NTIC

• Core Business Growth Drivers

  • Record consolidated Q3 sales were driven by strong global demand and increased adoption of NTIC's Xeros corrosion prevention and NatureTech bioplastic solutions. Xeris Oil & Gas has delivered consistent growth following investments in global sales infrastructure, with expanded sales pipelines covering above-ground storage tanks, pipeline casings, and offshore rigs across the Middle East, North America, India, and China.
  • NatureTech advanced two key new commercial initiatives: it was selected for the International Fresh Produce Association's Packaging Innovation Program to develop compostable barrier laminate for food packaging, and announced a collaboration with Bayer in India to develop biodegradable compostable seedling cups for nursery applications, which will begin pilot trials before potential full commercialization.
  • The 14+ million dollar multi-year Xeros corrosion prevention contract for Brazilian offshore FPSOs continues to scale as planned, with Brazilian oil and gas revenue up 70% for the first nine months of FY2026, growing on a cumulative ramp schedule that will reach full volume in the third year of the contract. NTIC's Middle Eastern sales subsidiary, invested in over the past 18 months, is now scaling and contributing to revenue growth.

• Geographic Operations

  • European joint ventures, particularly in Germany, are seeing early signs of demand stabilization after years of subdued performance, with management expecting new government economic stimulus to drive future operating income growth. NTIC China sales have limited exposure to US tariffs, and management expects continued demand improvement to drive incremental sales and profitability in the market, which management views as a key long-term growth market for both of NTIC's core segments.
  • NTIC has invested in diversified production and sourcing capabilities across China, India, Vietnam, and Thailand over the past three years to mitigate supply chain and tariff risks, and continues to expand this network.

• Strategic Priorities

  • NTIC is focusing on driving profitable growth by expanding sales of higher-margin Xeris Oil & Gas solutions, and growing NatureTech's new high-margin specialty applications globally. Reducing outstanding debt via positive operating cash flow and improving working capital efficiency is a key near-term strategic priority. The company has capped large corporate-level investments, with all new growth investments taking place at the subsidiary level in high-growth markets like Brazil and India. NTIC is also implementing AI tools to analyze granular customer and product level gross margin data, improve operational responsiveness, and tighten operational efficiency.

• Management expects the Q3 2026 raw material cost pressure from Middle East shipping disruptions to be temporary, and forecasts sequential gross margin improvement for Q4 FY2026, driven by pricing actions and already declining raw material prices that have returned to August 2025 levels.
• Management expects continued YoY sales growth in Q4 FY2026, with revenues higher than Q3 and operating expenses held relatively flat, leading to improved profitability. Management projects Q4 FY2026 to be the strongest quarter of FY2026, building momentum for FY2027.
• Xeris Oil & Gas sales and profitability are expected to improve significantly in full year FY2026, with continued sizable annual growth across all geographic markets.
• The first commercial sales from the Bayer NatureTech seedling cup collaboration are expected to materialize approximately one year from the Q3 2026 call, after pilot testing and validation. New high-margin NatureTech food packaging innovations are expected to drive segment growth over the next 12 to 24 months.
• The sale of NTIC's unused Beachwood, Ohio facility is expected to close in FY2027, generating over $1 million in expected net proceeds to support corporate liquidity.

NTIC's consolidated net sales for Q3 FY2026 increased 12.6% year-over-year to $24.2 million, the second consecutive quarter of double-digit growth. Unconsolidated joint venture net sales increased 15.1% YoY to $26.7 million, with joint venture operating income up 12.2% YoY. NTIC China wholly-owned subsidiary net sales decreased less than 1% YoY to $4.5 million, with trailing 12-month sales up 12.8% to $17.8 million. By product segment:

1. Xeris Oil & Gas: Q3 net sales hit a record $2.2 million, a 72.3% YoY increase. It marked the fourth consecutive quarter of sales over $2 million, with trailing 12-month sales exceeding $10 million for the first time in company history. This segment accounts for approximately 9.1% of total consolidated net sales. It is the company's highest-margin segment.
2. Xeros Industrial: Net sales increased 10.3% YoY in Q3 FY2026.
3. NatureTech Bioplastic: Q3 net sales reached a record $6.1 million, a 5% YoY increase, accounting for approximately 25.2% of total consolidated net sales. 5% YoY revenue growth has come alongside 10-12% YoY volume growth, with the difference driven by price concessions to compete in commodity market segments.

