BURLINGTON, ON, May 9, 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 (Q1 2018) ended March 31, 2018. Financial references are in U.S.
dollars unless otherwise indicated.
Q1 2018 Highlights
- Recorded net sales of $5.4
million in Q1 2018, up 51% compared to the same period in
2017
- Reduced adjusted EBITDA loss by 40% to $0.9 million in Q1 2018, compared to the same
period in 2017
- Won a new commercial account with DuraBind™ in the oriented
strand board (OSB) market at a top 10 global manufacturer of
wood-based panels
- Maintained a strong balance sheet with cash and term deposits
of $47.4 million as at March 31, 2018
"We continue to deliver improvements in our top and bottom lines
driven by sales growth and disciplined cost management. Delivering
on the potential of our DuraBind offering is our number one
priority in 2018," said Jeff
MacDonald, CEO of EcoSynthetix. "Our recent commercial win
for Durabind in OSB with a global top 10 producer of wood-based
panels demonstrates the progress we are making in the wood
composite market. In today's pricing environment, the manufacturers
showing the greatest interest are those already using pMDI resins.
DuraBind offers them an opportunity to reduce their use of pMDI,
which lowers their costs while still retaining performance. We are
committed to achieving profitability in the near-term through a
combination of new account wins in the wood composites and paper
markets and through continued focus on cost management."
Financial Summary
Net Sales
Net sales were $5.4 million for Q1
2018, compared to $3.6 million in the
corresponding period in 2017. The 51% increase was primarily due to
higher sales volume of $1.3 million,
or 38%, and higher average selling prices which improved sales
$0.5 million, or 13%.
Gross Profit
Gross profit was $1.1 million for
Q1 2018, compared to $0.8 million in
the corresponding period in 2017. The 31% increase was primarily
due to higher average selling prices and higher sales volumes,
partly offset by increases in manufacturing and freight costs.
Gross profit as a percentage of sales was 19.3% for Q1 2018,
compared to 22.2% in the corresponding period in 2017. Gross profit
as a percentage of sales adjusted for manufacturing depreciation
was 23.4% for Q1 2018, compared to 27.1% for the corresponding
period in 2017. The changes were primarily due to higher
manufacturing costs and freight costs, partly offset by an increase
in 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
essentially unchanged at $1.3 million
for Q1 2018, a $0.05 million increase
compared to the corresponding period in 2017. The slight increase
was primarily due to higher people related costs.
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 $0.6 million for Q1 2018, compared to
$1.3 million for the corresponding
period in 2017. The change was primarily due to lower people
related expenses, lower third-party development costs and lower
mill trial related costs.
Termination benefits
Termination benefits were $0.2
million for Q1 2018, which related to a cost reduction plan
implemented during the period. There were no termination
benefits recognized in the same period in 2017.
Foreign Exchange
Foreign exchange was a nominal loss for Q1 2018, compared to a
nominal gain in the same period in 2017. 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 $0.9
million for Q1 2018, compared to a loss of $1.5 million for the corresponding period in
2017. The 40% improvement was primarily due to an increase in gross
profit, principally due to higher sales volume and lower operating
expenses.
Net Loss
Net loss was $1.2 million, or
$0.02 per common share, for Q1 2018,
compared to $1.9 million, or
$0.03 per common share, for the
corresponding period in 2017. The improvement was principally due
to lower operating expenses, as well as higher gross profit
compared to the same period in 2017.
Liquidity
Cash on hand and term deposits were $47.4
million as at March 31, 2018,
compared to $49.3 million as at
December 31, 2017. Cash on hand at
March 31, 2018, excluding the
$30.1 million in term deposits, was
$17.3 million.
