Pyxus International, Inc. · OTC:PYYX
Pyxus International — Investor Day (September 2018)
103 slides from Pyxus International's investor day presentation, Sep 14, 2018
Slide 1: Slide 1
Slide 2: Legal Disclosures: Forward-Looking Statements
Legal Disclosures Forward-Looking Statements This presentation may include “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations of future events. Such statements may include, but are not limited to, statem
Slide 3: Legal Disclosures: Non-GAAP Information
Legal Disclosures Non-GAAP Information Earnings before interest, taxes, depreciation and amortization (“EBITDA”) adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) and Adjusted Net Debt are not measures of results of operations or financial condition under ge
Slide 4: Legal Disclosures: Separate Legal Entities
Legal Disclosures Separate Legal Entities Pyxus International, Inc. owns a number of direct and indirect subsidiaries and investments in joint ventures and other companies. From time to time, we may refer individually or collectively to Pyxus and one or more of our subsidiaries, joint ventures or in
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Slide 6: Global Leader
Global Leader Proven success over 145 years in the agricultural industry Pyxus’ global footprint, with agricultural products purchased in more than 35 countries and shipped to approximately 90 countries, has helped effectively compete, service customers and meet their requirements of sustainable sup
Slide 7: Headquarters: Research Triangle Park, North Carolina
Headquarters Research Triangle Park, North Carolina 8,998 PYX 9.0M $1.9B EMPLOYEES1 NYSE TICKER SHARES OUTSTANDING 2018 REVENUES (1) Including seasonal employees 8
Slide 8: Magic Beans Video
VIDEO MAGIC BEANS VIDEO 9
Slide 9: Commitment to Farmers
Commitment to Farmers 01 02 03 04 Agronomy training Income diversification and education for Sustainable crop Higher yield, through multiple 300,000+ farmer production higher quality crops crops relationships 10
Slide 10: Science & Data-Driven Culture
Science & Data-Driven Culture 11
Slide 11: Our Transformation
Our Transformation
Slide 12: Combustible Tobacco Trends & Transformation
Combustible Tobacco Trends & Transformation 425 6,000 Tobacco Trends 5,500 400 Green metric tons Dry metric tons 5,000 375 4,500 350 4,000 325 3,500 300 3,000 2013 2014 2015 2016 2017 2018 2019 2020 2021 AOI Volume¹ 422 424 378 382 381 383 WW Volume² 5,725 5,657 5,348 5,179 5,062 4,940 4,831 4,725 4
Slide 13: Combustible Tobacco Trends & Transformation
Combustible Tobacco Trends & Transformation FY23 Adj. EBITDA Value-Added FY18 Adj. EBITDA1 Agricultural $170M Products (In FY18 incl. Global in Tobacco) Specialty Products 3% Tobacco Global Specialty Products Tobacco 97% 1Adj. EBITDA is not a measure of results of operations under U.S. GAAP in the U
Slide 14: We believe everything we do is to transform people's lives
NE ORR WE BELIEVE EVERYTHING WE DO IS TO TRANSFORM PEOPLE’S LIVES SO THAT TOGETHER WE CAN GROW A BETTER WORLD TO W 15
Slide 15: Strategy
Strategy Trusted provider of responsibly produced, independently verified, sustainable and traceable agricultural products, ingredients and services to businesses and customers. Strengthen & Build With Reimagine our Foundation Enhance The Leaf Business Consumer-Driven Products Become Purpose Driven
Slide 16: Pyxus
/\ PYXUS
Slide 17: A Look Back at the Past 18 Months
A Look Back at the Past 18 Months Mar ‘17 Apr ‘17 Aug ‘17 Aug ‘17 Oct ‘17 Dec ‘17 Purpose New Idea Finalized WHY 40% share Internal 40% Share Exploration Exploration Story closed Launch Closed EVERYTHING The Start WE DO IS TO TM TRANSFORM PEOPLE’S TM LIVES SO THAT of our Journey TOGETHER WE CAN GROW
Slide 18: Agronomy and traceability technology for the win
Agronomy and traceability technology for the win. Agronomy is just one aspect of our company. It’s when you combine our agronomy skills with our traceability technology that you see Pyxus’ true competitive advantage.
