EcoSynthetix Reports 2021 First Quarter Results

 

BURLINGTON, ON, May 4, 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 (Q1 2021) ended March 31, 2021. Financial references are in U.S. dollars unless otherwise indicated.

Highlights
(Comparison periods in each case are the three months ended March 31, 2020)

• Recorded net sales of $3.7 million, down 13%, in Q1 2021, primarily due to lower volumes of 11% which was consistent with the year-over-year declines highlighted for the period by industry reports in coated paper demand
• Two product innovation awards won by strategic partners in wood composites and personal care, including the SWISS KRONO Group's BE.YOND particle board product named as a "20 PLUS 20 Annual Outstanding Furniture Accessories" at the recent Interzum Guangzhou 2021, subsequent to the end of the quarter
• Generated positive cash flow from operations of $0.4 million in Q1 2021, a decline of $0.2 million compared to the prior period
• Recorded Adjusted EBITDA loss of $0.3 million in Q1 2021, an increase in loss of $0.1 million, compared to the prior period
• Purchased and cancelled 57,600 common shares for total consideration of $0.2 million under the normal course issuer bid during 2021
• Maintained a strong balance sheet with cash of $41.9 million as at March 31, 2021

"We made important progress across each of our three market verticals during the first quarter that advanced our commercial strategies for EcoSphere®, DuraBind™ and personal care ingredients," said Jeff MacDonald, CEO of EcoSynthetix. "Our most important growth driver remains our commercial activity in the wood composites market. We have made a series of important steps in our commercialization strategy with both our most significant commercial account, SWISS KRONO, and our key strategic prospect. In each case, these manufacturers recognize the value that a bio-based resin can offer to retailers and end users. Our DuraBind resin is a sustainable and healthier alternative to petrochemical resins. It offers benefits to both manufacturers, in reducing their carbon footprint, as well as end users. Our highest priority is delivering meaningful growth through market penetration of the wood composites and personal care markets. Demand in the paper market improved in the quarter compared to the depths experienced last May and the weakness through the end of 2020. As a result, our sales volumes and pricing improved from the second half of 2020. Our strong balance sheet and positive cash flow from operations put us in a great position to deliver on this strategy."     

Financial Summary

Net Sales

Net sales were $3.7 million for Q1 2021 compared to $4.2 million for the same period in 2020. The 13% decrease was due to lower sales volumes which reduced sales $0.4 million, or 11%, and a lower average selling price which reduced sales by $0.1 million, or 2%.

Gross Profit

Gross profit was $0.8 million for Q1 2021, compared to $1.1 million for the same period in 2020. The 32% decrease was due to lower sales volume, lower average selling price and higher manufacturing costs.

Gross profit as a percentage of sales was 20.5% for Q1 2021, compared to 26.0% in the same period in 2020. Gross profit as a percentage of sales adjusted for manufacturing depreciation was 26.0% for Q1 2021, compared to 29.8% for the same period in 2020. The decreases were primarily due to a lower average selling price and higher manufacturing costs.

Selling, General and Administrative

Selling, General and Administrative ("SG&A") expenses were $1.2 million for Q1 2021, compared $1.4 million in the same period in 2020. The 13% decrease was primarily due to payments received under the Canadian Emergency Wage Subsidy program (CEWS) of $0.1 million and lower discretionary spend in the 2021 period.

Research and Development

Research and Development ("R&D") expenses were $0.3 million for Q1 2021, compared to $0.4 million for the same period in 2020. R&D expense as a percentage of sales was 9% for Q1 2021 which was comparable to the same period in 2020. 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 $0.3 million for Q1 2021, compared to $0.2 million in the same period in 2020. The increased loss 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, for Q1 2021, compared to $0.4 million, or $0.01 net loss per common share, in the same period in 2020. The change was primarily due to a higher loss from operations and lower interest income in the 2021 period.

Liquidity

Cash on hand was $41.9 million as at March 31, 2021, compared to $42.0 of cash on hand and short-term investments as at December 31, 2020. The Company purchased and cancelled 57,600 common shares for consideration of $0.2 million under the normal course issuer bid in Q1 2021.

