EcoSynthetix Inc. (ECO) reported a 14% decline in net sales for the first quarter of 2025 compared to the same period last year, with total sales reaching $4 million. Despite this decrease, the company’s stock price rose by 2.65% in after-hours trading, reflecting investor optimism about strategic partnerships and product innovations. According to InvestingPro data, the company maintains a "GREAT" financial health score of 3.37, with the stock currently trading at $23.64 and showing a year-to-date return of 13.08%. The adjusted EBITDA loss remained flat at $500,000, while cash from operations saw a significant drop to $120,000 from $1.1 million the previous year.
Key Takeaways
- EcoSynthetix’s stock price increased by 2.65% after earnings release.
- The company reported a 14% decline in Q1 2025 net sales year-over-year.
- Strategic partnerships and product innovations are key focuses.
- Adjusted EBITDA loss remained unchanged from the prior year.
Company Performance
EcoSynthetix faced a challenging start to 2025, with net sales declining by 14% compared to Q1 2024. The company continues to emphasize its strategic initiatives and partnerships, such as its collaboration with Dow in the personal care market, which are expected to support future growth. Despite the drop in sales, the firm has maintained its lean operational approach, reducing SG&A expenses by 15%.
Financial Highlights
- Revenue: $4 million (down 14% from Q1 2024)
- Gross profit: $870,000 (down 24% year-over-year)
- Adjusted EBITDA loss: $500,000 (flat year-over-year)
- Cash from operations: $120,000 (compared to $1.1 million in prior year)
- Cash and term deposits: $31.4 million
Outlook & Guidance
EcoSynthetix has identified significant growth opportunities in the pulp and wood composites markets, targeting a $60 million opportunity in the pulp market by 2028. The company expects growth to accelerate in the latter half of 2025, driven by strategic account development and commercial expansion across multiple product lines. Based on InvestingPro’s Fair Value analysis, the stock appears undervalued at current levels. Subscribers can access the comprehensive Pro Research Report, which provides detailed analysis of growth prospects and valuation metrics among 1,400+ top stocks.
Executive Commentary
CEO Jeff McDonnell expressed confidence in the company’s strategic direction despite the challenging demand environment. He stated, "The start of 2025 has been frustrating from a demand perspective, but you can see why we remain so confident in the progress we’ve made." McDonnell highlighted the potential to build the business beyond the $100 million target, emphasizing engagement with the right partners.
Risks and Challenges
- Decreased net sales and gross profit margins raise concerns about demand and pricing pressures.
- The significant drop in cash from operations may impact liquidity and operational flexibility.
- Maintaining strategic partnerships and innovation momentum is crucial to future growth.
Q&A
During the earnings call, analysts inquired about the company’s trial activities in the pulp and wood composites sectors. EcoSynthetix confirmed strong trial activity and discussed potential expansions, including a dedicated production line for SURFLOC and collaborations with service providers. The addition of new board member Greg Yall, with his industrial manufacturing expertise, was also highlighted as a strategic move to enhance operational capabilities.
Full transcript - EcoSynthetix Inc (ECO) Q1 2025:
Conference Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the EcoSynthetics twenty twenty five First Quarter Results Conference Call. Instructions will be provided for you at that time for questions. Listeners are reminded that portions of today’s discussion may contain forward looking statements that reflect current views with respect to future events.
Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward looking statements. For more information on EcoSynthetics’ forward looking statements, please refer to the company’s annual information form dated 02/18/2025, which is posted on SEDAR. This morning’s call is being recorded on Friday, 05/09/2025 at 08:30AM eastern time. I would now like to turn the call over to Mr. Jeff McDonnell, chief executive officer of EcoSynthetics.
Please go ahead, sir.
Jeff McDonnell, Chief Executive Officer, EcoSynthetics: Thank you. Good morning, and thank you all for joining us today. Yesterday afternoon, we reported our first quarter results. It’s been a soft start to 2025 with sales down 14% compared to Q1 twenty twenty four. Like many companies, we’re experiencing a level of uncertainty and concern among our global customer base, which has translated into lower demand for their products and for our biopolymers.
