INNOVATION. GROWTH. LEADERSHIP. - Flame Retardant & Phase ... · INNOVATION. GROWTH. LEADERSHIP....

INNOVATION. GROWTH. LEADERSHIP.

November 2017 Asia/Australia Investor Roadshow Presentation

1 Company Overview

2 Who We Are

3 Business Model & Strategy

4 Financial Analysis

5 2018 Outlook

6 Management Bios and Company History

2

November 2017 Investor Presentation

Key Statistics

ASX Code AJX

Current Share Price $0.38

52 Week High $0.76

52 Week Low $0.31

Shares on Issue ~304m

Market Capitalisation ~$117m

Cash (30 September 2017) $9.5m

Company Overview3

12 Month Share Price

Investor Mix Company Milestones

Institutional15%

Retail & HNW71%

Management & Directors

14%

• Revenue Growth up from $3M in 2016 to $24M in 2017

• Q1 2018 was the first cash positive quarter in company history

• Gross margins at 23% in 2018, up from 1% in 2017

• $9 Billion FR market and $0.9 Billion PCM market forecasted to grow at 6% and 24% p.a. respectively

1 Company Overview

2 Who We Are



5 2018 Outlook


4


• Alexium International is a speciality chemicals developer based in Greer, South Carolina, USA, with its headquarters in Perth, WA

• Focus on environmentally friendly, non-hazardous Flame Retardants (FR) and Phase Change Materials (PCM) that offer superior performance

• Cost effective, patented solutions for both textile and non-textile markets

• Formulations made as a single step, drop-in solution that can be added at any finishing facility around the globe with no changes to equipment

• Rapid growth in sales from $0.4M in FY15 to $3.4M in FY16 and $24M in FY17

• Global chemical markets for FR and PCM total US$9.0B and US$934M per year respectively

Environmentally Friendly FR Solutions

Knowledgeable Formulation Experts

Extensive Customer Support

Exceptional Product Performance

Innovation Driven

5

Who Are We?

Novel Eco-

Friendly Chemistry

Alexium

Exceptional Value

Proposition

Clear Market Demand

Expanding Patent

Portfolio

Commercial & Military

Partnerships

Unique Proprietary Technology

6

The Alexium Strategy• Identify key markets in significant transition that are

underserved by current market players and/or structure

• Provide unparalleled integration support with end user customers to assist early adoption and product innovation

• IP portfolio of 20+ global patent applications covering chemical structures and applications

• Leverage low-capital toll manufacturing strategy with major industry players for rapid product scale up and a globally established supply chain

Why Are We Different?

*Source: Markets and Markets’ Report on the Flame Retardant Market: Trends & Forecasts to 2019

Market Drivers

• Stringent fire safety regulations causing companies to look for more effective performance in FR

• Evidence of toxicity and bio accumulation in halogenated compounds and carcinogens

• New legislation in Europe & USA restricting/eliminating the use of several brominated/halogenated compounds

• Operating in a US$9.1BN market which has a forecasted compound annual growth rate of ~6.0% until 2019

• Expected market size over $10 billion by 2019

• Organophosphorus flame retardants have the highest rate of annual growth of 7.5%

• Europe and North America account for 46.7% of the world’s FR chemical consumption

Key Statistics

7

Fire Retardant Market

Fire retardant chemistries are chemicals required to be added to virtually every consumer product sold to prevent initiation of a fire or inhibit the rate at which the event propagates.

REACH Registration is the chemical regulatory system for the European Union. This system established one of the most rigorous standards for assessing chemical hazards and determining chemical usage by consumer and industry. REACH implementation is a tiered process which will be complete by summer of 2018.

Washington State Department of Ecology determined that manufacturers of children’s products sold in Washington state must report the presence of 20 additional compounds, most of which are flame retardants linked to cancer and used in furniture, baby carriers and car seats. The state’s “Chemicals of High Concern” list now includes 85 compounds-surpassing the 66 compounds on similar lists in Oregon and Vermont.

