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EcoSynthetix Reports 2011 Third Quarter Results
November 14, 2011
BURLINGTON, ON, Nov. 14, 2011 /CNW/ – EcoSynthetix Inc. (TSX: ECO), a renewable chemicals company that produces a family of commercially proven bio-based products, today announced its financial results for the three months and nine months ended September 30, 2011 (Q3 2011). Financial references are in U.S. dollars unless otherwise indicated.
Q3 2011 Highlights
- Revenue of $5.3 million compared to $4.8 million in Q3 2010
- Gross profit grew to $1.3 million compared to $1.0 million in Q3 2010
- Adjusted EBITDA¹ of ($2.0) million compared to $0.1 million in Q3 2010
- Commissioned a new 80 million pound production line within the existing facility in Oosterhout, The Netherlands, subsequent to the end of the quarter
- Commissioned a pilot production line at the Centre of Innovation within the Burlington facility to drive development and sales activities
- Won three net new mill customers during the quarter, including first sales in Europe
- Four of the top 20 global manufacturers are now using the Company's binders with an additional 10 of the top 20 manufacturers at the mill trial stage
"The high and volatile pricing of petroleum-based binder products is driving robust interest in our breakthrough product," said John van Leeuwen, Chairman and Chief Executive Officer. "The global paper industry continues to face a challenging period and is placing a large emphasis on cost cutting which we believe plays directly into our value proposition. Our ECOSPHERE®BIOLATEX® binders offer mills significant savings on their number two input cost, which is why our mill trial activity is at record levels with more than 70 initiated so far this year."
Financial Summary
Revenue
Total revenue for the quarter was $5.3 million compared to $4.8 million in Q3 2010. The increase was attributable to price increases. Revenue for the year-to-date (YTD) period was $17.0 million compared to $10.0 million in the prior period. The increase was due to price increases and higher volumes.
Gross Profit
Gross profit for the quarter was $1.3 million or 25.2% of revenue compared to $1.0 million or 21.3% of revenue during the quarter ended September 30, 2010. For the YTD period, gross profit was $4.2 million or 24.5% of revenue compared to $2.6 million or 25.5% of revenue in the prior period. The increases in gross profit during the quarter were primarily due to an increase in sales prices partially offset by an increase in corn-starch costs. The increases in gross profit for the YTD period were primarily due to an increase in sales prices and volumes, which were partially offset by increases in corn-starch costs.
Selling, General and Administrative (excluding share-based compensation, depreciation & amortization and foreign exchange gains or losses)
Selling, general and administrative costs for the quarter were $2.4 million compared to $0.8 million for the same period in 2010. Selling, general and administrative costs for the YTD period were $5.5 million compared to $2.6 million in the prior period. These increased costs are primarily attributable to higher salaries and benefits and higher administration costs related to increased headcount.
Research and Development
Research and development (R&D) expenses for the quarter were $0.7 million compared to $0.2 million for the same period in 2010. For the YTD period, R&D expenses were $1.4 million compared to $0.7 million in the prior period. Product development is a key focus of EcoSynthetix as it pursues the enhancement of ECOSPHERE® BIOLATEX®, as well as the development of its new offerings, ECOMER® and ECOSTIX®, to support market expansion. During the quarter, the Company commissioned a new pilot production line at its Burlington facility to drive development and sales activities.
Adjusted EBITDA1
Adjusted EBITDA for the quarter was ($2.0) million compared to $0.1 million for the same period in 2010. For the YTD period, adjusted EBITDA was ($2.6) million compared to ($0.5) million in the prior period. The change in adjusted EBITDA is primarily due to higher operating expenses partially offset by increased gross profit.
Net Loss
The net loss in Q3 2011 was $2.3 million, or $0.07 per common share (basic and fully diluted), compared to a net loss of $18.2 million, or $22.90 per share (basic and fully diluted), for the quarter ended September 30, 2010. For the YTD period, the net loss was $250.4 million, or $20.50 per share (basic and fully diluted) compared to $38.3 million or $48.09 per share (basic and fully diluted) in the prior period.
The pro-forma (before fair value charges) net lossin Q3 2011 was $2.3 million or $0.07 per share (basic and fully diluted) compared with a pro-forma net loss of $0.3 million or $0.42 per share (basic and fully diluted) in Q3 2010. For the YTD period, the pro-forma net loss was $3.5 million, or $0.29 per share (basic and fully diluted) compared to $1.6 million or $1.96 per share (basic and fully diluted) in the prior period.
