BURLINGTON, ON, Nov. 2, 2023
/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 2023) and nine months (YTD 2023) ended September 30, 2023. Financial references are in
U.S. dollars unless otherwise indicated.
Highlights
(Comparison periods in each case are the
three months ended September 30,
2022)
- Recorded net sales of $3.8
million, down 24%, compared to the prior period
- Recorded an Adjusted EBITDA1 loss of $0.2 million, in line with the prior period
- Maintained a strong balance sheet with cash and term deposits
of $34.7 million as at September 30, 2023
- Purchased and cancelled 274,600 common shares in Q3 2023 under
the normal course issuer bid for total consideration of
$0.7 million
- Internalization of North American production capacity on
schedule and budget with an anticipated startup by the end of 2023,
which will improve the Company's ability to launch new products and
reduce supply chain management risk
- Increased trial activity across each of the Company's end
markets during the quarter and into the fourth quarter
"We are seeing improvements in both trial activity and feedstock
that set us up for a stronger 2024. However, weak market conditions
continued to impact our volumes in the third quarter, led by the
ongoing deterioration in graphic paper demand," said Jeff MacDonald, CEO of EcoSynthetix. "We are
seeing strong trial activity with multiple trials ongoing across
each of our end markets, including wood composites, tissue,
packaging and specialty paper. Our key wood composites account is
expanding usage of our DuraBindâ„¢ resin. The trial activity in the
tissue, packaging and pulp end market is also accelerating despite
difficult macro conditions in that market. On the supply side, the
constraints we experienced earlier in the year on feedstock
availability have subsided. Feedstock pricing has also improved but
remains elevated relative to an historical basis. While it has been
a challenging 2023, we are seeing better momentum in the business
and look forward to a return to growth in 2024."
Financial Summary
Net Sales
Net sales were $3.8 million and
$9.8 million for Q3 2023 and YTD
2023, respectively, compared to $5.0
million and $13.4 million for
the corresponding periods in 2022. The 24% decrease in the
quarterly period was primarily due to lower volumes which decreased
sales $1.9 million or 38%, partially
offset by a higher average selling price which increased sales
$0.7 million or 14%. The 27% decrease
in the YTD period was due to lower volumes which decreased sales
$4.7 million or 35%, partially offset
by a higher average selling price which increased sales
$1.1 million or 8%. The lower volumes
in both periods were primarily due to continued demand
deterioration in the graphic paper market. The higher average
selling price during both periods was due to the offsetting of
inflationary pressures with price increases, and product
mix.
Gross Profit
Gross profit was $1.2 million and
$2.3 million for Q3 2023 and YTD
2023, respectively, compared to $1.0
million and $3.2 million for
the corresponding periods in 2022. The increase in the quarterly
period was primarily due to higher average selling price, as a
result of product mix, partially offset by lower volumes and higher
costs of manufacturing. The change in the YTD period was primarily
due to decreased sales volumes and higher costs of manufacturing,
partially offset by a higher average selling price.
Gross profit as a percentage of sales was 30.3% and 23.6% for Q3
2023 and YTD 2023, respectively, compared to 20.6% and 24.1% for
the corresponding periods in 2022. Gross profit as a percentage of
sales adjusted for manufacturing depreciation was 34.0% and 30.9%
for Q3 2023 and YTD 2023, respectively, compared to 23.0% and 27.3%
for the corresponding periods in 2022. The improvement is primarily
due to a higher average selling price partly offset by higher costs
of manufacturing.
Selling, General and Administrative
Selling, general and administrative expenses (SG&A) were
$1.2 million and $3.6 million for Q3 2023 and YTD 2023,
respectively, compared to $1.2
million and $3.9 million for
the corresponding periods in 2022. SG&A expenses in the
quarterly period were in line with the prior period. The
improvement in YTD period was primarily due to changes in foreign
exchange gains and losses and lower compensation expense related to
share based awards.
Research and Development
Research and development (R&D) costs were $0.5 million and $1.7
million for Q3 2023 and YTD 2023, respectively, compared to
$0.4 million and $1.4 million in the corresponding periods in
2022. The quarterly period was in line with the prior year. The
increase during the YTD period was primarily due to an increase in
new product scale up costs. R&D expense as a percentage of
sales was 14% and 18% for each of Q3 2023 and YTD 2023,
respectively, compared to 9% and 10% in the corresponding periods
in 2022. The Company's R&D efforts continue to focus on further
enhancing value for our existing products and expanding addressable
opportunities.
Adjusted EBITDA1
Adjusted EBITDA loss was $0.2
million and $1.6 million for
Q3 2023 and YTD 2023, respectively, compared to $0.1 million and $0.5
million for the corresponding periods in 2022. The quarterly
period was in line with the prior year. The change in the YTD
period was primarily due to lower gross profit and higher operating
costs adjusted for non-cash items when compared to the prior
period.
