Northern Technologies International Corp (NTIC) 2025 Q4 法說會逐字稿

Good day, and thank you for standing by. Welcome to NTIC's fourth quarter 2025 earnings conference call and webcast. (Operator Instructions) Today's conference is being recorded.

您好，感謝您的耐心等待。歡迎參加NTIC 2025年第四季財報電話會議和網路直播。（操作說明）今天的會議正在錄音。

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 Security Litigation Reform Act of 1995 and that NTIC desires to avail itself of the protections of the Safe Harbor for these statements.

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，以及他們的業務計劃、目標和預期，發表一些前瞻性聲明。請注意，這些前瞻性聲明受 1995 年《私人安全訴訟改革法案》安全港條款的保護，NTIC 希望利用安全港條款對這些聲明進行保護。

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.

另請注意，由於某些風險和不確定性，實際結果可能與前瞻性聲明中所述或暗示的結果有重大差異，這些風險和不確定性包括 NTIC 最新年度報告（表格 10-K）、後續季度報告（表格 10-Q）和最近的新聞稿中描述的風險和不確定性。請閱讀這些報告以及NTIC將向美國證券交易委員會提交的其他未來文件。

I will now hand the conference call over to Mr. Patrick Lynch, NTIC's CEO. Please go ahead, sir.

現在我將把電話會議交給NTIC執行長帕特里克·林奇先生。請繼續，先生。

Good morning. I'm Patrick Lynch, NTIC's CEO, and I'm here with Matt Wilsfeld, NTIC's CFO. Please note that a press release regarding our fourth quarter and full year 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 fiscal 2025 fourth quarter and full-year financial results, provide a brief business update, and then conclude with a question and answer session. Please note that when we discuss year-over-year performance, we are referring to the fourth quarter and full year of our fiscal 2025 in comparison to the fourth quarter and full year of last fiscal year.

早安.我是 NTIC 的執行長 Patrick Lynch，我旁邊是 NTIC 的財務長 Matt Wilsfeld。請注意，我們今天早些時候發布了關於2025財年第四季度及全年財務業績的新聞稿，您可以在ntic.com上查閱。在今天的電話會議上，我們將回顧2025財年第四季及全年財務業績的各個關鍵方面，提供簡要的業務更新，最後進行問答環節。請注意，當我們討論年比業績時，我們指的是 2025 財年第四季和全年業績與上一財年第四季和全年業績的比較。

Fiscal of 2025 was marked by order timing shifts and selective softness in our ZERUST oil and gas and Natur-Tec markets. So NTIC used this period to strengthen its competitive position and to execute strategic initiatives that we believe will enhance our long-term growth potential. We accelerated product innovation within Natur-Tec advanced new zero solutions across global industrial markets, and pursued emerging opportunities in the South American offshore oil and gas sector. These actions have expanded our pipeline, sharpened our focus, and positioned NTIC to re-accelerate growth and improve profitability in fiscal 2026 and beyond.

2025 財年，我們的 ZERUST 石油天然氣和 Natur-Tec 市場出現了訂單時間調整和選擇性疲軟的情況。因此，NTIC利用這段時間加強了自身的競爭地位，並實施了我們認為能夠增強我們長期成長潛力的策略性舉措。我們加速了 Natur-Tec 的產品創新，為全球工業市場提供先進的零排放解決方案，並尋求南美洲海上油氣領域的新興機會。這些舉措擴大了我們的業務範圍，明確了我們的重點，並使 NTIC 能夠在 2026 財年及以後重新加速成長並提高獲利能力。

In fiscal 2026, we expect to start reaping the benefits gained from the strategic investments NTIC made over the past three years to upgrade our global operations and support future growth. We are also focused on flattening our operating expenses while expanding gross margins and driving sales in the higher margin parts of our business, which we expect will improve our profitability and strengthen our balance sheet in fiscal 2026. While we anticipate macroeconomic headwinds to persist, especially in Europe, we believe NTSC is positioned to deliver growth and improve profitability across many of our key markets in the coming fiscal year.

預計在 2026 財年，我們將開始收穫 NTIC 在過去三年中為升級全球營運和支持未來成長而進行的策略投資所帶來的收益。我們也致力於降低營運成本，同時擴大毛利率，並推動業務中高利潤部分的銷售，我們預計這將提高我們的獲利能力，並在 2026 財年增強我們的資產負債表。儘管我們預計宏觀經濟逆風將持續存在，尤其是在歐洲，但我們相信，NTSC 已做好準備，在即將到來的財政年度中，在我們許多主要市場實現增長並提高盈利能力。

So with this overview, let's examine the drivers of the fourth quarter in more detail. For the fourth quarter ended August 31, 2025, our total consolidated net sales decreased 4.4% to $22.3 million as compared to the fourth quarter ended August 31, 2024. Broken down by business unit, this includes a 29.4% decrease in xeroxed oil and gas net sales and a 10% decrease in Natur-Tec net sales, partially offset by a 5.8% increase in xeroxed industrial net sales.

綜上所述，讓我們更詳細地分析一下第四季的驅動因素。截至 2025 年 8 月 31 日的第四季度，我們的合併淨銷售額較截至 2024 年 8 月 31 日的第四季下降 4.4%，至 2,230 萬美元。按業務部門細分，其中複印石油和天然氣淨銷售額下降了 29.4%，Natur-Tec 淨銷售額下降了 10%，部分被複印工業淨銷售額 5.8% 的成長所抵消。

Turning to our joint venture sales, which we do not consolidate in our financial statements, total net sales for the fiscal 2025 fourth quarter by our joint ventures increased year over year by 4.7% to $24.4 million.

再來看我們的合資企業銷售額（我們不將其納入財務報表），2025 財年第四季合資企業的總淨銷售額年增 4.7%，達到 2,440 萬美元。

For fiscal 2025, joint venture sales declined 4.9%, reflecting the continued impact of high energy prices and regional political pressures on the European economy, as well as significantly increased uncertainty related to US trade and economic policies and the potential impacts this will have on global supply chains. We continue to closely monitor trends across our European markets for signs of stabilization following years of subdued demand as governments begin to implement target economic stimulus packages. We expect that any economic recovery from these stimulus packages will lead to a positive impact on our joint venture operating income in future periods, especially in Germany.

