Northern Technologies (NTIC) reported its financial results for the first quarter of fiscal 2025, revealing a mixed performance. The company posted earnings per share (EPS) of $0.07, falling short of the $0.17 forecast. Revenue came in at $21.3 million, slightly below the expected $22.2 million. Following the announcement, NTIC's stock price saw a decline of 1.71% in after-hours trading.
Key Takeaways
- Northern Technologies missed its EPS and revenue forecasts for Q1 2025.
- The company's stock fell 1.71% in after-hours trading.
- NTIC reported a record Q1 in consolidated sales with a 5.7% year-over-year increase.
- The bioplastics segment, Natur Tec, showed significant growth with a 22.8% sales increase.
Company Performance
Northern Technologies demonstrated solid year-over-year growth with a 5.7% increase in consolidated net sales, reaching $21.3 million. The company's gross profit margin improved by 200 basis points to 38.3%, reflecting efficient cost management. Despite missing earnings expectations, NTIC achieved record sales for the quarter, bolstered by strong performance in its bioplastics and oil and gas segments.
Financial Highlights
- Revenue: $21.3 million, up 5.7% year-over-year
- Earnings per share: $0.07, below the $0.17 forecast
- Gross profit margin: 38.3%, a 200 basis point improvement
- Net income: $561,000 or $0.06 per diluted share
- Non-GAAP adjusted net income: $667,000 or $0.07 per diluted share
Earnings vs. Forecast
Northern Technologies reported an EPS of $0.07, missing the forecasted $0.17 by approximately 58.8%. Revenue also fell short of expectations, coming in at $21.3 million compared to the anticipated $22.2 million. This marks a notable miss for the company, potentially affecting investor confidence.
Market Reaction
In response to the earnings miss, NTIC's stock declined by 1.71% in after-hours trading, settling at $13.20. This movement reflects investor concerns over the company's ability to meet earnings expectations. The stock remains below its 52-week high of $19.63, indicating room for recovery if future performance aligns with projections.
Outlook & Guidance
Looking forward, Northern Technologies expects continued growth in fiscal 2025, with strong performance anticipated in its bioplastics and oil and gas sectors. The company projects a 20% growth in its Natur Tec segment and increased sales in China. NTIC also plans to expand its global sales team and invest strategically to support growth in the latter half of the fiscal year.
Executive Commentary
CEO Patrick Lynch stated, "We are seeing stable North American trends and robust growth across our global oil and gas and bioplastics markets." CFO Matt Wolsfeld added, "Our option is roughly a third of the cost of the traditional solution, which is the cathodic protection." These comments underscore the company's strategic positioning and cost advantages in the market.
Q&A
During the earnings call, analysts inquired about NTIC's market penetration strategies and geographic expansion plans, particularly in Southeast Asia and the Middle East. Executives highlighted ongoing efforts to develop the sales pipeline and expand the company's footprint in these regions.
Risks and Challenges
- Supply chain disruptions could impact product availability and cost.
- Market saturation in key segments may limit growth potential.
- Macroeconomic pressures, including inflation and currency fluctuations, could affect profitability.
- Competitive pressures in the oil and gas sector may challenge NTIC's market share.
- Regulatory changes in key markets, such as China and Europe, could affect operations and sales.
Full transcript - Northern Technologies (NTIC) Q1 2025:
Conference Moderator: 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. 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 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 ks, 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 hand the conference over to your speaker today, Patrick Lynch, NTIC's CEO. Please go ahead.
Patrick Lynch, CEO, NTIC: Good morning. I'm Patrick Lynch, NTIC's CEO and I'm here with Matt Wolsfeld, NTIC's CFO. A press release regarding our Q1 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 Q1 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 Q1 of our fiscal 2025 in comparison to the Q1 of our last fiscal year.
