BURLINGTON, ON, Nov. 6, 2018 /CNW/ - EcoSynthetix Inc.
(TSX: ECO) ("EcoSynthetix" or the "Company"), a
renewable chemicals company that produces a portfolio of
commercially proven bio-based products, today announced its
financial and operational results for the three months (Q3 2018)
and nine months (YTD 2018) ended September
30, 2018. Financial references are in U.S. dollars unless
otherwise indicated.
Q3 2018 Highlights
- Recorded net sales of $5.6
million in Q3 2018, up 24% compared to the same period in
2018
- Achieved breakeven adjusted EBITDA and $0.2 million positive operating cash flow in Q3
2018
- The SWISS KRONO GROUP launched a NAF (No-Added Formaldehyde)
Solution particleboard product using DuraBind™ technology,
subsequent to the end of the period
- Purchased and cancelled nearly 250,000 common shares for total
consideration of $0.3 million under
the normal course issuer bid during the open trading window in
August and September, bringing the total since May to 729,000
purchased and cancelled common shares
- Maintained a strong balance sheet with cash and term deposits
of $46.9 million as at September 30, 2018
"With continued strength in the paper and paperboard markets and
our disciplined cost management, we achieved positive operating
cash flow and breakeven adjusted EBITDA in the third quarter. These
are major milestones for the business as we have now established a
foundation from which we can grow. We intend to continue to drive
topline growth in both the wood composites market and the paper and
paperboard markets and maintain the trajectory of our improvements
in profitability," said Jeff
MacDonald, CEO of EcoSynthetix. "We are encouraged by the
recent market dynamics for each of the material inputs we either
compete with, SB Latex in the case of EcoSphere®, or
work in combination with, pMDI in the case of DuraBind. The
landscape for NAF solutions continues to advance in the wood
composites market as manufacturers are actively pursuing new
approaches to reduce formaldehyde emissions. The demand from
consumers and retailers is motivating change and our DuraBind
technology is ideally positioned as an enabling technology for
those manufacturers. Our focus is converting those manufacturers in
our pipeline today to commercial accounts."
Financial Summary
Net Sales
Net sales were $5.6 million and
$16.8 million for Q3 2018 and YTD
2018, respectively, compared to $4.5
million and $12.9 million in
the corresponding periods in 2017. The 24% increase in the quarter
was primarily due to higher sales volume of $1.0 million, or 23%, and higher average selling
prices which improved sales $0.1
million, or 1%. The 31% increase in the YTD period was
primarily due to higher sales volumes of $3.2 million, or 25%, and an increase in average
selling price which positively impacted sales by $0.8 million, or 6%.
Gross Profit
Gross profit was $1.1 million and
$3.3 million for Q3 2018 and YTD
2018, respectively, compared to $1.0
million and $2.8 million in
the corresponding periods in 2017. The 7% increase in the quarter
and the 17% increase in the YTD period were primarily due to higher
sales volumes, as well as higher average selling prices, partly
offset by increases in manufacturing costs.
Gross profit as a percentage of sales was 19.0% and 19.6% for Q3
2018 and YTD 2018, respectively, compared to 22.1% and 22.0% in the
corresponding periods in 2017. Gross profit as a percentage of
sales adjusted for manufacturing depreciation was 22.7% and 23.3%
for Q3 2018 and YTD 2018, respectively, compared to 26.0% and 26.2%
for the corresponding periods in 2017. The change in both periods
was primarily due to higher manufacturing costs, partly offset by
an increase in average selling prices.
Selling, General and Administrative
(Excludes
share-based compensation, depreciation, termination benefits, and
foreign exchange gains and losses)
Selling, general and administrative expenses (SG&A) were
$0.9 million and $3.5 million for Q3 2018 and YTD 2018,
respectively, compared to $1.2
million and $3.7 million in
the corresponding periods in 2017. The change in both periods was
primarily due to lower salaries & benefits and lower
discretionary spending.
Research and Development
(Excludes share-based compensation, depreciation, termination
benefits, and foreign exchange gains and losses)
Research and development (R&D) costs were $0.4 million and $1.5
million for Q3 2018 and YTD 2018, respectively, compared to
$0.9 million and $3.3 million for the corresponding periods in
2017. The change in both periods was primarily due to lower mill
trial related costs, lower people related expenses and lower
third-party development costs.
Share-based compensation
Share-based compensation expense was $0.2
million and $0.6 million for
Q3 2018 and YTD 2018, respectively, compared to $0.3 million and $0.9
million for the corresponding periods in 2017. The
change in both periods was primarily due to the achievement of
certain vesting conditions related to performance stock options
(PSOs) and Restricted Share Units (RSUs) and the timing of
share-based awards issued in the current fiscal year.
