Pyxus International, Inc. · OTC:PYYX
Pyxus International — Alliance One International — Investor Day (September 2018)
103 slides from Pyxus International's investor day presentation, Sep 12, 2018
Slide 1: Exhibit 99.01
Exhibit 99.01
Slide 2: Legal Disclosures: Forward-Looking Statements
Legal Disclosures 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, statements about future financial
Slide 3: Legal Disclosures: Non-GAAP Information
Legal Disclosures 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 generally accepted acco
Slide 4: Legal Disclosures: Separate Legal Entities
Legal Disclosures 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 investee companies as “we”
Slide 5: Slide 5
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 (1) Including seasonal employees $1.9B 2018 REVENUES 9.0M SHARES OUTSTANDING 8,998 EMPLOYEES1 PYX NYSE TICKER
Slide 8: Magic Beans Video
MAGIC BEANS VIDEO
Slide 9: Commitment to Farmers
Commitment to Farmers Higher yield, higher quality crops Income diversification through multiple crops Sustainable crop production Agronomy training and education for 300,000+ farmer relationships 01 02 03 04
Slide 10: Science & Data-Driven Culture
Science & Data-Driven Culture
Slide 11: Our Transformation
Our Transformation
Slide 12: Combustible Tobacco Trends & Transformation
Combustible Tobacco Trends & Transformation 1Company SEC filings 2 Euromonitor September 2018 Dry metric tons Green metric tons
Slide 13: Combustible Tobacco Trends & Transformation
1Adj. EBITDA is not a measure of results of operations under U.S. GAAP in the United States and should not be considered as an alternative to other U.S. GAAP measurements Note: Estimates assume continuation of North Carolina industrial hemp pilot program. Combustible Tobacco Trends & Transformation
Slide 14: Transform People's Lives Together
TO ONE ORROW WE BELIEVE EVERYTHING WE DO IS TO TRANSFORM PEOPLE'S LIVES SO THAT TOGETHER WE CAN GROW A BETTER WORLD
Slide 15: Reimagine our Foundation Strategy
Reimagine our Foundation Strategy Trusted provider of responsibly produced, independently verified, sustainable and traceable agricultural products, ingredients and services to businesses and customers. Enhance The Leaf Business Strengthen & Build With Consumer-Driven Products Evolve the Leaf Busine
Slide 16: Tan Pyxus
TAN PYXUS
Slide 17: A Look Back at the Past Months
A Look Back at the Past 18 Months The Start of our Journey Mar ‘17 Purpose Exploration Apr ‘17 New Idea Exploration Aug ‘17 Finalized WHY Story EVERYTHING WE DO IS TO TRANSFORM PEOPLE’S LIVES SO THAT TOGETHER WE CAN GROW A BETTER WORLD Oct ‘17 Internal Launch Dec ‘17 40% Share Closed Jan ‘18 FIGR ac
Slide 18: Agronomy and traceability technology
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. Agronomy and traceability technology for the win.
Slide 19: Video
VIDEO
Slide 20: Traceability
Traceability
Slide 21: Branding our Track and Trace platform: SENTRI
Branding our Track and Trace platform 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 integrity and quali
Slide 22: Crop Journey Begins
» Nt & : 4° ~ hé CROP Journey Begins poy ow Am SENTRI IF AY) Ss ae G
Slide 23: SENTRI Source to Market Assurance
Grower/ Source Raw Material Practices Environment Labor Procurement Quality Consumption Controls Products Source to Market Assurance Agronomy, Product Specialty, Quality Assurance, Information Technology, Manufacturing & Logistics SOURCE CUSTOMER Global Network of People, Process, and Technology — f
Slide 24: Looking Ahead
Looking Ahead 03 Creating a retailer interface to support product promotion Building a consumer facing interface so customers can learn about their products 01 Strengthening capabilities for B2B customers to support their own product differentiation 02 SM
Slide 25: SENTRI Future Innovation
SENTRI SM Future Innovation For demonstration purposes only. SM TM TM TM TM
Slide 26: Global Specialty Products
Global Specialty Products
Slide 27: Video
VIDEO
Slide 28: Extend traceability expertise to fast-growing markets
