EcoSynthetix Reports 2024 Fourth Quarter and Year End Results

BURLINGTON, ON, Feb. 19, 2025 /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 (Q4 2024) and twelve months (FY 2024) ended December 31, 2024. Financial references are in U.S. dollars unless otherwise indicated.

Highlights

(Comparison periods in each case are the three months and twelve months ended December 31, 2023, respectively)

• Recorded net sales of $5.4 million, up 91%, and $18.5 million, up 46%, compared to the prior periods, respectively, enabled by 82% and 56% higher volumes from increased demand.
• Recorded an Adjusted EBITDA¹ of $0.1 million and $(0.9) million, an improvement of $1.1 million and $1.7 million from the prior periods, respectively.
• Won a new commercial line using the Company's SurfLock™ strength aids with a leading international pulp manufacturer, subsequent to the end of the quarter.
• Experienced increased demand across all end markets from higher usage at commercial mills, including the highest quarterly volumes used to date by the particleboard producer backward integrated into an international retailer.
• EcoSynthetix was climate positive in 2024, enabled by higher usage of its low carbon products by customers which led to avoiding 100% of the carbon emissions associated with the business.
• Purchased and cancelled 174,000 and 678,500 common shares in Q4 2024 and FY 2024, respectively, under the normal course issuer bid for total consideration of $0.5 million and $2.2 million.  
• Maintained a strong balance sheet with cash and term deposits of $32.2 million as at December 31, 2024.

"We continue to see strong demand across all end markets which drove higher volumes and nearly doubled sales over a soft comparable period in 2023," said Jeff MacDonald, CEO of EcoSynthetix. "We continue to make progress with a leading international pulp manufacturer with their first line moving to commercial operations using our SurfLock™ strength aids. The pulp end market represents a significant growth opportunity as it relates to volumes and the value contributed by SurfLock™ to the finished product. Volumes were also up during the quarter with the particleboard manufacturer that is backward integrated with an international retailer. We are seeing consistently higher usage from earlier periods of our wood composites binder, DuraBind™, with this account. The momentum across these two key end markets, as well as Dow expanding the applications using our all-natural personal care ingredient, sets the stage for stronger growth. Industrial-scale change is always challenging but our binders are increasingly becoming a core ingredient to these manufacturers. With this progress across our most important strategic opportunities the business enters 2025 in a strong position from which to grow."

Financial Summary

Net Sales

Net sales were $5.4 million and $18.5 million for Q4 2024 and FY 2024, respectively, compared to $2.8 million and $12.7 million for the corresponding periods in 2023. The 91% increase in the quarterly period was due to higher volumes, which increased sales $2.3 million, or 82%, and a higher average selling price which increased sales $0.3 million or 9%. The higher volumes were primarily due to improved demand across all end markets and the higher average selling price was primarily due to favourable product mix. The 46% increase in the annual period was due to higher volumes of $7.1 million, or 56%, partly offset by a lower average selling price of $1.2 million, or 9%. The higher volumes were primarily due to improved demand across all end markets. The lower average selling price was primarily due to lower manufacturing costs which were partially passed on to customers, as well as product mix.   

Gross Profit

Gross profit was $1.6 million and $5.3 million for Q4 2024 and FY 2024, respectively, compared to $0.5 million and $2.8 million for the corresponding periods in 2023. The increase in the quarterly period was primarily due to higher volumes, a higher average selling price and lower manufacturing costs. The increase in the annual period was primarily due to higher volumes and lower manufacturing costs and was partially offset by a lower average selling price.

Gross profit as a percentage of sales was 28.9% and 28.6% for Q4 2024 and FY 2024, respectively, compared to 16.3% and 22.0% in the corresponding periods in 2023. Gross profit as a percentage of sales adjusted for manufacturing depreciation was 34.4% and 33.2% for Q4 2024 and FY 2024, respectively, compared to 21.9% and 28.9% for the corresponding periods in 2023. The increase in the quarterly period for both metrics was primarily due to lower manufacturing costs and a higher average selling price. The increase in the annual period for each one was primarily due to lower manufacturing costs partially offset by a lower average selling price.

Selling, General and Administrative

Selling, general and administrative expenses (SG&A) were $1.8 million and $6.5 million for Q4 2024 and FY 2024, respectively, compared to $1.3 million and $5.0 million for the corresponding periods in 2023. The change in the quarterly period was primarily due to foreign exchange losses and higher variable-based compensation and performance-based equity compensation. The change in the annual period was primarily due to increased variable-based compensation and performance-equity compensation as well as asset relocation costs associated with the Company's manufacturing footprint realignment project.

Research and Development

Research and development (R&D) costs were $0.4 million and $2.0 million for Q4 2024 and FY 2024, respectively, compared to $0.6 million and $2.3 million in the corresponding periods in 2023. The decrease in both periods was primarily due to lower labour and overhead costs allocated to R&D and lower product scale-up expenses. R&D expense as a percentage of sales was 7% and 11% for Q4 2024 and FY 2024, respectively, compared to 20% and 18% in the corresponding periods in 2023. The Company's R&D efforts continue to focus on further enhancing value for our existing products and expanding addressable opportunities.

Adjusted EBITDA¹

Adjusted EBITDA was $0.1 million for Q4 2024, a $1.1 million improvement compared to an Adjusted EBITDA loss of $1.0 million in the same period in 2023. Adjusted EBITDA loss was $0.9 million for FY 2024, a $1.7 million improvement compared to $2.5 million in FY 2023. The improvement in each period was due to higher gross profit partially offset by higher operating expenses adjusted for non-cash items.  

Net Loss

Net loss was $0.2 million, or $0.00 per common share, and $1.4 million, or $0.02 per common share, for Q4 2024 and FY 2024, respectively, compared to a net loss of $0.6 million, or $0.01 per common share, and $2.8 million, or $0.05 per common share, in the corresponding periods in 2023. The improvement in the quarterly period was primarily due to a $0.8 million lower loss from operations and $0.1 million in higher net interest income offset by a $0.5 million gain on the disposal of PP&E recognized in the prior period. The improvement in the annual period was primarily due to a $1.3 million lower loss from operations, $0.5 million in higher net interest income offset by a net change of $0.4 million relating to gains on the disposal of PP&E. The higher net interest income during each period was due to an increase in interest rates on cash and term deposits.

Liquidity

Cash on hand and term deposits were $32.2 million as at December 31, 2024, compared to $33.3 million as at December 31, 2023. The Company purchased and cancelled 174,000 and 678,500 common shares under the NCIB during Q4 2024 and FY 2024, respectively, for consideration of $0.5 million and $2.2 million.

Notice of Conference Call

EcoSynthetix will host a conference call Thursday, February 20, 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://emportal.ink/40FnYWK to easily register and be connected into the conference call automatically or the conventional method by dialling (416) 945- 7677 or (888) 699-1199 with the conference identification of 88298#. 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/ey7ZaY7Ew5X. 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, gain or loss on disposals of property, plant and equipment and 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, 2024, and December 31, 2023:

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).

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, 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 2025. 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 18, 2025. 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.

SOURCE EcoSynthetix Inc.