Financial Data and Key Metrics Changes - For the second quarter ended February 28, 2025, total consolidated net sales decreased by 8.5% to $19.1 million compared to the same period last year [11] - Gross profit as a percentage of net sales was 35.6%, down from 40.0% in the prior fiscal year period, reflecting a less profitable mix of sales [25][26] - Net income for the second quarter was $434,000, or $0.04 per diluted share, compared to $1.7 million, or $0.17 per diluted share, for the fiscal 2024 second quarter [26] Business Line Data and Key Metrics Changes - Xero's oil and gas net sales decreased by 28.5%, while NatureTech net sales decreased by 11.8%, and Xero's industrial net sales decreased by 3.7% [11] - NatureTech sales were $5 million in the second quarter, down from $5.6 million in the same period a year ago, attributed to order timing and seasonal variation [19] - Xero's oil and gas sales were $1.5 million in the second quarter, compared to $2.2 million in the same period last year, with a trailing 12-month sales increase of 7.2% [16][17] Market Data and Key Metrics Changes - Joint venture sales decreased by 15.7% year-over-year to $19.8 million, reflecting high energy prices and regional economic pressures in Europe [12] - NTIC China subsidiary reported a net sales increase of 8.1% to $3.7 million, stabilizing and approaching sales levels from fiscal 2021 and 2022 [13][14] Company Strategy and Development Direction - The company is focused on strategic investments in oil and gas sales infrastructure to support growth expected in the second half of fiscal 2025 [18] - A disciplined approach to managing cash, including adjustments to quarterly dividends and prioritizing debt reduction, is intended to position the company for future growth opportunities [10][30] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the increasing intensity of headwinds, including changes in U.S. trade policies and economic conditions, but expressed confidence in a rebound in NatureTech and U.S. oil and gas sales in the second half of the fiscal year [7][9] - The leadership team emphasized their experience in navigating challenging economic periods and the strength of the company's balance sheet [21][22] Other Important Information - The company declared a quarterly cash dividend of $0.07 per common share, with plans to adjust the dividend to one cent per share in the next quarter [30] - As of February 28, 2025, working capital was $21.4 million, with outstanding debt of $8.1 million [28][29] Q&A Session Summary Question: How are the investments in the oil and gas sales team working out? - The company hired eight people, some of whom did not work out, but expects the impact to show in the second half of the year [34] Question: What are the dynamics behind potential issues in the compostable business? - A large distributor in the U.S. has been added, which is expected to significantly boost business, along with a new line of technology in food packaging [36] Question: What is the current state of the core business? - The core business is expected to remain flat [41] Question: Can you provide more color on the gross margin decline? - Increased pricing pressures in the NatureTech business led to a decrease in sales prices, impacting gross margins [46][48] Question: What is the outlook for the oil and gas business in the second half? - The company anticipates growth primarily in oil storage tank bottoms and pipeline casings, with significant business expected from large customers [60]