NTIC's record Q1 consolidated sales were driven by Natur Tec all time record quarterly sales as well as stable ZERUST Oil and Gas and ZERUST Industrial sales. Furthermore, NTIC China enjoyed its highest quarterly sales in nearly 3 years, while we also saw improved sales trends across several important geographies and at NTIC's joint ventures. I believe these top line results demonstrate the efficacy of our strategic planning, the value we bring to our global customers and NTIC's resilience amidst ongoing economic complexities. Thanks to the continued successful execution of certain quality system improvement initiatives, NTIC was able to achieve another quarter of gross margin growth on a year over year basis. We have also been investing in expanding our oil and gas sales infrastructure due to increased customer activity, which in turn should accelerate Exeo's oil and gas sales in the second half of fiscal twenty twenty five.
Overall, our Q1 was an encouraging start to fiscal 2025. Although the economic environment remains fluid, we anticipate fiscal 2025 will bring further sales growth and improved profitability. So with this overview, let's examine the drivers for the Q1 in more detail. For the Q1 ended November 30, 2024, our total consolidated net sales increased 5.7% to a 1st quarter record of $21,300,000 as compared to the Q1 ended November 30, 2023. Broken down by business unit, this included a 22.8% increase in the Natur Tec net sales, a 0.7% increase in Xerist oil and gas net sales and a 0.4% increase in Xerist Industrial net sales.
Total (EPA:TTEF) net sales for the fiscal 2025 Q1 by our joint ventures, which we do not consolidate in our financial statements, increased year over year by 1.2% to $23,800,000 Stabilizing sales trends at our joint ventures are encouraging since we have been navigating challenging market conditions for the past several years at our European joint ventures due to higher energy prices as well as regional, political and economic uncertainties. I am also encouraged by improving sales trends at our wholly owned NTIC China subsidiary. Fiscal 2025 Q1 net sales at NTIC China increased by 8.6% year over year to nearly $4,000,000 Sales in this geography continue to stabilize and are approaching quarterly sales levels that we last experienced in fiscal 2021 2022. We remain cautiously optimistic that demand in China will continue to improve in fiscal 2025, helping to support higher incremental sales and profitability in this market. 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. Now moving on to ZERUST Oil and Gas. ZERUST Oil and Gas had a solid Q1 with sales reaching $1,500,000 As anticipated, Q1 sales were below 4th quarter levels because the previous quarter had benefited from the timing on several large orders and seasonality. Looking at ZERUST Oil and Gas on a trailing 12 month basis, sales were $9,200,000 a 20.3% increase over $7,700,000 for the trailing 12 month period ended November 30, 2023. Demand continues to grow among both new and existing customers of our ZERUST Oil and Gas Solutions, which today still focus primarily on protecting above ground oil storage tanks and pipeline casings from corrosion.
While we continue to expect seasonal ordering patterns to drive fluctuations in ZERUST oil and gas sales, we believe we are well positioned for compelling growth in this sector through fiscal 2025 and beyond. As I mentioned earlier, we made strategic investments to expand our oil and gas sales infrastructure during the Q1 to support accelerated zeroes oil and gas sales that we expect to occur in the second half of fiscal twenty twenty five. Turning to our Natur Tec Bioplastics business. Natur Tec sales remained strong during the Q1 and increased 22.8% year over year to a quarterly record of $5,900,000 Natur Tec's growth during the quarter was a result of continued new customer wins in North America and India, as well as expanding relationships with existing customers. We expect Natur Tec sales growth to remain strong in fiscal 2025.
Globally, we continue to see robust market demand for new applications of certified compostable plastics products and resin compounds, as well as increased interest in commercial and municipal programs that use certified compostable plastics as alternatives to conventional plastics. As you can see, fiscal 2025 is off to a solid start. We are excited by the positive momentum underway and the direction NTIC is headed. Before
Matt Wolsfeld, CFO, NTIC: I turn
Patrick Lynch, CEO, NTIC: 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 recent success and the opportunities we are pursuing are a direct result of their efforts. With this overview, let me now turn the call over to Matt Wolfsfeld to summarize our financial results for the fiscal 2025 Q1.