Slide 19: SENTRI Video
SENTRI VIDEO VIDEO
Slide 20: Traceability
Traceability
Slide 21: SENTRI: Branding our Track and Trace platform
SENTRI SM Branding our Track and Trace platform SM Derived from sentry, meaning guard or protector, and a stamp of approval. SENTRISM provides verifiable, accurate and comprehensive knowledge on our products and methods, from source to customer, in order to ensure confidence-inspiring product integr
Slide 22: The CROP Journey Begins
- TAN Thé CROP Journey Begins - << « +
Slide 23: SENTRI: Source to Market Assurance
SENTRI SM Our experts — our people Agronomy, Product Specialty, Quality Assurance, Information Technology, Manufacturing & Logistics SM SOURCE CUSTOMER Grower/ Raw Practices Environment Labor Procurement Quality Consumption Controls Products Source Material Source to Market Assurance Global Network
Slide 24: Looking Ahead
SM Looking Ahead 01 02 03 Building a consumer Strengthening Creating a retailer facing interface so capabilities for B2B interface to support customers can learn customers to support product promotion about their products their own product differentiation 25
Slide 25: SENTRI Future Innovation
SENTRI SM SM Future Innovation TM TM TM TM For demonstration purposes only. 26
Slide 26: Global Specialty Products
Global Specialty Products
Slide 27: GSP Video
GSP VIDEO VIDEO 28
Slide 28: Enter New Categories
Strengthen & Build with Consumer-Driven Products Enter New Categories Extend agricultural and ingredients traceability expertise to disrupt fast-growing markets Pyxus Enabling Competencies: Agronomy, SENTRI SM, Global Footprint, Compliance, Science and Corporate Social Responsibility 29
Slide 29: Build CPG Capabilities
Strengthen & Build with Consumer-Driven Products Build CPG Capabilities Train, Recruit, Partner & Acquire TM 30
Slide 30: Expand Distribution Capabilities
Strengthen & Build with Consumer-Driven Products Expand Distribution Capabilities Channels, Route-to-Market 31
Slide 31: Develop a Stable of Brands
Strengthen & Build with Consumer-Driven Products Develop a Stable of Brands Acquire, Launch, Rebrand SM TM ® TM TM TM ® 32
Slide 32: New Categories
New Categories Legal Medicinal Cannabis Industrial Hemp E-Liquids 33
Slide 33: Large, Rapidly Growing Categories
Large, Rapidly Growing Categories ($ in USD) UNITED STATES CANADA GLOBAL 2018 2023 2018 2023 2018 2023 Cannabis -- -- ~$1.4B (2) ~$5.8B (2) Legal Market ~$9.8B (1) ~$20.1B (1) ~$5.6B (2) ~$1.3B (2) -- -- Illicit / Unlawful Cannabidiol ~$0.3B ~$1.5B <$0.1B ~$0.5B ~$0.5B ~$2.9B 2018 2022 2018 2022 201
Slide 34: New Capabilities, Core Capabilities
New Capabilities Core Capabilities Agronomy SENTRI SM Partnerships Recruiting Global Footprint Compliance Science Corporate Social Responsibility Training Research 35
Slide 35: The Consumers
The Consumers 36
Slide 36: Growth Driven by Market Expansion
Growth Driven by Market Expansion Usage Expected to Double More Consumers Open to CBD Usage Than Current Consumers ~2.5mm Open to Cannabis ~4.6mm ~20-25mm Open to CBD ~2.1mm ~10-13mm Consumers Today Consumers Today Pyxus Companies do not participate in markets where cannabis is illegal. Pyxus compan
Slide 37: Key Consumer Considerations & Barriers
Key Consumer Considerations & Barriers 1 Family / Friend Recommendation Flavors Top Product Taste Taste Taste Considerations Ingredients / Transparency Ingredients / Transparency Legality Top Barriers Lack of Information / Transparency Lack of Information / Transparency Lack of Information / Transpa
Slide 38: CBD Purchase Locations
CBD Purchase Locations Dispensary Online Smoke / Head Shop Health Food Store Vape Shop Pyxus companies participate in industrial hemp in the U.S. under an authorized state pilot program. Source: Commissioned primary research; IPSOS, May 2018 Profile of category usage, purchase dynamics, usage habits
Slide 39: E-Liquid Purchase Locations
E-Liquid Purchase Locations Vape Shop Online Smoke / Head Shop Convenience Store Source: Commissioned primary research; IPSOS, May 2018 Profile of category usage, purchase dynamics, usage habits, consumer attitudes and perceptions and demographics. Question: “Where did you make your last purchase?”
