Northern Technologies International Corp (NTIC) 2025 Q3 法說會逐字稿

Good day and thank you for standing by. And welcome to the NTIC third-quarter 2025 earnings conference call and webcast. (Operator Instructions) 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.

您好，感謝您的支持。歡迎參加 NTIC 2025 年第三季財報電話會議和網路廣播。（操作員指示）請注意，今天的會議正在錄音。作為今天討論的一部分，NTIC 的代表將就 NTIC 未來的財務和經營業績以及其業務計劃、目標和期望做出某些前瞻性陳述。

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 the 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 and 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.

請注意，這些前瞻性聲明受到 1995 年私人證券訴訟改革法案安全港條款的保護，並且 NTIC 希望利用安全港對這些陳述的保護。另請注意，由於某些風險和不確定性，包括 NTIC 最新的 10-K 表年度報告、後續的 10-Q 表季度報告以及最近的新聞稿中所描述的風險和不確定性，實際結果可能與前瞻性陳述中明示或暗示的結果存在重大差異。請閱讀這些報告以及 NTIC 未來將向 SEC 提交的其他文件。

NTIC disclaims any duty to update or revise its forward-looking statements. I would now like to hand the conference call over to your speaker today, Patrick Lynch. Please go ahead.

NTIC 不承擔更新或修改其前瞻性陳述的任何義務。現在我想將電話會議交給今天的發言人派崔克·林奇。請繼續。

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 third-quarter fiscal 2025 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 third-quarter fiscal 2025 financial results, provide a brief business updates, and then conclude with the question-and-answer session. Please note that when we discuss year-over-year performance, we are referring to the third quarter of our fiscal 2025 in comparison to the third quarter of last fiscal year.

早安.我是 NTIC 的執行長 Patrick Lynch。我和 NTIC 的財務長 Matt Wolsfeld 一起來到這裡。請注意，我們今天早上發布了有關2025財年第三季財務業績的新聞稿，可在ntic.com上查閱。在今天的電話會議中，我們將回顧2025財年第三季財務業績的各個關鍵方面，簡要介紹業務更新，最後進行問答環節。請注意，當我們討論同比業績時，我們指的是 2025 財年第三季與上一財年第三季的比較。

For the third quarter of fiscal 2025, we delivered both sequential and year-over-year growth in consolidated net sales, reflecting strength across many aspects of our business despite ongoing global economic uncertainty.

2025 財年第三季度，我們的合併淨銷售額實現了環比和同比增長，反映出儘管全球經濟持續存在不確定性，但我們業務的許多方面仍表現強勁。

This performance underscores the dedication of our team and our continued focus on supporting existing customers, expanding global relationships, and scaling in high-growth [e-markets]. Gross margin was a particular highlight in the quarter, reaching 38.4%, an increase on both a sequential and year-over-year basis, which reflects the differentiated value we provide our global customer base.

這項績效凸顯了我們團隊的奉獻精神以及我們對支持現有客戶、擴大全球關係和擴大高成長[電子市場]規模的持續關注。毛利率是本季的一大亮點，達到 38.4%，環比和同比均有所增長，反映了我們為全球客戶群提供的差異化價值。

At the same time, macroeconomic pressures, especially in Europe, continue to weigh on the profitability of many of our joint ventures. Additionally, as part of our long-term growth strategy, we continue to make planned investments in our oil and gas business, which contributed to higher operating expenses.

同時，宏觀經濟壓力，尤其是歐洲的壓力，繼續影響著我們許多合資企業的獲利能力。此外，作為我們長期成長策略的一部分，我們繼續對石油和天然氣業務進行計劃投資，這導致營運費用增加。

While macroeconomic pressures and higher operating expenses have impacted third quarter and year-to-date profitability, we expect improvements in the fourth quarter and continued progress in fiscal 2026. So with this overview, let's examine the drivers for the third quarter in more detail.

