 2024 second quarter than first quarter.
Speaker Change: As a result, we expect U S oil and gas sales will have a stronger fiscal 'twenty 'twenty four second quarter and first quarter.
Speaker Change: The man remains strong and growing among both new and existing customers for our zero-scoil and gas solution.
Speaker Change: Demand remained strong and growing among both new and existing customers for our U S oil and gas solutions, which today is still focused primarily on protecting above ground oil storage tanks and pipeline casings from corrosion as a result, we believe fiscal 2024 will be another good year.
Speaker Change: which today still focus primarily on protecting above ground oil storage tanks and pipeline casings from corrosion.
Speaker Change: As a result, we believe fiscal 2024 will be another good year for zero soil and gas as this business further scales and continues to contribute to our overall profitability.
Speaker Change: Year, four as U S oil and gas.
Speaker Change: This business further scales and continues to contribute to our overall profitability.
Speaker Change: Turning to our nature tech bioplastics business, as expected, nature tech sales remained robust during the first quarter and increased 4.2% year-over-year to a first quarter record of $4.8 million.
Speaker Change: Turning to our nature Tec Bioplastics business as expected nature Tech sales remained robust during the first quarter and increased four 2% year over year to a first quarter record of $4 $8 million.
Speaker Change: We expect nature tech sales growth will continue throughout fiscal 2024 supported by favorable demand in North America and India and significant new customer wins and orders in these chargers.
Speaker Change: We expect nature take sales growth will continue throughout fiscal 2024 supported by favorable demand in North America, and India and significant new customer wins and orders in these geographies.
Speaker Change: Globally, we continue to see growing market demand for new applications of certified compostable plastic products and resin compound as well as increased interest in commercial and municipal programs that use certified compostable plastics as alternatives to conventional plastic.
Speaker Change: Globally, we continue to see growing market demand for new applications are 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 Change: As a result, we believe we are well-positioned for long-term sustainable growth within our Nature Tech bioplastics.
As a result, we believe we are well positioned for long term sustainable growth within our niche Tec Bioplastics business.
Speaker Change: As you can see, our fiscal 2024 first quarter financial results reflect the progress we are making towards growing our business and improving profitability.
Okay.
Speaker Change: As you can see our fiscal 2024 first quarter financial results reflect the progress we are making towards growing our business and improving profitability.
Speaker Change: Before I turn the call over to Matt, I want to acknowledge the hard work and dedication of our global team of both employees and joint venture partners.
Before I turn the call over to Matt I want to acknowledge the hard work and dedication of our global team of both employees and joint venture partners. Our recent success and the opportunities we are pursuing to drive value for our shareholders in the future as a direct result of their efforts.
Matt Wolffeld: our recent success and the opportunities we are pursuing to drive value for our shareholders in the future to the direct result of their efforts.
Matt Wolffeld: With this overview, let me now turn the call over to Matt Wolfefeld to summarize our financial results for the fiscal 2024 first quarter.
Speaker Change: With this overview, let me now turn the call over to Matt Wolsfeld to summarize our financial results for the fiscal 2024, our first quarter.
Matt Wolfefeld: Thanks, Patrick. Compared to the prior fiscal year period, NTSC's consolidated net sales increased 1.1 percent for the fiscal 2024 first quarter to a first quarter record because of the trend's Patrick Reviewedness Prepared remarks.
Matt Wolsfeld: Thanks, Patrick compared to the prior fiscal year period, Ntic's consolidated net sales increased one 1% for the fiscal 2024 first quarter to a first quarter record because of the trends Patrick reviewed in his prepared remarks sales.
Matt Wolfefeld: Sales across our global joint ventures declined 4.7% in fiscal 2020.
Matt Wolsfeld: Sales across our global joint ventures declined four 7% in fiscal 2024 first quarter.
Matt Wolfefeld: Joint venture operating income was down 0.8% compared to the prior fiscal year.
Matt Wolsfeld: Joint venture operating income was down eight.