There is no single culprit in terms of one end market or key customer that is underperforming relative to another. Demand is down a little bit across each of the end markets we serve. On the positive side, our key strategic accounts in the pulp and wood composites end markets have continued with steady order patterns, And they each took important strategic steps in the first quarter from an operational standpoint that demonstrate their conviction and commitment toward increased usage of our biopolymers, which I’ll address specifically in a moment. In doing so, it’s clear that they’re taking the long view and looking beyond today’s choppiness caused by tariff and trade issues. This is also evidenced in our broader and growing progress in trial activity through the start of the year.
Specifically on the tariffs, we do not see any impact on our finished goods or primary inputs as of today. That’s good news. However, some of our customers are closer to the risk of tariffs on their end products, which can impact demand for us. The primary risks to us in our view are twofold. The first risk is the same as for everyone that trades internationally, which is the potential for a general economic slowdown.
The second is more specific to us. Our biopolymers represent change. In an environment where a pullback is anticipated, there can be a reluctance to make change until you have greater certainty. The strength and conviction of the change agenda at our strategic accounts is a key asset for us. Neither account has shown any signs of breaking that commitment toward change, and they’ve each made progress at least as fast as we could have expected since the start of the year.
In the pulp, packaging and tissue end market, we commercialized our SURFLOX strength aids with a global leader in the production of pulp during the quarter. This successful win came after multiple positive mill trials in 2024, and this customer is a market leader with more than 10% of the global pulp market share. The $1,100,000 purchase order we announced from this customer was based on early customer demand that the first mill has secured in 2025 after initial proof of concept trials in 2024. Based on their order pattern, we expect them to work through this first commercial purchase order ahead of these initial expectations. We see in the market that this account is actively marketing the strategic importance of adding value to their products to fill the supply gap for stronger fiber in the market.
And they believe that gap continues to grow with a shortage of stronger long fiber. At the same time, they’ve evolved their customer support team for this value added category, which includes the product that is using our biopolymer. They’re expanding the team globally from the centralized model they were operating previously. It’s a more distributed model where they’re using their team members to help customers understand the application of their hardwood pulp and help with the implementation phase to continue to drive adoption among their customer base. From an operational perspective, the account is also testing a larger piece of equipment that our product would be used on.
This equipment represents a more efficient method for using our product. We believe it can unlock greater use of our product in an easier and more cost efficient way. We expect the pulp end market will be a major growth driver for the business as our SURFLOC strength aids represent a value added ingredient that addresses the long fiber gap in the pulp value chain. With more expensive long fibers in increasingly short supply as applications like packaging and tissue continue to grow globally, it’s clear that shorter hardwood fiber and recycled fiber will be needed to fill the gap. This week, the spot market price gap between long and short fibre reached a high of $275 a tonne.
This creates a strong driver to substitute in shorter hardwood fibre, which SURFLOC helps to solve. During the quarter, we won a new commercial tissue line at an existing customer. This customer was the first customer to originally implement SURFLOC strength aids and are now using SURFLOC broadly across their network, demonstrating its value. We also continue to advance trials on additional lines with our first pulp customer and are engaged in trials with many tissue pulp and packaging companies on a global basis. While these programs require investment in change in an uncertain time, their payback is ultimately in cost savings, improved performance and supply chain resilience and should therefore remain an attractive priority.
Based on the performance benefits of SURFLOC, we’re seeing continued progress and trial activity remains as strong as ever. On the wood composites front, we’ve seen steady order patterns from our key strategic accounts first facility that’s been commercial for some time now. We’ve also successfully completed our work at their second facility. They’ve now installed permanent equipment to enable the use of our product in commercial quantities. And as I’ve mentioned on prior calls, we expect that facility to go commercial in the near term.
At that stage, we would be on two of the strategic accounts commercial lines. This international retailer, which is backward integrated into particleboard production, produces approximately 30% of the particleboard they require annually. The remaining 70% comes from third party suppliers. Altogether, that represents approximately 17 lines worth production, and we’re nearing two. The retailer has has set a clear target of moving to bio based wood glues by 02/1930.
They are scorecarding their suppliers’ sustainability efforts and their transition to bio based glues. And more than just that, they’re working with two different members of their supply chain and our team to trial our biopolymers at the supplier’s facilities. We’ve all been involved together in the technical trialing and qualification of the process. We believe these two suppliers have reached a stage where they could come online with our products sometime in the next year. The depth of knowledge on the market and the technology of the international retailer is strong given the backward integrated production assets they operate.