Slide 40: Strategy
Strategy Strengthen & Build With Consumer-Driven Products Enter New Categories Build CPG Capabilities Expand Distribution Capabilities Develop a Stable of Brands TM TM ® TM TM Leverage Core Capabilities 41
Slide 41: GSP Target Adjusted EBITDA Margin
GSP Target Adjusted EBITDA Margin Adjusted FY2019 Target Future Targets 09/2018 TM EBITDA Margin 20-30% We expect margin expansion as we continue to scale the brands 04/2018 of GSP revenue TM ® 2014 2015 2016 2017 2018 2019 03/2014 08/2017 10/2018 TM TM ® 42
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Slide 43: E-Liquid Video
E-LIQUID VIDEO VIDEO 44
Slide 44: E-Liquid Category Growth
E-Liquid Category Growth Millions of People Cigarette Smokers Open to Vaping ~25mm users 30 28% of U.S. Smokers 17% of Canadian Smokers 25 Barriers include a lack of knowledge, 20 ~11-12mm E-Liquid Consumers a lack of 15 information and a preference for 10 Potential to Double Category Usage Sourcing
Slide 45: Vertically Integrated E-Liquid Portfolio
Vertically Integrated E-Liquid Portfolio TM ® TM ® Flavors from Scratch Global Distribution Global Distribution Continuous Innovation Best-in-Class Processes Loyal Consumers New Consumers Predicate Library Transparency eCommerce eCommerce B to C B to C B to C B to B B to B 50% Equity 40% Equity 51%
Slide 46: Purilum: The Future of Flavor
® Purilum: The Future of Flavor 19,000 Square Foot Facility People Flavor & Science Expertise Process Built from Molecular Level Food Grade Ingredients Product Registered Manufacturer with FDA 47
Slide 47: PyriSalt
TM PyriSalt TM High Quality Carefully Crafted Scientifically Formulated 48
Slide 48: NicRiver
TM NicRiver TM 45,000 Square Foot Facility E-Liquid Ingredients Nicotine, PG, VG, Flavors Contract Packing E-Liquid Brands eCommerce Strong Customer Base 49
Slide 49: Humble
® Humble ® Established Consumer Brand Global Distribution Vape Shops and eCommerce 50
Slide 50: Bantam
TM Bantam TM High Quality Flavor Leadership Scientific Formulation Transparency 51
Slide 51: Consumer Segmentation
Consumer Segmentation ® TM Taste Explorers Virtuous Hedonists Explore new flavors and innovation Social animals First to try new things Indulge in guilty pleasures Willing to spend more for quality View vaping as more acceptable than smoking Content Spiritualists Frugal Families Local Purists Inform
Slide 52: Vertically Integrated E-Liquid Portfolio
Vertically Integrated E-Liquid Portfolio TM TM ® ®
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Slide 54: Hemp Video
HEMPVIDEO VIDEO 55
Slide 55: Industrial Hemp Category Growth
Industrial Hemp Category Growth Potential CBD Consumers ~37M Potential consumers (millions of people) 40 10% of U.S. 35 6% of Canadians 30 Barriers include a 25 lack of information ~11-12mm CBD Users and transparency. 20 15 Potential to Triple 10 Category Consumers 5 0 Pyxus Companies participate in
Slide 56: Criticality
TM Criticality TM Extraction Purification Formulation ± 200 acres FY2019 55,000+ square foot facility in Wilson, NC Picture of partner production facility in Pittsburgh. Construction of similar facility in Wilson, NC nearly complete with opening expected in October 2018.
