Good day. Thank you for standing by. Welcome to the Northern Technologies International Corporation second quarter 2023 earnings conference call. At this time, all participants are on 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 one one on your telephone. You will then hear an automated message advising 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 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 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, Chief Executive Officer. Please go ahead. Good morning. I'm Patrick Lynch, NTIC's CEO, and I'm here with Matt Wolsfeld, NTIC's CFO. Please note that a press release regarding our second 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 second quarter financial results, provide a brief business update, and then conclude with a question-and-answer session. For almost 20 years now, NTIC has been singularly focused on building a solid foundation comprised of an experienced and committed leadership team, as well as a constantly growing portfolio of solutions to answer the diverse and evolving needs of our global customer base. We have continually invested in our business by adding capabilities, enhancing our operations, and opportunistically buying out select joint venture partners. This, in turn, has enabled us to pursue long-term growth strategies aimed at diversifying our end markets, product categories and geographic footprint. Our second quarter financial performance reflects the success of these initiatives and the resilience of our platform as stable demand for our ZERUST Industrial products and services in North America, coupled with growing interest in our Natur-Tec and ZERUST Oil & Gas products both in the U.S. and abroad, provided yet another new sales record in the second quarter. Even as we continue to navigate an extremely complex operating environment comprised of, but not limited to persistent inflation, raw material cost increases, geopolitical conflicts in Europe, and the lingering effects of the COVID-19 pandemic in Asia. I'm also pleased to report that we are making considerable progress rebuilding our gross margins and controlling operating expenses. In fact, our second quarter gross margin of 35% marks a significant improvement on both a sequential and year-over-year basis, reflecting the growing contributions made by a profitable ZERUST Oil & Gas business, as well as the benefits of other measures we've implemented successfully so far this fiscal year. Overall, momentum remains positive, we expect NTIC China sales will improve in the third quarter and beyond as the Chinese economy finally has the opportunity to start rebounding from its exceptionally long self-imposed pandemic freeze. In addition, Natur-Tec sales are expected to benefit in the third quarter from new customer relationships and incremental orders. Consequently, we believe we are well positioned for a strong finish to fiscal 2023. With this overview, let's examine the drivers for the second quarter in more detail. For the second quarter ended February 28, 2023, our total consolidated net sales increased 9.1% to a second quarter record of $18.3 million as compared to the second quarter ended February 28, 2022. Broken down by business unit, this included a 212.4% increase in ZERUST Oil & Gas net sales, a 5% increase in Natur-Tec net sales, and a 3.7% increase in ZERUST Industrial net sales. Total net sales for the fiscal 2023 second quarter by our joint ventures, which we do not consolidate in our financial statements. Increased 3.6% to $25.5 million. This increase was due primarily to a rebound in demand across the territories serviced by our global joint ventures after several quarters of lower demand due to certain geopolitical conflicts and their impact on raising the cost of energy while simultaneously reducing its availability. Fiscal 2023 second quarter net sales by our wholly owned NTIC China subsidiary decreased by 31% to $2.9 million due to the negative impact of severe COVID-19 related lockdowns across much of that country during the quarter and the resulting weaker economic conditions, as well as the impact of Chinese New Year. We continue to closely watch market conditions in China. Now that the Chinese government has terminated the PRC's zero COVID policy, we 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. Moving on to ZERUST Oil & Gas. The fiscal 2023 second quarter was one of the strongest quarters we have ever had for ZERUST Oil & Gas, as sales increased 212.4% to $1.8 million. The second quarter of fiscal 2023 is also the fourth consecutive quarter of ZERUST Oil & Gas sales over $1.5 million. On a trailing 12-month basis, we have reported nearly $6.5 million of oil and gas sales. We believe these positive trends reflect accelerating momentum within our oil and gas business. Interest is growing for our ZERUST Oil & Gas solutions, which include applications to protect above ground oil storage tanks and pipeline casings from corrosion. We believe the third quarter of fiscal 2023 will be another good quarter of oil and gas sales and growth. The expanding adoption of our ZERUST Oil & Gas solutions within the oil and gas industry is supporting bigger opportunities for our ZERUST Oil & Gas products and technologies. As a result, we believe fiscal 2023 will be a transformative year for ZERUST Oil & Gas as this business scales and continues to contribute to profitability. Turning to our Natur-Tec bioplastics business. Fiscal 2023 second quarter Natur-Tec sales were $3.8 million, a 5% increase over the prior fiscal year period. While sales trends within Natur-Tec remain positive, second quarter sales growth slowed due to seasonality and the timing of both shipments and orders. We expect Natur-Tec sales growth to re-accelerate in the third 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 Natur-Tec bioplastics business. While the global economic environment remains extremely complex, our results have continued to demonstrate the powerful platform we have created. Every day, our team members and joint venture partners are working closely with our customers to provide leading solutions to help protect global supply chains and oil and gas