Matt Wolsfeld, CFO, NTIC: Thanks, Patrick. Compared to the prior fiscal year period, NTIC's consolidated net sales increased 5.7% in the Q1 of fiscal 2025 to a quarterly record of $21,300,000 because of the positive trends Patrick reviewed in his prepared remarks. Sales across our global joint ventures increased 1.2% in the Q1 compared to the prior fiscal year period. Joint venture operating income increased 2.7%, primarily due to higher sales and an increase in net income at NTIC's joint ventures. Total operating expenses for the fiscal 2025 Q1 increased 14% compared to the prior fiscal year period to $9,500,000 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.
On a sequential basis, 1st quarter operating expenses were in line with 4th quarter. As a percentage of net sales, operating expenses were 44.4 percent for the Q1 compared to 41.2% for the prior fiscal year period. Gross profit as a percentage of net sales was 38.3% during the 3 months ended November 30, 2024 compared to 36.3% during the prior fiscal year period. The 200 basis point improvement was primarily a result of successful actions taken by the company to address inflationary pressures. Net income attributable to NTIC was $561,000 or $0.06 per diluted share for the Q1 compared to $896,000 or $0.09 per diluted share for the Q1 of fiscal 2024.
The Q1 Anti IT's non GAAP adjusted net income was $667,000 or $0.07 per diluted share compared to the non GAAP adjusted net income of $1,000,000 or $0.10 per diluted share for the Q1 of last year. A reconciliation of GAAP to non GAAP financial measures is available in our earnings press release that was issued this morning. As of November 30, 2024, working capital was $22,200,000 including $5,600,000 in cash and cash equivalents compared to $23,700,000 which included $5,000,000 in cash and cash equivalents as of August 31, 2024. As of November 30, 2024, we had outstanding debt of $7,300,000 This included $4,500,000 in borrowings under our existing revolving line of credit compared to $4,300,000 as of August 31, 2024. Reducing debt through positive operating cash flow and improving working capital efficiencies will be a strategic focus in fiscal 2025.
We generated 1 point $4,000,000 in operating cash flow for the 3 months ended November 30, 2024. On November 30, 2024, the company had $25,500,000 in investments in joint ventures, of which 54.6 percent or $13,900,000 was in cash with the remaining balance primarily invested in other working capital. During fiscal 2025 Q1, NKC's Board of Directors declared a quarterly cash dividend of $0.07 per common share that was payable on November 13, 2024, to stockholders of record on October 30, 2024. To conclude our prepared remarks, our Q1 fiscal 2025 financial results are off to a solid start, reflecting record consolidating sales, expanded gross margin and planned investments to support expected growth in the second half of the year. We're seeing stable North American trends and robust growth across our global oil and gas and bioplastics markets.
We expect these trends to continue. As a result, we believe our fiscal 2025 will be another good year of sales and higher profitability for NTIC, and we're excited by our long term prospects. With this overview, Patrick and I are happy to take your questions.
Conference Moderator: Thank you. Our first question comes from the line of Tim Clarkson from Van Clemens Inc.
Tim Clarkson, Analyst, Van Clemens Inc.: Hey guys, good quarter. We've got a few more questions. I missed the last one, sorry. So at this point, what percentage of the new tanks that have a potential to best potential to use this Xerox (NASDAQ:XRX) treatment? What percentage of those tanks are being treated with Northern Technology?
Matt Wolsfeld, CFO, NTIC: I'm not sure I understand your call your question, Tim.
Tim Clarkson, Analyst, Van Clemens Inc.: Well, there's a you got the total number of tanks out there, okay. And your best opportunity to use your treatment of course is when they're putting up new tanks, right. So I don't know how much those of the total tanks out there, what percentage turnover per year where they have to be replaced. So I guess I'm looking at that of the replacement market, the ones that are being replaced because they are rusted out or you're putting up new tanks because they're putting up new capacity. Those are probably your best opportunities to use your treatment.
So of those best opportunities, the new tanks and the replacement tanks, what percentage of that market do we have right now?
Matt Wolsfeld, CFO, NTIC: I would say it's not even 1%. I mean, at this point in time, if you look at the amount of tanks that are out there, and what's traditionally used as the solution to protect the infrastructure, we're not even a rounding error yet. Even the revenues that we have, the tanks that are out there, the available markets, we're not at a point where it's even measurable.
