Good day and thank you for standing by. Welcome to NTIC’s Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. As part of the discussion today, the representatives from NTIC will be making certain forward-looking statements regarding NTIC’s future financial and operating results, as well as their business plans, objectives and expectations. Please be advised that these forward-looking statements are covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and that NTIC desires to avail itself of the protections of the Safe Harbor for the statements. Please also be advised that actual results could differ materially from those stated or implied by the forward-looking statements due to the 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 would now like to turn the call over to your first speaker today to Patrick Lynch, NTIC’s CEO. Please go ahead.

Good morning. I am Patrick Lynch, NTIC’s CEO. I am here with Matt Wolsfeld, NTIC’s CFO. Please note that a press release regarding our fiscal 2022 fourth quarter and full year 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 2022 fourth quarter and full year financial results, provide a brief business update and then conclude with a question-and-answer session. Fiscal 2022 produced record sales for NTIC, thanks to strong demand for our ZERUST industrial products and services in North America, as well as for our Natur-Tec and ZERUST Oil & Gas products, both in the U.S. and abroad. Having said that, it’s also important to acknowledge the benefit NTIC received from buying out our former Indian joint venture partner at the start of fiscal 2022. With this acquisition, we now have to consolidate ZERUST India’s financials into NTIC’s, causing our net sales to show an increase of 31.3% year-over-year. If we had not acquired the other 50% of ZERUST India in September 2021, NTIC’s fiscal 2022 sales would only show an increase of 13.6% year-over-year. In the five-year period since fiscal 2017, NTIC’s annual sales have increased over 87% at a compound annual growth rate of 13.4%. This solid growth record is a direct result of the long-term strategy that we continue to execute on. We remain focused on developing innovative solutions, which in turn, our global distribution network sales to increasingly diverse worldwide markets with exceptional technical service everywhere our customers need it. Our sales growth during fiscal 2022 is especially encouraging when considering the complex business environment we faced during the year. This included supply chain and shipping issues, persistent inflation, significant raw material cost increases, geopolitical conflicts in Europe and the…

Thanks, Patrick. Compared to the prior fiscal year period, NTIC’s consolidated net sales increased 31.3% in fiscal 2022 to an annual record and grew 30.5% in the fiscal 2022 fourth quarter, because of the positive trends Patrick reviewed in his prepared remarks and the incremental sales from ZERUST India, a 22% decrease in fourth quarter sales across our global joint ventures drove an 8% decrease in fourth quarter joint venture operating income compared to the prior fiscal year period. For fiscal 2022 sales across our global joint ventures, sales decreased 14%, contributing to a 21.9% decrease in joint venture operating income compared to the prior fiscal year. The fiscal 2022 fourth quarter and full year declines in joint venture operating income were partially offset by $682 in the recovery of previously written-off fees for services related to the termination of our joint venture in China in fiscal 2015. Total operating expenses for fiscal 2022 fourth quarter were $7.5 million. The 14.1% increase from prior fiscal year period was due primarily to incremental expenses because of the ZERUST India acquisition and increased selling expenses associated with higher consolidated sales, as well as higher wages, travel expenses and slightly higher R&D investments. Operating expenses as a percentage of net sales improved to 37.1%, compared to 42.5% for the prior fiscal year period. For the full fiscal 2022, operating expenses as a percentage of net sales improved to 38.3%, compared to 43.7% for the prior fiscal year. As illustrated in our fourth quarter results, the ZERUST India transaction increased our net sales and operating expenses since it is now consolidated with our financial results and decreased our equity income from joint ventures in each case as compared to the prior fiscal year period. Gross profit as a percentage of net sales was 30.3%…

Thank you, sir. [Operator Instructions] And I show our first question comes from the line of Tim Clarkson from Van Clemens. Please go ahead.

Hey. Good quarter. I just wanted to get into a little bit more granular discussion of exactly some of the things you can do to improve profitability, obviously, you have got some pretty good sales growth. Is it just raising prices or what else can you do?

Well, we are looking at, obviously, lowering our costs as much as we can, and in certain cases, we are meeting with customers to negotiate price increases on a case-by-case basis.

Okay. In terms of the oil and gas business applications, what’s changed? Is it just that the technology is now finally getting recognized or is it because you have got some process issues resolved in terms of it’s no longer considered exotic technology or is it just more money in the oil and gas industry? What do you think are the reasons you are starting to get some traction in that area?

