Northern Technologies International Corporation

Q1 2022 Earnings Conference Call

1/6/2022

spk_0: the day and thank you for standing by welcome to the ntsb conference call and webcast at the sun all participants learn a lesson only mode after the speakers presentation the will be a question and answer session to ask the question during a session newly purchased star one on your telephone please be advised that a conference may be recorded history class there any further assistance please press start and zero as part of the discussion today the representatives from in t i see will be making certain forward looking statements regarding anti i see future financial and operating results as well as their business plans objective and expectations please be advised that these forward looking statements are covered under the safe harbor provisions of the private security medicare reform act of eighteen ninety five and that nt i see desires to reveal itself to the protections of the safe harbor for these statements please also be a vital actually else could differ materially from those stated or implied by the forward looking statements do to certain risks and uncertainties including the including those described in and anti i see his most recent and very poor and ten k subsequent quarterly reports on form can kill and recent press releases please read beat reports and other future failings that and t i see will make with the s e c n p i c disclaims any duty to up they are his life it's forward looking statements i would now like and i'm a conference over to your house today patrick lynch please go ahead
spk_1: the morning on patrick lynch and to i see the ceo and i'm here with matt was held and jc the ago please note that a press release regarding our first quarter fiscal twenty twenty two financial results was issued earlier this morning and is available at and vip dot com let me begin by wishing every one a healthy and prosperous twenty twenty two new year i'd also like to remind every one of our upcoming annual meeting of stockholders on january twenty one please note however that although the media will be held in person due to the covert nineteen pandemic we are strongly encouraging all stockholders to vote by proxy in advance the safety well being of our stockholders as well as our employees is extremely important and we believe that will be able to better comply with the cdc and they'd safety guidelines if attendance has kept to an absolute minimum and the meeting itself is kept as short as possible i only reporting the election results and not making any business presentation
spk_2: in this year
spk_1: now for the remainder of this call we will review various key aspects of our to school twenty twenty two first quarter financial results provide a brief business update and then conclude with a question and answer session overall the school twenty twenty two sales are up to a record start as we experienced strong demand during per square cross many of our global markets which is very encouraging we are also excited about our first quarter announcement that we acquired the remaining fifty percent ownership interest in how did the and the i r a z arrest for venture in india which we refer to as the rest india the financial results of zero india are now included in our by consolidated by statements effective as of september first and therefore for the entire first quarter of fiscal twenty twenty two as a result sales from us india are consolidated with in our income statement and are no longer accounted for to join bench are operating income this transaction also resulted in several one time financial charges and accounting adjustments that that were of in more detailed in his prepared remarks a strong demand we experienced during first quarter lead to a forty two point four percent increase in our total consolidated net sales as compared to the first quarter and november thirtieth twenty twenty to a quarterly record of eighteen point two million dollars a year over year increase in consolidated sales was primarily a result of sales growth across all the company's product categories due to hire global the man and the recovery from the coven nineteen pandemic as well as contribution from his us
spk_3: indian
spk_1: for first quarter of fiscal twenty twenty two just india contributed to point as it's me two million four hundred thirty three thousand in sales two entities and solid a net sales even excluding the incremental sales from zero to india indian we still experience strong organic growth that being said and he has he has not been immune to significant inflationary pressures which has affected the cost of our raw materials and labor as well as intense friction across our global supply chain and the impact of the continuing encoded nineteen pandemic unfortunately art and profitability lag during the first quarter due to several have to do to one time items associated with these us in your transaction as well as ironic serial freight and labour expenses while we plan to implement certain measures to address these inflationary pressures we're going to speed these measures taking effect during the second half of our fiscal twenty twenty two so with it's overview let's begin to examine the drivers for the first quarter in more detail for the first quarter ended november thirtieth twenty twenty one our total consolidated net sales increased forty two point four percent to a quarterly record of eighteen point two million dollars as compared to the first quarter ended november thirtieth twenty twenty broken down by business units this included a seventy two point seven percent increase in the us oil and gas net sales a forty seven point three percent increase in nature technet sales and a thirty two thirty eight point nine percent increase in zero industrial net sales total net sales for the fiscal twenty twenty two first quarter by our joint ventures which we do not consolidate in our financial statements were twenty six point eight million dollars this is an increase of one percent when compared to the same period last fiscal year and demonstrating continued strength in the global demand for products for both existing and new cut of from both existing and new customers this whole twenty twenty two first quarter net sales by are wholly owned and tasty china subsidiary decreased ten point seven percent to four point one million dollars over the first quarter of fiscal twenty twenty one we believe the year over year decline in and created china sales of the was primarily due to covered nineteen related lockdown and and weaker economic conditions in china despite the near term volatility within this market we continue to believe china will likely become our largest geographic market in the coming years to support the significant opportunity our new facility in shanghai china is expected to open soon and support our aren't the product production sales and marketing and training efforts throughout the region moving on to ours us oil and gas product group i'm encouraged by they continue continued progress we're making within this large and compelling market first quarter fiscal twenty twenty two is just oil and gas the have increased seventy two point seven percent over the prior fiscal year period we continue to see a higher growth and and market interest of the globally across our oil and gas solutions which includes applications to protect above ground oil storage tanks and pipeline case and from corrosion we expect oil and gas to track above the school twenty twenty one sales throughout the remainder of the twenty twenty two turning to our nature take bioplastics business fiscal twenty twenty two first quarter nature textiles were three point eight million dollars a forty seven point three percent increase over the prior personally your period this is the highest level of quarterly and he i hope a quarterly major tech sales since the code nineteen pandemic began to years ago however we've stuck totally volatility will remain over the near term as the coated nineteen pandemic continues and large users of compostable classics cycle in and out of luck belts
spk_4: our or or operate at limited capacity
