BURLINGTON, ON, March 7, 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 and twelve
months ended December 31, 2016.
Financial references are in U.S. dollars unless otherwise
indicated.
Q4 2016 Highlights
- Advanced each of the ongoing late-stage trials for DuraBind™
with 10+ prospects in its wood composite pipeline
- Recorded net sales of $4.7
million in Q4 2016, up 57% compared to the same period in
2015, and net sales of $13.3 million
in 2016, down 9% compared to 2015
- Reduced adjusted EBITDA loss by 42% to $1.7 million in Q4 2016 and 26% to $7.6 million in 2016, compared to the same
periods in 2015
- Maintained a strong balance sheet with cash and term deposits
of $53.6 million as at December 31, 2016
"Manufacturers, retailers and consumers increasingly recognize
the need to eliminate harmful chemicals from their supply chains,
shelves and homes. Our DuraBind technology addresses a
multi-billion dollar market opportunity by replacing
formaldehyde-based wood composite binders with a
No-Added-Formaldehyde alternative," said Jeff MacDonald, CEO of EcoSynthetix. "Our level
of trial activity is as high as it has ever been in the wood
composite market and is primarily focused on our prospects within
the top 15 wood panel producers in the world. Our number one
priority today is to successfully close the prospects that are well
underway in the industrial trial process."
Financial Summary
Net Sales
Net sales were $4.7 million and
$13.3 million for the three months
ended December 31, 2016 (Q4 2016) and
the twelve months ended December 31,
2016 (FY 2016), respectively, compared to $3.0 million and $14.6
million in the same periods in 2015. The 57% increase
in net sales during the quarter was primarily due to higher sales
volume, including an approximately $1.0
million positive impact from the timing of orders by a key
distributor. The 9% decrease in sales during FY 2016 was
primarily due to lower volume of $0.8
million or 5% resulting from the closure of a North American
paper mill last year and a decrease in average sale prices from the
pass-through of lower raw material costs which reduced sales
$0.6 million or 4%.
Gross Profit
Gross profit was $0.9 million and
$2.2 million for Q4 2016 and FY 2016,
respectively, compared to $0.3
million and $2.1 million in
the same periods in 2015. The improvement in the quarterly period
was due to higher sales volume and lower manufacturing costs partly
offset by pricing pressure. In FY 2016, gross profit was
higher due to lower manufacturing costs partly offset by pricing
pressure and lower volume.
Gross profit as a percentage of sales was 18.2% and 16.6% in Q4
2016 and FY 2016, respectively, compared to 10.9% and 14.3% in the
same periods in 2015. Gross profit as a percentage of sales
adjusted for manufacturing depreciation was 22.6% and 22.3% for Q4
2016 and FY 2016, respectively, compared to 18.7% and 20.3% for the
same periods in 2015. The improvements were primarily due to lower
manufacturing production costs partly offset by pricing
pressure.
Selling, General and Administrative
(Excludes share-based compensation, depreciation and
amortization, provision for termination benefits, impairment loss
on PP&E and foreign exchange gains and losses)
Selling, general and administrative expenses (SG&A) were
$1.4 million and $5.8 million in Q4 2016 and FY 2016,
respectively, compared to $1.5
million and $6.9 million in
the same periods in 2015. The decrease in the quarterly and annual
periods was primarily due to lower salaries & benefits and
discretionary spending.
Research and Development
(Excludes share-based compensation, depreciation and amortization,
provision for termination benefits, impairment loss on PP&E and
foreign exchange gains and losses)
Research and development (R&D) costs were $1.3 million and $4.4
million in Q4 2016 and FY 2016, respectively, compared to
$0.9 million and $3.5 million for the same periods in 2015. The
increase in both periods was primarily due to higher spending
related to commercialization activities for DuraBind in the wood
composites market.
Foreign Currency Exchange (Gain) Loss
Foreign exchange (gain) loss was $0.1
million and ($0.1) million in
Q4 2016 and FY 2016, respectively, compared to $0.3 million and $0.9
million in the same periods in 2015. The changes were
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 $1.7
million and $7.6 million in Q4
2016 and FY 2016, respectively, compared to a loss of $2.9 million and $10.4
million in the same periods in 2015. The 42% and 26%
improvements in Q4 2016 and FY 2016, respectively, were due to
lower operating expenses in Q4 2016 and FY 2016 as well as higher
gross profit in Q4 2016.
