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spk21: Morning, ladies and gentlemen. Thank you for standing by. Welcome to Northern Technologies International Cooperation third quarter 2023 earnings conference call and webcast. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automatic message advising your hand is raised. Please note that today's conference is being recorded. As part of the discussion today, the representative from NTIC will be making certain forward-looking statements regarding NTIC's future financial and operating results, as well as their business plans, objectives, and expectations. Please be advised that these forward-looking statements are covered under the safe harbor provisions of the Private Security Investigation Reform Act of 1995 and that NTIC desires to avail itself of the protections of the safe harbor of these statements Please also be advised that actual results could differ materially from those stated or implied by the forward-looking statements due to certain risks and uncertainties, including those described in NTIC's most recent annual report on Form 10-K, subsequent quarterly reports on Form 10-Q, and recent press releases. Please read these reports and other future filings that NTIC will make with the SEC. NTIC disclaims any duty to update or revise its forward-looking statements I will now hand the conference over to your speaker host for today, Ms. Patrick Lynch, Executive Officer. Please go ahead, sir.
spk04: Good morning. I'm Patrick Lynch, NTIC's CEO, and I'm here with Matt Walsfeld, NTIC's CFO. Please note that a press release regarding our third quarter fiscal 2023 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 2023 third quarter financial results, provide a brief business update, and then conclude with a question and answer session. Record top line sales for our Xerost Industrial, Xerost Oil and Gas, and NatureTech segments in turn pushed total sales for the third quarter to a new quarterly record as well. It would appear, therefore, that our strong third quarter performance not only revalidates the efficacy of our long-term growth strategies, but also the value that our corrosion-inhibiting products and services and bioplastic solutions provide to our growing customer base. I am proud of these results as they show that our team members and joint venture partners have been working hard to support the complex needs of our global customers while also navigating extremely dynamic currents. As planned, we also made considerable progress rebuilding our gross margins and controlling operating expenses this period. Our third quarter gross margin of 36.7% marks a significant improvement on both a sequential and year-over-year basis. This primarily reflects the positive impact of the countermeasures we put in place against supply chain issues, significant raw material cost increases, and challenges across our European and Asian markets. As we look to the fourth quarter and beyond, momentum in our business remains positive. We believe NTIC China sales will improve in the fourth quarter and into fiscal 2024, now that the Chinese economy finally as the opportunity to start rebounding from its exceptionally long self-imposed pandemic freeze. Cirrus Oil & Gas and NatureTech are both expected to continue to benefit from new customer relationships and incremental orders from existing customers. Therefore, we believe we are well positioned for a strong finish to fiscal 2023 and believe fiscal 2024 will also enjoy good growth and higher profitability. So, with this overview, let's examine the drivers for the third quarter in more detail. For the third quarter, and it's May 31st, 2023, our total consolidated net sales increased 10.6% to a quarterly record of $21 million, as compared to the third quarter ended May 31st, 2022. Broken down by business units, this included a 32.7% increase in Xeris oil and gas net sales, a 9% increase in Xeris industrial net sales, and a 7.8% increase in NatureTech net sales. Total net sales for the fiscal 2023 third quarter by our joint ventures which we do not consolidate in our financial statements, decreased year-over-year by 1.1% to $26.3 million, but were up 3.3% on a sequential basis. A slight year-over-year decline was due primarily to softer demand across the territories serviced by our global joint ventures and currency exchange rate fluctuations. Fiscal 2023 third quarter net sales by our wholly owned NTIC China subsidiary decreased by 8.4% to $3.3 million due to weaker economic conditions on a year-over-year basis. On a sequential basis, NTIC China sales were up 15.6%, which we believe reflects stabilizing demand trends, and we continue to expect demand to improve throughout the remainder of this fiscal year. We remain committed to the Chinese market and the long-term opportunities it represents for NTIC. We continue to take steps to enhance and protect our Chinese operations, and we continue to believe China will likely become our largest geographic market in the future. Now, moving on to Xeris Oil and Gas. The fiscal 2023 third quarter was the strongest quarter we have ever had for Xeris Oil and Gas. As sales increased, 32.7% to a record $2 million. The third quarter of fiscal 2023 is also the fifth consecutive quarter of Xeris oil and gas sales over $1.5 million, and on a trailing 12-month basis, we have reported nearly $7 million of oil and gas sales. We believe these positive trends reflect accelerating momentum within our oil and gas business. Interest continues to grow from new and existing customers for our Xerost oil and gas solutions, which include applications to protect above ground oil storage tanks and pipeline casings from corrosion. The expanding adoption of our Xerost oil and gas solutions within the oil and gas industry is supporting bigger opportunities for our Xerost oil and gas products and technologies. As a result, We believe that fiscal 2023 will be a transformative year for Xeris Oil and Gas, as we expect this business to scale and continue to contribute to profitability. Turning to our NatureTech bioplastics business. As expected, NatureTech sales growth re-accelerated in the third quarter after seasonality and the timing of both shipments and orders impacted NatureTech sales in our second quarter. Fiscal 2023 third quarter NatureTech sales were a record $4.9 million, a 7.8% increase over the prior fiscal year period. We expect NatureTech sales growth will remain strong in the fourth quarter, supported by favorable demand in North America and India and significant new customer wins and orders in these geographies. Globally, we continue to see growing market demand for new applications of certified compostable plastic products and resin compounds, as well as increased interest in commercial and municipal programs that use certified compostable plastics as alternatives to conventional plastics. As a result, we believe we are well-positioned for long-term, sustainable growth within our nature bioplastics business. As you can see, our third quarter performance reflects the progress we are making to profitably grow our business and create significant value for our shareholders. This is a testament to the leading solutions we have created, the valuable services we provide, and the strength of our team members and joint ventures. With this overview, let me now turn the call over to Matt Wolsfeld to summarize our financial results for the fiscal 2023 third quarter.
spk03: Thanks, Patrick.
