EcoSynthetix Inc

TSX:ECO

Earnings Call Transcript 2022-Q3

[Operator]

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the EcoSynthetix 2022 Third Quarter Results Conference Call.

[Operator Instructions] Listeners are reminded that portions of today's discussion may contain forward-looking statements that reflect current views in 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. More information on EcoSynthetix's risks and uncertainties related to these forward-looking statements, please refer to the Company's Annual Information Form dated February 24, 2022, which is posted on SEDAR. This morning's call is being recorded on Thursday, November 3, 2022 at 8:30 a.m. Eastern Time.

I would now like to turn the call over to Mr. Jeff MacDonald, Chief Executive Officer of EcoSynthetix. Please go ahead, sir.

[Jeff MacDonald, executive]

Thank you. Good morning, and thank you for joining us today. Yesterday afternoon, we released our 2022 third quarter results, which you can find on our website at ecosynthetix.com. You can also download a copy of the slides that accompany today's call from our website or alternatively access them on the webcast.

There are positive signs coming out of Q3 with $5 million in revenue or 7% growth compared to Q3 2021 and a new account win in our wet-end vertical, which I'll touch on in a moment. At the same time, we're also experiencing unprecedented supply constraints on our primary raw material, corn starch, which continued to impact our results during the quarter. This morning, I'll run through the highlights of the positive developments, including the progress we've made to diversify our revenue streams beyond the legacy graphic paper vertical and into wood composites, wet-end strength aids and paper and paperboard and personal care applications.

I'll also address the drivers behind the raw material supply constraints and the proactive strategies we're using to mitigate that issue to ensure our longstanding customers and key strategic accounts continue to receive our bio-based binders that are an important ingredient in their manufacturing processes. We continue to make progress with our new wet-end strength aid. We won a new account within a leading European packaging and paper group during the quarter. This account represents our third win and our largest account in this new vertical.

We're marketing our wet-end application under the name SurfLock, one of the key demands it addresses for paper and paperboard manufacturers is an economical and effective method to strengthen the fiber at the front end of the manufacturing process. Our polymer has shown its ability to add strength across a range of fiber-based applications. This is particularly important when working with recycled fiber. As fiber is recycled, it becomes shorter and the end product weakens. By restoring strength to these fibers, it allows the paper product manufacturer to use more recycled content, which represents both the sustainability and a cost advantage.

Our testing and our experience now with multiple accounts demonstrates that SurfLock consistently improves the strength of the fiber matrix in paper products. Another important attribute is that we have seen no negative effects from SurfLock on the existing chemistries used in the manufacturing process. This enhances the adoption profile for prospects. SurfLock also minimizes sheet breaks in tissue applications during processing. And finally, we deliver processing speed benefits and reduce energy costs to operate the lines.

We continue to demonstrate very strong trial results. Based on my experience with industrial change as well as feedback from our technical partners in Europe, it's rare to see the introduction of a new chemistry yield such strong results across the broad range of applications. Typically, you'd see a new chemistry work in specific target applications and maybe see mixed results in other applications, but that hasn't been the case with SurfLock. Our test results have been universally positive.

The wet-end strength aid vertical opens up a much larger market opportunity to us than the legacy graphic paper application, which continues to face declining demand. With our SurfLock application, we can now access paper and paperboard verticals that are larger than graphic paper and are growing. These include specialty packaging, resulting paper food packaging, container packaging within corrugated board as well as sanitary and household applications resulting tissue. These new applications represent more than 45 million tons of annual consumption or approximately 60% of the entire pulp and paper industry compared to coated graphic paper that represents approximately 6 million tons or 8% of the industry.

The wet-end strength aid vertical opens up a much larger addressable market for us. And in many cases, it's with paper and paperboard accounts, where we already have relationships, thanks to our work in the graphic paper vertical. Transitioning to graphic paper, the accounts that use EcoSphere continue to see value in our offering and continue to buy, although we did see volume declines in the quarter due to the macroeconomic climate. These declines were offset in the quarter by pricing.

Our ability to take price and pass through the cost increases related to raw material in the quarter was a result of the pricing dynamics in the market for the petroleum-based binder we replace, SB latex. SB Latex pricing was running above its historical norms, but more recently, SB Latex pricing has softened. As the market normalizes, we expect to retain our legacy graphic paper business. But overtime, we do expect this vertical to represent a smaller and smaller proportion of our overall revenue given the lack of growth in this vertical.

