BURLINGTON, ON, March 3, 2021 /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 2020)
and twelve months (FY 2020) ended December
31, 2020. Financial references are in U.S. dollars unless
otherwise indicated.
Highlights
(Comparison periods in each case are the
three months ended and twelve months ended December 31, 2019)
- Recorded net sales of $3.3
million, down 24%, and $13.7
million, down 26%, in Q4 2020 and FY 2020 respectively,
primarily due to lower volumes of 18% in Q4 2020 and 19% in FY 2020
which is consistent with declines highlighted by industry reports
in coated paper demand as a result of the COVID-19 pandemic
- Generated positive cash flow from operations for the second
year in a row in FY 2020; cash used in operations of $0.5 million in Q4 2020, and cash from operations
of $0.2 million for FY 2020, a
decline of $0.5 million in each
period compared to the prior periods
- Recorded Adjusted EBITDA loss of $0.1
million, an improvement of $0.1
million, and $0.8 million, an
increase in loss of $0.4 million, in
Q4 2020 and FY 2020, respectively
- Purchased and cancelled 1,392,000 common shares for total
consideration of $2.0 million under
the normal course issuer bid during 2020
- Maintained a strong balance sheet with cash and short-term
investments of $42.0 million as at
December 31, 2020
"Our commercial technologies in the paper, wood composites and
personal care markets are all-natural alternatives to conventional
fossil-fuel based technologies. As consumers and retailers
increasingly adopt sustainable and all-natural solutions,
EcoSynthetix is in a great position to capitalize on demand for
healthier alternatives that are used in the home and workplace,"
said Jeff MacDonald, CEO of
EcoSynthetix. "Our key strategic prospects and customers in the
wood composites and personal care markets remain highly engaged and
continue to advance their commercial strategies using our
solutions. Our number one priority is delivering on the wood
composites opportunity with the right strategic customers to drive
meaningful penetration in the global wood composites market. The
demand challenges in the paper market have impacted our financial
results with lower volumes and selling price, however all of our
paper customers continue to use EcoSphere®, albeit at lower levels
due to the end market demand. Despite this challenge and the
ongoing pandemic, strict financial discipline and cost controls
enabled us to achieve positive cash flow from operations for the
second consecutive year. Our strong balance sheet and stable bottom
line de-risk the business as we continue our efforts to drive
penetration in the wood composites and personal care markets."
Financial Summary
Net Sales
Net sales were $3.3 million and
$13.7 million for Q4 2020 and FY
2020, respectively, compared to $4.4
million and $18.4 million in
the corresponding periods in 2019. The decrease in the quarterly
period was due to lower sales volumes which reduced sales
$0.8 million, or 18%, and a lower
average selling price which reduced sales by $0.3 million, or 6%. The decrease in FY 2020 was
due to lower sales volume which reduced sales $3.6 million, or 19%, and a lower average selling
price which reduced sales by $1.2
million, or 7%. The decreases in volume and average selling
price were primarily due to unfavorable market conditions brought
on by the COVID-19 pandemic which reduced the global demand for
paper and paperboard products and created adverse market pricing
dynamics.
Gross Profit
Gross profit was $0.7 million and
$2.7 million for Q4 2020 and FY 2020,
respectively, compared to $1.0
million and $4.0 million in
the corresponding periods in 2019. The 33% and 32% respective
decreases were primarily due to lower sales volume and lower
average selling price partially offset by lower manufacturing
costs.
Gross profit as a percentage of sales was 20.3% and 20.0% for Q4
2020 and FY 2020, respectively, compared to 23.0% and 21.8% in the
same periods in 2019. The decrease was primarily due to a lower
average selling price partially offset by lower manufacturing
costs. Gross profit as a percentage of sales adjusted for
manufacturing depreciation was 27.2% and 26.0% for Q4 2020 and FY
2020, respectively, which is consistent with the 27.8% and 26.0%
margin in the same periods 2019.
