Q3 2024 Northern Technologies International Corp Earnings Call

July 11, 2024

Good day and welcome to the third quarter 2024 earnings conference call and webcast. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question, please press star 1 1. As a reminder, this call is being recorded.

Speaker Change: As part of the discussion today, the representatives from NCIC will be making certain forward-looking statements regarding NCIC's future financial and operating results as well as their business plans, objectives, and expectations.

Operator: Good day, and welcome to the third quarter 2024 earnings 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. To ask a question, please press star 1 1.

Unknown Executive: Good day, and welcome to the third quarter 2024 earnings conference calling webcasts. At this time, all participants are in listening mode.

Unknown Executive: After the speaker's presentation, there will be a question-and-answer session. To ask a question, please press star 1-1. As a reminder, this call is being recorded.

Speaker Change: Please be advised that these four looking statements are covered under the Safe Harbor Provisions

Operator: As a reminder, this call is being recorded. As part of the discussion today, the representatives from NCIC will be making certain forward-looking statements regarding NCIC'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 Provision 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.

Unknown Executive: 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 protection 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 to just certain risks and uncertainties, including those described in NTIC's, was recent annual report on Form 10-K, subsequent quarterly reports in Form 10-Q and recent press releases.

Operator: Please also be advised that actual results could differ materially from those stated or implied by the forward-looking statement. This slide shows you certain risks and uncertainties, 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 NCIC will make with the SEC. NCIC disclaims any duty to update or revise its forward-looking statements.

Speaker Change: of the Private Securities Litigation Reform Act of 1995 and that NCIC desires to avail itself of the protections of the safe harbor for these statements.

Speaker Change: Please also be advised that actual results could differ materially from those stated or implied by the four looking statements.

Speaker Change: Due to certain risks and uncertainties, 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.

Speaker Change: Please read these reports and other future filings that NTIC will make with the SEC. NCIC disclaims any duty to update or revise its forward-looking statements. I would now like to turn the call over to Patrick Lynch. Please go ahead.

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

Unknown Executive: Please read these reports in other future following that NTIC will make with the SEC. NTIC disclaims any duty to update or revise its forward-looking statements.

Speaker Change: A press release regarding our fiscal 2024 third quarter financial results was issued earlier this morning and is available at NTIC.com.

Unknown Executive: I would like to turn the call over to Patrick Lynch. Please go ahead.

Operator: I would now like to turn the call over to Patrick Lynch. Please go ahead.

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

Speaker Change: During today's call, we will review various key aspects of our fiscal 2024 third quarter financial results, provide a brief business update, and then conclude with a question and answer session.

Patrick Lynch: Good morning, I'm Patrick Lynch, NTIC's CEO, and I'm here with Matt Wolsfeld, NTIC's CFO. A press release regarding our fiscal 2024 third 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 third quarter financial results, provide a brief business update, and then conclude with a question and answer session. Please note that when we discuss year-over-year performance, we are referring to the third quarter of our current fiscal year in comparison to the third quarter of our previous fiscal year.

Patrick Lynch: A press release regarding our fiscal 2024 third 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 third quarter financial results, provide a brief business update, and then conclude with a question-and-answer session. Please note that when we discuss year-over-year performance, we are referring to the third quarter from our current fiscal year, in comparison to the third quarter from our previous fiscal year. Our third quarter results reflect the progress we're making, navigating a fluid macro environment, while capitalizing on growing demand within our nature tech and the zero-est oil and gas markets.

Patrick Lynch: Our third-quarter results reflect the progress we're making, navigating a fluid macro environment while capitalizing on growing demand within our NatureTech and Xerox oil and gas markets. We achieved record quarterly NatureTech sales, driven by continued growth in North America and India for our compostable plastic products and specialty resins. While shipping delays caused the timing of approximately $600,000 in orders to be moved from the third quarter to the fourth quarter, negatively impacting our third quarter results, demand for our oil and gas solutions is expanding.

Speaker Change: Please note that when we discuss year-over-year performance, we are referring to the third quarter from our current fiscal year in comparison to the third quarter from our previous fiscal year.

Patrick Lynch: As a result, we expect a significant rebound in oil and gas sales in the fourth quarter. Furthermore, I'm particularly encouraged by the continued year-over-year improvement in our gross margin, demonstrating that our initiatives aimed at offsetting supply chain and raw material challenges are working as intended. We anticipate that profitability will continue to improve and that we will continue to generate positive operating cash flow throughout the remainder of fiscal 2024. Year over year, cash from operating activities improved by 116% to $7.6 million, primarily due to higher net income for the nine months ended May 31st, 2024, and positive changes in working capital.

Speaker Change: Our third quarter results reflect the progress we're making, navigating a fluid macro environment, while capitalizing on growing demand within our NatureTech and Xerox oil and gas markets.

Patrick Lynch: We intend to continue allocating 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, driven by our zeroes oil and gas and NatureTech product categories. We also remain focused on enhancing the performance and profitability of our international joint ventures.

Speaker Change: We achieved record quarterly NatureTech sales, driven by continued growth in North America and India, for our compostable plastic products and specialty resins.

Speaker Change: While shipping delays caused the timing of approximately $600,000 in orders to be moved from the third quarter to the fourth quarter, negatively impacting our third quarter results, demand for our oil and gas solutions is expanding.

Patrick Lynch: We achieved record quarterly nature tech sales, driven by continued growth in North America and India for our compostable plastic products and specialty resins. While shipping delays caused the timing of approximately $600,000 in orders to be moved from the third quarter to the fourth quarter, negatively impacting our third quarter results, demand for our oil and gas solutions is expanding. As a result, we expect a significant rebound in oil and gas sales in the fourth quarter. Furthermore, I'm particularly encouraged by the continued year-over-year improvement in our gross margin, demonstrating that our initiatives aimed at offsetting supply chain and raw material challenges are working as intended.

Speaker Change: As a result, we expect a significant rebound in oil and gas sales in the fourth quarter.

Speaker Change: Furthermore, I'm particularly encouraged by the continued year-over-year improvement in our gross margin, demonstrating that our initiatives aimed at offsetting supply chain and raw material challenges are working as intended.

Speaker Change: We anticipate that profitability will continue to improve and that we will continue to generate positive operating cash flow throughout the remainder of fiscal 2024.

Speaker Change: Year over year, cash from operating activities improved by 116% to $7.6 million, primarily due to higher net income for the nine months ended May 31st, 2024, and positive changes in working capital.

Patrick Lynch: We anticipate that profitability will continue to improve and that we will continue to generate positive operating cash flow throughout the remainder of fiscal 2024. Year-over-year cash from operating activities improved by 116% to $7.6 million, primarily due to higher net income for the nine months ended May 31, 2024, and positive changes CEO. We intend to continue allocating 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, driven by our zeroes, oil and gas, and nature tech product categories.

Speaker Change: We intend to continue allocating 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.