Liquidity
Working capital was $118.9 million at September 30, 2011 compared to working capital of $35.9 million at December 31, 2010. The increase was attributable to higher cash of $77.1 million due to the initial public offering that closed August 4, 2011 net of cash utilized for operating and investing activities. The Company believes that ongoing operations, working capital and associated cash flow in addition to cash resources provide sufficient liquidity to support ongoing business operations for at least the next 12 months.
Notice of Conference Call
EcoSynthetix will host a conference call on Tuesday, November 15, 2011 at 8:30AM ET to discuss its financial results. John van Leeuwen, Chairman and 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. 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. We use non-IFRS measures such as Adjusted EBITDA to provide investors with a supplemental measure of operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Our management also use non-IFRS measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets and assess its 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. 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 is not a recognized measure under IFRS and should not be considered as an alternative to operating income or net income as a measure of operating results or an alternative to cash flows as a measure of liquidity. Adjusted EBITDA is defined as consolidated net income (loss) before interest, income taxes, depreciation, amortization, other non-cash expenses and charges which include the movement in the unrealized gains and losses on the Company's redeemable preferred shares and warrants classified as financial liabilities prior to the initial public offering and share based compensation expense. The following table reconciles net loss to Adjusted EBITDA for Q3 2011 and Q3 2010:
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September 30, |
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September 30, |
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2011 |
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2010 |
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|
|
|
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Net loss |
(2,288,612) |
|
(18,236,407) |
|
Depreciation and amortization |
33,005 |
|
81,583 |
|
Share based compensation |
296,773 |
|
337,039 |
|
Loss related to warrants and preferred shares |
– |
|
17,901,593 |
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Interest income, net |
(61,863) |
|
(12,413) |
|
Adjusted EBITDA |
(2,020,697) |
|
71,395 |
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. 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 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 supplemented prospectus dated July 27, 2011. 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.
About EcoSynthetix Inc. (www.ecosynthetix.com)
EcoSynthetix Inc. is a renewable chemicals company specializing in bio-based products that can be used as inputs in industrial manufacturing for a wide range of consumer products. The Company's products offer a reduced carbon footprint and are marketed primarily on the basis of lower cost, stable pricing and equal or superior performance. EcoSynthetix's lead product, ECOSPHERE® BIOLATEX® binders, is used commercially by a number of the global top 20 manufacturers in the coated paper and paperboard industry.
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EcoSynthetix Inc. |
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Interim consolidated balance sheets |
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(In U.S. dollars) |
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(Unaudited) |
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As at |
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As at |
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Assets |
|
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Current assets |
|
|
|
|
Cash |
112,246,813 |
|
35,193,037 |
|
Accounts receivable |
4,495,647 |
|
2,739,570 |
|
Inventories |
8,229,440 |
|
1,990,383 |
|
Government assistance receivable |
902,153 |
|
973,751 |
|
Prepaid expenses |
175,468 |
|
81,089 |
|
Total current assets |
126,049,521 |
|
40,977,830 |
|
|
|
|
|
|
Intangible assets |
62,715 |
|
44,315 |
|
Property and equipment |
7,562,261 |
|
1,690,069 |
|
Total assets |
133,674,497 |
|
42,712,214 |
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|
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Liabilities and shareholders' equity |
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Current liabilities |
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Accounts payable and accrued liabilities |
7,100,689 |
|
3,603,796 |
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Deferred government grant |
– |
|
486,961 |
|
Accrued compensation |
– |
|
1,005,371 |
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Total current liabilities |
7,100,689 |
|
5,096,128 |
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|
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|
|
|
Redeemable preferred shares |
– |
|
135,196,431 |
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Warrants |
– |
|
1,501,295 |
|
Total Liabilities |
7,100,689 |
|
141,793,854 |
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|
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Shareholder's equity |
|
|
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Common shares |
492,334,747 |
|
143,213 |
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Equity component of redeemable preferred shares |
– |
|
19,793,287 |
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Contributed surplus |
5,799,982 |
|
2,180,570 |
|
Accumulated deficit |
(371,560,921) |
|
(121,198,710) |
|
Total shareholder's equity (deficit) |
126,573,808 |
|
(99,081,640) |
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|
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Total liabilities and shareholders' equity |
133,674,497 |
|
42,712,214 |
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EcoSynthetix Inc. |
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Interim consolidated statements of operations |
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(In U.S. dollars, except per share amounts as noted) |
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(Unaudited) |
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Nine months ended |
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Three months ended |
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2011 |
2010 |
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2011 |
