Calix Ltd. · ASX:CXL
Calix — Merger or Acquisition (September 2019)
39 slides from Calix's merger presentation, Sep 27, 2019
Slide 1: Acquisition and Capital Raising Presentation
Acquisition and Capital Raising Presentation September 2019 1
Slide 2: Important disclaimer
Important disclaimer Summary information Any shares to be offered and sold in the Offer may not be offered and sold to, directly or indirectly, any person in the United States or any person that is, or is acting for the account or benefit of, a U.S. Person except pursuant to an exemption from, or in
Slide 3: Executive summary
Executive summary Acquisition Strategic Capital of IER Rationale Raising • Calix has entered into an agreement to acquire 100% of • Accelerates US market entry: from 2 customers to • Unconditional placement to sophisticated and professional Inland Environmental Resources (“IER”, the “Acquisition”; 8
Slide 4: Transformational acquisition impact
Transformational acquisition impact POST TRANSACTION Revenue(1),(2) A$m 13.9 13.4 27.3 96% EBITDA(2) A$m 0.5 1.1 1.6 220% Operating Cashflow(2) A$m 0.7 1.0 1.7 243% No. Customers 75 84 159 112% No. US States Penetrated(3) 2 9 11 450% No. Facilities Globally 3 4 7 133% No. Staff 40 16 56
Slide 5: Calix investment highlights
Calix investment highlights Proven Strong Penetrating Highly Acquisition that Experienced platform industry large global scalable accelerates US management technology tailwinds markets operations market entry team • Patent-protected • Strong focus on CO2 • Large multinational, • Vertically integrate
Slide 6: Complete value chain
Complete value chain CALIX IS VERTICALLY INTEGRATED, OWNING THE INPUT AND PROPRIETARY TECHNOLOGY THAT MANUFACTURERS MULTIPLE INDUSTRIAL PRODUCTS… Calix MgCO3 “CFC” Calcination Satellite Hydration, Mine, Australia & CO2 Separation (close to customer) JORC proven and probable Patented Patented All bas
Slide 7: Calix's MHL is unique and addresses multiple verticals
Calix’s MHL is unique…and addresses multiple verticals WATER AND A $36.7B(1) MARKET WASTE WATER Sewer odour and fat control, increase biogas production, asset protection… Rotten Egg gas Fatbergs Biogas Phosphates / Heavy PROBLEM metals discharge MARKET RESPONSE Toxic chemicals Wasted Emergency Energ
Slide 8: Calix's MHL is unique and addresses multiple verticals
Calix’s MHL is unique…and addresses multiple verticals FARMED PRAWNS FRESHWATER LAKES AQUACULTURE & FRESH WATER A $1.5b(1) MARKET Market opportunity TBD REMEDIATION AQUA-Cal+ continues push into Asian prawn farming… P and N run- Blue Green Algae Fish Kills Rapid Growth Disease Sustainability off PRO
Slide 9: Calix's MHL is unique and addresses multiple verticals
Calix’s MHL is unique…and addresses multiple verticals CROP PROTECTION BOOSTER-Mag commencing commercialisation… A $9.8b(1) MARKET PROBLEM • Increased Ag Demand • Increased pesticide restrictions • Increased Pesticide Development Costs • Increased Investment in ag tech MARKET RESPONSE • Global mega-
Slide 10: Calix's technology addresses industrial CO2 emissions
Calix’s technology is being developed to address industrial CO2 emissions CO2 MITIGATION FOR LIME AND CEMENT A $10.8b(1) MARKET INDUSTRIES • Cement and Lime largest industrial CO2 emitter • EU ETC cost of emission keeps rising…. PROBLEM • Increasing interest and investment in CO2 technology • Heidel
Slide 11: New BATMn Reactor – Bacchus Marsh
Calix’s technology is also being developed to make advanced battery materials ADVANCED BATTERIES A $6.5b(1) MARKET New “BATMn” Reactor – Bacchus Marsh PROBLEM • Slow charge / discharge • High cost • Low recyclability • “Cobalt cliff” MARKET RESPONSE • High R&D activity – porous nano materials • New
Slide 12: Acquisition Overview: Inland Environmental Resources Inc. (IER)