Net Loss
Net loss was $2.4 million, or
$0.04 per common share, in Q4 2016
compared to a net loss of $5.9
million, or $0.10 per common
share, in the same period in 2015. Net loss was $9.3 million, or $0.16 per common share, in FY 2016, compared to a
net loss of $14.4 million, or
$0.25 per common share, compared to
2015. The improvements were principally due to lower operating
expenses of $3.0 million and
$4.8 million in Q4 2016 and FY 2016,
respectively, compared to the same periods in 2015.
Liquidity
Cash on hand and long-term term deposits were $53.6 million as at December 31, 2016, compared to $60.7 million as at December 31, 2015. During the first quarter of
2016, the Company purchased a $15.0
million fixed term deposit maturing on January 8, 2018. Cash on hand at December 31, 2016, excluding the term deposit,
was $38.5 million.
Notice of Conference Call
EcoSynthetix will host a conference call on Wednesday, March 8, 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 twelve months ended December 31, 2016 and December 31, 2015:
|
Three months
ended
December 31, 2016
|
Three months
ended
December 31, 2015
|
Twelve months
ended
December 31, 2016
|
Twelve months
ended
December 31, 2015
|
Net Loss
|
$(2,372,940)
|
$(5,914,317)
|
$(9,304,598)
|
$(14,420,488)
|
Depreciation,
amortization &
impairment loss on PP&E
|
453,477
|
2,881,373
|
1,340,315
|
3,945,407
|
Share-based
Compensation
|
350,956
|
171,696
|
832,265
|
413,123
|
Interest
Income
|
(118,446)
|
(72,292)
|
(502,318)
|
(295,373)
|
Adjusted EBITDA
loss
|
(1,686,953)
|
(2,933,540)
|
(7,634,336)
|
(10,357,331)
|
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 expected product pipeline, plans to expand
the Company's business into new markets, the Company's ability to
achieve organizational efficiencies, and other statements regarding
the Company's plans and expectations in 2016. 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, 2016. 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)
|
|
|
|
|
|
|
|
|
December 31,
2016
|
|
December 31,
2015
|
Assets
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
Cash
|
38,517,278
|
|
60,717,658
|
Accounts
receivable
|
2,199,289
|
|
1,177,719
|
Inventory
|
3,216,016
|
|
3,290,238
|
Government grants
receivable
|
168,562
|
|
528,436
|
Prepaid
expenses
|
165,352
|
|
242,983
|
|
44,266,497
|
|
65,957,034
|
|
|
|
|
Non-current
assets
|
|
|
|
Long-term term
deposit
|
15,043,557
|
|
-
|
Property, plant and
equipment
|
7,933,584
|
|
8,746,072
|
Total
assets
|
67,243,638
|
|
74,703,106
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
Trade accounts
payable and accrued liabilities
|
3,070,203
|
|
1,262,709
|
Accrued termination
benefits
|
415,888
|
|
1,277,755
|
Total
liabilities
|
3,486,091
|
|
2,540,464
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
Common
shares
|
493,359,612
|
|
493,182,209
|
Contributed
surplus
|
8,740,007
|
|
8,017,907
|
Accumulated
deficit
|
(438,342,072)
|
|
(429,037,474)
|
Total
shareholders' equity
|
63,757,547
|
|
72,162,642
|
|
|
|
|
Total liabilities
and shareholders' equity
|
67,243,638
|
|
74,703,106
|
EcoSynthetix
Inc.