Matt Wolsfeld: 8% compared to the prior fiscal year period.
Matt Wolfefeld: The year-over-year reduction in joint venture operating income was primarily due to lower sales and the resulting lower net income at our German joint venture, partially offset by improved profitability across many of our other joint.
Matt Wolsfeld: The year over year reduction in joint venture operating income was primarily due to lower sales and the resulting lower net income at our German joint venture, partially offset by improved profitability across many of our other joint ventures.
Matt Wolfefeld: Total operating expenses for fiscal 2024 first quarter increased 5.2%.
Matt Wolsfeld: Total operating expenses for fiscal 2020 for first quarter increased five 2% to $8 3 million compared to $7 $9 million for the same period last fiscal year.
Matt Wolfefeld: $8.3 million compared to $7.9 million this same period last fiscal year. Higher out.
Matt Wolsfeld: Higher operating expenses were primarily due to increased personnel costs.
Matt Wolfefeld: As a percentage of net sales operating expenses were 41.2% for the fiscal 2024 first quarter compared to 39.6% for the prior fiscal year period.
Matt Wolsfeld: As a percentage of net sales operating expenses were 41, 2% for the fiscal 2024 first quarter compared to 39, 6% for the prior fiscal year period.
Matt Wolfefeld: Gross profit as a percentage of net sales was 36.3 percent during the three months ended November 30 at 2023.
Gross profit as a percentage of net sales was 36, 3% during the three months ended November 32023, compared to 31, 8% during the prior fiscal year period.
Matt Wolfefeld: compared to 31.8% during the prior fiscal year.
Matt Wolfefeld: The 450 basis point improvement was primarily a result of successful actions taken by the company to address inflationary pressures. Net income.
Matt Wolsfeld: The 450 basis point improvement was primarily a result of successful actions taken by the company to address inflationary pressures.
Net income attributable to NTIC was $896000 or nine cents per diluted share for the fiscal 2024 first quarter compared to 500 in $2000 or <unk> per share for fiscal 2023 first quarter.
Matt Wolfefeld: was $896,000 or $9 per diluted share for the fiscal 2024 first quarter compared to $502,000 or $5 per share for the fiscal 2021.
Matt Wolfefeld: For the fiscal 2024 first quarter, TNTIC's non-gap adjusted net income was $1 million, or $0.10 per dilute share compared to non-gap net income of $608,000, or $0.6 per dilute share for the same.
Matt Wolsfeld: For the fiscal 2020 for first quarter.
Matt Wolsfeld: non-GAAP adjusted net income was $1 million or 10 cents per diluted share compared to non-GAAP net income of $608000 or six cents per diluted share for the same period last year, a reconciliation of GAAP to non-GAAP financial measures is available on our 2024 first quarter earnings press release.
Matt Wolfefeld: Reconciliation of gap to non-gap financial measures is available in our 2024 first quarter earnings press release that was issued this morning.
Matt Wolsfeld: Issued this morning.
Matt Wolfefeld: As of November 30th, 2023, working capital was $22.4 million.
As of November 32023, working capital was $22 4 million, including $6 $1 million in cash and cash equivalents compared to $23 million, including $5 $4 million in cash and cash equivalents as of August 31, 2023 as of November 32023, we had out there.
Matt Wolfefeld: $2.1 million in cash and cash equivalents compared to $23 million, including $5.4 million in cash and cash equivalents, as of August 31st, 2020.
Matt Wolfefeld: As of November 30th, 2023, we had outstanding debt of $5.8 million.
And in that $5 $8 million. This included $3 million in borrowings under our existing revolving line of credit compared to $3 $6 million as of August 31 2023.
Matt Wolfefeld: included $3 million in borrowings under our existing revolving line of credit compared to $3.6 million as of August 31st, 2020.
Matt Wolfefeld: We generated $3.1 million in operating cash flows for the three months ended November 30th, 2023, compared to $2 million for the three months ended November 30th, 2020.