Speaker Change: As we look to the remainder of fiscal 2024, we believe we are well positioned for top line growth driven by our zeroes oil and gas and NatureTech product categories.

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

Speaker Change: In addition, we continue to make strategic investments in our operations aimed at supporting additional growth opportunities across our markets, most notably in North America, Brazil, and India.

Patrick Lynch: We also remain focused on enhancing the performance and profitability of our international joint ventures. In addition, we continue to make strategic investments in our operations, aimed at supporting additional growth opportunities across our markets, most notably in North America, Brazil, and India. I am pleased with anti-ISE's performance and believe fiscal 2024 will be another good year of growth and profitability.

Speaker Change: I am pleased with NJC's performance and believe fiscal 2024 will be another good year of growth and profitability.

Patrick Lynch: In addition, we continue to make strategic investments in our operations aimed at supporting additional growth opportunities across our markets, most notably in North America, Brazil, and India. I am pleased with NJC's performance and believe Fiscal 2024 will be another good year of growth and profitability. So with this overview, let's examine the drivers for the third quarter ended May 31st, 2024 in more detail. For the quarter, our total consolidated net sales decreased 1.4% to $20.7 million as compared to the third quarter ended May 31st, 2023.

Speaker Change: So, with this overview, let's examine the drivers for the third quarter ended May 31st, 2024, in more detail.

Speaker Change: For the quarter, our total consolidated net sales decreased 1.4% to $20.7 million as compared to the third quarter ended May 31, 2023.

Patrick Lynch: So with this overview, let's examine the drivers for the third quarter and at May 31, 2024, in more detail. For the quarter, our total consolidated net sales decreased. 1.4% to 20.7 million dollars has compared to the third quarter and at May 31, 2023. Total net sales for the third quarter by our joint ventures, which we do not consolidate in our financial statements, decreased year-over-year by 2.7% to 25.6 million dollars. Export Germany, our largest joint venture, experienced a 7.1% decrease in net sales compared to the prior fiscal year period, due primarily to a previously disclosed loss of the customer and softer demand within the region related to higher energy prices and other externalities linked to the war between Ukraine and Russia.

Patrick Lynch: Total net sales for the third quarter by our joint ventures, which we do not consolidate in our financial statements, decreased year-over-year by 2.7% to $25.6 million. Escort Germany, our largest joint venture, experienced a 7.1% decrease in net sales compared to the prior fiscal year period, due primarily to a previously disclosed loss of a customer and softer demand within the region related to higher energy prices and other externalities linked to the war between Ukraine and Russia.

Speaker Change: Total net sales for the third quarter by our joint ventures, which we do not consolidate in our financial statements, decreased year-over-year by 2.7 percent to 25.6 million dollars.

Patrick Lynch: Fiscal 2024 third quarter net sales by our wholly owned Hentai Xi China subsidiary increased on a year-over-year basis by 6.7% to $3.5 million. Sales trends in this geography have stabilized, and NTSC China has experienced two consecutive quarters of year-over-year sales growth. We remain cautiously optimistic that demand in China will improve throughout the remainder of fiscal 2024 and into fiscal 2025, helping to support higher incremental sales and profitability in this market.

Speaker Change: Xcor Germany, our largest joint venture, experienced a 7.1% decrease in net sales compared to the prior fiscal year period.

Speaker Change: Due primarily to a previously disclosed loss of a customer and softer demand within the region Related to higher energy prices and other externalities linked to the war between Ukraine and Russia

Speaker Change: Fiscal 2024 third quarter net sales by our wholly owned Hentai Xi China subsidiary increased on a year-over-year basis by 6.7% to 3.5 million dollars.

Speaker Change: Sales trends in this geography have stabilized and NTIC China has experienced two consecutive quarters of year-over-year sales growth.

Patrick Lynch: Fiscal 2024, third quarter and net sales by our wholly owned, Hintese China subsidiary increased on a year-over-year basis by 6.7% to 3.5 million. Sales trends in this geography have stabilized, and Hintese China has experienced two consecutive quarters of year-over-year sales growth. We remain cautiously optimistic that demand in China will improve throughout the remainder of fiscal 2024 and into fiscal 2025, helping to support higher incremental sales and profitability in this market. We are committed to the long-term opportunities that the Chinese market provides our industrial and bioplastic segments, and we continue to take steps to enhance our operations in this geography.

Speaker Change: We remain cautiously optimistic that demand in China will improve throughout the remainder of Fiscal 2024 and into Fiscal 2025, helping to support higher incremental sales and profitability in this market.

Speaker Change: We are committed to the long-term opportunities the Chinese market provides our industrial and bioplastic segments, and we continue to take steps to enhance our operations in this geography. As a result, we continue to believe China will likely become a significant geographic market for us in the future.

Patrick Lynch: We are committed to the long-term opportunities the Chinese market provides for our industrial and bioplastic segments, and we continue to take steps to enhance our operations in this geography. As a result, we continue to believe China will likely become a significant geographic market for us in the future. Now, moving on to zeroth oil and gas. For the fiscal 2024 third quarter, CRS oil and gas sales were $1.4 million, compared to $2.0 million for the same period last fiscal year.

Speaker Change: Now, moving on to zeroth oil and gas.

Speaker Change: For the fiscal 2024 third quarter, CRS oil and gas sales were $1.4 million, compared to $2.0 million for the same period last fiscal year.

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

Speaker Change: The 31.9% year-over-year decrease in zero-soil and gas sales was primarily associated with approximately $600,000 in sales that were expected to ship before the end of the third quarter of fiscal 2024, but got delayed until the beginning of the fourth quarter.

Patrick Lynch: Now moving on to zero-to-oil and gas. For the fiscal 2024, third quarter, zero-to-oil and gas sales were 1.4 million dollars compared to 2.0 million dollars for the same period last fiscal year. The 31.9% year-over-year decrease in zero-to-oil and gas sales was primarily associated with approximately $600,000 in sales that were expected to ship before the end of the third quarter of fiscal 2024 but got delayed until the beginning of the fourth quarter. So now, these $600,000 in sales, coupled with orders booked for delivery before August 31, are anticipated to make sales in the fourth quarter of fiscal 2024 exceptionally strong for our zero-to-oil and gas solution.

Patrick Lynch: The 31.9% year-over-year decrease in zero-soil and gas sales was primarily associated with approximately $600,000 in sales that were expected to ship before the end of the third quarter of fiscal 2024 but got delayed until the beginning of the fourth quarter.

Speaker Change: So now, these $600,000 in sales, coupled with orders booked for delivery before August 31st, are anticipated to make sales in the fourth quarter of fiscal 2024 exceptionally strong for our zero-waste oil and gas solutions.