Net Loss
Net loss was $0.3 million, or nil
per common share, and $2.2 million,
or $0.04 per common share, for Q3
2023 and YTD 2023, respectively, compared to $0.4 million, or $0.01 per common share, and $1.7 million, or $0.03 per common share, for the corresponding
periods in 2022. The change in the quarterly period was due to
$0.2 million in higher net interest
income earned during the period. The change in the YTD period was
primarily due to a $1.1 million
higher loss from operations partially offset by an increase of
$0.6 million in net interest income.
The higher net interest income during both periods is due to an
increase in interest rates on cash and term deposits.
Liquidity
Cash on hand and term deposits were $34.7
million as at September 30,
2023 compared to $36.0 million
as at December 31, 2022. The
$1.3 million change was primarily due
to $1.7 million for the purchase of
shares through the normal course issuer bid ("NCIB") and
$0.7 million of cash used to purchase
property, plant, and equipment primarily related to the Company's
manufacturing capacity realignment strategy, partially offset by
$1.3 million cash-flow from
operations. The Company purchased and cancelled 274,600 and
691,400 common shares under the NCIB during Q3 2023 and YTD 2023,
respectively.
Notice of Conference Call
EcoSynthetix will host a conference call Friday, November 3, 2023, at 9:00 AM ET to discuss its financial results.
Jeff MacDonald, CEO, and
Robert Haire, CFO, will co-chair the
call. All interested parties can instantly join the call by phone,
by following the URL https://emportal.ink/48K8Eua to easily
register and be connected into the conference call automatically or
the conventional method by dialling (416) 764-8659 or (888)
664-6392 with the conference identification of 77021489. 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 or https://app.webinar.net/kD2jx5bwrvZ. 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 and nine months ended September 30, 2023, and September 30, 2022:
|
Three months
ended
September 30, 2023
|
Three months
ended
September 30, 2022
|
Nine months
ended
September 30, 2023
|
Nine months
ended
September 30, 2022
|
Net
Loss
|
(267,947)
|
(388,850)
|
(2,236,423)
|
(1,724,570)
|
Depreciation
|
234,516
|
228,313
|
1,021,295
|
741,172
|
Share-based
Compensation
|
165,084
|
186,034
|
491,308
|
709,301
|
Interest
Income
|
(320,755)
|
(156,968)
|
(829,891)
|
(271,954)
|
Adjusted EBITDA
loss
|
(189,102)
|
(131,471)
|
(1,553,711)
|
(546,051)
|
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, DuraBindâ„¢, Surflockâ„¢, Bioformâ„¢, and
EcoSphere®, are used to manufacture wood composites, personal care,
paper, tissue and packaging products, and enable performance
improvements, economic benefits and carbon footprint reduction. 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,
deliver meaningful growth across all three product categories,
convert high-value strategic prospects into customers, and other
statements regarding the Company's plans and expectations in 2023.
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 February 28,
2023. 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.
|
|
|
Interim
Consolidated Balance Sheets
|
|
|
(expressed in US
dollars)
|
|
|
|
September
30,
2023
|
December 31,
2022
|
Assets
|
|
|
|
|
|
Current
assets
|
|
|
Cash
|
6,615,072
|
4,808,606
|
Term
deposits
|
28,061,920
|
21,054,812
|
Accounts
receivable
|
1,538,378
|
2,912,000
|
Inventory
|
4,049,962
|
5,317,367
|
Government grants
receivable
|
5,561
|
18,386
|
Prepaid
expenses
|
166,939
|
85,131
|
|
40,437,832
|
34,196,302
|
|
|
|
Non-current
assets
|
|
|
Term
deposits
|
-
|
10,138,542
|
Property, plant and
equipment
|
3,503,194
|
3,859,413
|
|
3,503,194
|
13,997,955
|
|
|
|
Total
assets
|
43,941,026
|
48,194,257
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Current
liabilities
|
|
|
Trade accounts payables
and accrued liabilities
|
1,939,744
|
2,595,353
|
|
|
|
Non-current
liabilities
|
|
|
Lease
liability
|
341,471
|
543,639
|
|
|
|
Total
liabilities
|
2,281,215
|
3,138,992
|
Shareholders'
Equity
|
|
|
Common
shares
|
490,062,192
|
491,700,059
|
Contributed
surplus
|
10,560,292
|
10,081,456
|
Accumulated
deficit
|
(458,962,673)
|
(456,726,250)
|
Total
shareholders' equity
|
41,659,811
|
45,055,265
|
|
|
|
Total liabilities
and shareholders' equity
|
43,941,026
|
48,194,257
|
EcoSynthetix
Inc.