儘管宏觀經濟壓力和更高的營運費用影響了第三季和年初至今的獲利能力，但我們預計第四季將有所改善，並在 2026 財年繼續取得進展。因此，透過這個概述，讓我們更詳細地研究第三季的驅動因素。

For the third quarter ended May 31, 2025, our total consolidated net sales increased 4.0% to $21.5 million as compared to the third quarter ended May 31, 2024. Broken down by business unit, this included a 7.1% increase in ZERUST Industrial's net sales, partially offset by a 5.3% decrease in ZERUST Oil & Gas net sales, and a 1.2% decrease in Natur-Tec net sales.

截至 2025 年 5 月 31 日的第三季度，我們的合併淨銷售額總額與截至 2024 年 5 月 31 日的第三季度相比增長 4.0%，達到 2,150 萬美元。按業務部門細分，ZERUST Industrial 的淨銷售額增長了 7.1%，但 ZERUST Oil & Gas 的淨銷售額下降了 5.3%，Natur-Tec 的淨銷售額下降了 1.2%，部分抵消了這一增長。

Turning to our joint-venture sales which we do not consolidate in our financial statements, total net sales for the fiscal 2025 third quarter by our joint ventures decreased year over year by 12.9% to $2.3 million. We believe the third quarter year-over-year decline in joint-venture sales reflects the continued impacts of high energy prices and regional economic pressures in the European economy as well as increased uncertainty related to US trade and economic policies and the potential impacts this will have on global supply chains.

談到我們未在財務報表中合併的合資企業銷售額，我們的合資企業在 2025 財年第三季的總淨銷售額年減 12.9% 至 230 萬美元。我們認為，第三季合資企業銷售額年減反映了高能源價格和歐洲經濟區域經濟壓力的持續影響，以及美國貿易和經濟政策的不確定性增加及其對全球供應鏈的潛在影響。

We are closely monitoring trends across our European markets for signs of stabilization following years of subdued demand as governments begin to implement targeted economic stimulus packages.

隨著各國政府開始實施有針對性的經濟刺激計劃，我們正密切關注歐洲市場的趨勢，尋找在經歷了多年需求低迷之後出現穩定的跡象。

We expect any economic recovery these stimulus packages may lead to, especially in Germany, to have a positive impact on our joint venture operating income in future periods.

我們預計，這些刺激方案可能帶來的經濟復甦，尤其是在德國，將對我們未來合資企業的營業收入產生正面影響。

Improving sales trends at our wholly owned NTIC China subsidiary continue. Fiscal 2025 third-quarter net sales at NTIC China increased by 27.4% to $4.5 million, the second highest quarterly revenue NTIC has achieved since we transitioned to a wholly owned subsidiary in fiscal 2015.

我們全資擁有的NTIC中國子公司的銷售趨勢持續改善。NTIC 中國 2025 財年第三季淨銷售額成長 27.4%，達到 450 萬美元，這是 NTIC 自 2015 財年轉型為全資子公司以來實現的第二高季度營收。

Recent NTIC China sales demonstrate growing demand in this geography. The majority of current NTIC China sales are for domestic Chinese consumption. And therefore, we believe NTIC China's exposure to US tariffs is limited. We expect demand in China will continue to improve in fiscal 2025, helping to support higher incremental sales and profitability in this market.

NTIC 近期在中國的銷售情況顯示該地區的需求不斷增長。目前NTIC中國銷售的產品大多面向中國國內消費。因此，我們認為 NTIC 中國受美國關稅的影響有限。我們預計2025財年中國的需求將持續改善，有助於支持該市場更高的增量銷售和獲利能力。

In addition, we are committed to the long-term opportunities the Chinese market provides our industrial and bioplastic segments. And we continue to take steps to enhance our operations in this geography. As a result, we continue to believe China will likely become a significant geographic market for us in the future.

此外，我們致力於中國市場為我們的工業和生物塑膠部門提供的長期機會。我們將繼續採取措施加強我們在該地區的業務。因此，我們仍然相信中國未來很可能成為我們重要的地理市場。

Now, moving on to ZERUST Oil & Gas. ZERUST Oil & Gas sales were $1.3 million compared to $1.4 million in the same period last year. Seasonality and the timing of orders can impact quarterly comparisons. Which is why we encourage investors to look at ZERUST Oil & Gas sales on a trailing 12-month basis.

