BURLINGTON, ON, Nov. 6, 2017 /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 2017)
and nine months ended (YTD 2017) September
30, 2017. Financial references are in U.S. dollars unless
otherwise indicated.
Q3 2017 Highlights
- Recorded net sales of $4.5
million in Q3 2017, up 65% compared to the same period in
2016
- Reduced adjusted EBITDA loss by 37% to $1.0 million in Q3 2017, compared to the same
period in 2016
- Won a new paper mill, within an existing account that is a
leading North American producer of coated and specialty papers
- Won a new paper mill, within an existing account in
Europe, subsequent to the end of
the quarter
- Maintained a strong balance sheet with cash and term deposits
of $50.3 million as at September 30, 2017
"Our number one priority is the conversion of industrial trial
prospects into customers for our DuraBind™ offering that targets
the wood composites market," said Jeff
MacDonald, CEO of EcoSynthetix. "Our stronger financial
results in the quarter reflect an improvement in the fundamentals
of our paper and paperboard markets. At the same time, the pricing
for pMDI, the co-binder that DuraBind works with, has been
significantly higher due to unprecedented pMDI supply challenges
which has temporarily reduced the urgency for change.
However, the wood composites manufacturers we are engaged with
believe change is inevitable. Major retailers, like Walmart and The
Home Depot, have joined IKEA by recently announcing new guidelines
that call for the elimination, reduction or transparency through
labeling, of formaldehyde containing products. Manufacturers
recognize that as consumers and retailers increasingly demand
No-Added Formaldehyde (NAF) alternatives for their homes and
shelves, our DuraBind offering provides an effective and safer,
bio-based alternative at a cost comparable to conventional
formaldehyde-based wood composites binders."
Financial Summary
Net Sales
Net sales were $4.5 million and
$12.9 million for Q3 2017 and YTD
2017, respectively, compared to $2.7
million and $8.6 million in
the corresponding periods in 2016. The 65% increase in the quarter
was primarily due to higher sales volumes of $1.4 million, or 50%, and an increase in average
selling price which positively impacted sales by $0.4 million, or 15%. Increased substitution
rates at existing customers represented 26% of the increase in
volume while sales to new commercial customers accounted for 24% of
the increase in volume. The 49% increase in the YTD period
was primarily due to higher sales volumes of $3.4 million, or 38%, and an increase in average
selling price which positively impacted sales by $0.9 million, or 11%. Increased substitution
rates at existing customers represented 23% of the increase in
volume while sales to new commercial customers accounted for 15% of
the increase in volume. The increases in average selling
prices were primarily due to favourable pricing
dynamics.
Gross Profit
Gross profit was $1.0 million and
$2.8 million for Q3 2017 and YTD
2017, respectively, compared to $0.4
million and $1.3 million in
the corresponding periods last year. The increases in gross profit
were primarily due to higher average selling prices and higher
sales volumes partly offset by increases in transportation
costs.
Gross profit as a percentage of sales was 22.1% and 22.0% in Q3
2017 and YTD 2017, respectively, compared to 15.2% and 15.7% in the
corresponding periods last year. Gross profit as a percentage of
sales adjusted for manufacturing depreciation was 26.0% and 26.2%
for Q3 2017 and YTD 2017, respectively compared to 21.3% and 22.2%
for the corresponding periods in 2016. The improvements were
primarily due to higher average selling prices.
Selling, General and Administrative
(Excludes
share-based compensation, depreciation, provision for termination
benefits and foreign exchange gains and losses)
Selling, general and administrative expenses (SG&A) were
$1.2 million and $3.7 million for Q3 2017 and YTD 2017,
respectively, compared to $1.2
million and $4.4 million for
the corresponding periods in 2016. SG&A expenses were flat in
the quarterly period as lower discretionary spending was offset by
an increase in people related costs. The decrease in the YTD period
was primarily due to lower discretionary spending.
Research and Development
(Excludes share-based compensation, depreciation, provision for
termination benefits and foreign exchange gains and losses)
Research and development (R&D) costs were $0.9 million and $3.3
million for Q3 2017 and YTD 2017, respectively, compared to
$0.9 million and $3.1 million for the corresponding periods in
2016. Lower government grants recognized in Q3 2017 were offset by
lower discretionary spending. The increase in the YTD period was
primarily due to lower government grants recognized in 2017
compared to 2016.