I think it’s basically a recognition of our presence in the market. I mean we have been doing this now for quite some time and it’s all basically coming together. We have seen some very significant interest now out of countries that have been more quiet up until now. We expect some significant business out of Norway in the next two months, as well as some other countries.

In terms of your competitive position there, I know you have some competition in the traditional packaging areas, is this a technology that’s a little bit more unique and proprietary to oil and gas stuff?

Yes. Yes. It is.

I am guessing that there’s a fair amount of knowhow involved with making sure this technology works the way it’s supposed to, right?

Absolutely. And -- I mean, and we do built in monitors into our solutions so that we can prove to the customer how well they are working in the field.

Right. Now is there -- once you get an order, is there ongoing revenues beyond just the initial order?

Absolutely. Are you talking about the oil…

Oil and gas, yeah.

Oil and storage tank solutions or...

Yeah. Oil…

Yeah.

… and storage solution.

Yes. Of course. I mean after we do the initial installation, you have to replenish the chemistry under the tanks after a certain period of time. So we are looking at repeat sales probably every five years to the same tank.

I see. I see. On the compostable end, I see that revenues are really coming back significantly. You mentioned that you have come up with some new applications, are there things you can talk about in terms of new applications using the compostable technology?

Not that I can talk about at this time.

Okay. All right. I am done. Good quarter and well stay with it. Thank you.

Thanks.

Thank you. [Operator Instructions] And I show our next question comes from the line of Gus Richard from Northland Capital Markets. Please go ahead.

Yes. Thanks for taking the question. Just wondering sort of how the lockdowns in China have affected the business as you move into your first quarter?

Well, as you have probably been watching in the news, every time there is a COVID case, they are locking down factories and entire cities. Most recently, probably, heard of, I guess, it was Foxconn that was shut down where they are manufacturing the Apple iPhones and the Guangzhou City around it. So we are seeing these rolling lockdowns, which are obviously impeding people from coming to the office, visiting customers, et cetera and so forth. So the current policy regarding COVID in China is significantly impacting that country’s economy and until they change their policies, which I am told, I think, they eased it slightly about two days or three days ago, but it will take -- it’s going to take some time before we see how that rolls out into our business.

Okay. Got it. So effectively no changes as in the month of September and October?

No.

Okay. And then just -- could you just characterize how much of your business at this point is contracted versus spot, as you adjust prices, what do you see sort of as the net lag effect?

Matt, do you want to take that one?

It kind of depends on a country-by-country basis. What we are seeing is that in North America, the majority of the business is not a contract, not set up for a contract as far as long-term pricing goes. We are seeing it more -- a little more prevalent in Europe that they have put in place pricing for an annual period or a year period, but not as much in North America. And so the result of that is that we have seen our margins in North America rebound much quicker. It’s almost as if the margins in Europe were somehow three months, six months, nine months behind the deterioration in the margins in Europe were delayed, lagged a little bit to what we saw in North America. And so as we hopefully see some of the volatility with the raw materials in Europe come down and then as we see some of these annual contracts coming back up for renewal, we feel like we are going to see a rebound in the gross margin across Europe and other parts of Asia that we saw in North America in the third quarter and fourth quarter.

Okay. Third and fourth quarter of fiscal 2023, correct?

No. Our third quarter and fourth quarter -- we -- our North American business saw a rebound in its gross margin in third quarter and fourth quarter.

Right.

We expect to see a rebound in the gross margin from -- in Europe and parts of Asia throughout the -- really throughout the probably second quarter and third quarter of this year.

Got it. And then just stick with Europe for a second. Clearly, they are going to winter, natural gas oil or type. How much is that impacting your customers or are they finding ways to work through the energy issues?

That’s still on a wait and see basis really at this point. I know that everybody is cautiously watching both the energy supply and cost of energy. But how that’s going to play out still needs to be seen…

Got it.

… for the European market, of course.

Right. Right. Okay. I think that’s it for me. Thanks so much.

Thank you. I am showing no further questions in the queue at this time. I’d like to turn the call back over to Mr. Lynch for any closing remarks.

Sure. I’d like to thank everyone for participating today and your interest in NTIC. Have a great week. Thanks.

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