ACQUISITION OVERVIEW Inland Environmental Resources Inc. (IER) 12
Slide 13: Calix Australian operations
Calix Australian operations CALIX KNOWS HOW TO MAKE STABLE MAGNESIUM HYDROXIDE LIQUID (MHL)…. Myrtle Springs mine - SA 25kTpa Reactor – Bacchus Marsh Satellite Hydration “just add water” CALIX’S PATENTED MHL PROCESS PRODUCES VERY STABLE MHL FROM SMALL, CLOSE- TO-CUSTOMER FACILITIES Magnesium Carbona
Slide 14: Strategic rationale
Strategic rationale Calix’s stable MHL is being used to open new markets… A. Establish performance via paid trials B. Establish volume foot- hold C. Establish local MHL plant, deliver savings in logistics (avoid shipping water!) 14
Slide 15: Strategic rationale
Strategic rationale IN THE US – THEY CANNOT MAKE MHL THAT CAN TRAVEL LONG DISTANCES OR LAST FOR MONTHS… Calix MHL is EXPERIMENT stable and Calix MHL useable over Sent to US long distances / times Container sent to US… …poured into a cup – still in good suspension US MHL is unstable and not EXPERIMEN
Slide 16: Strategic rationale
Strategic rationale IN THE US – MHL MARKETS ARE THEREFORE CONCENTRATED AROUND A FEW MANUFACTURING FACILITIES… MHL stability is a key issue in the US: markets are typically defined by a 150km to 200km radius around manufacturing facilities, into large bulk / frequent refill dosing facilities. There a
Slide 17: IER overview
IER overview IER1 has established a steady, cash positive business around its existing PRO FORMA REVENUE PERFORMANCE manufacturing facilities… (March year-end US$’000’s) A$13.4m (3) $10m 8.9 9.4 • Founded in 1997 IER is a Magnesium Hydroxide Liquid (MHL) business servicing 7.6 7.7 the Pacific North
Slide 18: Locations – Pacific North West
Locations – Pacific North West CENTRALIA SALES REGION ADMINISTRATION PASCO PLANT • Land leased, buildings and improvements CENTRALIA PLANT owned by IER • Multiple storage and • Land and buildings leased from Port of batching tanks Centralia • Multiple trucks and • Multiple storage and batching tanks
Slide 19: Locations – Mid West
Locations – Mid West MUSCATINE PLANT BIG SOO PLANT As per Big Soo Used to blend their own MHL material – are now supplied a finished product by rail from the East • Land and buildings leased • Multiple storage and batching tanks • Multiple trucks and barrels, pick-ups and trailers – all owned by IER
Slide 20: Commercial synergies
Commercial synergies • IER targets users of Caustic Soda (NaOH) in their wastewater treatment - value proposition for replacement with MHL is cost and safety 1 Market synergies • Calix targets Municipals for sewer odour control, phosphate removal and fats/oils/grease (FOG) control • Markets are addi
Slide 21: Acquisition Planning and Outlook
ACQUISITION PLANNING AND OUTLOOK 21
Slide 22: Overview – IER acquisition
Overview – IER acquisition • Calix has entered into an agreement to acquire 100% of IER, for total upfront cash consideration of A$6.5m and deferred contingent consideration of A$2.9m, subject to certain conditions(1). • Vendor deferred, contingent consideration: ‒ IER Chairman Dick Handley will rec
Slide 23: Acquisition funding and terms
Acquisition funding and terms Funding and equity • Upfront Acquisition consideration and transaction costs, as well as escrowed earn-outs at 1, 2 and 4 years, and integration and market expansion costs, funded by: raising ‒ A$12.0 million via unconditional placement of approximately 17.1 million New
Slide 24: Upcoming newsflow & catalysts next 12 months
Upcoming newsflow & catalysts next 12 months • Begin selling MHL into new customers / states via newly acquired IER. Material customer wins to be announced WASTEWATER • European biogas market entry – successful trials leading to first orders • SE Asia biogas – expansion from two customers via more s
Slide 25: Details of the Offer