spk02: Compared to the prior fiscal year period, NTIC's consolidated net sales increased 10.6% in the fiscal 2023 third quarter to a quarterly record. This growth was driven by the positive trends Patrick reviewed in his prepared remarks. Actions to improve gross margins successfully offset a 1.1% decrease in third quarter sales across our joint ventures to drive a 1.5% increase in third quarter joint venture operating income compared to the prior fiscal year period. Total operating expenses for fiscal 2023 third quarter were $8 million, a 12.8% increase over the prior fiscal year period, which was primarily due to increased personnel expenses and expenses incurred during the current fiscal year period in connection with the startup of a new indirect majority-owned subsidiary formed to assume the operations of a former joint venture in Taiwan. Operating expenses as a percentage of net sales were 38.3% compared to 37.5% for the prior fiscal year period. Gross profit as a percentage of net sales increased 36.7% during the three months ended May 31, 2023, compared to 32.9% during the same period last fiscal year. The 380 basis point improvement was primarily a result of successful actions taken by the company to address inflationary pressures and the increased sales of higher gross margin ZRust oil and gas solutions. NTIC's reported net income increased 52.5% to $1.5 million or $0.16 per diluted share for the fiscal 2023 third quarter compared to $1 million or $0.11 per diluted share for the fiscal 2022 third quarter. NTIC's non-GAAP net income adjusted for amortization expense was $1.6 million, or 17 cents per diluted share, compared to $1.1 million, or 12 cents per diluted share, for the fiscal 2022 third quarter. A reconciliation of GAAP to non-GAAP financial measures is available in our third quarter earnings press release that was issued this morning. As of May 31, 2023, working capital is $23.7 million, including $6.2 million in cash and cash equivalents compared to $23.2 million, including $5.3 million in cash and cash equivalents as of August 31st, 2022. As of May 31st, 2023, we had outstanding debt of $8 million. This included $5.2 million in borrowings under our existing revolving line of credit compared to $7.1 million as of February 28th, 2023. During the fiscal 2023 third quarter, the company's wholly-owned subsidiary in China, NTIC China, entered into two term loan agreements. Both loan agreements have an annual interest rate of 3.5%, and the total outstanding balance was $12.8 million as of May 31, 2023. The proceeds of these term loans were used to pay off intercompany loans that NTIC China had with NTIC. We generated $3.5 million in operating cash flows for the nine months ended May 31, 2023, including $1.3 million in the third quarter, which was driven primarily by stronger profitability and waning inventory levels. On May 31, 2023, the company had $22.9 million of investments in joint ventures. of which approximately 53.2% or $12.1 million was in cash, with the remaining balance primarily invested in other working capital. During the fiscal 2023 third quarter, NTIC's Board of Directors declared a quarterly cash dividend of 7 cents per common share that was payable on May 17, 2023 to stockholders of record on May 3, 2023. To conclude, our third quarter and year-to-date financial results demonstrate the continued progress we've made to increase sales across our diverse end markets and geographies, and the success of our near-term initiatives to improve profitability. I'm encouraged by the direction we're headed, and while the economic environment remains extremely fluid, we continue to believe fiscal 2023 will be another good year of sales and profitability at NTIC. With this overview, Patrick and I are happy to take your questions.
spk21: Thank you, ladies and gentlemen. At this time, if you'd like to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Once again, to ask a question, please press star 11. Please stand by while we compile the Q&A roster.
spk04: I'd also like to mention that Vineet Dalal is joining us this morning, so if you have any questions regarding NatureTech.
spk21: One moment for our first question. Now, first question coming from the line of Timothy Clarkson with Ben Clements, the line is open.
spk10: Hey, so I've got a few questions here. Just on a big picture basis, What's the impact of this trend towards electric cars? Does it change the need for rust corrosion products in an electric car versus a gas car?
spk04: It will because there's simply fewer parts in an electric vehicle than there are in an ICE engine. Okay. We have not seen it yet, and actually we're doing some – our sales are growing into the EV market as we speak. But we do ultimately expect that there will be some transition as the industry moves more towards e-vehicles.
spk10: Okay. What I ask about on the compostable end, again, what would you say is the differentiating factors on NatureTech's compostable products versus the competitors?
spk13: I think we make products that are easier to process on conventional plastics equipment cheaper and better properties. We are kind of unique in the fact that we are base material agnostic, so we work with PLAs, BHAs, BBATs. We work with the brand to understand their packaging requirements, and then based on those packaging requirements, we actually engineer a solution that meets the requirements at a affordable price.
spk10: Okay. At what point does the typical McDonald's or the typical fast food restaurant start to be using these kinds of products? I know they use them in the airports, but at what point does it become kind of a standard?
spk13: I think it's a function of regulation. Obviously, a lot of the QSRs are price conscious. So widespread adoption is still further out. But in those areas where, by law, they are required to use compostable products, we are seeing adoption happening.
spk10: What would be the typical extra expense on a compostable packaging versus conventional packaging?
spk13: It depends on the type of product. It could be anywhere from, let's say, a 10% to 20% treatment to maybe 2x or 3x.
spk10: Okay. All right. Okay, and then just another question here on the oil business. I mean, how big is that market versus the legacy market?
spk04: Well, we think that the oil and gas market has more potential than everything we've done in zero so far.
spk10: Okay. Now, when those products, I always tell my customers that for essentially about 1%, cost that you can extend the life of these tanks you know from 10 years to 30 years is are those kinds of payoffs actually occurring in the field yes we've seen the evidence in the in the installations we've done we've proven it to our customers that the the solutions work in that manner yes right right and it's not just uh replacing the tank it's all the problems with leaking oil and epa and production problems that are associated with that if the tanks start start leaking, obviously.
spk04: There's a huge incentive by the tank farm owners to implement a solution like we're offering.
spk10: Right. You know, you guys haven't talked anything about Brazil. Is there anything new going on in Brazil?
spk04: Nothing worth mentioning on this phone call today.
spk10: Okay. All right. Well, that's my question. Great quarter. Good to see the profitability come back. Thanks. Thanks, Tim.
spk21: Thank you. And our next question coming from the line of Gus Richard with Northland Capital Market. The line is open.
spk09: Yes, thanks for taking my question. I was just wondering if you could add a little color. You mentioned sort of new customers in nature tech, both North America and India. I was wondering if you could, you know, is that for garment bags in India or compostable for consumer products? Just any color on that pipeline, what's going on in North America as well.
spk13: Sure, Gus. In North America, we've expanded our distribution network, and we are starting to see some market share pick up. So hopefully over the next few quarters, that should add to the sales of the finished products that we sell in North America. Our traditional kind of resin sales for food service, Their demand is consistent, but we expect some additional pickup sales in Asia. We're seeing some new customers in the garment space in Asia, in South Asia, for example, where we have had some good wins. So I think overall, we are starting to see new customers come in. We've got a good pipeline of opportunities, and especially as things kind of calm down and the supply chain challenges ebb, we're seeing some of these customers starting to adopt our solution.
