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Burlington, Ontario, March 1, 2023 – 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 2022) and twelve months (FY 2022) ended December 31, 2022. Financial references are in U.S. dollars unless otherwise indicated.
(Comparison periods in each case are the three months ended December 31, 2021)
- Recorded net sales of $5.6 million in Q4 2022, up 15%, due to a higher average selling price which impacted sales by 23%, partly offset by lower volumes of 8%
- Gross profit of $0.9 million in Q4 2022, down 9%, due to lower volumes and higher manufacturing costs which offset higher average selling price
- Recorded an Adjusted EBITDA1 loss of $0.3 million in Q4 2022, unchanged from the prior period
- Purchased and cancelled 265,200 common shares in Q4 2022 under the normal course issuer bid for total consideration of $0.8 million
- Maintained a strong balance sheet with cash and term deposits of $36.0 million as at December 31, 2022
- Received the Platinum designation for the second consecutive year from EcoVadis, a globally recognized agency for business sustainability ratings of supply chains, by scoring within the top 1% of the 90,000 companies rated
- Subsequent to the end of the quarter, a backward integrated producer of particleboard for a leading international retailer, identified the use of bio-based glues as a key enabler to achieving their climate targets and committed to a meaningful step in its implementation of DuraBind™ resin
- Subsequent to the end of the quarter, the Company announced improvements to its asset bases in North America and Europe, including internalizing 30 million pounds of annualized nameplate manufacturing capacity at its Centre of Innovation in Burlington, Ontario
“Based on our progress in 2022, we are more confident in the future opportunities we are working toward with our biopolymer platform that addresses multi-billion markets,” said Jeff MacDonald, CEO of EcoSynthetix. “The announcement from our key strategic wood composites account committing to a step forward in their implementation of DuraBind™ gives us conviction that we will be successful in the long-term opportunity with them and their supply chain partners. Our work with Dow, and their award-winning MaizeCare™ formulations, give us conviction we’re doing the right things with the right partner in the personal care market. The three new wins with our strength aids in the tissue and paperboard markets tell us we’re working on the right new growth opportunities. With the macro economic challenges across many of our end markets, we anticipate softness in Q1 sales including continued demand deterioration in the legacy graphic paper end market and customer destocking, however we are confident we are executing the right commercial strategy for the success of the business with a multiple shots on goal approach.”
Mr. MacDonald continued, “Our key priorities for 2023 are growing volumes at existing production lines that use our biopolymers, expanding to new lines with existing accounts and winning new accounts. Our bio-based binders offer a unique value proposition. We deliver value and performance as an alternative to traditional petroleum-based binders. We can also help manufacturers and retailers reduce their carbon footprint and emissions and achieve their climate targets with our sustainable biopolymers. We have the platform, team and capital resources to deliver higher growth as the market continues to move toward more sustainable solutions in their supply chains.”
Net sales were $5.6 million and $19.0 million for Q4 2022 and FY 2022, respectively, compared to $4.9 million and $18.2 million for the corresponding periods in 2021. The 15% increase in the quarterly period was due to a higher average selling price which impacted sales by $1.1 million, or 23%, which was partly offset by lower volumes which impacted sales by $0.4 million or 8%. The 5% increase in FY 2022 was due to a higher average selling price which impacted sales by $5.0 million, or 28%, partly offset by lower volumes which impacted sales by $4.2 million, or 23%. The higher average selling price during Q4 2022 and FY 2022, was due to the offsetting of significant inflationary pressures with price increases and the volume decreases during Q4 2022 and FY 2022 were due to a stepdown in demand for most products and regions when compared to the prior period.
Gross profit was $0.9 million and $4.2 million for Q4 2022 and FY 2022, respectively, compared to $1.0 million and $4.0 million for the corresponding periods in 2021. During both periods, a higher average selling price was offset by decreases in sales volumes and rising costs of manufacturing.
