Your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. As part of the discussion today, the representatives from End will be making certain forward-looking statements regarding NTIC's future financial and operating results, as well as their business plans, objectives, and expectations. Please be advised that these forward-looking statements are covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, and that NTIC desires to avail itself of the protections of the safe harbor for these statements. Please also be advised that actual results could differ materially from those stated or implied by the forward-looking statements due to certain risks and uncertainties, including those described in NTIC's most recent annual report on Form 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 hand the conference over to your speaker today, Patrick Lynch, NTIC's CEO. Please go ahead.

Good morning. I am Patrick Lynch, NTIC's CEO.

And I am here with Matt Wolsfeld, NTIC's CFO. A press release regarding our first quarter fiscal 2025 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 quarter financial results, provide a brief business update, and then conclude with a question and answer session. Please note that when we discuss year-over-year performance, we are referring to the first quarter of our fiscal 2025 in comparison to the first quarter of our last fiscal year. NTIC's record first-quarter consolidated sales were driven by Natrotech all-time record quarterly sales, as well as stable ZERUST oil and gas and Xerox industrial sales. Furthermore, NTIC China enjoyed its highest quarterly sales in nearly three years, while we also saw improved sales trends across several important geographies and at NTIC's joint ventures. I believe these top-line results demonstrate the efficacy of our strategic planning, the value we bring to our global customers, and NTIC's resilience amidst ongoing economic complexities. Thanks to the continued successful execution of certain quality, NTIC was able to achieve another quarter of gross margin growth on a year-over-year basis. We have also been investing in expanding our oil and gas sales infrastructure due to increased customer activity, which in turn should accelerate Xeo's oil and gas sales in the second half of fiscal 2025. Overall, our first quarter was an encouraging start to fiscal 2025. Although the economic environment remains fluid, we anticipate fiscal 2025 will bring further sales growth and improved profitability. So with this overview, let's examine the drivers for the first quarter in more detail. For the first quarter ended November 30, 2024, our total consolidated net sales increased 5.7% to a first-quarter record of $21.3 million as compared to the first quarter ended…

Thanks, Patrick. Compared to the prior fiscal year period, NTIC's consolidated net sales increased 5.7% in the first quarter of fiscal 2025 to a quarterly record of $21.3 million because of the positive trends Patrick reviewed in his prepared remarks. Sales across our global joint ventures increased 1.2% in the first quarter compared to the prior fiscal year period. Joint venture operating income increased 2.7% primarily due to higher sales and an increase in net income NTIC's joint ventures. Total operating expenses for the fiscal 2025 first quarter increased 14% compared to the prior fiscal year period to $9.5 million, primarily due to increased personnel costs and strategic investments we are making to support expected growth in the second half of the year within our oil and gas business. On a sequential basis, first-quarter operating expenses were in line with the fourth quarter.

As a percentage of net sales, operating expenses were 44.4% for the first quarter compared to 41.2% for the prior fiscal year period. Gross profit as a percentage of net sales was 38.3% during the three months ended November 30, 2024, compared to 36.3% during the prior fiscal year period. The 200 basis point improvement was primarily a result of successful actions taken by the company to address inflationary pressures. Net income attributable to NTIC was $561,000 or $0.06 per diluted share for the first quarter compared to $896,000 or $0.09 per diluted share for the first quarter of fiscal 2024. First-quarter NTIC's non-GAAP adjusted net income was $667,000 or $0.07 per diluted share compared to the non-GAAP adjusted net income of $1 million or $0.10 per diluted share for the first quarter of last year. For reconciliation of GAAP to non-GAAP financial measures, it is available in our earnings press release that was issued this morning. As of November 30, 2024, working capital was $22.2 million, including $5.6 million in cash and cash equivalents, compared to $23.7 million, which included $5 million in cash and cash equivalents as of August 31, 2024. As of November 30, 2024, we had outstanding debt of $7.3 million. This included $4.5 million in borrowings under our existing revolving line of credit compared to $4.3 million as of August 31, 2024. Reducing debt through positive operating cash flow and improving working capital efficiencies will be a strategic focus in fiscal 2025. We generated $1.4 million in operating cash flow for the three months ended November 30, 2024. On November 30, 2024, the company had $25.5 million in investments in joint ventures.

Of which $13.9 million was in cash with the remaining balance primarily invested in other working capital. During fiscal 2025 first quarter, NTIC's board of directors declared a quarterly cash dividend of $0.07 per common share that was payable on November 13, 2024, to stockholders of record on October 30, 2024. To conclude our prepared remarks, our first quarter fiscal 2025 financial results are off to a solid start reflecting record consolidated sales, expanding gross margin, and planned investments to support expected growth in the second half of the year. We are seeing stable North American trends and robust growth across our global oil and gas and bioplastic markets. We expect these trends to continue. As a result, we believe our fiscal 2025 will be another good year of sales and higher profitability for NTIC. We are excited by our long-term prospects. With this overview, Patrick and I are happy to take your questions. Thank you.