Toxic Flame Retardant Regulations currently include 21 toxic flame retardant policies and 34 adopted policies in 14 states.

The United States Consumer Product Safety Commission (CPSC) voted on September 20th, 2017 to immediately warn the public about the dangers of using products containing halogenated, nonpolymeric flame retardants, a class of chemicals found in children’s toys, mattresses, furniture, and the plastic casings of electronic devices. Agency/Docket Number: CPSC Docket No. CPSC-2015-0022. Document Number: 2017-20733

Updated FR Regulations

*Source: Accuray Markets “Global Advanced Phase Change Material (PCM) Market Analysis and Trends”

Market Drivers

• Having a “cool feel” is becoming necessary to compete in key markets of bedding, apparel, athletic wear

• Traditional microcapsules contain high levels of either formaldehyde or VOCs

• Blending cooling with other features such as wicking and durability highly desired but highly complex

• Operating in an estimated US$934M market which has a forecasted CAGR of ~23.5% until 2025

• Expected market size over $5 billion by 2025

• Organic PCM materials comprise 51% of total market

• Europe and North America account for 54.0% of the world’s FR chemical consumption

Key Statistics

9

Thermal Management MarketThermal Management or Phase Change Material (PCM) chemistries can improve the efficiency of apparel and other textiles to absorb heat and moisture. The microscopic molecule attaches to a fibre and can retain heat and cool the textile it is applied to, and then re-charge itself when the heat source is removed.

1 Second After Contact

35 Seconds After Contact

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What Do We Produce?

1 Company Overview

2 Who We Are



5 2018 Outlook


11


Regionally Diverse and Scalable Global Manufacturing Model

• Partnerships with toll manufacturers allow almost infinite scalability that allows Alexium to grow with demand without having to invest in any manufacturing capabilities or shift its focus away from its core competency of making truly novel, impactful chemical solutions.

• Manpak is located in Australia, Brocolor is located in Germany, Fujifilm is located in Belgium, and other partners located in the US.

12

Holly Oak Chemical, Inc.

Toll Manufacturing/Supply Chain

Alexium has established strategic partnerships in order to rapidly scale its go-to-market capabilities• Partnerships were carefully selected according to geography and sector expertise• Sales agents representing various Alexium target markets started in 2016

Continued Organic Sales Growth

North American focused with global reach

Internationally focusedFocused on regional

coverage in EU, Australia, and SE Asia

Strategic approach by both product lines and

market segment

Initial targeting specific products and markets

Broad technology platform and market

coverage

Supported by:3 Sales RepresentativesGlobal Product Manager

Marketing ManagerCustomer Service Rep

Broad technology platform and market

coverage

Leverages expansive sales organizations and local

market knowledge

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Strategic Licensing Relationships Distribution Partnerships

Regi

onFo

cus

Stra

tegi

c Ad

vant

age

Global Sales Strategy

1 Company Overview

2 Who We Are



5 2018 Outlook


14


Financial Overview

• Total revenue grew 604% over the prior fiscal year to $24.02M

• Gross margin on chemical sales grew from -12% to 1%. Sales in FY2017 averaging 23% and growing towards organizational target of 40%.

$0.36M $0.24M $0.39M

$3.41M

$24.02M

-

5

10

15

20

25

2013 2014 2015 2016 2017

MIL

LIO

NS

Five Year Revenue Trend

15

Financial Overview

$3.0M $23.8M(12.08%)

1.24%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

-

5

10

15

20

25

2016 2017

MIL

LIO

NS

2016 vs 2017

Sales Revenue Gross Margin

• Revenue from chemistry sales up 693% from $3M to $24M

• Gross margin on chemical sales grew by 13.3 percentage points to 1%. GPM in FY2017 averaging 23% and growing

• Sales revenue grew 12% in the second half of the year as a result of continued gains in the mattress industry

• Gross margin gain of 4.2 percentage points from H1 to H2 was due to supply chain improvements and production scale pricing with raw material suppliers. This trend has continued to improve margins

$11.2M $12.6M

(0.97%)

3.21%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

-

2

4

6

8

10

12

14

H1 H2

MIL

LIO

NS

FY 2017 First Half vs Second Half

Sales Revenue Gross Margin

16

Financial Overview• Virtually all revenues are recurring

though size and frequency vary between customers.