Matt Wolsfeld: We generated $3 $1 million in operating cash flows for the three months ended November 32023, compared to $2 million for the three months ended November 32022.
Matt Wolfefeld: 53.6% year-over-year improvement in operating cash flow was driven primarily by stronger core profitability and positive changes in current
Matt Wolsfeld: 53, 6% year over year improvement in operating cash flow was driven primarily by stronger core profitability.
Matt Wolsfeld: And positive changes in current assets and liabilities.
Matt Wolfefeld: Throughout fiscal 2024, we expect to generate continued operating cash flow.
Matt Wolsfeld: Throughout fiscal 2024, we expect to generate continued operating cash flow, which we plan to invest in the growth of our business and support our quarterly cash dividend and pay down the balance our existing revolving line of credit.
Matt Wolfefeld: plan to invest in the growth of our business, support our quarterly cash dividend, and pay down the balance our existing revolving line of credit.
Matt Wolfefeld: On November 30th, 2023, the company had $24.6 million of investments in joint venture
Matt Wolsfeld: On November 32023, the company had $24 $6 million of investments in joint ventures.
Matt Wolfefeld: of which 61.8% or 15.2 million dollars was in cash. The remaining balance primarily invested in other working capital.
Matt Wolsfeld: Of which 61, 8% or $15 $2 million within cash with the remaining balance primarily invested in other working capital.
Matt Wolfefeld: During the fiscal 2024, first-quarter TNTIC's Board of Directors declared a quarterly cash dividend of $0.7 per common share. It was payable on November 15th, 2023 to tackle as a record on November 1st, 2023.
Matt Wolsfeld: During the fiscal 2024 first quarter Ntic's Board of directors declared a quarterly cash dividend of seven per common share that was payable on November 15th 2023 to stockholders of record on November one 2023.
So with this overview and to conclude our prepared remarks, we continue navigating a fluid business environment, while pursuing our product end market and geographical diversification strategies.
Matt Wolfefeld: Can you navigate a fluid business environment while pursuing our product and market and geographical diversification strategy?
Matt Wolfefeld: We're seeing stable North American demand trends and robust growth across our global oil and gas and biopastic markets.
Matt Wolsfeld: We're seeing stable north American demand trends and robust growth across our global oil and gas and bioplastic markets.
Matt Wolfefeld: While the economic environment remains uncertain, we believe fiscal 2024 will be another good year of sales and profitability for NCHIC. We're excited about our long-term prospects. With this overview,
Matt Wolsfeld: While the economic environment remains uncertain, we believe fiscal 2024 will be another good year of sales and profitability franchisee and we're excited about our long term prospects.
Matt Wolsfeld: This overview, Patrick and I are happy to take your questions.
Speaker Change: Thank you. As a reminder to ask a question, please press star 1-1 on your telephone and wait for your name to be announced.
Speaker Change: 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, please standby, while we compile the Q&A roster.
Speaker Change: To withdraw your question, please press star 11 again.
Speaker Change: Please stand by where we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Tim Clarkson from Van Clements and Company Inc. Good morning Pat.
Speaker Change: Our first question comes from the line of Tim Clarkson from Van Clemens and Company Inc.
Tim Clarkson: Good morning, Patrick Good morning, Matt how are you guys.
Tim Clarkson: Yeah, anyhow, so just, you know, I always dream in a little bit. I mean, is there a scenario where I know you guys are doing about a million and a half in the oil tank business? I mean, is there a potential this year to have a two and a half or a three million dollar quarter? Absolutely.
Speaker Change: Alright, Thanks, Tim.
Speaker Change: But anyhow. So just you know I always.
Speaker Change: Dreaming, a little bit I mean is there a scenario where I know you guys are doing about a million and a half in the oil tank business. I mean is there a potential this year to have a two and a half or a $3 million quarter.
Speaker Change: Absolutely.