They have complete clarity on what they’re asking of their suppliers given their use of our product in their own facilities. Our DuraBind biopolymers are competitive with conventional formaldehyde based binders, but there is a cost and time investment associated with change. We believe the best way to drive adoption in the long run is through constant innovation. We continue to make really good progress with further steps in our Durabind product offering that we believe will help accelerate change faster with an even more cost effective product. On the personal care side of the business, our marketing and development partner Dow remains highly engaged.
They’re leaning into opportunities that they believe can have an impact for them and as a result also for us. We saw good growth from them last year and we expect to see additional growth through the course of 2025. The feedback from both small and large customers they’re working with is very positive. So how does this all fit together? Our first commercial account in the pulp end market represents a $60,000,000 plus opportunity to us.
That figure is based on the business case they have laid out to customers and investors, which they want to achieve by 2028. That is without considering any growth in the tissue and packaging end markets or work with other pulp players. The 17 lines that serve our key strategic account in Wood Composites represent another $50,000,000 plus opportunity to us. The international retailer continues to publicly report they want to move the bio based glues across their supply chain by 02/1930. They are the thought leader in the market.
They tend to set the standard for change when change like this happens in the industry. The 17 lines that they draw from are part of a global market that is more than 1,000 wood composite production lines. The personal care opportunity and the growth that Dow believes exists in the all natural category is a warrant over and above the tissue pulp and packaging and the wood composites end markets. The start of 2025 has been frustrating from a demand perspective, but you can see why we remain so confident in the progress we’ve made and the opportunity in front of us, which is as large as it’s ever been. And with that, I’ll turn it over to Rob to review financials.
Rob? Thanks, Jeff,
Rob, Financial Officer, EcoSynthetics: and good morning. Net sales were $4,000,000 in Q1 twenty twenty five, down 14% compared to the same period in 2024. The change was primarily due to lower volumes of $500,000 or 12%, primarily as a result of inventory buildup by distributor in the prior period and challenging market conditions. Net of manufacturing depreciation, gross profit as a percentage of sales was 27.2% in the quarter compared to 29.2% in the same period in 2024. The change was primarily due to lower average selling price.
Gross profit was $870,000 in Q1 ’twenty five, which was down 24% compared to the same period in 2024. This change was primarily due to lower volumes. SG and A expenses were $1,500,000 in the quarter compared to $1,700,000 in the same period in 2024. The 15% improvement is primarily due to asset relocation costs incurred in the prior period from our manufacturing footprint realignment project, which was completed in 2024. R and D expenses were $380,000 in the quarter, essentially in line with the $450,000 investment in the same period in 2024.
Our R and D efforts continue to focus on further enhancing the value of our existing products and expanding our addressable opportunities. Adjusted EBITDA loss was $500,000 in the quarter and flat to the same period in 2024. Cash provided by operating activities was $120,000 in the quarter compared to $1,100,000 in the same period in 2024. The primary driver was an unwinding of working capital in the prior period of $1,300,000 versus Q1 twenty twenty five, where working capital of $200,000 was used. As of 03/31/2025, we had $31,400,000 of cash and term deposits compared to $32,200,000 as of 12/31/2024.
During Q1, we invested $330,000 into the NCIB to purchase and retire 106,000 shares. We have demonstrated our ability to responsibly manage our cash reserves through multiple cycles while continuing to invest in our long term growth strategy. With that, I’ll turn it back to Jeff for closing comments.
Jeff McDonnell, Chief Executive Officer, EcoSynthetics: Thanks, Rob. We’ve seen important progress made by our two key strategic accounts in the pulp and wood composites end markets. The uncertainty in the market from the trade and tariff issues impacted demand and sales in the quarter, which is frustrating. But we believe the momentum in our key end markets since the New Year and the commitment of the key accounts to take the long view and look past this near term uncertainty is encouraging. We’re engaged with the right partners to build this business beyond our $100,000,000 target.
Before turning to questions, later this month we’ll be holding our AGM on May 22. After that meeting, the board expects to appoint Jeff Nodland as chair. Jeff has served on the board since January of twenty sixteen. He is a veteran of our industry, specifically consumer packaged goods and chemicals. He’s been an effective and thoughtful contributor to the board during that period, and I’m excited to continue working with him.
