BURLINGTON, ON, July 31, 2019 /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 (Q2 2019)
and six months (YTD 2019) ended June 30,
2019. Financial references are in U.S. dollars unless
otherwise indicated.
Highlights
- Recorded net sales of $5.1
million in Q2 2019, compared to $5.8
million in Q2 2018
- Net loss of $0.2 million in Q2
2019, an improvement of 72%, compared to a loss of $0.7 million in Q2 2018
- Adjusted EBITDA was $26.0
thousand in Q2 2019, an improvement of 105%, compared to a
loss of $0.5 million in Q2 2018
- Cash provided by (used in) operating activities was
$0.2 million in Q2 2019, compared to
$(0.3) million in Q2 2018, an
improvement of $0.5 million or
167%
- During Q2 2019 the Company's biopolymer products for the
personal care space were launched together with a leading player in
the personal care market under exclusive marketing and development
agreements
- Maintained a strong balance sheet with cash and short-term
investments of $44.6 million as at
June 30, 2019
"It was a milestone quarter for the business as we generated
positive cash flow and profitable Adjusted EBITDA. In addition, we
generated positive cash flow from operations on a trailing twelve
month basis for the first time. This achievement is another
meaningful step toward delivering on our commitment of
profitability for 2019," said Jeff
MacDonald, CEO of EcoSynthetix. "Our bottom-line continues
to improve as a result of our cost discipline despite the impact on
our top-line of ongoing challenging dynamics in the paper market.
We believe our primary growth market in the near term remains wood
composites. The marketing efforts of a leading global wood
composites manufacturer and its launch of a No-Added Formaldehyde
particle board is receiving positive feedback in the market. Its
NAF solution clearly fills a need for consumers and retailers in
search of a sustainable and healthy alternative to
formaldehyde-based products."
Financial Summary
Net Sales
Net sales were $5.1 million and
$9.5 million for Q2 2019 and YTD
2019, respectively, compared to $5.8
million and $11.2 million in
the corresponding periods in 2018. The decreases were primarily due
to lower sales volume as a result of continued challenging market
dynamics within the paper market which included the loss of
business from a European paperboard mill in the first quarter of
2019 which reduced sales $0.4 million
and $0.7 million in the comparative
periods, respectively.
Gross Profit
Gross profit was $1.0 million and
$2.0 million for Q2 2019 and YTD
2019, compared to $1.2 million and
$2.2 million in the corresponding
periods in 2018. The decrease of $0.2
million in both periods was primarily due to lower sales
volume.
Gross profit as a percentage of sales was 20.1% and 21.1% for Q2
2019 and YTD 2019, respectively, compared to 20.5% and 19.9% in the
corresponding periods in 2018. Gross profit as a percentage of
sales adjusted for manufacturing depreciation was 24.8% and 25.1%
for Q2 2019 and YTD 2019, respectively, compared to 23.9% and 23.6%
for the corresponding periods in 2018. The increases in gross
profit as a percentage of sales adjusted for manufacturing
depreciation in the quarter were primarily due to lower
manufacturing costs partly offset by lower average selling
prices.
Selling, General and Administrative
Selling, general and administrative expenses (SG&A) were
$1.1 million and $2.3 million for Q2 2019 and YTD 2019,
respectively, compared to $1.6
million and $3.1 million for
the corresponding periods in 2018. The decreases in both periods
was primarily due to lower people related costs, a decrease in
foreign exchange losses and lower discretionary expenses. The
decrease in people related costs and discretionary spending was
primarily due to lower headcount. The decrease in foreign exchange
losses was primarily due to the translation of cash balances
denominated in Canadian dollars and foreign exchange rate
fluctuations between the Canadian dollar and U.S. dollar.
SG&A includes share-based compensation expense, which was
$0.1 million and $0.3 million for Q2 2019 and YTD 2019,
respectively, comparable to the same periods in 2018.
SG&A excluding share-based compensation expense was
$1.0 million and $2.0 million in Q2 2019 and YTD 2019,
respectively, compared to $1.5
million and $2.7 million for
the corresponding periods in 2018.
Research and Development
Research and development (R&D) costs were $0.4 million and $0.8
million for Q2 2019 and YTD 2019, respectively, compared to
$0.5 million and $1.3 million for the corresponding periods in
2018. The decrease in both periods was primarily due to lower
people related expenses, the recognition of government grants and a
decrease in rent expense. Rent expenses was $0.1 million lower in YTD 2019 due to the
adoption of IFRS 16, Leases, which was implemented using the
modified retrospective method on January
1, 2019.
