Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- EcoSynthetix Inc (ECSNF, Financial) reported an 8% increase in sales for Q2 2024 compared to the same period last year, indicating positive growth.
- Volumes have increased by 21% this quarter and 43% year-to-date, showcasing strong demand across end markets.
- The company secured two new wins on new lines at existing accounts, validating the performance and value of their product offerings.
- Positive trial results in pulp, packaging, tissue, and wood composites markets demonstrate the effectiveness of EcoSynthetix's technology.
- The company has a strong cash position with $33.2 million in cash and term deposits, allowing for continued investment in growth strategies.
Negative Points
- Lower average selling prices impacted sales by $400,000 or 13% due to lower manufacturing costs being passed on to customers.
- SG&A expenses increased by $280,000 due to asset relocation costs, impacting overall profitability.
- The conversion of positive trial results into sales is slow, as industrial changes are challenging and take time.
- The graphic paper end market is not seen as a significant opportunity due to macro headwinds and diminished demand.
- The company reported an adjusted EBITDA loss of $790,000 in the quarter, unchanged from the same period in 2023, indicating ongoing financial challenges.
Q & A Highlights
Q: Are the service providers progressing as planned, and what's your confidence level in driving further penetration of the Surf Block product?
A: Jeff MacDonald, CEO: One of the wins was through service providers, demonstrating their ability to deliver. We couldn't do this alone, and their relationships and technical depth are invaluable. They've advanced tremendously in the last year, learning how to apply our product and achieving better results. Their conviction in our technology as a growth enabler is high, and they've made significant investments to support our efforts.
Q: Are the learnings from each trial being utilized to expedite future contracts?
A: Jeff MacDonald, CEO: Yes, the pipeline is significantly larger than a year ago. While some learnings are specific to certain lines, the basic performance of our products is being applied across trials. Each trial improves our understanding and speeds up the process.
Q: Can you provide data points on improved strength, speed, or cost savings from trials?
A: Jeff MacDonald, CEO: A recent trial showed an 8.5% improvement in line speed, which is significant for a line at maximum capacity. This improvement stems from the strength our product provides, allowing for faster production or substitution of expensive fibers.
Q: What feedback have you received from the recent major pulp trial, and what are the next steps?
A: Jeff MacDonald, CEO: The pulp products are in the market for trials with end customers, indicating a positive commercial rollout. While we don't have visibility into the next steps, the shortage of long fiber in the market creates a demand for our product, which can fill that gap.
Q: Regarding Dow's involvement in personal care, how does the cosmetics opportunity compare to hair fix-it, and is the margin profile similar?
A: Jeff MacDonald, CEO: The margin profile is similar, and the cosmetics opportunity is larger, representing 50% of the personal care market. Dow remains engaged, and while wins are smaller, they are growing. The new category of makeup fix-it is particularly exciting.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