We’re also poised to welcome a new member, Greg Yall, to the Board. Greg is the former President, CEO and Board member of Intertape Polymer Group, which was publicly listed on the TSX. Greg has deep experience in industrial manufacturing and sales, including packaging and adhesives. We look forward to benefiting from his expertise and background. Lastly, these changes were a result of the retirement of Paul Lucas as our chair and board member.
I’ve worked with Paul during the last ten years. We’ve seen many positive changes that began with him taking over the role of chair. He was instrumental in establishing a highly functional and effective board to lead us. While we’re still a relatively small company, I believe he helped establish the strongest possible governance practices and a strong board culture for us. On behalf of the company, I’d like to thank Paul for these contributions and for the constructive approach he’s consistently taken with myself, our board and our team.
And with that, I’ll ask the operator to open up the call for your questions. Thanks for joining us.
Conference Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touch tone phone, and you will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, Please go ahead, sir.
Brian, Analyst: Good morning, Jeff. Good morning, Rob.
Jeff McDonnell, Chief Executive Officer, EcoSynthetics: Good morning, Brian. Good morning.
Brian, Analyst: So just a comment. So I appreciate you highlighting that the key players in pulp pulp and wood products continue to progress because that’s certainly important from a value standpoint. And as you indicated last quarter, there’s really nothing surprising in the numbers here. But I wanna start with pulp. You say that the pipeline for Surf Block, it continues to build.
In a recent sell side research report I saw a reference of fiber to fiber mentioned with another pulp producer. I know aside from your large commercial account that others have been thriving as you stated but can you just talk about the progression that they are making?
Jeff McDonnell, Chief Executive Officer, EcoSynthetics: Yes, it’s interesting that that term is being used by others though. I think it was coined by our initial customer and I think others have caught on that obviously this is a critical trend in the industry and that they need to find ways to take advantage of it. Think fiber to fiber has become kind of a colloquial term. We are engaged with multiple other players, but I think it’s safe to say that our first customer had a significant head start in working with us. And none of those are at this point anywhere near close to where they are.
But I would say good initial progress is being made.
Brian, Analyst: Okay. And when you talk about this 2,000,000 structural hardwood pulp gap that it’s a $60,000,000 80 million dollars opportunity, you mentioned that price gap between hardwood and softwood pulp at $275 per ton and your cost out is a fraction of that. The question is since Surflok enhances towards softwood pulp would it make sense for existing hardwood lines to also employ your product creating greater profitability for your customer and a significant increase to your TAM?
Jeff McDonnell, Chief Executive Officer, EcoSynthetics: Yeah, absolutely. I think for any supplier of hardwood pulp, they’re recognizing that that gap exists and as an opportunity, even just to fill the gap, let’s say at existing hardwood pulp prices at the EBITDA margin, some of these companies make it’s a very, very attractive proposition if they can substitute hardwood pulp in. So of course, they’re all going to be interested in that. And then at the end customer level that we’re serving directly and that the pulp players will also be serving in their own way, the opportunity to shift away from a fiber source that’s $275 a ton more expensive than what they can buy otherwise attractive. And the key objective at most of the companies that we’re trialing with in the end markets, let’s say in tissue, is to significantly reduce or even just this week completely turn off the the reliance on softwood pulp fiber for strength and we’re we’re helping customers to do that on a consistent basis now.
Brian, Analyst: You mentioned that twenty twenty twenty pardon me, the 2028 timeframe. Was that new? Just repeat what that comment was about the your commercial pulp producer.
Jeff McDonnell, Chief Executive Officer, EcoSynthetics: Yeah, so we just don’t want to speculate on when things could happen. We like to rely on what our customers are actually saying their own goals are. It’s actually I tried to mention it for both of the key accounts. So when we look at the materials that our customers are putting out there in terms of their change agenda and when they want to have certain things complete, That’s what we’re referring to. The materials of our one customer say that they want to achieve those goals in the pulp market in the 2028 timeframe.
Brian, Analyst: Okay. And the $1,100,000 order that you alluded to earlier, it sounds like it’s ahead of schedule. Do you I mean, it sounds like indications. I’m not sure you’re gonna address it, but you you would assume with the progress that they’re making that they would have to come back and reorder. But the question that I have is, are you getting any feedback satisfaction?
