BURLINGTON, ON, Aug. 3, 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 (Q2 2018) and six months (YTD 2018)
ended June 30, 2018. Financial
references are in U.S. dollars unless otherwise indicated.
Q2 2018 Highlights
- Recorded net sales of $5.8
million in Q2 2018, up 22% compared to the same period in
2017
- Reduced adjusted EBITDA loss by 63% to $0.5 million in Q2 2018, compared to the same
period in 2017
- Purchased and cancelled 489,900 common shares for total
consideration of $0.65 million under
the normal course issuer bid
- Maintained a strong balance sheet with cash and term deposits
of $46.7 million as at June 30, 2018
"It was a strong quarter as we continue to grow net sales into
both the wood composites and paper and paperboard markets. The
topline results and our disciplined cost management delivered a 63%
improvement in our adjusted EBITDA. We have consistently improved
our bottom line while our R&D efforts remain focused on
enhancing value for our existing product lines and expanding
addressable opportunities. We are well positioned to achieve our
commitment of profitability in the near term," said Jeff MacDonald, CEO of EcoSynthetix. "Delivering
growth from DuraBind™ in the wood composites market remains our
number one priority. Our key targets within the wood composites
market are highly engaged and we continue to make progress with our
commercialization activities. At the same time, the recent
pricing dynamics within the paper and paperboard markets are
driving growth within our existing customers and attracting new
interest in our EcoSphere® binder."
Financial Summary
Net Sales
Net sales were $5.8 million and
$11.2 million for Q2 2018 and YTD
2018, respectively, compared to $4.8
million and $8.4 million in
the corresponding periods in 2017. The 22% increase in the quarter
was primarily due to higher sales volume of $0.8 million, or 17%, and higher average selling
prices which improved sales $0.2
million, or 5%. The 34% increase in the YTD period was
primarily due to higher sales volumes of $2.2 million, or 26%, and an increase in average
selling price which positively impacted sales by $0.7 million, or 8%.
Gross Profit
Gross profit was $1.2 million and
$2.2 million for Q2 2018 and YTD
2018, respectively, compared to $1.0
million and $1.8 million in
the corresponding periods in 2017. The 14% increase in the quarter
and the 22% increase in the YTD period were primarily due to higher
average selling prices and higher sales volumes, partly offset by
increases in manufacturing costs.
Gross profit as a percentage of sales was 20.5% and 19.9% for Q2
2018 and YTD 2018, respectively, compared to 21.8% and 22.0% in the
corresponding periods in 2017. Gross profit as a percentage of
sales adjusted for manufacturing depreciation was 23.9% and 23.6%
for Q2 2018 and YTD 2018, respectively, compared to 25.8% and 26.6%
for the corresponding periods in 2017. The change in the quarter
was primarily due to higher manufacturing costs, partly offset by
an increase in average selling prices. The change in the YTD period
was also primarily due to higher manufacturing costs, as well as
higher 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
and $2.6 million for Q2 2018 and YTD
2018, respectively, compared to the corresponding periods in 2017.
Lower salaries & benefits and lower discretionary spending were
offset by foreign exchange pressure resulting from the
strengthening of the Canadian dollar relative to the U.S. dollar
during both periods.
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 $0.4 million and $1.1
million for Q2 2018 and YTD 2018, respectively, compared to
$1.1 million and $2.4 million for the corresponding periods in
2017. The changes were primarily due to lower mill trial related
costs, people related expenses and lower third-party development
costs.
Adjusted EBITDA1
Adjusted EBITDA loss was $0.5
million and $1.4 million for
Q2 2018 and YTD 2018, respectively, compared to a loss of
$1.3 million and $2.7 million for the corresponding periods in
2017. The 63% and 51% improvements for the respective periods were
primarily due to lower operating expenses and increased gross
profit.