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

Patrick Lynch: So now, these $600,000 in sales, coupled with orders booked for delivery before August 31st, are anticipated to make sales in the fourth quarter of fiscal 2024 exceptionally strong for our zero-waste oil and gas solutions. Overall, demand continues to grow among both new and existing customers for our zero-waste 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 that fiscal 2024 will be another good year of growth for zero-waste oil and gas as this business further scales and continues to contribute to our overall profitability.

Speaker Change: As a result, we believe that Fiscal 2024 will be another good year of growth for zero-emissive oil and gas as this business further scales and continues to contribute to our overall profitability. We are optimistic these trends will continue into Fiscal 2025.

Patrick Lynch: House. Overall, demand continues to grow among both new and existing customers of our zeroest 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 that fiscal 2024 will be another good year of growth for zeroest oil and gas as a business further scales and continues to contribute to our overall profitability. We are optimistic these trends will continue into fiscal 2025.

Speaker Change: Turning to our NatureSafe bioplastic business.

Speaker Change: Nature Tech sales were strong during the third quarter and increased 20.1% year-over-year to a quarterly record of $5.8 million.

Patrick Lynch: We are optimistic these trends will continue into fiscal 2025. Turning to our NatureSafe bioplastic business, Nature Tech sales were strong during the third quarter and increased 20.1% year over year to a quarterly record of $5.8 million. NatureTech's growth during the third quarter was a result of new customer wins in North America and India, as well as expanding relationships with existing customers. We expect NatureTech sales growth to continue throughout fiscal 2024 and into fiscal 2025.

Speaker Change: NatureTech's growth during the third quarter was a result of new customer wins in North America and India, as well as expanding relationships with existing customers.

Patrick Lynch: Turning to our NHSA bioplastic business, Nature Tech sales were strong during the third quarter and increased 20.1% year over year to a quarterly record of $5.8 million. Nature Tech's growth during the third quarter was a result of new customer wins in North America and India, as well as expanding relationships with existing customers. We expect Nature Tech sales growth to continue throughout fiscal 2024 and into fiscal 2025. Globally, we continue to see robust 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 Change: We expect NatureTech sales growth to continue throughout fiscal 2024 and into fiscal 2025.

Speaker Change: Globally, we continue to see robust 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 Change: As a result, we believe we are well positioned for long-term, sustainable growth within our nature tech bioplastics business.

Patrick Lynch: Globally, we continue to see robust 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 Change: We also continue to make strategic investments across several parts of our business in order to capitalize on current and expected future growth opportunities.

Speaker Change: In India, we are consolidating three separate NatureTech warehouses into a single larger facility, and also are adding manufacturing capacity to support NatureTech sales growth in the region.

Patrick Lynch: As a result, we believe we are well positioned for long-term, sustainable growth within our NHSA bioplastic business.

Patrick Lynch: As a result, we believe we are well positioned for long-term, sustainable growth within our nature-type bioplastics business. We also continue to make strategic investments across several parts of our business in order to capitalize on current and expected future growth opportunities. In India, we are consolidating three separate NatureTech warehouses into a single larger facility and also are adding manufacturing capacity to support NatureTech sales growth in the region. Sales in Brazil have doubled since fiscal 2019, so we are in the process of adding a facility to support growth opportunities in both that country as well as the broader region.

Patrick Lynch: We also continue to make strategic investments across several parts of our business in order to capitalize on current and expected future growth opportunities. In India, we are consolidating three separate NHSA warehouses into a single larger facility and also are adding manufacturing capacity to support Nature Tech sales growth in the region. Sales in Brazil have doubled since fiscal 2019, so we are in the process of adding a facility to support growth opportunities in both that country as well as the broader region. We also continue to invest in our domestic operations, as demonstrated by the new Circle Pines, Minnesota facility that came online earlier this year.

Speaker Change: Sales in Brazil have doubled since fiscal 2019, so we are in the process of adding a facility to support growth opportunities in both that country as well as the broader region.

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

Patrick Lynch: We also continue to invest in our domestic operations, as demonstrated by the new Circle Pines, Minnesota facility that came online earlier this year. At this location, we've been able to insource certain manufacturing processes that were previously outsourced as part of our efforts to improve gross margin. As you can see, fiscal 2024 is shaping up to be a strong year of growth, profitability, and strategic investments for NTIC. We are excited by the positive momentum underway and the direction NTAC is headed.

Speaker Change: As you can see, fiscal 2024 is shaping up to be a strong year of growth, profitability, and strategic investments for NTIC. We are excited by the positive momentum underway and the direction NTIC is headed.

Patrick Lynch: At this location, we've been able to ensure certain manufacturing processes that were previously outsourced as part of our efforts to improve growth margin.

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.

Patrick Lynch: As you can see, fiscal 2024 is shaping up to be a strong year of growth, profitability, and strategic investments for NGIC. We are excited by the positive momentum underway and the direction NGIC is headed.

Speaker Change: Our recent success and the opportunities we are pursuing to drive value for our shareholders in the future are 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 2024 third quarter.

Patrick Lynch: 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 efforts. With this overview, let me now turn the call over to Matt Wolsfeld to summarize our financial results for the fiscal 2024 third quarter.

Matthew Wolsfeld: With this overview, let me now turn the call over to Matt and Mowalfield to summarize our financial results for the fiscal 2024-3rd quarter.

Matthew C. Wolsfeld: Sales across our global joint ventures declined 2.7% in the fiscal 2024 third quarter. Joint venture operating income was down 3.6% compared to the prior fiscal year period.

Matthew Wolsfeld: Thanks, Patrick. Compared to the prior fiscal year period, NTSC's consolidated net sales decreased 1.4% for the fiscal 2024-3rd quarter because of the trends that Patrick reviewed in his prepared remarks. Sales across our global joint ventures declined 2.7% in the fiscal 2024-3rd quarter. Joint venture operating income was down 3.6% compared to the prior fiscal year period. The year-over-year reduction in joint venture operating income was primarily due to lower sales and the resulting lower net income of our German joint venture, partially offset by improved profitability across many of our other joint ventures.

Matthew C. Wolsfeld: Thanks, Patrick. Compared to the prior fiscal year period, NTIC's consolidated net sales decreased 1.4% for the fiscal 2024 third quarter because of the trend that Patrick reviewed in his prepared remarks. Sales across our global joint ventures declined 2.7% in the fiscal 2024 third quarter, and joint venture operating income was down 3.6% compared to the prior fiscal year period. The year over year reduction in joint venture operating income was primarily due to lower sales and the resulting lower net income of our German joint venture, partially offset by improved profitability across many of our other joint ventures.

Matthew C. Wolsfeld: The year-over-year reduction in joint venture operating income was primarily due to lower sales and the resulting lower net income of our German joint venture, partially offset by improved profitability across many of our other joint ventures.

Matthew C. Wolsfeld: Total operating expenses for fiscal 2024 third quarter increased 7.1% to $9 million, compared to $8.4 million for the same period last fiscal year.