spk_1: our long term prospects within the worldwide compostable perfect margaret are exciting we continue to focus our efforts on developing customer solutions are specific customer proper product news that aren't available elsewhere and we remain optimistic about major tech strong position within this large and compelling compost will classes market so did include my prepared remarks we are encouraged by the record sales growth we experienced during the first quarter and are diligently working to improve our profitability authors for sales growth continued to to benefit from arm and geographic and market and product diversification strategies which is supported by our robust balance sheet experience management team and acid blight protectiveness model while consider will growth and civil global books are sorry i wasn't suitable global uncertainty remains we believe njc is on track for another strong here of sales growth and profitability in fiscal twenty twenty two with there's a real let me now turn the call over to was failed to summarize our financial results for the fiscal twenty twenty
spk_5: to first quarter
spk_6: they have the quarter ended nov thirty or twenty twenty one represents the first quarter century configure the acquisition of the remaining fifty percent ownership interest in a joint venture with referred to as zero india
spk_7: for six point two five million dollars
spk_6: we funded the purchase price with a combination of cash and borrowings under evolving line of credit which would also increase the connection with the transaction the five million dollars as a result the opposition zero induced cancer that are now reflected not unfounded have any of them as effective september first the beginning of our first quarter the twenty twenty two and addition during the fiscal twenty twenty two first quarter be accounted for again and an acquisition of three point nine five million dollars during the quarter and is that and reflected in a line item remembered him again and acquisition of equity method in bad team on are consolidated statement of operation look at our consolidated result in more detail compared to prior fiscal year period and healthy consolidate net sales increased forty two point four percent in the fiscal twenty twenty two first quarter to quarter they record because of the positive trends patrick of viewed and is prepared remarks and the incremental sales from zero india while we expected panda plan to continue throughout the school twenty twenty two we anticipate some sadness and our sales during the short term her male a result of the continued covenant him pandemic and it's variants despite a one percent increase in first quarter sales across our global joint ventures first quarter joint venture operating income decline top point three percent compared to the pirates for your period that decrease was primarily attributable to the acquisition of the remaining fifty percent of the earth india and lower profitability of
spk_8: the company to adventures
spk_6: total first quarter fiscal twenty twenty two operating expenses were seven point one million dollars the nineteen point nine percent increase over the prior fiscal year period was due primarily to the incremental expense due to the zero in the acquisition and increase selling expenses associated with higher consolidated failed as well as higher wages travel expenses and are the investments operating expenses are the percentage net sales or thirty nine percent compared to forty six point three percent the same period last fiscal year an illustrated our first quarter results the europe india can't do the earth and a transaction increase or net sales and operating expenses sensitive now consolidated with our financial results and decreased or equity in income from joint ventures in which and each case at compare to the same period last fiscal year so we anticipate that the acquisition will continue to have these effects on our financial results are in their major fiscal twenty twenty two cop gets old the percentage and that failed increased to sixty nine percent during a three month and a november thirtieth twenty twenty one compared to sixty five percent during the same period last fiscal year and the other result of the price increase their raw materials and increase labor costs hello patch check out our at patrick said we've had a take certain action to address inflationary pressures we expected inflationary pressures to persist and to at least the second quarter of fiscal twenty twenty two and don't expect to relied benefits from his actions until the second half of the fiscal twenty twenty two and here he reported net income a four point seven million dollars or forty eight cents per diluted share for the fiscal twenty twenty two first quarter compared to one point three million dollars and thirteen cents per share for the fiscal twenty twenty one first quarter excluding the one time jane up three point nine million dollars blender the acquisition of the remaining peppers and fifty percent ownership interest is your thing
spk_7: india and other related adjustments and a non gap adjusted net income was seven or eighty thousand dollars or eight and per diluted share the fiscal twenty twenty two first quarter compared to one point three million dollars or thirteen cents per ship printed than share the same quarter last year a reconciliation of gap to non japanese matters is available and our first quarter earnings press release the with issue this morning have a november thirtieth twenty twenty one working capital was twenty five point eight million dollars including eight million dollars in cash and cash equivalents and five thousand dollars in available for sale securities compared to twenty five point two million dollars including seven point seven million dollars in cash and cash equivalents and five thousand dollars in available for sale securities huh
spk_6: august thirty first twenty twenty one and november thirtieth twenty twenty one the company had nearly twenty two million dollars in investments in your adventures of which approximately fifty four percent are nearly eleven point six million dollars with in cash for the remaining balance primarily invested in other words and capital during the fiscal twenty twenty two first quarter and happy board of directors increased a regular quarter cask evident by seven point seven percent to seven cents per share that was payable on nov seventeen twenty twenty one the share there's a record and november third twenty twenty one so to conclude or paired remarks were focused on making the necessary adjustments are business to navigate the near term expense raw material and supply chain challenges and addition we continue to invest across our global operations to support a significant long term growth opportunities while near term uncertainty appears to have picked up recently especially light of the covered variants we believe overall physical twenty twenty two will be another good year for the other profitability for and jesse with this overview patrick are happy to take any questions
spk_0: thank you if you have a question at this time please pass and one on youtube time telephone he can question has been answered are you must remember stuff in the key please pass the pound key again if you have a question at full time the past star than one am i do have a crossing from the line of porn clarkson with and clemens yeah line as open play for her
spk_9: hey guys on a great great quarter are just wanted to ask solid it's a it's a little confusing to me because it looks like you know why i look at the operational profits they were much higher but you're saying with the gap ah not gap results of the profitability was lower i mean can't i did what are what were the one time expenses ah that were ah it occurred or are they are they added into the one time gain hot how did you how to do to them calling basis
spk_7: while they're the one time expensive that we had already transaction are included in the you know we we we broke that out in the non gap calculation that in the back of the under pressure so there's a cosmic separate associated with the transaction there's new amortization expand we got in the quarter is by the amortization of the new intangible that are balance
spk_10: he'd and attack impact from the items we talked about to to add back ah yes of those items that are included in the he to get the non get numbers that are included in our our normal operating expenses that you're looking at our income statement
