BURLINGTON, ON, Oct. 28, 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 (Q3 2019)
and nine months (YTD 2019) ended September
30, 2019. Financial references are in U.S. dollars unless
otherwise indicated.
Highlights
- Net sales of $4.5 million in Q3
2019, compared to $5.6 million in Q3
2018
- Net loss of $0.3 million in Q3
2019, unchanged from Q3 2018
- Adjusted EBITDA loss was $40
thousand in Q3 2019, compared to a nominal loss in Q3
2018
- Cash provided by operating activities was $0.3 million in Q3 2019, compared to $0.2 million in Q3 2018
- Maintained a strong balance sheet with cash and short-term
investments of $44.4 million as at
September 30, 2019
"The business continues to demonstrate durable bottom line
performance. Coated free sheet paper demand is down nearly 18% year
to date which impacted our top line. However, through disciplined
cost management we maintained our momentum with a nominal Adjusted
EBITDA loss and positive cash flow from operations during the
quarter," said Jeff MacDonald, CEO
of EcoSynthetix. "While paper and paperboard remain the majority of
our volumes today, our number one priority is delivering on the
value proposition our No Added Formaldehyde (NAF) DuraBind resin
offers to manufacturers, retailers and end customers of particle
board. We remain highly engaged with both our lead commercial
account and our key strategic prospects, which represent the
leading players in the NAF market. Our DuraBind offering represents
a healthier and sustainable alternative to conventional
formaldehyde-based binders. We are also excited by the progress and
feedback from the exclusive licensee of our all-natural biopolymer
binder for use in the personal care market. While it's still early
days, it represents a new market that speaks to the breadth of
application of our technology."
Financial Summary
Net Sales
Net sales were $4.5 million and
$14.0 million for Q3 2019 and YTD
2019, respectively, compared to $5.6
million and $16.8 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 $1.1 million in the comparative
periods, respectively.
Gross Profit
Gross profit was $1.0 million and
$3.0 million for Q3 2019 and YTD
2019, compared to $1.1 million and
$3.3 million in the corresponding
periods in 2018. The decreases of $0.1
million and $0.3 million were
primarily due to lower sales volume, partially offset by lower
manufacturing costs.
Gross profit as a percentage of sales was 22.3% and 21.5% for Q3
2019 and YTD 2019, respectively, compared to 19.0% and 19.6% in the
corresponding periods in 2018. Gross profit as a percentage of
sales adjusted for manufacturing depreciation was 26.2% and 25.5%
for Q3 2019 and YTD 2019, respectively, compared to 22.7% and 23.3%
for the corresponding periods in 2018. The increases in gross
profit as a percentage of sales and gross profit as a percentage of
sales adjusted for manufacturing depreciation in both periods were
primarily due to favourable customer mix and lower manufacturing
costs.
Selling, General and Administrative
Selling, general and administrative expenses (SG&A) were
$1.2 million and $3.4 million for Q3 2019 and YTD 2019,
respectively, compared to $1.1
million and $4.1 million for
the corresponding periods in 2018. The change in the quarterly
period was due to a change in foreign exchange revaluation gains
and losses. The change in the YTD period was primarily due to lower
people related costs, a change in foreign exchange revaluation
gains and losses and lower discretionary expenses.
SG&A includes share-based compensation expense, which was
$0.2 million and $0.5 million for Q3 2019 and YTD 2019,
respectively, compared to $0.2
million and $0.6 million in
the corresponding periods in 2018. SG&A excluding
share-based compensation expense was $0.9
million and $2.9 million in Q3
2019 and YTD 2019, respectively, compared to $0.8 million and $3.6
million for the corresponding periods in 2018.
Research and Development
Research and development (R&D) costs were $0.4 million and $1.3
million for Q3 2019 and YTD 2019, respectively, compared to
$0.5 million and $1.8 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 partly offset by an increase in
depreciation expense. Rent expense was $0.2
million lower and depreciation expense included in R&D
was $0.1 million higher 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 $0.4
million for Q3 2019 and YTD 2019, respectively, compared to
$0.1 million and $0.3 million in the corresponding periods in
2018. R&D excluding depreciation expense was $0.3 million and $0.8
million for Q3 2019 and YTD 2019, respectively, compared to
$0.4 million and $1.5 million for the corresponding periods in
2018.