Selling, General and Administrative
Selling, General and Administrative ("SG&A") expenses
were $1.2 million and $4.3 million in Q4 2020 and FY 2020,
respectively, compared $1.4 million
and $4.8 million in the same periods
in 2019. The 14% and 11% respective decreases were primarily due to
payments received under the Canadian Emergency Wage Subsidy program
(CEWS) and lower discretionary spend. The Company received
$0.1 million and $0.3 million in CEWS payments in the respective
periods in 2020.
Research and Development
Research and Development ("R&D") expenses were $0.3 million and $1.4
million for Q4 2020 and FY 2020, respectively, compared to
$0.5 million and $1.7 million in the corresponding periods in
2019. The changes were primarily due to CEWS payments received as
well as lower discretionary spend.
R&D expense as a percentage of sales was 8% and 10% for Q4
2020 and FY 2020, respectively, compared to 11% and 9% in the same
periods in 2019. 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 $0.1
million and $0.8 million in Q4
2020 and FY 2020, respectively, compared to $0.2 million and $0.4
million in the corresponding periods in 2019. The
improvement in the quarterly period was primarily due to lower
operating expenses partially offset by lower gross profit. The
change in the annual period was primarily due to lower gross profit
partially offset by lower operating expenses.
Net Loss
Net loss was $0.7 million, or
$0.01 per common share, and
$2.4 million, or $0.04 per common share in Q4 2020 and FY 2020,
respectively, compared to $0.6
million, or $0.01 net loss per
common share, and $1.5 million, or
$0.02 net loss per common share, in
the corresponding periods in 2019. The change in the annual period
is primarily due to lower gross profit as a result of lower volumes
and lower average selling price partially offset by lower operating
expenses.
Liquidity
Cash on hand and short-term investments were $42.0 million as at December 31, 2020, compared to $43.7 million as at December 31, 2019. Cash on hand at December 31, 2020, excluding the $25.3 million in short-term investments, was
$16.6 million. In FY 2020, the
Company purchased and cancelled 1,392,000 common shares for
consideration of $2.0 million under
the normal course issuer bid.
Notice of Conference Call
EcoSynthetix will host a conference call Thursday, March 4, 2021 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 with the conference identification of
6441579. 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 and twelve months ended December 31, 2020 and December 31, 2019:
(Unaudited)
|
Three months
ended
December 31, 2020
|
Three months
ended
December 31, 2019
|
Twelve months
ended
December 31, 2020
|
Twelve months
ended
December 31, 2019
|
Net
Loss
|
(705,904)
|
(587,793)
|
(2,402,094)
|
(1,454,058)
|
Depreciation
|
391,098
|
363,391
|
1,439,504
|
1,381,061
|
Share-based
Compensation
|
277,394
|
263,506
|
783,822
|
784,623
|
Interest
Income
|
(86,222)
|
(276,434)
|
(605,497)
|
(1,108,646)
|
Adjusted EBITDA
loss
|
(123,634)
|
(237,330)
|
(784,265)
|
(397,020)
|
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 2021. 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,
2021. 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.
