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EcoSynthetix Reports 2013 Second Quarter Results
August 7, 2013
BURLINGTON, ON, Aug. 7, 2013 /CNW/ – EcoSynthetix Inc. (TSX:ECO) ("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 and six months ended June 30, 2013. Financial references are in U.S. dollars unless otherwise indicated.
Second Quarter 2013 Highlights
- Grew net sales by 48% to $5.5 million for the three months ended June 30, 2013, (Q2 2013) compared to the three months ended June 30, 2012 (Q2 2012)
- Won two new customers in Q2 2013, totalling five new customers year-to-date (YTD)
- Expanded product pipeline with upcoming new additions that target the paper and paperboard market and innovative new binders that target the building products market
- Signed an agreement to support product development, validation and sales with Chimar Hellas, a global provider of innovative industrial technology for the resin and wood based panel industries
- Conducted industrial scale trials with leading global manufacturers in both wood composites and, subsequent to the end of the quarter, insulation
"Our base of recurring business continues to grow as sales to existing customers increase and we convert mill trials into new customers, including two new customers in the quarter giving us twelve new mills in the last twelve months," said John van Leeuwen, Chief Executive Officer of EcoSynthetix. "The investments we have made in product development are driving innovation as we expand our product offering. We are preparing to launch new product technologies that address targeted applications in paper and paperboard as well as broad applications in building products, which significantly expand our addressable market."
Financial Summary
Net Sales
Net sales for the three months ended June 30, 2013 (Q2 2013) were $5.5 million compared to $3.7 million for the three months ended June 30, 2012 (Q2 2012), a 48% increase. The increase was principally due to higher sales volume in North America,Asia Pacific and EMEA of $0.9 million, $0.5 million and $0.4 million, respectively. This was partially offset by a marginal decline in sales volume in Latin America of $0.1M. EcoSynthetix has won twelve new customers since Q2 2012, including two new customers in Q2 2013. Collectively, these new customers accounted for 20% of net sales in the quarter and 29% of the increase in sales compared to the same period last year. Sales to existing customers accounted for 80% of net sales in the quarter, representing a 19% increase in sales to those existing customers compared to the same period last year.
Net sales for the year-to-date (YTD) period were $11.7 million compared to $7.7 million in the same period last year, an increase of 51%. The increase was primarily attributable to higher sales volumes sales in North America, EMEA, Asia Pacific and Latin America.
Gross Profit
Gross profit was $0.8 million or 14.8% of sales in Q2 2013 compared to $0.6 million or 16.7% in the same period last year. For the YTD period, gross profit was $1.9 million or 16.1% of sales compared to $1.4 million or 18.0% in the same period last year. The change in gross profit during the both the Q2 and YTD periods were principally due to higher sales volume and lower manufacturing production costs.
Gross profit as a percentage of sales, adjusted for manufacturing depreciation, was 19.6% and 21.1% for Q2 2013 and YTD, respectively, compared with 22.9% and 23.6% in the same periods last year. The change is 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 $2.9 million in Q2 2013 compared to $2.3 million in the same period last year. For the YTD period, SG&A costs were $5.9 million compared to $4.7 million for the same period last year. The change was principally due to increased headcount.
Research and Development
Research and development (R&D) costs were $1.2 million in Q2 2013 compared to $1.0 million for the same period last year. For the YTD period, R&D costs were $2.5 million compared to $2.0 million for the same period last year. R&D is a key focus ofEcoSynthetix 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.
Adjusted EBITDA1
Adjusted EBITDA was ($3.1) million in Q2 2013, compared to ($2.4) million in the same period last year. For the YTD period, adjusted EBITDA was ($6.0) million compared to ($5.0) million in the same period last year. The change is primarily due to higher operating expenses including SG&A and R&D noted above partially offset by higher gross profit.
Net Loss
Net loss in Q2 2013 was $3.6 million, or $0.07 per common share (basic and fully diluted), compared to a net loss of $2.8 million, or $0.05 per common share (basic and fully diluted), for same period last year. For the YTD period, net loss was $7.2 million, or $0.13 per share (basic and fully diluted) compared to $5.7 million or $0.10 per share (basic and fully diluted) in the prior period.
Liquidity
Working capital was $93.8 million at June 30, 2013 compared to working capital of $100.2 million at December 31, 2012. The decrease was principally due to cash utilized in operating and investing activities.