Slide 57: Korent
Korent TM Natural Hemp-Derived CBD Reliable and Verifiable Dosage Quality Ingredients TM Pyxus Companies participate in industrial hemp in Source: Commissioned primary research; IPSOS, May 2018 Profile of category the U.S. under an authorized state pilot program. usage, purchase dynamics, usage habi
Slide 58: Product Quality Assurance
Product Quality Assurance Picture of partner production facility in Pittsburgh. SM SENTRI SM 59
Slide 59: Pyxus
JN PYXUS
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Slide 61: Cannabis Video
CANNABIS VIDEOVIDEO 62
Slide 62: Legal Medicinal Cannabis Category Growth
Legal Medicinal Cannabis Category Growth ~2mm Consumers Open to Consumption Est. 4-5mm Potential Consumers In millions of people 16% Incidence in Canada 7% Incidence in Canada Barriers include legality, lack of information and ~2-3mm Consumers 8% Incidence in Canada transparency. Pyxus Companies do
Slide 63: FIGR Operations
FIGR Operations TM TM Norfolk East 64
Slide 64: FIGR Drone Flyover Video
FIGR DRONE FLYOVER VIDEO VIDEO
Slide 65: FIGR Advantage
FIGR Advantage Product Process People
Slide 66: Flowers, Oils, Pre-Rolls
TM Flowers Oils • THC: 9% • THC: 17.7% • THC: 20.0% • CBD: 11% • CBD: <0.07% • CBD: <0.07% • Indica • Hybrid • Indica Terpenes Terpenes Terpenes Pre-Rolls • Myrene: 28% • Myrene: 40% • Myrene: 14% • Limonene: 12% • Pinene: 25% • Limonene: 48% • Pinene: 34% • Caryophyllene: 12% • Caryophyllene: 26% 6
Slide 67: Craft, Artisan, Master
TM TM TM TM TM Artisan Craft Master Signature • Hand Crafted, Sorted & • All Artisan Benefits • All Craft Benefits • All Master Benefits Trimmed • Only Whole Buds • Hand Burped for Ideal • Exclusive to Maritimes • Signature Curing Aging Process • Higher THC Content • Fresh from the Plant • Hand Sele
Slide 68: Artisan, Craft, Master
TM TM TM Artisan Craft Pre Roll TM Loose Flower TM Master Oil 69
Slide 69: Pyxus Companies do not participate in markets where their products are illegal
TM TM Pyxus Companies do not participate in markets where their products are illegal. 70
Slide 70: Strategy
Strategy Strengthen & Build With Consumer-Driven Products Enter New Categories Build CPG Capabilities Expand Distribution Capabilities Develop a Stable of Brands TM TM ® TM TM Leverage Core Capabilities 71
Slide 71: Value-Added Agricultural Products is not a new idea for us
Value-Added Agricultural Products is not a new idea for us. Change is already happening.