Termination benefits
Termination benefits were nil for both Q3 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 loss was $40
thousand and $0.2 million for
Q3 2019 and YTD 2019, respectively, compared to a nominal loss and
$1.4 million loss in the
corresponding periods in 2018. The change in the quarterly period
was due to lower gross profit partly offset by lower operating
expenses. The change in the YTD period was primarily due to
lower operating expenses partly offset by a decrease in gross
profit.
Net Loss
Net loss was $0.3 million, or
$0.01 per common share, and
$0.9 million, or $0.01 per common share, for Q3 2019 and YTD 2019,
respectively, unchanged, in the quarterly period from last year and
compared to $2.2 million, or
$0.04 per common share, for the YTD
period in 2018. The decrease in the YTD period was primarily due to
lower operating expenses partly offset by lower gross profit
Liquidity
Cash on hand and short-term investments were $44.4 million as at September 30, 2019, compared to $44.8 million as at December 31, 2018. Cash on hand at September 30, 2019, excluding the $35.6 million in short-term investments, was
$8.8 million. During the nine months
ended September 30, 2019, the Company
repurchased and cancelled 361,168 common shares for total
consideration of $0.8 million.
Notice of Conference Call
EcoSynthetix will host a conference call Tuesday, October 29, 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 nine months ended September 30, 2019 and September 30, 2018:
|
Three months
ended
September 30, 2019
(unaudited)
|
Three months
ended
September 30, 2018
(unaudited)
|
Nine months
ended
September 30, 2019
(unaudited)
|
Nine months
ended
September 30, 2018
(unaudited)
|
Net
Loss
|
(312,441)
|
(307,582)
|
(866,265)
|
(2,181,807)
|
Depreciation
|
327,711
|
300,497
|
1,017,670
|
936,038
|
Share-based
Compensation
|
226,710
|
231,536
|
521,117
|
555,038
|
Interest
Income
|
(282,310)
|
(228,498)
|
(832,212)
|
(667,980)
|
Adjusted EBITDA
(loss)
|
(40,330)
|
(4,047)
|
(159,690)
|
(1,358,711)
|
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)
|
|
|
September 30,
2019
|
December 31,
2018
|
Assets
|
|
|
|
|
|
Current
assets
|
|
|
Cash
|
8,786,778
|
14,207,342
|
Short-term
investments
|
35,619,726
|
30,635,400
|
Accounts
receivable
|
1,732,215
|
2,347,622
|
Inventory
|
2,784,351
|
2,722,742
|
Government grants
receivable
|
108,078
|
140,000
|
Prepaid
expenses
|
173,186
|
129,240
|
|
49,204,334
|
50,182,346
|
|
|
|
Non-current
assets
|
|
|
Property, plant and
equipment
|
6,915,310
|
6,174,898
|
Total
assets
|
56,119,644
|
56,357,244
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Current
liabilities
|
|
|
Trade accounts
payables and accrued liabilities
|
1,724,176
|
2,255,430
|
|
|
|
Non-current
liabilities
|
|
|
Lease
liability
|
1,222,640
|
-
|
Total
liabilities
|
2,946,816
|
2,255,430
|
|
|
|
Shareholders'
Equity
|
|
|
Common
shares
|
491,245,997
|
491,618,125
|
Contributed
surplus
|
10,108,210
|
9,798,803
|
Accumulated
deficit
|
(448,181,379)
|
(447,315,114)
|
Total
shareholders' equity
|
53,172,828
|
54,101,814
|
|
|
|
Total liabilities
and shareholders' equity
|
56,119,644
|
56,357,244
|
EcoSynthetix
Inc.