Operator: Good day, and thank you for standing by. Welcome to NTIC's First Quarter 2024 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode.
Speaker Change: Okay great.
Speaker Change: Yeah. And the gross margins on that business are higher than the rest of the business, right? Yes, that's correct.
Sure.
Speaker Change: Yeah, and and the gross.
Speaker Change: Margins on that business are higher than the rest of the business right. Yes, that's correct.
Speaker Change: Right. Good. My other dream is, but I'll get to that. Secondly, I just on the, on the compostable, again, what would be the typical applications for your compostable plastics?
Speaker Change: Alright good.
Operator: 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. You will then hear an automated message advising that your hand is raised.
My other my other dream is.
Speaker Change: But I'll get to that secondly, just on the on the compulsive ball again, what would be the typical applications for your composed of plastics.
Speaker Change: You're talking culinary, for example, is a major one, or in checkered molded plastic articles and also bags or major application that we're sourcing in the United States.
Speaker Change: Youre talking Calgary for example is a major one who are interested in ticket injection molded plastic articles and also.
Operator: To withdraw your question, please press star 1 1 again. 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 its 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. Please also be advised that actual results could differ materially from those stated or implied by the forward-looking statements due to certain risks and uncertainties, including those described in NTIC's most recent annual report on Form 10-K, subsequently 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. Please go ahead.
Our major applications.
Speaker Change: We're seeing in the United States.
Speaker Change: Right. And one of the major advantages of that stuff is it's stronger than a lot of the competition. Yes. And she brought it.
Speaker Change: Alright, and one of the major advantages of that stuff is it stronger than a lot of the competition yes.
Speaker Change: and cheaper and cheaper and there's no and there's no problem with uh... i know a couple years ago you had problem with getting the the material to make that
Speaker Change: Hey, Brian.
Speaker Change: And cheaper and cheaper and Theres no and there is no problem with I know a couple of years ago, you had problem with getting the material to make that.
Speaker Change: No, they've had a capacity on worldwide basis, so there's no shortage right now of raw materials for
Speaker Change: They've added capacity on a worldwide basis. So there's no shortage right now raw materials for us.
Speaker Change: right right now is there a scenario where
Speaker Change: Right right now is there a scenario where.
Speaker Change: You could link up with another company either on a marketing basis or on a manufacturing basis or on a technology basis that would make sense to
Speaker Change: You could link up with another company either on a marketing basis or on a manufacturing basis or on a technology basis, where it makes sense.
Speaker Change: You could add a piece to the compulsible thing and separate and bring public. I mean, is there a potentialality of that or is still too early?
Speaker Change: You could.
Speaker Change: It's add a piece too.
Speaker Change: The compulsive bolting and separating bringing public I mean is that a is there a potential LD of that or is it still too early.
Speaker Change: Well, I think there's two different questions there, Tim. One is, ultimately, what do you think would happen with nature tech when it hits?
Speaker Change: Well I think it's going to.
Speaker Change: Two different questions there Tim what one is ultimately what do we think what happened with nature Tech when it hits.
Speaker Change: a level of revenue or level of profitability where it makes more sense to be a standalone entity. I think we've always said that that's certainly a possibility, but right now when you look at the total revenues of nature tech, although they're growing, they're not really at a level where I think it's sustainable to be a standalone entity where it'll be properly valued. The other part of your question where you talk about partnering with other companies, one of the main ways that we are growing nature tech are by developing
The level of revenue our level of profitability, where it makes more sense to be a standalone entity I think we've always said that thats certainly a possibility but.
Right now when you look at the total revenues of nature tack, although they're growing they're not really at a level, where I think it's sustainable to be a standalone entity, where it will be properly valued.