|
|
|
|
|
|
Interim Consolidated
Statements of Operations and Comprehensive Loss
|
|
|
|
|
For the three and
nine months ended September 30, 2023 and September 30,
2022
|
|
|
|
(expressed in US
dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended September 30,
|
|
Nine months
ended September 30,
|
|
2023
|
2022
|
|
2023
|
2022
|
|
|
|
|
|
|
Net
sales
|
3,800,564
|
5,019,650
|
|
9,816,186
|
13,425,443
|
|
|
|
|
|
|
Cost of
sales
|
2,648,579
|
3,984,789
|
|
7,498,403
|
10,193,057
|
|
|
|
|
|
|
Gross profit on
sales
|
1,151,985
|
1,034,861
|
|
2,317,783
|
3,232,386
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Selling, general and
administrative
|
1,226,127
|
1,146,576
|
|
3,638,671
|
3,862,642
|
Research and
development
|
514,560
|
434,103
|
|
1,745,426
|
1,366,268
|
|
1,740,687
|
1,580,679
|
|
5,384,097
|
5,228,910
|
|
|
|
|
|
|
Loss from
operations
|
(588,702)
|
(545,818)
|
|
(3,066,314)
|
(1,996,524)
|
|
|
|
|
|
|
Net interest
income
|
320,755
|
156,968
|
|
829,891
|
271,954
|
Net loss and
comprehensive loss
|
(267,947)
|
(388,850)
|
|
(2,236,423)
|
(1,724,570)
|
|
|
|
|
|
|
Basic and diluted
loss per common share
|
(0.00)
|
(0.01)
|
|
(0.04)
|
(0.03)
|
Weighted average
number of common shares outstanding
|
58,711,122
|
58,809,507
|
|
59,024,253
|
58,866,452
|
EcoSynthetix
Inc.
|
|
|
|
|
|
Interim Consolidated
Statements of Cash Flows
|
|
|
|
|
|
For the three and
nine months ended September 30, 2023 and September 30,
2022
|
|
|
|
(expressed in US
dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended September 30,
|
|
Nine months
ended September 30,
|
|
2023
|
2022
|
|
2023
|
2022
|
Cash provided by
(used in)
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
Net loss and
comprehensive loss
|
(267,947)
|
(388,850)
|
|
(2,236,423)
|
(1,724,570)
|
Items not affecting
cash
|
|
|
|
|
|
Depreciation
|
234,516
|
228,313
|
|
1,021,295
|
741,172
|
Share-based
compensation
|
165,084
|
186,034
|
|
491,308
|
709,301
|
Other
|
69,672
|
66,996
|
|
28,520
|
77,532
|
Changes in non-cash
working capital
|
|
|
|
|
|
Accounts
receivable
|
(314,112)
|
(830,624)
|
|
1,373,622
|
(621,740)
|
Inventory
|
(638,361)
|
(1,914,302)
|
|
1,271,071
|
(2,586,046)
|
Government grants
receivable
|
102
|
(7,889)
|
|
12,825
|
(17,767)
|
Prepaid expenses
|
(306)
|
26,785
|
|
(81,808)
|
(44,588)
|
Trade accounts payables and
accrued liabilities
|
769,268
|
622,350
|
|
(639,055)
|
(22,039)
|
Interest on term
deposits
|
|
|
|
|
|
Interest received on term deposits
|
371,064
|
-
|
|
743,536
|
-
|
Accrued interest on term deposits
|
(261,305)
|
(76,043)
|
|
(691,502)
|
(182,564)
|
|
127,675
|
(2,087,230)
|
|
1,293,389
|
(3,671,309)
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
Purchase of property,
plant and equipment
|
(154,748)
|
(34,975)
|
|
(676,444)
|
(233,461)
|
Receipts on mature term
deposits
|
13,416,140
|
-
|
|
27,093,884
|
-
|
Purchase of term
deposits
|
(12,500,000)
|
(7,500,000)
|
|
(23,982,840)
|
(27,500,000)
|
|
761,392
|
(7,534,975)
|
|
2,434,600
|
(27,733,461)
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
Payments made on lease
liability
|
(73,158)
|
(68,499)
|
|
(214,519)
|
(200,134)
|
Common shares
repurchased
|
(749,239)
|
(442,369)
|
|
(1,677,206)
|
(1,444,585)
|
Exercise of common
share options
|
-
|
136,232
|
|
26,867
|
136,232
|
|
(822,397)
|
(374,636)
|
|
(1,864,858)
|
(1,508,487)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate
changes on cash
|
(92,965)
|
(113,692)
|
|
(56,665)
|
(131,240)
|
|
|
|
|
|
|
Change in cash
during the period
|
(26,295)
|
(10,110,533)
|
|
1,806,466
|
(33,044,497)
|
|
|
|
|
|
|
Cash - Beginning of
period
|
6,641,367
|
19,292,852
|
|
4,808,606
|
42,226,816
|
|
|
|
|
|
|
Cash - End of
period
|
6,615,072
|
9,182,319
|
|
6,615,072
|
9,182,319
|
SOURCE EcoSynthetix Inc.