現在，我們來談談 ZERUST 石油和天然氣。ZERUST 石油和天然氣銷售額為 130 萬美元，而去年同期為 140 萬美元。季節性和訂單時間會影響季度比較。這就是為什麼我們鼓勵投資者關注過去 12 個月 ZERUST 石油和天然氣的銷售情況。

ZERUST Oil & Gas sales were $8.6 million for the trailing 12-month period ended May 31, 2025, a 15.4% increase from $7.4 million for the trailing 12-month period ended May 31, 2024.

截至 2025 年 5 月 31 日的過去 12 個月，ZERUST 石油和天然氣銷售額為 860 萬美元，比截至 2024 年 5 月 31 日的過去 12 個月的 740 萬美元增長 15.4%。

As we continue to invest in building our ZERUST Oil & Gas sales team and other resources to support future growth, the size and number of opportunities continue to expand among both new and existing customers. Which today still focus primarily on protecting aboveground oil storage tanks and pipeline casings from corrosion.

隨著我們繼續投資建造我們的 ZERUST 石油和天然氣銷售團隊和其他資源以支持未來的成長，新舊客戶的機會規模和數量將繼續擴大。如今，其主要工作重點仍是保護地上儲油槽和管道套管免受腐蝕。

The nature of this industry will always cause certain fluctuations in the ZERUST Oil & Gas sales. Nevertheless, we still expect to see ZERUST Oil & Gas sales and profitability to improve sequentially in the fourth quarter of fiscal 2025 and improve significantly next fiscal year as we leverage these investments and rein in operating expense growth.

這個行業的性質總是會導致 ZERUST 石油和天然氣銷售出現一定的波動。儘管如此，我們仍然預計，隨著我們利用這些投資並控制營運費用成長，ZERUST 石油和天然氣的銷售額和盈利能力將在 2025 財年第四季度環比改善，並在下一個財年顯著改善。

Turning to our Natur-Tec bioplastics business. Natur-Tec sales were $5.8 million representing a 1.2% year-over-year decline in Natur-Tec sales. As expected, Natur-Tec sales rebounded sequentially and increased 16.5% over the fiscal 2025 second quarter. While we continue to monitor the near-term impact tariffs may have on our Natur-Tec sales, the long term market opportunities remain strong.

轉向我們的 Natur-Tec 生物塑膠業務。Natur-Tec 的銷售額為 580 萬美元，年減 1.2%。正如預期的那樣，Natur-Tec 的銷售額環比反彈，比 2025 財年第二季增長了 16.5%。雖然我們繼續關注關稅可能對我們的 Natur-Tec 銷售產生的短期影響，但長期市場機會仍然強勁。

In addition, US organic diversion mandates and waste management rules are created at the local municipality and state levels. We do not expect changes in US federal priorities to impact local US demand for our compostable solutions.

此外，美國有機物轉移授權和廢棄物管理規則是在地方市政當局和州一級制定的。我們預計美國聯邦政府優先事項的變化不會影響美國當地對我們的可堆肥解決方案的需求。

We are also working on several larger opportunities for our Natur-Tec solutions that we believe hold significant promise to significantly benefit our sales in the coming quarters. While fiscal 2025 has been more challenging than we expected at the beginning of the fiscal year, we remain steadfast on pursuing a profit-focused, multi-year strategic growth plan. We are confident in the direction we are headed.

我們也正在為我們的 Natur-Tec 解決方案尋找幾個更大的機會，我們相信這些解決方案將在未來幾季顯著促進我們的銷售。儘管 2025 財年比我們在財年初預期的更具挑戰性，但我們仍然堅定不移地推行以利潤為中心的多年戰略成長計劃。我們對自己前進的方向充滿信心。

Before I turn the call over to Matt, I want to acknowledge the hard work and dedication of our global team of both employees and joint-venture partners. Our success and our [probability] to navigate more complex economic periods are a direct result of their efforts.

在我將電話轉給馬特之前，我想感謝我們全球團隊的員工和合資夥伴的辛勤工作和奉獻精神。我們的成功以及我們渡過更複雜經濟時期的可能性直接歸功於他們的努力。

With this overview, let me now turn the call over to Matt Wolsfeld to summarize our financial results for the fiscal 2025 third quarter.