2025 財年，合資企業銷售額下降 4.9%，反映出高能源價格和區域政治壓力對歐洲經濟的持續影響，以及與美國貿易和經濟政策相關的不確定性顯著增加，以及這將對全球供應鏈產生的潛在影響。我們將繼續密切關注歐洲市場的趨勢，以尋找在經歷了多年的低迷需求後，隨著各國政府開始實施有針對性的經濟刺激計劃而出現的企穩跡象。我們預計，這些刺激計劃帶來的任何經濟復甦都將對我們合資企業的營業收入在未來時期產生積極影響，尤其是在德國。

Improving sales trends at our wholly owned NTIC China subsidiary continue. Fiscal 2025 fourth quarter net sales at NTIC China increased by 12% For fiscal 2025, NTIC China sales increased 14% to $16.2 million, the second strongest year of sales we have experienced in this market. NTIC China sales for fiscal 2025 demonstrate that demand continues to grow in this geography. Furthermore, given that the majority of NTIC China's sales are for domestic Chinese consumption, We believe NTIC China's exposure to US tariffs is limited.

我們全資擁有的NTIC中國子公司的銷售趨勢持續改善。2025 財年第四季 NTIC 中國淨銷售額成長 12%。 2025 財年，NTIC 中國銷售額成長 14% 至 1,620 萬美元，這是我們在該市場經歷的第二強勁的銷售年份。NTIC 2025 財年中國銷售額表明，該地區的需求持續成長。此外，鑑於NTIC China的大部分銷售額都來自中國國內消費，我們認為NTIC China受美國關稅的影響有限。

We expect demand in China will continue to improve in fiscal 2026, helping to support higher incremental sales and profitability in this market. We continue to believe that China will likely become a significant market for our industrial and bioplastic segments, so we'll continue to take steps to enhance our operations in this geography. Now, moving on to ZERUST oil and gas. Fourth quarter of fiscal 2025, ZERUST oil and gas sales were $3 million, compared to $4.2 million in the same period last year. As a reminder, ZERUST oil and gas sales for the fourth quarter last year benefited from approximately $600,000 in sales that shifted from the third quarter due to timing.

我們預計2026財年中國市場需求將持續改善，有助於提高該市場的增量銷售額和獲利能力。我們仍然相信中國很可能成為我們工業塑膠和生物塑膠領域的重要市場，因此我們將繼續採取措施加強我們在該地區的業務。接下來，我們來看看ZERUST石油和天然氣公司。2025 財年第四季度，ZERUST 石油和天然氣銷售額為 300 萬美元，而去年同期為 420 萬美元。需要提醒的是，由於時間安排的原因，ZERUST 去年第四季的石油和天然氣銷售額受益於約 60 萬美元的銷售額從第三季度轉移過來。

On an annual basis, ZERUST oil and gas sales were $7.3 million compared to $9.2 million for the prior full fiscal year. This decline was primarily due to timing of orders. We have continually invested in ZERUST oil and gas to enhance our sales team and add resources to support future growth. This has improved our sales pipeline as the size and number of opportunities have expanded among both new and existing customers. Our pipeline includes global opportunities to protect above-ground oil storage tanks, pipeline casings, and offshore oil rigs from corrosion.

ZERUST 石油和天然氣年銷售額為 730 萬美元，而上一財年為 920 萬美元。這一下降主要是由於訂單時間表造成的。我們持續投資於 ZERUST 石油天然氣公司，以增強我們的銷售團隊並增加資源，從而支持未來的成長。這改善了我們的銷售管道，因為新舊客戶的銷售機會規模和數量都擴大了。我們的管道系統涵蓋了保護地上儲油槽、管道套管和海上石油鑽井平台免受腐蝕的全球機會。

The nature of this industry will always cause certain fluctuations in ZERUST oil and gas sales. Nevertheless, we still expect to see Xeris oil and gas sales and profitability to improve significantly in fiscal 2026 as we leverage these investments and rein in operating expense growth.

該產業的特性決定了ZERUST的石油和天然氣銷售額總是會有一定的波動。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，Xeris 的石油和天然氣銷售額和獲利能力將在 2026 財年顯著提高。

Earlier this month, we announced that our 85% owned subsidiary, ZERUST Brazil, secured a new three-year contract for a major offshore project with a leading global EPC company. Under this agreement, ZERUST Brazil will provide advanced corrosion protection solutions for floating production storage and offloading units, or FPSOs, with an estimated total value of approximately 70 million Brazilian reais, which is equal to approximately 13 million US dollars based on current exchange rates.

本月初，我們宣布我們持股 85% 的子公司 ZERUST Brazil 與一家全球領先的 EPC 公司簽訂了一份新的三年期大型海上項目合約。根據該協議，ZERUST Brazil 將為浮式生產儲卸油裝置（FPSO）提供先進的防腐蝕解決方案，預計總價值約為 7,000 萬巴西雷亞爾，按當前匯率計算，約 1,300 萬美元。

The project started in Q4 and is expected to ramp up during our fiscal 2026 and then continue through calendar 2028. This is a significant validation of our engineering capabilities, scalability of our ZERUST oil and gas business, and the reputation we've built as a trusted partner to leading offshore operators. Brazil represents one of the fastest-growing deepwater markets globally, and we believe this win provides a strong foundation for continued growth and expansion across international oil and gas markets.