Please press star one one again. Our first question comes from the line of Tim Clark from Van Clemens Inc.

Hey, guys. Good quarter. Got a few more questions. I missed the last one. Sorry. So at this point, what percentage of the new tanks that have the potential to use this ZERUST treatment? What percentage of those tanks are being treated with Northern Technology?

I am not sure I understand your question.

Well, you know, you have the total number of tanks out there, okay? And your best opportunity to use your treatment, of course, is when they are putting up new tanks, right? So I do not know how much of those of the total tanks out there, what percentage turnover per year where they have to be replaced. So I guess I am looking at that of the replacement market, the ones that are being replaced because they are rusted out or you are putting up new tanks because they are putting up new capacity. Those are probably your best opportunities to use your treatment. So of those best opportunities, the new tanks and the replacement tanks, what percentage of that market do we have right now?

I would say it is not even 1%. I mean, at this point in time, if you look at the amount of tanks that are out there, and what is traditionally used as the solution to protect the infrastructure, we are not even a rounding error yet. Even the revenues that we have, the tanks that are out there, the available markets, we are not at a point where it is even measurable.

Right. No. The expectation is that you get to a point where it is, you know, obviously, you are taking over market, you know. You are essentially hoping to take over existing technology.

Right.

What is the cost of the existing technology versus your option?

Our option is roughly a third of the cost of the traditional solution, which is the cathodic protection.

Okay. So and, you know, when you do your treatments, how much of it, let's say that it, what would be a typical cost on the front end for our treatment? Say half a million, quarter of a million.

I mean, if you are talking about a standard tank, we might charge, you know, the chemistry portion that we charge maybe anywhere from $25,000 to $50,000 for a standard size tank. It can be upwards of several hundred thousand dollars if it is a tank that is, you know, one of the larger tanks, one that is, you know, the size of football fields. You know, but there are also smaller fifteen-meter tanks where the revenue generated from is very small. So that obviously depends on the square footage or protection that you are providing.

Sure. Now what percentage once you do an installation, is there ongoing revenues that flow from that installation?

Ongoing revenue typically five plus years after as you recharge the tank or recharge the infrastructure.

Okay. Okay. And are they, I mean, would it be ten percent of the original treatment or is it more than that or less than that or about that?

Yeah. I mean, that is kind of what we are seeing. We are getting to a point now where we are starting to do some of the recharge work. And, you know, we are starting to gather more data on that to figure out what percentage we should expect going forward, what the timelines are, how that fits into their schedules, and what the requirements are for them to inspect their tanks. It has got a lot of quality.

Right. And I am guessing those are good opportunities to continue to sell and market for additional installations at that point when you are out there.

Certainly. Certainly.

Okay. And on the compostable end, you know, what is new that is going on there? Is there, I mean, it was really good growth, twenty percent plus.

I would say the biggest, you know, the excitement from the compostable space, I think, continues to be the companies that we are kind of working with and coordinating with to develop what is called specialized resins to manufacture their products. You know, there are some nice opportunities that we are working on that we should see success from over the next six, twelve, eighteen months, you know, that I think will continue to accelerate the growth from Natur Tec. You certainly still have the existing growth kind of from the normal distribution sales of the bin liners, of cutlery, of things like that. But there are also kind of things going on in the background of selling resin to companies to manufacture their own products, which we are certainly working on. So I think that is probably the most exciting thing that we are going to see over the next, you know, six to eighteen months and what is certainly going to drive the Natur Tec revenue going forward.

Sure. You know, going back, just one last question on the tanks deal. I mean, is there a potential for you guys to have a three to four million dollar quarter this year? Is or is that too ambitious?

Inside of Natur Tec.

No. Inside of the, I am flipping back to the oil tank business.