• Gross margins increased by 37 percentage points from Q3 2017 to Q1 2018 and are expected to grow further.

• Correlation between improving gross margins and cash generation is largely due to the Company’s flat cost structure. Toll manufacturing partners allow the flexibility of low cost manufacturing coupled with almost infinitely scalable production capacity with virtually zero impact to SG&A costs.

• Alexium has made significant improvements to its cost structure, both in improving gross margins and strategically reducing non-operational costs.

17

-15%

-5%

5%

15%

25%

-

1

2

3

4

5

6

7

Q3 2017 Q4 2017 Q1 2018

MIL

LIO

NS

Margin Growth

Revenue Gross Margin

-15%

-5%

5%

15%

25%

(6)

(3)

-

3

Q3 2017 Q4 2017 Q1 2018M

ILLI

ON

S

Margins and Cash Neutrality

Net Cash From Operating Activities Gross Margin

Cash Flow Statement CASH NEUTRALITY

• The recent September quarter being Alexium’s first quarter of positive cash flows builds off corporate goal of cash neutrality achieved in June 2017

• Reduction of administrative and non-operational costs has resulted in even further working capital benefits

• Margins poised to continue growth throughout 2018CASH POSITION

• $9.5M cash on hand and continued period over period cash inflows from operations

• Alexium has made significant improvements to its cost structure, both in improving gross margins and strategically reducing non-operational costs

• Alexium is in a strong position to fund organic growth going forward

18

Quarter Ended 30-Sep-17 30-Jun-17$A'000 $A'000

Cash flows from operating activitiesReceipts from customers 5,764 6,844 Payments for:(a) research and development (349) (403) (b) product manufacturing and operating costs (3,149) (7,357) (c) advertising and marketing (52) (95) (d) leased assets (26) (74) (e) staff cost (876) (1,097) (f) administration and corporate costs (722) (468) Interest and other costs of finance paid (239) (254) Goods & services tax (paid) / received from ATO 8 13

Net cash used in operating activities 359 (2,891)

Net cash flows from investing activities (6) (69) Net cash flows from financing activities 5,751 -

Net increase / (decrease) in cash held 6,104 (2,960) Cash and cash equivalents at the beginning of the period 3,410 6,403 Effects of exchange rate changes on cash (57) (33) Cash and cash equivalents at the end of the period 9,457 3,410

BS

AssetsLiabilities & Equity

30-Jun-1730-Jun-1630-Jun-1730-Jun-16

Current AssetsCurrent Liabilities

Cash and cash equivalents3,409,78311,218,556Trade and other payables1,830,0372,817,172

Trade and other receivables1,427,908191,762Deferred income32,45818,365

Inventories2,091,0281,656,669Borrowings5,854,37638,526

Other current assets101,12990,869Other liabilities263,772-

Total Current Assets7,029,84813,157,856Total Current Liabilities7,980,6432,874,063

Non-Current Liabilities

Non-Current AssetsBorrowings394,07718,549

Other financial assets35,53037,094Derivative liability1,056,403-

Property, plant and equipment2,441,920816,738Total Non-Current Liabilities1,450,48018,549

Intangible assets143,299148,454Total Liabilities9,431,1232,892,612

Total Non-Current Assets2,620,7491,002,286

Total Assets9,650,59714,160,142Total Equity219,47411,267,530

Cash Flows

Quarter Ended 30-Sep-1730-Jun-17

$A'000$A'000

Cash flows from operating activities

Receipts from customers5,7646,844

Payments for:

(a) research and development(349)(403)

(b) product manufacturing and operating costs(3,149)(7,357)

(c) advertising and marketing(52)(95)

(d) leased assets(26)(74)

(e) staff cost(876)(1,097)

(f) administration and corporate costs(722)(468)

Interest and other costs of finance paid(239)(254)

