EcoSynthetix Inc.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the EcoSynthetix 2025 third quarter results conference call. At this time, all participants are in the listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided for you at that time for questions. If anyone has any difficulty hearing the conference, you may press star zero for the operator at any time. 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 Ecosynthetix risks and uncertainties related to these forward-looking statements, please refer to the company's annual information form dated February 18, 2025. which is posted on CEDAR. This morning's call is being recorded on Friday, November 7, 2025 at 8 a.m. Eastern Time. I would now like to turn the call over to Mr. Jeff McDonald, Chief Executive Officer of EcoSynthetix. Please go ahead, sir.

Thank you. Good morning, and thank you all for joining us. Yesterday afternoon, we reported our third quarter results. We're seeing good momentum across our core end markets. Sales were up 11% year over year. But more important in my view is the strong demand we're seeing in our key end markets, specifically pulp, tissue, wood composites, and personal care. In our view, it has led to higher quality revenue and an evolution in the composition of our book of business. We've largely diversified away from legacy graphic paper into these new end markets that can have a meaningful impact on our growth. Each of pulp, tissue, and wood composites drove significantly stronger volumes in Q3 than the same period last year, well beyond 11%. We're making good progress with the account that is a leading global pulp manufacturer. They continue to invest resources to support the product that uses our Surflok strength aids. They're also increasing the promotion of their product with end customers, driving awareness of its benefits through publications and social media, as well as direct promotion and support around the world by their team members. Key players in their market are trying the new product. The broader market dynamics also support its adoption. The market price differential between more expensive softwood fiber remains well above $200 a ton globally compared to the lower cost hardwood fiber. That is driving the use of hardwood pulp to be a top priority for any manufacturer that uses pulp in their products. And that's exactly where we help. Softwood fiber has greater strength than hardwood fiber or recycled fiber. Our strength aids enable the production of pulp with superior mechanical properties or the production of paperboard and tissue with lower cost fibers while retaining the required strength. At the beginning of the year, demand for our strength aids from the global pulp manufacturer was approximately $1 million on an annual basis on their first line. They've now increased their run rates to more than $3 million a year on that line. They operate multiple lines, and we're on one today. We believe the market potential for Surflok could exceed $50 million at this customer. And while they are a leading global player, they have less than a 20% share of the global pulp market today. We believe the pulp end market is set to be a major component of our growth. On the tissue front, we won two new tissue accounts during the quarter. These wins were a result of our work with a European distributor, the RNM Group. RNM is one of several distributors that we're working with as part of our go-to-market strategy in the tissue and packaging end markets. RNM is a great example of the type of high-quality partners we've identified. They have a long track record of success in this industry and others of growing new chemistries and driving adoption based on the product's benefits to manufacturers and the strong support they provide. They're an impressive organization, and we believe there's more runway with them while we work to replicate this success with others as well. One of the key measures of our success today in the tissue end market is our ability to drive repeat wins. Every one of our wins this year in tissue is a repeat win with an existing customer or a new customer that has already moved to a second line. Every account that we're commercial with in tissue now has multiple lines using our strength aids. They've proven it once and repeated it at additional mills. In the case of one smaller regional tissue manufacturer, We are now commercial across all of their mills as a result of another distributor relationship we work with in Europe. That repeatability with accounts that have really dug in and invested to drive it across their organization is a telling sign of how well our strength aids are working in the tissue end market. In the paper board and specialty end market, we're running ongoing trials and volume expansion programs with existing accounts. Paperboard is a more complex trial program which takes longer than tissue. But once commercial, the lines use more product than a tissue line, so the opportunity per line is larger. Just before turning to wood composites, one dynamic we're seeing play out in the broader pulp and paper market is consolidation. There have been a number of interesting and significant transactions this year. Large integrations can be complex and distracting, But we believe