Termination benefits
Termination benefits were nil and $0.2
million for Q3 2018 and YTD 2018, respectively, compared to
$0.1 million in the corresponding
periods in 2017. The termination benefits in 2018 related to a cost
reduction plan implemented during the first quarter of the current
fiscal year.
Foreign Exchange
Foreign exchange was a gain of $0.1
million in Q3 2018 and a loss of $0.1
million in YTD 2018, compared to a $0.1 million loss and a nominal amount in the
corresponding periods last year. The change was primarily due
to the translation of cash balances denominated in Canadian dollars
and exchange rate fluctuations between the Canadian dollar versus
U.S. dollar.
Adjusted EBITDA
Adjusted EBITDA loss was a nominal amount and $1.4 million for Q3 2018 and YTD 2018,
respectively, compared to a loss of $1.0
million and $3.7 million for
the corresponding periods in 2017. The improvements were primarily
due to lower operating expenses and increased gross profit,
principally due to higher sales volume.
Net Loss
Net loss was $0.3 million, or
$0.01 per common share, and
$2.2 million, or $0.04 per common share, for Q3 2018 and YTD 2018,
respectively, compared to $1.4
million, or $0.02 per common
share, and $5.0 million, or
$0.08 per common share, for the
corresponding periods in 2017. The improvements were principally
due to lower operating expenses, as well as higher gross profit
compared to the same periods in 2017.
Liquidity
Cash on hand and term deposits were $46.9
million as at September 30,
2018, compared to $49.3
million as at December 31,
2017. Cash on hand at September 30,
2018, excluding the $30.5
million in term deposits, was $16.4
million.
Notice of Conference Call
EcoSynthetix will host a conference call Wednesday, November 7, 2018, at 8:30 AM ET to discuss its financial
results. Jeff MacDonald, CEO,
and Robert Haire, CFO, will co-chair
the call. All interested parties can join the call by dialling
(647) 427-7450 or (888) 231-8191. Please dial in 15 minutes prior
to the call to secure a line. A live audio webcast of the
conference call will also be available at www.ecosynthetix.com. The
presentation will be accompanied by slides, which will be available
via the webcast link and the Company's website. Please connect at
least 15 minutes prior to the conference call to ensure adequate
time for any software download that may be required to join the
webcast.
1Non-IFRS Financial Measures
This
press release makes reference to certain non-IFRS measures. These
non-IFRS measures are not recognized measures under IFRS, do not
have a standardized meaning prescribed by IFRS and are therefore
unlikely to be comparable to similar measures presented by other
companies. Rather, these measures are provided as additional
information to complement those IFRS measures by providing a
further understanding of results of operations of EcoSynthetix from
management's perspective. Accordingly, they should not be
considered in isolation nor as a substitute for analysis of the
financial information of EcoSynthetix reported under IFRS. The
Company uses non-IFRS measures such as Adjusted EBITDA to provide
investors with a supplemental measure of operating performance and
thus highlight trends in its core business that may not otherwise
be apparent when relying solely on IFRS financial measures.
Management also believes that securities analysts, investors and
other interested parties frequently use non-IFRS measures in the
evaluation of issuers. Management also uses non-IFRS measures in
order to facilitate operating performance comparisons from period
to period, prepare annual operating budgets and assess the
Company's ability to meet its capital expenditure and working
capital requirements.
Adjusted EBITDA is not a measure recognized under IFRS and does
not have a standardized meaning prescribed by IFRS. See "IFRS and
Non-IFRS Measures." The Company presents Adjusted EBITDA because
the Company believes it facilitates investors' use of operating
performance comparisons from period to period and company to
company by backing out potential differences caused by variations
in capital structures (affecting relative interest expense), the
book amortization of intangibles (affecting relative amortization
expense) and the age and book value of property and equipment
(affecting relative depreciation expense). The Company also
presents Adjusted EBITDA because it believes it is frequently used
by securities analysts, investors and other interested parties as a
measure of financial performance. Adjusted EBITDA as presented
herein are not recognized measures under IFRS and should not be
considered as an alternative to operating income or net income as
measures of operating results or an alternative to cash flows as
measures of liquidity. Adjusted EBITDA is defined as consolidated
net income (loss) before net interest expense, income taxes,
depreciation, amortization, other non-cash expenses and charges
deducted in determining consolidated net income (loss).