Goods & services tax (paid) / received from ATO813

Net cash used in operating activities359(2,891)

Net cash flows from investing activities(6)(69)

Net cash flows from financing activities5,751- 0

Net increase / (decrease) in cash held6,104(2,960)

Cash and cash equivalents at the beginning of the period3,4106,403

Effects of exchange rate changes on cash(57)(33)

Cash and cash equivalents at the end of the period9,4573,410

P&L

Consolidated Statement of Comprehensive Income for the twelve months ended June 30, 2017Current PeriodPrevious Period

20172016

$$

Revenues from continuing operations24,034,4163,457,932

Cost of goods sold(23,516,103)(3,363,839)

518,31394,093

Administrative expenses(1,512,740)(1,361,276)

Employee benefits expense(5,104,877)(3,672,088)

Depreciation and amortisation expenses(359,241)(204,473)

Research and development(1,878,367)(1,984,423)

Professional fees(1,525,349)(2,130,604)

Other expenses(1,507,547)(2,010,910)

Share based payments-(4,175,190)

Change in fair value of derivative liability(189,276)-

Finance costs(596,184)-

Operating loss (12,155,268)(15,444,871)

Net exchange difference on translation of financial report of foreign controlled entity(78,350)459,291

Total comprehensive loss for the year(12,233,618)(14,985,580)

Basic loss per share (cents per share)(4.03)(6.97)

Diluted loss per share (cents per share)(4.03)(6.97)

1 Company Overview

2 Who We Are



5 2018 Outlook


19


2018 OutlookMILITARYOver the last quarter, the focus of the effort has largely been tweaking the breathability of the fabric to ensure a successful result in a future field evaluation but minimizing the heat flux through the fabric during a fire event:• Alexium’s Partner, a current supplier of U.S. Military uniforms, is finalizing the

fabric construction and FR treatment.• Next phase is procurement which includes hazard assessment, limited user

evaluations (i.e. field trials) and specification writing • The Company expects that process to commence within FY2018

20

FORM STRATEGIC PARTNERSHIPS FOR GLOBAL ALEXIFLAM NF LAUNCH

Due to significant industry interest in the value proposition of Alexiflam™NF, Alexium will form strategic partnerships to maximize the value ofAlexiflam™ NF for its shareholders:• Those partnerships will likely include exclusive licensees• Targeting markets such as Europe where the market is more fragmented• Discussions with potential partners in this space are underway and

advancing rapidly

CONTINUED GROWTH IN HOME TEXTILES

Expansion in bedding will continue to drive revenues upward:

• Planned expansion into the pillow market with Pegasus Home Fashions, a majorsupplier into “Big Box” retailers (i.e. Walmart or Bed, Bath, and Beyond)

• Five new customers have come online in this space in the last several months

• New business represents an estimated $4M p.a. post scale-up

2018 Outlook

COMMERCIALIZATION OF TENTING TREATMENT

Planned penetration into highly eco-conscious tenting market space in FY18:

• Market represents a massive opportunity with over 70 million meters offabric treated annually in the global market

• Alexium’s all-in-one Oeko-Tex Certified tent fabric treatment (including FR,water repellency, coatings and binders) expected to be highly disruptive

• Customer trials are underway

21

2018 Outlook

CONTINUED IMPROVEMENT IN FINANCIALS AND PROFITABLE GROWTH

Building off Alexium’s first full quarter of cash positivity and recent scale-up of fivenew customers:

• Alexium is well poised to continue to grow the top line and increase margins

• Several cost saving initiatives enacted throughout Q1• there should be an even greater cost savings moving forward to help drive cash

generation

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PENETRATION INTO NEW KEY MARKETS

Over the next six months, Alexium expects key projects in two new sectors protectivecoatings and resins and disposable healthcare nonwovens to convert into active sales:

• Nonwovens are the predominant textiles used in markets that consume high volumesof low-cost, disposable fabrics

• The company is in late stages of product validation and scale-up with customers inboth resins and nonwovens

• Represents a significant expansion outside of bedding and the first significantrevenue Alexium would realize outside of textiles

SHIFT IN FOCUS THROUGH MARKET ANALYSIS

About Wilson Growth Partners:

WGP was founded in 2014 with a focus onimproving the strategic positioning and enduringperformance of it’s clients by providing practicalstrategic data, analysis, insight, and advice to topmanagement.