Patrick Lynch: Good morning, I'm Patrick Lynch, NTIC's CEO, and I'm here with Matt Wilsfeld, NTIC's CFO. Please note that a press release regarding our fiscal 2024 first quarter financial results was issued earlier this morning and is available at NTIC.com. During today's call, we will review various key aspects of our fiscal 2024 first quarter financial results, provide a brief business update, and then conclude with a question and answer session. I'm pleased with the strong start to fiscal 2024, highlighting stable demand across our zeroest industrial and nature tech markets. While the timing of certain orders did hold back zero oil and gas sales, we experienced higher consolidated sales and a 78 percent increase in first quarter net income over the prior year's first quarter net income. I am particularly encouraged by the year-over-year improvement in our gross margin, demonstrating that our broad initiatives aimed at improving profitability are working as intended.
Speaker Change: The other part of your question, where you talked about partnering with other companies. That's the main one of the main ways that we are growing nature Tac hereby developing.
Speaker Change: especially applications for larger companies that are using container-load quantities of residents.
Speaker Change: The applications for larger companies that are using container load quantities of resin.
Speaker Change: And so a lot of the growth that we're expecting to see over the next.
And so a lot of the growth that we're expecting to see over the next year.
Speaker Change: Yeah, 12 months, 24 months, 36 months comes from working with companies that are looking to use.
Speaker Change: 12 months 24 months 36 months comes from working with companies that are looking to use.
Speaker Change: large container load quantities of our specialty resin for them to make their own composable products. So I think both of those kind of in combination are really what's going to help the overall nature tech, you know, as a company and as a brand grow. But there's certainly significant opportunities in the United States, in Europe, in parts of Asia, where we're seeing these applications sell well.
Speaker Change: Large potato low quantities of our <unk> specialty resin to for them to make their own compostable products. So I think both of those kind of in combination are really what's going to help.
Speaker Change: The overall nature Tac as a company and as a brand grow but theres certainly significant opportunities in the United States in Europe and parts of Asia, where we're seeing these these applications sell well.
Speaker Change: sure sure now i know that that you know on the foreign basis that in the germany was kind of a week order for them
Speaker Change: Sure sure no I know that.
Speaker Change: Foreign basis that Germany was kind of a weak quarter for them for a variety of reasons is that starting to come back or is that still pretty weak.
Patrick Lynch: As we mentioned last quarter, we are also making strategic investments to bolster our infrastructure and support our long-term expansion needs, particularly in our oil and gas and natural resources tech business. These investments are primarily focused on adding sales and support capabilities to enable us to take greater advantage of both current demand as well as what we anticipate unfolding during the course of fiscal 2024 and beyond. We are striving to improve operational efficiencies across our business, as evidenced by our operating expenses as a percent of net sales holding relatively stable over the past three months. We expect higher profitability and strong operating cash flow to continue throughout fiscal 2024. During the first quarter, cash from operating activities improved year-over-year by nearly 54%.
Speaker Change: for a variety of reasons, is that starting to come back or is that still pretty weak? I don't see it coming back immediately. There are two reasons. One, I mean, they've lost a very large customer that they had for a very long time, and that's not that easy to replace. Also, as long as the Ukraine and Russia conflict continues, you're going to have higher energy prices and raw material prices in Europe, which is also putting a bit down the pressure on sales. Right, right.
Speaker Change: I don't see it coming back immediately there are two reasons, one we lost a very large customer.
Speaker Change: For a very long time, and that's not that easy to replace also as long as the Queen.
Russia conflict continues.
Speaker Change: Going to have higher energy prices and raw material prices in Europe, which is also putting.
Speaker Change: Downward pressure on sales.
Speaker Change: Right right.
Speaker Change: In terms of just overall inflation, are you guys seeing?
Speaker Change: In terms of just overall inflation are you guys seeing.
Speaker Change: You know, better costs across the board with the lower oil prices now and some of the claim that inflation has been moderating.
Speaker Change: Better cost across the board with with the Loral oil prices now and somehow they claim that inflation has been moderating.