DETAILS OF THE OFFER 25
Slide 26: Details of the offer
Details of the offer • Unconditional placement to sophisticated and professional investors at A$0.70 per share to raise up to A$12.0 million ‒ Approximately 17.1 million New Shares will be issued under the Offer Offer size and structure • Share Purchase Plan (SPP) to existing eligible shareholders i
Slide 27: Timetable
Timetable Placement Date(1) Trading halt (pre market open) Wednesday, 25 September Placement bookbuild Wednesday, 25 September Announcement of Acquisition and Placement results and trading halt lifted Friday, 27 September Settlement of Placement Thursday, 3 October Allotment and trading of New Share
Slide 28: Key Risks
KEY RISKS 28
Slide 29: Specific investment risks
Specific investment risks • Calix undertook a due diligence process in respect of IER, which relied mostly on the review of financial and other information provided by the Vendors. While Calix considers the due diligence process undertaken to be appropriate, Calix cannot provide assurance that the d
Slide 30: Specific investment risks
Specific investment risks • Calix’s and IER’s products and applications compete in each of its markets against alternative products and solutions. There is no guarantee that:- • Calix’s and / or IER’s products and applications will not be superseded by superior products and applications, or achieve
Slide 31: Specific investment risks
Specific investment risks • The proposed Transaction is targeted at establishing a base for expansion into new markets, using the combined market and technical know-how of Calix and IER. There New market / acquisition is no guarantee that Calix and/or IER will be successful in acquiring sufficient c
Slide 32: Specific investment risks
Specific investment risks • Events may occur within or outside the US that could impact upon Calix and the value of the IER business. These events include but are not limited to acts of terrorism, an outbreak of international hostilities, fires, floods, earthquakes, labour strikes, civil wars, natur
Slide 33: General investment risks
General investment risks • As a business operating in both local and international markets, the Group’s revenue is subject to fluctuations in the global and domestic economy or country specific Global and local economic economic circumstances. Accordingly, adverse economic conditions overseas or in
Slide 34: Appendix
APPENDIX 34
Slide 35: FY19 pro-forma income statement
FY19 pro-forma income statement Year ended 30 June 2019 (A$m) Calix IER(4) Pro forma Calix Revenue(1) 3.3 13.4 16.7 Other revenue(2) 10.6 - 10.6 Total revenue 13.9 13.4 27.3 Cost of goods sold (2.0) (9.1) (11.1) Gross profit 11.9 4.3 16.2 Total operating expenses (11.5) (3.1) (14.6) EBITDA 0.5 1.1 1
Slide 36: FY19 pro-forma balance sheet
FY19 pro-forma balance sheet Year ended 30 June 2019 (A$m) Calix IER(1) Capital raise / Eliminations Pro forma Calix Cash and equivalents 4.4 0.7 2.0 7.1 Trade and other receivables 6.3 1.3 - 7.6 Contingent consideration - - 0.9 0.9 Inventories 0.3 0.6 - 0.9 Total current assets 11.0 2.5 2.9 16.5 In
Slide 37: Overview – Nano-Activity
Overview – “Nano-Activity” Other Industrial CO2 De- Carbonised Hydrogen Lime and Production with Cement CO2 Capture COMMERCIAL | PRE-COMMERCIAL | R&D • Safe, cheap production of “nano-active” materials • Direct separation of CO2 (when processing carbonates) • Other operational benefits (Capex, Opex)
Slide 38: Overview – Nano-Activity
Overview – “Nano-Activity” TEM of MgO (sonication C) nanoparticles STANDARD, LAB-SCALE NANO-MGO has reported surface areas of 100 to 200 m2/gm and costs $000’s / kg It is being developed for anti-bacterial / fungal, anti-chemical warfare agent, numerous catalytic, 3D printing and advanced battery de
Slide 39: Qcalix
Qcalix