Alexium has begun work Wilson Growth Partners, a strategygroup engaged to deepen our understanding of the flameretardancy and thermal regulation markets:• Identify further addressable gaps both inside and outside of

textiles• Guide future R&D and sales efforts• Identify key strategic partners to drive market penetration in

areas outside our current expertise

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2018 Outlook

1 Company Overview

2 Who We Are



5 2018 Outlook


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Board of DirectorsGavin Rezos – Non Executive Chairman• Extensive international investment banking experience• Held CEO and Board positions in successful technology companies in

Australia, the UK, US & Singapore• Former Non Executive Director of Iluka Resources, Department 13, Metalysis

plc and former Investment Banking Director at HSBC

Craig Metz – Non Executive Director• Partner at Nelson, Mullins, Riley and Scarborough LLP with over 20 years experience in legislative and regulatory affairs• Served as Chief of Staff to the late Congressman Floyd Spence (R-SC) • Held staff positions in the United States Senate and House of Representatives • Appointed to senior positions in the Executive Branch of the Federal Government

Brigadier General Stephen Cheney – Non Executive Director• Former Inspector General of the Marine Corps and Commanding General of Parris Island Marine Base• Former Deputy Executive Secretary to U.S. Defense Secretary Dick Cheney under President George H.W. Bush• Sits on Secretary of State John Kerry’s Foreign Affairs Policy Board

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Congresswoman Karen Thurman, (D-FL) – Non Executive Director• Congresswoman Karen Thurman served in the United States House of Representatives from 1993 to 2003 • Prior to being elected to Congress in 1992, Thurman served in the Florida State Senate for 10 years• She obtained her bachelor's degree in education from the University of Florida

Executive ManagementDirk Van Hyning - Chief Executive OfficerDr. Van Hyning received his BS in Chemical Engineering from North Carolina State University before receiving his MS and Ph.D. in Chemical Engineering from The University of Illinois at Urban-Champaign. Dr. Van Hyning has extensive experience in product development and scale-up, and previously worked at Milliken.

Robert Brookins - Vice President of Research and Product DevelopmentDr. Robert (Bob) Brookins- Ph.D., M.A.E. B.A. B.Sc is Vice President of Research and Product Development. Dr. Brookins has experience in organic synthesis, materials chemistry, and chem/bio decontamination. He received his Ph.D. from the University of Florida in the areas of synthesis and characterization of conjugated poly-electrolytes and polymers with an emphasis on developing new polymerization methods. Upon completion of his Ph.D., he worked at the US Air Force Research Laboratory at Tyndall AFB, FL where he developed decontamination methods for chemical and biological threats and developed novel synthetic routes for reactive and functional surfaces.

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Aaron Krech - Chief Financial OfficerMr. Krech serves as the Chief Financial Officer at Alexium International Group Limited. Mr. Krech has previous experience in corporate treasury analysis and risk management at Blue Cross and Blue Shield. He has earned a BA in Accounting and MBA in International Finance from the Darla Moore School of Business at the University of South Carolina.

Scott Hunter - Vice President of Sales and MarketingMr. Hunter holds a Bachelor of Science in Chemistry from the University of Dayton in Ohio. He possesses over 20 years’ experience in solution sales and leadership within the specialty chemical field. Mr. Hunter has a successful track record within both Fortune 500 and mid-cap privately held organizations. Mr. Hunter is a versatile leader who is passionate about identifying root-barriers impeding success while establishing strategic processes, partnerships, and innovative approaches to unlock growth within companies.

November 2017 Asia/Australia Investor Roadshow Presentation

Contact:[email protected]

U.S.: +1.864.254.9923

mailto:[email protected]

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