The following table reconciles net loss to Adjusted EBITDA loss
for the three months and nine months ended September 30, 2018 and September 30, 2017:
|
Three months
ended
September 30, 2018
|
Three months
ended
September 30, 2017
|
Nine months
ended
September 30, 2018
|
Nine months
ended
September 30, 2017
|
Net Loss
|
(307,582)
|
(1,365,336)
|
(2,181,807)
|
(5,008,004)
|
Depreciation
|
300,497
|
280,610
|
936,038
|
852,304
|
Share-based
Compensation
|
231,536
|
289,169
|
555,038
|
909,756
|
Interest
Income
|
(228,498)
|
(195,846)
|
(667,980)
|
(485,663)
|
Adjusted EBITDA
loss
|
(4,047)
|
(991,403)
|
(1,358,711)
|
(3,731,607)
|
About EcoSynthetix Inc. (www.ecosynthetix.com)
EcoSynthetix offers a range of sustainable engineered
biopolymers that allow customers to reduce their use of harmful
materials, such as formaldehyde and styrene-based chemicals. The
Company's flagship products, DuraBind™ and EcoSphere®,
are used to manufacture wood composites, paper and packaging, and
enable performance improvements, economic benefits and
sustainability. The Company is publicly traded on the Toronto Stock
Exchange (T:ECO).
Forward-Looking Statements
Certain statements in this Press Release constitute
"forward-looking" statements that involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance, objectives or achievements of the Company, or industry
results, to be materially different from any future results,
performance, objectives or achievements expressed or implied by
such forward looking statements. The forward-looking statements in
this Press Release include, but are not limited to, statements
regarding the Company's plans to execute its commercial strategy,
convert late-stage industrial trial prospects into customers and
expand the number of lines and the volumes at existing customers,
and other statements regarding the Company's plans and expectations
in 2018. These statements reflect our current views regarding
future events and operating performance and are based on
information currently available to us, and speak only as of the
date of this Press Release. These forward-looking statements
involve a number of risks, uncertainties and assumptions and should
not be read as guarantees of future performance or results, and
will not necessarily be accurate indications of whether or not such
performance or results will be achieved. Those assumptions and
risks include, but are not limited to, the Company's ability to
successfully allocate capital as needed and to develop new
products, as well as the fact that our results of operations and
business outlook are subject to significant risk, volatility and
uncertainty. Many factors could cause our actual results,
performance or achievements to be materially different from any
future results, performance or achievements that may be expressed
or implied by such forward-looking statements, including the
factors identified in the "Risk Factors" section of the Company's
Annual Information Form dated March 6,
2018. Should one or more of these risks or uncertainties
materialize, or should assumptions underlying the forward-looking
statements prove incorrect, actual results may vary materially from
those described in this Press Release as intended, planned,
anticipated, believed, estimated or expected. Unless required by
applicable securities law, we do not intend and do not assume any
obligation to update these forward-looking statements.
EcoSynthetix
Inc.
|
|
|
Consolidated
Balance Sheets
|
|
|
(Unaudited)
|
|
|
|
|
|
(expressed in US
dollars)
|
|
|
|
|
|
|
September 30,
2018
|
December 31,
2017
|
Assets
|
|
|
|
|
|
Current
assets
|
|
|
Cash
|
16,425,310
|
19,116,828
|
Term
deposits
|
30,469,800
|
30,171,121
|
Accounts
receivable
|
1,834,489
|
2,296,255
|
Inventory
|
2,855,788
|
2,535,234
|
Prepaid
expenses
|
168,568
|
153,524
|
|
51,753,955
|
54,272,962
|
|
|
|
Non-current
assets
|
|
|
Property, plant and
equipment
|
6,196,862
|
7,115,672
|
Total
assets
|
57,950,817
|
61,388,634
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Current
liabilities
|
|
|
Trade accounts
payables and accrued liabilities
|
1,774,215
|
2,951,220
|
Accrued termination
benefits
|
-
|
39,830
|
Total
liabilities
|
1,774,215
|
2,991,050
|
|
|
|
Shareholders'
Equity
|
|
|
Common
shares
|
493,569,319
|
493,631,495
|
Contributed
surplus
|
9,573,446
|
9,550,445
|
Accumulated
deficit
|
(446,966,163)
|
(444,784,356)
|
Total
shareholders' equity
|
56,176,602
|
58,397,584
|
|
|
|
Total liabilities
and shareholders' equity
|
57,950,817
|
61,388,634
|
EcoSynthetix
Inc.