industry infrastructure from corrosion, while also improving the environment by providing best-in-class compostable bioplastics. I am proud of our team's strong performance during a very fluid business landscape, and I'm extremely excited by the opportunities we have in the future to create lasting value for our shareholders. With this overview, let me now turn the call over to Matt Wolsfeld to summarize our financial results for fiscal 2023 second quarter. Thanks, Patrick. Compared to the prior fiscal year period, NTIC's consolidated net sales increased 9.1% in the fiscal 2023 second quarter to a second quarter record. This growth was driven by the positive trends Patrick reviewed in his prepared remarks. A 3.6% increase in second quarter sales across joint ventures, combined with the action to improve gross margins, drove a 9.8% increase in second quarter joint venture operating income compared to the prior fiscal year period. Total operating expenses for the fiscal 2023 second quarter were $7.5 million. An 11.8% increase over the prior fiscal year period, which was primarily due to increased personnel expenses and expenses incurred in 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 41% compared to 40.1% for the prior fiscal year period. Gross profit as a percentage of net sales was 35% during the three months ended February 28, 2023, compared to 29.8% during the same period last fiscal year. The 520 basis point improvement was primarily a result of successful actions taken by the company to address inflationary pressures and the increased sales of higher margin ZERUST Oil & Gas solutions. NTIC reported net income of $885,000 or $0.09 per diluted share for the fiscal 2023 second quarter, compared to $183,000 or $0.02 per diluted share for the fiscal 2022 second quarter. NTIC's non-GAAP net income, adjusted for amortization expenses and expenses related to the NTIC India transaction, was $991,000 or $0.11 per diluted share, compared to $392,000 or $0.04 per diluted share for the fiscal 2022 second quarter. A reconciliation of GAAP to non-GAAP financial measures are available in our second quarter earnings press release that was issued this morning. As of February 28, 2023, working capital is $24 million, including $5.5 million in cash and cash equivalents, compared to $23.2 million, including $5.3 million in cash and cash equivalents as of August 31, 2022. As of February 28, 2023, we had $7.1 million outstanding on our revolving line of credit. During the second quarter, we purchased a 26,000 sq ft facility immediately adjacent to our headquarters in Circle Pines, Minnesota, for $1.2 million. The building will be used for additional warehousing and production space to support our continued growth. We generated $2.2 million in operating cash flow for the six months ended February 28, 2023, including $202,000 in the second quarter. During the second half of the fiscal year, we expect to use positive operating cash flow to reduce the outstanding balance of our revolving line of credit. On February 28, 2023, the company had $21.5 million in investments in joint venture, of which approximately 52.9% or $11.4 million was in cash, with the remaining balance primarily invested in other working capital. During the fiscal 2023 second quarter, NTIC's Board of Directors declared a quarterly cash dividend of $0.07 per common share that was payable on February 15, 2023 to the stockholders of record on February 1, 2023. To conclude, our second quarter and year-to-date financial results demonstrate the 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. Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Gus Richard with Northland Capital Markets. Your line is now open. Good morning. Thanks for taking my questions. Just wondering if you'd talk a little bit about what you're seeing in China now. Clearly, the last quarter was challenging and just wondering, you know, how quickly you see that geography coming back. That's still. We're still in a wait-and-see mode, really. We're expecting now that China was locked down for such a long period of time. It's taking some time for them to recover and get things going again. We'll have a better picture of how quickly China will recover basically at the end of third quarter. Got it. Then you mentioned, you know, a couple of new customers applications in Natur-Tec, and I'm just, again, you know, any color around that in terms of geography and market, et cetera? Well, one of those is domestic. We have one large customer we feel are about to come online. People already started production on for the initial orders, and we expect to start delivering this quarter. Okay. The last one for me, oil and natural gas, no pun intended, what's the pipeline look like there? Right now it looks pretty good. You know, any color, if you have, more multinationals, you know, is it pipeline work, above ground storage? You know, just. It's a combination of both. It's combination of both. it's, I mean, it's a very healthy pipeline at this point. Okay. All right. Appreciate it. Thanks so much. Gus, I'll just add one comment that, the revenues in the second quarter for oil and gas did not include any sales to British Petroleum from the contract that we received in the first half of the year. It's something that we're starting to deliver on in the second half of the year. Got it. Got it. Just one follow on. You know, sort of how many customers do you have in a quarter? Is it, you know, a handful of, you know, just any sense there? From an oil and gas standpoint? Yeah. I mean, the number of customers would be in the 10- 20, you know, per quarter. I mean, if I look at kind of an opportunity listing, it's certainly not like the ZERUST Industrial listing when you look at a backlog as far as the hundreds of customers that we're continually delivering to. It's obviously a product that we sell at, you know, at from a price per opportunity is much higher than either the ZERUST or the Natur-Tec traditional business. Yeah, it is simply a handful of customers per month, and that's what adds to the volatility of the, you know, of the revenue that we see. It is positive and a good note that what we're finally starting