該專案於第四季度啟動，預計將在 2026 財年加速推進，並持續到 2028 年。這充分證明了我們的工程能力、ZERUST 油氣業務的可擴展性，以及我們作為領先的海上營運商值得信賴的合作夥伴所建立的聲譽。巴西是全球成長最快的深水市場之一，我們相信此次中標將為巴西在國際油氣市場的持續成長和擴張奠定堅實的基礎。

Turning to our Natur-Tec bioplastics business, fourth quarter Natur-Tec sales were $5.1 million, representing a 10% year-over-year decline in Natur-Tec sales, primarily due to pricing dynamics and the timing of orders. For example, during the past year, a large North American customer of our resin compounds delayed purchasing for nearly six months as they made tooling adjustments to increase the output of their manufacturing line.

再來看我們的 Natur-Tec 生物塑膠業務，第四季 Natur-Tec 的銷售額為 510 萬美元，年減 10%，主要原因是價格動態和訂單時間。例如，在過去一年中，我們的一家北美大型樹脂化合物客戶由於需要調整生產線的模具以提高產量，因此推遲了近六個月的採購。

While this contributed to Natur-Tec's decline in sales for fiscal 2025, we have already received orders for the first and second quarters of the new fiscal year for the equivalent of what this customer purchased from us in all of fiscal 2025. It's also worth mentioning that in Q4 of fiscal 2025, We entered into a preferred supplier agreement with the nation's leading specialized distributor for Janssen, food service and industrial packaging.

雖然這導致 Natur-Tec 在 2025 財年的銷售額下降，但我們已經收到了新財年第一季和第二季的訂單，其金額相當於這位客戶在 2025 財年從我們這裡購買的總量。值得一提的是，在 2025 財年第四季度，我們與全國領先的 Janssen、食品服務和工業包裝專業分銷商簽訂了優先供應商協議。

We expect this new relationship to translate into higher Natur-Tec sales growth in fiscal 2026. We are also working on several larger opportunities for our Natur-Tec solutions that we believe hold significant promise to benefit our sales in the coming quarters, including advancing the compostable food packaging solution we mentioned on our last call.

我們預計這種新的合作關係將在 2026 財年轉化為 Natur-Tec 更高的銷售成長。我們也正在努力開拓幾個更大的 Natur-Tec 解決方案市場，我們相信這些方案有望在未來幾季大幅提升我們的銷售額，其中包括推進我們在上次電話會議上提到的可堆肥食品包裝解決方案。

Overall, we believe Natur-Tec is a best-in-class compostable plastic business that is well-positioned for significant further growth in the US and abroad. While fiscal 2025 was more challenging than we expected at the beginning of the fiscal year, we remain steadfast on pursuing our strategic growth plan. We are confident in the direction we are headed. Before I turn the call over to Matt, I wanted to acknowledge the hard work and dedication for our global team of both employees and joint venture partners. Our success and our ability to navigate more complex economic periods are a direct result of their efforts.

總的來說，我們認為 Natur-Tec 是一家一流的可堆肥塑膠企業，在美國和海外市場都擁有良好的發展前景，並有望實現顯著的進一步成長。儘管 2025 財年比我們年初預期的更具挑戰性，但我們仍堅定不移地推進我們的策略成長計畫。我們對前進的方向充滿信心。在將電話交給 Matt 之前，我想對我們全球員工和合資夥伴團隊的辛勤工作和奉獻精神表示感謝。我們的成功以及我們應對更複雜的經濟時期的能力，都是他們努力的直接結果。

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

有了以上概述，現在讓我把電話交給 Matt Wolsfeld，讓他總結一下我們 2025 財年第四季和全年的財務表現。

Thanks, Patrick. Compared to the prior fiscal year period, NTIC's consolidated net sales decreased 1.0% in fiscal 2025 and decreased 4.4% in fiscal 2025 fourth quarter because of the trends Patrick reviewed in his prepared remarks. Sales across our global joint ventures increased 4.7% in the fourth quarter. Joint venture operating income in the fourth quarter increased 6.6% compared to the prior fiscal year period, primarily due to the corresponding increase in net sales.

謝謝你，派崔克。與上一財年相比，由於派崔克在準備好的發言稿中回顧的趨勢，NTIC 2025 財年的合併淨銷售額下降了 1.0%，2025 財年第四季下降了 4.4%。第四季度，我們全球合資企業的銷售額成長了4.7%。第四季合資企業營業收入較上年同期成長6.6%，主要原因是淨銷售額相應成長。

For fiscal 2025, sales across our global joint ventures decreased 4.9%, while joint venture operating income decreased 9.8% compared to the prior fiscal period. Total operating expenses for the fiscal 2025 fourth quarter increased 2.2% or $9.7 million for the fiscal 2025, primarily due to strategic investments in ZERUST oil and gas, sales infrastructure, and increased personnel expenses, including new hires, benefits, and higher travel and professional fees. As a percentage of net sales, operating expenses were 43.5% for the fourth quarter compared to 40.7% for the prior fiscal year period. For fiscal 2025, operating expenses as a percentage of net sales were 44.7% compared to 41.6% for the prior fiscal year. Gross profit as a percentage of net sales was 37.9% during the three months ended August 31, 2025, compared to 43.8% during the prior fiscal year period.

2025 財年，我們全球合資企業的銷售額下降了 4.9%，而合資企業營業收入與上一財年相比下降了 9.8%。2025 財年第四季總營運支出成長 2.2% 或 970 萬美元，主要原因是 ZERUST 石油和天然氣、銷售基礎設施的策略性投資，以及人員支出增加，包括新員工招募、福利以及更高的差旅費和專業費用。第四季營業費用佔淨銷售額的 43.5%，而上一財年同期為 40.7%。2025 財年，營業費用佔淨銷售額的百分比為 44.7%，而上一財年為 41.6%。截至 2025 年 8 月 31 日止的三個月內，毛利佔淨銷售額的百分比為 37.9%，而上一財年同期為 43.8%。

Gross profit as a percentage of net sales was 37.6% for the fiscal year ended August 31, 2025, compared to 39.7% for the prior fiscal year. lower gross margin for the fourth quarter and full year periods were primarily due to a less profitable mix of sales. There were a couple of one-time items that impacted profitability during the fiscal year, including a $1.1 million benefit to other income due to the receipt of cash from the employee retention credit that was payable in February of 2025.

