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NT

NORTHERN TECHNOLOGIES INTERNATIONAL CORP (NTIC)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 2025 revenue was $22.315M, essentially in-line with S&P Global consensus ($22.4M*), but EPS missed materially: non-GAAP adjusted EPS was -$0.06 vs $0.08* consensus; GAAP diluted EPS was -$0.12, reflecting gross margin compression and elevated operating expenses . Values retrieved from S&P Global.
  • Segment mix: ZERUST industrial grew 5.8% YoY while oil & gas fell 29.4% YoY due to a large prior-year order shift; Natur-Tec declined 10% YoY on pricing dynamics and order timing .
  • Management highlighted a multi-year Brazil FPSO contract (~R$70M/US$13M) as a catalyst for oil & gas, ramping through FY26–FY28, albeit with a service component that trims margins vs product-only sales .
  • FY25 effective tax rate spiked to 67.5% due to mix and low pre-tax income; management expects normalization as North America profitability improves. Focus for FY26: hold OpEx roughly flat, expand gross margins, and drive higher-margin sales .

What Went Well and What Went Wrong

What Went Well

  • ZERUST industrial resilience: Q4 industrial net sales rose 5.8% YoY to $14.205M, lifting total ZERUST to 77% of revenue .
  • China momentum: NTIC China sales grew 14% in FY25 to $16.2M and 12% in Q4 to ~$4.0M; exposure to U.S. tariffs is limited given domestic demand. “We expect demand in China will continue to improve in fiscal 2026” .
  • Strategic oil & gas win: Brazil FPSO contract (~US$13M) validates offshore capabilities and expands the pipeline internationally, positioning for FY26 growth .

What Went Wrong

  • EPS miss and margin compression: Gross margin fell to 37.9% in Q4 (vs 43.8% LY), with GAAP diluted EPS at -$0.12; non-GAAP adjusted EPS -$0.06 .
  • Oil & gas and Natur-Tec softness: Q4 oil & gas net sales -29.4% YoY due to prior-year timing; Natur-Tec -10% YoY on pricing dynamics and order delays .
  • Elevated OpEx and tax rate: Q4 OpEx was 43.5% of sales (vs 40.7% LY); FY25 effective tax rate surged to 67.5% given foreign subsidiary tax expense and low pre-tax income, pressuring net income .

Financial Results

Quarterly Performance (sequential comparison)

MetricQ2 2025Q3 2025Q4 2025
Revenue ($USD)$19,072,066 $21,508,563 $22,315,452
Gross Margin %35.6% 38.4% 37.9%
Operating Expenses % of Net Sales46.2% 44.9% 43.5%
Diluted EPS (GAAP)$0.04 $0.01 $(0.12)
Adjusted Diluted EPS (Non-GAAP)$(0.03) $0.02 $(0.064)

Year-over-Year Q4 comparison

MetricQ4 2024Q4 2025
Revenue ($USD)$23,349,107 $22,315,452
Gross Margin %43.8% 37.9%
Diluted EPS (GAAP)$0.19 $(0.12)
Adjusted Diluted EPS (Non-GAAP)$0.196 $(0.064)

Segment Breakdown (absolute sales)

SegmentQ4 2024Q3 2025Q4 2025
ZERUST Industrial ($USD)$13,431,917 $14,440,591 $14,204,997
ZERUST Oil & Gas ($USD)$4,199,583 $1,288,046 $2,966,943
Natur-Tec ($USD)$5,717,607 $5,779,926 $5,143,512
Total Net Sales ($USD)$23,349,107 $21,508,563 $22,315,452

KPIs and Other Items

KPIQ2 2025Q3 2025Q4 2025
JV Net Sales ($USD)$19,800,000 $23,212,000 $24,388,000
JV Operating Income ($USD)$1,691,000 $2,273,000 $2,168,000
Working Capital ($USD)$21,416,000 $21,662,000 $20,439,000
Cash & Equivalents ($USD)$5,090,630 $6,773,401 $7,250,523
Total Debt ($USD)$8,100,785 (LOC+Term) $10,148,074 (LOC+Term) $12,656,000 (LOC+Term)
Dividend/Share ($)$0.07 (declared) $0.01 (declared) $0.01 (declared)

Non-GAAP/one-time items in FY25:

  • ERC other income: $1.140M; China customs penalty: $386,785; amortization expense: $423,132 (FY) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Operating ExpensesFY2026Invested in FY24–FY25; growth expected on leverage Maintain near FY25 levels; grow revenue to drop-through gross margin dollars Maintained (discipline)
Gross MarginFY2026Efforts to improve; 38.4% in Q3 Expand margins in higher-margin parts of business Raised (directionally)
Oil & Gas Brazil FPSO ContractFY2026–FY2028N/A~R$70M (~US$13M) total over duration; ramp in FY26 New contract (positive)
DividendQ4 2025$0.01/share declared in Q3 $0.01/share payable Nov 12, 2025; record Oct 29, 2025 Maintained
Effective Tax RateFY202617.3% in FY24 Expect normalization from FY25’s 67.5% as NA profits recover Raised (normalization expected)

