Good morning. I'm Patrick Lynch NTIC CEO and I'm here with Matt Wolsfeld and Jesse's co a press release regarding our first quarter of fiscal 2025 financial results was issued earlier this morning and is available at NTIC dotcom.
During today's call, we will review various key aspects of our first quarter. Financial results provide a brief business update and then conclude with the 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 NACS record first quarter, consolidated sales were driven by Nature Tech all time record quarterly sales as well as stable zero, oil and gas and zeros 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 NT I CS joint ventures, I believe these top line results demonstrate the efficacy of our strategic planning. The value we bring to our global customers and nic's resilience amidst ongoing economic complexities.
Thanks to the continued successful execution of certain quality system improvement initiatives. NT 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 exist 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 30th 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 November 30th 2023.
Broken down by business unit. This included a 22.8% increase in nature tech net sales. A 0.7% increase in zeros to oil and gas net sales and a 0.4% increase in zeros industrial net sales total net sales for the fiscal 2025 1st quarter by our joint ventures which we do not consolidate in our financial statements increased year over year by 1.2% to $23.8 million.
Stabilizing sales trends at our joint ventures are encouraging since we have been navigating challenging market conditions for the past several years. At our European joint ventures due to higher energy prices, as well as regional political and economic uncertainties.
I am also encouraged by improving sales trends at our wholly owned NTIC China subsidiary fiscal 2025 1st quarter, net sales at NTIC China increased by 8.6% year over year to nearly $4 million sales in this geography continue to stabilize and are approaching quarterly sales levels that we last experienced in fiscal 2021 and 2022.
We remain cautiously optimistic that demand in China will continue to improve in fiscal 2025 helping to support higher incremental sales and profitability in this market.
We are committed to the long term opportunities that chinese market provides our industrial and bioplastic segments and we continue to take steps to enhance our operations in this geography. As a result, we continue to believe China will likely become a significant geographic market for us in the future.
Now, moving on to zero oil and gas, zero oil and gas had a solid first quarter with sales reaching $1.5 million as anticipated. First quarter sales were below fourth quarter levels because the previous quarter had benefited from the timing on several large orders and seasonality.
Looking at zero oil and gas on a trailing 12 month basis sales were $9.2 million. A 20.3% increase over $7.7 million for the trailing 12 month period ended November 30th 2023.
Demand continues to grow among both new and existing customers of our Zerust Oil and Gas Solutions which today still focus primarily on protecting above ground oil storage tanks and pipeline casings from corrosion.
While we continue to expect seasonal ordering patterns to drive fluctuations in zero oil and gas sales. We believe we are well positioned for compelling growth in this sector through fiscal 2025 and beyond.
As I mentioned earlier, we made strategic investments to expand our oil and gas sales infrastructure during the first quarter to support accelerated zero oil and gas sales that we expect to occur in the second half of fiscal 2025.
Turning to our Nature tech bioplastics business. Nature tech sales remained strong during the first quarter and increased 22.8% year over year to a quarterly record of $5.9 million.
Nch's growth during the quarter was a result of continued new customer wins in North America and India as well as expanding relationships with existing customers.
We expect Nature tech sales growth to remain strong in fiscal 2025 globally. We continue to see robust market demand for new applications of certified compostable plastics 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 you can see, fiscal 2025 is off to a solid start. We are excited by the positive momentum underway and the direction NTIC is headed before I turn the call over to Matt, I want to acknowledge the hard work and dedication of our global team of both employees and joint venture partners. Our recent success and the opportunities we are pursuing are a direct result of their efforts.
With this overview, let me now turn the call over to Matt Wolsfeld to summarize our financial results for the fiscal 2025 1st quarter.
Thanks Patrick. Compared to the prior fiscal year period. NTA CS 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. At NTIC. Joint ventures total operating expenses for the fiscal 2025 1st quarter increased 14% compared to the prior fiscal year period to $9.5 million. Primarily due to increased personnel costs and strategic investments were 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 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 30th 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 the 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.
A reconciliation of GAAP to non-GAAP financial measures is available in our earnings press release that was issued this morning as of November 30th, 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 31st 2024 as of November 30th 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 31st 2024 reducing threat, reducing debt through positive operating cash flow and improving working capital efficiencies will be a strategic focus. In fiscal '25 we generated $1.4 million in operating cash flow for the three months ended November 30th 2024 on November 30th 2024 the company had $25.5 million in investments and joint ventures of which 54.6% or $13.9 million was in cash with the remaining balance primarily invested in other working capital.