Unidentified Speaker, Company Representative, NTIC: Right.
Matt Wolsfeld, CFO, NTIC: No. The expectation is that you get to a point where it's obviously you're taking over market you're essentially hoping to take over an existing technology.
Tim Clarkson, Analyst, Van Clemens Inc.: Right. What's the cost of the existing technology versus your option?
Matt Wolsfeld, CFO, NTIC: Our option is roughly a third of the cost of the traditional solution, which is the cathodic protection.
Tim Clarkson, Analyst, Van Clemens Inc.: Okay. So and when you do your treatments, how much of it let's say that it what would be a typical cost on the front end for our treatment, say $500,000,000 $250,000
Matt Wolsfeld, CFO, NTIC: I mean, if you're talking about a standard tank, we might charge the chemistry portion that we charge maybe anywhere from $25,000 to $50,000 for a standard size tank. It can be upwards of several $100,000 if it's a tank that's one of the larger tanks, one that is the size of football fields. But there's also smaller 15 meter tanks that the revenue generated from it is very small. So that obviously depends on the square footage of protection that you're providing.
Tim Clarkson, Analyst, Van Clemens Inc.: Sure. Now what percentage once you do an installation, is there ongoing revenues that flow from that installation?
Matt Wolsfeld, CFO, NTIC: There's ongoing revenues typically 5 plus years after as you recharge the tank or recharge the infrastructure.
Tim Clarkson, Analyst, Van Clemens Inc.: Okay. Okay. And are they I mean, is it would be would it be 10% of the original treatment or is it more than that or less than that or about that?
Matt Wolsfeld, CFO, NTIC: Yes. I mean, that's kind of what we're seeing. We're getting to a point now where we're starting to do some of the recharge work. And we're starting to kind of gather more data on that to figure out what percentage we should expect going forward, what the timelines are, how that fits into their schedules and what the requirements are for them to inspect their tanks. It's kind of a lot of quarters
Tim Clarkson, Analyst, Van Clemens Inc.: to call. Right. And I'm guessing those are good opportunities to continue to sell and market for additional installations at that point when you're out there.
Unidentified Speaker, Company Representative, NTIC: Certainly.
Tim Clarkson, Analyst, Van Clemens Inc.: Certainly. Okay. And on the compostable end, what's new that's going on there? Is there are there I mean, it was really good growth 20% plus. What's going on there that's exciting?
Matt Wolsfeld, CFO, NTIC: I'd say the biggest the excitement from the compostable space, I think, continues to be the companies that we're kind of working with and coordinating with to develop, let's call them specialized resins to manufacture their products. There's some nice opportunities that we're working on that we should see success from over the next 6, 12, 18 months that I think will continue to accelerate the growth from Natur Tec. You certainly still have the existing growth kind of from the normal distribution sales of the bin liners, of cutlery, of things like that. But there's also kind of things going on in the background of selling resin to companies to manufacture their own products, which we're certainly working on. So I think that's probably the most exciting thing that we're going to see over the next 6 to 18 months and what's certainly going to drive the Natur Tec revenue going forward.
Tim Clarkson, Analyst, Van Clemens Inc.: Sure. Going back, just one last question on the tank still. I mean, is there a potential for you guys to have a $3,000,000 to $4,000,000 quarter this year or is that too ambitious?
Matt Wolsfeld, CFO, NTIC: Inside of Natur Tec?
Tim Clarkson, Analyst, Van Clemens Inc.: No, inside of the I'm flipping back to the oil tank business.
Matt Wolsfeld, CFO, NTIC: Yes, I certainly hope so. I mean, we if you look at from a revenue standpoint in Q4 of last year, we did 4,200,000 dollars There are some sizable opportunities that we're working on in oil and gas. One of the part of the expectations we have is that some of the oil and gas work is a bit seasonal because you get the a lot of the work we're doing and stuff like that with some of the pipe casings and pipeline protection and things like that doesn't happen in the winter. But certainly some of the expectations of some of the larger projects that we saw in our 3rd Q4 of last year, we expect to kind of repeat and grow in the 3rd Q4 of this year. So I don't expect typically company wide, our Q2 has historically if you go back 10, 15 years, our Q2 is historically not the strongest quarter.