Net Loss
Net loss was $0.7 million, or
$0.01 per common share, and
$1.9 million, or $0.03 per common share, for Q2 2018 and YTD 2018,
respectively, compared to $1.7
million, or $0.03 per common
share, and $3.6 million, or
$0.06 per common share, for the
corresponding periods in 2017. The improvements were principally
due to lower operating expenses, as well as higher gross profit
compared to the same periods in 2017.
Liquidity
Cash on hand and term deposits were $46.7
million as at June 30, 2018,
compared to $49.3 million as at
December 31, 2017. Cash on hand at
June 30, 2018, excluding the
$30.3 million in term deposits, was
$16.4 million. The Company believes
that ongoing operations, working capital and associated cash flow
in addition to its cash resources provide sufficient liquidity to
support ongoing business operations for the foreseeable
future.
Notice of Conference Call
EcoSynthetix will host a conference call Tuesday, August 7, 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:
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 interest, income taxes,
depreciation, amortization, and other non-cash expenses 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, 2018 and June 30,
2017:
|
Three months
ended
June 30, 2018
|
Three months
ended
June 30, 2017
|
Six months
ended
June 30, 2018
|
Six months
ended
June 30, 2017
|
Net Loss
|
(709,018)
|
(1,739,030)
|
(1,874,225)
|
(3,642,668)
|
Depreciation
|
307,570
|
304,648
|
635,541
|
571,694
|
Share-based
Compensation
|
148,088
|
306,566
|
323,502
|
620,587
|
Interest
Income
|
(225,860)
|
(157,651)
|
(439,482)
|
(289,817)
|
Adjusted EBITDA
loss
|
(479,220)
|
(1,285,467)
|
(1,354,664)
|
(2,740,204)
|
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)
|
|
|
|
|
|
|
June 30,
2018
|
December 31,
2017
|
Assets
|
|
|
|
|
|
Current
assets
|
|
|
Cash
|
16,415,766
|
19,116,828
|
Term
deposits
|
30,304,200
|
30,171,121
|
Accounts
receivable
|
2,424,109
|
2,296,255
|
Inventory
|
2,833,484
|
2,535,234
|
Prepaid
expenses
|
161,504
|
153,524
|
|
52,139,063
|
54,272,962
|
|
|
|
Non-current
assets
|
|
|
Property, plant and
equipment
|
6,488,043
|
7,115,672
|
Total
assets
|
58,627,106
|
61,388,634
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Current
liabilities
|
|
|
Trade accounts
payables and accrued liabilities
|
2,145,079
|
2,951,220
|
Accrued termination
benefits
|
-
|
39,830
|
Total
liabilities
|
2,145,079
|
2,991,050
|
|
|
|
Shareholders'
Equity
|
|
|
Common
shares
|
493,584,062
|
493,631,495
|
Contributed
surplus
|
9,556,546
|
9,550,445
|
Accumulated
deficit
|
(446,658,581)
|
(444,784,356)
|
Total
shareholders' equity
|
56,482,027
|
58,397,584
|
|
|
|
Total liabilities
and shareholders' equity
|
58,627,106
|
61,388,634
|
EcoSynthetix
Inc.
|
|
|
|
|
|
Consolidated
Statements of Operations and Comprehensive Loss
|
|
|
|
|
For the three and
six months ended June 30, 2018 and 2017
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
(expressed in US
dollars)
|
|
|
|
|
|
|
Three months
ended June 30,
|
|
Six months
ended June 30,
|
|
2018
|
2017
|
|
2018
|
2017
|
|
|
|
|
|
|
Net
sales
|
5,796,669
|
4,759,213
|
|
11,243,743
|
8,361,342
|
|
|
|
|
|
|
Cost of
sales
|
4,607,028
|
3,719,895
|
|
9,002,574
|
6,522,064
|
|
|
|
|
|
|
Gross profit on
sales
|
1,189,641
|
1,039,318
|
|
2,241,169
|
1,839,278
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Selling, general and
administrative
|
1,598,842
|
1,629,171
|
|
3,056,591
|
3,118,837
|
Research and
development
|
525,677
|
1,243,343
|
|
1,275,507
|
2,589,441
|
Termination
benefits
|
-
|
63,485
|
|
222,778
|
63,485
|
|
2,124,519
|
2,935,999
|
|
4,554,876
|
5,771,763
|
|
|
|
|
|
|
Loss from
operations
|
(934,878)
|
(1,896,681)
|
|
(2,313,707)
|
(3,932,485)
|
|
|
|
|
|
|
Interest
income
|
225,860
|
157,651
|
|
439,482
|
289,817
|
Net loss and
comprehensive loss
|
(709,018)
|
(1,739,030)
|
|
(1,874,225)
|
(3,642,668)
|
|
|
|
|
|
|
Basic and diluted
loss per common share
|
(0.01)
|
(0.03)
|
|
(0.03)
|
(0.06)
|
Weighted average
number of common shares outstanding
|
59,701,785
|
59,563,101
|
|
59,690,837
|
59,536,785
|
EcoSynthetix
Inc.