有了這些概述，現在讓我將電話轉給 Matt Wolsfeld，讓他總結一下我們 2025 財年第三季的財務表現。

Thanks, Patrick. Compared to the prior fiscal year period, NTIC's consolidated net sales increased 4% in the third quarter of fiscal 2025 to $21.5 million because of the trends Patrick reviewed in his prepared remarks. Sales across our global joint ventures decreased 9.3% in the third quarter. Joint venture operating income decreased 12.9% compared to the prior fiscal year period. Primarily due to a decrease in equity income from joint ventures, which was primarily driven by lower sales at most of NTIC's joint ventures.

謝謝，派崔克。與上一財年相比，由於帕特里克在其準備好的發言中回顧的趨勢，NTIC 的綜合淨銷售額在 2025 財年第三季度增長了 4%，達到 2150 萬美元。第三季度，我們全球合資企業的銷售額下降了 9.3%。合資公司營業收入與上一財年相比下降了12.9%。主要是由於合資企業的股權收入減少，而這主要是由於NTIC大部分合資企業的銷售額下降所致。

Total operating expenses for fiscal 2025 third quarter increased 7.6% compared to the prior fiscal year period to $9.7 million primarily due to increased personnel costs and strategic investments we're making to support expected growth in the second half of the year within our oil and gas business.

2025 財年第三季的總營運費用與上一財年相比增長了 7.6%，達到 970 萬美元，這主要是由於人員成本增加以及我們為支持下半年石油和天然氣業務的預期增長而進行的戰略投資。

As a percentage of net sales, operating expenses were 44.9% for the third quarter compared to 43.4% for the prior fiscal year period. Gross profit as a percentage of net sales was 38.4% during the three months ended May 31, 2025, compared to 38.2% during the prior fiscal year period.

作為淨銷售額的百分比，第三季的營運費用為 44.9%，而上一財年同期為 43.4%。截至 2025 年 5 月 31 日的三個月，毛利佔淨銷售額的百分比為 38.4%，而上一財年為 38.2%。

The 20-basis-point increase was primarily a result of a more profitable mix of sales and our ongoing efforts to improve gross margin. NTIC reported net income of $122,000 or $0.01 per diluted share for the fiscal 2025 third quarter compared to $977,000 or $0.10 per diluted share for the fiscal 2024 third quarter.

20 個基點的成長主要得益於銷售組合利潤的提高以及我們持續努力提高毛利率。NTIC 報告稱，2025 財年第三季的淨收入為 122,000 美元或每股攤薄收益 0.01 美元，而 2024 財年第三季的淨收入為 977,000 美元或每股攤薄收益 0.10 美元。

For the fiscal 2025 third quarter, NTIC's non-GAAP adjusted net income was $228,000 or $0.02 per diluted share compared to the non-GAAP adjusted income of $1.1 million or $0.11 per diluted share for the fiscal 2024 third quarter. A reconciliation of GAAP to non-GAAP financial measures is available in our third-quarter fiscal year 2025 earnings press release that was issued this morning.

2025 財年第三季度，NTIC 的非 GAAP 調整後淨收入為 228,000 美元或每股攤薄收益 0.02 美元，而 2024 財年第三季的非 GAAP 調整後淨收入為 110 萬美元或每股攤薄收益 0.11 美元。我們今天早上發布的 2025 財年第三季財報新聞稿中提供了 GAAP 與非 GAAP 財務指標的對帳。

As of May 31, 2025, working capital is $21.7 million including $6.8 million in cash and cash equivalents compared to $23.7 million, including $5 million in cash and cash equivalents as of August 31, 2024. As of May 31, 2025, we had outstanding debt of $10.1 million. This included $7.4 million in borrowings under our existing revolving line of credit compared to $4.3 million as of August 31, 2024.