|
|
Consolidated
Statements of Operations and Comprehensive Loss
|
For the three and
nine months ended September 30, 2018 and 2017
|
(Unaudited)
|
|
|
|
|
|
|
|
(expressed in US
dollars)
|
|
|
|
|
|
|
Three months
ended September 30,
|
|
Nine months
ended September 30,
|
|
2018
|
2017
|
|
2018
|
2017
|
|
|
|
|
|
|
Net
sales
|
5,566,269
|
4,494,086
|
|
16,810,012
|
12,855,428
|
|
|
|
|
|
|
Cost of
sales
|
4,505,910
|
3,502,293
|
|
13,508,484
|
10,024,357
|
|
|
|
|
|
|
Gross profit on
sales
|
1,060,359
|
991,793
|
|
3,301,528
|
2,831,071
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Selling, general and
administrative
|
1,063,387
|
1,546,069
|
|
4,119,978
|
4,664,906
|
Research and
development
|
533,052
|
1,006,906
|
|
1,808,559
|
3,596,347
|
Termination
benefits
|
-
|
-
|
|
222,778
|
63,485
|
|
1,596,439
|
2,552,975
|
|
6,151,315
|
8,324,738
|
|
|
|
|
|
|
Loss from
operations
|
(536,080)
|
(1,561,182)
|
|
(2,849,787)
|
(5,493,667)
|
|
|
|
|
|
|
Interest
income
|
228,498
|
195,846
|
|
667,980
|
485,663
|
|
|
|
|
|
|
Net loss and
comprehensive loss
|
(307,582)
|
(1,365,336)
|
|
(2,181,807)
|
(5,008,004)
|
|
|
|
|
|
|
Basic and diluted
loss per common share
|
(0.01)
|
(0.02)
|
|
(0.04)
|
(0.08)
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding
|
59,585,638
|
59,569,921
|
|
59,655,385
|
59,546,267
|
EcoSynthetix
Inc.
|
|
Consolidated
Statements of Cash Flows
|
|
For the three and
nine months ended September 30, 2018 and 2017
|
(Unaudited)
|
|
|
|
|
|
(expressed in US
dollars)
|
Three months
ended September 30,
|
|
Nine months
ended September 30,
|
|
2018
|
2017
|
|
2018
|
2017
|
Cash provided by
(used in)
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
Net loss and
comprehensive loss
|
(307,582)
|
(1,365,336)
|
|
(2,181,807)
|
(5,008,004)
|
Items not affecting
cash
|
|
|
|
|
|
|
Depreciation
|
300,497
|
280,610
|
|
936,038
|
852,304
|
|
Share-based
compensation
|
231,536
|
289,169
|
|
555,038
|
909,756
|
|
Unrealized foreign
exchange loss (gain)
|
(126,696)
|
13,562
|
|
14,572
|
(418)
|
|
Other
|
(115,784)
|
(229,375)
|
|
(213,928)
|
(244,987)
|
Changes in non-cash
working capital
|
|
|
|
|
|
|
Accounts
receivable
|
589,620
|
522,307
|
|
461,766
|
641,977
|
|
Inventory
|
(23,610)
|
393,142
|
|
(329,772)
|
88,792
|
|
Government grants
receivable
|
-
|
11,629
|
|
-
|
-
|
|
Prepaid
expenses
|
(7,064)
|
54,008
|
|
(15,044)
|
(33,312)
|
|
Trade accounts
payables and accrued liabilities
|
(370,864)
|
(48,877)
|
|
(1,177,005)
|
(263,839)
|
|
Accrued termination
benefits
|
-
|
(12,910)
|
|
(39,830)
|
(398,741)
|
|
170,053
|
(92,071)
|
|
(1,989,972)
|
(3,456,472)
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
Purchase of property,
plant and equipment
|
(17,563)
|
(144,750)
|
|
(17,563)
|
(315,873)
|
Purchase of term
deposit
|
-
|
-
|
|
-
|
(15,000,000)
|
|
(17,563)
|
(144,750)
|
|
(17,563)
|
(15,315,873)
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
Common shares
repurchased
|
(330,919)
|
-
|
|
(980,936)
|
-
|
Exercise of common
share options
|
101,540
|
38,908
|
|
386,723
|
47,617
|
Proceeds from
government grants
|
-
|
102,856
|
|
-
|
168,562
|
|
(229,379)
|
141,764
|
|
(594,213)
|
216,179
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
86,433
|
88,309
|
|
(89,770)
|
112,638
|
|
|
|
|
|
|
Increase
(decrease) in cash during the period
|
9,544
|
(6,748)
|
|
(2,691,518)
|
(18,443,528)
|
|
|
|
|
|
|
Cash - Beginning
of period
|
16,415,766
|
20,080,498
|
|
19,116,828
|
38,517,278
|
|
|
|
|
|
|
Cash - End of
period
|
16,425,310
|
20,073,750
|
|
16,425,310
|
20,073,750
|
SOURCE EcoSynthetix Inc.