BURLINGTON, ON, March 3, 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 (Q4 2019)
and twelve months (FY 2019) ended December
31, 2019. Financial references are in U.S. dollars unless
otherwise indicated.
Q4 2019 and FY 2019 Financial Highlights
- Recorded net sales of $4.4
million, down 27%, and $18.4
million, down 19%, in Q4 2019 and FY 2019, respectively,
compared to the corresponding periods in 2018
- Generated positive cash flow from operations for FY 2019 for
the first time in the Company's history; cash flow from operations
in Q4 2019 of $0.1 million was
similar to Q4 2018, and $0.7 million
for FY 2019, an improvement of $2.6
million, compared to FY 2018
- Recorded Adjusted EBITDA loss of $0.2
million in Q4 2019, an increase of $0.1 million compared to Q4 2018, and
$0.4 million in FY 2019, an
improvement of $1.0 million, compared
to FY 2018
- Purchased and cancelled 710,368 common shares for total
consideration of $1.5 million under
the normal course issuer bid during 2019
- Maintained a strong balance sheet with cash and short-term
investments of $43.7 million as at
December 31, 2019
"Our proprietary bio-based platform offers sustainable,
all-natural alternatives to conventional petroleum and chemical
based technologies. As demand from consumers, retailers and
manufacturers increasingly emphasizes sustainability and the
environment, our technologies targeting the wood composites,
personal care and paper markets are ideally positioned," said
Jeff MacDonald, CEO of EcoSynthetix.
"Major strides in the transformation of the business were made in
2019 which resulted in positive cash flow from operations. Our
DuraBind™ resin was launched as part of SWISS KRONO's new
BE.YOND particleboard offering and our third product category,
personal care, is attracting significant interest from the industry
as an all-natural ingredient in hair fixatives. The paper and
paperboard market continued to suffer from demand pressure
impacting our EcoSphere® volumes which remain the majority of sales
at this stage. The changes we made to right-size the cost structure
of the business enabled us to manage this impact and still deliver
significant improvements to our bottom line. Our focus in 2020 is
to support the commercial activities of our partners and customers
in the wood composites and personal care markets to deliver topline
growth."
Financial Summary
Net Sales
Net sales were $4.4 million and
$18.4 million for Q4 2019 and FY
2019, respectively, compared to $6.0
million and $22.8 million in
the corresponding periods in 2018. The $1.6
million and $4.4 million
respective decreases were primarily due to lower sales volumes
caused by continued challenging market dynamics within the paper
market. U.S. shipments of coated free sheet papers declined 10%
compared to December 2018 as reported
by the American Forest & Paper Association. Lower market demand
for coated paper impacts demand for the Company's
biopolymers. Also impacting sales in 2019 was the loss of
business at a European paperboard mill announced in the first
quarter of fiscal 2019 which reduced sales by $1.3 million for FY 2019.
Gross Profit
Gross profit was $1.0 million and
$4.0 million for Q4 2019 and FY 2019,
respectively, compared to $1.2
million and $4.5 million in
the corresponding periods in 2018. The 15% and 10% respective
decreases were primarily due to lower sales volume partially offset
by lower manufacturing costs.
Gross profit as a percentage of sales was 23.0% and 21.8% for Q4
2019 and FY 2019, respectively, compared to 19.9% and 19.7% in the
same periods in 2018. Gross profit as a percentage of sales
adjusted for manufacturing depreciation was 27.8% and 26.0% for Q4
2019 and FY 2019, respectively, compared to 23.5% and 23.4% in the
same periods 2018. The increase in both periods was primarily due
to lower manufacturing costs.
Selling, General and Administrative
Selling, General and Administrative ("SG&A") expenses
were $1.4 million in Q4 2019 which is
comparable to the same period in 2018. SG&A expenses were
$4.8 million in FY 2019 compared to
$5.5 million in the same period last
year, a decrease of $0.7 million or
12%. The decrease was primarily due to lower people related costs,
a change in foreign exchange revaluation gains and losses and lower
discretionary expenses. The decrease in people related costs and
discretionary spending was primarily due to lower headcount.
Research and Development
Research and Development ("R&D") expenses were $0.5 million and $1.7
million for Q4 2019 and FY 2019, respectively, compared to
$0.4 million and $2.2 million in the corresponding periods in
2018. The change in the quarterly period was primarily due to lower
government grants recognized. The change in the annual period was
primarily due to lower people related costs and discretionary
spend. Rent expense included in R&D was $0.2 million lower and depreciation expense was
$0.2 million higher for FY 2019 due
to the adoption of IFRS 16, Leases, effective January 1, 2019.