spk09: Got it. And then sort of a similar question for oil and gas. You know, just wondering, you know, you've got a lot of work in Cass D&C. You know, you talk about, you know, sort of additional orders from existing customers and new customers coming in. Can you give a little bit of color on that pipeline as well?
spk04: Sure. We are getting repeat orders from existing customers and bringing in new customers on a regular basis. So as we speak, our market continues to grow.
spk06: Pretty much everyone. Okay.
spk09: Okay, got it. And then just switching over to the cost side, you know, energy prices have been fluctuating. I would expect, given the heat waves and whatnot, that natural gas prices fluctuate. increase? You know, sort of how are you positioned on, you know, cost escalators? You know, how are the commodities impacting, you know, sort of the gross margin line currently? Or is it, you know, just a mixed issue that's going to drive upside going forward?
spk02: Well, if you kind of, Gus, this is Matt. If you kind of take a look back over the past nine months, obviously, you know, before we started this year, we were at really high commodity prices for a lot of our base materials. Over the past nine months, we have seen that come down to a much more reasonable level, and that's one of the things that's fueled the rebound in the gross margin. It's kind of back to meeting what our typical gross margins were before we saw the spiking of the raw material pricing. I would say even right now, from a natural gas standpoint, and the derivative resin pricing, we're still seeing relatively low levels. So we're not seeing, at least at this point in time, or have an expectation that the raw materials, or specifically the resins, are going to be increasing anytime soon. So right now we're continuing to see that rebound in gross margin as we see it flow through all of our existing inventory and the pricing that we're giving to our customers.
spk09: Got it. And in sort of your long-term contracts, am I correct in assuming that there's sort of escalators if there is a spike in raw material?
spk02: Yeah, I mean, there are. And obviously, in most situations, we're doing spot pricing. In about 70% of our business, we're doing spot pricing based on the price of raw material at that time. The other 30%, some of it is just purchasing of our stock inventory, which we can control, but it takes longer for us to adjust that pricing and then have that flow through the inventory that we have on hand. A small portion of our total business are blanket orders for a full year, for a longer period of time. That tends to be the situation where we potentially could get caught with either negative or positive impacts on margins. You know, we think we have a much better handle on where we are right now from a pricing standpoint. And I think we are positioning ourselves now to act quicker than we did, you know, 12 to 15 months ago when we saw some of the, you know, some of the volatility that we've talked about over the past five quarters.
spk09: Got it. Got it. And then just flipping over to, you know, China, there's been a lot of commentary in the press about, you know, the strength and duration of the recovery. You know, just any comments on kind of what you've been seeing over the last quarter in terms of, you know, the trajectory? Is it just stabilized? Is it improving? You know, is it moving on beyond auto? You know, any help there?
spk02: It's difficult kind of for us to say exactly where it's hitting and what's going on, you know, from a sales standpoint in China. know it's it's existing customers that are ordering uh that are ordering less is what we're seeing so there's just kind of a general slowdown compared to when i look at like the revenues that we achieve you know in all of our fiscal 2021 and you know the first half of our fiscal 2022 we're simply at lower uh lower sales level and not seeing the recovery and the rebound that we expected to uh to see you know we we did have better sales in q3 than uh than q2 but you know we're still a half million dollars to a million dollars off on a quarterly basis where we were through the majority of our fiscal 2021. So what we're looking is to see kind of that recovery take place to get back to that level and then ultimately grow the markets in China beyond that. It still is a very large potential market for us. And obviously it's a bit of a headwind given that you know, we are basically hovering right at a breakeven point on that subsidiary. Got it.
spk09: And then last one for me, you mentioned sort of FX impact on the JDs, you know, is that a dollar Euro impact, you know, or yeah, any, any color on that one. And that's it for me. The majority of it, you know, there's two, there's two key,
spk02: We're really three key exchange rates that we deal with. Obviously, the euro from a JV standpoint, which has been relatively stable between 1.07 and 1.1 for the past few quarters. Part of the secondary impact would be in India, and that appears to be kind of a consistent increase in the exchange rate. which has had some issues from the standpoint of if they're paying us for resins, if they're paying us for their receivables, that's just a little bit of a headwind, and it's going to be a push on overall revenue. Thirdly, and obviously this bounces around a little bit more, is in China. One of the things that we've done in China to kind of mitigate some of the exchange fluctuation was to moved the debt that we had at NTIC China from a loan to NTIC in North America to be localized in China. And so, you know, our Chinese entity took out, you know, a little over $2 million in, or right around $2 million in term loans, and then repaid that amount to NTIC in North America. That helps a little bit with the currency volatility there. You know, but you still have fluctuation with currency in China, given the sales and given the overall profitability that they have.
spk08: Got it. Got it. Very helpful. Appreciate it. That's it for me. Great. Thanks, Gus.
spk21: Thank you. And our next question coming from the line of Richard Hillman, private investor. Your line is open.
spk17: Yeah. Good morning, gentlemen. Yeah, I had two questions. First thing was about, I guess, the sales cycle in oil and gas, what it was before and what it is now to sign up a new customer. And also, how did you get to the inflection point you're at right now? Was there some sort of industry accreditation for those products? Can you talk about that a little bit, please?
spk02: I think what we're seeing is We've talked before about some of the difficulties in oil and gas being the volatility and not having kind of a baseline level of sales. And what we're finally starting to see is more of a consistent amount of ordering coming in so that we can kind of have a base level of sales that we can kind of count on on a quarterly basis. And so if I look back at the past five quarters, it's been nice growth from the standpoint of You know, if I go back to like Q3 last year, 1.5 million to 1.6 million to a little over 1.6 million to 1.8 million and now up to 2 million, we're seeing a nice level of growth. You know, the one thing that you do have with oil and gas is it is a much longer sales cycle. It takes much longer to become integrated with the customers for them to test out the product, for them to understand, you know, the return that it will give them and the benefits that it'll have to the overall infrastructure. And just historically, the oil and gas market is a slower market to adopt new technology. But what we're happy with is that the sales that we have now and that we've seen over the past, as I said, four or five quarters are coming from a wide number of customers in a lot of different applications, meaning that the opportunity inside of each of those customers are significantly bigger. You're not talking about selling one tank or selling one casing to a customer, and then that customer goes away. You're talking about selling one or two tanks to a customer when they potentially have tens or hundreds of sales opportunities or infrastructure issues. And so that's one of the reasons why we are excited about the oil and gas space is just because as you get integrated with these customers and you show the potential return, the opportunity is, you know, a huge multiple compared to a situation where you would just have a one-off sale and then you move on.