Yeah. I certainly hope so. I mean, if you look at from a revenue standpoint in the fourth quarter of last year, we did $4.2 million. You know, there are some sizable opportunities that we are working on in oil and gas. One of the expectations we have is that some of the oil and gas work is a bit seasonal because a lot of the work we are doing and stuff like that with some of the pipe casings and pipeline protection and things like that does not happen in the winter. But certainly, some of the expectations with some of the larger projects that we saw in our third and fourth quarter of last year we expect to kind of repeat and grow in the third and fourth quarter of this year. So, you know, I do not expect, you know, typically, company-wide, our second quarter has historically, if you go back ten, fifteen years, our second quarter is historically not the strongest quarter. Typically, the third and fourth quarter is kind of where things accelerate. I would expect that to be kind of a similar trend for the current year certainly based on what I am seeing as far as the backlog and projects. From, you know, an industrial standpoint, an oil and gas standpoint, and a Natur Tec standpoint, that is when I would expect to see kind of the acceleration in sales. So, you know, I do think that, you know, the growth, the four million plus dollar quarter is certainly doable. The other thing I will say is that over the past twelve, sixteen months, we have dramatically accelerated the investments that we have made into the oil and gas space specifically to develop a global sales team. And, you know, for us, hiring the ten plus people that we have hired in that space to go after that market, it takes a little time for the, let's say, the traction, the opportunities to develop. But that is something that we expect to see the results on, you know, in the back half of our fiscal 2024 or I am sorry, the back half of our fiscal 2025, meaning third and fourth quarter and then beyond. So, you know, we are kind of gearing up for bigger and better things. And kind of developing the internal infrastructure to be able to handle the increase in revenue from those groups. And so, you know, that is really what gets me excited from a company standpoint.

Sure. Sure. Switching to China, how come China is doing better?

I wish I could answer all the questions on what is going on in China. I can tell you that there is, you know, just in general from a Chinese standpoint, we saw a slight recovery. If you look at kind of what is going on in China, we saw, you know, we are not selling a huge amount in China compared to kind of where we were, where we expected to be. I mean, so you are talking about $4 million in revenue in our Q1 compared to $3.6 million of revenue in our Q4. So there is, you know, that is almost a ten percent increase in sales. I think there are certain things that are starting to kind of accelerate and recover a little bit there. I think, you know, there is also our team there is also working on some domestic sales in China and protecting things in China compared to being solely focused on exports before. So I think there are markets that we are going after that we have not gone after before, and there is a bit of a recovery starting to happen in China. Some of it might be temporary. There is obviously a lot going on from a geopolitical standpoint between the countries. You know, I know that right now there is a huge increase in activity in China specifically because of the changing of presidents and the uncertainty of what is going to happen with tariffs and things like that. So we will kind of see how things change in China going forward, but, you know, our expectations are that we are going to see a decline in Q2 in China regardless just because that is when Chinese New Year is mid-January. And so we are going to see a slowdown that we always see in the second quarter from China. But then our expectations are that Q3 and Q4 will be similar or slightly better than in Q1. So, you know, all in all, our expectations are that China is going to grow from, you know, last year doing $14.2 million to, you know, $15 plus million and beyond this year.

Great. One last question. Is there anything in your R&D that is particularly exciting that you can talk about?

No. I think from an R&D standpoint, the blocking and tackling and the work we are doing in Natur Tec is what is exciting from my standpoint. The additional, let's say, the rollout of and seeing kind of the adoption of the technologies in oil and gas and seeing the projects that we are working on there starting to, you know, get put into company's budgets and start as we look at our planning for our third and fourth quarter and beyond, is what kind of gets me excited from an oil and gas standpoint.

Great. Great. Alright. Good quarter. Thanks for answering my questions. I am done.

Thank you. One moment for our next question. Our next question comes from the line of Gus Richard from Northland Capital Markets.

Good morning. Thanks for taking the questions. Just on ZERUST, you know, it looks like that business has stabilized. And I was just wondering if you could give a little bit of color on that market, do you expect it to remain stable going forward or could there be some growth?

Right now, we are looking at more of a stability in the market. But right now, we are still trying to see what is going to happen with the German economy instead. There is going to be some pain with their automotive industry right now.

Got it. And I was going to follow-up with Europe and the JVs, sort of a similar question. Do you expect, you know, Europe, given what is going on in Germany, you know, can you hold that JV revenue flat, or is it going to continue to be pressure?

Well, it really depends on which country you are talking about. I mean, in Finland, we are having a fantastic quarter versus in Germany where they are feeling more pain with the Volkswagen, Audi situation. So I think for the most part, aside from Germany, the joint venture in Europe should do fairly well. It is just Germany that we are worried about.

Got it. And then I know that the oil and gas business is still pretty lumpy. You know, can you sort of give a sense of, you know, first half, second half, you know, the relative seasonality, is it, like, fifty-fifty? Not fifty-fifty, but maybe one-third first half, two-thirds second half for oil and gas in terms of how that would weight. Second half over first half.

Yeah. I mean, if I look at it, I think you are looking at something close to sixty-forty or one-third, two-thirds as far as first half, second half.

Got it. Got it. Super helpful. And the last one for me. Do you feel like at this point, maybe Natur Tec can sustain roughly twenty percent growth, you know, this year?