R&D expense as a percentage of sales was 11% and 9% for Q4
2019 and FY 2019, respectively, compared to 7% and 10% in the same
periods last year. The Company's R&D efforts continue to focus
on further enhancing value for its existing products and expanding
addressable opportunities.
Adjusted EBITDA1
Adjusted EBITDA loss was $0.2
million and $0.4 million in Q4
2019 and FY 2019, respectively, compared to $0.1 million and $1.4
million in the corresponding periods in 2018. The change in
the quarterly period was primarily due to lower gross profit while
the $1.0 million improvement in the
annual period was primarily due to lower operating expenses,
partially offset by lower gross profit.
Net Loss
Net loss was $0.6 million, or
$0.01 per common share, and
$1.4 million, or $0.02 per common share in Q4 2019 and FY 2019,
respectively, compared to $0.3
million, or $0.01 net loss per
common share, and $2.5 million, or
$0.04 net loss per common share, in
the corresponding periods in 2018. The $0.2
million change in the quarterly period is primarily due to
lower gross profit while the $1.1
million improvement in the annual period is primarily due to
lower operating expenses, partially offset by lower gross
profit.
Liquidity
Cash on hand and short-term investments were $43.7 million as at December 31, 2019, compared to $44.8 million as at December 31, 2018. Cash on hand at December 31, 2019, excluding the $35.7 million in short-term investments, was
$8.0 million. In FY 2019 the
Company purchased and cancelled 710,368 common shares for
consideration of $1.5 million under
the normal course issuer bid.
Notice of Conference Call
EcoSynthetix will host a conference call Wednesday, March 4, 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 and twelve months ended December 31, 2019 and December 31, 2018:
|
Three months
ended
December 31, 2019
(unaudited)
|
Three months
ended
December 31, 2018
(unaudited)
|
Twelve months
ended
December 31, 2019
(unaudited)
|
Twelve months
ended
December 31, 2018
(unaudited)
|
Net
Loss
|
(587,793)
|
(348,951)
|
(1,454,058)
|
(2,530,758)
|
Depreciation
|
363,391
|
312,908
|
1,381,061
|
1,248,946
|
Share-based
Compensation
|
263,506
|
225,357
|
784,623
|
780,395
|
Interest
Income
|
(276,434)
|
(258,904)
|
(1,108,646)
|
(926,884)
|
Adjusted EBITDA
(loss)
|
(237,330)
|
(69,590)
|
(397,020)
|
(1,428,301)
|
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. 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)
|
|
|
|
|
|
|
|
|
|
December 31,
2019
|
December 31,
2018
|
Assets
|
|
|
|
|
|
Current
assets
|
|
|
Cash
|
7,975,713
|
14,207,342
|
Short-term
investments
|
35,720,548
|
30,635,400
|
Accounts
receivable
|
1,824,581
|
2,347,622
|
Inventory
|
2,268,961
|
2,722,742
|
Government grants
receivable
|
114,956
|
140,000
|
Prepaid
expenses
|
75,973
|
129,240
|
|
47,980,732
|
50,182,346
|
|
|
|
Non-current
assets
|
|
|
Property, plant and
equipment
|
6,729,371
|
6,174,898
|
Total
assets
|
54,710,103
|
56,357,244
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Current
liabilities
|
|
|
Trade accounts
payables and accrued liabilities
|
1,360,568
|
2,255,430
|
|
|
|
Non-current
liabilities
|
|
|
Lease
liability
|
1,176,643
|
-
|
Total
liabilities
|
2,537,211
|
2,255,430
|
|
|
|
Shareholders'
Equity
|
|
|
Common
shares
|
490,590,406
|
491,618,125
|
Contributed
surplus
|
10,351,658
|
9,798,803
|
Accumulated
deficit
|
(448,769,172)
|
(447,315,114)
|
Total
shareholders' equity
|
52,172,892
|
54,101,814
|
|
|
|
Total liabilities
and shareholders' equity
|
54,710,103
|
56,357,244
|
EcoSynthetix
Inc.