Slide 72: Alternative Crops
Alternative Crops 300,000+ farmer relationships in 30 countries spanning five continents 1,000+ field technicians 1 million+ farm visits conducted in FY18 Visibility into production practices through SENTRI SM These farmers already produce more non- tobacco crops than tobacco (by weight)
Slide 73: Alternative Crops
Alternative Crops 74
Slide 74: Transforming Lives
Transforming Lives Malawian farmer began growing in 2006. Since contracting with Alliance One in 2010: ✓ Built a solar powered home ✓ Bought a diesel maize mill ✓ Secured a plot and constructed another home at Mzimba Boma ✓ Bought an electric maize mill THIS FARMER HAS ACHIEVED FINANCIAL AND FOOD SE
Slide 75: Oasis of Prosperity
Input Oasis of Prosperity Supply Central WATER SOURCE—SOLAR BOREHOLE/WEIR/DAM 10 taps, 10 x 0.5 HA DRIP UNITS Capital Water Marketing Development Hubs Extension Variances will exist between clusters as some might use petrol pumps rather than solar and others may not include the piped water to homest
Slide 76: Improving water access
Improving water access Village Earth Dams Boreholes Shallow Wells Irrigated Crops Program Our WASH programs in Malawi bring water relief to contracted farmers and their communities, resulting in: • Significantly improved yields Over 125,000 people positively • Reduced risk of child and forced labor
Slide 77: Our Only Limit is Our Creativity
Our Only Limit is Our Creativity Continuing to diversify Exploring relationships with new partners Expanding our existing capabilities within agronomy and SENTRI SM
Slide 78: Tobacco Leaf
Tobacco Leaf
Slide 79: Alliance One Video
Alliance One VIDEO Play AOB 2017 institutional video
Slide 80: Alliance One Brand Remains with Tobacco
Alliance One Brand Remains with Tobacco • Market leader in tobacco traceability & IS • Enhanced farm management • Small farmer network • Sustainability commitment • Innovative, entrepreneurial, nimble, can-do HONORING OUR PAST AS WE mindset PROUDLY PURSUE OUR FUTURE. • Customer service - reliable, c
Slide 81: Enhance The Leaf Business
Enhance The Leaf Business 01 02 03 04 Evolve the Leaf Business Continue to Improve Ops Move Up the Value Chain Expand the Leaf Become the partner of Factory consolidations, Expand cut rag operations Business trusted full traceable reverse integration, Attract new businesses and tobacco supply with r
Slide 82: Strong Relationship With China
Strong Relationship With China China Tobacco International’s first joint venture in Leaf Business China is the biggest combustible tobacco market in the world and continues to grow Well-positioned to continue to expand our market share
Slide 83: Sustainable Tobacco Production
Sustainable Tobacco Production Planted 163 million+ trees worldwide Trained 100% of contracted growers and monitored for Agricultural Labor Practices program compliance Continuous third-party audits of sustainable tobacco production programs We are on track to achieve our 2020 sustainability targets
Slide 84: Ready for Future Regulation
Ready for Future Regulation Patented low nicotine seeds Natural breeding, non-GMO Options to comply with potential future regulation intended to reduce nicotine levels in combustible products
Slide 85: Financials
Financials
Slide 86: Improved Sales, Gross Profit, Adj. EBITDA
Improved Sales, Gross Profit, Adj. EBITDA ($ in millions) Fiscal Year 2018 Q1 FY 2019 Revenue 7.7% to $1,846.0 Revenue 5.1% to $291.0 Gross profit 13.5% to $246.2 Gross profit 44.8% to $41.4 • Gross profit as a percentage of sales • Gross profit as a percentage of sales to 13.3% from 12.7% to 14.2%
Slide 87: Consistent Volume and Margin
Consistent Volume and Margin Average full-service selling price / kg Full-service volume (millions of kg) Consistent Volume 2016– LTM 6/30/18 $4.78 392 $4.60 $4.55 382 381 383 $4.28 FY2016 FY2017 FY2018 LTM 6/30/18 FY2016 FY2017 FY2018 LTM 6/30/18 Source: Company SEC filings 88
Slide 88: Solid Financial Performance
Solid Financial Performance Revenue(1) Adjusted EBITDA(2) % of Sales $1,905 $1,860 $1,846 $1,715 10.4% 8.7% 9.2% 9.6% $198 $179 $170 $149 (2) FY2016 FY2017 FY2018 LTM 6/30/18 FY2016 FY2017 FY2018 LTM 6/30/18 1Includes processing and other revenues 2LTM revenue and Adjusted EBITDA are not a measure o
Slide 89: Leverage and Capital Expenditures
Leverage and Capital Expenditures Adjusted Net Debt (1) Adjusted Net Leverage (1) Capital Expenditures(2) $1,103 CapEx as % of sales $1,083 6.4x 6.4x $956 0.9% 0.8% 1.3% 5.6x $23 $17 $14 $627 $656 3.9x $480 3.2x 3.2x FY 2016 FY 2017 FY 2018 FY 2016 FY 2017 FY 2018 FY 2016 FY 2017 FY 2018 Total Adj.