On the raw materials front, the market is dealing with a perfect storm of a number of issues converging to create supply shortages. The macro challenges impacting broader markets play a role, including inflation and general supply chain challenges. Ukraine is a major producer of corn and the war has disrupted their ability to contribute their normal volumes to the market. In addition to these issues, Europe's growing season was severely impacted by drought conditions, which led the European Commission to cut its forecast for corn.

Finally, a labor strike at a major U.S. Midwest mill has been ongoing for more than 2 months. As a result of these issues, corn starch markets are very tight with production below expectations, which is leading to availability issues. Consequently, the price of starch, which usually tracks the price of corn as the primary ingredient has become disconnected from corn. Roquette, a global food company and a major producer and user of starch, estimates it is facing 30% lower volumes versus last year and that it will have no choice but to reduce supply to its customers.

When asked about the primary hurdle facing our company, my answer has generally been the pace of change or the rate of adoption in the market. Driving change in well-established markets that use chemistries entrenched for 50-plus years is difficult. What we're seeing today is the market moving to us. Major manufacturers and marketers in wood composites, personal care, packaging and tissue, recognize the value our all-natural bio-based resins bring to their supply chains.

Today, the primary hurdle is raw material supply. We have managed through these supply issues to date on a hand-to-mouth basis. During the quarter, supply became available from a primary long-standing supplier and we've been successful securing supply from a broader range of vendors than in the past. We built inventory during the quarter, investing almost $2 million since the end of Q2. It's expensive inventory and supply lines are long, but we believe it's necessary in the current market. Securing this inventory provided us with sufficient confidence to initiate our first shipments to the new wet-end account late in the quarter. But make no mistake, at this stage, we're managing raw material supply, monitoring our margin profile to ensure it remains positive and balancing the growth opportunities in front of us.

In my experience, it's extremely difficult as a commercial operator to recapture margin once you've given price breaks to customers due to higher input pricing. We're not going to write checks with product. It's not responsible. Instead, we're going to retain customers and grow with new prospects that recognize the value we bring to them while earning a fair margin through this difficult cycle. We have seen some positive developments recently. There were conflicting reports in October that more supply may be available. It's unclear at this point if suppliers are sitting on inventory to retain price.

What is certain is that the market is fluid. We will continue to work to secure sufficient supply for our key strategic accounts in new verticals and our longstanding accounts in the legacy paper vertical. As part of a long-term strategy to improve the flexibility of our platform, we're also trialing alternative feedstocks beyond corn starch to give us greater optionality in difficult markets. As Rob will address in a moment, you can see the impact of the current raw material supply shortages on our margin and the use of cash to build inventory.

On the wood composites front, our key strategic account that is backward integrated into a major retailer continues to run steady production volumes. They are working hard and close to their goals to have us fully implemented on the first line by the end of the year, although that may move to the right by a couple of months. Our ability to ramp with them on the first line and expand across other lines they operate and into other suppliers they use is a key component of our growth strategy. Their commitment to our bio-based binder has a path to reduce their reliance on fossil-based binders remains intact. Sustainability and safety are core to their management philosophy and their work with our bio-based binder is completely aligned with those goals.

Our first major account in wood composites, SWISS KRONO continues to invest marketing and sales support in their beyond particleboard. They market beyond as the most environmentally friendly particleboard available that delivers the highest indoor air quality. Their leadership team is committed to the product line as a premium offering in the market. We continue to work with their team to expand at other mills as they build demand for their no-added formaldehyde offering.

On the personal care front, our marketing and development partner, Dow announced that MaizeCare Clarity Polymer won 2 prestigious innovation awards. R&D Magazine named it a 2022 R&D 100 Award winner and Business Intelligence Group, BIG, named a Sustainability Product of the Year. These award wins demonstrate the innovation that we and Dow are bringing to the market. Dow is optimistic that 2023 will be another step forward for the product line as they continue to build awareness with formulators and brands. They've had a number of small wins in the market and believe there are larger opportunities ahead. They remain very active in the hair care vertical. At the same time, they're doing more and more development work in new applications where our all-natural film former has performance and consumer preference benefits. This level of activity demonstrates their commitment to making the product successful.

Our diversification strategy with multiple shots on goal is working. Wood composites, the wet-and strength aids vertical and personal care are key to our long-term growth. The technology's performance capabilities, value and its impact on reducing a manufacturers' carbon footprint position us for sustainable success.

And with that, I'll turn it over to Rob to review the financials. Rob?