2010 |
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Net sales |
17,050,722 |
10,017,200 |
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5,282,495 |
4,828,696 |
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Cost of sales |
12,874,175 |
7,461,396 |
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3,951,167 |
3,800,071 |
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Gross profit |
4,176,547 |
2,555,804 |
|
1,331,328 |
1,028,625 |
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Operating expenses |
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Selling, general and administrative |
6,389,458 |
3,386,214 |
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2,987,573 |
1,132,513 |
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Research and development |
1,427,515 |
738,053 |
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694,230 |
243,339 |
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Total operating expenses |
7,816,973 |
4,124,267 |
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3,681,803 |
1,375,852 |
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Loss from operations |
(3,640,426) |
(1,568,463) |
|
(2,350,475) |
(347,227) |
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Interest income |
107,752 |
9,557 |
|
61,863 |
12,413 |
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Loss related to warrants and preferred shares |
(246,829,537) |
(36,735,731) |
|
– |
(17,901,593) |
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Net loss |
(250,362,211) |
(38,294,637) |
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(2,288,612) |
(18,236,407) |
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Basic and diluted loss per common share |
(20.50) |
(48.09) |
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(0.07) |
(22.90) |
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Weighted average number of common shares outstanding |
12,213,476 |
796,278 |
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34,406,703 |
796,278 |
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EcoSynthetix Inc. |
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Interim consolidated statements of cash flows |
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(In U.S. dollars) |
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(Unaudited) |
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Nine months ended |
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Three months ended |
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2011 |
2010 |
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2011 |
2010 |
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Operating activities |
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Net loss |
(250,362,211) |
(38,294,637) |
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(2,288,612) |
(18,236,407) |
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Items not affecting cash |
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Changes in fair value of warrants and redeemable preferred shares |
246,829,537 |
36,735,731 |
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– |
17,901,593 |
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Share based compensation expense |
708,108 |
775,485 |
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296,773 |
337,039 |
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Depreciation and amortization |
325,039 |
271,576 |
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33,005 |
81,583 |
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Changes in non-cash working capital |
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|
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Accounts receivable |
(1,756,077) |
(1,433,001) |
|
(1,414,768) |
731,503 |
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Inventories |
(6,107,057) |
(545,955) |
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(1,956,668) |
97,912 |
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Government assistance receivable |
71,598 |
– |
|
261,795 |
– |
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Prepaid expenses |
(94,379) |
(185,973) |
|
4,026 |
(157,375) |
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Accounts payable and accrued liabilities |
883,702 |
714,663 |
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(1,280,129) |
231,652 |
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Deferred government assistance |
(486,961) |
– |
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– |
– |
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Accrued compensation |
(1,005,371) |
45,851 |
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– |
8,192 |
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Cash provided by (used in) operating activities |
(10,994,072) |
(1,916,260) |
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(6,344,578) |
995,692 |
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Investing activities |
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Cash used for purchase of property, equipment and intangibles |
(6,245,898) |
(1,668,974) |
|
(3,333,578) |
(825,569) |
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Cash used in investing activities |
(6,245,898) |
(1,668,974) |
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(3,333,578) |
(825,569) |
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Financing activities |
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Common share issuance costs |
(10,802,780) |
– |
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(8,571,527) |
– |
|
Issuance of common shares |
102,451,082 |
– |
|
102,451,082 |
– |
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Increase in government grant |
2,511,459 |
415,000 |
|
208,555 |
– |
|
Preferred share warrants exercised |
29,494 |
232,456 |
|
29,494 |
– |
|
Common share options exercised |
104,491 |
– |
|
58,933 |
– |
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Cash provided by financing activities |
94,293,746 |
647,456 |
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94,176,537 |
– |
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Net increase (decrease) in cash |
77,053,776 |
(2,937,778) |
|
84,498,381 |
170,123 |
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Cash – beginning of period |
35,193,037 |
9,550,134 |
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27,748,432 |
6,442,233 |
|
Cash – end of period |
112,246,813 |
6,612,356 |
|
112,246,813 |
6,612,356 |
Source: Canada Newswire (November 14, 2011 – 5:23 PM EST)
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