截至2025年8月31日的財年，毛利率佔淨銷售額的37.6%，而上一財年為39.7%。第四季和全年毛利率下降的主要原因是銷售組合的獲利能力下降。本財年有幾項一次性項目影響了獲利能力，其中包括因收到員工留任抵免現金而帶來的 110 萬美元其他收入收益，該抵免將於 2025 年 2 月支付。

Secondly, NTIC recognized $387,000 in other expense during the fourth quarter of 2025 as NTIC's Chinese subsidiary was assessed penalties from Ningguo Customs, a customs authority in China, as a result of a technical classification matter. We have since updated our export documents and internal review procedures and believe this issue has now been fully resolved. We also experienced an increase in our effective tax rate for fiscal 2025, which was 67.5% for fiscal 2025 compared to 17.3% in the prior fiscal year. The changes primarily reflect increased income tax expense in our foreign subsidiaries and is primarily due to the increase in income tax expense as compared to reduced consolidated pre-book tax income.

其次，由於NTIC的中國子公司因技術分類問題被中國寧國海關處以罰款，NTIC在2025年第四季確認了387,000美元的其他費用。我們已更新了出口文件和內部審核程序，並相信該問題現已徹底解決。2025 財年我們的實際稅率也有所上升，2025 財年為 67.5%，而上一財年為 17.3%。這些變化主要反映了我們海外子公司所得稅費用的增加，這主要是由於所得稅費用的增加而合併帳前所得稅收入的減少所致。

As a result, our effective tax rate was unusually high and volatile in fiscal 2025. We expect the effective rate to normalize in future periods when additional profits are recognized in our North American operations. NTIC reported net loss of $1.1 million or $0.11 per diluted share for the fiscal 2025 fourth quarter compared to net income of $1.8 million or $0.19 per diluted share for the fiscal 2024 fourth quarter. For the full year, NTIC reported net income of $18,000, or 0 cents per diluted share, compared to $5.4 million, or $0.55 per diluted share, for the fiscal 2024 full year.

因此，2025 財年我們的實際稅率異常高且波動較大。我們預計，隨著北美業務確認更多利潤，未來期間實際利率將趨於正常化。NTIC 報告稱，2025 財年第四季淨虧損 110 萬美元，即每股攤薄虧損 0.11 美元，而 2024 財年第四季淨利為 180 萬美元，即每股攤薄利潤 0.19 美元。NTIC 全年淨收入為 18,000 美元，即每股攤薄收益 0 美分，而 2024 財年全年淨收入為 540 萬美元，即每股攤薄收益 0.55 美元。

For the fiscal 2025 fourth quarter, NTIC's non-GAAP adjusted net loss was $607,000, or $0.6 per diluted share, compared to non-GAAP adjusted net income of $1.9 million, or $0.20 per diluted share for the fiscal 2024 fourth quarter. For the fiscal 2025 non-GAAP adjusted net loss was $12,000 or 0 cents per diluted share compared to net income of $5.8 million or $0.59 per diluted share for fiscal 2024. A reconciliation of GAAP to non-GAAP financial measures is available in our fourth quarter fiscal year 2025 earnings press release that was issued this morning. As of August 31, 2025, working capital was $20.4 million, including $3.7 million in cash and cash equivalents, compared to $23.7 million, including $5 million in cash and cash equivalents as of August 31, 2024.

2025 財年第四季，NTIC 的非 GAAP 調整後淨虧損為 607,000 美元，即每股攤薄虧損 0.6 美元，而 2024 財年第四季的非 GAAP 調整後淨利為 190 萬美元，即每股攤薄收益 0.20 美元。2025 財年非 GAAP 調整後淨虧損為 12,000 美元，即每股攤薄虧損 0 美分，而 2024 財年淨利為 580 萬美元，即每股攤薄收益 0.59 美元。有關 GAAP 與非 GAAP 財務指標的調整表，請參閱我們今天早上發布的 2025 財年第四季財報新聞稿。截至 2025 年 8 月 31 日，營運資金為 2,040 萬美元，其中包括 370 萬美元的現金及現金等價物；而截至 2024 年 8 月 31 日，營運資金為 2,370 萬美元，其中包括 500 萬美元的現金及現金等價物。

As of August 31, 2025, we had outstanding debt of $12.2 million. This included $9.3 million in borrowings under our existing revolving line of credit. compared to $4.3 million as of August 31, 2024. Reducing debt through positive operating cash flow and improving working capital efficiencies will be a strategic focus for fiscal 2026. We generated $2.4 million in operating cash flows for the fiscal year ended August 31, 2025.

截至 2025 年 8 月 31 日，我們有 1,220 萬美元的未償債務。其中包括根據我們現有的循環信貸額度借入的 930 萬美元，而截至 2024 年 8 月 31 日，該金額為 430 萬美元。2026 財年，透過正向經營現金流減少債務和提高營運資本效率將是策略重點。截至 2025 年 8 月 31 日的財政年度，我們產生了 240 萬美元的營運現金流。

At year end, the company had $28.6 million of investment in joint ventures of which 51.7% or $14.8 million was in cash, with the remaining balance primarily invested in other working capital. During fiscal 2025 fourth quarter, NTIC's board of directors declared a quarterly cash dividend of one cent per common share that was payable on August 13, 2025, to stockholders of record on July 30, 2025.

截至年底，該公司在合資企業中的投資額為 2,860 萬美元，其中 51.7%（即 1,480 萬美元）為現金，其餘部分主要投資於其他營運資金。在 2025 財年第四季度，NTIC 董事會宣布派發每股普通股 1 美分的季度現金股息，將於 2025 年 8 月 13 日支付給 2025 年 7 月 30 日登記在冊的股東。

To conclude our prepared remarks, we are optimistic NTIC's momentum is building across many parts of our business. We believe our multi-year strategies are working, our global markets are expanding, and our team is delivering results. With a clear vision and disciplined execution, we're confident that the foundation we've built will drive continued growth, stronger profitability, and meaningful value creation for our shareholders.

