BURLINGTON, ON, May 8, 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 (Q1 2019)
ended March 31, 2019. Financial
references are in U.S. dollars unless otherwise indicated.
Highlights
- Recorded net sales of $4.5
million in Q1 2019, compared to $5.4
million in Q1 2018
- Net loss of $0.4 million in Q1
2019, an improvement of 70%, compared to a loss of $1.2 million in Q1 2018
- Adjusted EBITDA loss of $0.1
million in Q1 2019, compared to a loss of $0.9 million in Q1 2018
- Cash used in operating activities was $0.1 million in Q1 2019, an improvement of
$1.7 million or 97%, compared to Q1
2018
- Announced funding of up to C$2.0
million over 5 years from the Federal Government's Canadian
Agriculture Partnership for the development of the Company's wood
composites resin DuraBind™, subsequent to the end of the
quarter
- Maintained a strong balance sheet with cash and short-term
investments of $44.3 million as at
March 31, 2019
"Our primary commercial customer in wood composites continues to
support the recent launch of their No-Added Formaldehyde engineered
wood product. In paper and paperboard, we experienced significant
lumpiness in sales volumes during the quarter as a result of the
timing of procurement and a European mill that is no longer using
EcoSphere®," said Jeff MacDonald,
CEO of EcoSynthetix. "We continue to demonstrate strict cost
discipline as demonstrated by our improved adjusted EBITDA position
on a year-over-year basis. We are committed to running a profitable
business in 2019. Further penetration of the wood composites market
is our number one priority. Consumers, retailers and manufacturers
are increasingly searching for sustainable and healthy alternatives
to traditional resin systems. Our bio-based platform offers them a
viable solution."
Financial Summary
Net Sales
Net sales were $4.5 million for Q1
2019, compared to $5.4 million in the
corresponding period in 2018. The 18% change was primarily due to
lower sales volume of $1.3 million,
or 23%, due to unfavourable market conditions. Sales volumes were
impacted by inventory de-stocking at a distributor in
Asia Pacific, which has since
normalized, and the loss of business at a European paperboard mill
which reduced sales volume $0.6
million and $0.4 million,
respectively. These decreases were partly offset by an increase in
average selling prices due to favourable customer mix, which
improved sales $0.3 million or
5%.
Gross Profit
Gross profit was $1.0 million for
Q1 2019, compared to $1.1 million in
the corresponding period in 2018. The 6% decrease was primarily due
to lower sales volumes, partly offset by higher average selling
prices.
Gross profit as a percentage of sales was 22.2% for Q1 2019,
compared to 19.3% in the corresponding period in 2018. Gross profit
as a percentage of sales adjusted for manufacturing depreciation
was 25.5% for Q1 2019, compared to 23.4% for the corresponding
period in 2018. The improvements were primarily due to higher
average selling prices due to favourable customer mix.
Selling, General and Administrative
Selling, general and administrative expenses (SG&A) were
$1.2 million for Q1 2019, compared to
$1.5 million for the corresponding
period in 2018. The decrease was primarily due to $0.1 million of foreign exchange gains and lower
people related costs and discretionary spending. The change in
foreign exchange was primarily due to the translation of cash
balances denominated in Canadian dollars and foreign exchange rate
fluctuations between the Canadian dollar and U.S. dollar. The
decrease in people related costs and discretionary spending was
primarily due to a cost reduction plan which was implemented during
the first quarter of 2018.
SG&A includes share-based compensation expense, which was
$0.2 million for Q1 2019, unchanged
from the same period in 2018. Changes in share-based
compensation expense are primarily due to the achievement of
certain time-based and performance-based vesting conditions related
to stock options and restricted share units in addition to the
issuance of share-based awards. SG&A excluding share-based
compensation expense was $1.0 million
in Q1 2019 compared to $1.3 million
in the same period in 2018.