Depreciation expense included in R&D was $0.1 million and $0.3
million for Q2 2019 and YTD 2019, respectively, compared to
$0.1 million and $0.2 million in the corresponding periods in
2018. R&D excluding depreciation expense was $0.2 million and $0.5
million for Q2 2019 and YTD 2019, respectively, compared to
$0.4 million and $1.1 million for the corresponding periods in
2018.
Termination benefits
Termination benefits were nil for both Q2 2019 and YTD 2019,
compared to nil and $0.2 million in
corresponding periods in 2018. Termination benefits recorded
in 2018 related to a cost reduction plan implemented in the first
quarter of 2018.
Adjusted EBITDA1
Adjusted EBITDA was $26.0 thousand
for Q2 2019, compared to an Adjusted EBITDA loss of $0.5 million in the corresponding period in 2018.
Adjusted EBITDA loss was $0.1 million
for YTD 2019, compared to $1.4
million for the corresponding period in 2018. The
improvement of 105% and 91% for the respective periods was
primarily due to lower operating expenses.
Net Loss
Net loss was $0.2 million, or nil
per common share, and $0.6 million,
or $0.01 per common share, for Q2
2019 and YTD 2019, respectively, compared to $0.7 million, or $0.01 per common share, and $1.9 million, or $0.03 per common share, for the corresponding
periods in 2018. The improvements were principally due to lower
operating expenses, partly offset by lower gross profit.
Liquidity
Cash on hand and short-term investments were $44.6 million as at June
30, 2019, compared to $44.8
million as at December 31,
2018. Cash on hand at June 30,
2019, excluding the $35.4
million in short-term investments, was $9.2 million. During the six months ended
June 30, 2019, the Company
repurchased and cancelled 42,000 common shares for total
consideration of $65,763.
Notice of Conference Call
EcoSynthetix will host a conference call Thursday, August 1, 2019 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 six months ended June 30, 2019 and June 30,
2018:
|
Three months
ended
June 30, 2019
(unaudited)
|
Three months
ended
June 30, 2018
(unaudited)
|
Six months
ended
June 30, 2019
(unaudited)
|
Six months
ended
June 30, 2018
(unaudited)
|
Net Loss
|
(200,588)
|
(709,018)
|
(553,824)
|
(1,874,225)
|
Depreciation
|
387,330
|
307,570
|
689,959
|
635,541
|
Share-based
Compensation
|
113,810
|
148,088
|
294,407
|
323,502
|
Interest
Income
|
(274,857)
|
(225,860)
|
(549,902)
|
(439,482)
|
Adjusted EBITDA
(loss)
|
25,695
|
(479,220)
|
(119,360)
|
(1,354,664)
|
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 2019. 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 4,
2019. 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
|
|
|
(expressed in US
dollars)
|
|
|
|
|
|
|
(Unaudited)
|
|
|
June 30,
2019
|
December 31,
2018
|
Assets
|
|
|
|
|
|
Current
assets
|
|
|
Cash
|
9,217,611
|
14,207,342
|
Short-term
investments
|
35,367,672
|
30,635,400
|
Accounts
receivable
|
2,201,251
|
2,347,622
|
Inventory
|
2,570,343
|
2,722,742
|
Government grants
receivable
|
211,307
|
140,000
|
Prepaid
expenses
|
179,888
|
129,240
|
|
49,748,072
|
50,182,346
|
|
|
|
Non-current
assets
|
|
|
Property, plant and
equipment
|
7,096,211
|
6,174,898
|
Total
assets
|
56,844,283
|
56,357,244
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Current
liabilities
|
|
|
Trade accounts
payables and accrued liabilities
|
1,629,550
|
2,255,430
|
|
|
|
Non-current
liabilities
|
|
|
Lease
liability
|
1,288,473
|
-
|
Total
liabilities
|
2,918,023
|
2,255,430
|
|
|
|
Shareholders'
Equity
|
|
|
Common
shares
|
491,901,850
|
491,618,125
|
Contributed
surplus
|
9,893,348
|
9,798,803
|
Accumulated
deficit
|
(447,868,938)
|
(447,315,114)
|
Total
shareholders' equity
|
53,926,260
|
54,101,814
|
|
|
|
Total liabilities
and shareholders' equity
|
56,844,283
|
56,357,244
|
EcoSynthetix
Inc
|