Matthew C. Wolsfeld: Higher operating expenses were primarily due to increased personnel costs. As a percentage of net sales, operating expenses were 43.4% for the fiscal 2024 third quarter, compared to 40% for the prior fiscal year period.

Matthew Wolsfeld: Total operating expenses for fiscal 2024-3rd quarter increased 7.1 percent to $9 million compared to $8.4 million for the same period last fiscal year. Higher operating expenses were primarily due to increased personnel costs. As a percentage of net sales, operating expenses were 43.4 percent for the fiscal 2024-3rd quarter compared to 40 percent for the prior fiscal year period. Gross profit as a percentage of net sales was 38.2 percent during the three months ended May 31st, 2024, compared to 36.1 percent during the prior fiscal year period. The 210 basis point improvement was primarily a result of successful actions taken by the company to offset supply chain disruptions and raw material challenges, including in sourcing of various production.

Matthew C. Wolsfeld: Total operating expenses for fiscal 2024's third quarter increased 7.1% to $9 million, compared to $8.4 million for the same period last fiscal year. Higher operating expenses were primarily due to increased personnel costs. As a percentage of net sales, operating expenses were 43.4% for the fiscal 2024 third quarter compared to 40% for the prior fiscal year period. Gross profit as a percentage of net sales was 38.2% during the three months ended May 31st, 2024, compared to 36.1% during the prior fiscal year period. The 210 basis point improvement was primarily a result of successful actions taken by the company to offset supply chain disruptions and raw material challenges, including in sourcing of various production.

Matthew C. Wolsfeld: Gross profit as a percentage of net sales was 38.2% during the three months ended May 31st, 2024, compared to 36.1% during the prior fiscal year period.

Matthew C. Wolsfeld: The $210 basis point improvement was primarily a result of successful actions taken by the company to offset supply chain disruptions and raw material challenges, including insourcing of various production.

Matthew C. Wolsfeld: Net income attributable to NTSC was $977,000, or $0.10 per diluted share for the fiscal 2024 third quarter, compared to $1.1 million, or $0.11 per diluted share for the fiscal 2023 third quarter.

Matthew C. Wolsfeld: As of May 31, 2024, working capital was $23.2 million, including $5.8 million in cash and cash equivalents, compared to $23 million, including $5.4 million in cash and cash equivalents as of August 31, 2023.

Matthew Wolsfeld: Net income attributable to NTSC was $977,000 or 10 cents per diluted share for the fiscal 2024-3rd quarter compared to $1.1 million or 11 cents per diluted share for the fiscal 2023-3rd quarter. As of May 31st, 2024, working capital was $23.2 million, including $5.8 million in cash and cash equivalents, compared to $23 million, including $5.4 million in cash and cash equivalents, as of August 31st, 2023. As of May 31st, 2024, we had outstanding debt at $4.8 million. This included $2 million in borrowing under our existing revolving line of credit compared to $3.6 million as of August 31st, 2023.

Matthew C. Wolsfeld: Net income attributable to NTSC was $9977,000, or $0.10 per diluted share, for the fiscal 2024 third quarter compared to $1.1 million, or $0.11 per diluted share, for the fiscal 2023 third quarter. As of May 31st, 2024, working capital was $23.2 million, including $5.8 million in cash and cash equivalents, compared to $23 million, including $5.4 million in cash and cash equivalents, as As of May 31st, 2024, we had outstanding data for $4.8 million.

Matthew C. Wolsfeld: As of May 31, 2024, we had outstanding debt at $4.8 million. This included $2 million in borrowings under our existing revolving line of credit, compared to $3.6 million as of August 31, 2023.

Matthew C. Wolsfeld: We generated $7.6 million in operating cash flows for the nine months ended May 31, 2024, compared to $3.5 million for the nine months ended May 31, 2023.

Matthew C. Wolsfeld: This included $2 million in borrowings under our existing revolving line of credit compared to $3.6 million as of August 31st, 2023. We generated $7.6 million in operating cash flows for the nine months ended May 31, 2024, compared to $3.5 million for the nine months ended May 31, 2023. The 116% year-over-year improvement in operating cash flow was driven primarily by stronger core profitability and positive changes in current assets and liabilities. Throughout fiscal 2024, we expect to generate continued operating cash flow, which we plan to invest in the growth of our business, support our quarterly cash dividend, and pay down the remaining balance on our existing revolving line of credit.

Matthew C. Wolsfeld: The 116% year-over-year improvement in operating cash flow was driven primarily by stronger core profitability and positive changes in current assets and liabilities.

Matthew Wolsfeld: We generated $7.6 million in operating cash flows for the nine months ended May 31st, 2024, compared to $3.5 million for the nine months ended May 31st, 2023. The 116 percent year-over-year improvement in operating cash flow was driven primarily by stronger core profitability and positive changes in current assets and liabilities. Throughout fiscal 2024, we expected to generate continued operating cash flow, which we plan to invest in the growth of our business, support our quarterly cash dividend, and pay down the remaining balance on our existing revolving line of credit.

Matthew C. Wolsfeld: Throughout fiscal 2024, we expect to generate continued operating cash flow, which we plan to invest in the growth of our business, support our quarterly cash dividend, and pay down the remaining balance on our existing revolving line of credit.

Matthew C. Wolsfeld: During fiscal 2024 third quarter, NTSC's Board of Directors declared a quarterly cash dividend of $0.07 per common share that was payable on May 15, 2024 to stockholders of record on May 1, 2024.

Matthew Wolsfeld: On May 31st, 2024, the company had $24.2 million of investments and joint ventures, of which 55.4 percent, $13.4 million within cash, with the remaining balance primarily invested in other working capital.

Matthew C. Wolsfeld: On May 31, 2024, the company had $24.2 million of investments in joint ventures, of which 55.4%, or $13.4 million, was in cash, with the remaining balance primarily invested in other working capital. During the third quarter of fiscal 2024, NTSC's Board of Directors declared a quarterly cash dividend of seven cents per common share that was payable on May 15, 2024 to stockholders of record on May 1, 2024. To conclude our prepared remarks, our third quarter financial results reflect the progress we're making in navigating a fluid business environment while successfully pursuing our product and market, and geographical diversification strategies.

Matthew C. Wolsfeld: To conclude our prepared remarks, our third quarter financial results reflect the progress we're making navigating a fluid business environment while successfully pursuing our product and market and geographical diversification strategies.

Matthew Wolsfeld: During fiscal 2024, a third quarter and TSC's board of directors declared a quarterly cash dividend of $0.7 per common share that was payable on May 15th, 2024, to stockholders of record on May 1st, 2024.

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

Matthew Wolsfeld: To conclude, our prepared remarks are third quarter financial results reflect the progress we're making navigating a fluid business environment while successfully pursuing our product and market and geographical diversification strategies. We're seeing stable North American demand trends and robust growth across our global oil and gas and bioplastics markets. and we expect these trends to continue throughout the remainder of our fiscal year. As a result, we believe fiscal 2024 will be another good year of sales and higher profitability for NTSC, who are excited by our long-term prospects.

