Northern Technologies International Corp (NTIC) 2016 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Northern Technologies International Corporation third-quarter 2016 earnings conference call and webcast. (Operator Instructions). As a reminder, this conference call 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 from 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 turn the conference over to Mr. Patrick Lynch, President and CEO. Please go ahead.

Good morning. I am Patrick Lynch, NTIC's CEO, and I'm here with Matt Wolsfeld, NTIC's CFO. Please note that our financial results for the third quarter of fiscal 2016 were included in a press release issued earlier this morning, a copy of which is available at NTIC.com. During this call we will review various key aspects of our fiscal 2016 third-quarter financial results, give a brief business update, comment on our net sales and earnings guidance for the full fiscal year, and then conclude with a question-and-answer session.

We experienced net sales growth of 4.9% for the fiscal 2016 third quarter, driven primarily by a 25% growth in worldwide Natur-Tec sales of over $1.5 million. While, overall, ZERUST industrial sales increased almost 3% due to stronger sales at NTIC China, North American industrial ZERUST sales dipped slightly due to soft demand from the slowing agricultural and heavy equipment sectors. Also, despite the numerous challenges facing the oil and gas industry over the past 12 months, sale of NTIC's oil and gas group increased slightly in the third quarter to just over $500,000.

The total sales by our joint ventures, which we do not consolidate on our income statement, were up 24.8% to $24.2 million for the fiscal 2016 third quarter compared to $19.4 million for the fiscal 2016 second quarter. Year-to-date, however, JV sales have declined 12.8% to $66.2 million, which is indicative of the challenges faced during the first half of the fiscal year, including the absence of our former Chinese joint venture sales, the significant weakening of major foreign currencies in comparison to the US dollar, and weaker demand for our ZERUST products in Europe.

We are optimistic that the increase in JV sales during the third quarter demonstrates that demand is building across our JV network. However, we continue to closely monitor all of our markets, and we are proactively working with our JV partners to strengthen market share and improve performance globally.

Sales at our wholly owned NTIC China subsidiary have continued to improve in each quarter since starting operations in January 2015. And having just enjoyed our first quarter with over $1 million in sales, we are encouraged about our long-term potential in China. Our management team in China is very strong and is helping us navigate an exceptionally competitive and complex market. While not currently breakeven on a quarterly basis, we believe that as sales continue to ramp, we will end the year with a monthly sales run rate at a breakeven level and expect our Chinese operations will continue to -- will contribute to profits next fiscal year.

NTIC China sales and corresponding gross profits have helped offset some operating expenses related to our Chinese operations. Nevertheless, year to date we have still been forced to absorb a $1.4 million impact related to the termination of our JV license agreement with Tianjin ZERUST and the formation and operations of NTIC China.

As we outlined in our press release this morning, since the termination of the agreement in January 2015, our former Chinese JV has yet to release financial statements to NTIC and agree to an orderly liquidation. As a result, we are currently evaluating if and when we need to write down our $1.9 million investment in this former joint venture. If the Company were to decide to write down this investment, the Company would incur a $1.1 million non-cash charge for our 60% proportional ownership of this JV entity.

We continue to litigate against our former Chinese partner in both the United States and China, and this is expected to continue into our fiscal 2017. We continue to expect a favorable outcome in the coming quarters regarding this lawsuit.

Finally, as it relates to our transformation in China, it is important to note that during the first nine months of fiscal 2016, NTIC did not record any royalty or equity income from Tianjin ZERUST. During the first nine months of fiscal 2015, prior to the termination of the license agreement, Tianjin ZERUST contributed over $376,000 of royalties and equity income to NTIC compared to no royalties and no equity income to NTIC during the first nine months of fiscal 2016.

The pre-tax impact on NTIC's earnings for the first nine months of fiscal 2016 of both direct and indirect -- excuse me, of both the direct expenses associated to China and the absence of the royalty and equity income amounted to $1.8 million or $0.39 per share. This obviously caused a significant impact to NTIC's earnings during fiscal 2016.

All said, NTIC reported net income of $0.20 per diluted share for the third quarter and $0.13 per diluted share for the nine months of fiscal 2016 compared to net income attributable to NTIC of $0.20 per diluted share during the third quarter and $0.39 per diluted share for the nine months of fiscal 2015.