|
|
|
|
|
Consolidated
Statements of Operations and Comprehensive Loss
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
(expressed in US
dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
months ended December 31,
|
|
Twelve
months ended December 31,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
Net
sales
|
4,672,268
|
|
2,984,351
|
|
13,277,386
|
|
14,582,820
|
|
|
|
|
|
|
|
|
Cost of
sales
|
3,820,055
|
|
2,660,013
|
|
11,076,583
|
|
12,500,455
|
|
|
|
|
|
|
|
|
Gross profit on
sales
|
852,213
|
|
324,338
|
|
2,200,803
|
|
2,082,365
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
1,831,850
|
|
2,121,524
|
|
6,532,524
|
|
8,488,594
|
Provision for
termination benefits
|
-
|
|
719,000
|
|
534,114
|
|
1,939,080
|
Research and
development
|
1,511,749
|
|
970,423
|
|
4,941,081
|
|
3,870,552
|
Impairment loss on
property, plant & equipment
|
-
|
|
2,500,000
|
|
-
|
|
2,500,000
|
|
|
|
|
|
|
|
|
|
3,343,599
|
|
6,310,947
|
|
12,007,719
|
|
16,798,226
|
|
|
|
|
|
|
|
|
Loss from
operations
|
(2,491,386)
|
|
(5,986,609)
|
|
(9,806,916)
|
|
(14,715,861)
|
|
|
|
|
|
|
|
|
Interest
income
|
118,446
|
|
72,292
|
|
502,318
|
|
295,373
|
|
|
|
|
|
|
|
|
Net loss and
comprehensive loss
|
(2,372,940)
|
|
(5,914,317)
|
|
(9,304,598)
|
|
(14,420,488)
|
|
|
|
|
|
|
|
|
Basic and diluted
loss per common share
|
(0.04)
|
|
(0.10)
|
|
(0.16)
|
|
(0.25)
|
Weighted average
number of common
|
59,374,714
|
|
58,607,787
|
|
59,307,361
|
|
57,977,096
|
|
shares
outstanding
|
|
|
|
|
|
|
|
EcoSynthetix
Inc.
|
|
|
|
|
|
Consolidated
Statements of Cash Flows
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(expressed in US
dollars)
|
Three
months ended December 31,
|
|
Twelve
months ended December 31,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Cash provided by
(used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
|
|
Net loss and
comprehensive loss
|
(2,372,940)
|
|
(5,914,317)
|
|
(9,304,598)
|
|
(14,420,488)
|
Items not affecting
cash
|
|
|
|
|
|
|
|
|
Depreciation,
amortization and impairment loss
|
453,477
|
|
2,881,373
|
|
1,340,315
|
|
3,945,407
|
|
|
on property, plant
& equipment
|
|
|
|
|
|
|
|
|
Share-based
compensation
|
350,956
|
|
171,696
|
|
832,265
|
|
413,123
|
|
Unrealized foreign
exchange (gain) loss
|
18,275
|
|
(134,210)
|
|
(219)
|
|
139,937
|
|
Other
|
63,674
|
|
388,946
|
|
(228,238)
|
|
796,115
|
Changes in non-cash
working capital
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
(408,296)
|
|
159,204
|
|
(1,021,570)
|
|
1,080,432
|
|
Inventory
|
(158,479)
|
|
460,307
|
|
31,168
|
|
2,139,842
|
|
Government grants
receivable
|
(211,900)
|
|
(149,097)
|
|
(670,081)
|
|
(917,228)
|
|
Prepaid
expenses
|
89,169
|
|
73,769
|
|
77,631
|
|
43,305
|
|
Trade accounts
payable and accrued liabilities
|
1,067,188
|
|
168,006
|
|
1,907,494
|
|
(409,267)
|
|
Accrued termination
benefits
|
(152,355)
|
|
614,291
|
|
(861,867)
|
|
1,277,755
|
|
(1,261,231)
|
|
(1,280,032)
|
|
(7,897,700)
|
|
(5,911,067)
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
|
|
Purchase of property,
plant and equipment
|
(63,720)
|
|
(3,140)
|
|
(584,773)
|
|
(780,860)
|
Purchase of long-term
term deposit
|
-
|
|
-
|
|
(15,000,000)
|
|
-
|
|
(63,720)
|
|
(3,140)
|
|
(15,584,773)
|
|
(780,860)
|
|
|
|
|
|
|
|
|
Financing
activity
|
|
|
|
|
|
|
|
Proceeds from
government grant
|
533,138
|
|
-
|
|
1,029,955
|
|
455,749
|
Exercise of common
share options
|
6,033
|
|
70,799
|
|
67,238
|
|
643,918
|
|
539,171
|
|
70,799
|
|
1,097,193
|
|
1,099,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
(16,250)
|
|
(165,557)
|
|
184,900
|
|
(936,052)
|
|
|
|
|
|
|
|
|
Change in cash
during the period
|
(802,030)
|
|
(1,377,930)
|
|
(22,200,380)
|
|
(6,528,312)
|
|
|
|
|
|
|
|
|
Cash - Beginning
of period
|
39,319,308
|
|
62,095,588
|
|
60,717,658
|
|
67,245,970
|
|
|
|
|
|
|
|
|
Cash - End of
period
|
38,517,278
|
|
60,717,658
|
|
38,517,278
|
|
60,717,658
|
SOURCE EcoSynthetix Inc.