Matthew C. Wolsfeld: And we expect these trends to continue throughout the remainder of our fiscal year.

Matthew C. Wolsfeld: As a result, we believe fiscal 2024 will be another good year of sales and higher profitability for NTIC, and we're excited by our long-term prospects.

Matthew C. Wolsfeld: We're seeing stable North American demand trends and robust growth across our global oil and gas and bioplastics markets, and we expect these trends to continue throughout the remainder of our fiscal year. As a result, we believe fiscal 2024 will be another good year of sales and Higher Profitability for NTSC, and we're excited by our long-term prospects. With this overview, Patrick and I are happy to take your questions.

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

Speaker Change: Thank you. If you would like to ask a question, please press star 11.

Speaker Change: If your question hasn't been answered and you'd like to remove yourself from the queue, please press star 1 again.

Patrick Lynch: With this overview, Patrick and I are happy to take your questions. Thank you.

Speaker Change: One moment for questions.

Operator: Thank you. If you'd like to ask a question, please press star 11. If your question hasn't been answered and you'd like to remove yourself from the queue, please press star 1 again. One moment for questions. And our first question comes from Timothy Clarkson with fanclements.com. Your line is open.

Unknown Executive: If you like to ask a question, please press star 11. If your question has an answer and you'd like to move yourself from the queue, please press star 11 again. One moment for questions.

Speaker Change: And our first question comes from Timothy Clarkson with VanClements.com. Your line is open.

Timothy Clarkson: Hey guys, decent quarter. Just was wondering about, I saw that, you know, obviously, you know, your fixed expenses were up a little bit. What, I mean, what was the typical increase in salaries at Northern Tech for this year?

Timothy Clarkson: And our first question comes from Timothy Clarkson with Banklimbins.com. Your line is open.

Speaker Change: We change salaries on September 1st of each year with the fiscal year. Last year, I want to say the average increase was probably 3 to 4 percent.

Timothy Clarkson: Hey guys, decent quarter. Just wondering about I saw that obviously your fixed expenses were up a little bit. What was the typical increase in salaries at Northern Tech for this year? We changed salaries on September 1st of each year with the fiscal year. Last year, I want to say the average increase was probably three to four percent. Okay.

Timothy Clarkson: Hey guys, decent quarter. I'm just wondering about I saw that your fixed expenses were up a little bit. What I mean, what was the typical increase in salaries at Northern Tech for this year?

Speaker Change: Okay.

Speaker Change: In terms of looking at the two big growth areas, the compostable and the oil and gas, any significant changes in the players who are buying, say, compostables?

Patrick Lynch: We change salaries on September 1st of each year with the fiscal year. Last year, I want to say the average increase was probably 3 to 4 percent.

Speaker Change: So it's all about the same people or are there any new positives that you're seeing out there? There's certainly the similar people. It's really a matter of expanding the distributors that we have across North America and then getting it in new markets.

Timothy Clarkson: Okay. In terms of looking at the two big growth areas, compostables and oil and gas, any significant changes in the players who are buying, say, compostables? Is that still about the same people, or are there any new positives that you're seeing out there?

Patrick Lynch: And in terms of looking at the two big growth areas that are compostable and oil and gas, any significant changes in the players who are buying say compostable? Is that so about the same people, or are there any new positives that you're seeing out there? There's certainly the similar people that's really a matter of expanding the distributors that we have across North America and then getting into new markets whether they're in Europe or other opportunities that we're seeing throughout Southeast Asia. So they're the same types of players, but we're just seeing that the market is continuing to increase due to various municipal legislation, state legislation, or even national legislations that we're seeing around the world related to the use of conventional plastics and the ability to use compostable plastics instead.

Speaker Change: whether they're in Europe or other opportunities that we're seeing throughout Southeast Asia.

Speaker Change: So they're the same types of players, but we're just seeing that the market is continuing to increase.

Patrick Lynch: There are certainly similar people. It's really a matter of expanding the distributors that we have across North America and then getting into new markets, whether they're in Europe or other opportunities that we're seeing throughout Southeast Asia. So they're the same types of players, but we're just seeing that the market is continuing to increase due to various municipal legislation, state legislation, or even national legislation that we're seeing around the world related to the use of conventional plastics and the ability to use compostable plastics instead. There are just a lot more people getting into the industry and getting into the space from a consumption standpoint.

Speaker Change: municipal legislation, state legislation, or even national legislations that we're seeing around the around the world related to the use of conventional plastics and the ability to use compostable plastics instead. So it's

Speaker Change: It's just a lot more people getting into the industry and getting into the space from a consumption standpoint.

Speaker Change: Right, now typically on the compostables are you selling a finished product or are you selling the goop that makes the finished product?

Speaker Change: We're selling both. We certainly started out selling the finished products to various customers where we're selling bin liners or trash bags, cutlery, and now we're working towards

Patrick Lynch: So it's just a lot more people getting into the industry and getting into the space from a consumption standpoint. Right.

Timothy Clarkson: Right now, typically on the compostables, are you selling a finished product, or are you selling the goop that makes the finished product?

Patrick Lynch: Now, typically on the compostables, are you selling a finished product or are you selling the group that makes the finished product? We're selling, we're selling both. We certainly started out selling the finished products to various customers where we're selling the bin liners or trash bags, cutlery, and now we're working towards a lot of the newer opportunities and sales that we've had are with the selling of specialty blended resins so the companies can make their own products out of the proprietary resins that we have. So we're taking the base resins and modifying them to make a specialty resins so that companies have the ability to essentially make anything that they're currently making out of conventional plastics a compostable a compostable plastic which is more profitable.

Speaker Change: A lot of the newer opportunities and sales that we've had are with the selling of specialty blended resins so that companies can make their own products out of the proprietary resins that we have.

Patrick Lynch: We're selling both. We certainly started out selling the finished products to various customers where we sold bin liners or trash bags, cutlery, and now we're working towards a lot of the newer opportunities and sales that we've had are with the selling of specialty blended resins so that companies can make their own products out of the proprietary resins that we have. So we're taking the base resins and modifying them to make a specialty resin so that companies have the ability to essentially make anything that they're currently making out of conventional plastics a compostable plastic.

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

Speaker Change: Which is more profitable?

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

Speaker Change: As far as kind of how things are transitioning. So it's not as much a matter of which gross margin is better it's just a matter of being able to You know kind of value the size of the opportunities

Timothy Clarkson: Which is more profitable?