Notice of Conference Call
EcoSynthetix will host a conference call Thursday, May 10, 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 ended March 31,
2018 and March 31, 2017:
|
Three months
ended March 31,
2018
|
Three months
ended March 31,
2017
|
Net Loss
|
(1,165,207)
|
(1,903,638)
|
Depreciation
|
327,971
|
267,046
|
Share-based
Compensation
|
175,414
|
314,021
|
Interest
Income
|
(213,622)
|
(132,166)
|
Adjusted EBITDA
loss
|
(875,444)
|
(1,454,737)
|
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2018
|
December 31,
2017
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
Cash
|
|
|
|
17,277,750
|
19,116,828
|
Term
deposits
|
|
|
|
30,135,900
|
30,171,121
|
Accounts
receivable
|
|
|
|
3,044,596
|
2,296,255
|
Inventory
|
|
|
|
2,642,484
|
2,535,234
|
Prepaid
expenses
|
|
|
|
84,105
|
153,524
|
|
|
|
|
53,184,835
|
54,272,962
|
|
|
|
|
|
|
Non-current
assets
|
|
|
|
|
|
Property, plant and
equipment
|
|
|
|
6,803,039
|
7,115,672
|
Total
assets
|
|
|
|
59,987,874
|
61,388,634
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
Trade accounts
payables and accrued liabilities
|
|
|
|
2,519,623
|
2,951,220
|
Accrued termination
benefits
|
|
|
|
-
|
39,830
|
Total
liabilities
|
|
|
|
2,519,623
|
2,991,050
|
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
|
Common
shares
|
|
|
|
493,851,443
|
493,631,495
|
Contributed
surplus
|
|
|
|
9,566,371
|
9,550,445
|
Accumulated
deficit
|
|
|
|
(445,949,563)
|
(444,784,356)
|
Total
shareholders' equity
|
|
|
|
57,468,251
|
58,397,584
|
|
|
|
|
|
|
Total liabilities
and shareholders' equity
|
|
|
|
59,987,874
|
61,388,634
|
EcoSynthetix
Inc.
|
|
|
Consolidated
Statements of Operations and Comprehensive Loss
|
|
For the three
months ended March 31, 2018 and 2017
|
|
|
(Unaudited)
|
|
|
|
|
|
(expressed in US
dollars)
|
|
|
|
Three months
ended March 31,
|
|
2018
|
2017
|
|
|
|
Net
sales
|
5,447,074
|
3,602,129
|
|
|
|
Cost of
sales
|
4,395,546
|
2,802,169
|
|
|
|
Gross profit on
sales
|
1,051,528
|
799,960
|
|
|
|
Expenses
|
|
|
Selling, general and
administrative
|
1,457,749
|
1,489,666
|
Research and
development
|
749,830
|
1,346,098
|
Termination
benefits
|
222,778
|
-
|
|
|
|
|
2,430,357
|
2,835,764
|
|
|
|
Loss from
operations
|
(1,378,829)
|
(2,035,804)
|
|
|
|
Interest
income
|
213,622
|
132,166
|
|
|
|
Net loss and
comprehensive loss
|
(1,165,207)
|
(1,903,638)
|
|
|
|
Basic and diluted
loss per common share
|
(0.02)
|
(0.03)
|
|
|
|
Weighted average
number of common shares outstanding
|
59,679,767
|
59,515,232
|
EcoSynthetix
Inc.
|
|
|
Consolidated
Statements of Cash Flows
|
|
|
For the three
months ended March 31, 2018 and 2017
|
|
|
(Unaudited)
|
|
|
|
|
|
(expressed in US
dollars)
|
Three months
ended March 31,
|
|
2018
|
2017
|
Cash provided by
(used in)
|
|
|
|
|
|
Operating
activities
|
|
|
Net loss and
comprehensive loss
|
(1,165,207)
|
(1,903,638)
|
Items not affecting
cash
|
|
|
|
Depreciation
|
327,971
|
267,046
|
|
Share-based
compensation
|
175,414
|
314,021
|
|
Unrealized foreign
exchange loss (gain)
|
140,702
|
(8,839)
|
|
Other
|
(38,540)
|
(108,237)
|
Changes in non-cash
working capital
|
|
|
|
Accounts
receivable
|
(748,341)
|
378,352
|
|
Inventory
|
(122,588)
|
(102,291)
|
|
Government grants
receivable
|
-
|
(59,521)
|
|
Prepaid
expenses
|
69,419
|
23,031
|
|
Trade accounts
payables and accrued liabilities
|
(431,597)
|
(918,126)
|
|
Accrued termination
benefits
|
(39,830)
|
(297,833)
|
|
(1,832,597)
|
(2,416,035)
|
|
|
|
Investing
activities
|
|
|
Purchase of property,
plant and equipment
|
-
|
(171,123)
|
|
-
|
(171,123)
|
|
|
|
Financing
activities
|
|
|
Proceeds from
government grants
|
-
|
65,706
|
Exercise of common
share options
|
60,460
|
8,709
|
|
60,460
|
74,415
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
(66,941)
|
52,805
|
|
|
|
Decrease in cash
during the period
|
(1,839,078)
|
(2,459,938)
|
|
|
|
Cash - Beginning
of period
|
19,116,828
|
38,517,278
|
|
|
|
Cash - End of
period
|
17,277,750
|
36,057,340
|
SOURCE EcoSynthetix Inc.