Now, regarding our oil and gas business, during the third quarter of 2016, our North American oil and gas team continued to focus its sales efforts primarily on protecting the bottom plates of oil storage tanks in North America from corrosion. As we stated in previous quarterly calls, customers in this industry segment have been revising their infrastructure expansion and maintenance budgets to address the dramatic fluctuations in global oil prices we've seen over the past 12 months. As a result, our oil and gas net sales were up slightly in the fiscal 2016 third quarter, but were down 11.1% for the nine months of fiscal 2016 compared to the same periods last fiscal year.

Despite the challenging industry backdrop, however, our oil and gas team has continued to achieve significant milestones, which include signing a distribution and installation partnership agreement in the United States with a large service provider and receiving an order from a global oil company for installation in a new country. Furthermore, since our oil and gas sales exceeded $300,000 in June, we remain optimistic that our oil and gas net sales for fiscal 2016 will finish stronger.

Nevertheless, we continue to anticipate that our financial results from sales of ZERUST corrosion inhibiting products into the oil and gas industry will continue to be choppy, with spikes in sales as opportunities are converted and revenue is recognized over the next few years.

Now, turning to our Natur-Tec bioplastics business. For the fiscal 2016 third quarter, Natur-Tec sales were a record $1.5 million, a 25% increase over the same period last year. This increase was due to higher sales of finished products to NTIC's majority-owned subsidiary in India, as well as increased sales in North America to our domestic distribution network. We continue to see a strong demand for finished products, such as compostable bags and cutlery in North America, as a direct result of increases in zero waste initiatives as well as a favorable local and state level waste management regulations.

We also anticipate further adoption of our product lines by key customers in India, and also several new customers coming online in North America during the remainder of fiscal 2016 and beyond, as we continue to target and convert additional customers globally to use our sustainable solutions.

Overall, I am pleased with the third quarter's financial performance. I am also encouraged with the direction NTIC is headed, the business plan we have created, and the many growth opportunities we have in front of us. While fiscal 2016 has been a volatile year, with many moving parts, I am confident we are making significant progress toward enhancing our global brands, and believe we are well positioned for significant, long-term, profitable growth.

At this point, let me turn the call over to Matt Wolsfeld to summarize our financial results for the third quarter of fiscal 2016.

Thanks, Patrick. Net sales of NTIC's ZERUST product increased 1.5% across our industrial market and oil and gas market segments during the third quarter of fiscal 2016 compared to the same period in fiscal 2015. ZERUST oil and gas net sales were $512,000 during the third quarter of fiscal 2016, up 1.6% compared to $504,000 in the three months ended May 31, 2015. Net sales of ZERUST corrosion inhibiting products through our joint ventures decreased over 9% during the third quarter of fiscal 2016 compared to the same quarter in 2015.

Income provided by our joint venture operations decreased by 0.4% to $3 million during the third quarter of fiscal 2016 compared to the prior fiscal year quarter. This small decline was a significant improvement over the $2.5 million and $1.9 million earned in the first and second quarters of fiscal 2016, respectively. We're hopeful that this increase in joint venture income demonstrates that demand is stabilizing and increasing across our joint venture network.

Lastly, net sales of our Natur-Tec products increased 25% to $1.5 million during the third quarter of fiscal 2016 compared to the same quarter of fiscal 2015. Our total operating expenses were $4.7 million in the fiscal 2016 third quarter, which was a 3.6% increase compared to the third quarter of fiscal 2015.

This increase is primarily a result of the expenses related to the formation and establishment of NTIC China and the anticipated liquidation of the Tianjin ZERUST, partially offset by decreases in expenses in North America due to Company-wide cost cutting initiatives. As a percentage of sales, operating expenses were 54.1% in fiscal 2016 third quarter compared to 57.7% in the same period last fiscal year.

Overall, NTIC's reported net income attributed to NTIC of $917,000, $0.20 per diluted share for the third quarter of fiscal 2016 compared to net income attributable to NTIC of $905,000 or $0.20 per diluted share during the third quarter of fiscal [2016].

As of May 31, 2016, our working capital was $18.4 million, including $4.6 million in cash and cash equivalents and $2.6 million in available for-sale securities compared to $15.6 million, including $2.6 million in cash and cash equivalents and $2 million in available-for-sale securities as of August 31, 2015.