[Robert Haire, executive]

Thanks, Jeff, and good morning. Net sales were $5 million in Q3 2022, up 7% compared to the same period in 2021. The change in net sales was due to higher average selling price, which impacted sales of $1.3 million or 28%, which was partially offset by lower volumes, which impacted sales by $1 million or 21%. The higher average selling price this quarter was due to offsetting of significant inflationary pressures with price increases as well as the continued diversification of the company's product mix.

The decrease in volumes during the quarter was due to unfavorable market conditions, primarily in graphic paper and limited feedstock availability due to the challenging supply chain conditions. Gross profit was $1 million in the quarter, a decrease of $70,000 from the prior year period. The higher average selling price was offset by a decrease in sales volumes and higher manufacturing costs.

Net of manufacturing depreciation, gross profit as a percentage of sales was 23% in the quarter compared to 27.8% for the same period in 2021. The impact of higher cost raw materials and logistics impacted margin profile in the quarter, and we expect this impact will continue into the fourth quarter and into 2023 based on what we're seeing in the market today.

SG&A expenses were $1.1 million in the quarter, a decrease of $250,000 compared to the same period in 2021. This improvement is primarily due to a reduction in variable compensation compared to the prior year. R&D expenses were $430,000 in the quarter, relatively in line with the $480,000 from the corresponding period in 2021. R&D expense as a percentage of sales was 9% in the quarter compared to 10% in the same period in 2021. We continue to invest in innovation to improve our value proposition and expand our addressable market opportunities.

Adjusted EBITDA loss was $130,000 in the quarter, which was flat to the same period in 2021. Net cash -- sorry, cash used in operating activities was $2.1 million compared to cash provided by operating activities of $50,000 in the prior year period. Our cash used in operating activities changed significantly in the quarter as we invested $1.9 million in additional inventory given the current market dynamics.

As of September 30, 2020 (sic) [2022], we had $36.9 million in cash and term deposits compared to $42.2 million as of December 31, 2021. The $5.3 million change was primarily due to an increase in inventory of $2.6 million, an increase in accounts receivable of $600,000 and $1.4 million of cash used to purchase shares through the NCIB since January 1, 2022. During the quarter, we invested $440,000 in NCIB share buybacks for the purchase and cancellation of 133,600 common 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 MacDonald, executive]

Thanks, Rob. The top line opportunities in front of us remain as strong as ever, especially as we win new wet-end accounts like we did in Q3. Our strategy of diversification to achieve greater contributions from our wood composites, personal care and wet-end verticals is working. The diversification is helping to make up for lost ground in graphic paper with wood composites and the wet-end applications poised to be the primary drivers of top line growth. While the challenges we face on the availability of raw materials and supply in constraints are difficult, we have managed them effectively to date.

We're actively engaged in risk mitigation strategies now, should they persist in 2023, including building inventory and broadening our supply base. Our customers rely on us. They recognize the value proposition, performance and carbon footprint benefits of our all-natural bio-based binders within their production processes, supply chains and end products. We are in a great position to deliver long-term sustainable growth. We appreciate the trust and the patience that our shareholders have shown, and I look forward to updating you further on our progress.

And with that, I'll turn it back to the Operator to open up the call for questions. Thank you.

[Operator]

[Operator Instructions] Your first question comes from Meaghen Annett of TD.

[Meaghen Annett, analyst]

So a nice step up in revenue here sequentially in the quarter, but the gross margin performance was lower than I would have expected. So I assume part of the revenue step up there as it related to the new wet-end account. And just on the gross margin, so would that represent a reasonable level for Q4 and 2023? Just any more detail you can provide there would be great?

[Robert Haire, executive]

Meaghen, thanks for the question. From a gross margin perspective, there definitely we had, as we talked about, a lot of supply chain issues, which have continued throughout the year and also impacted in the quarter. Product mix also played a part in the margin decrease during the year -- during the quarter. As we talked last quarter, we did have a fair bit of backlog built up and the timing of when we accepted some of those orders to the point of when we shipped them, we did see some cost escalation that we're unable to pass on to our customers. As we've moved into the fourth quarter here, we're continuing to see incremental cost escalations. So we're actively trying to address that through some pricing actions, but there are some legs with that.

So we do expect to potentially see a similar gross margin pressure in Q4, similar to what we've seen to the gross margin in Q3. 2023 is a bit challenging right now to estimate. Overall, our goal is to have a higher margin than what we saw in the quarter. But that -- the inflationary pressure that we're still seeing on the starch side, in particular right now is making it challenging. But we're hoping to see improvement in that market in 2023, which should allow us to restore some of our margins closer to our targets.