Impact of COVID-19
The recent outbreak of the novel coronavirus (COVID-19 and
its variants), which has been declared by the World Health
Organization to be a "pandemic", has spread across the globe and is
impacting worldwide economic activity. The governments of many
countries, states, cities and other geographic regions have taken
preventative or protective actions, such as imposing restrictions
on travel and business operations and temporary closures of
businesses. In addition, numerous other businesses have temporarily
closed voluntarily. Such actions are creating disruption in global
supply chains, increasing rates of unemployment and adversely
impacting many industries. During the twelve months ended
December 31, 2020, the impact of
COVID-19 has caused both the global demand for paper products to
decrease and a decrease in the pricing of petroleum-related
products with which the Company's products compete with. This has
resulted in reduced sales volume, lower pricing and reduced gross
profit for the Company. COVID-19 has reduced the Company's ability
to effectively market and trial its products with customers where
on-site collaboration is preferred. COVID-19 has also caused a
decline in interest rates reducing interest income earned on cash
deposits and short-term investments. During the twelve months ended
December 31, 2020, the Company also
applied for and received government assistance under the Canadian
Emergency Wage Subsidy (CEWS) program and the Canadian Emergency
Rent Subsidy (CERS) program. No other COVID-19 related risks
identified below have materialized during the period and there has
been no other direct impact on operating results. The global impact
of COVID-19 continues to evolve rapidly, and in 2021, COVID-19 will
likely continue to have negative material impacts on the global
economy and our relevant markets. 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 our ability to effectively market and sell our products;
reduce demand for our products; result in labor shortages or social
unrest; cause a significant decrease in the market price for
petroleum related feedstocks which our products compete with, and
cause increased credit risk. Any of these additional risks factors
could have a significant negative impact on the Company's financial
results. Given the dynamic nature of this outbreak, the extent to
which the COVID-19 virus impacts the Company's operational results
and financial performance will depend on future developments, which
remain highly uncertain and cannot be accurately predicted at this
time, including the duration, scope and severity of the pandemic,
the actions taken to contain or mitigate its impact, and the direct
and indirect economic effects of the pandemic and related
containment measures, among others.
EcoSynthetix
Inc.
|
|
|
Consolidated
Balance Sheets
|
|
(expressed in US
dollars)
|
|
|
|
|
|
|
|
|
|
December 31,
2020
|
December 31,
2019
|
Assets
|
|
|
|
|
|
Current
assets
|
|
|
Cash
|
16,637,161
|
7,975,713
|
Short-term
investments
|
25,344,575
|
35,720,548
|
Accounts
receivable
|
1,794,594
|
1,824,581
|
Inventory
|
2,134,389
|
2,268,961
|
Government grants
receivable
|
122,218
|
114,956
|
Prepaid
expenses
|
69,633
|
75,973
|
|
46,102,570
|
47,980,732
|
|
|
|
Non-current
assets
|
|
|
Property, plant and
equipment
|
5,620,805
|
6,729,371
|
Total
assets
|
51,723,375
|
54,710,103
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Current
liabilities
|
|
|
Trade accounts
payables and accrued liabilities
|
1,179,097
|
1,360,568
|
|
|
|
Non-current
liabilities
|
|
|
Lease
liability
|
1,072,287
|
1,176,643
|
Total
liabilities
|
2,251,384
|
2,537,211
|
Shareholders'
Equity
|
|
|
Common
shares
|
490,259,923
|
490,590,406
|
Contributed
surplus
|
10,383,334
|
10,351,658
|
Accumulated
deficit
|
(451,171,266)
|
(448,769,172)
|
Total
shareholders' equity
|
49,471,991
|
52,172,892
|
|
|
|
Total liabilities
and shareholders' equity
|
51,723,375
|
54,710,103
|
EcoSynthetix
Inc.
|
|
|
|
|
|
Consolidated
Statements of Operations and Comprehensive Loss
|
|
For the three and
twelve months ended December 31, 2020 and 2019
|
(expressed in US
dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended December 31,
|
|
Twelve
months ended December 31,
|
|
2020
|
2019
|
|
2020
|
2019
|
|
|
|
|
|
|
Net
sales
|
3,343,823
|
4,398,305
|
|
13,662,711
|
18,446,922
|
|
|
|
|
|
|
Cost of
sales
|
2,664,492
|
3,385,369
|
|
10,924,338
|
14,417,197
|
|
|
|
|
|
|
Gross profit on
sales
|
679,331
|
1,012,936
|
|
2,738,373
|
4,029,725
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Selling, general and
administrative
|
1,204,655
|
1,408,141
|
|
4,333,649
|
4,849,977
|
Research and
development
|
266,802
|
469,022
|
|
1,412,315
|
1,742,452
|
|
1,471,457
|
1,877,163
|
|
5,745,964
|
6,592,429
|
|
|
|
|
|
|
Loss from
operations
|
(792,126)
|
(864,227)
|
|
(3,007,591)
|
(2,562,704)
|
|
|
|
|
|
|
Net interest
income
|
86,222
|
276,434
|
|
605,497
|
1,108,646
|
Net loss and
comprehensive loss
|
(705,904)
|
(587,793)
|
|
(2,402,094)
|
(1,454,058)
|
|
|
|
|
|
|
Basic and diluted
loss per common share
|
(0.01)
|
(0.01)
|
|
(0.04)
|
(0.02)
|
Weighted average
number of common shares outstanding
|
56,823,364
|
58,101,864
|
|
57,196,584
|
58,297,045
|
EcoSynthetix
Inc.