It's also important to point out that at May 31, 2016, the Company had $18.6 million of investments in joint ventures, of which approximately 55% is in cash, with the remaining balance is invested in working capital.

Turning now to NTIC's annual guidance, as we mentioned in this morning's press release, for the fiscal year ending August 31, 2016, we expect sales to be at the lower end of our previous guidance range of between $34 million to $37 million. As a result, we also anticipate net income attributable to NTIC to be at the lower end of our previous guidance range, between $2 million and $3.2 million, or between $0.40 and $0.70 per diluted share.

This large range of guidance is due to the significant risks and uncertainties facing our business, including, without limitation, the risks and uncertainties related to the change in our China operations, pending litigation, and other risks and uncertainties.

With that update, we will now answer any questions you may have.

(Operator Instructions). Tim Clarkson, Van Clemens.

Great quarter. Just wanted to get some background on the two new areas a little bit. First of all, on the compostable line of business, where geographically in the United States are you seeing the strength? And what are the attributes of your product that differentiates you from the competition?

Morning, Tim. Well, our primary market still happens to be on the West Coast, so Washington, Oregon, California. There are two categories of products, obviously: the cutlery that we're selling, as well as the bags and the resin systems. Generally our bags, we believe, are stronger and -- stronger mechanically and cheaper to produce than the competition. So we're providing a better product at a competitive price. And our cutlery, as opposed to competitive alternatives, has the -- is truly compostable while having excellent heat deflection capabilities. So you can use our spoons and our forks and knives in hot foods and beverages without them melting on you, which is a problem that other competitors face.

Are the customers echoing your beliefs about that? Is it starting to resonate with -- are the customers saying that about your products?

Yes. And actually after a -- I think a seven-year trial period, we're now at least being adopted on a limited basis in a large national fast food chain.

Super. On the oil and gas end, how much of an issue is just the fact that it's a new process? And is there a change in terms of the mindset of people realizing that the product really works, and it's not that difficult to add to their processes? How is that going?

Well, we continue to get repeat orders from core customers. We're also, as I mentioned early on the call, just got our first order from a global oil company for installation in a country we hadn't done business before in before.

Can you mention that country?

I would prefer not to.

Okay.

But, again, I think that we're getting a lot of positive feedback from the customers in terms of performances of our solutions, to the point where they are making presentations raving about the result they've had with our products at technical conferences. So, I think we've started to make some significant headway, and that things should become progressively easier for us to penetrate this market more broadly going forward.

Okay.

Assuming that oil prices are cooperating.

Right. Well, sure. Okay. Well, I may come back. But excellent quarter, and glad to see Northern Tech back on track. It's my favorite micro cap, so I have high expectations for you guys. Thanks.

We know. Thanks, Tim.

Scott Billeadeau, Walrus Partners.

Just wanted to reiterate, was the guidance -- is for fiscal -- I'm trying to remember what -- expectations for the next quarter should be pretty significant, pretty -- even to make the low end. If I'm doing my math right, it should be, what, a $10 million, $11 million quarter? Is that correct?

That is correct.

Okay, good. All right. And second question, any -- I came onto the call just a few minutes -- I didn't know if you had any updates on where the different legal battles are, at this point.

The legal battles in China are progressing at the pace of continental drift, so very slowly. With respect to the case in the United States, discovery is supposed to -- and it's discovery, including depositions -- are supposed to be concluded by the end of August, early September. If that doesn't lead to a settlement, then the trial date will be, I'm told, is sometime in March of next year.

Okay, great. And then just a follow-up on the oil and gas business. Is there much visibility? I know you have an issue with -- when the ground is frozen, given the liquid aspect of one of your process. Can you maybe give us a little update on what you see now? And how much visibility do you have, if much at all, in terms of implementations, and what that looks like for the next quarter?

Again, as I mentioned early in the call, we just had sales of $300,000 in June, which was quite significant for us. So, at least for the next -- for right now, we are quite busy doing the installations. We're still trying to finalize what we can still manage to ship and install for July and August. And, thereafter, we've also -- we still have projects we are hoping to close and install, certainly through the end of this calendar year.