spk_9: right funny just looking at it in all from afar it looks like you're family profitable and yet you know more in transit profitability this quarter than last quarter by
spk_11: oh ya these numbers bouncing back reflecting gap a non gaap earnings yeah it's everyday the incomes david comparing
spk_10: if the three months ended
spk_6: know fiscal twenty twenty two and had prior it it it's it's sometimes difficult to reconcile him in of be part of the transaction because the train that took place in the quarter and also because you're switching from the equity consolidation of your india to the full consolidation of the as india so you're essentially eighteen you know five hundred plus thousand dollars that expenses to the operating expense line that are in we did that are related to india you're adding the sale the cost of goods sold to be to the top line and you know that ultimately your pauline
spk_12: your pauline
spk_10: in come out of the joint venture operating line from one previously would have been there related to the consolidation
spk_6: so it's a little it's the loan debt go going quarter to quarter because of the adjustments but now overall the mean that the main issue we had this quarter is not sales were up and sales were where where where salad and sales the comparing a fourth quarter last year he he he income from the sale of income from our oil and gas is pretty significant the fourth quarter and so there's a pedophile
spk_10: off to first quarter with the with the revenue that we recognized and address in a different gross margin they're associated with their with that and beyond that across he does you up industrial market the gross margins yeah throughout
spk_6: trump first quarter or same kind of the second quarter is that what the the increase in the cost of the ravens the main materials the a mocking the main raw material the gone our product and you know it was pretty volatile during the last six months of the last fiscal year and through the first that through the first three months of this yourself your were a upon where make
spk_10: in adjustments to ah
spk_6: yeah to take into account for that and to increase their profitability but it's going to take a little bit a time that and upload try him and tory and and and get pushed out sell it expectations are that we're going to be able to increase or gross margins throughout the young from from kind of now or
spk_7: february on increase grow my gross margin through the industrial products and also the expectations are that we're going to have more failed in a second half of the fiscal twenty twenty two relating to oil and gas similar to what we did last year and added to the gross margins on the oil and gas business are are are better and stronger than the does your business so that should bring back some profitability as well so so i would expect that you know our our first and second quarters there there's gonna be some your it
spk_6: gross margin pressure the word that were the only because the supply chain issues because the raw material issues and raw material pricing but would expect a lot of out to be ironed out the second half of the year so can we still think reality very strong year
spk_7: the or profitability standpoint certainly from a sale camp point even if you pull out the two and a half million dollars of revenue that you and india contributed during the first three months of the year we still thought significant increases your up across the board for me out from a failed important
spk_6: and so killed that that something that we were pretty excited about it are specifically if you look at the revenue from and you're comparing comparing fourth quarter first quarter know the the major tech sales were up close to fifty percent in a divine report for the first quarter not die now that our first quarter the first quarter and a sorry that spoke that nature that total sales are up thirty percent brain fourth quarter to first quarter and on fifty percent comparing first quarter first quarter and kill similarly although failed in oil and gas were down by for fourth quarter to first quarter they were up seventy two percent comparing the yeah for quarter first quarter so yeah we're pretty optimistic given were sales are headed and given the you know the magically put in place to kind of deal with them the profitability issues
spk_9: but yeah we're pretty confident and how are going forward for the the rest of the year shirt so i are on the on the yard and compostable business i noticed when i was and cosco that they're starting and switch to compostable packaging i think they're using somebody out a me what would you say the differentiator for that for and or nature texas
spk_13: up compostable products
spk_1: and he doesn't differentiate we've always had him back to home and we use or word take the compostable residents that are available on the market produced by some very major chemical companies but they in and of themselves do not have certain mechanical properties that make an easy to manufacture process and also the finished products tend to be weaker if they're just those resin system used by themselves so we take their as systems we had our chemistry to had which make an easier to process i never reduce the cost like losing the quality and also the finished products have greater mechanical strength and that's how we differentiate selves the market and we also don't have go after all of the commodity the applications are we are all the always seeking to get have to find specially applications where our technology really differentiates ourselves as a is as from the competition because we can produce a certain products that nobody else can sure sure
spk_9: okay by an eel one last question just on the oil and gas i know that your admit you're making some progress with them using the technology on specifically on pipelines as a thing developed further as far as that goes or is that this time of an ongoing thing
spk_1: i left an ongoing thing there's no there's nothing we did develop recently and that augments that okay okay
spk_9: i got i was good quarter and knowledge somebody else ask questions thank you
spk_0: thank you on our next question can smell line as kept going to play the pump my partners your nine as open please go ahead
spk_14: oh hi guys think serve a couple my questions were were ass but i'm ill or on a go forward basis just as you of home
spk_15: you know when you
spk_14: the deal such as the india deal so everything kind of moves above above the line was there any difference in kind of what operating profit said india vs separate other other joint ventures or is it kind of in line with what with others is based on scale or whatever else you plan on doing there
spk_6: well it can general have said a lot of our joint venture is experiencing similar ah yes it's and similar issues with the price of the red and some guy metres been better at at able to been unable to push the
spk_7: get a class raw materials and you're done on to the hung onto the customers other have others have i have nothing when he specifically look at the young to the it on the jt standpoint and pullback and address your idiot panic in end
spk_6: last year the contribution of in i'm from zero to indiana first quarter was about two hundred eighty thousand dollars that was or fifty percent contribution this year with the hundred percent contribution we had like four hundred and twenty thousand dollars so kind of looking at looking at that young zero india was slightly less profitable and first quarter far this year than they were last year again dealing with and as some of the same issues that that they are already a dealing with
spk_16: great
spk_14: good and
spk_17: the i guess just the ill outlook for
spk_14: on the own oil and gas side is there much visibility of pipeline vs tank bottom to get any the spread of that certainly that you guys can give us a little
spk_18: you view on a i know though the the pipeline's a little newer but it ill in the any on any break down there at all