Patrick Lynch: They're pretty close from a gross margin standpoint, but we just feel like the specialty resin market of being able to sell container-load quantities of resin appears to be, long-term, probably the bigger market as far as how things are transitioning. So it's not as much a matter of which gross margin is better. It's just a matter of being able to kind of value the size of the opportunities. So in some of the opportunities where we're selling resins, you're talking about selling containers of resin compared to when you're selling finished products; you're ultimately selling caseloads or pallet loads of product. So it's just a matter of the opportunity, but we're certainly going after both areas.

Patrick Lynch: They're pretty close from a gross margin standpoint. We just feel like the specialty resin market of being able to sell container low quantities of resin appears to be long term probably the bigger market as far as kind of how things are transitioning. So it's not as much a matter of which gross margin is better. It's just a matter of being able to kind of value the size of the opportunities. So, in the opportunities where we're selling resins, you're talking about selling containers of containers of resin compared to when you're selling the finished products; you're ultimately selling case loads or palette loads of a product.

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

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

Speaker Change: How about on the oil and gas, any changes in the kinds of people buying the product or is it pretty much the same guys you've been seeing?

Speaker Change: Certainly it's a similar customer base.

Speaker Change: What we're seeing is we're seeing more adoption of the technology of using the VCI solution compared to the alternative solutions. And so when we're going to trade shows, when we are presenting to customers, when we are kind of moving forward and looking at the opportunities.

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

Timothy Clarkson: How about oil and gas? Any changes in the kinds of people buying the product, or is it pretty much the same guys you've been seeing?

Patrick Lynch: How about on the oil and gas, any changes in the kinds of people buying the product or is it pretty much the same geysers you've been seeing? Certainly, it's a similar customer base. What we're seeing is we're seeing more adoption of the technology of using the VCI solution compared to the alternative solutions. And so, when we're going to trade shows, when we are presenting to customers, when we are kind of moving forward and looking at the opportunities, more people understand the solution and what the value out of proposition that it brings. So it's more a matter of seeing this get pushed out to companies after they've been able to try it and kind of review the results.

Patrick Lynch: Certainly, it's a similar customer base. What we're seeing is more adoption of the technology of using the VCI solution compared to the alternative solutions. And so when we're going to trade shows, when we are presenting to customers, when we are kind of moving forward and looking at the opportunities, more people understand the solution and the value added proposition that it brings. So it's more a matter of seeing this get pushed out to companies after they've been able to try it and kind of review the results. This is why we're starting to see kind of the expansion of the oil and gas group now.

Speaker Change: More people understand the solution and what the, you know, the value added proposition that it brings. So it's more a matter of

Speaker Change: Seeing this get pushed out to companies.

Speaker Change: after they've been able to try it and kind of review the results.

Speaker Change: This is why we're starting to see kind of the expansion of the oil and gas group now.

Speaker Change: And I know that third quarter was a little disappointing from an oil and gas standpoint, but we've always kind of highlighted the volatility of the numbers.

Speaker Change: And I can say that the actual POs that we have in hand right now, not just opportunities or things in the pipeline, but actual POs that we have, are really significant. It'll make our fourth quarter, from an oil and gas standpoint,

Patrick Lynch: This is why we're starting to see kind of the expansion of the oil and gas group now. And I know that third quarter was a little disappointing for an oil and gas standpoint, but we've always kind of highlighted the volatility of the numbers. And I can say that the actual POs that we have in hand right now, not just opportunities or things in the pipeline, but actual POs that we have are really significant that are going to, it'll make our fourth quarter from an oil and gas standpoint a pretty strong fourth quarter that I know that last and the last earnings call we had, we talked about the second half of the year being stronger than the first half of the year from an oil and gas standpoint.

Patrick Lynch: And I know that the third quarter was a little disappointing from an oil and gas standpoint, but we've always kind of highlighted the volatility of the numbers. And I can say that the actual POs that we have in hand right now, not just opportunities or things in the pipeline, but actual POs that we have are really significant. It'll make our fourth quarter, from an oil and gas standpoint, a pretty strong fourth quarter.

Speaker Change: you know, a pretty strong fourth quarter that'll, you know, I know that last

Speaker Change: And the last earnings call we had, we talked about the second half of the year being stronger than the first half of the year from an oil and gas standpoint. Obviously, with the third quarter results, it doesn't look like that's the case, but I can tell you that based on actual POs and expected delivery dates at this point in time, it still will be a significantly stronger second half to the year from an oil and gas standpoint.

Patrick Lynch: I know that last... And in the last earnings call we had, we talked about the second half of the year being stronger than the first half of the year from an oil and gas standpoint. Obviously, with the third quarter results, it doesn't look like that's the case, but I can tell you that, based on actual POs and expected delivery dates at this point in time, it still will be a significantly stronger second half of the year from an oil and gas perspective.

Speaker Change: Great, great. Okay, I'm done. Thanks, guys.

Timothy Clarkson: Obviously, with the third quarter results, it doesn't look like that's the case, but I can tell you that based on actual POs and expected delivery dates at this point in time, it will still be a significantly stronger second half to the year from an oil and gas standpoint. Great, great.

Speaker Change: Thank you. As a reminder, to ask a question, please press star 11.

Speaker Change: Our next question comes from Gus Richard with Northland. Your line is open.

Auguste Philip Richard: Yes, thanks for taking the questions. Just on Z-Rust Industrial, you know, that was down year over year. Is that a function of

Operator: Great, great. Okay, I'm done. Thanks, guys. Thanks, Tim.

Timothy Clarkson: Okay, I'm done. Thanks, guys. Yep, thanks, Tim.

Auguste Philip Richard: Thank you. As a reminder, to ask a question, please press star 11. Our next question comes from Gus Richard with Northland. Your line is open.

Unknown Executive: Thank you.

Unknown Executive: As a reminder to ask a question, please press the store 11.

Auguste Philip Richard: You know the weakness in Germany or is there an end market exposure that's that's causing that to to be down year over year

Gus Richard: Our next question comes from Gus Richard with Northland. Your line is open.

Auguste Philip Richard: Yes, thanks for taking the questions. Um, just on Xerox Industrial, you know, that was down year over year. Is that a function of, you know, the weakness in Germany, or is there an end market exposure that's causing that to be down year over year?

Gus Richard: Yes, thanks for taking the questions. Just on zero industrial, you know, that was down year over year. Is that a function of, you know, the weakness in Germany, or is there an end market exposure that's causing that to be down year over year?

Speaker Change: As we mentioned, we were down in Germany because we had lost a significant customer, but also our European joint ventures overall are feeling a bit...

Speaker Change: of the Economic pressure based on the ongoing war with the Ukraine and the externalities that's causing, for example, higher energy prices in Europe .

Unknown Executive: As we mentioned, we are down in Germany because we lost a significant customer, but also, our European joint ventures overall are feeling a bit down. (inaudible)

Patrick Lynch: As we mentioned, we were down in Germany because we had lost a significant customer, but also our European joint ventures overall are feeling a bit of economic pressure based on the ongoing war with the Ukraine and the Ukraine. Okay, got it. And then just looking at zero soil and gas, you know, on the first half, you did three, you know, 3.7 million round numbers. You know, you had a soft Q2. Is it sort of reasonable to assume that, you know, you're on roughly, you know, two million, a quarter run rate? You know, I know it's volatile.