spk17: Okay. And then, Matt, also I wanted to ask you about R&D capabilities. across the company. Basically, do you consider yourself to be a specialty chemical company? And also, what are you doing to improve your R&D effort on the divisional level for your companies, your joint ventures, and also with universities or outside partners?
spk02: Sure. Well, I think what I'll do is, I mean, I can touch a little bit on R&D from a From the Xerox standpoint, and I'll let Vineet touch on the R&D aspect from the NatureTech standpoint. But, you know, from a Xerox standpoint, you can obviously see what we're doing, you know, as I just kind of explained in oil and gas, as far as how we've transitioned a lot of the work over the past, really the past decade from being research to more development to be more, you know, integrated with, you know, and building sales. We've really seen that transition happen. We don't partner as much from an industrial standpoint with universities. The development that we do is typically in our R&D facility here or in our R&D facility that we have with X-Core in Germany. Typically, a lot of that development has to do with tweaking existing products, coming up with new formulations to potentially sell or new products to sell to existing customers and potentially new markets. And that's how we've gotten into some of the new markets over the past, you know, if I look over the past five or 10 years, some of the new markets that we've got into have dealt with a lot of new products that we did develop internally and are selling. So, you know, the R&D capability from a Xero standpoint is much more internally focused and, you know, geared towards selling and providing products to the existing markets that we're currently serving.
spk13: Yeah. And from a nature tech perspective, we do have a good strong core R&D group here in Minnesota, but we also have R&D labs in India and some R&D going on in China. On the nature tech side, we also partner very heavily with Michigan State University, which is probably one of the leading biomaterials program in the world. And then we do have some arrangements with Clemson University for usage of testing capabilities and some specific advanced development capabilities. So we do work with universities also in India to kind of develop specific aspects of new product development that we are engaged in in those areas. In general, a lot of that strategic direction in terms of R&D is driven out of the U.S.
spk17: here. Okay. In terms of nature tech, what other areas are you going into besides just compostable materials?
spk13: So, I mean, the nature tech business is focused more on compostables and biomaterials. So we are looking at bio-based products. We're looking at multilayer structures for packaging, consumer packaging, food packaging. And then on the longer term, we're also looking at fibers, especially for textiles. Compostable fibers. Yeah, bio-based compostable fibers, yeah.
spk16: Okay. Okay. Thanks very much.
spk21: Thank you. And our next question, coming from the lineup, Gregory Weaver with Invexa Capital Management. Your line is open.
spk15: Good morning, gentlemen. Thanks for taking my questions here. I'm glad to have Vineet on the call. I guess I'll start with Vineet. Has there been any go-to-market changes for NatureTech here over the recent timeframe in terms of some of this traction you're seeing?
spk13: Nothing significant. I think we're just executing to our strategic plan and just I think getting over the supply chain challenges of last year was critical because that meant raw material was widely available. We're also executing better on some of the opportunities that we had in our pipeline. And how's it going with bulk resin sales? We don't sell bulk resins. We sell our compounds, and those are growing very nicely.
spk15: Okay, I thought there was some opportunity, maybe I'm mistaken, years back in Europe when they were passing some of those bag laws for what I was characterized, I thought it was bulk resin, but I guess I'm mistaken. And I guess just, Patrick, I've known you since day one here, heading the company, and I've never heard you this bowled up, so, I mean, people have pressed you on some of this oil and gas stuff, but I'm super happy to see it, and I guess kind of I'll try to get a little more color again here. Is it just that the phone's ringing now as opposed to you out there beating the pavement? Is part of your excitement?
spk04: Yes. I mean, we're getting – the phone is ringing repeatedly from the same sources. We're also finding new applications and expanding into new market segments, so geographically. So things are really humming all across the board.
spk15: And in terms of the base level of sales that Matt was talking about, I mean, that doesn't really have much Petrobras these days in it. This is just onesies, twosies from a lot of guys. And I don't know if that big BP job has started to roll in yet or not, but.
spk04: We are delivering on the BP job, and we are still selling to Petrobras, but we have not been working with Petrobras. We're still working with Petrobras. They have not bought any of the tank bottom solutions from us yet, but that certainly is a technology that they're currently looking at.
spk15: Okay. All right. Super excited to hear the enthusiasm here on oil and gas because, yeah, given the margin structure there, it seems like it could do wonders for the overall business. So keep up the good work, and thank you.
spk24: Appreciate it. Thanks.
spk21: Thank you. And I'm sure we have a follow-up question from Gus Richard with Northland Capital. Your line is open.
spk09: Yes, thanks for taking additional questions. Just Based on some of your comments, I'm wondering, are you guys starting to work on, you know, recyclable products for Tetra packs?
spk13: Gus, we're not working on recycling, but we are looking at compostable versions of those multilayer structures. There's an increasing demand from brands for fully compostable versions of those solutions. There are some specific barrier requirements, so it's still in development form.
spk27: Okay.
spk09: But I'm assuming that given the inability to recycle those products, that there's an increasing desire to do so. Yes, absolutely. And you're working on the development of that, and that could be an incremental market for you down the road.
spk11: Yes, potentially.
spk09: Got it. Got it.
spk11: Thank you.
spk20: Thank you. And our next question coming from the line of Don.
spk07: Hello, was it was that me? I'm not sure.
spk18: Don, how are you?
spk07: Oh. Just one question. Do you have an inclination to buy out, get 100% ownership in some of your joint ventures, and are there opportunities to do so? Is that a possibility going forward? And is it desirable?
spk05: As you saw, we bought out India a little bit over a year ago.
spk07: Yes.
spk04: We are looking at buying out joint ventures if and as they become available and if that's the right decision to make at that time. So there's nothing right now on our radar to do by anymore.
spk05: But it's an opportunity presents itself and it makes sense to us. We will be looking into acquiring them.
spk28: All right. Thank you.
spk21: Thank you. And I see no further questions in the Q&A queue at this time. I will now turn the call back over to Mr. Patrick Lynch for any closing remarks.
spk04: Just wanted to thank everybody for their interest in NTIC this morning and wish you all a good day.
spk21: Ladies and gentlemen, that's the conference for today. Thank you for your participation. You may now disconnect. Good day. you Thank you. Thank you.