No numerical revenue/EPS guidance was provided; management emphasized margin expansion, OpEx discipline, and pipeline-driven growth .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2025)Previous Mentions (Q3 2025)Current Period (Q4 2025)Trend
Macro/EuropeHeadwinds; JV net sales -15.7% YoY; OpEx elevated Monitoring stimulus; JV net sales -9.3% YoY; margin focus JV net sales +4.7% YoY in Q4; optimism for future JV OI, esp. Germany Stabilizing from trough
Oil & GasSales -28.5% YoY; rebound expected H2 FY25 Sequential improvement expected Q4; building Middle East/SA/Africa presence Brazil FPSO contract; pipeline expanding; acceptance of technology; margin slightly lower due to services Positive ramp FY26
Natur-TecSales -11.8% YoY; local mandates supportive Compostable barrier breakthrough; large opportunities being developed Preferred supplier agreement; trials in U.S./India; premium pricing; orders booked for H1 FY26 Building bookings
ChinaNTIC China +8.1% (Q2); domestic focus NTIC China +27.4% (Q3); tariff exposure limited NTIC China +12% Q4; +14% FY; demand improving Strong growth
Tax RateN/AN/AFY25 ETR 67.5%; normalization expected as NA profits rise Normalizing anticipated
CapEx/ERPERP and building investments in FY24–FY25 N/AMinimal North America capex in FY26; focus on debt reduction FCF/Deleveraging
AIN/AN/ANo AI use cases identified Not a focus

Management Commentary

  • “We are focused on flattening our operating expenses while expanding gross margins and driving sales in higher-margin parts of our business, which we expect will improve our profitability and strengthen our balance sheet in fiscal 2026” — G. Patrick Lynch, CEO .
  • “Our 85%-owned subsidiary…secured a new three-year contract…for FPSOs, with an estimated total value of approximately BRL 70 million (~$13 million)…ramp up during fiscal 2026…through 2028” — CEO prepared remarks .
  • “The goal at this point isn’t to cut expenses…maintain the same level of operating expenses…drive revenue growth in 2026…gross margin dollars falling down to operating profit” — Matt Wolsfeld, CFO .
  • “We experienced an increase in our effective tax rate…67.5%…expect the effective rate to normalize in future periods when additional profits are recognized in our North American operations” — CFO .
  • “It’s just general acceptance of the [oil & gas] technology…we’ve proven that it works…repeat business…pulling in new customers” — CEO .

Q&A Highlights

  • Effective tax rate mechanics: High FY25 ETR driven by foreign tax expense with low consolidated pre-tax income; normalization expected as NA profits recover .
  • OpEx discipline vs cuts: Strategy is to hold OpEx near FY25 levels and let higher-margin growth drive operating profit leverage in FY26 .
  • Oil & gas growth drivers: Technology acceptance and pipeline expansion (tanks, casings, offshore rigs); Brazil FPSO work includes on-rig service, modestly lowering margin vs product-only sales .
  • Natur-Tec roadmap: Premium-priced compostable solutions; trials in U.S. QSR pouches and India milk pouches; initial PO in India; expected contribution by Q2–Q3 FY26 .
  • Capital allocation: Minimal NA capex planned in FY26; target debt reduction and eventual dividend ramp as earnings improve .
  • AI: No identified use cases for FY26 .

Estimates Context

  • Q4 2025 vs consensus: Revenue $22.315M actual vs $22.4M estimate*; Primary EPS -$0.06 actual vs $0.08 estimate* — a material EPS miss and slight revenue miss. Values retrieved from S&P Global.
  • Forward look: Q1 2026 consensus Revenue $22.1M*; EPS $0.02* — management’s margin expansion and OpEx discipline are key to meeting/raising EPS from the current low base. Values retrieved from S&P Global.
MetricQ4 2025 Consensus*Q4 2025 ActualQ1 2026 Consensus*
Revenue ($USD)$22.400M$22.315M $22.100M
Primary EPS ($)$0.08$(0.064) $0.02

Values retrieved from S&P Global.

Key Takeaways for Investors

  • EPS reset: Non-GAAP EPS missed by ~$0.14 vs consensus*, driven by mix, margin compression, elevated OpEx, and an unusually high tax rate; watch FY26 margin actions and NA profitability to normalize taxes . Values retrieved from S&P Global.
  • Segment cadence: Industrial steady; Natur-Tec orders booked for H1 FY26 and preferred supplier agreement support recovery; oil & gas to ramp on Brazil FPSO and broader acceptance, though service mix moderates margins .
  • Cash/debt posture: Year-end cash $7.25M and total debt $12.66M; management targeting operating cash generation and debt reduction in FY26 (minimal NA capex) — constructive for dividend flexibility longer term .
  • JV improvement: JV net sales and OI improved in Q4; European stabilization and targeted stimulus could aid JV income in FY26, especially Germany .
  • Risk checks: Natur-Tec price premiums and regulatory dependencies; oil & gas order timing and service logistics; Chinese customs issue deemed one-time after process changes .
  • Trading setup: Near-term sentiment hinges on visibility to margin expansion and early oil & gas/Natur-Tec wins; Brazil contract headlines and gross margin sequential improvement are potential positive catalysts .
  • Estimate path: Consensus for Q1 FY26 is modest ($0.02 EPS*); upside likely requires margins improving and OpEx stability; downside risk if service-heavy oil & gas mix and pricing dynamics persist. Values retrieved from S&P Global.