During fiscal 2025. 1st quarter, NT CS Board of directors declared a quarterly cash dividend of $0.07 per common share that was payable on November 13th 2024 to stockholders of record on October 30th 2024 to conclude our prepared remarks. Our first quarter fiscal 2025 financial results are off to a solid start reflecting record consolidating sales, consolidated sales, expanding gross margin and planned investments to support expected growth in the second half of the year, we're seeing stable North American trends and robust growth across our global oil and gas and bioplastic markets. We're expected 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. So we're excited by our long term prospects. With this overview, Patrick and I are happy to take your questions.
Operator
Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced to withdraw your question. Please press star 11 again. Please stand by while we compile the Q&A roster.
Our first question comes from the line of Tim Clarkson from Van Clemens Inc.
Tim Clarkson
Hey guys, good quarter. I got a few more questions. I missed the last one. Sorry. So at this point, what, what percentage of the new tanks that have a potential to best potential to, to use this zeros treatment? What percentage of those tanks are being treated with? Northern technology technology?
Matthew Wolsfeld
I'm not sure I understand your call. Your your question, Tim.
Tim Clarkson
Well, there's a, you got, the total number of tanks out there. Okay. And, and your best opportunity to use your treatment. Of course is when they're putting up new tanks, right? So, I don't know how, how much those of the total tanks out there. What percentage turnover per year where they have to be replaced? So, I guess I'm looking at that of the replacement market, the ones that are being replaced because they're rusted out or, or you're putting up new tanks because they're putting up new capacity. Those are probably your best opportunities to use your treatment. So, of those best opportunities, the new tanks and the re replacement tanks. What percentage of that market do we have right now?
Matthew Wolsfeld
I would say it, it's not even 1%. I mean, the, at this point in time, if you look at the amount of tanks that are out there, And, and what traditionally used as the solution to protect the infrastructure, we're, we're not even a rounding area yet, even the revenues that we have the tanks that are out there, the available market. We're, we're not at a point where it's even even measurable right now. The expectation is that you get to a point where it's, obviously you're, you're, you're taking over market, you're essentially hoping to take over an existing technology.
Tim Clarkson
Right? What, what's the cost of the existing technology versus your, your option?
Matthew Wolsfeld
It's our option is roughly a third of the cost of the traditional solution, which is the Cathodic protection.
Tim Clarkson
Okay. So, and, and you know, when you do your treatment, how much of it, let's say that it co what what would be a typical cost on the front end for our, for our treatment, say half a million, quarter of a million.
Matthew Wolsfeld
I mean, if you're talking about a standard tank, we might charge, 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's a tank that's, one of the larger tanks, ones that are, the size of football fields. You know, but there's also smaller 15 m tanks that, the revenue generated from it is very small. So it obviously depends on the square, the square footage of protection that you're providing.
Tim Clarkson
Sure. Now what percentage once you do an installation, is there ongoing revenues that flow from that installation?
Matthew Wolsfeld
There's ongoing revenues typically five plus years after as you recharge the tank or recharge the infrastructure?
Tim Clarkson
Okay. Okay. And, and, and, and are they, I mean, is it would be, would it be 10% of the original treatment or, or is it, or is it more than that or less than that or about about that?
Matthew Wolsfeld
Yeah, I mean, that's kind of what we're seeing where we're getting to a point now where we're starting to do some of the recharge work. And, we're starting to kind of 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, you know, to inspect their tanks. It's kind of a lot of questions.
Tim Clarkson
Right. And, and I, and I'm guessing those are, are good opportunities to continue to selling market for additional installations at that point when you're, when you're out there.
Certainly. Okay. And, and, on the compostable end, you know, what, what's new that's going on there is there are there, I mean, it was really good growth, 20% plus what's going on there. That's exciting.
Matthew Wolsfeld
I, I'd say the biggest you know, the excitement from the compostable space, I think continues to be the companies that we're kind of working with the coordinating with to, develop, let's call specialized resins to manufacture their products. You know, there's some, there's some nice opportunities that we're working on that we, should see success from, over the next 6, 12, 18 months. You know, that I, that I think will continue to accelerate the growth from Nature Tech. You certainly still have the existing growth kind of from the normal distribution sales of of, of the bin liners of cutlery and things like that. But there's also kind of things going in the background of, of, of selling resin to to companies to manufacture their own products. You know, which we're certainly working. So I think that's probably the most exciting thing that we're going to see over the next 6 to 18 months and what's certainly going to drive the nature tech revenue going forward?
Tim Clarkson
Sure. You know, going back just one last question the tank deal. I mean, is there a potential for you guys to have a $3 million to $4 million quarter this year? Is, or is that, is that too ambitious.
No, inside of the, I'm, I'm, I'm flipping back to the, to the oil tank business. Yeah.