spk_10: that they're going on yeah like i say i mean what we what we saw last year with that kind of how things rebounded in a second half of the opener against the empire there that does a significant contribution from the pipeline business and i would say that that's looking forward kind of through the remainder of our fiscal year and a lotta project that haven't we have the visibility the project they're going to be happening and given in the next counter year and in the next you'll really eight months of this fiscal year i'm okay to break even split between and he tank opportunities and the and the pipeline opportunities that were there were working on which is you know which is good and if a look at the had the opportunity we have going beyond that with them
spk_19: you don't have the interest from your interest that we have seen after the the a p i hung tech report the came out thing like that ah yeah we're pretty a kind of excited about what the opportunities for oil and gas you know i take over the next twelve eighteen months
spk_0: great thanks guys appreciate it
spk_7: that's her
spk_10: thank you and again ladies and gentlemen at you have a question at this time please press star than one and i next question comes from the line of best metrics that northland yeah line up and say for that
spk_20: yeah thanks for taking the question at math tests on clear what is the incremental effect from india in the in the first quarter is that would you expect going forward
spk_21: yeah the the incremental operating expenses that the hit our an operating expense line on favors by five hundred and twenty thousand dollars and i would expect that can be pretty flat at least for the next three quarters that it and then
spk_22: i the it was notable the weakness in china and india is that
spk_1: tough comp is that you know the auto industry having like him issues of heat add a little bit of color on the weakness in one that that's right a region
spk_21: that's right now the in exemplary of the chinese market and you're having ongoing problems of coded and other softness isn't there a market so we expect them to be temporary or as pandemic recovers the that's and it's that's what we're facing my
spk_23: same base in china
spk_24: okay okay that make sense and then in europe and i noted that car sales were rather weak and i was wondering if that the davies their own dear operations there were impacted by that
spk_7: why am i getting a thing
spk_6: no i meant and time
spk_7: i had begun to like a pick axe score which is you know kind of the mean not you're looking at the sailed the we have in europe that certainly dominate said what it what i can say that and it'll be out in our in our cue as well that your ex for germany had it
spk_21: they the increases in first quarter compared to last first quarter about twenty percent but their overall income contribution decreed by about nine percent so again were infants similar similar issues where we're see the opportunities out there were going after lot of the opportunities even with the i give you
spk_6: with some the supply constraints it's just a matter of how to add you know how to account for the puppy a bit now produce better that were thin and and also be you know the gross margin pressure got it and then and the last one is a you've got some know on cost reduction efforts you know in place and is is also a part of a plan to help gross margins passing on your arm ecmo increase in costs onto your customers yeah we're doing work were certainly right in the middle of kind of a more comprehensive analysis of what we can deal from from a gross margin standpoint and that's gonna include everything from shipping costs to internal labor issues too
spk_7: i'm young and prices they were paying for products to thank you look at inciting certain not certain products to increase gross margins get similar things that were to deal with you to give us more control over our product specially given somebody uncertainties out there in the market and yeah i was a big thing that we've seen it's been really volatile and then lead time changes with
spk_10: utilizing some of our some of our sub contractors i'm gonna what should what you typically have as
spk_6: okay the main ingredient got your product but it's have one small ingredient or one year when you're out second say certain things one small component that it difficult to act to get by the price neck opponent has that is that have increased and so they said that a lot more emphasis from my standpoint that is band plays and
spk_21: the procurement cycle to yeah and the per person died or procurement process to make you ever had everything i need a timely manner and the be able to turn it around and delivered to the customers and so and out there we we we've spent so much more time over the past six months i'm dealing with supply issues compared to anything that we previously had to or had to do and so yes where were certainly very very much aware what's going on from i'm from i'm from a gross margin standpoint and addressing in every every aspect of it the weekend
spk_6: got it that makes a lot of handful
spk_10: would it be paired it with some you're gonna have to carry a little bit more in the toy called for just to make sure the day you don't get hit with these disruptions in third in certain places yeah and we for certain product yes
spk_21: i'm in orbit similar to what you say when you look at a car lot and you were where we're building as quick as we can has quickened the candidates point in time and with failed been up you know where they are it's i you know where where where replenishing as quick as i could as the cats are there certain products are trying to bring in inventory but it's go
spk_0: on out the door and die and as vapid coming in
spk_25: okay got it very good thanks so much thank you rather next question cancer line and ten darling with jeffrey carolina open please go ahead yeah to question the so reloaded nature tech
spk_1: the increase in sales that the it reported it is that from new customers obtained in the less the three to six months and the second question is can you give it a sense geographically on the sales strength nature deck you're looking at him and yet we are costly acquiring new customers i wouldn't say that we were acquired name significantly and never new customers by our on our sales increase reflects obviously recovery of certain customers that i dropped off during the global pandemic but also served new applications as well the and terms of geographic locations right now our primary geographic markets are at north america and in southeast asia particularly india pakistan sri lanka in bangladesh
spk_26: with some increasing business in china although china tennessee to of it's law right now because
spk_25: they're pushed towards regulation particularly in regards to compose falls as nice as it hadn't happened as fast as we had expected to originally or were also are now getting customers in europe as well so no i'm in new rock diversifying across geographically
spk_6: and growing in that respect what is the at the breakdown between know not american revenues in the rest of the world i met of had a yeah and first quarter of i have the twenty twenty two which we just finished selva make attack in north america are on point four million
spk_27: the sale that nature tech india were little over two million
spk_0: and i had a sales were about three hundred plus thousand dollars so you're looking at total ilford total major tech revenue
spk_14: up the ladder three point eight million thank you thank you and we have a our question from a line as captain we do with my partners and finance open please go ahead
spk_1: oh ha thanks our i was just wondering on a as you try to do either cost cutting or you know sourcing i'm how does that play out across the jvs do you have to do it jv by jay the or is there hey there's common there's some com chemical did you buy for all maybe give us a little sense for we know what kind of process does that take it as you go across tv by jv it's mostly done on jp by jv basis because the of new the majority of our ontario's our best locally sourced
spk_28: yup
spk_14: and also manufacture
spk_19: in our our primary businesses packaging and it doesn't make loss and to ship and the packaging around the world so that's why we tried to a manufacturer as close to the customer and user as possible
spk_0: got itself and
spk_1: i assume there is some