Overall, as a total company, twenty percent growth.

No. No. No. Just Natur Tec.

If I look at it from an expectation standpoint, it is right around that number as far as expectations for Natur Tec. Yes.

Got it. Alright. Very helpful. Thank you so much.

Yep. Thanks, guys.

Thank you. One moment for our next question. Our next question comes from the line of Joe Vidich from Manalapan Oracle Capital Management LLC.

Yes. Good morning, Patrick and Matt. Great to see the progress and the outlook. I was wondering if you could just, you know, regarding Natur Tec, you know, whether you consider the sales to be recurring once you have started, you know, with a customer, whether that is something we could look forward to as a basically, you know, building upon.

That is exactly how Natur Tec has worked in the past and the expectations going forward. It is a matter of signing up distributors, starting to sell product, and then typically what you have is repeat business. You keep on, you know, on a step function adding to that revenue. So Natur Tec lends itself to typical, you know, kind of forecastable month-by-month growth, which is what we have seen in the past. If you discount out, you know, what happened during COVID, which obviously had a major impact with Natur Tec given, you know, given the nature of how it impacted everybody's daily life. But that is typically what we see is that you work on a project or a distributor, you get them working on projects, and you ramp up from there with consistent growth.

Right. Right. Great. Great. Great. You know, and then just with regard to the oil and gas business, I was wondering if, you know, what you talked about the time frame in terms of getting a new salesperson up and running. I was wondering if you could also talk about just what the sales cycle is and then also, you know, talk about your sales pipeline and how that has progressed over time.

Alright. Could you repeat the question, please? Hello? Hello? Could you repeat your question, please?

Oh, yeah. Sure. Yeah. So with regard to the oil and gas business, ZERUST oil and gas, I was wondering if you could talk about your sales pipeline and how the sales pipeline has progressed over time. And then also regarding the new salespeople, roughly over what period of time do you see them becoming really adding to the sales?

With any salesperson we have ever hired in the history of the company, it really takes them about six months to a year to really learn the business and start to be effective. So we will start to see a pickup from the ten people we hire. We will start to see some pickup product by the end of this fiscal year. But you are really not going to see the major impact until the next fiscal year.

Right. And in terms of just your sales pipeline, I am just wondering if you could talk a little bit about it. Are you, you know, are you seeing repeat, is that where the, or are you seeing, you know, customers come who are new and, you know, the size of the potential size of orders and also maybe globally too, talk about where you are seeing the sales.

In North America, we are primarily announcing retail sales from existing customers. But, obviously, we are also adding new customers as they are coming along. But, yes, we are getting some steady repeat business. Internationally, we are still building that up over time. We will know more about how that is moved out once we have these ten people fully up to speed.

And the ten people, is that ten new people on top of whatever existing sales staff you had?

Yes. That is correct. I am not saying ten salespeople. There are probably six salespeople and four technical or other people that are associated with oil and gas.

Right. Right. Right. My final question is, you know, in terms of this Chinese sales, I was just wondering, could you break that down between Natur Tec and ZERUST and ZERUST oil and gas, do you break it down at all like that?

Sure. There is not much in oil and gas, but in terms of the main metric and then the business industry is going to help you out with that. So if I am looking at the historical, you know, China sales, I would say that we are at roughly, you know, you are at about ten percent sales, ten percent of the China sales number is Natur Tec. And the rest being, you know, the North American, you know, outside of China. Meaning, it is the business in North America, the business in India, other parts of Southeast Asia.

Right. Right. Right. Right. Okay. That anyway, that is all I got, guys. I appreciate you taking my questions.

Yep. Thanks, Joe.

Thank you. One moment for our next question. Our next question comes from the line of Don Hall.

Good morning, gentlemen. Just one simple question. Excuse me. Your expenses increased in the last quarter and the reason was, as I am quoting, because you expanded your sales infrastructure. And I wanted to elaborate on that a little more. Although I have been listening to all of your previous conversation. So you are hiring a number of salespeople and sales support people. Can you say where or how? Or are these brand new territories? Can you describe that a little more, please?

Southeast Asia and the Middle East.

I am sorry?

Southeast Asia and the Middle East.

I missed, I am sorry. I did not pick up your...

Sorry. Southeast Asia and the Middle East is primarily where these people are located.

Southeast Asia and Middle East. And these are brand new territories, are they?

Yes.

I see. Southeast Asia and Middle East. Well, I hope it has got great promise. I assume it does.

We think so.

Yeah. Alright. Thank you very much.

Sure.

Thank you. At this time, I would now like to turn the conference back to Patrick Lynch for closing remarks.

I would like to thank everybody for participating in the call today, and wish you a nice day.

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