最後，我們總結一下準備好的發言稿，我們樂觀地認為，NTIC 的發展勢頭正在我們業務的許多領域不斷增強。我們相信，我們的多年策略正在奏效，我們的全球市場正在擴張，我們的團隊正在取得成果。憑藉著清晰的願景和嚴謹的執行力，我們有信心我們所建立的基礎將推動持續成長、提高獲利能力，並為我們的股東創造有意義的價值。

With this overview, Patrick and I are happy to take your questions.

有了以上概述，我和派崔克很樂意回答您的問題。

(Operator Instructions) Tim Clarkson, Van Clemens.

（操作說明）提姆·克拉克森，範·克萊門斯。

Hey, Patrick. Hey, Matt. Obviously, this year was not what everyone wanted, but just a couple of background questions. In general, are the income taxes on our international business, are they higher than the taxes domestically in the United States?

嘿，派崔克。嘿，馬特。顯然，今年並非每個人都希望的那樣，但這裡只問幾個背景問題。整體而言，我們國際業務的所得稅是否高於美國國內的所得稅？

It's not that it's higher. It's that essentially what you have is you have a situation where with all of our subsidiaries, let's say the main five subsidiaries, they have a standard statutory tax rate. somewhere between 20% and 33%, 34% depending on the country. And so all of those subsidiaries are profitable, so they generate tax expense. So if you look at it from an effective tax rate when you put it all together, you have essentially the numerator in the effective tax rate calculation is a fixed number. There isn't a significant amount of tax expense from North America.

並不是說它更高。本質上，我們面臨的情況是，我們所有的子公司，比如說主要的五家子公司，都適用標準的法定稅率，稅率在 20% 到 33% 之間，甚至 34%，具體取決於所在國家。因此，所有這些子公司都是有利可圖的，所以它們會產生稅收支出。因此，如果你從實際稅率的角度來看，當你把所有因素綜合起來，你會發現實際稅率計算中的分子實際上是一個固定數字。來自北美的稅收支出並不多。

However, we do have tax expense from North America, based off of the royalties and dividends that we received from JVs. The issue that we have is that the denominator in the calculation, there's very little profit, especially in fourth quarter, that went into that number. And so what it created is a very large effective tax rate for fourth quarter. The expectations are that going forward, as there is more profitability, specifically in North America, the denominator in that calculation is going to be increased.

但是，我們確實有來自北美的稅收支出，這些支出是基於我們從合資企業收到的特許權使用費和股息。我們遇到的問題是，計算中的分母，尤其是第四季度，幾乎沒有利潤被計入這個數字。因此，第四季的實際稅率非常高。預計未來隨著獲利能力的提高，尤其是在北美地區，該計算中的分母將會增加。

For example, if we had more profit in North America, we would have had the same numerator, the same tax expense, but the denominator in the calculation would have been significantly higher, would have led to a more normalized effective tax rate. It's just the nature of how the tax provision calculation works, especially when we had, I would say, a difficult fourth quarter from a North American standpoint. So I do expect it to normalize. in fiscal 2026 as we get back to similar profit levels that we had before.

例如，如果我們在北美獲得更多利潤，那麼分子（即稅收支出）將保持不變，但計算中的分母將顯著增加，從而導致更正常的實際稅率。這就是稅務準備金計算方式的本質，尤其是考慮到從北美角度來看，我們經歷了一個相當艱難的第四季。所以我預計到2026財年，隨著我們恢復到之前的利潤水平，情況會趨於正常。

Okay, sure. So I know you mentioned that you're looking to cut expenses in the company too. I mean, how realistic, how much money do you think you can cut to improve profitability?

好的，沒問題。我知道您也提到公司正在尋求削減開支。我的意思是，實際情況如何？你認為為了提高獲利能力，可以削減多少成本？

The goal at this point isn't to cut expenses. The goal is to, I would say, maintain the same level of operating expenses that we had or close to the same level operating expenses that we had in fiscal '25. I mean, you recall all through the end of 2024 and through 2025, we talked about the increased investments that we've made in the oil and gas group and a couple other areas inside of the company with the ability to kind of use those investments to drive revenues going forward.

現階段的目標不是削減開支。我的目標是保持與 2025 財年相同的營運支出水平，或接近相同的營運支出水平。我的意思是，你還記得在 2024 年底到 2025 年期間，我們一直在討論我們在石油和天然氣集團以及公司內部其他幾個領域增加的投資，以便利用這些投資來推動未來的收入成長。

We didn't see the revenue increases in fiscal 2025. The expectations of the investments that we made in 2024 and 2025, we'll start seeing the results of that in 2026 and beyond as those investments, specifically the people that we hired, are able to gain traction and drive revenue growth. So the expectation is that we're going to drive revenue growth in 2026, those gross margin dollars falling down to the operating profit line as we're able to hold operating expenses as stable as possible.

2025財年我們沒有看到營收成長。我們預計在 2024 年和 2025 年進行的投資，將在 2026 年及以後開始產生效果，因為這些投資，特別是我們僱用的人員，將能夠取得成效並推動收入成長。因此，我們預計到 2026 年，隨著我們能夠盡可能保持營運費用的穩定，毛利將會下降到營業利潤。

Sure. Okay, on oil and gas, it sounds like there's some additional business that will kick into the first quarter and further on out with some of these larger orders. Now, what's driving this business? Is it just having more sales? meant out in the field in places like the Middle East and Brazil, or is the technology finally getting to be accepted as superior to the legacy technology of the cathodic arc stuff?

當然。好的，關於石油和天然氣，聽起來第一季會有一些額外的業務啟動，而且隨著一些較大訂單的到來，業務將進一步成長。那麼，是什麼因素推動了這項業務的發展？只是銷量更高嗎？是指在中東和巴西等地的實地應用，還是指這項技術最終被公認為優於傳統的陰極電弧技術？

Yeah. Can you hear me?