Okay. All right. And just one other question for Matt. You mentioned the $18 million, and that's in cash, working capital. There isn't anything else really carried on the balance sheet in terms of what the joint ventures are in terms of the value of them. Is that correct? It's essentially the cash held over there, plus the working capital there? Is that pretty much it?

Correct. Correct. They all have similar balance sheets to hours that tend to be very working capital heavy, with very few, if any, long-term liabilities. And none of them have any debt.

Yes. And like I say, you are not carrying anything. Well, gee, if that was a company, what the value of it be that we own X percent of? It's just purely the cash and the working capital.

Correct.

So, fairly conservatively held on the balance sheet. Great. All right, guys. Thanks.

(Operator Instructions). Dick Feldman, Axiom Capital.

When you speak about the losses in China, do they include the losses in operating income? Or are you just focusing on the one-time legal costs?

No, those include the total -- where we talk about the $1.4 million losses that we sustained in China, that takes into account the -- if you are looking at the subsidiary's profit and loss statement for the year -- year to date, that shows about an $800,000 loss.

And then if you add onto that, you have a little more than the $600,000 of expenses that NTIC has incurred in North America related to litigation that is impacted by the Chinese operations, and also by the increase in expense that we incur through selling, general, and administrative expense of in support of that Chinese business. So, just looking at the total expense related to China, the Company is at a net loss for the nine months of a little over $1.4 million.

What were the operating (multiple speakers)?

Sorry?

What were the operating losses for the third quarter? And you said you hoped to be at breakeven levels by the end of the fiscal year, is that correct?

Certainly on a monthly run rate, given where sales are headed, we want China to be, as a standalone -- and if you look at their stand-alone monthly financial statements -- want them to be profitable.

And the operating losses during the third quarter?

The operating losses during the third quarter? I don't have the number exactly in front of me. I only have the nine-month numbers in front of me just under $800,000 in losses. I want to say it was a couple hundred thousand dollars in losses during the third quarter.

Okay. That's close enough, and hopefully they will be going away.

It's certainly been going down if you look at the -- when I look at the quarterly trend line of losses in China, it has certainly been going down on a quarter-by-quarter basis.

In your guidance for the final quarter of the year, what do you anticipate in legal costs as you enter the discovery process for your litigation in the US?

We're at a run rate of, depending on the month, somewhere between $30,000 to $50,000 per month of legal expenses in North America related to the litigation in China.

But will the costs rise dramatically with the discovery?

We're pretty much through discovery. We're on to other stages in the --.

I think, at this point, interrogatories, documents have been produced; several depositions have already been taken. So we still have some more depositions to conclude, but it's --.

I would imagine it would be pretty consistent with that amount.

Okay (multiple speakers).

I don't anticipate any huge spike in legal expenses in fourth quarter that we didn't see in second or third quarter. Put it that way.

Okay. Do you have any sense as to whether you can -- after this discovery, whether you can settle?

That all depends on the other side.

Okay. The R&D expenses have risen moderately. Is there any particular focus of these -- this rise?

As far as which new products we're working on, or the overall R&D? (multiple speakers) You're just looking at --.

It's not a big rise. I'd have to look at the numbers again.

Yes, it's -- in general, the majority of the expense we have associated with R&D, and for the most part selling and G&A, is usually a function of employees, and the number of people employed in that area. So, there hasn't been a significant flux in the number of people as far as the R&D department goes. It's not as if all the sudden in one quarter we are placing a lot -- a huge amount of expense on developing one specific new product or something like that. There's no correlation like that.

But, certainly, the Company's certainly working on several new products in each area; and also product improvements in each area, whether it be oil and gas, Natur-Tec, or the traditional ZERUST product lines. And so, I anticipate the R&D spending to stay pretty consistent with where it has been.

Okay. Just eyeballing it, it looks like it's up 10% or so.

I would say that as we start to -- as the product lines, being the oil and gas product line and the Natur-Tec product line, move into profitability, they certainly had what I would prefer to previously as business development expenses over the past eight, nine years, that would, from our categorization of expense standpoint, would -- most likely starting in 2017, would be moved up to traditional SG&A expense as those two entities are profitable.

So, I would say that in our fiscal 2017 I would expect the amounts that are included in the R&D line to decrease. But it would just be a matter of assigning that to the SG&A buckets above it.