to see is somewhat of a baseline of revenue is coming in. As Patrick said in his prepared remarks that, you know, the last four quarters has seen over $1.5 million in revenue per quarter. You know, as we're looking forward, we're better able to kind of plan where we are, you know, not just in third and fourth quarter coming up, but also throughout our fiscal 2024. We can see the size of the opportunity, we can see the growth that we're looking at, and that's one of the reasons why we're excited about the direction oil and gas is headed. I'm sorry, I keep on thinking of more questions. you know, how many customers roughly are in the pipeline? I would say you're probably... It's not necessarily all new customers, if I'm looking at just opportunities that we are gonna deliver on in third quarter, you're likely looking at probably 30 or 40 different customers. Okay, got it. Got it. Very helpful. Thank you. Thank you. As a reminder, to ask a question at this time, please press star one one on your touchtone telephone. Our next question comes from Tim Clarkson with Van Clemens & Co, Inc Your line is now open. Hey, guys, great quarter. Anyhow, you know, you got this new URL number to get onto the call. You thought you could shake me off knowing how bad I am with details, but I had Angie to the rescue, so there. Anyhow, on the oil and gas stuff, I mean, what are the typical gross margins on oil and gas, you know, versus your traditional business? I mean, they're certainly more positive. We don't like putting out specific gross margins, you know, because it obviously does vary, based on opportunity. It certainly is a higher gross margin than what we see in compared to ZERUST Industrial. Obviously, ZERUST Industrial has historically been slightly better than the Natur-Tec gross margins. Right. What approximately is the break even in that division? The break even in the oil and gas division? Yeah. you know, if I'm looking at oil and gas, I think we had, you know, it's right in between about $4.2 million-$4.8 million in revenue. Given the trailing, you know, trailing four months, trailing, you know, however far you want to go back from when we kind of saw the step up in revenue, you know, the oil and gas group has been positive for the last, the last few quarters, which was kind of- Okay. A big milestone, which was a big milestone for that group. you know, and now it's, you know, now we're looking at what are the additional opportunities, what are the additional geographies that we can, we can start going into. There's additional hiring that's taking place in oil and gas to kind of service these opportunities. you know, it's part of what gives us, you know, a lot of optimism with what's going on currently in oil and gas. Right. Just on a big picture intuitive basis, I guess what's finally happening, which Patrick predicted is, you know, after eight to 10 years, people are actually seeing this technology, you know, work dramatically better than the traditional technologies, and they see other people using it. Between seeing other people using it and wanting to catch up and actually seeing the technology continuously prove out, they're finally end believers and along with less government variances that you have to jump through. That's exactly right. Thanks. Yeah. Okay. Well, good. On, on the compostable stuff, I guess, you know, I've been hearing again, you know, Hennepin County here locally, you know, putting the push on the compostable. I guess that's the other, you know, big picture that, you know, there's starting to be some government movement requiring, you know, the organics to get pushed out of the garbage stream and, you need to have the, you know, the packaging as part of that solution. That's exactly right. I mean, one of the key drivers for that market in general are the municipal and state mandates that we're seeing and even countrywide mandates that we're seeing in various markets. You know, and also with Natur-Tec, we're also seeing positive movements with some of the key raw materials that are going into the product as far as those price points coming down as well. The expectation is that we're going to see continued recovery in the ZERUST Industrial gross margin and also improvements in the Natur-Tec gross margins compared to where we were in first and second quarters. Right. Yeah, what are the considerations in terms of potentially spinning this division out and having it trade separately? Well, I mean, we're certainly looking at that opportunity just because it's prudent to do so. I mean, at this point in time, NTIC is such a small, you know, as I always say we aspire to be a microcap company. At this point in time, Natur-Tec, we don't feel has the, you know, the size, the revenues and the profitability at this point to be standalone. Certainly in the future, that's something that we're gonna be evaluating and looking at because it is something that could be valued differently as if it wasn't seen in conjunction with the rest of the industrial oil and gas business. Right. Is there a potential to get a strategic partner that would help with that? I mean, like a Cargill, someone like that would bring technology and maybe sales and marketing into the deal. It's possible. I don't... There's no external conversations that we've had with anybody from that level of, you know, of partnership. It's, you know, as Natur-Tec continues to grow and the market continues to grow, you know, certainly there'll be a lot of different options out there for the business. Now in your past, the issue of there being a shortage of the key element that you're using. Yeah, to make this stuff. No, no restrictions at this time. We've got plenty of raw material available to us. Right. Right. Okay. Well, great. Good. Good quarter. It sounds like quarters coming up are gonna be even better. Thanks. I'm done. Thanks, Tim. Thank you. I'm currently showing no further questions at this time. I'd like to hand the call back over to NTIC management team for closing remarks. Just like to thank everybody for listening in today. I hope you have a good week. This concludes today's conference call. Thank you for joining. You may now disconnect.