是的。你聽得到我嗎？

Yeah, I can hear you. Go ahead.

是的，我聽得到你說話。前進。

All right. Okay. It's just general acceptance of the technology in the market. We've proven that it works over and over again. We're getting repeat business from existing customers as we're pulling in new customers. And that's really starting to give our oil and gas business the attention that we think it deserves.

好的。好的。這只是市場對這項技術的普遍接受。我們已經反覆證明它是有效的。我們既獲得了現有客戶的回頭客，也吸引了新客戶。這確實開始讓我們的石油和天然氣業務獲得我們認為它應得的關注。

Sure. In terms of the packaging, I know that you guys had a breakthrough in terms of being able to kind of replace the traditional saran wrap packaging that doesn't allow air to go out, and you've now developed packaging that's similar to that that's compostable. I mean, how close are we from getting some business from that?

當然。在包裝方面，我知道你們取得了突破，能夠取代傳統的不透氣的保鮮膜包裝，現在你們已經開發出類似但可堆肥的包裝。我的意思是，我們離從中獲得一些業務還有多遠？

For that, I'd like to turn the question over to Vineet Dalal, who runs our NH Tech business. You want to go ahead.

為此，我想把這個問題交給負責我們 NH Tech 業務的 Vineet Dalal。你想繼續。

Yeah, this is Vineet. Yeah, we have several customers where we're doing trials with compostable packaging, especially for consumer food applications. So this is something that we're working on. We've gotten some good feedback, not just here in North America, but also in India. where there's a big market for these kind of applications. So we expect some of those opportunities to start hitting our sales in 2026.

是的，這是維尼特。是的，我們有好幾位顧客正在試用可堆肥包裝，特別是用於消費食品領域。這是我們正在努力的方向。我們收到了一些很好的回饋，不僅在北美，在印度也是如此，因為印度對這類應用有著龐大的市場需求。因此，我們預計其中一些機會將在 2026 年開始影響我們的銷售。

Okay. Are the costs similar for the compostable product versus the legacy product?

好的。可堆肥產品與傳統產品的成本是否相似？

No, the cost is definitely higher as a premium solution, but due to legislation and government regulations in countries like India, these companies are forced to use compostable packaging instead of traditional plastic packaging.

不，作為高端解決方案，成本肯定更高，但由於印度等國家的法律和政府法規，這些公司被迫使用可堆肥包裝而不是傳統的塑膠包裝。

Okay. Okay. Well, great. Well, I'm looking forward to seeing some of those results. I'm done. Thanks, guys.

好的。好的。太好了。我很期待看到一些結果。我受夠了。謝謝各位。

Gus Richard, Northland Capital Markets.

Gus Richard，北地資本市場。

Yes, thanks for taking the questions. You mentioned weakness in North America. Could you just describe where that's coming from?

是的，謝謝你回答這些問題。你提到了北美地區的弱點。你能描述一下這是從哪裡來的嗎？

The main weakness in North America we experienced throughout The entire fiscal 2025 was primarily the Natur-Tec group and the oil and gas group. If you look at the oil and gas group in North America was down close to 46% on the year. Natur-Tec North America was down about 13% on the year.

在整個 2025 財年，我們在北美遇到的主要弱點主要是 Natur-Tec 集團和石油天然氣集團。如果你看一下北美石油和天然氣板塊，你會發現該板塊年減了近 46%。Natur-Tec北美公司今年的股價下跌了約13%。

Got it, okay. And then in the floating platforms for the oil and gas. I'm trying to wrap my mind around how your solutions work floating on the water, and how much does that open up the market opportunity for you?

明白了，好的。然後是石油和天然氣的浮動平台。我正在努力理解你們的解決方案是如何在水面上運作的，以及這能為你們帶來多大的市場機會？

Well, it's a new market for us overall. It's not like you're trying to or packet, put the entire rig into a package, but you're taking sections of it and finding unique ways to apply our technology in those sections to provide long-term corrosion protection. And based on what we've seen in practice in Brazil so far, we think this is an opportunity, obviously, that can be very useful. For us in Brazil, but in other areas around the world where they use offshore platforms.

嗯，對我們來說，這是一個全新的市場。這並不是說你要把整個鑽井平台打包，而是要把它分成幾個部分，然後找到獨特的方法，將我們的技術應用到這些部分，以提供長期的防腐蝕保護。根據我們目前在巴西的實務經驗，我們認為這顯然是一個非常有用的機會。對我們巴西人來說是這樣，但對世界其他使用海上平台的地區來說也是如此。

The only thing I'll add, Gus, is that the work that we talked about in Brazil, specifically on these FPSOs, there's a service component to it, where there are actual ZERUST oil and gas employees that are living on the offshore essentially the offshore floating platforms and applying the zero solution to the infrastructure and then they're on the rig for a period of time and then they leave and then replacements come in and so it's been a long process in order to be able to get slots where our specific workers can be on those platforms to do the installation work and so that's a different It's kind of a different sales process than we typically see with Onshore where we're typically selling the solution and it's getting installed and then you don't need to continually apply and continually upkeep it.

Gus，我唯一要補充的是，我們在巴西討論的那些FPSO項目，其中包含服務部分。 ZERUST的石油天然氣員工就住在海上，也就是海上浮動平台上，負責將零銹解決方案應用於基礎設施。他們在鑽井平台上工作一段時間後離開，然後由其他人接替。因此，為了安排我們的員工上台進行安裝工作，這是一個漫長的過程。這與我們通常在陸上看到的銷售流程有所不同。在陸上，我們通常銷售解決方案，安裝完成後無需持續應用和維護。

Okay, and just out of curiosity, does that, having to have folks on the rigs and continually reapplying, does that have an impact on the margin profile for the floating platforms?