Speaker Change: Okay, got it.

Speaker Change: Just looking at Z-Rust oil and gas, you know, in the first half you did three

Speaker Change: You know 3.7 million round numbers

Speaker Change: You know, you had a soft

Speaker Change: Q2, is it sort of reasonable to assume that, you know, you're on roughly a

Auguste Philip Richard: Okay, got it. And then just looking at seabird soil and gas.

Auguste Philip Richard: You know, in the first half, you did three, you know, 3.7 million round numbers, you had a soft Q2, is it sort of reasonable to assume that, you know, you're on, roughly, you know, two million and a quarter run rate, you know, I know it's volatile. Going into Q3, if I just take the 600,000 that got delayed in Q3 and added to that run rate. And am I coming up with roughly the right number for Q4?

Speaker Change: you know, two million and a quarter run rate, you know, I know it's volatile. Going into Q3, if I just take the 600,000 that got

Speaker Change: 600,000 that got delayed in Q3 and added to that run rate. Am I coming up with roughly the right number for Q4?

Speaker Change: It could be even stronger, even stronger than that.

Patrick Lynch: Going into Q3, if I just take the 600,000 I've got, the 600,000 that got delayed in Q3 and added to that run rate, am I coming up with roughly the right number for Q4? You could be even stronger than that, but as far as the $2 million run rate for oil and gas, if I look at that, I think that's a pretty fair baseline to look at. But, as I said, it is volatile. I mean, that's just one of the things that we run into with oil and gas, so some of the size of the opportunity.

Speaker Change: But I mean, as far as the $2 million run rate for oil and gas, if I look at, you know, I look at that, I think that's a pretty fair baseline to look at. But as I said, it is volatile. I mean, that's just one of the things that we that we run into with oil and gas with some of the size of the opportunities.

Unknown Executive: It could be even stronger, even stronger than that. But I mean, as far as the $2 million run rate for oil and gas, if I look at, you know, I look at that, I think that's a pretty fair baseline to look at. But as I said, it is volatile. I mean, that's just one of the things that we run into with oil and gas given some of the size of the opportunities.

Speaker Change: Right. And then thinking about 2025 and oil and gas, you know, is it is it reasonable to assume that the

Speaker Change: The base run rate is going to increment up a little bit, you know, maybe two and a half, three million a quarter, you know, plus volatility or

Speaker Change: Do you think you'd remain at that $2 million a quarter run rate?

Gus Richard: Right.

Auguste Philip Richard: Right. And then thinking about 2025 and oil and gas, you know, is it reasonable to assume that the base run rate is going to increment up a little bit, you know, maybe two and a half, three million a quarter, plus volatility, or, you know, do you think you will remain at that $2 million a quarter run rate?

Patrick Lynch: And then, thinking about 2025 and 10 oil and gas, is it reasonable to assume that the base run rate is going to increment up a little bit, maybe two and a half, three million and a quarter plus volatility, or do you think you remain at that $2 million quarter run rate? I think that as we exit the fiscal 25 in third and fourth quarter, you're going to continue to see the increase. I mean, I think it's just a matter of looking at the moving average rather than kind of the quarter by quarter. But I think of you, you know; that's certainly what we're targeting: is that kind of growth or more.

Speaker Change: I think that as we exit the fiscal 25, you know, in third and fourth quarter, you're going to continue to see the increase. I mean, I think it's just a matter of looking at

Speaker Change: You know, kind of looking at the moving average rather than kind of the quarter by quarter. But I think of you, you know, that's certainly what we're targeting is that kind of growth or more.

Unknown Executive: I think that as we exit the fiscal 25, you know, in the third and fourth quarters, you're going to continue to see the increase. I mean, I think it's just a matter of looking at, you know, kind of looking at the moving average, rather than kind of looking at it quarter by quarter. But I think if you that's certainly what we're targeting is that kind of growth or more.

Speaker Change: Got it. That's very helpful. And then just, you know, going back to industrial...

Speaker Change: You know, in thinking about that business, you know, Europe has been a big portion of your revenue.

Speaker Change: Is that business going to stabilize? What do you think the growth rate is over the next couple years for Zrus Industrial? Well, there's two different ways that we kind of look at it. One is if you look at, obviously the largest individual player is the German joint venture that we have.

Gus Richard: Got it. That's very helpful.

Auguste Philip Richard: Got it. That's very helpful. And then just, you know, going back to industrial. You know, in thinking about that business, Europe has been a big portion of your revenue. You know, do you think that business is going to stabilize? What do you think the growth rate is over the next couple of years for ZRust Industrial?

Patrick Lynch: And then just, you know, going back to industrial, you know, and thinking about that business, you know, Europe has been a big portion of your revenue. You know, do you, is that business going to stabilize? What do you think the growth rate is over the next couple of years for the rest industrial? Well, there's two different ways that we kind of look at it. One of the things that you looked at, obviously, the largest individual player is the German joint venture that we have. From a positive standpoint, we have seen increases; you know, the German joint venture kind of bottomed out from a revenue standpoint in our first quarter at about 7.8 million euros.

Speaker Change: From a positive standpoint, we have seen increases in

Speaker Change: You know, the German joint venture kind of bottomed out from a revenue standpoint in our first quarter.

Unknown Executive: Well, there are two different ways that we kind of look at it. One is, obviously, the largest individual player is the German joint venture that we have. From a positive standpoint, we have seen increases. You know, the German joint venture kind of bottomed out from a revenue standpoint in our first quarter at about 7.8 million euros. And we've seen increases in each of the last two quarters to kind of get back out to, you know, revenue of about 9.2 million euros, with the expectation that we're going to kind of continue to see growth coming out of that. And if we're able to put three or four quarters in a row together from a German viewpoint, that will help.

Speaker Change: at about 7.8 million euros. And we've seen increases in each of the last two quarters to kind of get back out to, you know, revenue of about 9.2 million euros, with the expectation that we're going to kind of continue to see

Speaker Change: out of that entity. And if we're able to put three or four quarters in a row together from a German standpoint, that will help. Similarly, if I look at the similar trend, if I look at kind of all the joint ventures, that they're kind of seen a little bit of a

Patrick Lynch: And we've seen increases in each of the last two quarters to kind of give back out to, you know, revenue of about 9.2 million euros, with the expectation that we're going to kind of continue to see growth coming out of that, that kind of, and if we're able to put three or four quarters in a row together from a German standpoint, that will, that will help. Similarly, if I look at, if it's a similar trend, if I look at kind of all the joint ventures, that they're kind of seen a little bit of a column of bottoming out or a trot kind of around Q4, Q1 of this year with kind of growth coming, you know, from beyond that.