Gross profit as a percentage of sales was 16.4% and 21.8% for Q4 2022 and FY 2022, respectively, compared to 20.7% and 21.9% for the corresponding periods in 2021. Gross profit as a percentage of sales adjusted for manufacturing depreciation was 21.4% and 25.5% for Q4 2022 and FY 2022, respectively, compared to 24.8% and 26.2% for the corresponding periods in 2021. The changes in both metrics during the quarterly and annual periods were primarily due to higher manufacturing costs partially offset by a higher average selling price.
Selling, General and Administrative
Selling, general and administrative expenses (SG&A) were $1.3 million and $5.1 million for Q4 2022 and FY 2022, respectively, compared to $1.5 million and $5.4 million for the corresponding periods in 2021. The improvement in the quarterly period was primarily due to lower salaries and benefits of $0.1 million and lower share-based compensation of $0.1 million. The improvement in the annual period was primarily due to lower salaries and benefits of $0.6 million, partially offset by $0.1 million lower payments received under the Canadian Emergency Wage Subsidy, $0.2 million in higher discretionary spend and a $0.1 million change in foreign exchange gains and losses.
Research and Development
Research and development (R&D) costs were $0.6 million and $1.9 million for Q4 2022 and FY 2022, respectively, which were in line with $0.5 million and $1.8 million in the corresponding periods in 2021. R&D expense as a percentage of sales was 10% for each of Q4 2022 and FY 2022, respectively, unchanged from the corresponding periods in 2021. The Company’s R&D efforts continue to focus on further enhancing value for our existing products and expanding addressable opportunities.
Adjusted EBITDA loss was $0.3 million and $0.9 million for Q4 2022 and YTD 2022, respectively, which was in line with the corresponding periods in 2021.
Net loss was $0.7 million, or $0.01 per common share, and $2.4 million, or $0.04 per common share, for Q4 2022 and FY 2022, respectively, compared to $0.9 million, or $0.02 per common share, and $3.2 million, or $0.06 per common share, for the corresponding periods in 2021. The improvement in the quarterly period was due to a higher interest income of $0.2 million. The improvement in the annual period was primarily due to lower loss from operations of $0.3 million and higher interest income of $0.5 million. The higher interest income in both periods was due to an increase in interest rates on cash and term deposits.
Cash on hand and term deposits were $36.0 million as at December 31, 2022, compared to $42.2 million as at December 31, 2021. The $6.2 million change was primarily due to an increase in inventory of $3.1 million, an increase in accounts receivable of $1.0 million, and $2.2 million of cash used to purchase shares through the NCIB. The Company purchased and cancelled 265,200 and 626,400 common shares under the normal course issuer bid during the Q4 2022 and FY 2022 periods, respectively, for consideration of $0.8 million and $2.2 million.
Notice of Conference Call
EcoSynthetix will host a conference call Thursday, March 2, 2023, 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 instantly join the call by phone, by following the URL https://bit.ly/3Y7dYBu to easily register and be connected into the conference call automatically or the conventional method by dialling (416) 764-8659 or (888) 664-6392 with the conference identification of 52875682. 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 or https://app.webinar.net/eo6lpx0pZ5q. 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 and twelve months ended December 31, 2022 and December 31, 2021:
|Three months ended December 31, 2022||Three months ended December 31, 2021||Twelve months ended December 31, 2022||Twelve months ended December 31, 2021|
|Adjusted EBITDA loss||(336,308)||(332,981)||(882,359)||(924,074)|
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™, Surflock™, Bioform™, and EcoSphere®, are used to manufacture wood composites, personal care, paper, tissue and packaging products, and enable performance improvements, economic benefits and carbon footprint reduction. The Company is publicly traded on the Toronto Stock Exchange (T:ECO).
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, deliver meaningful growth across all three product categories, convert high-value strategic prospects into customers, and other statements regarding the Company’s plans and expectations in 2023. 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 February 28, 2023. 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.
For further information, please contact:
Phone: (416) 526-1563