BURLINGTON, ON, May 6, 2020 /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 2020) ended March 31, 2020. Financial references are in U.S.
dollars unless otherwise indicated.
Highlights
- Recorded net sales of $4.2
million, down 5%, in Q1 2020 supported by volume growth of
6%, compared to the same period in 2019
- Generated positive cash flow from operations of $0.6 million in Q1 2020, an improvement of more
than $0.6 million compared to the
same period in 2019
- Recorded Adjusted EBITDA loss of $0.2
million in Q1 2020, compared to a loss of $0.1 million for the same period in 2019
- Purchased and cancelled 356,900 common shares for total
consideration of $0.5 million under
the normal course issuer bid during Q1 2020
- Maintained a strong balance sheet with cash and short-term
investments of $43.0 million as at
March 31, 2020
"The health and safety of our employees and our ability to
continue to serve our customers with our proprietary bio-based
polymers for their essential end markets are our highest priorities
as we move through the COVID-19 pandemic," said Jeff MacDonald, CEO of EcoSynthetix. "Our core
operations and toll-manufacturing partners continue to produce. The
impact of the pandemic on our primary end market of paper and
paperboard is difficult to determine due to the overall softness
the sector was experiencing prior to the outbreak. We remain
focused on disciplined cost management and our commercial
activities with our customers in wood composites and personal care.
The ongoing production runs and trials with strategic prospects in
the wood composites market are proceeding as planned as key
retailers are at the forefront of the change agenda from
formaldehyde-based resins to No-Added Formaldehyde (NAF) resins,
where our bio-based DuraBindâ„¢ alternative is well positioned."
Financial Summary
Net Sales
Net sales were $4.2 million for Q1
2020, compared to $4.5 million in the
same period in 2019. The 5% change was primarily due to lower
average selling price due to a change in customer mix and
unfavorable market pricing dynamics which reduced sales by
$0.5 million, or 11%. This result was
partially offset by an increase in sales volume of $0.3 million, or 6%.
Gross Profit
Gross profit was $1.1 million for
Q1 2020, compared to $1.0 million in
the same period in 2019. The 11% increase was primarily due to
lower manufacturing costs partially offset by the impact of average
selling price referenced above.
Gross profit as a percentage of sales was 26.0% for Q1 2020,
compared to 22.2% in the same period in 2019. Gross profit as a
percentage of sales adjusted for manufacturing depreciation was
29.8% for Q1 2020, compared to 25.5% in the same period in 2019.
The improvements were primarily due to lower manufacturing
costs.
Selling, General and Administrative
Selling, General and Administrative (SG&A) expenses
were $1.4 million in Q1 2020,
compared to $1.2 million in the same
period in 2019. The 17% change was primarily due foreign exchange
losses. During the 2020 period foreign exchange losses were
$0.1 million, compared to a foreign
exchange gain of $0.1 million in the
2019 period. Changes in foreign exchange are primarily due to
fluctuations between the U.S. dollar (the Company's functional
currency) and foreign currencies (primarily Canadian dollars) and
the related impact on the net monetary position in those respective
currencies.
Research and Development
Research and Development (R&D) expenses were $0.4 million, which is comparable to same period
in 2019. R&D expense as a percentage of sales was 9% for Q1
2020, compared to 10% in the same period in 2019. The Company's
R&D efforts continue to focus on further enhancing value for
its existing products and expanding addressable opportunities.
Net Loss
Net loss was $0.4 million, or
$0.01 per common share, for Q1 2020,
which is comparable to the same period in 2019.
Adjusted EBITDA1
Adjusted EBITDA loss was $0.2
million for Q1 2020, compared to a loss of $0.1 million for the same period in 2019. The
change was primarily due to higher operating expenses which was
partly offset by higher gross profit.
Liquidity
Cash on hand and short-term investments were $43.0 million as at March
31, 2020, compared to $43.7
million as at December 31,
2019. Cash on hand at March 31,
2020, excluding the $35.2
million in short-term investments, was $7.8 million. During Q1 2020, the Company has
purchased and cancelled 356,900 common shares for consideration of
$0.5 million under the normal course
issuer bid.
Notice of Conference Call
EcoSynthetix will host a conference call Thursday, May 7, 2020 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,
2020 and March 31, 2019:
|
Three months ended
March 31, 2020
(unaudited)
|
Three months ended
March 31, 2019
(unaudited)
|
Net Loss
|
(447,255)
|
(353,236)
|
Depreciation
|
313,877
|
302,629
|
Share-based
Compensation
|
144,252
|
180,597
|
Interest
Income
|
(201,113)
|
(275,045)
|
Adjusted EBITDA
(loss)
|
(190,239)
|
(145,055)
|
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 2020. 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 2,
2020. In addition to the risk factors identified in the
Company's Annual Information Form, as of the date of this Press
Release, the Company has identified additional risks associated
with the COVID-19 global pandemic which are described
below.
Beginning in December 2019, a
new strain of the coronavirus (COVID-19) has spread rapidly through
the world including the United
States, Asia, Canada and Europe (where, collectively, fairly large
portions of the Company's operations and customers are located).