截至 2025 年 5 月 31 日，營運資金為 2,170 萬美元，其中包括 680 萬美元的現金和現金等價物，而截至 2024 年 8 月 31 日，營運資金為 2,370 萬美元，其中包括 500 萬美元的現金和現金等價物。截至 2025 年 5 月 31 日，我們的未償債務為 1,010 萬美元。其中包括我們現有循環信貸額度下的 740 萬美元借款，而截至 2024 年 8 月 31 日為 430 萬美元。

Despite the recent increase in our revolving line of credit from $8 million to $10 million to allow for future flexibility, reducing debt through positive operating cash flow and improving working capital efficiencies will be a strategic focus for the remainder of fiscal 2025 and into fiscal 2026.

儘管我們最近將循環信貸額度從 800 萬美元增加到 1000 萬美元，以提供未來的靈活性，但透過正營運現金流減少債務和提高營運資本效率將是 2025 財年剩餘時間和 2026 財年的戰略重點。

We generated $3.8 million in operating cash flow for the nine months ended May 31, 2025. At quarter end, the company had $27.1 million of investments in joint ventures, of which 49.7% or $13.5 million was in cash, with the remaining balance primarily invested in other working capital.

截至 2025 年 5 月 31 日的九個月，我們產生了 380 萬美元的營運現金流。截至本季末，該公司在合資企業的投資為 2,710 萬美元，其中 49.7% 或 1,350 萬美元為現金，剩餘部分主要用於投資其他營運資金。

During the fiscal 2025 third quarter, NTIC's Board of Directors declared a quarterly cash dividend of $0.01 per common share that was payable on May 14, 2025. The stock [closed] at record on April 30, 2025. Recall we temporarily adjusted our quarterly dividend to $0.01 per share as a part of our disciplined approach to managing our cash and navigating through this dynamic global environment.

在 2025 財年第三季度，NTIC 董事會宣布每股普通股派發 0.01 美元的季度現金股息，將於 2025 年 5 月 14 日支付。該股於 2025 年 4 月 30 日收盤。回想一下，我們暫時將季度股息調整為每股 0.01 美元，這是我們管理現金和應對這個動態的全球環境的嚴謹方法的一部分。

To conclude our prepared remarks, we remain committed to our long-term growth opportunities. We are confident that our strategic priorities and financial discipline will drive sustainable growth to improving profitability and value for our shareholders. With this overview, Patrick and I are happy to take your questions.

最後，我們想總結我們的準備發言，我們仍然致力於我們的長期成長機會。我們相信，我們的策略重點和財務紀律將推動永續成長，從而提高獲利能力和股東價值。透過這個概述，派崔克和我很樂意回答您的問題。

(Operator Instructions)

（操作員指示）

Tim Clarkson, Van Clemens.

提姆克拉克森、範克萊門斯。

Hey guys, improved quarter. It's sometimes hard to tell with -- when you're focused just on net earnings. So what I was looking at the pre-tax or operational profits from the previous quarter versus this. And there's a significant improvement from second quarter, obviously.

嘿夥計們，改進了季度。當你只專注於淨收益時，有時很難判斷。因此，我正在查看上一季與本季的稅前利潤或營業利潤。顯然，與第二季度相比，情況有了顯著改善。

Yeah. It's -- it certainly was better and I certainly think we're trending now and headed in the right direction. I mean, looking across all the different business units. Just about every business unit took a step forward going from Q2 to Q3.

是的。這確實更好，我確實認為我們現在正朝著正確的方向發展。我的意思是，縱觀所有不同的業務部門。從第二季到第三季度，幾乎每個業務部門都取得了進步。

But hey, so just on a big-picture basis when you look at this oil and gas thing, you know when you're trying to get one of these guys to switch from the older technologies to your newer technology. Now, on the front end, is your technology cheaper on the front end?

但是，嘿，所以當你從宏觀角度看待石油和天然氣問題時，你知道當你試圖讓其中一個人從舊技術轉向新技術時。現在前端的話，你們的技術在前端是不是比較便宜？

Compared to traditional methods, yes.

與傳統方法相比，是的。

Yeah. Yeah, the electrolysis stuff.

是的。是的，電解物質。

I'm sorry, I didn't understand what you were saying, Tim --

對不起，我不明白你在說什麼，提姆--

Yeah. So I mean, if -- let's say that you're a customer and you're looking to switch from the older technology which uses the electricity deal and -- yeah, yeah. And and you're going to switch to this new technology. I mean, on -- just on the front end, is it cheaper or more expensive or about the same on the front end when you're trying to treat the tanks?