Okay, great. So it's --.

But I would expect fourth-quarter R&D numbers to be consistent with third quarter, or even an average between second and third quarter.

One last question, and that is what have you found to be the greatest impediment in your tank bottom business to a more rapid acceptance?

I think that while we have proven that the product provides protection, warranted in the short term, certainly for the first few years -- and as I mentioned before on the call that we had satisfied customers publishing technical papers citing their results. I think some of these larger customers are still reasonably cautious. And they are willing to implement it on a certain set of tanks until they have the first five years' worth of data. And then we would expect an uptick.

So, since we have been now doing this certainly over two years, I think we're going to just continued to be -- on one growth pace for the next 2 1/2 years, and then just see if -- a more rapid rise after that.

Okay. So it takes -- so until we get that five-year anniversary, the orders will likely be more modest in scale; onesie, twosie, let's try it?

It's not a fixed date in the orders. There's not a fixed timeline, but that's my anticipation. It could happen sooner than that.

Okay. Thanks for taking my questions. And while lots of moving pieces, the total looks good.

Joe Furst, Furst Associates.

Good quarter. Appreciate the good work. The person, two persons ago, made the point that I wanted to make about even if you only hit the lower end of your previous estimate of earnings, it would be a $0.27 quarter, which would be better than this quarter. So you certainly are improving [demonstrably] -- drastically, rather. And the question I had, what's the nature of your competition in China? Expand upon that a little bit.

I would guess that it's -- there are two levels of competition in China. You have other corrosion inhibiting solution providers that operate in multiple countries that are basically attacking the high end of the market. And then you have a set of very low-cost domestic suppliers that, again, go after the low end of the market. But I would say in total there are certainly, probably in excess of 10 companies that are competing for this business. And it is quite an aggressive, complex market.

Okay, thank you. And also I wanted to compliment you for hiring an Investor Relations type person to help get your story [in there], because you certainly have a good story to tell. I think that was a good thing to do. Thank you, and keep up the good work.

[Jerry Well], Private Investor.

Congratulations on the quarter. Say, my question relates to this service agreement that you signed your with your -- I presume the same partner you've been partnering with before with the tank business. I'm just curious, what drove the signing of a formal agreement with you. Was that driven by you, buy them? And I wanted to see how you see that impacting revenue growth in that area with them, and also gross margin. So that's one question.

And then the second question is just if you have any additional product rollouts over the next 12 months that you haven't announced yet, that you may or may not have? And if you have anything to share on that it would be appreciated.

Sure. Yes, it is the same partner we were talking about before. I believe that this is based on mutual respect in terms of what we see -- what each side has to offer in terms of building sales and market share. So, our solutions are being viewed as a very attractive addition to this distribution partner's portfolio of solutions that they think they can market profitably. In terms of impact on margins, I think our margins should be just fine, even under this model.

And what was the second part of your question?

Well, I'm curious how it impacts in your selling other places and through other channels, if you will, in the US. It sounds like they were a US-based company. I don't know if they sell overseas also, but just -- an agreement; does it give them exclusive distribution to certain states or certain niches? I'm just curious how it -- without getting into legalities.

It basically makes them the preferred solution implementer, but it's not entirely exclusive. And in terms of other products, we continue to introduce new products in various applications and countries. We haven't been talking about them openly because we certainly anticipate that the ramp-up cycle, much like we've shown with tank bottoms, can be quite slow. And until we gain significant traction in them, we will just monitor them as a sideline rather than basically touting them to the market just yet.

Okay, all right. And back -- so thanks for that information. Back to the agreement, then, so you don't anticipate probably much of a difference in revenue increase with this signed distribution agreement as compared to how you've been doing business with them in the past? It's just more formalizing it.

I think we're going to see the biggest pick-up really once we hit 2017. Right now we're more working on more broadly educating their sales staff, and training them on how to really offer this solution. And they are also figuring out how to best market it within their network. So, we really anticipate that things will pick up in 2017 in that regard.

Okay. Thanks a lot, guys. And as far as the lawsuits, they are out pain in the fanny, but you guys did the right thing. And that's the important thing; and long-term, it will work out fine. So, thanks guys, for good quarter.

