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NT

NORTHERN TECHNOLOGIES INTERNATIONAL CORP (NTIC)·Q1 2025 Earnings Summary

Executive Summary

  • Record Q1 revenue of $21.338M (+5.7% y/y) driven by Natur-Tec (+22.8% y/y to $5.863M) and stable ZERUST industrial and oil & gas; gross margin expanded 200 bps to 38.3%, but EPS fell to $0.06 on higher OpEx tied to oil & gas sales investments .
  • Management reiterated expectation for a second-half acceleration in oil & gas, with seasonality and expanded sales infrastructure likely to skew revenue to H2; Natur-Tec demand remains robust across North America and India .
  • No numeric guidance was issued; tone remained cautiously optimistic on FY25 sales growth and improved profitability, with China demand stabilizing and Europe mixed (Germany headwinds) .
  • Street consensus (S&P Global) was unavailable at time of request; beat/miss vs estimates cannot be assessed. This reduces near-term “surprise” clarity, but H2 oil & gas ramp and sustained Natur-Tec momentum are catalysts to watch [GetEstimates error].

What Went Well and What Went Wrong

  • What Went Well

    • Natur-Tec achieved an all-time quarterly sales record ($5.863M, +22.8% y/y) on new wins and expanding relationships; management expects growth to remain strong in FY25 .
    • Gross margin rose 200 bps to 38.3% on quality system-improvement initiatives and insourcing, demonstrating structural margin progress .
    • China subsidiary sales rose 8.6% y/y to $3.995M, reaching the highest quarterly level in nearly three years; management is cautiously optimistic on continued improvement .

  • What Went Wrong

    • EPS declined to $0.06 (vs $0.09 y/y) as OpEx rose 14% to $9.470M (44.4% of sales), largely due to strategic hiring and expansion in oil & gas sales infrastructure .
    • ZERUST oil & gas net sales were $1.514M (down from $4.200M in Q4 due to timing/seasonality), underscoring lumpiness and seasonal patterns .
    • Europe remains mixed; Germany is pressured by auto headwinds (e-vehicle transition, Volkswagen/Audi), weighing on some JV contributions despite strength elsewhere .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$20.686 $23.349 $21.338
Gross Profit ($USD Millions)$7.893 $10.220 $8.163
Gross Margin (%)38.2% 43.8% 38.3%
Operating Income ($USD Millions)$1.524 $2.762 $1.107
Net Income Attributable to NTIC ($USD Millions)$0.977 $1.836 $0.561
Diluted EPS ($)$0.10 $0.19 $0.06
Changes vs Prior Year and Prior QuarterQ1 2025 vs Q1 2024Q1 2025 vs Q4 2024
Revenue ($USD Millions)+$1.157 to $21.338 (+5.7% y/y) -$2.011 from $23.349 → $21.338
Gross Margin (%)+200 bps to 38.3% -550 bps vs 43.8%
EPS (Diluted) ($)$0.06 vs $0.09 $0.06 vs $0.19

Segment breakdown (net sales):

Segment ($USD Millions)Q3 2024Q4 2024Q1 2025
ZERUST Industrial$13.477 $13.432 $13.962
ZERUST Oil & Gas$1.360 $4.200 $1.514
Natur-Tec$5.849 $5.718 $5.863
Total$20.686 $23.349 $21.338

KPIs and other metrics:

KPIQ3 2024Q4 2024Q1 2025
NTIC China Net Sales ($USD Millions)$3.541 $3.600 $3.995
JV Operating Income ($USD Millions)$2.609 $2.034 $2.414
Working Capital ($USD Millions)$23.179 $23.682 $22.183
Cash & Equivalents ($USD Millions)$5.795 $4.952 $5.570
Debt (Revolver + Term Loan) ($USD Millions)$4.750 $7.112 $7.280
Dividend/Share ($)$0.07 $0.07 $0.07

Notes:

  • Operating expenses were $9.470M (44.4% of sales) in Q1 2025 vs $8.309M (41.2%) in Q1 2024 .
  • Management cited $1.4M operating cash flow on the call for Q1, while the press release reported $2.395M; we present the 8-K figure in KPIs and note the discrepancy .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Oil & Gas Sales CadenceFY2025H2 stronger than H1 due to seasonality and project timing Expect accelerated H2 sales; 60/40 or 1/3–2/3 split H1:H2 Maintained/clarified
Natur-Tec GrowthFY2025Sustained strong growth expected Growth to remain strong; ~20% trajectory referenced in Q&A Maintained
Gross Margin TrajectoryFY2025Structural improvements + mix tailwinds (oil & gas) Continued improvement from quality initiatives; 200 bps y/y in Q1 Maintained
China OutlookFY2025Stabilizing with cautious optimism Q2 seasonal dip (Chinese New Year), Q3–Q4 similar/slightly better than Q1 Maintained/seasonal detail
Formal Revenue/EPS GuidanceFY2025None providedNone providedMaintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Oil & Gas seasonality and timingQ3: ~$0.6M orders shifted to Q4; volatility acknowledged . Q4: record $4.2M; H2 stronger; investments in new regions .Q1: $1.5M; expect H2 acceleration; 60/40–1/3:2/3 H1:H2; global sales team expanded (10+ hires) .Improving in H2
Natur-Tec growthQ3: Record quarter; resin strategy scaling; municipal/regulatory tailwinds . Q4: New wins across regions; strong demand .Q1: 22.8% y/y growth; strong pipeline in North America/India; recurring nature with distributors/resin customers .Sustained growth
Gross margin initiativesQ3: +210 bps on insourcing/quality actions . Q4: 43.8% on mix and structural gains .Q1: +200 bps y/y to 38.3%; ongoing company-wide quality improvements .Structural improvement
China demandQ3: Stabilizing, +6.7% y/y . Q4: Three consecutive y/y growth quarters .Q1: +8.6% y/y; expect Q2 seasonal dip, Q3–Q4 similar/slightly better .Stabilizing to improving
Europe/Germany macroQ3: JV Germany down on lost customer and energy costs . Q4: European headwinds; EV transition pressure .Q1: Germany headwind persists (Volkswagen/Audi); Finland strong; mixed across EU JVs .Mixed/headwind
Regulatory/APIQ4: API change may take effect late FY2025; pushing VCI acceptance .Q1: No update to timing beyond H2 focus and adoption efforts .Potential medium-term tailwind

Management Commentary

  • “NTIC’s record first quarter consolidated sales were driven by Natur-Tec all-time record quarterly sales, as well as, stable ZERUST oil and gas and ZERUST industrial sales… We are cautiously optimistic that global trends within our ZERUST industrial markets will continue improving throughout fiscal year 2025.” — G. Patrick Lynch, CEO .
  • “Operating expenses increased 14.0% year-over-year primarily due to our strategic investments in ZERUST oil and gas sales infrastructure… 200-basis point year-over-year improvement in gross margin… We continue to believe fiscal 2025 will be another strong year of sales growth and higher profitability.” — G. Patrick Lynch .
  • “Gross profit as a percentage of net sales was 38.3%… The 200 basis point improvement was primarily a result of successful actions taken by the company to address inflationary pressures.” — Matt Wolsfeld, CFO .
  • “Demand continues to grow among both new and existing customers of our Zerust Oil & Gas solutions… we believe we are well positioned for compelling growth… through fiscal 2025 and beyond.” — CEO .
  • “Natur-Tec’s growth… was a result of continued new customer wins in North America and India, as well as expanding relationships with existing customers.” — CEO .

Q&A Highlights

  • Oil & Gas TAM/adoption: Current penetration of new/replacement tanks is “not even 1%”; NTIC’s solution costs roughly one-third of traditional cathodic protection; standard tank chemistry revenues ~$25k–$50k, larger tanks can be several hundred thousand; recharge revenues recur 5+ years at ~10% of original treatment .
  • Seasonality and H2 skew: Oil & gas expected ~60/40 or 1/3–2/3 H1:H2; Q4 last year was $4.2M; management sees potential repeat/expansion in Q3–Q4 this year .
  • Natur-Tec recurrence: Sales considered recurring once distributors/customers are on-boarded; consistent month-by-month growth with specialty resins an increasing focus .
  • Geographic dynamics: China improved q/q and y/y; expect Q2 seasonal dip; Europe mixed with Germany pressured; expanding oil & gas sales infrastructure in Southeast Asia and Middle East as brand-new territories .
  • Sales force ramp: Oil & gas hiring (≈6 sales + 4 technical) takes 6–12 months to become effective; major impact expected by late FY25 and more materially in FY26 .

Estimates Context

  • S&P Global (Capital IQ) consensus for Q1 2025 EPS and revenue was unavailable at time of request due to provider limits; therefore, a beat/miss assessment vs Street cannot be made. Values retrieved from S&P Global were unavailable at time of request [GetEstimates error].

Key Takeaways for Investors

  • Natur-Tec is a durable growth engine (+22.8% y/y, record quarter) with recurring characteristics and expanding specialty resins, supporting multi-quarter revenue visibility .
  • Oil & gas remains lumpy but structurally positive; expect H2 acceleration driven by seasonality, backlog, and expanded sales coverage (Southeast Asia/Middle East), with potential quarters reaching $3–$4M as seen historically .
  • Margin story intact: +200 bps y/y gross margin on quality initiatives; mix uplift from oil & gas can add tailwinds as H2 ramps .
  • Earnings compression in Q1 reflects planned OpEx investments; watch OpEx intensity vs revenue growth as sales force productivity ramps over the next 6–12 months .
  • China is stabilizing with seasonal Q2 dip expected; narrative suggests Q3–Q4 rebound, offering incremental upside to industrial and bioplastics segments .
  • Europe mixed with Germany headwinds; monitor JV trends and auto sector developments (EV transition impacts Volkswagen/Audi), which affect JV contributions .
  • Dividend ($0.07/quarter) maintained; balance sheet liquidity improved q/q with cash at $5.57M; near-term focus includes working capital efficiency and debt reduction .

All data and quotations are sourced from NTIC’s Q1 2025 8-K/press release and earnings call, and prior quarters’ materials: .