是的。所以我的意思是，如果——假設你是客戶，並且你希望從使用電力交易的舊技術轉換過來——是的，是的。而且你將會轉向這項新技術。我的意思是，就前端而言，當您嘗試處理坦克時，前端是更便宜還是更昂貴還是大致相同？

It's much easier installation and -- it's much easier installation and basically, you're spending a lot less money and getting the protection and you're getting -- and ours works better for a longer period of time.

它的安裝更加容易，基本上，您可以花更少的錢獲得保護，而且我們的產品可以在更長的時間內發揮更好的作用。

Oh sure. I mean, there's no question about the long term. But you're dealing with -- humans have a tend tendency to be kind of insect-like and then the benefits are in 10 years for all these people. That's just an eternity. But at least [if] on the front end, it's easier and you save money. That's a benefit immediately that they can justify the switch. And and then of course the longer term benefits are way more significant, but that but that's important.

哦，當然。我的意思是，從長遠來看，這是毫無疑問的。但你要處理的是——人類傾向於變得像昆蟲一樣，而所有這些人將在 10 年後受益。那隻是永恆。但至少在前端，它會更容易，而且你可以省錢。這是一個立即可見的好處，他們可以證明這種轉變是合理的。當然，長期利益更為顯著，但這很重要。

Now, what's the -- in general, on a quarter-to-quarter basis, what's the additional spending that you're doing on sales this year versus last year? What's the additional amount of money you guys are spending per quarter on the sales effort for the oil and gas?

現在，總體而言，按季度計算，今年與去年相比，您在銷售上增加了多少支出？你們每季在石油和天然氣銷售上額外花了多少錢？

You're talking primarily about personnel, really, in terms of (inaudible) gas and various (inaudible) regions around the world that have experience in the oil and gas industry in the kinds of areas that we like. And that should basically make cluster conversion happen faster.

實際上，您主要談論的是人員，涉及（聽不清楚）天然氣和世界各地各個（聽不清楚）地區，他們在我們喜歡的領域的石油和天然氣行業擁有經驗。這基本上可以使叢集轉換更快。

Right. But what would be the total incremental cost of -- that we're -- what we're paying up front? The investments we're making right now per quarter versus what we're doing a year ago before we started making this big -- a roll out with the sales expense?

正確的。但是，我們預先支付的總增量成本是多少？我們現在每季進行的投資與一年前開始大規模投資之前的投資相比如何——是否涉及銷售費用？

(inaudible) if you look at -- if you look back to our fiscal '23, fiscal '24 from an oil and gas standpoint --

（聽不清楚）如果你從石油和天然氣的角度回顧我們的 23 財年和 24 財年--

Yeah.

是的。

In North America, we averaged about $4 million. In the current year, we're projected to spend about $5.3 million. So we've got about $1.3 million of additional [reinvestment] and personnel that we've done over the past 12-plus months.

在北美，我們的平均收入約為 400 萬美元。今年，我們預計支出約 530 萬美元。因此，在過去 12 個多月裡，我們已額外投入約 130 萬美元並招募人員。

So -- but that $1.3 million, that's over a 12-month period, not over a quarterly period?

那麼——但那 130 萬美元是 12 個月內的，而不是一個季度內的？

Correct.

正確的。

Right. So it'd be $300,000, $400,000 maybe per quarter is the additional expenses on the oil and gas?

正確的。那麼每季石油和天然氣的額外費用可能是 30 萬美元、40 萬美元嗎？

Yeah.

是的。

Right, right. And then of course, the other issue is there's a -- it's a business that's clumpy so that you'll see a lot of the results in one quarter versus another quarter.

對，對。當然，另一個問題是——這是一個分散的業務，因此你會看到一個季度與另一個季度的結果有很大不同。

Yeah. And I think you'll certainly see a step up in revenue going from Q3 to Q4 as well from an oil and gas standpoint. Given where we are in the quarter so far and expectations of backlogs and things like that, certainly would expect Q4 to be stronger than Q3 from an oil and gas standpoint.