spk_0: best practices you can share but it is very much a local a local decision yes great thanks thank you and i'm shy no further questions at the time and i like ten compact back over to patrick lynch for any further are closing remarks as much is one of just want to thank everyone for but of for participate a day and your interest in jersey ah have have a great day and a quarter again next quarter that conflicted a conference call thank you for participating you may not to connect day and thank you for standing by welcome to the ntsb conference call and webcast at the same all participants are no listen only mode after the speakers presentation the will be a question and answer session to ask the question during a session newly press star one on your tell us on please be advised that a conference may be recorded hippie require any further assistance please press start and zero as part of the discussion today the representatives from t i see will be making certain forward looking statements regarding anti i see future financial and operating results
spk_1: as well as their business plans objective and expectations please be advised that these forward looking statements are covered under the safe harbor provisions of the private security medicare reform act of eighteen ninety five and that nt i see desires to reveal itself to the protections of the safe harbor for these statements please also be a vital actually fell could differ materially from los stated or implied by the forward looking statements do to certain risks and uncertainties including the including those described in and i see his most recent and very poor and for ten k subsequent quarterly reports on form ten q and recent press releases please read the reports and other future failings that and i see will make with the s e c n p i c disclaims any duty to update revised it's forward looking statements i would now like this i'm a conference over to your house today patrick lynch please go ahead the morning on patrick lynch and t i see the ceo and i'm here with matt was held and jc the ago please note that a press release regarding our first quarter fiscal twenty twenty two financial results was issued earlier this morning and is available at and vip dot com let me begin by wishing every one a healthy and prosperous twenty twenty two new year i'd also like to remind every one of our upcoming annual meeting of stockholders on january twenty one please note however that although the media will be held in person due to the covert nineteen pandemic we are strongly encouraging all stockholders to vote by proxy in advance the safety well being of our stockholders as well as our employees is extremely important and we believe that will be able to better comply with the cdc and they'd safety guidelines if attendance has kept to an absolute minimum and the meeting itself is kept as short as possible i only reporting the election results and not making any business presentation this year now for the remainder of this call we will review various key aspects of our the school twenty twenty two first quarter financial results provide a brief business update and then conclude with a question and answer session overall the school twenty twenty two sales are up to a record start as we experienced strong demand during per square cross many of our global markets which is very encouraging we are also excited about our first quarter announcement that we acquired the remaining fifty percent ownership interest in how did the and the i r a z rest for venture in india which we refer to as the rest india the financial results of zero india are now included in our by consolidated by statements effective as of september first and therefore where the entire first quarter of fiscal twenty twenty two as a result sales from us india are consolidated with in our income statement and are no longer accounted for to join bench you're operating income this transaction also resulted in several one time financial charges and accounting adjustments that matt were of you in more detailed in his prepared remarks a strong demand we experienced during first quarter lead to a forty two point four percent increase in our total consolidated net sales as compared to the first quarter and november thirtieth twenty twenty to a quarterly record of eighteen point two million dollars a year over year increase in consolidated sales was primarily a result of sales growth across all the company's product categories due to higher global the man and the recovery from the coven nineteen pandemic as well as contribution from his us india for first quarter of fiscal twenty twenty two zero india contributed to point as it's me two million four hundred thirty three thousand in sales to entities and solid a net sales even excluding the egg incremental sales from zero to india indian we still experience strong organic growth that being said and he has he has not been immune to significant inflationary pressures which has affected the cost of our raw materials and labor as well as intense friction across our global supply chain and impact of the continuing coded nineteen pandemic unfortunately art and profitability lag during the first quarter due to several have to do several one time items associated with these us in your transaction as well as iraq a turtle freight and labour expenses while we plan to implement certain measures to address these inflationary pressures against a spade these measures taking effect during the second half of our fiscal twenty twenty two so with it's overview let's begin to examine the drivers for the first quarter in more detail for the first quarter ended november thirtieth twenty twenty one our total consolidated net sales increased forty two point four percent to a quarterly record of eighteen point two million dollars as compared to the first quarter ended november thirtieth twenty twenty broken down by business units this included a seventy two point seven percent increase in just oil and gas net thales a forty seven point three percent increase in nature technet sales any thirty two thirty eight point nine percent increase in zero industrial net sales total net sales for the fiscal twenty twenty two first quarter by our joint ventures which we do not consolidate in our financial statements were twenty six point eight million dollars this is an increase of one percent when compared to the same period last fiscal year and demonstrating continued strength in the global demand for products for both existing and new cut of from both existing and new customers this whole twenty twenty two first quarter net sales by are wholly owned and tasty china subsidiary decreased ten point seven percent to four point one million dollars over the first quarter of fiscal twenty twenty one we believe the year over year decline in ntsc china sales of the was primarily due to covered nineteen related lockdowns and weaker economic conditions in china despite the near term volatility within this market we continue to believe china will likely become our largest geographic market in the coming years to support the significant opportunity our new facility in shanghai china is expected to open soon and support our aren't the product production sales and marketing and training efforts throughout the region moving on to ours us oil and gas product group i'm encouraged by they continued progress we're making within this large and compelling market first quarter fiscal twenty twenty two of us oil and gas the have increased seventy two point seven percent over the prior fiscal year period we continue to see higher growth and and market interest of the globally across our oil and gas solutions which includes applications to protect above ground oil storage tanks and pipeline case and from corrosion
spk_4: we expect oil and gas to track above the school twenty twenty one sales throughout the remainder of fiscal twenty twenty two
spk_1: turning to our nature take bow plastic business fiscal twenty twenty two first quarter an textiles were three point eight million dollars a forty seven point three percent increase over the prior personally year period this is the highest level of quarterly and he i hope a quarterly nature tech sales since the code nineteen pandemic began to years ago however we expect quarterly volatility will remain over the near term as the coven nineteen pandemic continues and large users of compostable classics cycle in and out of luck belts our or or operate at limited capacity our long term prospects within the worldwide compostable path margaret are exciting we continue to focus our efforts on developing custom solutions for specific customer proper product news that aren't available elsewhere