And typically, the 3rd Q4 is kind of where things accelerate. I would expect that to be kind of a similar trend for the current year, certainly based on what I'm seeing as far as the backlog in projects from an industrial standpoint, an oil and gas standpoint and a Natur Tec standpoint, that's when I would expect to see kind of the acceleration in sales. So I do think that the growth, the $4,000,000 plus quarter is certainly doable. The other thing I'll say is that over the past 12, 16 months, we have dramatically accelerated the investments that we have made into the oil and gas space specifically to develop a global sales team. And for us hiring the 10 plus people that we've hired in that space to go after that market, It takes a little time for the, let's say, the traction, the opportunities to develop.
But that's something that we expect to see the results on in the back half of our fiscal 'twenty four I'm sorry, the back half of our fiscal 'twenty five, meaning 3rd Q4 and then beyond. So we're kind of gearing up for bigger and better things and kind of developing the internal infrastructure to be able to handle the increase in revenue from those groups. And so that's really what gets me excited from a company standpoint.
Tim Clarkson, Analyst, Van Clemens Inc.: Sure, sure. Switching to China, how come China is doing better?
Matt Wolsfeld, CFO, NTIC: I wish I could answer all the questions on what's going on in China. I can tell you that there is just in general from a Chinese standpoint, we saw a slight recovery. If you look at kind of what's going on in China, we thought we're not selling a huge amount in China compared to kind of where we were or where we expected to be. I mean, so you're talking about $4,000,000 in revenue in our Q1 compared to $3,600,000 of revenue in our Q4. So there is that's almost a 10% increase in sales.
I think there's certain things that are starting to kind of accelerate and recover a little bit there. I think there's also our team there is also working on some domestic sales in China and protecting things in China compared to being solely focused on exports before. So I think there's markets that we're going after that we haven't gone after before and there's a bit of a recovery starting to happen in China. Some of it might be temporary. There's obviously a lot going on from a geopolitical standpoint between the countries.
I know that right now there's a huge increase in activity in China specifically because of the changing of presidents and the uncertainty of what's going to happen with tariffs and things like that. So we'll kind of see how things change in China going forward. But our expectations are that we're going to see a decline in Q2 in China regardless just because that's when Chinese New Year is mid January. And so we're going to see a slowdown that we always see in Q2 from China. But then our expectations are that Q3 and Q4 will be similar or slightly better than Q1.
So all in all, our expectations are that China is going to grow from last year doing $14,200,000 to $15 plus 1,000,000 and beyond this year.
Tim Clarkson, Analyst, Van Clemens Inc.: Great. One last question. Is there anything in your R and D that's particularly exciting that you can talk about?
Matt Wolsfeld, CFO, NTIC: No. I think from an R and D standpoint, the blocking and tackling and the work we're doing in Natur Tec is it's what's exciting from my standpoint. The additional, let's say, the rollout of, and seeing kind of the adoption of the technologies in oil and gas and seeing the projects that we're working on there starting to get put into company's budgets and start we look at our planning for our 3rd Q4 and beyond is what kind of gets me excited from an oil and gas standpoint.
Tim Clarkson, Analyst, Van Clemens Inc.: Great, great. All right, good quarter. Thanks for answering my questions.
Matt Wolsfeld, CFO, NTIC: I'm done.
Conference Moderator: Thank you. One moment for our next question. Our next question comes from the line of Gus Richard from Northland Capital Markets.
Gus Richard, Analyst, Northland Capital Markets: Good morning. Thanks for taking the questions. Just on ZRUST, it looks like that business has stabilized. And I was just wondering if you could give a little bit of color on that market. Do you expect it to remain stable going forward?
Or could there be some growth?
Unidentified Speaker, Company Representative, NTIC: Right now, we're looking at more of a stability in the market. But right now, we're still trying to see what's going to happen with the German economy. There's some pain with their automotive industry right now.