是的。我認為從石油和天然氣的角度來看，從第三季到第四季度，你肯定會看到收入的成長。考慮到本季迄今的狀況以及對積壓訂單等情況的預期，從石油和天然氣的角度來看，第四季肯定會比第三季表現強勁。

Right. Now, switching to China, that was a strong quarter for those guys. I mean, is China now profitable?

正確的。現在，轉向中國，這對這些公司來說是一個強勁的季度。我的意思是，中國現在獲利了嗎？

China is profitable. China has been profitable for some time. But what's nice is that we're seeing China as a standalone. If I look back over the past three years, it certainly is a nice trend line from a revenue standpoint. I mean, if I look back to the lows that we saw coming out of COVID in our fiscal '23 first quarter, second quarter, third quarter, where we're at $2.6 million, $2.8 million in revenue per quarter, now putting forth a quarter of $4.2 million shows significant growth in that region. So it is profitable, it is contributing, and it looks like what the Chinese are doing from a -- stimulating their economy standpoint that we are also increasing our revenues accordingly.

中國是有獲利的。中國已經獲利一段時間了。但令人欣慰的是，我們將中國視為一個獨立國家。如果我回顧過去三年，從收入的角度來看這無疑是一條不錯的趨勢線。我的意思是，如果我回顧我們在 2023 財年第一季、第二季和第三季因 COVID 而經歷的低谷，當時我們每季的收入分別為 260 萬美元、280 萬美元，現在每季的收入達到 420 萬美元，這表明該地區實現了顯著增長。所以它是有利可圖的，它是有貢獻的，而且看起來中國人從刺激經濟的角度所做的就是我們也相應地增加我們的收入。

Yes (inaudible) primarily, domestic consumption in China. Not for export.

是的（聽不清楚）主要是中國的國內消費。不可用於出口。

Right, right. Now, the electric cars, I mean, do they still need the -- some of the technology you have to prevent rust and corrosion?

對，對。現在，我的意思是，電動車是否仍然需要一些防止生鏽和腐蝕的技術？

Yes. Just less of it than the traditional combustion engine.

是的。只是比傳統內燃機少一點。

Yeah. Less, but they're making a hell of a lot of electric cars so --

是的。少了，但他們生產了大量電動車，所以--

(inaudible) basis, yes, it's less. But if they're making a hell of a lot of cars, you're going to use a lot more material, obviously.

（聽不清楚）基礎，是的，較少。但如果他們要製造大量的汽車，顯然就要使用更多的材料。

Yeah, yeah. Okay, well, good. I'm good. I'm -- one last question on the compostable stuff. Is it -- what's new there? Is it -- is business pretty much as usual or are there any exciting area -- new areas you're seeing on the compostable side?

是啊是啊。好的，很好。我很好。我還有最後一個關於可堆肥物質的問題。有什麼新鮮事嗎？業務是否一切如常，或者您在可堆肥方面看到了什麼令人興奮的新領域？

Well, there's one project we're working on (inaudible) a little too early to talk about revenues. But I mean, historically, one of these problems you had with the compostable packaging is the water vapor transmission rate is pretty high. I mean, the plastic is pretty permeable, so there's limits to what you can actually package in it on a convenient basis.

嗯，我們正在進行一個專案（聽不清楚），現在談論收入還為時過早。但我的意思是，從歷史上看，可堆肥包裝面臨的一個問題是水蒸氣透過率相當高。我的意思是，塑膠的滲透性很強，因此在方便包裝方面，塑膠所能容納的東西是有限的。

Now, say that we -- at least in the laboratory have managed to fix that problem, there is a possibility of scaling that up and finding significant applications in food packaging with that way. We're -- right now, looking to do some -- soon start some scale-up production of that -- in that area and we -- probably, will see revenues if (inaudible) it all works out in the next two years or so.

現在，假設我們——至少在實驗室中已經設法解決了這個問題，那麼就有可能擴大規模，並利用這種方式在食品包裝中找到重要的應用。我們現在正在尋求做一些事情——很快就在那個領域開始擴大生產，如果一切順利的話，我們可能會在未來兩年左右看到收入。

Great. Okay. Thanks, I'm done. Thank you.