Speaker Change: I think certainly in the United States, so I think that inflation will under control. So that's not an issue. Like I said, it continues to be an issue in all of Europe. Because in Europe, they get most of their energy, gas and oil from Russia are used to. And until that conflict is settled, it's going to continue to be an issue in that region. But elsewhere, we're fine in that regard. Right, right. Got it.
Speaker Change: I think certainly in the United States, So alright got it.
Speaker Change: <unk> well under control.
Speaker Change: So.
Speaker Change: That's not an issue.
Speaker Change: Can you just mean nishu in all of Europe, because in Europe.
Patrick Lynch: We intend to continue to allocate capital to support our growth initiatives and quarterly dividend payments while using excess cash flow to pay down the balance on our existing line of credit. As we look to the remainder of fiscal 2024, we believe we are well positioned for top-line growth across our zeroes industrial, zeroes oil and gas, and nature tech product categories. We also plan to improve the performance and profitability of our joint ventures across our European and Asian markets.
Speaker Change: Most of our energy.
Gas and oil from Russia or Easter.
And until that Congress has settled it's going to continue to be an issue in that region, but elsewhere.
Fine.
Speaker Change: With regard.
Right right got it.
Speaker Change: Thank you.
Speaker Change: 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 Change: Yeah.
Speaker Change: 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.
Patrick Lynch: As our team continues to navigate a fluid global economic environment, I am pleased with NTSC's improving performance and believe fiscal 2024 will be another good year of growth and improved profitability. So, with this overview, let's examine the drivers for the first quarter ended November 30th, 2023 in more detail. For the quarter, our total consolidated net sales increased 1.1% to a first quarter record of $20.2 million, as compared to the first quarter ended November 30, 2020. Broken down by business unit, this included a 4.2% increase in NatureTech net sales and a 1.1% increase in Xerus Industrial net sales. These increases were partially offset by a 7.4% decline in serious oil gas net sales. Total net sales for the first quarter by our joint ventures, which we do not consolidate in our financial statements, decreased year over year by 4.7% to $23.6 million. Excor Germany, our largest joint venture, experienced a 17% decrease in net sales compared to the prior fiscal year period, due primarily to the loss of a customer and softer demand within Europe related to higher energy prices and other externalities linked to the war between Ukraine and Russia.
Speaker Change: At this time, I would not like to turn the conference back over to Patrick Lynch for closing remarks.
Speaker Change: At this time I would now like to turn the conference back over to Patrick Lynch for closing remarks.
Patrick Lynch: Well, thank you very much for attending this morning and wish you a nice day. Thank you.
Speaker Change: Well.
Patrick Lynch: Thank you very much for attending this morning, and wish you a nice day. Thank you.
Patrick Lynch: This concludes today's conference call. Thanks for participating. You may now disconnect.
Patrick Lynch: This concludes today's conference call. Thank you for participating you may now disconnect.
Patrick Lynch: Okay.
Patrick Lynch: .
Okay.
[music].
Patrick Lynch: Okay.
Patrick Lynch: Okay.
Patrick Lynch: [music].
Patrick Lynch: Fiscal 2024 first quarter net sales by our wholly owned NTSC China subsidiary decreased on a year-over-year basis by 1.8% to $3.7 million due to weaker economic conditions in that country. On a sequential basis, NTIC China sales increased by 4.1%, which was the third consecutive quarter of higher sales sequentially after we recorded a small annual net loss at NTT China last fiscal year. We remain cautiously optimistic that demand in China will improve throughout fiscal 2024, helping to support higher incremental sales and profitability in this market. While near-term economic conditions in China continue to remain uncertain, we are committed to the Chinese market and continue to take steps to enhance our Chinese operations. We continue to believe China will likely become a significant geographic market for us in the future. Now, moving on to zero-soil and gas.
Patrick Lynch: The first quarter of fiscal 2024 was the seventh consecutive quarter of zero oil and gas sales over $1.5 million, reflecting the positive momentum within our oil and gas business. For the fiscal 2020 first quarter, zeroth oil and gas sales were $1.5 million, compared to $1.6 million for the same period last year. The 7.4% year-over-year decline in zero-waste oil and gas fuels was primarily due to the timing of certain oil and gas projects, which pushed the associated revenue to the second quarter.