Gus Richard, Analyst, Northland Capital Markets: Got it. And I was going to follow-up with Europe and the JVs, sort of a similar question. Do you expect Europe, given what's going on in Germany, can you hold that JV revenue flat or is there going to continue to be pressure?
Unidentified Speaker, Company Representative, NTIC: Well, it really depends on what's which country you're talking about. I mean, for example, in Finland, we're having fantastic quarter versus in Germany where they're feeling more pain because of the Volkswagen (ETR:VOWG_p) Audi situation. So I think for the most part, aside
Patrick Lynch, CEO, NTIC: from Germany, the joint ventures in Europe are
Unidentified Speaker, Company Representative, NTIC: still doing fairly well. It's just Germany that we're worried about.
Gus Richard, Analyst, Northland Capital Markets: Got it. And then I know that the oil and gas business is still pretty lumpy. Can you sort of give a sense to first half, second half relative seasonality, is it like fifty-fifty, not fifty-fifty, but maybe 1 third first half, 2 thirds second half for oil and gas in terms of how that would wait second half over first half?
Matt Wolsfeld, CFO, NTIC: Yes, I mean, if I look at it, I mean, I think you're looking at something close to sixty-forty or 1 third, 2 thirds as far as first half, second half.
Gus Richard, Analyst, Northland Capital Markets: Got it. Got it. Super helpful. And last one for me. And do you feel like at this point, MACI can sort of sustain roughly 20% growth this year?
Matt Wolsfeld, CFO, NTIC: Overall as a total company 20% growth?
Gus Richard, Analyst, Northland Capital Markets: No, no, no, no, just Natur Tec.
Matt Wolsfeld, CFO, NTIC: If I look at from an expectation standpoint, it's right around that number as far as expectations for Natur Tec, yes.
Gus Richard, Analyst, Northland Capital Markets: Got it. All right. Very helpful. Thank you so much.
Matt Wolsfeld, CFO, NTIC: Yes. Thanks, guys.
Conference Moderator: Thank you. One moment for our next question. Our next question comes from the line of Joe Vadich from Manalapan Oracle (NYSE:ORCL) Capital Management LLC.
Joe Vadich, Analyst, Manalapan Oracle Capital Management LLC: Yes. Good morning, Patrick and Matt. Great to see the progress and the outlook. I was wondering if you could just regarding Natur Tec, whether you consider the sales to be recurring once you've started with a customer, whether that's something we could look forward to as a basically building upon?
Matt Wolsfeld, CFO, NTIC: That is the exactly how Natur Tec has worked in the past and the expectations kind of going forward. It's a matter of signing up distributors, starting to sell product and then typically what you have is repeat business that you keep on a step function adding to that revenue. So it's Natur Tec lends itself to typical kind of forecastable month by month growth, which is what we've seen in the past. If you discount out what happened during COVID, which obviously had a major impact regarding NatureTech given the nature of how it impacted everybody's daily life. But that's typically what we see is, as you work on a project or you sign up a distributor, you get them working on projects and you ramp up from there with consistent growth.
Joe Vadich, Analyst, Manalapan Oracle Capital Management LLC: Right, right. Great, great, great. And then just with regard to the oil and gas business, I was wondering if what you talked about the timeframe in terms of getting a new salesperson up and running. I was wondering if you could also talk about just what the sales cycle is? And then also talk about your sales pipeline and how that's progressed over time?
Unidentified Speaker, Company Representative, NTIC: Could you repeat that question, please? Hello?
Joe Vadich, Analyst, Manalapan Oracle Capital Management LLC: Hello?
Unidentified Speaker, Company Representative, NTIC: Could you repeat your question, please?
Joe Vadich, Analyst, Manalapan Oracle Capital Management LLC: Yes, sure. Yes, so with regard to the oil and gas business, 0th Oil and Gas, I was wondering if you could talk about your sales pipeline and how the sales pipeline has progressed over time? And then also regarding the new sales people, roughly over what period of time do you see them becoming really adding to the sales?