spk_6: and we remain optimistic about major tech strong position within this large and compelling compost will classes market so did include my prepared remarks we are encouraged by the record sales growth we experienced during the first quarter and are diligently working to improve our profitability authors for sales growth continued to to benefit from our and geographic and market and product diversification strategies which is supported by our robust balance sheet experience management team and acid light truck business model while considerable growth and civil global vote ah sorry i wasn't suitable global uncertainty remains we believe njc is on track for another strong here of sales both and profitability in fiscal twenty twenty two with his own view let me now turn the call over to that was failed to summarize our financial results for the fiscal twenty twenty he to first quarter they are the quarter ended nov thirty or twenty twenty one represents the first quarter century configured the acquisition of the remaining fifty percent ownership interest and actually a joint venture which we refer to as zero india
spk_2: for six point two five million dollars
spk_6: we find it a purchase price with a combination of cash and borrowings under about in line of credit which would also increase the connection with the transaction five million dollars as a result the opposition zero and finance financial results are now reflected not unfounded a any of them affect them september first the beginning of our first quarter of this twenty twenty two addition during the fiscal twenty twenty two first quarter be accounted for a again and an acquisition of three point nine five million dollars during the quarter and is this is reflected in a line item rematch measurement an acquisition of equity method invest deep are consolidated statement of operations look at are consolidated result in more detail compared to prior fiscal year period and he cuts out a net sales increase forty two point four percent in the fiscal twenty twenty two first quarter to quarter they record because of the positive trends patrick are viewed is prepared remarks and incremental sales from zero india oh expected positive trend to continue throughout the school twenty twenty two we anticipate some softness and our sales drew the short term her male a result of the continued college nineteen pandemic its variants despite a one percent increase in first quarter sales across our global joint venture ventures first quarter joint venture operator i am decline top point three percent compared to the park as the your period the decrease was primarily attributable to the acquisition of the remaining fifty percent of the earth and yet and law profitability of the company's joint ventures total first quarter fiscal twenty twenty two operating expenses or seven point one million dollars the nineteen point nine percent increase over the prior fiscal year period was due primarily to the incremental expense due to the zero africa russian and you'd be selling expenses associated with higher consolidated sales as well as higher wages travel expenses and are the investments operating expenses as the percentage net sales or thirty nine percent compared to forty six point three percent the same period last fiscal year an illustrated our first quarter results the rest india can do the earth in a transaction increased or net sales and operating expenses it is now consolidated with our financial results and decreased or equity in income from joint ventures in which in each case as compared to the same period last fiscal year
spk_7: dissipate the the acquisition will continue to have these effects on our financial results are in their major fiscal twenty twenty two of goods sold the percentage in that sales increased to sixty nine percent during the three months ended of amber thirty at twenty twenty one compared to sixty five percent during the same period last fiscal year i may allah result of the price increase their raw materials and increased labor costs father patrick out or at patrick said we've had a take or
spk_6: action to address inflationary pressures we expected inflationary pressures to persist until at least the second quarter of fiscal twenty twenty two and don't expect to rely benefits from his actions until the second half of the fiscal twenty twenty two and yet he reported net income a four point seven million dollars or forty cents per diluted share for the fiscal twenty twenty two first quarter compared to one point three million dollars and thirteen cents per share for the fiscal twenty twenty one first quarter excluding the one time gene of three point nine million dollars blender the acquisition of the remaining peppers and fifty percent ownership interest is earth india and other related adjustments and check a non gap adjusted net income was seven or eighty thousand dollars or eight cents per diluted share the fiscal twenty twenty two first quarter compared to one point three million dollars or thirteen cents per ship pretty good share the same quarter last year a reconciliation of gap to non yeah financial matters is available in our first quarter earnings press release the with the this money added november thirtieth twenty twenty one working capital was twenty five point eight million dollars including eight million dollars in cash and cash equivalents and five thousand dollars in available for sale securities compared to twenty five point two million dollars including seven point seven million dollars in cash and cash equivalents and five thousand dollars in available for sale securities heather
spk_10: august thirty first twenty twenty one and november thirtieth twenty twenty one of the company had nearly twenty two million dollars in investments and joint ventures of which approximately fifty four percent for nearly eleven point six billion dollars them cash for the remaining balance primarily invested in other words and capital
spk_0: the in the pit got twenty twenty two first quarter and happy board of directors increased a regular quarter cask evident by seven point seven percent to seven cents per share that was payable on nov seventeen twenty twenty one to share there's a record and november third twenty twenty one so to conclude or paired remarks were focused on make an unnecessary just been smart business to navigate the near term expense
spk_9: raw material and supply chain challenges addition we continue to invest across our global operations to support a significant long term growth opportunities while near term uncertainty appears to have picked up recently especially in light of the covered variants we believe overall physical twenty twenty two will be another good year for the other profitability friends see with this overview patrick are happy to take any questions thank you if you have a question at the time please pass die than one on your tops time telephone he can question has been answered are you must remember stuff in the camp please pass the pound key again if you have a question at the time the past star than one am i do have a question from the line as can than with and clemens yeah line as open please people had
spk_10: a guy saddam are great great quarter are just wanted to ask saw it a it's a little confusing to me because it looks like you know why i look at the operational profits
spk_8: they are much higher but you're saying with the gap
spk_9: not gap results that the profitability was lower i mean can't i did what are what were the one time expenses
spk_6: ah that were ah it occurred or are they are they added into the one time gain hot how did you how did you do them calling basis while they're the ones are expensive that we had already transaction are included in the young we we we broke that out in the non gap calculation that in the back of the under pressure so there's okay unexpected expected associated with the transaction there's new everyday expenses without in the quarter is or the amortization of the new intangibles that i her balance cheap as attack impact from the the items we talked about to to add back ah yes of those items that are included in the had to get to the non get numbers that are included in our our normal operating expenses that you're looking at our income statement