spk00: Thank you. Thank you.
spk21: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Northern Technologies International Cooperation third quarter 2023 earnings conference call and webcast. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automatic message advising your hand is raised. Please note that today's conference is being recorded. As part of the discussion today, the representative from NTIC will be making certain forward-looking statements regarding NTIC's future financial and operating results, as well as their business plans, objectives, and expectations. Please be advised that these forward-looking statements are covered under the safe harbor provisions of the Private Security Investigation Reform Act of 1995 and that NTIC desires to avail itself of the protections of the safe harbor of these statements. Please also be advised that actual results could differ materially from those stated or implied by the forward-looking statements due to certain risks and uncertainties, including those described in NTIC's most recent annual report on Form 10-K, subsequent quarterly reports on Form 10-Q, and recent press releases. Please read these reports and other future filings that NTIC will make with the SEC. NTIC disclaims any duty to update or revise its forward-looking statements I will now hand the conference over to your speaker host for today, Ms. Patrick Lynch, Executive Officer. Please go ahead, sir.
spk04: Good morning. I'm Patrick Lynch, NTIC's CEO, and I'm here with Matt Walsfeld, NTIC's CFO. Please note that a press release regarding our third quarter fiscal 2023 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 2023 third quarter financial results, provide a brief business update, and then conclude with a question and answer session. Record top line sales for our Xerost Industrial, Xerost Oil and Gas, and NatureTech segments in turn pushed total sales for the third quarter to a new quarterly record as well. It would appear, therefore, that our strong third quarter performance not only revalidates the efficacy of our long-term growth strategies, but also the value that our corrosion inhibiting products and services and bioplastic solutions provide to our growing customer base. I am proud of these results as they show that our team members and joint venture partners have been working hard to support the complex needs of our global customers while also navigating extremely dynamic currents. As planned, we also made considerable progress rebuilding our gross margins and controlling operating expenses this period. Our third quarter gross margin of 36.7% marks a significant improvement on both a sequential and year-over-year basis. This primarily reflects the positive impact of the countermeasures we put in place against supply chain issues, significant raw material cost increases, and challenges across our European and Asian markets. As we look to the fourth quarter and beyond, momentum in our business remains positive. We believe NTIC China sales will improve in the fourth quarter and into fiscal 2024, now that the Chinese economy finally as the opportunity to start rebounding from its exceptionally long self-imposed pandemic freeze. Cirrus Oil & Gas and NatureTech are both expected to continue to benefit from new customer relationships and incremental orders from existing customers. Therefore, we believe we are well positioned for a strong finish to fiscal 2023 and believe fiscal 2024 will also enjoy good growth and higher profitability. So, with this overview, let's examine the drivers for the third quarter in more detail. For the third quarter ended May 31, 2023, our total consolidated net sales increased 10.6% to a quarterly record of $21 million. May 31st, 2022. Broken down by business units, this included a 32.7% increase in Xeris oil and gas net sales, a 9% increase in Xeris industrial net sales, and a 7.8% increase in NatureTech net sales. Total net sales for the fiscal 2023 third quarter by our joint ventures which we do not consolidate in our financial statements, decreased year over year by 1.1% to $26.3 million, but were up 3.3% on a sequential basis. A slight year over year decline was due primarily to softer demand across the territories serviced by our global joint ventures and currency exchange rate fluctuations. Fiscal 2023 third quarter net sales by our wholly owned NTIC China subsidiary decreased by 8.4% to $3.3 million due to weaker economic conditions on a year-over-year basis. On a sequential basis, NTIC China sales were up 15.6%, which we believe reflects stabilizing demand trends, and we continue to expect demand to improve throughout the remainder of this fiscal year. We remain committed to the Chinese market and the long-term opportunities it represents for NTIC. We continue to take steps to enhance and protect our Chinese operations, and we continue to believe China will likely become our largest geographic market in the future. Now, moving on to Xeris Oil and Gas. The fiscal 2023 third quarter was the strongest quarter we have ever had for Xeris Oil and Gas. As sales increased, 32.7% to a record $2 million. The third quarter of fiscal 2023 is also the fifth consecutive quarter of Xeris oil and gas sales over $1.5 million, and on a trailing 12-month basis, we have reported nearly $7 million of oil and gas sales. We believe these positive trends reflect accelerating momentum within our oil and gas business. Interest continues to grow from new and existing customers for our Xerost oil and gas solutions, which include applications to protect above ground oil storage tanks and pipeline casings from corrosion. The expanding adoption of our Xerost oil and gas solutions within the oil and gas industry is supporting bigger opportunities for our Xerost oil and gas products and technologies. As a result, We believe that fiscal 2023 will be a transformative year for Xeris Oil and Gas, as we expect this business to scale and continue to contribute to profitability. Turning to our NatureTech Bioplastics business. As expected, NatureTech sales growth re-accelerated in the third quarter after seasonality and the timing of both shipments and orders impacted NatureTech sales in our second quarter. Fiscal 2023 third quarter NatureTech sales were a record $4.9 million, a 7.8% increase over the prior fiscal year period. We expect NatureTech sales growth will remain strong in the fourth quarter, supported by favorable demand in North America and India and significant new customer wins and orders in these geographies. Globally, we continue to see growing market demand for new applications of certified compostable plastic products and resin compounds, as well as increased interest in commercial and municipal programs that use certified compostable plastics as alternatives to conventional plastics. As a result, we believe we are well-positioned for long-term, sustainable growth within our nature bioplastics business. As you can see, our third quarter performance reflects the progress we are making to profitably grow our business and create significant value for our shareholders. This is a testament to the leading solutions we have created, the valuable services we provide, and the strength of our team members and joint ventures. With this overview, let me now turn the call over to Matt Wolsfeld to summarize our financial results for the fiscal 2023 third quarter.
spk03: Thanks, Patrick.