Research and Development
Research and development (R&D) costs were $0.4 million for Q1 2019, compared to
$0.7 million for the corresponding
period in 2018. The change was primarily due to lower people
related expenses and discretionary spending. R&D expenses were
$0.1 million lower in Q1 2019 due to
the adoption of IFRS 16, Leases, which was implemented using the
modified retrospective method on January
1, 2019. Under IFRS 16, the Company recognized a new
right of use asset under property, plant & equipment of
$1.5 million and a corresponding
short-term and long-term lease liability of $0.2 million and $1.3
million, respectively, on January
1, 2019.
Depreciation expense included in R&D was $0.1 million for Q1 2019, which was flat compared
to the corresponding period in 2018. R&D excluding depreciation
expense was $0.3 million for Q1 2019,
compared to $0.6 million in the
corresponding period in 2018.
Termination benefits
Termination benefits were nil for Q1 2019, compared to
$0.2 million in corresponding period
in 2018. Termination benefits recorded in 2018 related to a
cost reduction plan implemented in the first quarter of 2018.
Net Loss
Net loss was $0.4 million, or
$0.01 per common share, for Q1 2019,
compared to $1.2 million, or
$0.02 per common share, for the
corresponding period in 2018. The improvement was principally due
to lower operating expenses.
Adjusted EBITDA1
Adjusted EBITDA loss was $0.1
million for Q1 2019, compared to a loss of $0.9 million for the corresponding period in
2018. The 83% improvement was primarily due to lower operating
expenses.
Liquidity
Cash on hand and short-term investments were $44.3 million as at March
31, 2019, compared to $44.8
million as at December 31,
2018. Cash on hand at March 31,
2019, excluding the $35.2
million in short-term investments, was $9.1 million. Since the normal course issuers bid
was announced in April 2018, The
Company purchased and cancelled 2,087,500 common shares for
consideration of $3.0 million.
Notice of Conference Call
EcoSynthetix will host a conference call Thursday, May 9, 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 ended March 31,
2019 and March 31, 2018:
|
|
|
|
|
|
|
|
|
Three months ended
March 31, 2019
(unaudited)
|
Three months ended
March 31, 2018
(unaudited)
|
|
Net
Loss
|
(353,236)
|
(1,165,207)
|
|
Depreciation
|
302,629
|
327,971
|
|
Share-based
Compensation
|
180,597
|
175,414
|
|
Interest
Income
|
(275,045)
|
(213,622)
|
|
Adjusted EBITDA
loss
|
(145,055)
|
(875,444)
|
|
|
|
|
|
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)
|
|
|
|
March 31,
2019
|
December 31,
2018
|
|
Assets
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
Cash
|
9,050,178
|
14,207,342
|
|
Short-term
investments
|
35,204,658
|
30,635,400
|
|
Accounts
receivable
|
1,629,316
|
2,347,622
|
|
Inventory
|
3,573,458
|
2,722,742
|
|
Government grants
receivable
|
136,362
|
140,000
|
|
Prepaid
expenses
|
89,523
|
129,240
|
|
|
49,683,495
|
50,182,346
|
|
|
|
|
|
Non-current
assets
|
|
|
|
Property, plant and
equipment
|
7,412,700
|
6,174,898
|
|
Total
assets
|
57,096,195
|
56,357,244
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
Trade accounts
payables and accrued liabilities
|
1,869,463
|
2,255,430
|
|
|
|
|
|
Non-current
liabilities
|
|
|
|
Lease
liability
|
1,308,319
|
-
|
|
Total
liabilities
|
3,177,782
|
2,255,430
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
Common
shares
|
491,747,498
|
491,618,125
|
|
Contributed
surplus
|
9,839,265
|
9,798,803
|
|
Accumulated
deficit
|
(447,668,350)
|
(447,315,114)
|
|
Total
shareholders' equity
|
53,918,413
|
54,101,814
|
|
|
|
|
|
|
|
|
|
Total liabilities
and shareholders' equity
|
57,096,195
|
56,357,244
|
|
|
|
|
|
|
|
|
|
EcoSynthetix
Inc.