Notice of Conference Call
EcoSynthetix will host a conference call on Thursday, August 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 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 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 Q2 2013 and Q2 2012:
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Three months ended |
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June 30, 2013 |
June 30, 2012 |
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Net loss |
(3,634,692) |
(2,772,608) |
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Depreciation and amortization |
365,697 |
262,515 |
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Share-based compensation |
285,876 |
177,104 |
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Interest Income |
(93,856) |
(95,655) |
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Adjusted EBITDA (1) |
(3,076,975) |
(2,428,644) |
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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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Interim Consolidated Balance Sheet |
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(Expressed in U.S. dollars), unaudited |
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As at June 30, 2013 |
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As at |
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Assets |
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Current assets |
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Cash |
84,977,872 |
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93,260,296 |
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Accounts receivable |
4,580,528 |
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4,309,355 |
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Inventories |
7,604,394 |
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6,822,619 |
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Government grants receivable |
176,520 |
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184,118 |
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Prepaid expenses |
389,034 |
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154,492 |
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Total current assets |
97,728,348 |
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104,730,880 |
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Non-current assets |
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Intangible assets |
159,671 |
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163,501 |
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Property, plant and equipment |
13,249,974 |
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13,174,416 |
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Total Assets |
111,137,993 |
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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 |
3,803,996 |
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4,282,296 |
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Deferred government grant |
82,918 |
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226,920 |
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Total liabilities |
3,886,914 |
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4,509,216 |
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Shareholder's Equity |
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Common shares |
492,402,517 |
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492,065,820 |
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Contributed surplus |
7,354,333 |
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6,831,354 |
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Accumulated deficit |
(392,505,771) |
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(385,337,593) |
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Total shareholder's equity |
107,251,079 |
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113,559,581 |
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Total shareholders' equity and liabilities |
111,137,993 |
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118,068,797 |
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EcoSynthetix Inc. |
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Interim Consolidated Statement of Operations and Loss |
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(Expressed in U.S. dollars, unless otherwise noted), |
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Six months ended June 30, |
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Three months ended June 30 |
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2013 |
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2012 |
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2013 |
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2012 |
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Net sales |
11,654,156 |
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7,713,113 |
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5,533,678 |
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3,734,766 |
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Cost of sales |
9,777,548 |
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6,328,535 |
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4,713,196 |
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3,110,002 |
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Gross profit on sales |
1,876,608 |
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1,384,578 |
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820,482 |
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624,764 |
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Expenses |
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Selling, general and administrative |
6,725,061 |
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5,254,457 |
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3,319,599 |
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2,538,024 |
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Research and development |
2,498,953 |
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2,031,497 |
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1,229,431 |
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955,003 |
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Total operating expenses |
9,224,014 |
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7,285,954 |
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4,549,030 |
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3,493,027 |
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Loss from operations |
(7,347,406) |
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(5,901,376) |
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(3,728,548) |
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(2,868,263) |
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Interest income |
179,228 |
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189,276 |
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93,856 |
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95,655 |
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Net loss and comprehensive loss |
(7,168,178) |
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(5,712,100) |
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(3,634,692) |
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(2,772,608) |
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Basic and diluted loss per common share |
(0.13) |
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(0.10) |
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(0.07) |
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(0.05) |
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Weighted average number of common shares outstanding |
55,904,023 |
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55,248,568 |
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55,709,678 |
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55,248,933 |
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EcoSynthetix Inc. |
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Interim Consolidated Statement of Cash Flows |
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(Expressed in U.S. dollars), unaudited |
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Six months ended June 30, |
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Three months ended June 30 |
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2013 |
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2012 |
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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 |
(7,168,178) |
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(5,712,100) |
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(3,634,692) |
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(2,772,608) |
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Items not affecting cash |
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Depreciation and amortization |
747,604 |
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501,932 |
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365,697 |
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262,515 |
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Share based compensation |
616,979 |
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417,104 |
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285,876 |
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177,104 |
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Changes in non-cash working capital |
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– |
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Accounts receivable |
(271,173) |
|
346,008 |
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108,476 |
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(140,693) |
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Inventories |
(716,568) |
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1,841,523 |
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283,494 |
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1,057,335 |
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Government grants receivable |
7,598 |
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12,889 |
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3,979 |
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(104,460) |
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Prepaid expenses |
(234,542) |
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1,035 |
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(167,350) |
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(63,901) |
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Accounts payable and accrued liabilities |
(119,904) |
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(1,122,947) |
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(1,668,447) |
|
390,202 |
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Deferred government grant |
(144,002) |
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– |
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(40,972) |
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– |
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(7,282,186) |
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(3,714,556) |
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(4,463,939) |
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(1,194,506) |
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Investing activities |
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Cash used for purchase of intangible assets, property, |
(1,242,935) |
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(4,717,994) |
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(775,745) |
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(1,407,095) |
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(1,242,935) |
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(4,717,994) |
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(775,745) |
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(1,407,095) |
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Financing activities |
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Exercise of common share options |
242,697 |
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18,321 |
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7,818 |
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2,174 |
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Cash provided by financing activities |
242,697 |
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18,321 |
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7,818 |
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2,174 |
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Change in cash during the period |
(8,282,424) |
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(8,414,229) |
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(5,231,866) |
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(2,599,427) |
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Cash – Beginning of period |
93,260,296 |
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105,713,705 |
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90,209,738 |
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99,898,903 |
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Cash – End of period |
84,977,872 |
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97,299,476 |
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84,977,872 |
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97,299,476 |
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SOURCE EcoSynthetix Inc.
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