Foreign Exchange Loss/Gain
Foreign exchange loss was $0.1
million for Q3 2017, compared to a nominal amount in the
same period last year. The Company recognized a nominal loss
in YTD 2017 compared to a gain of $0.1
million in the corresponding period 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 $1.0
million and $3.7 million for
Q3 2017 and YTD 2017, respectively, compared to a loss of
$1.6 million and $5.9 million for the corresponding periods in
2016. The 37% improvement in each of the respective periods was due
to higher gross profit and lower operating expenses in the 2017
periods.
Net Loss
Net loss was $1.4 million, or
$0.02 per common share, and
$5.0 million, or $0.08 per common share, in Q3 2017 and YTD 2017,
respectively, compared to $1.9
million, or $0.03 per common
share, and $6.9 million, or
$0.12 per common share, for the
corresponding periods in 2016. The improvements were principally
due to higher gross profits as well as lower operating expenses in
the YTD 2017 compared to the corresponding period in 2016.
Liquidity
Cash on hand and term deposits were $50.3
million as at September 30,
2017, compared to $53.6
million as at December 31,
2016. Cash on hand at September 30,
2017, excluding the term deposits, was $20.1 million.
Notice of Conference Call
EcoSynthetix will host a conference call on Tuesday, November 7, 2017 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, 2017 and September 30, 2016:
|
Three months
ended
September 30, 2017
|
Three months
ended
September 30, 2016
|
Nine months
ended
September 30, 2017
|
Nine months
ended
September 30, 2016
|
Net Loss
|
(1,365,336)
|
(1,918,350)
|
(5,008,004)
|
(6,931,658)
|
Depreciation and
Amortization
|
280,610
|
290,614
|
852,304
|
886,838
|
Share-based
Compensation
|
289,169
|
184,072
|
909,756
|
481,309
|
Interest
Income
|
(195,846)
|
(121,713)
|
(485,663)
|
(383,872)
|
Adjusted EBITDA
loss
|
(991,403)
|
(1,565,377)
|
(3,731,607)
|
(5,947,383)
|
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 2017. 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 30,
2017. 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
|
|
|
(Unaudited)
|
|
|
|
|
|
(expressed in US
dollars)
|
|
|
|
|
|
|
September 30,
2017
|
December 31,
2016
|
Assets
|
|
|
|
|
|
Current
assets
|
|
|
Cash
|
20,073,750
|
38,517,278
|
Term
deposits
|
30,176,324
|
-
|
Accounts
receivable
|
1,557,312
|
2,199,289
|
Inventory
|
3,140,899
|
3,216,016
|
Government grants
receivable
|
-
|
168,562
|
Prepaid
expenses
|
198,664
|
165,352
|
|
55,146,949
|
44,266,497
|
|
|
|
Non-current
assets
|
|
|
Term
deposit
|
-
|
15,043,557
|
Property, plant and
equipment
|
7,383,478
|
7,933,584
|
Total
assets
|
62,530,427
|
67,243,638
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Current
liabilities
|
|
|
Trade accounts
payables and accrued liabilities
|
2,806,364
|
3,070,203
|
Accrued termination
benefits
|
17,147
|
415,888
|
Total
liabilities
|
2,823,511
|
3,486,091
|
|
|
|
Shareholders'
Equity
|
|
|
Common
shares
|
493,631,495
|
493,359,612
|
Contributed
surplus
|
9,425,497
|
8,740,007
|
Accumulated
deficit
|
(443,350,076)
|
(438,342,072)
|
Total
shareholders' equity
|
59,706,916
|
63,757,547
|
|
|
|
Total liabilities
and shareholders' equity
|
62,530,427
|
67,243,638
|
EcoSynthetix
Inc.