Thanks. I appreciate that.

Greg Weaver, Invicta.

Just following up on the line of questioning there, on the implementation of the oil and gas, is there a bottleneck there? Because you mentioned, Patrick, about your guys are really busy with the $300,000 in orders that you got during the prior month.

I don't think it's a bottleneck; it's just a question of shipping product; getting it to the destination at the destination site; making sure that all of the other preparatory work has been done on time. So, it's just a -- I don't think there's anything impeding us -- none of our resources impeding the installation. But even in the summertime, you never know what the weather is going to be. Or actually one of our installations when you had that big, massive fire in Canada just a month or two ago, that delayed an installation by over a month. So, sometimes we're subject to acts of God.

Right. So, point being if, say, orders went up to $500,000 month, that's not an issue for you guys. But other stuff can happen to actually get that rolled out.

We can produce the product; we can ship the product; we can get everything staged on site. And then just regular construction-associated delays can slow down the implementation. But between us and our distribution partner, we have certainly enough technical resources to oversee the installation in a timely manner.

Right, the technical oversight was kind of what I was -- right. Okay. Then, Matt, so back to the couple prior questions about the revenue in the current quarter of $11 million-ish. Is there any particular driver there, or is just everything going up, or what should we think about that?

In general, we tend to have a stronger third and fourth quarter. But just looking at -- looking forward at the results we already have from June, we're already -- I want to say we're already $600,000 ahead of where we finished -- or when we were one month into third quarter, we're already $600,000 ahead of that. All the different areas that we have are picking up, and we certainly anticipate a strong fourth quarter. That's why we're able to maintain the guidance. And that's why we're -- I certainly hope that we -- and with where I'm looking at the numbers for all the different business units -- why we would still be able to come in at the low end of our sales guidance.

Got you, okay. Sounds good. And obviously with more oil and gas in there, I assume the nice gross margins you had in the current quarter are to be sustainable.

I certainly hope so.

Okay. And --.

I don't see a reason why gross margin would change between third quarter and fourth quarter. Put it that way.

Right. And Natur-Tec, where are we at there in terms of stand-alone profitability?

Well, we -- May was the first month in the history of the Company where Natur-Tec was profitable, and which is a significant milestone. They've gone -- their monthly average run rate has certainly spiked over the past -- if I look back on a monthly run rate of this year, it certainly has ramped up now into the mid-$400,000 monthly levels, which is good. And it's where we wanted the Company to be from a Natur-Tec standpoint to be profitable.

They've got an awful lot of potential, Greg, as you're well aware, as far as the opportunities. And it looks like they just keep on -- on a monthly basis, adding and adding to their base business as a consumable with solid repeat orders. So, Natur-Tec is going strong. And certainly we're happy from a company standpoint to cross the threshold and start making money on that product line.

It's worth mentioning; what has it been, 10 years or so now? So we're on the other side? (laughter)

It's going to take more than a month or two to dig out of the hole of everything we've spent over the last nine years. But it certainly still is significant from our standpoint of getting to a point where we're generating something out of Natur-Tec. Because we know that long-term Natur-Tec is a business. And Natur-Tec -- as far as what it's doing from a compostability standard and everything that's going on worldwide with the concerns over plastic, that it's a business that we want to be in.

And certainly what we've been able to do, as far as being one of the pioneers in the industry with the cutting-edge technology and the people that we are partnering with, as far as utilization of the base resins from NatureWorks and other companies, it certainly -- it appears that the Company is positioned well in Natur-Tec to continue the growth that we've seen. If you look back over a three-year run rate, it's been a pretty significant, consistent build of sales.

Yes, very good. And the opportunity for bulk resin sales, that's still -- not much activity there?

There's certainly more activity.

We're selling bulk now out of our subsidiary in India, and also out of the United States also. It's starting to pick up. It is still measured in a few containers per month. But it's picking up, bit by bit.

Okay, great. Well, congrats, especially on the breakeven in Natur-Tec. So, glad we're on the right path there. Thanks.

Thank you. And I'm showing no further questions at this time.

I'd like to turn the conference back over to Mr. Lynch for any closing remarks.

I'd like to thank everyone for participating today and your interest in NTIC. Have a great day. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Have a great day, everyone.