Matthew Wolsfeld
IC I certainly hope so. I mean, we, if you look at from a revenue standpoint in fourth quarter of last year, we did $4.2 million. You know, there, there are some sizable opportunities that we're working on an oil and gas. One of the, part of the expectations we have is that, some of the oil and gas work is a bit seasonal because you get the, you know, a lot of the work we're doing and stuff like that with some of the pipe casings and pipeline protection and things like that doesn't happen in the, in the winter. But certainly some of the expectations of some of the larger projects that we saw in our 3rd and 4th quarter of last year, we expect to kind of repeat and grow in the 3rd and 4th quarter of this year. So, I don't expect, typically company wide, our second quarter has historically, if you go back, 10, 15 years, our second quarter is historically not the strongest quarter. And typically the 3rd and 4th quarter is kind of where things accelerate. I would expect that to be kind of a similar trend for, for the current year. Certainly based on what I'm seeing as far as the backlog and projects from, an industrial standpoint, an oil and gas standpoint and a nature tech standpoint. That's when I would expect to see kind of the acceleration in sales. So, I do think that, the growth, the $4 million plus dollar quarter is certainly doable. You know, the other thing I'll say is that over the past 12, 16 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, for, for us hiring, the 10 plus people that we've 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's something that we expect to see the results on, in the back half of our fiscal '24 I'm sorry, the back half of our fiscal '25 meaning 3rd and 4th quarter and then beyond so, we're 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, that that's really what gets me excited from a company standpoint.
Tim Clarkson
Sure, sure. Switching to China, how come China is doing better?
Matthew Wolsfeld
I wish I could answer all the questions on what's going on in China. I can tell you that there is, just, just in general from a Chinese standpoint, we saw, a slight recovery, the, if you look at kind of what's going on in China, we thought, we're not selling a huge amount in China compared to kind of where we were where we expected to be. I mean, so you're talking about a $4 million in revenue in our Q1 compared to $3.6 million of revenue in our Q4. So there is, that's, that's almost a 10% increase in sales.
I think there's certain things that are starting to kind of accelerate and recover a little bit there. I think you know, there's 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's markets that we're going after that, we haven't gone after before and there's a bit of a recovery starting to happen in China. Some of it might be temporary. There's obviously a lot going on from a geopolitical standpoint between the countries, I know that right now there's a, there's a huge increase in activity in China specifically because of the changing of, you know, of Presidents and the uncertainty of what's going to happen with tariffs and things like that. So we'll kind of see how things change in China going forward. But you know, our expectations are that, our, our, we're going to see a decline in Q2 in China regardless, just because that's when Chinese Chinese New Year is mid January. And so we're going to see a slowdown that we always see in second quarter from China. But then our expectations are that, Q3 and Q4 will be similar or slightly better than in Q1. So, all in all our expectations are that China is going to grow from, last year doing 14.2 million to, 15-plus million and beyond this year.
Tim Clarkson
Great. One last question. What is, is there anything in your R&D that's particularly exciting that you can talk about?
Matthew Wolsfeld
No, I think I think from an R&D standpoint, the blocking and tackling and the work we're doing in nature. Tech is it's what's exciting from my standpoint the additional, let's say the roll out of and seeing kind of the adoption of the technologies in oil and gas and seeing the projects that we're working on there starting to, get put into companies, budgets and, and start because we look at our plan and our 3rd and 4th quarter and beyond is what kind of gets me excited from an oil and gas standpoint?
Tim Clarkson
Great, great. Alright, good, good quarter. Thanks. Thanks for answering my questions. I'm done.
Operator
Thank you one moment for our next question.
Our next question comes from the line of Gus Richard from Northland capital Markets.
Gus Richard
Good morning. Thanks for taking the questions. Just on Z rust. You know, it looks like that business is 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, or could there be some growth.
G. Patrick Lynch
Right now? We're looking at more of a stability in the market right now. We're still trying to see what's going to happen with the German economy. Once said there's feeling some pain with their automotive industry right now.
Gus Richard
Got it. And, and I was going to follow up with Europe and, and the J BS sort of a similar question. Do you expect, you know, do you expect, you're given what's going on in Germany? You know, can you hold, hold that JV revenue flat or, is it can continue to be pressure?
G. Patrick Lynch
Well, it really depends on what, which country you're talking about. I mean, for example, in Finland we're having fantastic, fantastic order versus in Germany where they're feeling more pain because of the Volkswagen Audi situation.
So it, I think for the most part, aside from Germany, the joint vendors in Europe are still doing fairly well. It's just Germany that we're worried about.
Gus Richard
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 to, first half, second half, you know, the relative seasonality is it like 5,050 not 5,050 but maybe third, first half, two thirds, second half for, for oil and gas in terms of how that would, would wait. Second half over first half.