[Meaghen Annett, analyst]

And then on the composition of the inventory balance, is there anything to read into there in terms of forthcoming volumes or how much of that is just being driven by higher raw material costs?

[Robert Haire, executive]

It's a mix of, for sure, higher raw materials playing into our inventory balance. But we did also receive -- it's a lot of timing of inventory. We received access to a fair bit of inventory late in the quarter. And a large -- I shouldn't say a large part, but there is a larger percentage than we typically have allocated towards our new account to ensure that we can supply them on a consistent basis moving into 2023.

So that inventory -- that new customer was started at shipments late in the quarter. So we definitely are hoping to see a far bit of growth from that account. Predicting of which quarter that will be realized is probably a bit challenging right now for us. But we definitely, from a full year perspective, expect to see a fair bit of growth from that account. And like I said, a fair bit of our inventory is on the balance sheet at quarter end for that account.

[Meaghen Annett, analyst]

And just a last question here with regards to securing raw materials. So are there any investments you could make with the suppliers maybe to have a more direct relationship going forward or anything that you could do in house within your own facilities in the more near term that might help to mitigate some challenges in accessing raw materials?

[Jeff MacDonald, executive]

Thanks, Meaghen. We've explored, I would say, all possible strategic angles with the raw material suppliers. I think the biggest things that we can do to mitigate this going forward are really on the R&D side to ensure that we have as much optionality as possible across different input materials. And that opens up not only other feedstocks, but a very different supply base in some cases that we could rely on for at least some of our products.

So that's where most of our attention has been. I have to say, I guess, unfortunately, the suppliers of the agricultural products that we rely on, it's been very much a commodity relationship so far, but we will continue to explore what other strategic angles there may be to collaborate more in the future. So far, there really aren't any paths there that we see that could help us in the near term.

[Operator]

[Operator Instructions] The next question comes from Dan Marks of Stonehouse Capital.

[Daniel Marks;Stonehouse Capital, analyst]

Jeff, I wonder, can you give us a little more flavor about this big new wet-end account? I think on last quarter's call, you said that it could provide substantial uptick in your volumes and allow you to get pretty close to the targets you said at the beginning of the year. Is that still possible for Q4? Can you give us a little more flavor about that account?

[Jeff MacDonald, executive]

Yes. Dan, thanks. I think we're pretty late in the year to see a full recovery to our expectations from the start of the year, just given some of the constraints that we faced for the last couple of quarters here. But we're really pleased to have a start with this account. And if I can characterize it in fairly general terms because it is -- I mean, it's sensitive to both them and us in terms of the advantage that we're offering to them.

But when we look at an opportunity like them, we consider it's by coincidence only, and I'll explain what I mean there, but an account is an account. So an account at one of these large packaging board mills, and we'll call it a line, represents a very similar revenue opportunity to us as a line in wood composites. They're very different application rates, and it's very different pricing in the [ 2 ] verticals.

It just happens to end up being in that sort of $3 million to $5 million range of opportunity. We do see that through our early work with them panning out to be true. And that accounts -- again, I don't want to give away too much of their advantage or who they are, but let's just say that within that account, which is one of the larger ones in the packaging board field, they're somewhere between 10 and 50 lines like this. And I would say that's representative of other large players like them. So it's a multiple line opportunity once we get started with an account like this.

And the thing that's got me and our team, I think most excited is just the profile of adoption here, given the results that we see early on from trials, and the limited impact we have on other parameters within the manufacturing line and then ultimately, their ability to use our product and hopefully now ramp up quite quickly with it. So we think this can have quicker results than some of the other markets that simply take longer.

[Daniel Marks;Stonehouse Capital, analyst]

So this account could be the same or perhaps greater order of magnitude than your key wood composites account?

[Jeff MacDonald, executive]

Yes. I would say each one of these packaging board type accounts could be similar in scale for us to the large opportunities we see in wood composites.

[Daniel Marks;Stonehouse Capital, analyst]

And yes, it could be used -- obviously, that account has been going on -- your wood composite account has been ongoing for, I think a year since you've press released that you were moving forward. The pace at which this -- these accounts, the wet-end accounts can grow substantially faster than that?

[Jeff MacDonald, executive]

Yes, for sure. I mean, keep in mind that the journey prior to us announcing that account as commercial and wood composites was quite long in terms of getting to that point. And then even subsequent to continuing to ship to them commercially on an ongoing basis, there's still steps into full implementation with them. So it continues to be a step-by-step approach.