|
|
|
|
|
|
Consolidated
Statements of Operations and Comprehensive Loss
|
|
|
|
|
|
For the three and
nine months ended September 30, 2019 and 2018
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
(expressed in US
dollars, unless otherwise noted)
|
Three months
ended September 30,
|
|
Nine months
ended September 30,
|
|
2019
|
2018
|
|
2019
|
2018
|
|
|
|
|
|
|
Net
sales
|
4,505,533
|
5,566,269
|
|
14,048,617
|
16,810,012
|
|
|
|
|
|
|
Cost of
sales
|
3,500,964
|
4,505,910
|
|
11,031,828
|
13,508,484
|
|
|
|
|
|
|
Gross profit on
sales
|
1,004,569
|
1,060,359
|
|
3,016,789
|
3,301,528
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Selling, general and
administrative
|
1,156,878
|
1,063,387
|
|
3,441,836
|
4,119,978
|
Research and
development
|
442,442
|
533,052
|
|
1,273,430
|
1,808,559
|
Termination
benefits
|
-
|
-
|
|
-
|
222,778
|
|
1,599,320
|
1,596,439
|
|
4,715,266
|
6,151,315
|
|
|
|
|
|
|
Loss from
operations
|
(594,751)
|
(536,080)
|
|
(1,698,477)
|
(2,849,787)
|
|
|
|
|
|
|
Net interest
income
|
282,310
|
228,498
|
|
832,212
|
667,980
|
Net loss and
comprehensive loss
|
(312,441)
|
(307,582)
|
|
(866,265)
|
(2,181,807)
|
|
|
|
|
|
|
Basic and diluted
loss per common share
|
(0.01)
|
(0.01)
|
|
(0.01)
|
(0.04)
|
Weighted average
number of common shares
outstanding
|
58,378,346
|
59,585,638
|
|
58,362,820
|
59,655,385
|
|
|
|
|
|
|
EcoSynthetix
Inc.
|
|
|
|
|
|
Consolidated
Statements of Cash Flows
|
|
|
|
|
|
For the three and
nine months ended September 30, 2019 and 2018
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
(expressed in US
dollars)
|
|
|
|
|
|
Three months
ended September 30,
|
|
Nine months
ended September 30,
|
|
2019
|
2018
|
|
2019
|
2018
|
Cash provided by
(used in)
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
Net loss and
comprehensive loss
|
(312,441)
|
(307,582)
|
|
(866,265)
|
(2,181,807)
|
Items not affecting
cash
|
|
|
|
|
|
Depreciation
|
327,711
|
300,497
|
|
1,017,670
|
936,038
|
Share-based
compensation
|
226,710
|
231,536
|
|
521,117
|
555,038
|
Other
|
80,940
|
(76,880)
|
|
89,376
|
99,323
|
Changes in non-cash
working capital
|
|
|
|
|
|
Accounts
receivable
|
469,036
|
589,620
|
|
615,407
|
461,766
|
Inventory
|
(201,189)
|
(23,610)
|
|
(26,233)
|
(329,772)
|
Government grants
receivable
|
(21,313)
|
-
|
|
(92,620)
|
-
|
Prepaid
expenses
|
6,702
|
(7,064)
|
|
(43,946)
|
(15,044)
|
Trade accounts
payables and accrued liabilities
|
(27,388)
|
(370,864)
|
|
(764,209)
|
(1,177,005)
|
Accrued termination
benefits
|
-
|
-
|
|
-
|
(39,830)
|
Interest on
short-term investments
|
|
|
|
|
|
Interest received on
short-term investments
|
-
|
-
|
|
741,501
|
187,318
|
Accrued interest on
short-term investments
|
(252,054)
|
(165,600)
|
|
(725,827)
|
(485,997)
|
|
296,714
|
170,053
|
|
465,971
|
(1,989,972)
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
Purchase of property,
plant and equipment
|
(41,225)
|
(17,563)
|
|
(206,274)
|
(17,563)
|
Receipts on mature
short-term investments
|
-
|
-
|
|
30,000,000
|
30,000,000
|
Purchase of
short-term investments
|
-
|
-
|
|
(35,000,000)
|
(30,000,000)
|
|
(41,225)
|
(17,563)
|
|
(5,206,274)
|
(17,563)
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
Principal payments
made on lease liability
|
(45,128)
|
-
|
|
(141,327)
|
-
|
Common shares
repurchased
|
(688,429)
|
(330,919)
|
|
(754,192)
|
(980,936)
|
Exercise of common
share options
|
20,728
|
101,540
|
|
170,354
|
386,723
|
Proceeds from
government grants
|
124,542
|
-
|
|
124,542
|
-
|
|
(588,287)
|
(229,379)
|
|
(600,623)
|
(594,213)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
(98,035)
|
86,433
|
|
(79,638)
|
(89,770)
|
|
|
|
|
|
|
Change in cash
during the period
|
(430,833)
|
9,544
|
|
(5,420,564)
|
(2,691,518)
|
|
|
|
|
|
|
Cash - Beginning
of period
|
9,217,611
|
16,415,766
|
|
14,207,342
|
19,116,828
|
|
|
|
|
|
|
Cash - End of
period
|
8,786,778
|
16,425,310
|
|
8,786,778
|
16,425,310
|
|
|
|
|
|
|
SOURCE EcoSynthetix Inc.