spk02: Compared to the prior fiscal year period, NTIC's consolidated net sales increased 10.6% in the fiscal 2023 third quarter to a quarterly record. This growth was driven by the positive trends Patrick reviewed in his prepared remarks. Actions to improve gross margins successfully offset a 1.1% decrease in third quarter sales across our joint ventures to drive a 1.5% increase in third quarter joint venture operating income compared to the prior fiscal year period total operating expenses for fiscal 2023 third quarter were 8 million dollars a 12.8 increase over the prior fiscal year period which was primarily due to increased personnel expenses and expenses incurred during the current fiscal year period in connection with the startup of a new indirect majority-owned subsidiary formed to assume the operations of a former joint venture in taiwan Operating expenses as a percentage of net sales were 38.3% compared to 37.5% for the prior fiscal year period. Gross profit as a percentage of net sales increased 36.7% during the three months ended May 31, 2023, compared to 32.9% during the same period last fiscal year. The 380 basis point improvement was primarily a result of successful actions taken by the company to address inflationary pressures and the increased sales of higher gross margin Xerox oil and gas solutions. NTIC's reported net income increased 52.5% to $1.5 million or $0.16 per diluted share for the fiscal 2023 third quarter compared to $1 million or $0.11 per diluted share for the fiscal 2022 third quarter. NTIC's non-GAAP net income adjusted for amortization expense was $1.6 million, or 17 cents per diluted share, compared to $1.1 million, or 12 cents per diluted share, for the fiscal 2022 third quarter. A reconciliation of GAAP to non-GAAP financial measures is available in our third quarter earnings press release that was issued this morning. As of May 31, 2023, working capital is $23.7 million, including $6.2 million in cash and cash equivalents compared to $23.2 million, including $5.3 million in cash and cash equivalents as of August 31st, 2022. As of May 31st, 2023, we had outstanding debt of $8 million. This included $5.2 million in borrowings under our existing revolving line of credit compared to $7.1 million as of February 28th, 2023. During the fiscal 2023 third quarter, the company's wholly-owned subsidiary in China, NTIC China, entered into two term loan agreements. Both loan agreements have an annual interest rate of 3.5%, and the total outstanding balance was $12.8 million as of May 31, 2023. The proceeds of these term loans were used to pay off intercompany loans that NTIC China had with NTIC. We generated $3.5 million in operating cash flows for the nine months ended May 31st, 2023, including $1.3 million in the third quarter, which was driven primarily by stronger profitability and waning inventory levels. On May 31st, 2023, the company had $22.9 million of investments in joint ventures. of which approximately 53.2% or $12.1 million was in cash, with the remaining balance primarily invested in other working capital. During the fiscal 2023 third quarter, NTIC's Board of Directors declared a quarterly cash dividend of $0.07 per common share that was payable on May 17, 2023 to stockholders of record on May 3, 2023. To conclude, our third quarter and year-to-date financial results demonstrate the continued progress we have made to increase sales across our diverse end markets and geographies, and the success of our near-term initiatives to improve profitability. I'm encouraged by the direction we're headed, and while the economic environment remains extremely fluid, we continue to believe fiscal 2023 will be another good year of sales and profitability at NTIC. With this overview, Patrick and I are happy to take your questions.
spk21: Thank you, ladies and gentlemen. At this time, if you'd like to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Once again, to ask a question, please press star 11. Please stand by while we compile the Q&A roster.
spk04: I'd also like to mention that Vineet Dalal is joining us this morning, so if you have any questions regarding NatureTech.
spk21: One moment for our first question. Now, first question coming from the line of Timothy Clarkson with Ben Clements, the line is open.
spk10: Hey, so I've got a few questions here. Just on a big picture basis, What's the impact of this trend towards electric cars? Does it change the need for rust corrosion products in an electric car versus a gas car?
spk04: It will, because there's simply fewer parts in an electric vehicle than there are in an ICE engine. Okay. We have not seen it yet, and actually we're doing some research. where our sales are growing into the EV market as we speak. But we do ultimately expect that there will be some transition as the industry moves more towards EV vehicles.
spk10: Okay. I want to ask about on the compostable end, again, what would you say is the differentiating factors on NatureTech's compostable products versus
spk13: competitors? I think we just make products that are easier to process on conventional plastics equipment cheaper and better properties. We are kind of unique in the fact that we are base material agnostic, so we work with PLAs, BHAs, BBATs. We work with the brand to understand their packaging requirements, and then based on those packaging requirements, we actually engineer a solution that meets the requirements at a affordable price. Okay.
spk10: At what point does the typical McDonald's or the typical fast food restaurant start to be using these kinds of products? I know they use them in the airports, but at what point does it become kind of a standard?
spk13: I think it's a function of regulation. Obviously, a lot of the QSRs are price conscious. So widespread adoption is still further out. But in those areas where, by law, they are required to use compostable products, we are seeing adoption happening.
spk10: What would be the typical extra expense on a compostable packaging versus conventional packaging?
spk13: It depends on the type of product. It could be anywhere from, let's say, a 10% to 20% treatment to maybe 2x or 3x.
spk10: Okay. All right. Okay, and then just another question here on the oil business. I mean, how big is that market versus the legacy market?
spk04: Well, we think that the oil and gas market has more potential than everything we've done in zero so far.
spk10: Okay. Now, when those products, you know, I always tell my customers that, you know, for essentially about 1%, cost that you can extend the life of these tanks you know from 10 years to 30 years is are those kinds of payoffs actually occurring in the field yes we've seen the evidence in the in the installations we've done we've proven it to our customers that the the solutions work in that manner yes right right and it's not just uh replacing the tank it's all the problems with leaking oil and epa and production problems that are associated with that if the tanks start start leaking, obviously.
spk04: There's a huge incentive by the tank farm owners to implement a solution like we're offering.
spk10: Right. You know, you guys haven't talked anything about Brazil. Is there anything new going on in Brazil?
spk04: Nothing worth mentioning on this phone call today.
spk10: Okay. All right. Well, that's my question. Great quarter. Good to see the profitability come back. Thanks. Thanks, Tim.
spk21: Thank you. And our next question coming from the line of Gus Richard with Northland Capital Market. The line is open.
spk09: Yes, thanks for taking my question. I was just wondering if you could add a little color. You mentioned sort of new customers in nature tech, both North America and India. I was wondering if you could, you know, is that for garment bags in India or compostable for consumer products? you know, just any color on that pipeline, what's going on in North America as well.
spk13: Sure, Gus. In North America, we've expanded our distribution network and we are starting to see some market share pick up. So hopefully over the next few quarters, we'll be able to, that should add to the sales of the finished products that we sell in North America. Our traditional kind of resin sales for food service, Their demand is consistent, but we expect some additional pickup sales in Asia. We're seeing some new customers in the garment space in Asia, in South Asia, for example, where we have had some good wins. So I think overall, we are starting to see new customers come in. We've got a good pipeline of opportunities, especially as things kind of calm down and the supply chain challenges ebb. we're seeing some of these customers starting to adopt our solution.