|
|
|
|
|
|
Consolidated
Statements of Operations and Comprehensive Loss
|
|
|
|
|
For the three and
twelve months ended December 31, 2019 and 2018
|
|
|
|
|
(expressed in US
dollars)
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
Three months
ended December 31,
|
|
Twelve
months ended December 31,
|
|
2019
|
2018
|
|
2019
|
2018
|
|
|
|
|
|
|
Net
sales
|
4,398,305
|
5,989,317
|
|
18,446,922
|
22,799,329
|
|
|
|
|
|
|
Cost of
sales
|
3,385,369
|
4,794,498
|
|
14,417,197
|
18,302,982
|
|
|
|
|
|
|
Gross profit on
sales
|
1,012,936
|
1,194,819
|
|
4,029,725
|
4,496,347
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Selling, general and
administrative
|
1,408,141
|
1,391,958
|
|
4,849,977
|
5,511,936
|
Research and
development
|
469,022
|
410,716
|
|
1,742,452
|
2,219,275
|
Termination
benefits
|
-
|
-
|
|
-
|
222,778
|
|
1,877,163
|
1,802,674
|
|
6,592,429
|
7,953,989
|
|
|
|
|
|
|
Loss from
operations
|
(864,227)
|
(607,855)
|
|
(2,562,704)
|
(3,457,642)
|
|
|
|
|
|
|
Net interest
income
|
276,434
|
258,904
|
|
1,108,646
|
926,884
|
Net loss and
comprehensive loss
|
(587,793)
|
(348,951)
|
|
(1,454,058)
|
(2,530,758)
|
|
|
|
|
|
|
Basic and diluted
loss per common share
|
(0.01)
|
(0.01)
|
|
(0.02)
|
(0.04)
|
Weighted average
number of common shares outstanding
|
58,101,864
|
59,032,951
|
|
58,297,045
|
59,498,498
|
EcoSynthetix
Inc.
|
|
|
|
|
|
Consolidated
Statements of Cash Flows
|
|
|
|
|
|
For the three and
twelve months ended December 31, 2019 and 2018
|
|
|
|
|
(expressed in US
dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
Three months
ended December 31,
|
|
Twelve
months ended December 31,
|
|
2019
|
2018
|
|
2019
|
2018
|
Cash provided by
(used in)
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
Net loss and
comprehensive loss
|
(587,793)
|
(348,951)
|
|
(1,454,058)
|
(2,530,758)
|
Items not affecting
cash
|
|
|
|
|
|
Depreciation
|
363,391
|
312,908
|
|
1,381,061
|
1,248,946
|
Share-based
compensation
|
263,506
|
225,357
|
|
784,623
|
780,395
|
Other
|
(23,849)
|
128,491
|
|
65,527
|
227,814
|
Changes in non-cash
working capital
|
|
|
|
|
|
Accounts
receivable
|
(92,366)
|
(513,133)
|
|
523,041
|
(51,367)
|
Inventory
|
485,114
|
117,790
|
|
458,881
|
(211,982)
|
Government grants
receivable
|
(6,878)
|
(140,000)
|
|
25,044
|
(140,000)
|
Prepaid expenses
|
67,531
|
39,328
|
|
23,585
|
24,284
|
Trade accounts payables and
accrued liabilities
|
(252,735)
|
402,528
|
|
(1,016,944)
|
(774,477)
|
Accrued termination
benefits
|
-
|
-
|
|
-
|
(39,830)
|
Interest on
short-term investments
|
|
|
|
|
|
Interest received on short-term investments
|
151,232
|
-
|
|
892,733
|
187,318
|
Accrued interest on short-term investments
|
(252,054)
|
(165,600)
|
|
(977,881)
|
(651,597)
|
|
115,099
|
58,718
|
|
705,612
|
(1,931,254)
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
Purchase of property,
plant and equipment
|
(251,898)
|
(201,302)
|
|
(458,172)
|
(218,865)
|
Receipts on mature
short-term investments
|
-
|
-
|
|
30,000,000
|
30,000,000
|
Purchase of
short-term investments
|
-
|
-
|
|
(35,000,000)
|
(30,000,000)
|
|
(251,898)
|
(201,302)
|
|
(5,458,172)
|
(218,865)
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
Principal payments
made on lease liability
|
(46,100)
|
-
|
|
(187,427)
|
-
|
Common shares
repurchased
|
(721,115)
|
(1,952,047)
|
|
(1,475,307)
|
(2,932,983)
|
Exercise of common
share options
|
45,466
|
853
|
|
215,820
|
387,576
|
|
(721,749)
|
(1,951,194)
|
|
(1,446,914)
|
(2,545,407)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
47,483
|
(124,190)
|
|
(32,155)
|
(213,960)
|
|
|
|
|
|
|
Change in cash
during the period
|
(811,065)
|
(2,217,968)
|
|
(6,231,629)
|
(4,909,486)
|
|
|
|
|
|
|
Cash - Beginning
of period
|
8,786,778
|
16,425,310
|
|
14,207,342
|
19,116,828
|
|
|
|
|
|
|
Cash - End of
period
|
7,975,713
|
14,207,342
|
|
7,975,713
|
14,207,342
|
SOURCE EcoSynthetix Inc.