偉大的。好的。謝謝，我完成了。謝謝。

(Operator Instructions)

（操作員指示）

Gus Richard, Northland Capital Markets.

北國資本市場 (Northland Capital Markets) 的 Gus Richard。

Hey, good morning. I had a couple of questions. I just want to walk through the strength and the gross margin when I look at it on a sequential basis. Mix really doesn't imply gross margin should be up as much year on year. It's right in the right ballpark. And I'm just wondering, was this Q2 a weak gross-margin quarter or what would the drivers sequentially and the improvement?

嘿，早安。我有幾個問題。我只是想按順序介紹一下實力和毛利率。混合實際上並不意味著毛利率應該比去年同期大幅增長。一切恰好在正確的範圍內。我只是想知道，第二季的毛利率是否較低，或者其後續的驅動因素是什麼，以及有何改善？

Yeah. I think you certainly saw Q2 as being a weak quarter. I think you also see the continued improvement that we're making and trying to be as efficient and effective as we can with the products that we're selling. So it's a combination of both, Gus.

是的。我認為您肯定認為第二季是一個疲軟的季度。我想您也看到了我們正在不斷改進，並努力使我們銷售的產品盡可能高效和有效。所以這是兩者的結合，格斯。

Got It. And then you -- looks like you're hiring heavily for oil and gas. And I'm just wondering -- or this to harvest new customers? Is it to service new regions? If you could explain where you're going there, that'd be helpful.

知道了。然後你——看起來你正在大量招募石油和天然氣方面的員工。我只是想知道——這是否是為了吸引新客戶？是為了服務新地區嗎？如果您能解釋一下您要去哪裡，那將會很有幫助。

It's a combination of things. We're looking to cover broader geographies and also go after new applications.

這是多種因素的綜合作用。我們希望涵蓋更廣泛的地域並尋求新的應用。

Geographies and applications?

地理和應用？

Yes. I mean, we're now building up our presence in the Middle East specifically. But we're also getting -- I mean, new opportunities in South America and in Africa.

是的。我的意思是，我們現在正在加強我們在中東地區的影響力。但我們也獲得了——我的意思是，在南美和非洲的新機會。

Got it. And then the last one for me. You talked about Natur-Tec some large opportunities. And I was just wondering if you could give us a sense on relative size and timing of those opportunities.

知道了。對我來說這是最後一個。您談到了 Natur-Tec 的一些重大機會。我只是想知道您是否可以讓我們了解這些機會的相對規模和時機。

I was just mentioning with Tim a second ago. The project that we're working on right now is trying to find applications in compostable plastics in food packaging. And what historically, it's been -- the problem is that the compostable plastics are too permeable. So it can't contain gasses and liquids and still be composable.

我剛才和提姆提過。我們目前正在進行的項目是嘗試尋找可堆肥塑膠在食品包裝中的應用。從歷史上看，問題在於可堆肥塑膠的滲透性太強。因此它不能包含氣體和液體，但仍然可以組合。

We think we've found a way of solving that problem. And now, we're trying to figure out, can you scale it up? And if so, what food applications can you be going after? (inaudible) we have some significant interest in that area. So we're very confident that we should be able to develop something interesting over the next year or two.

我們認為我們已經找到了解決該問題的方法。現在，我們正在嘗試弄清楚，您能否擴大其規模？如果可以的話，您可以追求哪些食品應用？（聽不清楚）我們對該地區有濃厚的興趣。因此，我們非常有信心在未來一兩年內能夠發展出一些有趣的東西。

Got it. got it. Helpful. Thank you very much.

明白了，明白了。很有幫助。非常感謝。

And I would now like to turn the conference back to Patrick for closing remarks.

現在我想請派崔克致閉幕詞。

Thank you very much for calling in today. Hope you have a nice week.

非常感謝您今天的來電。祝您有個愉快的一周。

And this concludes today's conference call. Thank you for participating. You may now disconnect.

今天的電話會議到此結束。感謝您的參與。您現在可以斷開連線。