好的，我只是好奇，由於需要有人在鑽井平台上不斷重新施藥，這會對浮動平台的利潤率產生影響嗎？

Yeah, there's, I mean, it's a slightly decreased margin given the service component and things like that compared to just selling any of the other zero-soil and gas solutions where you're just selling the actual product and somebody else is doing the installation work.

是的，我的意思是，考慮到服務部分等等因素，利潤率會略有下降，相比之下，其他零土壤和氣體解決方案，你只需要銷售產品本身，而安裝工作由其他人負責。

Got it. Thanks. That's super helpful. And then the one time adjust is the Chinese power of custom, whatever the heck that charge was. Was that a one-time event and non-reoccurring, or is there an impact to the P&L going forward?

知道了。謝謝。這太有幫助了。然後，還有一次調整，那就是中國海關的權力，不管那筆費用到底是多少。那是一件一次性事件，不會再發生嗎？還是會對未來的損益表產生影響？

Well, Vineet, do you want to address that?

維尼特，你想談談這個問題嗎？

Yeah, it was a one-time event. I mean, essentially, we produced some compounds in China that are pills compounds, so they contain minerals and then export out of China. And when you export it, I mean, we've always followed international norms for HDS codes that we use here in the US, in India, in Europe. And essentially, when we export it out of China, we get a VAT credit.

是的，那是一次性事件。我的意思是，基本上，我們在中國生產了一些化合物，這些化合物是藥丸化合物，所以它們含有礦物質，然後出口到中國以外的地方。出口時，我們一直遵循美國、印度和歐洲使用的HDS代碼的國際標準。實際上，當我們把產品出口到中國以外的地方時，我們可以獲得增值稅抵免。

Now, because of the trade war between the US and China and Chinese customs cracking down on any exports that contain minerals or red earths, there's a customs official who basically said that because your compounds contain these minerals, you're not eligible for the VAT refund. And so that basically accounted for. We had to repay back all the credit or the rebate that we got. So we expect this to be a one-time event moving forward that will be part of our cost of goods sold.

現在，由於中美貿易戰以及中國海關嚴厲打擊任何含有礦物或紅土的出口，一位海關官員表示，因為你的化合物含有這些礦物，所以你沒有資格獲得增值稅退稅。基本上就是這樣了。我們必須償還所有獲得的信貸或退款。因此，我們預計這將是一次性事件，並將計入我們的銷售成本。

So essentially it was a couple years' worth of VAT that the Chinese government clawed back as well as a penalty on top of that for using what they deemed to be the wrong code for the VAT. So the expectations are it's a one-time charge that we took and decided we weren't going to challenge the Chinese government in this. We wanted to move forward as quickly as possible with the process so we can continue the import and export of the product.

所以，中國政府實際上追回了兩年的增值稅，也因為使用了他們認為錯誤的增值稅代碼而處以罰款。因此，我們預計這只是一次性指控，我們決定不會在這件事上挑戰中國政府。我們希望盡快推進這項流程，以便能夠繼續進行產品的進出口。

Got it. And then on the food packaging application is this going to be like packaging in, I don't know like a fixable produce supplier, or is there something applied in a supermarket over chicken breasts or whatever? Go ahead.

知道了。那麼，在食品包裝應用方面，這是指像某種可固定包裝的農產品供應商提供的包裝，還是指超市裡用於包裝雞胸肉或其他食品的包裝？前進。

Yeah, so we're looking at multiple applications. One of the applications that we're looking at in India is packaging of milk. So these are milk pouches where we're working with some of the largest dairies in India to change over from conventional polyethylene packaging to a fully compostable solution. And we have run trials. We had to engineer the product so that it met the barrier performance, the shelf life performance, the handling, and then even on their form-filled machine, the throughput existing plastic technology. And so we have proven all that, and we expect that to be a growth business in East India.

是的，我們正在考慮多種應用方案。我們在印度正在研究的應用之一是牛奶包裝。所以，這些是牛奶包裝袋，我們正在與印度一些最大的乳製品企業合作，將傳統的聚乙烯包裝改為完全可堆肥的解決方案。我們已經進行了試驗。我們必須對產品進行工程設計，使其滿足阻隔性能、保質期性能、搬運性能，甚至在他們現有的塑膠成型填充機上，也能滿足其吞吐量要求。因此，我們已經證明了這一切，我們預計這將成為印度東部的一個成長型業務。

In the US, we are working with consumer food companies where they're looking at multi-layer structures which would be used for things like sauces and salad dressings and those kind of food items.

在美國，我們正在與消費食品公司合作，他們正在研究多層結構，這種結構將用於醬汁、沙拉醬等食品。

Okay, so replacement for a Tetra Pak?

好的，那麼，有什麼可以取代利樂包裝的嗎？

Yeah, or pouches like these little pouches for salad dressings or short shelf life sauces.

是的，或像這種裝沙拉醬或保質期短的醬料的小袋子。

Got it, like the pouches you would get in a restaurant for salad.

明白了，就像餐廳裡裝沙拉的那種小袋子。

Yeah, in a restaurant or a QSR. This one the project that we're working on in the US, that's essentially for a QSR segment.

是的，在餐廳或快餐店。這是我們在美國正在進行的一個項目，它主要面向快餐連鎖店領域。

Got it. And when do you expect that to sort of add to Natur-Tec revenue? Is that revenue second half of fiscal '26? YIs it starting today? Can you give a little bit of color as to when you expect that to contribute to revenue?

知道了。那麼，您預計這何時能為 Natur-Tec 帶來營收成長呢？該收入是指2026財年下半年的收入嗎？是今天開始嗎？您能否簡要說明預計何時能為公司帶來收入？

The application in the US that requires some fine-tuning, so we're working closely with the customer on trials and prototype validation. before we can introduce that in the market. But the application in India, we've already gotten an initial deal from one of the dairy companies, and so we expect that business to kind of grow probably by Q2, Q3 of fiscal 2026. Got it.