Slide 90: Investing
Investing Diversification of Strategy: • Expand to multiple agricultural products • Capitalize on growth sectors Pyxus has invested • Extend go-to-market strategy to include business to consumer in diversification Utilize knowledge of large-scale, global operations and expansion for Increase market
Slide 91: E-Liquids
E-Liquids Current1 Target (FY 2023) Revenue $14.7 Adjusted EBITDA $6.7 Note: Metrics measured at the end of each Fiscal Year. 1All amounts in millions of US dollars. 92
Slide 92: Legal Cannabis
Legal Cannabis (Dollar Amounts in CAD$) Current 2023 # Harvests/Year 5-6 5-6 Total Sq. Feet(1) 44,000 1,060,202 Pyxus Flowering Sq. Feet(2) 10,560 516,477 Companies do not participate Avg. Grams / Flowering Sq. Foot(2) 40.4 in markets where cannabis $ Per Gram Metrics is illegal. Price to Retail $6.
Slide 93: Industrial Hemp
Industrial Hemp Current Crop Target (FY 2023) # Harvests/Year 1 1 Total Acreage ± 200 Weighted Avg. Price/kg1 $8,366 (Dollars in USD) Avg. kg/Acre CBD ~32 Similar Criticality participates in industrial hemp in the U.S. under an authorized state pilot program; estimates assume program continuation. N
Slide 94: Guidance
Guidance We believe everything we FY19 revenue and adjusted EBITDA expected to improve vs. FY18 do is to transform • Revenue: $1.950 billion to $2.050 people’s lives so that billion together we can grow a • Adjusted EBITDA: $170 million to $190 better world million 95
Slide 95: Pyxus
/\ PYXUS
Slide 96: Question and Answer Session
Question and Answer Session
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Slide 98: Appendix
Appendix 99
Slide 99: Condensed Consolidated Statements of Operations
CONDENSED Statement CONSOLIDATED STATEMENTS of Operations OF OPERATIONS Information Twelve Months Ended Three Months Ended (1) March 31, LTM June 30, (in thousands, except per share data) 2016 2017 2018 June 30, 2018 2018 2017 Sales and other operating revenues $1,904,592 $1,714,750 $1,845,966 $1,85
Slide 100: Adjusted EBITDA Reconciliation
Adjusted Adjusted EBITDA EBITDA Reconciliation Reconciliation Twelve Months Ended March 31, LTM(8) Three Months Ended (in thousands) 2016 2017 2018 June 30, 2018 June 30, 2018 June 30, 2017 U.S. GAAP - Net Income (loss) $65,532 ($62,928) $52,436 $84,220 ($759) ($32,543) Plus: Interest expense(2) 121
Slide 101: Adjusted EBITDA Reconciliation (footnotes)
Adjusted EBITDA Adjusted Reconciliation EBITDA (footnotes) Reconciliation (footnotes) (1) Earnings before interest, taxes, depreciation and amortization (“EBITDA”) and adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) are not measures of results of operation
Slide 102: Adjusted Net Debt and Leverage
AdjustedAdjusted Net Debt and Leverage EBITDA Twelve Months Ended March 31, (in thousands) 2016(1) 2017 2018 Adjusted EBITDA $ 198,356 $ 148,862 $ 169,815 Total debt $ 1,386,559 $ 1,428,868 $ 1,347,584 (2) Less: Debt of reconsolidated subsidiary funded by affiliate 84,258 - - Total adjusted debt $ 1
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