The implementation of the wet-end strength aids that by all accounts so far just goes faster. There's less downstream testing required across a range of applications. I mean that's one factor. But I think upstream just the fact that so far, it seems to go into these mills quite easily and work quite quickly. And then I think the economic driver just in that it's offering such substantial savings has caused it to definitely move faster than what we've seen in wood composites.

[Daniel Marks;Stonehouse Capital, analyst]

Okay. So I heard you're right in that $3 million to $5 million per line, this entity has somewhere between 10 and 50 lines and implementation is much faster. Is there any reason why they -- with a successful first line, they wouldn't want to add more lines very quickly?

[Jeff MacDonald, executive]

I can't see any. I think they're very focused on successful implementation on the first line first. And I do think that they're working to maintain their strategic advantage and not saying much more than they need to. But given what's been accomplished, I can't see any reasons why. And I guess maybe just to clarify why I used 10 lines to 50 lines, that's kind of what we see as a large player in this field, anybody who's sort of in that range, and they definitely fall within that range. Those obviously are very interesting accounts for us.

[Daniel Marks;Stonehouse Capital, analyst]

Got it. On the last call as well, you told us in addition to this account and the 2 existing tissue accounts, there were 8 more that were in various stages of filing. Can you tell us what to expect from those accounts over the next quarter or 2?

[Jeff MacDonald, executive]

Yes. We've seen good progress there. I will say that given supply constraints, progress did not go as quickly as we would like. We definitely have had to hold back on some of them. We have advanced some of those trials, though in the last bit. And going commercial with them, I think is almost entirely reliant on our ability to acquire our raw materials.

The tables set for more. I would say the table could have been set for even more if we had greater confidence through the middle of the year on what the raw material supply would look like. It's really -- it can be a really bad reflection on us as a company, if we're seeing as maybe a little R&D entity that doesn't need things on trials, but then has an inability to deliver. So we've been pretty careful in managing, I'll say, our image and how we can work with a customer to get to commercialization quickly. So we've been pretty selective here.

[Daniel Marks;Stonehouse Capital, analyst]

Got it. So then just reflecting back to the decline of $1 million of volume in Q3. That is attributed. How much of that would be because of your legacy paper couldn't -- wasn't as just as economical? And how much would be -- you just didn't have enough supply to meet demand?

[Jeff MacDonald, executive]

There's a lot of puts and takes there, and it is -- it's influenced, I would say, first and foremost, by the 2 factors you mentioned, but there are more puts and takes to that. I think suffice it to say that through the course of 2022, so far, about 80% we could attribute to a decline in graphic paper demand. And then beyond that, other puts and takes related to supply chain or other smaller opportunities, let's say.

[Daniel Marks;Stonehouse Capital, analyst]

Right. Last question. I think you mentioned briefly that you're looking at alternative inputs. Are any of those advancing in trials? What can you give us on that?

[Jeff MacDonald, executive]

Yes. Again, I think I've characterized it this way before, but these are longer-term R&D activities that are focused on ensuring that we have optionality for the future. We've done a lot of work. That said, what I just said, true. That said, we did a lot of work in Q3 to advance some of those. And some of those veins are going quite well. But I would say like that's not going to change our fortunes next quarter or the quarter after. These are longer-term programs that we hope to give us more security of supply in the future.

[Daniel Marks;Stonehouse Capital, analyst]

Got you. Sorry, one last item. You had $2.7 million of finished goods inventory, substantially higher than you would normally carry. Is that a case of you just got product at the end of the quarter and just couldn't get it to customers in time? And should we expect to see that flow into Q4?

[Jeff MacDonald, executive]

Yes. So it's a bit of what you said. So finished product destined, let's say, more imminently for existing customers. But as Rob mentioned, there's a fair bit of that, that we have put in place to ensure our ability to supply to this new wet-end account. So we're a little bit ahead of the curve with them. And I think we needed to do that to show them confidence that this wasn't going to turn on in November and turn off again in December.

[Operator]

[Operator Instructions] The next question comes from Gerry Wimmer of Investorfile.

[Gerry Wimmer;Investorfile, analyst]

Just wanted to pick up on the previous caller's questions in the wet-end market. You mentioned now you have 3 accounts. I assume [ 2 ] of the accounts -- all 3 accounts deemed commercial, and I guess the most recent account announcement in the much larger mills than the other 2?