Speaker Change: Call it a bottoming out or a trot, kind of around Q4 or Q1 of this year with kind of growth coming from beyond that.

Unknown Executive: Similarly, if I look at the similar trend, if I look at kind of all the joint ventures, they're kind of seeing a little bit of a call it a bottoming out or a trot kind of around Q4, Q1 of this year with kind of growth coming from beyond that. So, you know, we are starting to see a little bit of a rebound coming out of coming out of Europe, which is helping from a joint venture operating income contribution scan.

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

Speaker Change: Now the other thing that I'll point out when you talk about the industrial sales is that our third quarter of fiscal 23, so the last

Patrick Lynch: So, you know, we are starting to see a little bit of a rebound coming out of Europe, which is helping from a joint venture operating income contributions standpoint. Now, the other thing that I'll point out when you talk about the industrial sales is that our third quarter of fiscal 23, so the last, you know, I know that when we were comparing numbers earlier on in the call, you know, we talked about the industrial business being down compared to, you know, Q3, Q3 of last year. Q3 of last year was probably the strongest industrial quarter that we've had specifically in North America.

Speaker Change: You know, I know that when we were comparing numbers earlier on in the call, we talked about the industrial business being down.

Speaker Change: compared to Q3, Q3 of last year.

Speaker Change: Q3 of last year was probably the strongest industrial quarter that we've had.

Unknown Executive: Now, the other thing that I'll point out when you talk about industrial sales is that our third quarter of fiscal 23, so the last, you know, I know that when we were comparing numbers earlier in the call, we talked about the industrial business being down compared to, you know, Q3 of last year. Q3 of last year was probably the strongest industrial quarter that we've had, specifically in North America, from a comparative quarter standpoint, that's When I look at it just from a kind of a trailing three or four quarter standpoint, it's kind of an average quarter.

Speaker Change: specifically in North America, it was, you know, it was well above average and a very strong third quarter. You know, so the comparative

Speaker Change: You know, from a comparative quarter standpoint, that's one of the reasons why industrial is down. When I look at it just on a kind of a trailing three or four quarter standpoint, it's kind of an average quarter.

Patrick Lynch: It was, you know, it was well above average in a very strong third quarter, you know, so the comparative, you know, from a comparative quarter standpoint, that's one of the reasons why industrial is down. When I look at it just on a kind of a trailing three or four quarters standpoint, it's kind of an average quarter. You know, from Q4 of last year and so Q2 of this year, we've averaged about 4.4, 4.5 million. In Q3 of this year, where it's 4.6, or I'm sorry, we've averaged 5.4 million in North America and we're at about 5.6 million in Q3.

Speaker Change: You know, from Q4 of last year until Q2 of this year, we've averaged about 4.5%.

Speaker Change: 4.4, 4.5 million. In Q3 of this year, we're at 4.6, or I'm sorry, we've averaged 5.4 million in North America, and we're at about 5.6 million in Q3.

Speaker Change: And that's kind of while we're looking at this and still feel like that's kind of down compared to where we expect revenues in North America industrial to be. So certainly the hope is that we're going to see kind of a rebound in the industrial, industrial sales in North America.

Unknown Executive: You know, from Q4 of last year until Q2 of this year, we've averaged about 4.4, 4.5 million. In Q3 of this year, we're at 4.6, or, I'm sorry, we averaged 5.4 million in North America, and we were at about 5.6 million in Q3. And that's kind of while we're looking at this and still feel like that's kind of down compared to where we expect revenues in North America industrial to be. So certainly, the hope is that we're going to see kind of a rebound in industrial sales in North America. But I think part of the reason why it looks so poor in Q3 is just because Q3 of last year was so high. Does that make sense?

Speaker Change: But I think part of the reason why it looks so poor in Q3 is just because Q3 of last year was so high. Does that make sense?

Patrick Lynch: And that's kind of while we're looking at this and still feel like that's kind of down compared to where we expect revenues in North America industrial to be. So certainly the hope is that we're going to see kind of a rebound in the industrial sales in North America.

Speaker Change: Okay, and then just, you know, your thoughts on on growth rates for that business going forward, you know, is...

Speaker Change: and seasonality for the fourth quarter.

Gus Richard: But I think part of the reason why it looks so poor in Q3 is just because Q3 of last year, Anderson. Okay.

Speaker Change: Well, typically third and fourth quarter are stronger quarters for us just because of the, you know, we do have some, you know, we do have some seasonality given the kind of the rough season that happens during the summer, but typically the industrial, the ZRS industrial sales,

Patrick Lynch: And then just, you know, your thoughts on growth rates for that business going forward, you know, is and and seasonality for the fourth quarter. Well, typically third and fourth quarter are stronger quarters for us, just because of the, you know, we do have some, you know, we do have some seasonality given the kind of the rough season that happened during the summer. But typically, the industrial, the zero industrial sales will outpace GDP by three or four percent. So, you know, we typically target 10, 11 percent of growth across the industrial market, whether it's in North America or Brazil or, you know, other areas.

Unknown Executive: Well, typically, the third and fourth quarters are stronger quarters for us just because of the, you know, we do have some seasonality given the kind of rough season that happens during the summer. But typically, the ZRS industrial sales will outpace GDP by three or four percent. So we typically target 10, 11 percent of growth across the industrial market, whether it's in North America or Brazil or, you know, other areas.

Speaker Change: will outpace GDP by 3 or 4 percent. So we typically target 10, 11 percent of growth across the industrial market, whether it's in North America or Brazil or other areas.

Speaker Change: There's some subsidiaries that we have, like India and China, that historically have shown a higher growth rate than what we see in the more mature markets, like North America and Germany. But typically from an industrial standpoint, we kind of target that

Speaker Change: you know, 10, 11, 12 percent.

Unknown Executive: There are some subsidiaries that we have, like India and China, that historically have shown a higher growth rate than what we see in the more mature markets like North America and Germany. But typically, from an industrial standpoint, we kind of target that, you know, 10, 11, 12%.

Gus Richard: There's some subsidiaries that we have, like India and China, that historically have shown a higher growth rate than what we see in the more mature markets, like North America and Germany. But typically, from an industrial standpoint, we kind of target that, you know, 10, 11, 12 percent number. Got it. Thanks. Very helpful. Yep. Thanks, guys.

Speaker Change: Number.

Speaker Change: Got it. Thanks. Very helpful. Yep. Thanks, guys.

Speaker Change: Thank you. I'm showing no further questions.

Speaker Change: Thank you for your participation. This does conclude the program and you may now disconnect. Everyone, have a great day.

Unknown Executive: Thank you. I'm showing no further questions.

Unknown Executive: Thank you for your participation.

Unknown Executive: This does include the program, and you may now disconnect.

Unknown Executive: Everyone, have a great day.

Q3 2024 Northern Technologies International Corp Earnings Call

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