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NT

NORTHERN TECHNOLOGIES INTERNATIONAL CORP (NTIC)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 delivered sequential and year-over-year revenue growth to $21.51M (+4.0% YoY), with gross margin up 20bps to 38.4%; GAAP diluted EPS was $0.01 and non-GAAP adjusted EPS $0.02 .
  • Versus S&P Global consensus, NTIC beat revenue ($21.51M vs $20.70M*) and missed EPS ($0.02 adjusted vs $0.04*); prior quarter Q2 had missed both revenue ($19.07M vs $20.20M*) and EPS (−$0.03 adjusted vs $0.06*) *.
  • Management expects ZERUST oil & gas sales and profitability to improve sequentially in Q4 and into FY2026; NTIC China sales rose 27.4% YoY to $4.51M, the second-highest since becoming a wholly owned subsidiary .
  • Operating expenses rose 7.6% to $9.67M on continued investment in oil & gas sales infrastructure; JV operating income fell 12.9% amid European macro weakness, though stimulus in Europe (esp. Germany) is viewed as a potential tailwind to JV income .

What Went Well and What Went Wrong

What Went Well

  • Consolidated revenue growth with strength in ZERUST industrial; gross margin expanded to 38.4% due to more profitable sales mix and margin improvement initiatives .
  • NTIC China net sales increased 27.4% to $4.51M; management noted strong domestic demand and limited U.S. tariff exposure, positioning China as a significant future market .
  • Management expects sequential improvement in oil & gas in Q4 and stronger in FY2026: “we expect to see ZERUST oil & gas sales and profitability improve sequentially in the fourth quarter and into our fiscal 2026” .

What Went Wrong

  • JV operating income declined 12.9% YoY to $2.27M as JV sales fell amid European weakness; equity income from JVs decreased .
  • Operating expenses increased 7.6% (44.9% of net sales) due to strategic investments and higher personnel/travel/professional fees, compressing profitability .
  • Natur-Tec sales declined 1.2% YoY; management cited pricing pressures and order timing; Q2 gross margin was notably weak, though Q3 recovered .

Financial Results

Consolidated Results (Quarterly)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD)$21,338,393 $19,072,066 $21,508,563
Gross Margin (%)38.3% 35.6% 38.4%
Operating Expenses (% of Sales)44.4% 46.2% 44.9%
Operating Income ($USD)$1,106,671 $(332,933) $867,187
Net Income attributable to NTIC ($USD)$561,091 $434,319 $121,775
Diluted EPS (GAAP) ($)$0.06 $0.04 $0.01
Adjusted Diluted EPS (non-GAAP) ($)$0.07 $(0.03) $0.02

Revenue and EPS vs S&P Global Consensus

MetricQ1 2025Q2 2025Q3 2025
Revenue Consensus ($USD)$21,000,000*$20,200,000*$20,700,000*
Revenue Actual ($USD)$21,338,393 $19,072,066 $21,508,563
Primary EPS Consensus Mean ($)0.12*0.06*0.04*
EPS Actual (Adjusted) ($)0.07 -0.03 0.02

Values retrieved from S&P Global.*

Segment Breakdown (Revenue and Mix)

SegmentQ1 2025 ($, % of Sales)Q2 2025 ($, % of Sales)Q3 2025 ($, % of Sales)
ZERUST Industrial$13,962,252; 65.4% $12,562,853; 65.9% $14,440,591; 67.1%
ZERUST Oil & Gas$1,513,551; 7.1% $1,549,164; 8.1% $1,288,046; 6.0%
Natur-Tec$5,862,590; 27.5% $4,960,049; 26.0% $5,779,926; 26.9%
Total$21,338,393; 100.0% $19,072,066; 100.0% $21,508,563; 100.0%

KPIs and Balance Sheet Highlights

KPIQ1 2025Q2 2025Q3 2025
NTIC China Net Sales ($USD)$3,995,000 $3,735,000 $4,510,000
JV Operating Income ($USD)$2,414,000 $1,691,000 $2,273,000
Cash & Cash Equivalents ($USD)$5,569,834 $5,090,630 $6,773,401
Revolver + Term Loan ($USD)$7,280,000 $8,101,000 $10,148,000
Working Capital ($USD)$22,183,000 $21,416,000 $21,662,000
Dividend per share ($)$0.07 $0.07 $0.01