For the period ended March 31, 2020,
COVID-19 has not caused significant disruption in the Company's
business and operating results, however, for the remainder of 2020,
COVID-19 will likely continue to have negative material impacts on
the global economy which present significant additional risk
factors. For the Company, this outbreak might materially impact the
Company's ability to manufacture, source (including the delivery of
raw materials to its facilities) or distribute its products both
domestically and internationally; reduce its ability to effectively
market and sell its products; reduce demand for its products; cause
a significant decrease in the market price for petroleum-related
feedstocks which the Company's products are an alternative, and
cause increased credit risk. Any of these additional risks factors
could have a significant negative impact on the Company's financial
results in 2020 and beyond. Given the dynamic nature of this
outbreak, the extent to which the COVID-19 virus impacts the
Company's results will depend on future developments, which remain
highly uncertain and cannot be accurately predicted at this
time.
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
|
|
|
(expressed in US
dollars)
|
|
|
|
|
|
|
(Unaudited)
|
|
|
March 31,
2020
|
December 31,
2019
|
Assets
|
|
|
|
|
|
Current
assets
|
|
|
Cash
|
7,803,595
|
7,975,713
|
Short-term
investments
|
35,162,795
|
35,720,548
|
Accounts
receivable
|
2,286,810
|
1,824,581
|
Inventory
|
2,672,585
|
2,268,961
|
Government grants
receivable
|
33,207
|
114,956
|
Prepaid
expenses
|
37,172
|
75,973
|
|
47,996,164
|
47,980,732
|
|
|
|
Non-current
assets
|
|
|
Property, plant and
equipment
|
6,496,656
|
6,729,371
|
Total
assets
|
54,492,820
|
54,710,103
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Current
liabilities
|
|
|
Trade accounts
payables and accrued liabilities
|
2,023,417
|
1,360,568
|
|
|
|
Non-current
liabilities
|
|
|
Lease
liability
|
1,030,551
|
1,176,643
|
Total
liabilities
|
3,053,968
|
2,537,211
|
Shareholders'
Equity
|
|
|
Common
shares
|
490,294,331
|
490,590,406
|
Contributed
surplus
|
10,360,948
|
10,351,658
|
Accumulated
deficit
|
(449,216,427)
|
(448,769,172)
|
Total
shareholders' equity
|
51,438,852
|
52,172,892
|
|
|
|
Total liabilities
and shareholders' equity
|
54,492,820
|
54,710,103
|
EcoSynthetix
Inc
|
|
|
Interim
Consolidated Statements of Operations and Comprehensive
Loss
|
|
|
For the three
months ended March 31, 2020 and 2019
|
|
|
(expressed in US
dollars)
|
|
|
|
|
|
(Unaudited)
|
|
Three months
ended March 31,
|
|
2020
|
2019
|
|
|
|
Net
sales
|
4,224,416
|
4,468,721
|
|
|
|
Cost of
sales
|
3,124,202
|
3,477,649
|
|
|
|
Gross profit on
sales
|
1,100,214
|
991,072
|
|
|
|
Expenses
|
|
|
Selling, general and
administrative
|
1,372,487
|
1,173,329
|
Research and
development
|
376,095
|
446,024
|
|
1,748,582
|
1,619,353
|
|
|
|
Loss from
operations
|
(648,368)
|
(628,281)
|
|
|
|
Net interest
income
|
201,113
|
275,045
|
Net loss and
comprehensive loss
|
(447,255)
|
(353,236)
|
|
|
|
Basic and diluted
loss per common share
|
(0.01)
|
(0.01)
|
Weighted average
number of common shares outstanding
|
57,926,217
|
58,290,368
|
EcoSynthetix
Inc
|
|
|
Interim
Consolidated Statements of Cash Flows
|
|
|
For the three
months ended March 31, 2020 and 2019
|
|
|
(expressed in US
dollars)
|
|
|
|
|
|
|
(Unaudited)
|
|
Three months
ended March 31,
|
|
2020
|
2019
|
Cash provided by
(used in)
|
|
|
|
|
|
Operating
activities
|
|
|
Net loss and
comprehensive loss
|
(447,255)
|
(353,236)
|
Items not affecting
cash
|
|
|
Depreciation
|
313,877
|
302,629
|
Share-based
compensation
|
144,252
|
180,597
|
Other
|
78,720
|
(34,530)
|
Changes in non-cash
working capital
|
|
|
Accounts
receivable
|
(462,229)
|
718,306
|
Inventory
|
(370,926)
|
(794,318)
|
Government grants
receivable
|
81,749
|
3,638
|
Prepaid
expenses
|
38,801
|
39,717
|
Trade accounts
payables and accrued liabilities
|
649,215
|
(543,790)
|
Interest on
short-term investments
|
|
|
Interest received on
short-term investments
|
760,545
|
655,200
|
Accrued interest on
short-term investments
|
(202,792)
|
(224,458)
|
|
583,957
|
(50,245)
|
|
|
|
Investing
activities
|
|
|
Purchase of property,
plant and equipment
|
(88,955)
|
(78,687)
|
Receipts on mature
short-term investments
|
35,000,000
|
30,000,000
|
Purchase of
short-term investments
|
(35,000,000)
|
(35,000,000)
|
|
(88,955)
|
(5,078,687)
|
|
|
|
Financing
activities
|
|
|
Payments made on
lease liability
|
(47,579)
|
(52,000)
|
Common shares
repurchased
|
(476,567)
|
(59,314)
|
Exercise of common
share options
|
45,530
|
48,552
|
|
(478,616)
|
(62,762)
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
(188,504)
|
34,530
|
|
|
|
Change in cash
during the period
|
(172,118)
|
(5,157,164)
|
|
|
|
Cash - Beginning
of period
|
7,975,713
|
14,207,342
|
|
|
|
Cash - End of
period
|
7,803,595
|
9,050,178
|
SOURCE EcoSynthetix Inc.