|
|
|
|
|
|
Consolidated
Statements of Cash Flows
|
|
|
|
For the three and
twelve months ended December 31, 2020 and 2019
|
|
(expressed in US
dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended December 31,
|
|
Twelve
months ended December 31,
|
|
2020
|
2019
|
|
2020
|
2019
|
Cash provided by
(used in)
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
Net loss and
comprehensive loss
|
(705,904)
|
(587,793)
|
|
(2,402,094)
|
(1,454,058)
|
Items not affecting
cash
|
|
|
|
|
|
Depreciation
|
391,098
|
363,391
|
|
1,439,504
|
1,381,061
|
Share-based
compensation
|
277,394
|
263,506
|
|
783,822
|
784,623
|
Other
|
18,450
|
(23,849)
|
|
(87,486)
|
65,527
|
Changes in non-cash
working capital
|
|
|
|
|
|
Accounts
receivable
|
(665,042)
|
(92,366)
|
|
184,998
|
523,041
|
Inventory
|
271,201
|
485,114
|
|
152,390
|
458,881
|
Government grants
receivable
|
(81,990)
|
(6,878)
|
|
(7,262)
|
25,044
|
Prepaid expenses
|
40,742
|
67,531
|
|
6,340
|
23,585
|
Trade accounts payables and
accrued liabilities
|
(71,244)
|
(252,735)
|
|
(219,409)
|
(1,016,944)
|
Interest on
short-term investments
|
|
|
|
|
|
Interest received on short-term investments
|
168,484
|
151,232
|
|
1,037,522
|
892,733
|
Accrued interest on short-term investments
|
(105,251)
|
(252,054)
|
|
(661,549)
|
(977,881)
|
|
(462,062)
|
115,099
|
|
226,776
|
705,612
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
Purchase of property,
plant and equipment
|
(41,821)
|
(251,898)
|
|
(248,146)
|
(458,172)
|
Receipts on mature
short-term investments
|
30,000,000
|
-
|
|
75,000,000
|
30,000,000
|
Purchase of
short-term investments
|
(20,000,000)
|
-
|
|
(65,000,000)
|
(35,000,000)
|
|
9,958,179
|
(251,898)
|
|
9,751,854
|
(5,458,172)
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
Payments made on
lease liability
|
(49,194)
|
(46,100)
|
|
(192,989)
|
(187,427)
|
Common shares
repurchased
|
(311,158)
|
(721,115)
|
|
(1,957,216)
|
(1,475,307)
|
Exercise of common
share options
|
628,282
|
45,466
|
|
719,576
|
215,820
|
|
267,930
|
(721,749)
|
|
(1,430,629)
|
(1,446,914)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
39,546
|
47,483
|
|
113,447
|
(32,155)
|
|
|
|
|
|
|
Change in cash
during the period
|
9,803,593
|
(811,065)
|
|
8,661,448
|
(6,231,629)
|
|
|
|
|
|
|
Cash - Beginning
of period
|
6,833,568
|
8,786,778
|
|
7,975,713
|
14,207,342
|
|
|
|
|
|
|
Cash - End of
period
|
16,637,161
|
7,975,713
|
|
16,637,161
|
7,975,713
|
SOURCE EcoSynthetix Inc.