spk_12: right side it is looking at it you know from our far it looks like you're sadly profitable and yet you know more intrinsic profitability this quarter than last quarter but you know ya these numbers bouncing back reflecting gap a non gaap earnings yeah it's everyday the incomes david comparing
spk_6: if the three months ended does the twenty twenty two and a prayer it if it's it's sometimes difficult to reconcile him in a be part of the transaction because the same that took place in the quarter and also because you're switching from the equity consolidation of zero india to the full consolidation of the rest india so you're essentially atty you know five hundred plus thousand dollars that expenses to the operating expense line that are in we did that are related and yeah you're adding the sale the cost of goods sold to the to the top line and then ultimately your pauline
spk_29: your pauline
spk_6: in come out of the joint venture operating line from one previously would have done their related to the consolidation
spk_30: so it it's a little it's the loan debt go going quarter to quarter because of the adjustments but overall the mean that the main issue we had this quarter is your sales were up and sales where where where where salad and sales the comparative fourth quarter last year he he he income from it
spk_6: if they fail the income from our oil and gas is pretty significant fourth quarter and so there's a bit of a fall off to first quarter with the with the revenue that we recognized and address in a different gross margin they're associated with their with that and beyond that across he does you up industrial market the gross margins young
spk_7: throughout young drop first quarter or same hundred the second quarter is that when the the increase in the cost of the ravens the main materials the rain mocking the main raw material the gone our product and you know it was pretty volatile during the last six months of the last fiscal year and through the first that through the first three months of this yourself your were upon were making a
spk_10: yup and to ah yeah to take into account for that and to increase our profitability and but it's going to take a little bit of times that and a try him and tory and and and get pushed out so it expectations are that we're going to be able to increase or gross margins throughout the you from from kind of now or february on increase grow my gross margin through the industrial products and also the expectations are that we're going to have more fail in the second half of the fiscal twenty twenty two legged oil and gas similar to what we did last year and added to the gross margins on the oil and gas business are are are better and stronger than industrial business so that should bring back to profitability as well so so out expected you know our our first and second quarters there is there's gonna be some your call it
spk_6: gross margin pressure the word that we're dealing with because the supply chain issues because a raw material issues and raw material pricing would expect a lot of that to be ironed out the second half of the year so can we still think reality very strong year and or profitability standpoint certainly from a sale camp point even you pull out the two and a half million dollars dollars of revenue that zero india contributed during the first three months of the year we still thought significant increases
spk_31: yeah across the board for me out from a failed family and so you know that that something that we were pretty excited about it
spk_9: specifically at you look at the revenue from and you're comparing
spk_13: comparing fourth quarter first quarter of the the major tech sales were up close to fifty percent in one fourth quarter first quarter not down nat how the first quarter the first quarter and a sign of spoke that nature that total sales are up thirty percent preparing fourth quarter to first quarter and on fifty percent comparing first quarter
spk_1: first quarter and similarly although failed in oil and gas for down by for fourth quarter to first quarter they were up seventy two percent comparing the first quarter first quarter oh yeah we're pretty optimistic given were sales are headed and given the in other measures we put in place to kind a deal with them the profitability the issues but in we're pretty happy with kind of our going forward for the the rest of the year shirt so i are on the on the yard and compostable business i noticed when i was and cosco that they're starting to switch to composed packaging i think games using somebody out of me what would you say at the differentiator for that for and on nature texas compostable products and kinda and differentiator we've always had in that room and we use or or i'd take the compostable residents that are available on the market produced by some very major chemical companies ah but they in of themselves do not have certain mechanical properties that make an easy to many
spk_9: factor process and also the finished products tend to be weaker a they're just those run system used by themselves so we take their as systems we had our chemistry to it which make an easier to process i never reduce the cost like losing the quality and also the finished products have greater mechanical strength well and that's how we differentiate was the market and we also don't have go after all of the commodity
spk_1: i'm half occasions
spk_9: we are all the always seeking to get have to find specially applications where our technology really differentiates ourselves as defenses as from the competition because we can produce a certain products that nobody else can sure sure
spk_0: okay by and an eel one last question just on the oil and gas i know that your admit you're making some progress with them
spk_14: do using the technology on specifically on pipelines as a thing develop further as far as that goes where is that this kind of an ongoing thing
spk_15: i not an ongoing thing as know there's nothing we've been developed recently and that to augments that okay okay
spk_14: oh god i was good quarter and knowledge somebody else and question thank you thank you on our next question comes from the line as kept going to do with his partners your nine as open please go ahead oh hi guy thinks a couple my questions were were ass but i'm ill or on a go forward bases just as view you know when you did
spk_27: the deal such as the india deal so everything kind of moves above love the line
spk_10: with there any difference in kind of what operating profit said india vs
spk_6: separate are there other joint ventures or is it kind of in line with what with others is based on scale or whatever else you plan on doing there well in in general i would say that a lot of our joint venture is experiencing similar ah
spk_16: yes it's and similar issues when the price of the red and some joint ventures have been better at an able to been unable to push the and your the classroom materials and deal and on on to the hung onto the customers other have others have i have know how many specifically look at the yeah
spk_14: the record on the jv and point and pullback and address your in the accounting in in
spk_17: last year the contribution of in i'm from your at indiana first quarter when about two hundred eighty thousand dollars that was fifty percent contribution this year with the hundred percent contribution we had like four hundred and twenty thousand dollars so kind of looking at looking at that not zero
spk_14: india was slightly less profitable and first quarter ah this year than they were last year again dealing with of some of the same issue that that they are already a dealing with great
spk_18: good and
spk_10: the i guess just the ill outlook for on the oil and gas side is there much visibility oil pipeline vs tank bottom of get any the any spread of that certainly that you guys can give us a little the you view on a i know though the the pipeline's a little newer but an illini india any break down there at all
spk_19: that they're going on