Jeff McDonnell, Chief Executive Officer, EcoSynthetics: I think the end consumer satisfaction is borne out in the pace that they’re seeing and in the continued deployment of people in the market to serve those customers. So they’re obviously seeing really good results and I’m assuming very good economics as a result of what they’re doing. So the fact that the orders are ahead of their expectations as they started the year and that they continue to invest in putting people in field is going very well for them.
Brian, Analyst: Good. You mentioned in your MD and then you said in your prepared comments that SURFLOC will be a material growth driver in coming years. Would you consider doing a dedicated line for this product? And if so, what commitment would you require to do so in terms of either tons or dollars?
Jeff McDonnell, Chief Executive Officer, EcoSynthetics: Yeah. So the volumes would have to be concentrated and build to a level where that makes sense for us, but we’re absolutely open minded to doing that. And in fact, we’d love to use some of our capital to do that. It probably given that at least initially we could be robbing from existing capacity like we’d need to be seeing growth through the 10,000, 15 thousand ton range before we could really justify doing that. But the volumes that we’re talking about here just from this one customer could well justify that at some point.
Brian, Analyst: In dollar terms, Jeff, do you
Sylenthead, Private Investor: want to state what that is or no?
Jeff McDonnell, Chief Executive Officer, EcoSynthetics: Well, I mean if we’re talking about that opportunity being a $60,000,000 opportunity, if we start to see revenue growth going through, let’s say, of that and we’re on the right trajectory to $60,000,000 half of that would be probably a good level to be targeting additional investment.
Brian, Analyst: Okay. After considering that, obviously, the opportunity looks pretty attractive. I want to switch gears a little quieter on the tissue and paper front, a little bit of inventory build due to macro factors. Why at this time would the customers not try to take advantage of the cost savings and speed and improved product quality that seems to be proven out now? Other than time, is sales personnel?
Is it service providers? Are we growing the service providers? And also you said I think the trial is as strong as ever. What flips that switch?
Jeff McDonnell, Chief Executive Officer, EcoSynthetics: What flips the switch to it being as strong as ever
Brian, Analyst: or flips the switch to To get this trialing to become commercial.
Jeff McDonnell, Chief Executive Officer, EcoSynthetics: I see. So I guess maybe just to ground it, I should say, you know, we’ve been at this, I would say for a relatively short time in terms of change agendas within the pulp and paper industry. But we’ve now converted directly eight lines during a fairly short timeframe. And I don’t know of another product in the pulp and paper industry that’s converted eight mills in that way. So it has been a significant amount of change I would say.
And I think the industry is clearly taking note. I’ll tell you a little bit of give you a little bit of color on why we see that. But among those eight, there’s obviously no one of them that’s more important than the big pipeline that we’re on. And we still clearly see that as having the greatest potential and possibly also the easiest path for everybody to success. But in the meantime, we’re continuing to support anyone that wants to take advantage of SurfLock in the market.
And when I say we see some indicators of that interest and success in the market, we’re now having service providers come to us and want to get on board with providing this product to their customers. So since the start of the year, we’ve added additional service providers. One of them even since coming on in the start of the year, has put two already fairly successful trial programs in place. So things are expanding and in some cases accelerating. And what it takes to flip the switch, it is time.
Unfortunately, there’s an element of scale as we expand geographically for sure. And I think you have to have your proof points and then expand out that way and that’s happening. And I think it’s happening at a really good pace through these service providers. But then once they lock on to opportunities, it is just a matter of time and putting the effort in and doing the iterative process to get to success. But like again, I’ll remind everybody eight lines within the timeframe we’ve been working at this is pretty substantial in this market.
Brian, Analyst: Okay. And should we start to see those numbers reflected sort of in the back half of the year?
Jeff McDonnell, Chief Executive Officer, EcoSynthetics: Yeah. I think so.
Brian, Analyst: Okay. I guess another good story is wood products line two sounds like it’s gonna go commercial soon. And then I believe there’s two more internal, 13 external, and I think you said that two of those are now moving forward. How quickly do they need to move with the I’m talking about your Wood Products customer obviously. How quickly do they need to move with those lines in aggregate to hit their 2,030 target?
Jeff McDonnell, Chief Executive Officer, EcoSynthetics: So it means they need to be adding you know, a few new lines of capacity through their supply chain on an annual basis now to meet that target. So it’s it’s it’s a quite a bit of change that’s going to be required within what is now a fairly short period of time. We’re we’re talking about 15 lines being 15 lines worth of capacity being converted in a five year period.