Gross profit margin for the consolidated company was 33.6% in Q3 FY2026, down 480 basis points from 38.4% in Q3 FY2025. Total operating expenses increased 5.3% YoY to $10.2 million, equal to 42% of net sales, down from 44.9% in the prior year period. NTIC reported a GAAP net loss of $263,000 ($0.03 per diluted share) in Q3, compared to net income of $122,000 ($0.01 per diluted share) in Q3 FY2025. Non-GAAP adjusted net loss was $158,000 ($0.02 per diluted share), compared to non-GAAP adjusted net income of $228,000 ($0.02 per diluted share) in the prior year quarter. As of May 31 2026, NTIC held $7.3 million in cash and cash equivalents, with $14.8 million in outstanding total debt.

• Geopolitical conflict in the Middle East caused shipping disruptions through the Strait of Hormuz, which drove a 30%+ increase in global polyethylene and base chemistry prices that reduced Q3 2026 gross margin by 480 basis points, and reduced Q3 gross profit by an estimated $1 million. Operational disruptions also slowed activity at NTIC's Dubai-based regional operations during the conflict.
• Intense price competition in NatureTech's commodity bioplastic product lines (including bag liners and cutlery) has pressured segment gross margins, as NTIC has had to offer price concessions to maintain market share.
• European industrial demand remains below historical levels, and full recovery depends on continued macroeconomic stabilization and resolution of national energy price challenges in markets like Germany.
• The large multi-year Brazilian FPSO contract ramps up gradually, with full sales and profit contribution not realized until the third year of the contract, leading to slower-than-immediate revenue growth from the award.

Q: The analyst asks if Xeris Oil & Gas can reach a 5-10% net margin on its projected $10 million annual run rate, and asks for clarification on growth trends and profitability expectations. / A: Management does not break out full standalone net profitability for the segment, but confirms Xeris Oil & Gas has higher gross margins than the rest of NTIC's business, and growing contribution to the company's bottom line. Management notes Q3 Xeris revenue was lower than Q2 as some large projects were invoiced in June (Q4), which will boost Q4 gross margin contribution. With raw material prices normalizing, management expects strong profitability contribution from the segment in Q4.

Q: The analyst asks how NTIC is diversifying raw material sourcing to reduce exposure to Middle East supply chain volatility, for both NatureTech and industrial products. / A: Management clarifies NTIC does not source raw materials directly from the Middle East; the price impact came from global market ripple effects of Strait of Hormuz shipping disruptions. Over the past three years, NTIC has built diversified production and sourcing capabilities across China, India, Vietnam, and Thailand to access competitive pricing and mitigate regional supply chain and tariff risks, and will continue expanding this strategy.

Q: The analyst asks if the Bayer seedling cup collaboration with NatureTech in India can be expanded globally, and when it will contribute to the bottom line. / A: Management confirms the technology can be implemented globally, with relevant existing applications in North America and other large agricultural markets. The collaboration is currently focused on India, with pilot testing expected to take approximately one year, and the first commercial sales projected to begin around one year after the call.

Q: The analyst asks what drove the trajectory of NatureTech gross margins, and what the segment's margin outlook is. / A: Management explains NatureTech splits into commodity and high-margin proprietary product lines. Commodity lines face intense price competition, requiring price concessions that have pressured segment gross margins. Raw material price normalization in Q4 is expected to improve overall NatureTech margins, but existing commodity pricing concessions will remain in place unless input costs fall further. New proprietary applications like food packaging and seedling cups are higher-margin opportunities that will drive long-term segment margin improvement.