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EcoSynthetix Reports 2013 First Quarter Results
May 7, 2013
TORONTO, May 7, 2013 /CNW/ – EcoSynthetix Inc. ("EcoSynthetix" or the "Company"), a renewable chemicals company that produces a family of commercially proven bio-based products, today announced its financial results for the three months endedMarch 31, 2013. Financial references are in U.S. dollars unless otherwise indicated.
First Quarter 2013 Highlights
- Net sales grew 54% to $6.1 million for the three months ended March 31, 2013 (Q1 2013) compared to the three months ended March 31, 2012 (Q1 2012)
- Won three new customers during the quarter
- Six of the top 20 global paper and paperboard manufacturers are commercial with the Company's EcoSphere® biolatex®binders
- Signed a five-year industrial partnership with Waterloo Institute for Nanotechnology at the University of Waterloo to collaborate on new applications for EcoSynthetix' EcoSphere® technology
- Received separate certifications in accordance with the International Organization for Standardization (ISO) – ISO 9001:2008 for Quality Management Systems and ISO 14001:2004 for Environmental Management Systems
"We are growing sales both within our existing customer base and through new customer wins, including three new paper and paperboard customers this year," said John van Leeuwen, Chief Executive Officer of EcoSynthetix. "While coated paper and paperboard will remain a primary market in the near term, we continue to invest in product development. The cost and performance benefits our bio-based materials bring as an alternative to petroleum-based binders are just as relevant to the building products and adhesive markets as the paper and paperboard market. Our teams are hard at work on creating new and innovative applications of EcoSphere and EcoStix that will open new markets and revenue opportunities."
Financial Summary
Net Sales
Net sales increased 54% to $6.1 million in Q1 2013, compared to $4.0 million in Q1 2012. The increase was primarily due to higher sales volume. From a geographic perspective, sales volume increased $1.1 million in North America, $0.5 million in EMEA, $0.4 million in Latin America and $0.1 million in Asia Pacific. EcoSynthetix has won 11 new customers since Q1 2012, including three new customers in Q1 2013. Collectively these new customers accounted for 66% of the $2.1 million increase in net sales. Existing customers accounted for 34% of the sales increase in the quarter, representing a 19% increase in sales to those existing customers compared to the same period last year.
Gross Profit
Gross profit was $1.1 million in Q1 2013, or 17.3% of sales, compared to $0.8 million, or 19.1% of sales, in Q1 2012. The change in gross profit during Q1 2013 was principally due to higher sales volume and lower manufacturing production costs partly offset by higher corn starch costs.
Gross profit adjusted for manufacturing depreciation as a percentage of sales was 22.3% in Q1 2013 compared to 24.4% in Q1 2012. The change was primarily due to higher corn starch costs partly offset by lower manufacturing production costs.
Selling, General and Administrative
(Excludes share-based compensation, depreciation and amortization and foreign exchange loss or gain)
Selling, general and administrative (SG&A) costs were $3.0 million for Q1 2013 compared to $2.4 million in Q1 2012. The change was principally due to increased headcount as part of the Company's strategy to expand its sales and marketing efforts.
Research and Development
Research and development (R&D) expenses were $1.3 million in Q1 2013 compared to $1.1 million in Q1 2012. R&D is a key focus of EcoSynthetix to enhance its bio-based material product portfolio and expand into new applications and markets. The increase in R&D expenses reflects the Company's ongoing investment in product development and innovation for itsEcoSphere® biolatex® binders, as well as EcoMer and EcoStix.
Adjusted EBITDA1
Adjusted EBITDA for the quarter was ($2.9) million, compared to ($2.6) million in Q1 2012. The change in adjusted EBITDA is due to higher operating expenses partly offset by higher gross profit.
Net Loss
Net loss in Q1 2013 was $3.5 million, or $0.06 per common share, compared to $2.9 million, or $0.05 per share, for Q1 2012. The change in net loss is principally due to an increase in operating expenses partially offset by higher sales volumes resulting in increased gross profit.
Liquidity
Working capital was $97.3 million at March 31, 2013 compared to working capital of $100.2 million at December 31, 2012. The decrease in working capital was principally due to cash utilized in operating activities.
Notice of Conference Call
EcoSynthetix will host a conference call on Wednesday, May 8, 2013, at 8:30 AM ET to discuss its financial results. John van Leeuwen, 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. 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 ofEcoSynthetix 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. 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 Q1 2013 and Q1 2012:
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Three months ended |
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March 31, 2013 |
March 31, 2012 |
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Net loss |
(3,533,486) |
(2,939,492) |
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Depreciation and amortization |
381,907 |
239,417 |
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Share-based compensation |
331,103 |
240,000 |
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Interest Income |
(85,372) |
(93,621) |
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Adjusted EBITDA (1) |
(2,905,848) |
(2,553,696) |
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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.