Brian, Analyst: Jeff, can they leverage best practices from what they’ve already done? And you mentioned a thousand lines, think, aggregate for the industry. We focus on your key player, but are you seeing any progress from competitors or other players in the market?
Jeff McDonnell, Chief Executive Officer, EcoSynthetics: There are always a lot of players out there even since prior to us getting started with DuraBind that have been chasing bio based alternatives, but we still believe we have a significant head start there. I think the broader beyond the ’17 and extending out to 1,000, that’s the influence factor of our key partner in this space. Once they move to that level and fully walk the talk, that’s when other changes they’ve made in the industry begin to become the standard and you get a watershed among others as well.
Brian, Analyst: Okay. And the last question, sorry to dominate the call, but you sounded quite optimistic with opportunities with Dow as opposed to recent calls. That was just my interpretation. Do you think we’re going to see something notable play out here in personal care in 2025?
Jeff McDonnell, Chief Executive Officer, EcoSynthetics: I guess if I sounded more optimistic, it’s probably because from their marketing team, again, like we don’t have great clarity into their pipeline, but we haven’t heard as optimistic a tone from their marketing team as we have as they’ve begun this year. And if you look at everything that they’ve done to proliferate maze care beyond the initial hair care space into a bunch of new SKUs and expand their customer efforts. Guess I can see why. I’ll continue to call it a warrant until it’s really ringing the cash register more, but it’s been growing successively quarter by quarter and they sound to me to be more optimistic than we’ve heard them before. So we’re excited.
Brian, Analyst: Yeah. Well, I find it quite impressive that even at these lower levels of profitability right now that you’re still generating positive free cash flow prior to your NCIB. So that’s commendable and obviously should take off going forward. I just have one last question. Can you comment I’m a little bit excited to hear about the new board member.
Can you just comment on Greg Yall, the qualifications he brings to your board?
Jeff McDonnell, Chief Executive Officer, EcoSynthetics: Yes, sure. We’re really excited. Greg joined this week’s meeting as an observer and was more than an observer right away. He’s going to be a great contributor. He’s got great experience in the spaces that we play in directly or indirectly.
And I guess moreover, he’s been through a lot of the business steps that in some cases we’ve gone through and in some cases we’ll need to get through in growing from a struggling company, a struggling emerging company into something that was very successful and ultimately went through a very successful transaction at the end of his tenure with Intertape. So he’s got a lot of stuff that I’m going to be very interested personally just to tap into and run by him as we make progress on our next steps. Hopefully you can hear I’m pretty excited to have him. He’s shown up well already.
Brian, Analyst: I appreciate all the, all the detail, Jeff, and I wish you good luck going forward.
Jeff McDonnell, Chief Executive Officer, EcoSynthetics: Thanks a lot, Brian.
Conference Operator: Thank you. The next question comes from Sylenthead, Private Investor. Please go ahead.
Sylenthead, Private Investor: Hi there.
Jeff McDonnell, Chief Executive Officer, EcoSynthetics: Good morning.
Sylenthead, Private Investor: Oh, yeah. I just had a question on the Dow contract. Like, is there any way any way a royalty shouldn’t have been worked into this contract to kind of ensure that they bring something to market a little quicker than what they’re doing? Like, could that have not? You got I take it you got another four years on this contract?
Jeff McDonnell, Chief Executive Officer, EcoSynthetics: Approximately. Yeah. That’s right. So
Sylenthead, Private Investor: it’s it’s an exclusive. You can’t do anything. You can’t approach any other company in personal care. What’s the definition of personal care?
Jeff McDonnell, Chief Executive Officer, EcoSynthetics: So personal care, care we’ve got a really bad echo on the line. Sorry. Personal care really encompasses anything that go into the Shoppers Drug Mart counter for. So, it is a pretty broad definition. But you know, when we got this started understanding what we had as a product, we were very feet on the ground to understand.
We did not have the applications know how nor the marketing reach to take this product to market in the way that we needed a market leader to. And they were very keen to do that, demonstrated themselves to be a market leader, but the price of entry was exclusivity. The exclusivity does carry certain volume thresholds. So they do have to demonstrate performance on this. And I can’t provide all the details into the commercial structure of the deal, but there’s a very, very fair two way sharing of the proceeds of success on this, which is very motivational to both sides.