some of these consolidations could be a benefit to us in the longer term, with the potential for broader adoption of our technology with players that already use our strength aids or binders, which once again speaks to the repeatability theme. In wood composites, progress continues at our key strategic account that is an international retailer, which is backward integrated into wood panel production. We experienced increased demand from them both during Q3 as well as on a year-to-date basis compared to the prior periods. They've driven usage of our binder across more SKUs at the first mill. Part of the reason for that growth has been our continued push for innovation and improving the value of our product even over the course of this year. We've reached a stage now where we know we're very competitive on a cost basis, even cost-advantaged over the incumbent solution at certain points this year. They're conducting regular runs of our product at a second mill now, but they're starting from a very small base. We believe their intent is to grow their usage at the second mill step-by-step as they build success and confidence, just as they did at the first mill. I recently participated in a group panel discussion at an industry conference where our key customer was also present. They continue to act as thought leaders in the sector with a clear commitment to drive down their carbon footprint through the use of bio-based glues in panel production. They remain as committed as ever to reaching their 2030 targets, and that will require the other players in the market that produce wood panels for them to pursue bio-based solutions that are cost-competitive and deliver the required performance. And we're a proven enabler of that change based on our work with the international retailer. Moving over to personal care. I often refer to this end market as a warrant on our growth. I still believe that today, but I'm becoming even more confident in it. We're seeing an uptick in demand from our marketing and development partner, Dow. It's still off a small base relative to our other end markets, but it's encouraging. Dow is building momentum with some of the smaller brands at top 10 players in the space. It's a positive sign that Dow's all-natural formulations are being proven in new niche products, but with big players gaining exposure to them. Lastly, a quick update on our work here in Burlington at the Center of Innovation. The productivity improvement that we've seen since internalizing our North American production base here at the COI has been great. Having the full team and production under one roof has increased the cycle time on both the commercial production and the research and development side. We believe the footprint we have today with a tolling operation in Europe serving Europe and Asia and the COI serving the Americas provides greater flexibility and optionality for both sourcing raw materials and serving our accounts most effectively. With that, I'll turn it over to Rob to review the financials. Rob?

Thanks, Jeff, and good morning. Net sales were $5.8 million in Q3 2025, up 11% or $600,000 compared to the same period in 2024. The improvement was primarily due to higher volumes of 500,000 or 10%. As Jeff mentioned, we're seeing higher volumes that are strategic accounts in tissue, pulp, and wood composites. Net of manufacturing depreciation, gross profit as a percentage of sales was 34.2% in the quarter compared to 36.8% in the same period in 2024. The change was primarily due to higher manufacturing costs due to product mix. Gross profit was $1.7 million in the quarter on change from the same period last year. SG&A expenses were $1.8 million in the quarter compared to $1.5 million in the same period in 2024. The change is primarily due to higher salary and benefits costs as well as higher repairs and maintenance costs during this quarter. R&D expenses were $390,000 in the quarter compared to 560,000 in the same period in 2024. The change is primarily due to higher product scale-up costs, which we incurred in the prior year, as well as lower asset depreciation. R&D expense is a percentage of sales with 7% in the quarter. Our R&D efforts continue to focus on further enhancing the value of our existing products and expanding our addressable opportunities. Adjusted EBITDA was $200,000 in the quarter compared to $360,000 in the same period in 2024. The change is primarily due to higher operating expenses, partially offset by higher gross profit when adjusted for non-cash items. We've reported positive adjusted EBITDA in four of the last five quarters, and we are adjusted EBITDA positive on the last 12-month basis. While we should still expect some lumpiness in our results from period to period, we are very close to consistently reporting positive EBITDA on a go-forward basis. As of September 30, 2025, we had $30.4 million of cash in term deposits compared to $32.2 million as of December 31, 2024, representing a change of $1.8 million. During the first nine months of 2025, we invested $1 million to purchase and retire 346,000 shares. We also increased our working capital investment, primarily due to $1.2 million higher inventory compared to December 31, 2024. 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.