Patrick Lynch: As a result, we expect U.S. oil and gas sales will have a stronger fiscal 2024 second quarter than the first quarter. Demand remains strong and growing among both new and existing customers for our zero-oil and gas solution, which today still focuses primarily on protecting above ground oil storage tanks and pipeline casings from corrosion. As a result, we believe fiscal 2024 will be another good year for Xerox oil and gas as this business further scales and continues to contribute to our overall profitability. Turning to our NatureTech bioplastics business, as expected, NatureTech sales remained We expect NatureTech sales growth to continue 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.
Patrick Lynch: As a result, we believe we are well positioned for long-term sustainable growth within our NatureTech bioplastics business. As you can see, our fiscal 2024 first quarter financial results reflect the progress we are making towards growing our business and improving profitability. Before I turn the call over to Matt, I want to acknowledge the hard work and dedication of our global team of both employees and joint venture partners; our recent success and the opportunities we are pursuing to drive value for our shareholders in the future are a direct result of their effort. With this overview, let me now turn the call over to Matt Wolsfeld to summarize our financial results for the fiscal 2024 first quarter. Thanks, Patrick.
Matt Wolsfeld: Compared to the prior fiscal year period, NTIC's consolidated net sales increased 1.1 percent for the fiscal 2024 first quarter to a first quarter record. Because of the trends Patrick reviewed in his prepared remarks, sales across our global joint ventures declined 4.7% for our first quarter, joint venture operating income was down 0.8% compared to the prior fiscal year. The year-over-year reduction in joint venture operating income was primarily due to lower sales and the resulting Total operating expenses for fiscal 2024's first quarter increased 5.2%. $8.3 million compared to $7.9 million in the same period last year. Higher operating expenses were primarily for Alcott.
Matt Wolsfeld: As a percentage of net sales, operating expenses were 41.2% for the fiscal 2024 first quarter compared to 39.6% for the prior fiscal year period. Gross profit as a percentage of net sales was 36.3% during the three months ended November 30, 2023, compared to 31.8% during the prior fiscal year. The 450 basis point improvement was primarily a result of successful actions taken by the company to address inflationary pressure; net income attributable to NTSU was $896,000, or $0.09 per diluted share for the fiscal 2024 first quarter, compared to $502,000, or $0.05 per share for the fiscal 2020 first quarter. Additionally, for the fiscal 2024 first quarter, NTIC's non-gap adjusted net income was $1 million, or $0.
Matt Wolsfeld: Reconciliation of Gap and Non-Gap Financial Measures is available in our 2024 First Quarter Earnings Press Release that was issued this morning. As of November 30, 2023, working capital was $22.4 million. $6.1 million in cash and cash equivalents, compared to $23 million, including $5.4 million in cash and cash equivalents as of August 31, 2022. As of November 30th, 2023, we had outstanding debt of $5.8 million. This included $3 million in borrowings under our existing revolving line of credit, compared to $3.6 million as of August 31, 2020.
Matt Wolsfeld: We generated $3.1 million in operating cash flows for the three months ended November 30, 2023, compared to $2 million for the three months ended November 30, 2022. The 53.6% year-over-year improvement in operating cash flow is driven primarily by stronger core profitability. Throughout fiscal 2024, we expect to generate continued operating cash flow. We plan to invest in the growth of our business, support our quarterly cash dividend, and pay down the balance of our existing revolving line of credit. On November 30, 2023, the company had $24.6 million of investments in joint ventures, of which 61.8% or $15.2 million was in cash, with the remaining balance primarily invested in other working capital. During the fiscal 2024 first quarter, NTIC's Board of Directors declared a quarterly cash dividend of $0.07 per common share that was payable on November 15, 2020.