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
ZERUST Oil & Gas sales/profitabilityQ4 2025 & FY2026Not previously quantified; seasonal order shifts noted“Expect…sales and profitability [to] improve sequentially in the fourth quarter and into fiscal 2026” Raised qualitative outlook
Dividend per shareQ3 2025$0.07 dividend declared in Q2 ; management said dividend would be temporarily adjusted to $0.01 next quarter $0.01 dividend declared in Q3 Lowered
Revenue, margins, OpEx, OI&E, tax rateFY2025/Q4No formal numeric guidance providedNo formal numeric guidance providedMaintained (no guidance)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Oil & Gas trajectory and investmentsHiring ~10 people across sales/technical; seasonal revenue skew to H2; potential for $4M quarterly revenue; investments focused in North America, Middle East, Asia, Europe Continued investment; expect Q4 sequential revenue step-up in oil & gas; easier installation and lower upfront cost vs traditional solutions; incremental personnel investment ~$1.3M over 12+ months Improving outlook; lumpy orders but sequential growth expected
Gross margin dynamicsQ1 margin +200bps YoY on pricing/quality actions; Q2 margin down 440bps on mix and Natur-Tec pricing pressure Q3 margin 38.4%, improved on mix and efficiency; Q2 acknowledged as weak Recovery from Q2 trough
China demand and tariff exposureQ1/Q2 noted domestic consumption buffering tariff impact; improving sales trends Q3 China sales +27.4% YoY to $4.5M; limited U.S. tariff exposure Strengthening
Natur-Tec product performanceQ1 record $5.86M; pipeline of compostable resins/applications; recurring distributor model Q3 down 1.2% YoY; sequential rebound vs Q2 (+16.5%); pursuing food packaging breakthrough to address permeability Mixed near-term; positive medium-term R&D
European JV and macroEnergy costs and Germany auto sector weakness weighing; mixed performance across countries JV op. income down 12.9%; monitoring EU stimulus, expecting positive impact esp. Germany Cautious; potential tailwinds ahead

Management Commentary

  • “We delivered sequential and year-over-year growth… despite mercurial global trade and geopolitical tensions” — G. Patrick Lynch, CEO .
  • “We… expect to see ZERUST oil & gas sales and profitability improve sequentially in the fourth quarter and into our fiscal 2026” — CEO .
  • “Gross margin was a particular highlight… reaching 38.4%… reflects the differentiated value we provide” — CEO .
  • “Reducing debt through positive operating cash flow and improving working capital efficiencies will be a strategic focus” — CFO .

Q&A Highlights

  • Oil & Gas value proposition: NTIC’s solution is easier to install and lower upfront cost vs traditional methods; management emphasized long-term protection benefits .
  • Investment cadence: Incremental ~$1.3M personnel investment in oil & gas over the past 12+ months; expectation for Q4 revenue step-up from backlog .
  • China profitability: China is profitable and trending higher versus post-COVID lows; largely domestic consumption .
  • Natur-Tec R&D: Working on compostable food packaging with improved barrier properties; potential to scale over next 1–2 years .
  • Gross margin: Q2 was weak; Q3 improvement driven by mix and efficiency; Natur-Tec pricing pressure noted in Q2 .

Estimates Context

  • Q3 FY2025: Revenue beat ($21.51M vs $20.70M*), EPS miss (adj. $0.02 vs $0.04*). Q2 FY2025: Revenue miss ($19.07M vs $20.20M*), EPS miss (adj. −$0.03 vs $0.06*). Q1 FY2025: Revenue beat ($21.34M vs $21.00M*), EPS miss (adj. $0.07 vs $0.12*) *.
  • Coverage depth: Only one estimate on EPS and revenue across the three quarters, indicating thin sell-side coverage, which can increase volatility around prints.*
  • Implications: Street likely raises revenue expectations modestly for Q4 given oil & gas commentary and China strength; EPS path depends on operating expense discipline and JV recovery.*

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Revenue momentum resumed in Q3 with margin recovery; strength in ZERUST industrial and China offset oil & gas/Natur-Tec variability .
  • Oil & Gas is the swing factor: management guides sequential improvement in Q4 and stronger in FY2026; backlog and hiring support ramp, but quarterly lumpiness persists .
  • Cost discipline will be crucial: elevated OpEx (44.9% of sales) from oil & gas investments weighed on EPS; focus on debt reduction and working capital efficiency in H2/FY2026 .
  • JV exposure to Europe remains a headwind; monitor German stimulus impacts on JV income and potential dividend flow recovery from JVs .
  • Natur-Tec’s near-term is mixed (pricing pressure, order timing), but medium-term optionality exists in food packaging R&D and larger opportunities in the pipeline .
  • Trading setup: Q4 commentary on oil & gas execution and order timing is the likely catalyst; with thin consensus coverage, prints can drive outsized moves on revenue/EPS surprises.*
  • Medium-term thesis: A more diversified revenue base (industrial, oil & gas, bioplastics, China) plus margin initiatives and reduced leverage can support EPS normalization as JV and macro conditions stabilize .
Notes:
- Non-GAAP adjustments: Q3 adjusted EPS excludes amortization; earlier periods also reflect ERC-related adjustments per reconciliations **[875582_19f6eee1bff04df29faf3a9cc4ccdab6_10]** **[875582_3fecf246b61f4ef6bfb693cbeafe9ff5_10]** **[875582_3d64ff2b66f547348351e2d1180e2e67_10]**.
- All quantitative figures and statements are sourced from NTIC’s Q3, Q2, and Q1 FY2025 press releases, 8-K filings, and earnings call transcripts as cited above.
- S&P Global consensus estimates marked with *; Values retrieved from S&P Global.