Unidentified Speaker, Company Representative, NTIC: With any salesperson we've ever hired in the history of the company, it generally takes them about 6 months to a year to really learn the business and start to be effective. So we'll start to see a pickup from the tenants people we hired. Try to see some pickup probably by the end of this fiscal year, but you're really not going to see
Patrick Lynch, CEO, NTIC: the major impact until the next fiscal year.
Joe Vadich, Analyst, Manalapan Oracle Capital Management LLC: Right. And in terms of just your sales pipeline, I'm just wondering if you could talk a little bit about it. Are you seeing repeat customers? Is that where the or are you seeing customers come who are new and the size of potential size of orders and also maybe globally to talk about where you're seeing the sales?
Unidentified Speaker, Company Representative, NTIC: In North America, we're primarily announcing repeat sales from existing customers. But obviously, we're also adding new customers as they're coming along. But yes, we're getting some steady repeat business. Internationally, we're still building that up over time. We'll see we'll know more how that's going to pan out once we have these 10 people fully up to speed.
Joe Vadich, Analyst, Manalapan Oracle Capital Management LLC: And the 10 people, is that 10 new people on top of whatever existing sales staff you add?
Unidentified Speaker, Company Representative, NTIC: Yes, that's correct.
Matt Wolsfeld, CFO, NTIC: I'm not saying it's 10 salespeople. There is probably 6 salespeople and 4 technical or other people that are associated with oil and gas.
Joe Vadich, Analyst, Manalapan Oracle Capital Management LLC: Right, right, right. My final question is, in terms of the Chinese sales, I was just wondering, could you break that down between Natur Tec and ZERUST and ZERUSTO and Gas? Do you break it down at all like that?
Unidentified Speaker, Company Representative, NTIC: Sure. There isn't much of oil and gas, but in terms of the name MakeCheck and then the US Industrial is going to help you out with that.
Matt Wolsfeld, CFO, NTIC: So if I'm looking at the historical China sales, I would say that we are at roughly you're at about 10% sales 10% of the China sales number is Natur Tec and the rest being the North American outside of China. Meaning it's the business in North America, the business in India and other parts of Southeast Asia.
Joe Vadich, Analyst, Manalapan Oracle Capital Management LLC: Right, right, right, right. Okay. Anyway, that's all I got guys. I appreciate you taking my questions. Yes.
Matt Wolsfeld, CFO, NTIC: Thanks, Joe.
Conference Moderator: Thank you. One moment for our next question. Our next question comes from the line of Don Hall.
Don Hall, Analyst: Good morning, gentlemen. Just one simple question. Excuse me. Your expenses increased in the last quarter and the reason was, as I'm quoting, because you expanded your sales infrastructure. And I wanted to elaborate on that a little more, although I've been listening to all of your the previous conversation.
So you're hiring a number of sales people and sales support people. Can you say where or how or are these brand new territories? Can you describe that a little more, please?
Unidentified Speaker, Company Representative, NTIC: Southeast Asia and Middle East.
Don Hall, Analyst: I'm sorry?
Unidentified Speaker, Company Representative, NTIC: Southeast Asia and Middle East.
Don Hall, Analyst: I missed I'm sorry, I didn't pick up your comment.
Unidentified Speaker, Company Representative, NTIC: Sorry, Southeast Asia and the Middle East is primarily where these people are located.
Don Hall, Analyst: Southeast Asia and Middle and these are brand new territories, are they?
Unidentified Speaker, Company Representative, NTIC: Yes.
Don Hall, Analyst: I see. Southeast Asia and Middle East. Well, I hope it's got great promise. I assume it does.
Unidentified Speaker, Company Representative, NTIC: We think so. Yes. All
Don Hall, Analyst: right. Thank you very much.
Conference Moderator: Sure. Thank you. At this time, I would now like to turn the conference back to Patrick Lynch for closing remarks.
Unidentified Speaker, Company Representative, NTIC: I'd like to thank everybody for participating in the call today and wish you a nice day.
Conference Moderator: This concludes today's conference call. Thank you for participating. You may now disconnect.
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