|
|
|
|
|
|
Interim
Consolidated Statements of Operations and Comprehensive
Loss
|
|
|
For the three and
nine months ended September 30, 2017 and 2016
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
(expressed in US
dollars)
|
|
|
|
|
|
|
Three months
ended September 30,
|
|
Nine months
ended September 30,
|
|
2017
|
2016
|
|
2017
|
2016
|
|
|
|
|
|
|
Net
sales
|
4,494,086
|
2,723,638
|
|
12,855,428
|
8,605,118
|
|
|
|
|
|
|
Cost of
sales
|
3,502,293
|
2,310,478
|
|
10,024,357
|
7,256,528
|
|
|
|
|
|
|
Gross profit on
sales
|
991,793
|
413,160
|
|
2,831,071
|
1,348,590
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Selling, general and
administrative
|
1,546,069
|
1,370,262
|
|
4,664,906
|
4,700,674
|
Research and
development
|
1,006,906
|
1,041,385
|
|
3,596,347
|
3,429,332
|
Provision for
termination benefits
|
-
|
41,576
|
|
63,485
|
534,114
|
|
2,552,975
|
2,453,223
|
|
8,324,738
|
8,664,120
|
|
|
|
|
|
|
Loss from
operations
|
(1,561,182)
|
(2,040,063)
|
|
(5,493,667)
|
(7,315,530)
|
|
|
|
|
|
|
Interest
income
|
195,846
|
121,713
|
|
485,663
|
383,872
|
Net loss and
comprehensive loss
|
(1,365,336)
|
(1,918,350)
|
|
(5,008,004)
|
(6,931,658)
|
|
|
|
|
|
|
Basic and diluted
loss per common share
|
(0.02)
|
(0.03)
|
|
(0.08)
|
(0.12)
|
Weighted average
number of common shares outstanding
|
59,569,921
|
59,300,627
|
|
59,546,267
|
59,282,164
|
EcoSynthetix
Inc.
|
|
|
|
|
|
Interim
Consolidated Statements of Cash Flows
|
|
|
|
|
For the three and
nine months ended September 30, 2017 and 2016
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
(expressed in US
dollars)
|
Three months
ended September 30,
|
|
Nine months
ended September 30,
|
|
2017
|
2016
|
|
2017
|
2016
|
Cash provided by
(used in)
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
Net loss and
comprehensive loss
|
(1,365,336)
|
(1,918,350)
|
|
(5,008,004)
|
(6,931,658)
|
Items not affecting
cash
|
|
|
|
|
|
|
Depreciation
|
280,610
|
290,614
|
|
852,304
|
886,838
|
|
Share-based
compensation
|
289,169
|
184,072
|
|
909,756
|
481,309
|
|
Unrealized foreign
exchange loss (gain)
|
13,562
|
29,185
|
|
(418)
|
(18,494)
|
|
Other
|
(229,375)
|
(50,129)
|
|
(244,987)
|
(291,912)
|
Changes in non-cash
working capital
|
|
|
|
|
|
|
Accounts
receivable
|
522,307
|
(131,885)
|
|
641,977
|
(613,274)
|
|
Inventory
|
393,142
|
(114,033)
|
|
88,792
|
189,647
|
|
Government grants
receivable
|
11,629
|
(205,933)
|
|
-
|
(458,181)
|
|
Prepaid
expenses
|
54,008
|
(24,483)
|
|
(33,312)
|
(11,538)
|
|
Trade accounts
payables and accrued liabilities
|
(48,877)
|
(128,928)
|
|
(263,839)
|
840,306
|
|
Accrued termination
benefits
|
(12,910)
|
(876,485)
|
|
(398,741)
|
(709,512)
|
|
(92,071)
|
(2,946,355)
|
|
(3,456,472)
|
(6,636,469)
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
Purchase of property,
plant and equipment
|
(144,750)
|
(86,095)
|
|
(315,873)
|
(521,053)
|
Purchase of term
deposit
|
-
|
-
|
|
(15,000,000)
|
(15,000,000)
|
|
(144,750)
|
(86,095)
|
|
(15,315,873)
|
(15,521,053)
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
Proceeds from
government grants
|
102,856
|
-
|
|
168,562
|
496,817
|
Exercise of common
share options
|
38,908
|
61,205
|
|
47,617
|
61,205
|
|
141,764
|
61,205
|
|
216,179
|
558,022
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
88,309
|
(44,752)
|
|
112,638
|
201,150
|
|
|
|
|
|
|
Decrease in cash
during the period
|
(6,748)
|
(3,015,997)
|
|
(18,443,528)
|
(21,398,350)
|
|
|
|
|
|
|
Cash - Beginning
of period
|
20,080,498
|
42,335,305
|
|
38,517,278
|
60,717,658
|
|
|
|
|
|
|
Cash - End of
period
|
20,073,750
|
39,319,308
|
|
20,073,750
|
39,319,308
|
SOURCE EcoSynthetix Inc.