|
|
|
|
|
|
Consolidated
Statements of Cash Flows
|
|
|
|
|
|
For the three and
six months ended June 30, 2018 and 2017
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
(expressed in US
dollars)
|
Three months
ended June 30,
|
|
Six months
ended June 30,
|
|
2018
|
2017
|
|
2018
|
2017
|
Cash provided by
(used in)
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
Net loss and
comprehensive loss
|
(709,018)
|
(1,739,030)
|
|
(1,874,225)
|
(3,642,668)
|
Items not affecting
cash
|
|
|
|
|
|
|
Depreciation
|
307,570
|
304,648
|
|
635,541
|
571,694
|
|
Share-based
compensation
|
148,088
|
306,566
|
|
323,502
|
620,587
|
|
Unrealized foreign
exchange loss (gain)
|
566
|
(5,141)
|
|
141,268
|
(13,980)
|
|
Other
|
(59,604)
|
92,625
|
|
(98,144)
|
(15,612)
|
Changes in non-cash
working capital
|
|
|
|
|
|
|
Accounts
receivable
|
620,487
|
(258,682)
|
|
(127,854)
|
119,670
|
|
Inventory
|
(183,574)
|
(202,059)
|
|
(306,162)
|
(304,350)
|
|
Government grants
receivable
|
-
|
47,892
|
|
-
|
(11,629)
|
|
Prepaid
expenses
|
(77,399)
|
(110,351)
|
|
(7,980)
|
(87,320)
|
|
Trade accounts
payables and accrued liabilities
|
(374,544)
|
703,164
|
|
(806,141)
|
(214,962)
|
|
Accrued termination
benefits
|
-
|
(87,998)
|
|
(39,830)
|
(385,831)
|
|
(327,428)
|
(948,366)
|
|
(2,160,025)
|
(3,364,401)
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
Purchase of property,
plant and equipment
|
-
|
-
|
|
-
|
(171,123)
|
Purchase of term
deposit
|
-
|
(15,000,000)
|
|
-
|
(15,000,000)
|
|
-
|
(15,000,000)
|
|
-
|
(15,171,123)
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
Common shares
repurchased
|
(650,017)
|
-
|
|
(650,017)
|
-
|
Exercise of common
share options
|
224,723
|
-
|
|
285,183
|
8,709
|
Proceeds from
government grants
|
-
|
-
|
|
-
|
65,706
|
|
(425,294)
|
-
|
|
(364,834)
|
74,415
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
(109,262)
|
(28,476)
|
|
(176,203)
|
24,329
|
|
|
|
|
|
|
Decrease in cash
during the period
|
(861,984)
|
(15,976,842)
|
|
(2,701,062)
|
(18,436,780)
|
|
|
|
|
|
|
Cash - Beginning
of period
|
17,277,750
|
36,057,340
|
|
19,116,828
|
38,517,278
|
|
|
|
|
|
|
Cash - End of
period
|
16,415,766
|
20,080,498
|
|
16,415,766
|
20,080,498
|
SOURCE EcoSynthetix Inc.