spk_0: yeah like i say i mean what we what we saw last year with that kind of how things rebounded in a second half of the opener against them empire there that there's a significant contribution from the pipeline business and i would say that that's looking forward kind and through the remainder of our fiscal year and a lot a project that
spk_21: haven't we have the visibility the project they're gonna be happening and given in the next counter year and in the next year
spk_10: really eight months of this fiscal year i'm okay to break even split between and he had been opportunities and the and the pipeline opportunities that were that were working on which is you know which is good and a look at the had the opportunity we have going beyond that with them
spk_20: you don't have the interest from your interest that we have seen after the the a p i hung type of report the came out thing like that ah yeah we're pretty a kind of excited about what the opportunity as for oil and gas you know i take over the next twelve eighteen months
spk_21: great thanks guys appreciate it after
spk_22: thank you and again ladies and gentlemen at the other question at this time please press star than one of our next question comes from the line of best richard northland your line of up and say for that
spk_1: yeah thanks for taking the question at math tests on clear what is the incremental effect from india the in the first quarter is that would you expect going forward yeah the the incremental operating expenses that the hit our an operating expense line on favors by five hundred and twenty thousand dollars i would expect that can be pretty flat at least for the next three quarters
spk_21: got it and then
spk_23: i the it was notable the weakness in china and india is that
spk_24: tough comp is that on you know the auto industry having like him issues in of he added little bit of color on the weakness
spk_7: that that's right a region
spk_6: that's right now the in exemplary of the chinese market and the having ongoing problems of called id and other softness isn't there a market so we expect them to be temporary as endemic recovers but the nuts and it's that's what we're facing my
spk_7: same baseman china
spk_21: okay okay that makes sense and then in europe and i noted that car sales were rather weak and i was wondering if that the davies their own dear operations there were impacted by that
spk_6: why am i getting a thing the limited time i had begun to i could pick axe score which is you know kind of the mean not your look at the sailed the we have in europe that certainly dominate said what it what i can say that and it'll be out in our in our cue as well that your ex export germany had it they have increases in first quarter compared to last first quarter about twenty percent but their overall income contribution decreed by about nine percent so again were instant similar similar issues where we're see the opportunities out there were going after lot of the opportunities even with the i give you
spk_7: with some the supply constraints it said the matter of how to i you know how to account for the puppy a bit now produce better that were thin and and also be you know the gross margin pressure
spk_10: got it and then and and last one is a you've got some know on cost production efforts you know in place on is is also on part of plan to help gross margins passing on your arm and gmo increase in costs onto your customers
spk_6: yeah we're we're doing work with were certainly right in the middle of kind of a more comprehensive analysis of what we can do from from a gross margin standpoint and that's gonna include
spk_21: everything from shipping costs to internal labor issues too
spk_6: i'm young and prices they were paying for products to thank you look at inciting certain not certain products to increase gross margin get similar things that were a deal with you to give us more control over our product specially given somebody uncertainties out there in the market and yeah i was a big thing that we've seen it's been really volatile and then lead time changes with
spk_21: utilizing some of our our sub contractors i'm getting what should what she typically have as
spk_0: and in fact the the mean really got your product but if have one small ingredient or one the a when you're outsourcing can say certain things one small component that it difficult to like to get where the price neck opponent has that is i have increased and so this isn't a lot more emphasis from my standpoint that his band plays and
spk_25: and the procurement cycle to your on the per person died or procurement process to make you ever had everything i need a timely manner and the be able to turn it around and delivered to the customers and so and out that we we've spent so much more time over the past six months i'm dealing with supply issues compared to anything than we previously had to had to do and so yes where were certainly very very much aware what's going on from i am i'm from a gross margin standpoint and addressing every every aspect of at the weekend got it that makes a lot of sense of would it be fair there was some you're gonna have to carry a little bit more in the toy it for just to make sure that day you don't get hit with these disruptions in certain in certain places yes and mean for certain product yes i'm in a similar to what you say when you look at a car lot
spk_1: you were where we're building as quick as we can has quickened the candidates point in time and with fail been up you know where they are it's i you know where where where replenishing as quick as i could give the cats are there certain products are trying to bring in inventory but it's going out the door and i and as fast food coming in okay got it very good thanks so much thank thank you and our next question cause online and ten darling with jeffrey carolina open please go ahead yeah to question the so reloaded nature tech the increase the in sales that the he reported it is that from new customers sir obtained in the less the three to six months and the second question is can you give it a sense geographically on the sales strength nature deck you're looking at him and yet we are costly acquiring new customers i wouldn't say that we were acquired name significantly and is to never new customers but our on our sales increase reflects obviously recovery of certain customers that had dropped off during the global pandemic but also certain
spk_25: new applications as well
spk_6: the and from the geographical locations right now our primary geographic markets are and north america and in southeast asia particularly india pakistan sri lanka in bangladesh
spk_32: with some increasing business in china although china tennessee be a limits law right now because ah
spk_6: they're pushed towards of regulation particularly in regards to compose falls is nice as the hadn't happened as fast as we had expected to originally or were also are now getting customers in europe as well
spk_27: so no aminu rock diversifying across geographically and growing in that respect
spk_0: what is the at the breakdown between know not american revenues in the rest of world
spk_14: i met to a had a yeah and first quarter of i have the twenty twenty two which we just finished fail the naked attack in north america are about one point four million the sale that nature tech india were little over two million
spk_33: and i had a the were
spk_1: about three hundred plus thousand dollars so you're looking at total milford total major tech revenue of the ladder three point eight million thank you thank you and we have a our question from online as captain we do with always partners and finance open please go ahead
spk_14: oh per day i was just wondering i'm a little as you try to do either cost cutting or you know sourcing i'm how does that play out across the j these the have to do a jv by jay the
spk_19: or is there hey there's common there's some com chemicals that you by for all maybe give us a little sense for we know what kind of process does that take a as you go across tv by jv
spk_0: it's most have done on jv by jv basis because the of the majority of ironic aerials our best locally sourced love up
spk_1: and also manufacture
spk_0: in our our primary businesses packaging and it doesn't make a loss and to ship and the packaging around the world
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