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 Annual Information Form dated March 28, 2013. 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.
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EcoSynthetix Inc. |
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Consolidated Balance Sheets |
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(Expressed in U.S. dollars), unaudited |
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As at March 31, 2013 |
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As at |
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Assets |
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Current assets |
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Cash |
90,209,738 |
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93,260,296 |
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Accounts receivable |
4,689,004 |
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4,309,355 |
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Inventories |
7,835,686 |
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6,822,619 |
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Government grants receivable |
180,499 |
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184,118 |
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Prepaid expenses |
221,684 |
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154,492 |
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Total current assets |
103,136,611 |
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104,730,880 |
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Non-current assets |
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Intangible assets |
182,983 |
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163,501 |
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Property, plant and equipment |
13,115,659 |
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13,174,416 |
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Total Assets |
116,435,253 |
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118,068,797 |
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Liabilities |
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Current liabilities |
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Accounts payable and accrued liabilities |
5,719,286 |
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4,282,296 |
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Deferred government grant |
123,890 |
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226,920 |
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Total liabilities |
5,843,176 |
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4,509,216 |
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Shareholder's Equity |
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Common shares |
492,394,699 |
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492,065,820 |
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Contributed surplus |
7,068,457 |
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6,831,354 |
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Accumulated deficit |
(388,871,079) |
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(385,337,593) |
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Total shareholder's equity |
110,592,077 |
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113,559,581 |
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Total shareholders' equity and liabilities |
116,435,253 |
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118,068,797 |
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EcoSynthetix Inc. |
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(Expressed in U.S. dollars, unless otherwise noted), unaudited |
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Three months ended March 31, |
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2013 |
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2012 |
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Net sales |
6,120,531 |
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3,978,347 |
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Cost of sales |
5,064,405 |
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3,218,533 |
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Gross profit on sales |
1,056,126 |
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759,814 |
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Expenses |
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Selling, general and administrative |
3,405,462 |
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2,716,433 |
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Research and development |
1,269,522 |
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1,076,494 |
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Total operating expenses |
4,674,984 |
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3,792,927 |
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Loss from operations |
(3,618,858) |
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(3,033,113) |
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Interest income |
85,372 |
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93,621 |
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Net loss and comprehensive loss |
(3,533,486) |
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(2,939,492) |
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Basic and diluted loss per common share |
(0.06) |
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(0.05) |
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Weighted average number of common shares outstanding |
55,689,778 |
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55,248,203 |
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EcoSynthetix Inc. |
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Consolidated Statements of Cash Flows |
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(Expressed in U.S. dollars), unaudited |
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Three months ended March 31, |
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2013 |
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2012 |
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Cash provided by (used in) |
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Operating activities |
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Net loss and comprehensive loss |
(3,533,486) |
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(2,939,492) |
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Items not affecting cash |
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Depreciation and amortization |
381,907 |
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239,417 |
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Share based compensation |
331,103 |
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240,000 |
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Changes in non-cash working capital |
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Accounts receivable |
(379,649) |
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486,701 |
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Inventories |
(1,000,062) |
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784,188 |
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Government grants receivable |
3,619 |
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117,349 |
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Prepaid expenses |
(67,192) |
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64,936 |
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Accounts payable and accrued liabilities |
1,548,543 |
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(1,513,149) |
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Deferred government grant |
(103,030) |
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– |
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(2,818,247) |
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(2,520,050) |
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Investing activities |
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Cash used for purchase of intangible assets, property, |
(467,190) |
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(3,310,899) |
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(467,190) |
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(3,310,899) |
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Financing activities |
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Exercise of common share options |
234,879 |
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16,147 |
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Cash provided by financing activities |
234,879 |
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16,147 |
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Change in cash during the period |
(3,050,558) |
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(5,814,802) |
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Cash – Beginning of period |
93,260,296 |
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105,713,705 |
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Cash – End of period |
90,209,738 |
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99,898,903 |
EcoSynthetix Inc.
John van Leeuwen
Chief Executive Officer
Phone: (289) 288-5010
E-mail: jvanleeuwen@ecosynthetix.com
Investor Relations
Ross Marshall
TMX Equicom
Phone: (416) 815-0700 (Ext.238)
E-mail: rmarshall@tmxequicom.com