spk09: Got it. And then sort of a similar question for oil and gas. You know, just wondering, you know, you've got a lot of work in Cass D&C. You know, you talk about, you know, sort of additional orders from existing customers and new customers coming in. Can you give a little bit of color on that pipeline as well?
spk04: Maybe. We are getting repeat orders from existing customers and bringing in new customers on a regular basis. So as we speak, our market continues to grow.
spk06: Pretty much everywhere. Okay.
spk09: Okay, got it. And then just switching over to the cost side, you know, energy prices have been fluctuating. I would expect even the heat waves and whatnot that natural gas prices fluctuate. increase? You know, sort of how are you positioned on, you know, cost escalators? You know, how are the commodities impacting, you know, sort of the gross margin line currently? Or is it, you know, just a mixed issue that's going to drive upside going forward?
spk02: Well, if you kind of, Gus, this is Matt. If you kind of take a look back over the past nine months, obviously, you know, before we started this year, we were at really high commodity prices for a lot of our base materials. Over the past nine months, we have seen that come down to a much more reasonable level, and that's one of the things that's fueled the rebound in the gross margin. It's kind of back to meeting what our typical gross margins were before we saw the spiking of the raw material pricing. I would say even right now, from a natural gas standpoint, And the derivative resin pricing, we're still seeing relatively low levels. So we're not seeing, at least at this point in time, or have an expectation that the raw materials or specifically the resins are going to be increasing anytime soon. So right now we're continuing to see that rebound in gross margin as we see it flow through all of our existing inventory and the pricing that we're giving to our customers.
spk09: Got it. And in sort of your long-term contracts, am I correct in assuming that there's sort of escalators if there is a spike in raw material?
spk02: Yeah, I mean, there are. And obviously, in most situations, we're doing spot pricing. In about 70% of our business, we're doing spot pricing based on the price of raw material at that time. The other 30%, some of it is just purchasing of our stock inventory, which we can control, but it takes longer for us to adjust that pricing and then have that flow through the inventory that we have on hand. A small portion of our total business are blanket orders for a full year, for a longer period of time. That tends to be the situation where we potentially could get caught with either negative or positive impacts on margins. You know, we think we have a much better handle on where we are right now from a pricing standpoint. And I think we are positioning ourselves now to act quicker than we did, you know, 12 to 15 months ago when we saw some of the, you know, some of the volatility that we've talked about over the past five quarters.
spk09: Got it. Got it. And then just flipping over to, you know, China, there's been a lot of commentary in the press about, you know, the strength and duration of the recovery. You know, just any comments on kind of what you've been seeing over the last quarter in terms of, you know, the trajectory? Is it just stabilized? Is it improving? You know, is it moving on beyond auto? You know, any help there?
spk02: It's difficult kind of for us to say exactly where it's hitting and what's going on, you know, from a sales standpoint in China. know it's it's existing customers that are ordering uh that are ordering less is what we're seeing so there's just kind of a general slowdown compared to when i look at like the revenues that we achieve you know in all of our fiscal 2021 and you know the first half of our fiscal 2022 we're simply at lower uh lower sales level and not seeing the recovery and the rebound that we expected to uh to see you know we we did have better sales in q3 than uh than q2 but you know we're still a half million dollars to a million dollars off on a quarterly basis where we were through the majority of our fiscal 2021. So what we're looking at to see, you know, kind of that recovery take place to get back to that level and then ultimately grow, you know, grow the markets in China beyond that. It still is a large, you know, very large potential market for us. And, you know, obviously it's a bit of a headwind given that, you know, we are basically hovering right at a break-even point on that subsidiary.
spk09: Got it. And then last one for me, you mentioned sort of FX impact on the JVs. You know, is that a dollar-euro impact, you know, or any color on that one? And that's it for me. The majority of it, you know, there's two key...
spk02: We're really three key exchange rates that we deal with. Obviously, the euro from a JV standpoint, which has been relatively stable between 1.07 and 1.1 for the past few quarters. Part of the secondary impact would be in India, and that appears to be kind of a consistent increase in the exchange rate. which has had some issues from the standpoint of if they're paying us for resins, if they're paying us for their receivables, that's just a little bit of a headwind, and it's going to be a push on overall revenue. Thirdly, and obviously this bounces around a little bit more, is in China. One of the things that we've done in China to kind of mitigate some of the exchange fluctuation was to moved the debt that we had at ntic china from a loan to ntic in north america to be localized in china and so you know our our chinese entity took out uh you know a little over two million dollars and right around right around two million dollars in uh in term loans and then repaid that amount to ntic in north america that helps a little bit with the currency uh the currency volatility there But you still have fluctuation with currency in China, given the sales and given the overall profitability that they have.
spk08: Got it. Got it. Very helpful. Appreciate it. That's it for me. Great. Thanks, Gus.
spk21: Thank you. And our next question coming from the line of Richard Hillman, Five Investor. Your line is open.
spk17: Yeah. Good morning, gentlemen. Yeah, I had two questions. First thing was about, I guess, the sales cycle in oil and gas, what it was before and what it is now to sign up a new customer. And also, how did you get to the inflection point you're at right now? Was there some sort of industry accreditation for those products? Can you talk about that a little bit, please?
spk02: I think what we're seeing is We've talked before about some of the difficulties in oil and gas being the volatility and not having kind of a baseline level of sales. And what we're finally starting to see is more of a consistent amount of ordering coming in so that we can kind of have a base level of sales that we can kind of count on on a quarterly basis. And so if I look back at the past five quarters, it's been nice growth from the standpoint of If I go back to Q3 last year, 1.5 million to 1.6 million to a little over 1.6 million to 1.8 million and now up to 2 million, we're seeing a nice level of growth. The one thing that you do have with oil and gas is it is a much longer sales cycle. It takes much longer to become integrated with the customers for them to test out the product, for them to understand the return that it will give them and the benefits that it'll have to the overall infrastructure. And just historically, the oil and gas market is a slower market to adopt new technology. But what we're happy with is that the sales that we have now and that we've seen over the past, as I said, four or five quarters are coming from a wide number of customers in a lot of different applications, meaning that the opportunity inside of each of those customers are significantly bigger. You're not talking about selling one tank or selling one casing to a customer, and then that customer goes away. You're talking about selling one or two tanks to a customer when they potentially have tens or hundreds of sales opportunities or infrastructure issues. And so that's one of the reasons why we are excited about the oil and gas space is just because as you get integrated with these customers and you show the potential return, the opportunity is, you know, a huge multiple compared to a situation where you would just have a one-off sale and then you move on.