[Jeff MacDonald, executive]

Yes. As I mentioned, we've done quite a bit of work across several verticals that use fiber in their production process. And where we got started was in tissue, where we saw an very interesting value proposition on smaller mills. So these tissue lines are inherently smaller than these large packaging lines, which is the most recent account we won. The early wins were in tissue. And those have continued to be smaller going concern accounts for us through most of 2022.

[Gerry Wimmer;Investorfile, analyst]

Okay. And back to the most recent account when you -- the previous caller, you said there are about anywhere for a large player like them anywhere from 10 lines to 50 lines. I guess when you announced that this is a customer you're comfortable to deliver products to them to feed one of their lines to move over to more than one line. Is it a subject? Is it based on what they want or is it based on what you can deliver? So what I'm asking is that one line that you're going commercial, would you be able to expand to more than one line based on what you know with your corn starch availability?

[Jeff MacDonald, executive]

And that's exactly the question. So it -- I think it's all predicated on our corn starch availability. I think they're very focused on getting this ramped up and continuous on the first line, but I do believe that will be a proof point for others within their network. But at the end of the day, it's going to come down to our confidence in our ability to deliver based on having the corn starch to do that.

And so far, we've been hand-to-mouth as I said.

So we were pretty pleased that we were able to secure enough to give them confidence and ourselves confidence on this first line. But it's going to require the same kind of effort and diligence to secure more for the quarters to come. And honestly, we have very little visibility on availability and pricing when we look out more than a quarter or so in this environment. So we're going to be aggressive, but we're going to be careful at the same time.

[Gerry Wimmer;Investorfile, analyst]

Okay. Fair enough. A question on R&D, you did talk about your different input products -- raw material inputs. I guess, that R&D project in different inputs would only be applicable for the wet-end market. In the other markets, I guess, once you committed to a raw material, it's a very, very long time to pilot a different raw material to be used, say, in wood composite or in the personal care market?

[Jeff MacDonald, executive]

Yes. That's -- so that's an astute point, Gerry. So you sound like a veteran of change in the industrial world. It would be for existing accounts, even though we may qualify it as an easy direct replacement. I'll say even in graphic paper, but for sure in wood composites, we would have to do a U-turn and go through some pretty extensive testing and trialing again to qualify a new material across a range of applications.

That said, there's the potential for this to work in a similar way in some of the other verticals. So to the extent we get into some new accounts there, there's a possibility we could be introducing alternative materials there in the future. So we are thinking about it more broadly than just the wet-end when we do our R&D work.

[Gerry Wimmer;Investorfile, analyst]

Okay. Change of topic, on your buyback, you've been kind of in the market buying back shares here and there. One expect that same pace of buyback or is that a function of cash and how much inventory you have to build up for these new accounts?

[Jeff MacDonald, executive]

Yes. So we remain confident in our value going forward, and we want to show that and deploy our capital in a balanced way with that as a component of what we're doing. I'll say that in this environment and seeing what's going on with other small cap stocks, we feel very fortunate to have the balance sheet that we do today. And our customers feel very fortunate to have a small cap partner that has this balance sheet. So we will continue to be balanced in our approach. But suffice it to say that we have invested again in the last quarter, we see value beyond where we are today, for sure.

[Gerry Wimmer;Investorfile, analyst]

Okay. And finally, from an Investor Relations front, given now that you've been able to communicate to the market a large wet-end customer, you have some inventory built, at least supply one line for this customer. Are -- will you be planning to get out more and talk about the recent success to the marketplace on the IR front?

[Jeff MacDonald, executive]

Yes, absolutely. So we actually have -- we have an interesting day lined up in the next few weeks that we're pleasantly surprised in this environment for small caps. There seems to be some pretty good interest in what we're doing. So absolutely. And our approach is that any time that people in the capital market side that are smarter than us in that respect, say come on out and talk to us about this or talk to my clients about this, we're happy to do that as long as it's a meaningful opportunity. So, yes, for sure.

[Gerry Wimmer;Investorfile, analyst]

Okay. Well, that's been my questions, guys, and keep up the good work. And I just hope for the corn starch market to give you guys a little bit of easier work to secure, but well done to you guys.

[Jeff MacDonald, executive]

Thanks a lot, Gerry. Appreciate it.

[Operator]

Thank you. There are no further questions at this time. I'll turn the conference back to you, Mr. MacDonald. Please go ahead.

[Jeff MacDonald, executive]

Great. Thanks again, everyone, for joining us today, and we'll talk to you again soon.

[Operator]

Ladies and gentlemen, this does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.