Matt Wolsfeld: Stackler will be a record on November 1st, 2020. So with this overview, I'd like to conclude our prepared remarks and continue navigating a fluid business environment while pursuing our product and market and geographical diversification strategy. We're seeing stable North American demand trends and robust growth across our global oil and gas and bioplastics markets. While the economic environment remains uncertain, we believe fiscal 2024 will be another good year of sales and profitability for NCIC.
Operator: We're excited about our long-term prospects. After 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 1 1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Tim Clarkson from Van Clements and Company, Inc. Good morning, Patrick. Good morning, Matt. How are you guys?
Tim Clarkson: I always dream a little bit. I mean, is there a scenario where I know you guys are doing about a million and a half in the oil paint business? I mean, is there the potential this year to have a two and a half or a three million dollar quarter? Absolutely. That's what I'm looking for. Yeah, and the gross margins on that business are higher than the rest of the business, right? Yes, that's correct. Right, good. My other dream is, but I'll get to that secondly. Just on the subject of compostable plastics again, what would be the typical applications for your compostable plastics?
Patrick Lynch: You're talking cutlery, for example, is a major one, or injection-molded plastic articles, and also bags are a major application that we're servicing in the United States. Right, and one of the major advantages of that stuff is that it's stronger than a lot of the competition. Yes, and cheaper too, and cheaper and cheaper.
Tim Clarkson: And there's no problem with, I know a couple years ago you had a problem with getting the materials to make that. No, they've added capacity on a worldwide basis, so there's no shortage right now of raw materials. Right, right. Now, is there a scenario where... You could link up with another company either on a marketing basis or on a manufacturing basis or on a technology basis, or it would make sense to... You could add a piece to the compulsory thing and separate and bring it into the public? I mean, is there the potential for that, or is it still too early?
Patrick Lynch: Well, I think there are two different questions there, Tim. One question is, ultimately, what do we think would happen with Nature Tech when it hits a level of revenue or a level of profitability where it makes more sense to be a standalone entity? I think we've always said that that's certainly a possibility. But right now, when you look at the total revenues of Nature Tech, although they're growing, they're not really at a level where I think it's sustainable to be a standalone entity where it would be properly valued. The other part of your question where you talk about partnering with other companies, that's the main one of the main ways that we are growing Nature Tech is by developing specialty applications for larger companies that are using container load quantities of resin. And so a lot of the growth that we're expecting to see over the next, you know, 12 months, 24 months, 36 months comes from working with companies that are looking to use large container loads of our specialty resin for them to make their own compostable products.
Patrick Lynch: So, I think both of those, kind of in combination, are really what's going to help the overall nature of tech, as a company and as a brand, grow. But there are certainly significant opportunities in the United States, in Europe, and in parts of Asia, where we're seeing these applications sell well. Sure, sure. Now, I know that, on the foreign basis, Germany was kind of a weak quarter for them for a variety of reasons. Is that starting to come back, or is it still pretty weak?
Patrick Lynch: I don't see it coming back immediately. There are two reasons. One, they lost a very large customer that they had for a very long time, and that's not that easy to replace.
Patrick Lynch: Also, as long as the Ukraine and Russia conflict continues, you're going to have higher energy prices and raw material prices in Europe, which is also putting a bit of a downer on sales. Right. And, and, um, In terms of just overall inflation, are you guys seeing better costs across the board with the lower oil prices now, and some of them claim that inflation's been moderating. I think, and certainly in the United States, I think we've got inflation well under control, so that's not an issue. Like I said, it continues to be an issue in all of Europe because, in Europe, they get most of their energy, gas, and oil from Russia, or used to, and until that conflict is settled, it's going to continue to be an issue in that region. But elsewhere, we're fine in that regard.
Patrick Lynch: Right, right. I've got it. I'm done. 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. At this time, I would now like to turn the conference back over to Patrick Lynch for closing remarks. Well, thank you very much for attending this morning and I wish you a nice day. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Take care, bye.