|
|
|
|
Consolidated
Statements of Operations and Comprehensive Loss
|
|
|
|
For the three
months ended March 31, 2019 and 2018
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
(expressed in US
dollars, unless otherwise noted)
|
Three months
ended March 31,
|
|
|
2019
|
2018
|
|
|
|
|
|
Net
sales
|
4,468,721
|
5,447,074
|
|
|
|
|
|
Cost of
sales
|
3,477,649
|
4,395,546
|
|
|
|
|
|
Gross profit on
sales
|
991,072
|
1,051,528
|
|
|
|
|
|
Expenses
|
|
|
|
Selling, general and
administrative
|
1,173,329
|
1,457,749
|
|
Research and
development
|
446,024
|
749,830
|
|
Termination
benefits
|
-
|
222,779
|
|
|
1,619,353
|
2,430,357
|
|
|
|
|
|
Loss from
operations
|
(628,281)
|
(1,378,829)
|
|
|
|
|
|
Net interest
income
|
275,045
|
213,622
|
|
Net loss and
comprehensive loss
|
(353,236)
|
(1,165,207)
|
|
|
|
|
|
Basic and diluted
loss per common share
|
(0.01)
|
(0.02)
|
|
Weighted average
number of common shares outstanding
|
58,290,368
|
59,679,767
|
|
|
|
|
|
|
|
|
|
EcoSynthetix
Inc.
|
|
|
|
Consolidated
Statements of Cash Flows
|
|
|
|
For the three
months ended March 31, 2019 and 2018
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
(expressed in US
dollars)
|
|
|
|
Three months
ended March 31,
|
|
|
2019
|
2018
|
|
Cash provided by
(used in)
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
Net loss and
comprehensive loss
|
(353,236)
|
(1,165,207)
|
|
Items not affecting
cash
|
|
|
|
Depreciation
|
302,629
|
327,971
|
|
Share-based
compensation
|
180,597
|
175,414
|
|
Unrealized foreign exchange
(gain) loss
|
(51,832)
|
140,702
|
|
Other
|
(207,156)
|
(225,859)
|
|
Changes in non-cash
working capital
|
|
|
|
Accounts
receivable
|
718,306
|
748,341
|
|
Inventory
|
(794,318)
|
(122,588)
|
|
Government grants
receivable
|
3,638
|
-
|
|
Prepaid expenses
|
39,717
|
69,419
|
|
Trade accounts payables and
accrued liabilities
|
(543,790)
|
(431,597)
|
|
Accrued termination
benefits
|
-
|
(39,830)
|
|
Interest received on
short-term investments
|
655,200
|
187,319
|
|
|
(50,245)
|
(1,832,597)
|
|
|
|
|
|
Investing
activities
|
|
|
|
Purchase of property,
plant and equipment
|
(78,687)
|
-
|
|
Receipts on mature
short-term investments
|
30,000,000
|
30,000,000
|
|
Purchase of
short-term investments
|
(35,000,000)
|
(30,000,000)
|
|
|
(5,078,687)
|
-
|
|
|
|
|
|
Financing
activities
|
|
|
|
Payments made on
lease liability
|
(52,000)
|
-
|
|
Common shares
repurchased
|
(59,314)
|
-
|
|
Exercise of common
share options
|
48,552
|
60,460
|
|
|
(62,762)
|
60,460
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
34,530
|
(66,941)
|
|
|
|
|
|
Decrease in cash
during the period
|
(5,157,164)
|
(1,839,078)
|
|
|
|
|
|
Cash - Beginning
of period
|
14,207,342
|
19,116,828
|
|
|
|
|
|
Cash - End of
period
|
9,050,178
|
17,277,750
|
|
SOURCE EcoSynthetix Inc.