So we feel like we have if we have a product that works, we feel like we have a deal that works that really incents both sides to get this get this successful.
Sylenthead, Private Investor: Okay. Alright. What what about I mean, it’s the revenues are a little disappointing this term. What about reducing operational costs to try to ensure a match of, you know, profitability? Is is have you looked at those areas?
We
Jeff McDonnell, Chief Executive Officer, EcoSynthetics: were forced to look at those areas earlier in the history of the business and we took some significant steps to right size the business to be a few steps ahead of where we are in terms of revenue, not ten year steps, but let’s say a few year steps and we need to be as an emerging growth company. So this is all about growth. We’re going to continue to invest roughly $2,000,000 a year in R and D to make sure our value proposition stays ahead of everybody else and what we’re working on. But I’ll also say, I’ll invite you to come and see it for yourself anytime you want. We have a pretty lean footprint in getting done what we are getting done.
I feel like we’ve right sized the business to the point where it is meaningfully ahead of where we need to be on growth, but not too far.
Sylenthead, Private Investor: Okay. I mean, you talk about pricing and mean, when I go to the supermarket, I don’t see people reducing their prices. Why can’t you get more why are you continuing to reduce the price you’re selling it the product for?
Jeff McDonnell, Chief Executive Officer, EcoSynthetics: Yeah. We’re we’re not actually. So you’re you’re seeing some reflection of that in the quarter to quarter numbers, but that has more to do with mix than a direct price reduction. And through the escalation through and since the pandemic of costs, we pushed price up significantly. So if you look back at the history of our pricing, we have pushed it up significantly.
So we’re not unlike probably other products that you’ve seen.
Sylenthead, Private Investor: Okay. All right. Okay. I mean, you’ve lost Paul Lucas, who is, you know, certainly had a great reputation. Is have you got any directors in the pulp and paper industry?
Can you look get look for them in in pulp and paper?
Jeff McDonnell, Chief Executive Officer, EcoSynthetics: I I would say, indirectly, do have two board members that have worked very closely with pulp and paper industry and Jeff Nadlin and now Greg Yall in servicing those markets through chemicals, through adhesives, through tapes. So there’s good application knowledge of that industry. And what we also do in addition to draw on our board for that kind of input is we do engage external consultants on very specific issues when we need them. And that obviously includes the pulp and paper industry. Part of that is also the surf lock part of the pulp and paper industry for us is relatively new to us.
And that’s why we made a decision to engage these third party distribution partners to be able to help us with the introduction of our product and the implementation of it. So we’re not afraid to go out and ask for help and pay fairly for it when we need it to drive
Brian, Analyst: growth. Okay.
Sylenthead, Private Investor: And then my usual question about shareholder return, it hasn’t been great. I don’t know if you’ve I mean, I think you guys and management are doing okay, but I I I’d still concerned about the the share float keeps increasing. We’re up to 58,000,000 shares now. You’re continuing to buy back shares, issue more at the same time. For all shareholders to to benefit, the share float should be decreasing, know, so everyone benefits.
It also seems like you’ve attracted the the the you’ve attracted a short seller who keeps increasing the short as as the price rises and and then decreasing it. So we’re just playing the market, just buying up the the shares that you’re buying back. Anyway, it’s that’s the concern. I I would like to see the the the float actually decrease for after all these buybacks to benefit all shareholders. You can make a comment on that if you want.
Jeff McDonnell, Chief Executive Officer, EcoSynthetics: It’s a fair position. The thing that I think we need to do in order to deliver that return is to drive the growth that’s there in front of us. The buyback is there to support the share price, to show our confidence in the value that we have as a company and to strike a balance between shares issued and shares retired. But by far the biggest thing we need to do to achieve what you’re looking for is to deliver the growth and that’s what we’re most focused on.
Sylenthead, Private Investor: Okay, agreed. All right, thank you.
Jeff McDonnell, Chief Executive Officer, EcoSynthetics: Thanks for checking in.
Conference Operator: Thank you. There are no further questions at this time. I would now like to turn the call over to Mr. Geoff McDonald, Chief Executive Officer of EcoSynthetics, for closing remarks. Please go ahead, sir.
Jeff McDonnell, Chief Executive Officer, EcoSynthetics: Thanks again to everybody for joining us, and we’ll look forward to talking to you again soon.
Conference Operator: Thank you. Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.
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