在美國，這款應用還需要一些微調，所以我們正在與客戶緊密合作進行試驗和原型驗證，之後才能將其推向市場。但是，在印度的應用方面，我們已經與一家乳製品公司達成了初步協議，因此我們預計到 2026 財年第二季度或第三季度，這項業務可能會有所增長。知道了。

That's it for me. Thanks so much.

就這些了。非常感謝。

Zach Liggett, Desmond Liggett Wealth Advisors.

Zach Liggett，Desmond Liggett 財富顧問。

Hey, good morning, guys. Thanks for taking the question. On your presentations here over the last, I think, couple years, you've had a strategic objective of hitting greater than 15% top-line growth and slower expense growth. I'm just curious. I know the last couple of years have been sort of investment years for you, but how are you thinking about those objectives looking forward?

嘿，大家早安。感謝您回答這個問題。在過去兩年裡，您在這裡的演講中，似乎都提到了一個策略目標，那就是實現超過 15% 的營收成長和更慢的支出成長。我只是好奇。我知道過去幾年對您來說主要是投資年，但展望未來，您如何看待這些目標？

Matt, I think you're better qualified to handle this one.

馬特，我覺得你比較適合處理這件事。

I guess from a top-line growth standpoint, we are certainly still optimistic. We look at the opportunities that we have specifically in oil and gas, specifically in Natur-Tec. The expectations are that those two groups are going to have some significant growth in 2026.

從營收成長的角度來看，我們當然仍然保持樂觀。我們著眼於石油和天然氣領域，特別是 Natur-Tec 領域的機會。預計這兩個群體在 2026 年將顯著成長。

The traditional ZERUST business is going to be relatively stable with some slight growth, but certainly the opportunities that we have in Natur-Tec and oil and gas kind of worldwide are what we expect to kind of fuel that 15% growth this year. Certainly, we didn't get that last year, but we think the investments that we've made should put us back to that kind of growth rate, which would obviously have a significant impact from a gross margin standpoint, and again, with the dollar values slowing down to the earning EPS level.

ZERUST 的傳統業務將相對穩定，並略有成長，但我們在自然技術、石油和天然氣等領域的全球機遇，預計將推動今年 15% 的成長。當然，我們去年沒有達到那個水平，但我們認為我們所做的投資應該能讓我們恢復到那種成長速度，這顯然會對毛利率產生重大影響，而且隨著美元價值放緩至盈利每股收益水平，情況也會如此。

Yeah, okay. And then the operating cash flow came off quite a bit this year. How are you thinking about that for FY26 and free cash flow for that matter? If you could give us an update on your CapEx expectations.

好的。今年的經營現金流大幅下降。您對2026財年以及自由現金流有何看法？可否告知我們您目前的資本支出預期？

Well, our fiscal 2025 was a large year. Really,' 24 and '25 were a large year from a CapEx standpoint. We had a new ERP, new SAP ERP system that was implemented, which was certainly wasn't cheap. We funded that out of operating cash. We also purchased a building that's directly adjacent to our existing headquarters here for the increased production and warehousing that we need, given that we're kind of outgrowing the current footprint that we have here. So we were able to add another 60%, 70% to our office, to our space here. The expectations are for 2026 that there's going to be very little capital improvements that are needed in North America.

嗯，我們的 2025 財政年度是個重要的年份。確實，從資本支出角度來看，2024 年和 2025 年是規模很大的一年。我們實施了一套新的ERP系統，一套新的SAP ERP系統，這套系統價格不菲。我們用營運現金支付了這筆費用。鑑於我們目前的辦公室已經無法滿足不斷增長的生產和倉儲需求，我們還購買了一棟緊鄰我們現有總部大樓的建築。因此，我們得以將辦公室面積擴大 60% 到 70%。預計到 2026 年，北美地區將幾乎不需要任何資本改善項目。

There are additional facilities we're looking at in Brazil, which they would fund on their own, which wouldn't involve operating cash coming out of North America. And they have a cash surplus in Brazil. And also at Natur-Tec India, they're looking at essentially building their facility there to accommodate the production and warehousing needs for the Indian business. And again, they would be funding that and taking care of that entirely within their operating cash and any kind of financing in India.

我們正在巴西考察其他一些設施，這些設施將由他們自行出資建設，不會涉及從北美調撥營運資金。而且他們在巴西還有現金盈餘。此外，Natur-Tec India 也正在考慮在那裡建造工廠，以滿足印度業務的生產和倉儲需求。而且，他們將完全依靠自身的營運現金和在印度的任何融資方式來支付和處理這筆費用。

So the expectations are, specifically in North America in 2026, that we're going to be able to add a significant amount of cash to pay down our line of credit the goal is certainly to pay down the line of credit as much as possible, get back to the point that as we're seeing increased earnings, we're able to ramp the dividend back up and have a nice cash cushion to be able to fund future growth and needs that the company has over the next few years.

因此，我們預計，尤其是在北美地區，到 2026 年，我們將能夠增加大量現金來償還我們的信貸額度。我們的目標當然是盡可能多地償還信貸額度，回到獲利成長的階段，這樣我們就可以提高股息，並擁有充足的現金緩衝，以資助公司未來幾年的成長和需求。

All right. Yeah, that sounds promising then. Two small ones for me, I guess. Any benefits you're seeing this coming year from the one big beautiful bill? Not really.

好的。嗯，聽起來很有希望。我想，我得吃兩個小的。你認為明年這項龐大的法案會帶來哪些好處？並不真地。

No, not to our business.

不，這跟我們沒關係。

Okay. And then any AI use cases that you guys have identified for the coming year?

好的。那麼，你們針對來年有哪些人工智慧應用案例呢？

No.

不。

All right. Thanks for taking the questions. Good luck.

好的。謝謝您回答問題。祝你好運。

Thank you. I'll now turn it back to Mr. Patrick Lynch.

謝謝。現在我把問題交還給派崔克·林奇先生。

All right. Thank you all for joining this morning. Hope you have a nice day.

好的。感謝各位今天上午的參與。祝你今天過得愉快。

This concludes today's conference call. Thank you for your participation. 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了。