Matthew Wolsfeld
Yeah, I mean, if I look at it, I mean, I think you're, you're, you're looking at something close to 6,040 or third, two thirds as far as first half, second half.
Gus Richard
Got it, got it. Super helpful and the last one for me. And, do you feel like at this point, maybe I can sort of sustain roughly 20% growth, this year.
If I look at from an expectation standpoint. It's right. It's right around that number as far as far as expectations for Nature Tech. Yes.
Thank you one moment for our next question. Our next question comes from the line of Joe Vidich from Manalapan Oracle Capital Management LLC.
Joseph Vidich
No. Yes. Good morning. Patrick and Matt great to see the progress and the outlook. I was wondering if you could just, you know, regarding Nature Tech, whether you consider the sales to be recurring once, once you've started, with a customer, whether that's something we could look forward to as a, basically, building upon it.
Matthew Wolsfeld
It's certain that that is the, exactly how Nature Tech has worked in the past and the expectations kind of going forward. It's a matter of signing up distributors starting to sell product and then typically what you have is repeat business that you keep on a, on a step function adding to that to that revenue. So it's Nature Tech lends itself to typical, kind of forecastable month by month growth. Which is, which is what we've seen in the past, if you discount out, what happened during during COVID, which obviously had a major impact. So we got Nature Tech given, given the nature of how that impacted, everybody's daily life but that, that's typically what we see is if you work on a project or you sign up a distributor, you get them working on projects and you ramp up from there with consistent growth.
Joseph Vidich
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 sales person up and running. I was wondering if you could also talk about just what the sales cycle is and then also, talk about the, your sales pipeline and, and how that progressed over time.
Oh, yeah, sure. Yeah, I, so with regard to the oil and gas business, zero 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 sales people roughly over what period of time do you see them becoming, really adding to the sales.
G. Patrick Lynch
With the, with any sales person we've ever hired in the history of the company only takes them about six months to a year to really learn the business and, and start to start to be effective. So, we'll, we'll start to see a pick up from the 10 people we hired, we'll start to see some pick up probably by the end of this fiscal year. But you're really not going to see the major impact until the next fiscal year.
Joseph Vidich
Right. And, and in terms of just your sales pipeline, I was just wondering if you could talk a little bit about it. Are, are you, are, you've seen, repeat customers? Is that where the, or are you seeing, customers come, who are new and you know, the size of the potential size of orders? And, and, and also maybe globally to talk about where you're seeing the sales.
G. Patrick Lynch
In North America, we're primarily renouncing repeat sales from existing customers, but obviously we're also adding new customers as they're coming along. But, yes, we're getting some steady repeat business, internationally.
We're still building that up over time. We'll see, we'll know more how that's going to pan out once we have these 10 people up to speed.
Joseph Vidich
And, and, and the, and the 10 people, is that 10 new people on top of whatever existing sales that you have?
Matthew Wolsfeld
I'm not, I'm not saying it's 10 sales people there, there's probably six sales people and, and four technical or other people that are associated with the oil and gas.
Joseph Vidich
Right. Right. Right. And my, my final question is, in terms of the chinese sales, I was just wondering could you break that down between Nature Tech and Xero and zero oil and gas? Do, do you break it down at all like that? Sure.
G. Patrick Lynch
There's not much of oil and gas but in terms of the any check and then just industrially can help you out with that.
Matthew Wolsfeld
So if I'm looking at the historical, China sales, I would say that we are at roughly, you're, you're at about 10% sales, 10% of the China sales number is, is Nature Tech. And the rest being you know, the North American, outside of, outside of China, meaning it's the business in North America, the business in India and other parts of Southeast Southeast Asia.
Joseph Vidich
Right. Right. Right. Right. Okay. That, anyway, that's, that's all I got guys. I appreciate you taking my questions.
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 I'm quoting because you expanded your sales infrastructure and I wanted to elaborate on that a little more. Although I've been listening to all of your, the previous conversation, so you're hiring a number of sales people and sales support people. Can you say where or how or are these brand new territories. Can you describe that a little more, please?
G. Patrick Lynch
I think they are really primarily. I'm sorry, Southeast Asia and the Middle East.
Oh, sorry, Southeast Asia and the Middle East is primarily where these people are located. Southeast Asia.
And Middle and these are brand new territories, are they?
I see. Southeast Asia and Middle East. Well, I hope it's got great promise. I assume it does.
Thank you. At this time. I would now like to turn the conference back to Patrick Lynch for closing remarks.
G. Patrick Lynch
Like to thank everybody for participating in the call today and wish you a nice day.
Operator
This concludes today's conference call. Thank you for participating. You may now disconnect.