|
|
|
|
|
Consolidated
Statements of Operations and Comprehensive Loss
|
|
|
|
|
|
For the three and
six months ended June 30, 2019 and 2018
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
(expressed in US
dollars, unless otherwise noted)
|
Three months
ended June 30,
|
|
Six months
ended June 30,
|
|
2019
|
2018
|
|
2019
|
2018
|
|
|
|
|
|
|
Net
sales
|
5,074,363
|
5,796,669
|
|
9,543,084
|
11,243,743
|
|
|
|
|
|
|
Cost of
sales
|
4,053,215
|
4,607,028
|
|
7,530,864
|
9,002,574
|
|
|
|
|
|
|
Gross profit on
sales
|
1,021,148
|
1,189,641
|
|
2,012,220
|
2,241,169
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Selling, general and
administrative
|
1,111,629
|
1,598,842
|
|
2,284,958
|
3,056,591
|
Research and
development
|
384,964
|
525,677
|
|
830,988
|
1,275,507
|
Termination
benefits
|
-
|
-
|
|
-
|
222,778
|
|
1,496,593
|
2,124,519
|
|
3,115,946
|
4,554,876
|
|
|
|
|
|
|
Loss from
operations
|
(475,445)
|
(934,878)
|
|
(1,103,726)
|
(2,313,707)
|
|
|
|
|
|
|
Net interest
income
|
274,857
|
225,860
|
|
549,902
|
439,482
|
Net loss and
comprehensive loss
|
(200,588)
|
(709,018)
|
|
(553,824)
|
(1,874,225)
|
Basic and diluted
loss per common share
|
(0.00)
|
(0.01)
|
|
(0.01)
|
(0.03)
|
Weighted average
number of common shares outstanding
|
58,418,779
|
59,701,785
|
|
58,354,928
|
59,690,837
|
EcoSynthetix
Inc
|
|
|
|
|
|
Consolidated
Statements of Cash Flows
|
|
|
|
|
|
For the three and
six months ended June 30, 2019 and 2018
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
(expressed in US
dollars)
|
|
|
|
|
|
Three months
ended June 30,
|
|
Six months
ended June 30,
|
|
2019
|
2018
|
|
2019
|
2018
|
Cash provided by
(used in)
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
Net loss and
comprehensive loss
|
(200,588)
|
(709,018)
|
|
(553,824)
|
(1,874,225)
|
Items not affecting
cash
|
|
|
|
|
|
Depreciation
|
387,330
|
307,570
|
|
689,959
|
635,541
|
Share-based
compensation
|
113,810
|
148,088
|
|
294,407
|
323,502
|
Other
|
42,966
|
109,262
|
|
8,436
|
176,203
|
Changes in non-cash
working capital
|
|
|
|
|
|
Accounts
receivable
|
(571,935)
|
620,487
|
|
146,371
|
(127,854)
|
Inventory
|
969,274
|
(183,574)
|
|
174,956
|
(306,162)
|
Government grants
receivable
|
(74,945)
|
-
|
|
(71,307)
|
-
|
Prepaid
expenses
|
(90,365)
|
(77,399)
|
|
(50,648)
|
(7,980)
|
Trade accounts
payables and accrued liabilities
|
(193,031)
|
(374,544)
|
|
(736,821)
|
(806,141)
|
Accrued termination
benefits
|
-
|
-
|
|
-
|
(39,830)
|
Interest on
short-term investments
|
|
|
|
|
|
Interest received on
short-term investments
|
86,301
|
-
|
|
741,501
|
187,319
|
Accrued interest on
short-term investments
|
(249,315)
|
(168,300)
|
|
(473,773)
|
(320,398)
|
|
219,502
|
(327,428)
|
|
169,257
|
(2,160,025)
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
Purchase of property,
plant and equipment
|
(86,362)
|
-
|
|
(165,049)
|
-
|
Receipts on mature
short-term investments
|
-
|
-
|
|
30,000,000
|
30,000,000
|
Purchase of
short-term investments
|
-
|
-
|
|
(35,000,000)
|
(30,000,000)
|
|
(86,362)
|
-
|
|
(5,165,049)
|
-
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
Payments made on
lease liability
|
(44,199)
|
-
|
|
(96,199)
|
-
|
Common shares
repurchased
|
(6,449)
|
(650,017)
|
|
(65,763)
|
(650,017)
|
Exercise of common
share options
|
101,074
|
224,723
|
|
149,626
|
285,183
|
|
50,426
|
(425,294)
|
|
(12,336)
|
(364,834)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
(16,133)
|
(109,262)
|
|
18,397
|
(176,203)
|
|
|
|
|
|
|
Increase
(decrease) in cash during the period
|
167,433
|
(861,984)
|
|
(4,989,731)
|
(2,701,062)
|
|
|
|
|
|
|
Cash - Beginning
of period
|
9,050,178
|
17,277,750
|
|
14,207,342
|
19,116,828
|
|
|
|
|
|
|
Cash - End of
period
|
9,217,611
|
16,415,766
|
|
9,217,611
|
16,415,766
|
SOURCE EcoSynthetix Inc.