spk17: Okay. And then, Matt, also I wanted to ask you about R&D companies. across the company. Basically, do you consider yourself to be a specialty chemical company? And also, what are you doing to improve your R&D effort on the divisional level for your companies, your joint ventures, and also with universities or outside partners?
spk02: Sure. Well, I think what I'll do is, I mean, I can touch a little bit on R&D from a So from the Xerox standpoint, and I'll let Vineet touch on the R&D aspect from the NatureTech standpoint, but from a Xerox standpoint, you can obviously see what we're doing, as I just kind of explained in oil and gas, as far as how we've transitioned a lot of the work over the past, really the past decade from being research to more development to be more integrated with and building sales. We've really seen that transition happen. We don't partner as much from an industrial standpoint with universities. The development that we do is typically in our R&D facility here or in our R&D facility that we have with X-Core in Germany. Typically, a lot of that development has to do with tweaking existing products, coming up with new formulations to potentially sell or new products to sell to existing customers and potentially new markets. And that's how we've gotten into some of the new markets over the past, you know, I look over the past five or 10 years, some of the new markets that we've got into have dealt with a lot of new products that were that we did develop internally and are selling. So, you know, the R and D capability from a zero standpoint is much more internally focused and, you know, geared towards selling and providing products to the existing markets that we're currently serving.
spk13: Yeah. And from a, from a nature deck perspective, we do, have a good strong core R&D group here in Minnesota. But we also have R&D labs in India and some R&D going on in China. On the nature tech side, we also partner very heavily with Michigan State University, which is probably one of the leading biomaterials program in the world. And then we do have some arrangements with Clemson University for usage of testing capabilities and some specific advanced development capabilities so we do work with universities also in India to kind of develop specific aspects of new product development that we are engaged in and in those areas but in general a lot of that strategic direction in terms of R&D is driven out of the US here okay okay in terms of
spk17: nature tech, what other areas are you going into besides just compostable materials?
spk13: So, I mean, the nature tech business is focused more on compostables and biomaterials. So we are looking at bio-based products. We're looking at multilayer structures for packaging, consumer packaging, food packaging. And then on a longer term, we're also looking at fibers, especially for textiles. Compostable fibers. Yeah, bio-based compostable fibers, yeah.
spk16: Okay. Okay. Thanks very much.
spk21: Thank you. And our next question coming from the line of Gregory Weaver with Invicta Capital Management. Your line is open.
spk15: Yeah. Hi. Good morning, gentlemen. Thanks for taking my questions here and glad to have Vineet on the call. I guess I'll start with Vineet. Has there been any go-to-market changes for NatureTech here over the recent timeframe in terms of some of this traction you're seeing?
spk13: Nothing significant. I think we're just executing to kind of our strategic plan and just I think getting over the supply chain challenges of last year was critical because that meant raw material was widely available. We're also executing better on some of the opportunities that we had in our pipeline. And how's it going with bulk resin sales? We don't sell bulk resins. We sell our compounds, and those are growing very nicely.
spk15: Okay, I thought there was some opportunity, maybe I'm mistaken, years back in Europe when they were passing some of those bag laws for what I was characterized, I thought it was bulk resin, but I guess I'm mistaken. And I guess just, Patrick, I've known you since day one here, heading the company, and I've never heard you this bowled up, so, I mean, people have pressed you on some of this oil and gas stuff, but I'm super happy to see it, and I guess kind of I'll try to get a little more color again here. Is it just that the phone's ringing now as opposed to you out there, you know, beating the pavement? Is part of your excitement?
spk04: Yes. I mean, we're getting the phone is ringing repeatedly from the same sources. We're also finding new applications and expanding into new market segments. So geographically. So things are really humming on all across the board.
spk15: And in terms of the base level of sales that Matt was talking about, I mean, that doesn't really have much Petrobras these days in it. This is just onesies, twosies from a lot of guys. And I don't know if that big BP job has started to roll in yet or not.
spk04: We are delivering on the BP job. but we are still selling to Petrobras, but we have not been working with Petrobras. We're still working on Petrobras. They have not bought any of the tank bottom solutions from us yet, but that certainly is a technology that they're currently looking at.
spk15: Okay. All right. Well, I'm super excited to hear the enthusiasm here on oil and gas because, yeah, given the margin structure there, it seems like it could do wonders for the overall business. So, Keep up the good work, and thank you.
spk24: Appreciate it. Thanks.
spk21: Thank you. And I'm sure we have a follow-up question from Gus Richard with Northland Capital. Your line is open.
spk09: Yes, thanks for taking the additional questions. Based on some of your comments, I'm wondering, are you guys starting to work on, you know, recyclable products for Tetra Pak's?
spk13: Gus, we're not working on recycling, but we are looking at compostable versions of those multilayer structures. There's an increasing demand from brands for fully compostable versions of those solutions, but there are some specific barrier requirements, so it's still in development form.
spk27: Okay.
spk09: But I'm assuming that given the inability to recycle those products, that there's an increasing desire to do so. Yes, absolutely. And you're working on the development of that, and that could be an incremental market for you down the road.
spk11: Yes, potentially.
spk09: Got it. Got it.
spk03: Thank you.
spk20: Thank you. And our next question coming from the line of Don .
spk07: Hello. Was that me? I'm not sure.
spk18: Don .
spk07: Oh. Just one question. Do you have an inclination to buy out, to get 100% ownership in some of your joint ventures? And are there opportunities to do so? going forward? And is it desirable?
spk04: As you saw, we bought out India a little bit over a year ago. Yes. We are looking at buying out joint ventures if and as they come available and if that's the right decision to make at that time. So there's nothing right now on our radar to do buy anymore.
spk05: But if an opportunity presents itself and it makes sense to us, we will be looking into acquiring them.
spk28: All right, thank you.
spk21: Thank you. And I see no further questions in the Q&A queue at this time. I will now turn the call back over to Mr. Patrick Lynch for any closing remarks.
spk05: Just wanted to thank everybody for their interest in NTIC this morning and wish you all a good day.
spk21: Ladies and gentlemen, that's the conference for today. Thank you for your participation. You may now disconnect. Good day.
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