Notice of Conference Call

EcoSynthetix will host a conference call Wednesday, May 5, 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 [phone] or [phone] with the conference identification of 3849877. 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, 2021 and March 31, 2020:

(Unaudited)	Three months ended March 31, 2021	Three months ended March 31, 2020
Net Loss	(749,884)	(447,255)
Depreciation	360,126	313,877
Share-based Compensation	119,477	144,252
Interest Income	(25,941)	(201,113)
Adjusted EBITDA loss	(296,222)	(190,239)

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.

EcoSynthetix Inc.
Interim Consolidated Balance Sheets
(expressed in US dollars)
	March 31, 2021	December 31, 2020
Assets
Current assets
Cash	41,915,025	16,637,161
Short-term investments	-	25,344,575
Accounts receivable	1,833,907	1,794,594
Inventory	2,579,994	2,134,389
Government grants receivable	125,091	122,218
Prepaid expenses	42,110	69,633
	46,496,127	46,102,570
Non-current assets
Property, plant and equipment	5,375,426	5,620,805
Total assets	51,871,553	51,723,375
Liabilities
Current liabilities
Trade accounts payables and accrued liabilities	2,160,909	1,179,097
Non-current liabilities
Lease liability	1,022,091	1,072,287
Total liabilities	3,183,000	2,251,384
Shareholders' Equity
Common shares	490,313,256	490,259,923
Contributed surplus	10,296,447	10,383,334
Accumulated deficit	(451,921,150)	(451,171,266)
Total shareholders' equity	48,688,553	49,471,991
Total liabilities and shareholders' equity	51,871,553	51,723,375

EcoSynthetix Inc.
Interim Consolidated Statements of Operations and Comprehensive Loss
For the three months ended March 31, 2021 and 2020
(expressed in US dollars)
	Three months ended March 31,
	2021	2020
Net sales	3,673,447	4,224,416
Cost of sales	2,921,358	3,124,202
Gross profit on sales	752,089	1,100,214
Expenses
Selling, general and administrative	1,198,989	1,372,487
Research and development	328,925	376,095
	1,527,914	1,748,582
Loss from operations	(775,825)	(648,368)
Net interest income	25,941	201,113
Net loss and comprehensive loss	(749,884)	(447,255)
Basic and diluted loss per common share	(0.01)	(0.01)
Weighted average number of common shares outstanding	57,247,344	57,926,217

EcoSynthetix Inc.
Interim Consolidated Statements of Cash Flows
For the three months ended March 31, 2021 and 2020
(expressed in US dollars)
	Three months ended March 31,
	2021	2020
Cash provided by (used in)
Operating activities
Net loss and comprehensive loss	(749,884)	(447,255)
Items not affecting cash
Depreciation	360,126	313,877
Share-based compensation	119,477	144,252
Other	3,894	78,720
Changes in non-cash working capital
Accounts receivable	(194,324)	(462,229)
Inventory	(473,721)	(370,926)
Government grants receivable	(2,873)	81,749
Prepaid expenses	27,523	38,801
Trade accounts payables and accrued liabilities	933,182	649,215
Interest on short-term investments
Interest received on short-term investments	358,740	760,545
Accrued interest on short-term investments	(14,165)	(202,792)
	367,975	583,957
Investing activities
Purchase of property, plant and equipment	(44,557)	(88,955)
Receipts on mature short-term investments	25,000,000	35,000,000
Purchase of short-term investments	-	(35,000,000)
	24,955,443	(88,955)
Financing activities
Payments made on lease liability	(59,237)	(47,579)
Common shares repurchased	(189,995)	(476,567)
Exercise of common share options	191,975	45,530
	(57,257)	(478,616)
Effect of exchange rate changes on cash	11,703	(188,504)
Change in cash during the period	25,277,864	(172,118)
Cash - Beginning of period	16,637,161	7,975,713
Cash - End of period	41,915,025	7,803,595

SOURCE EcoSynthetix Inc.

Investor Relations, Ross Marshall, Phone: [phone], E-mail: [email protected]

Related Links

http://www.ecosynthetix.com/