Release Date: November 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- EcoSynthetix Inc (ECSNF, Financial) reported a 38% increase in sales to $5.2 million in Q3, driven by a 56% rise in product demand.
- The company transitioned to profitability with $365,000 in positive adjusted EBITDA and $1.6 million in cash from operating activities.
- The diversification strategy is yielding results, with growth across all target end markets and geographies.
- EcoSynthetix Inc (ECSNF) is working with blue-chip partners, increasing the volume of biopolymer purchases, indicating strong market acceptance.
- The company is seeing significant progress in the wood composites market, with strategic accounts executing plans and expanding product use.
Negative Points
- Winning new lines or accounts in the tissue and paperboard market is taking longer than anticipated, causing some frustration.
- The lower average selling price impacted sales by $700,000 or 18%, due to lower manufacturing costs passed on to customers.
- Despite increased activity, the company has not yet converted enough prospects and trials into commercial accounts.
- There is lumpiness in demand due to the diversification strategy, which may lead to inconsistent financial performance.
- The company faces challenges in achieving sustainable profitability, as current profitability is on a spot basis and not yet consistent.
Q & A Highlights
Q: Congratulations on the strong financial results. Can you share what gives you confidence in the adoption and pipeline for the Surf Lock line, particularly in tissue and paperboard, despite the absence of contract announcements?
A: Jeffrey MacDonald, CEO: The most important announcement is the use of Surf Lock in pulp with a large global manufacturer. We're working with channel partners who continue to invest in Surf Lock and engage with end customers. The pipeline is moving forward, albeit slowly, but positively, with no U-turns from customers. The change in large industries takes time, but our partners are committed.
Q: What are the main drivers for the strong performance this quarter?
A: Jeffrey MacDonald, CEO: The key drivers include pulp trialing with a major customer, acceleration in wood products, and heightened trialing revenue. Additionally, we've seen growth in packaging and specialty paper applications.
Q: Can you provide an update on the progress with the second mill in wood composites and third-party suppliers?
A: Jeffrey MacDonald, CEO: We expect the second mill to reach commercial levels in 2025. We've made significant progress, and third-party suppliers are now fully collaborating with us and the strategic account. We anticipate supplying wood panels in the near future.
Q: Is there potential for the pulp trialing activity to lead to commercial use on existing lines?
A: Jeffrey MacDonald, CEO: Yes, our customer is positioning the product as a premium offering, addressing a market gap in stronger long fiber pulp. They aim to fill this gap while selling it as a premium product, which could lead to use on existing lines.
Q: How is the personal care segment progressing with Dow, and should we expect more material growth in 2025?
A: Jeffrey MacDonald, CEO: We're seeing step-by-step growth from a small base, with Dow launching new applications beyond hair fixatives. The shift towards all-natural ingredients is driven by emerging brands, and Dow remains engaged in expanding the product range.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