Extend agricultural and ingredients traceability expertise to disrupt fast-growing markets Strengthen & Build with Consumer-Driven Products Enter New Categories Pyxus Enabling Competencies: Agronomy, SENTRI SM, Global Footprint, Compliance, Science and Corporate Social Responsibility
Slide 29: Train, Recruit, Partner & Acquire
Train, Recruit, Partner & Acquire Strengthen & Build with Consumer-Driven Products Build CPG Capabilities TM
Slide 30: Channels, Route-to-Market
Channels, Route-to-Market Strengthen & Build with Consumer-Driven Products Expand Distribution Capabilities
Slide 31: Acquire, Launch, Rebrand
Acquire, Launch, Rebrand Strengthen & Build with Consumer-Driven Products Develop a Stable of Brands ® SM TM ® TM TM TM
Slide 32: New Categories
Legal Medicinal Cannabis New Categories Industrial Hemp E-Liquids
Slide 33: Large, Rapidly Growing Categories
Large, Rapidly Growing Categories ($ in USD) Pyxus Companies do not participate in markets where cannabis is illegal. Pyxus Companies participate in US CBD markets through an authorized industrial hemp pilot program. 2018 2023 2018 2023 2018 2023 ~$1.4B (2) ~$5.8B (2) ~$5.6B (2) ~$1.3B (2) -- -- ~$9
Slide 34: Core and New Capabilities
Agronomy SENTRI SM Global Footprint Compliance Science Corporate Social Responsibility Core Capabilities New Capabilities Partnerships Recruiting Training Research
Slide 35: The Consumers
The Consumers
Slide 36: Growth Driven by Market Expansion
Growth Driven by Market Expansion Pyxus Companies do not participate in markets where cannabis is illegal. 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 dy
Slide 37: Key Consumer Considerations & Barriers
Top Product Considerations Key Consumer Considerations & Barriers 1E-Liquid barriers based on current cigarette user responses only Source: Commissioned primary research; IPSOS, May 2018 Profile of category usage, purchase dynamics, usage habits, consumer attitudes and perceptions and demographics.
Slide 38: CBD Purchase Locations
Dispensary Health Food Store Vape Shop Online Smoke / Head Shop CBD Purchase Locations 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 purch
Slide 39: E-Liquid Purchase Locations
Vape Shop Convenience Store Online Smoke / Head Shop E-Liquid Purchase Locations 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 Leverage Core Capabilities Enter New Categories Build CPG Capabilities Expand Distribution Capabilities Develop a Stable of Brands ® TM TM TM TM
Slide 41: GSP Target Adjusted EBITDA Margin
GSP Target Adjusted EBITDA Margin 03/2014 TM ® TM ® TM TM 08/2017 04/2018 09/2018 10/2018 2014 2015 2016 2017 2018 2019 Future Targets We expect margin expansion as we continue to scale the brands FY2019 Target 20-30% of GSP revenue Adjusted EBITDA Margin
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Slide 43: E-Liquid Video
E-LIQUID VIDEO
Slide 44: E-Liquid Category Growth
E-Liquid Category Growth Millions of People Source: Commissioned primary research; IPSOS, May 2018 Profile of category usage, purchase dynamics, usage habits, consumer attitudes and perceptions and demographics. Current users defined as past 12-month usage. Potential consumers are “open to using in
Slide 45: Vertically Integrated E-Liquid Portfolio
Vertically Integrated E-Liquid Portfolio ® Flavors from Scratch TM eCommerce ® Loyal Consumers TM New Consumers Best-in-Class Processes Predicate Library B to B 50% Equity B to B 40% Equity B to C 51% Equity 100% Equity B to C eCommerce B to C Continuous Innovation Global Distribution Transparency G
Slide 46: 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 Purilum: The Future of Flavor ®
Slide 47: PyriSalt
High Quality Carefully Crafted Scientifically Formulated PyriSalt TM TM
Slide 48: NicRiver 45,000 Square Foot Facility
45,000 Square Foot Facility E-Liquid Ingredients Nicotine, PG, VG, Flavors Contract Packing E-Liquid Brands eCommerce Strong Customer Base NicRiver TM TM
Slide 49: Humble: Established Consumer Brand
Established Consumer Brand Global Distribution Vape Shops and eCommerce ® Humble ®
Slide 50: Bantam
High Quality Flavor Leadership Scientific Formulation Transparency TM Bantam TM
Slide 51: Consumer Segmentation
Consumer Segmentation Taste Explorers Virtuous Hedonists Frugal Families Informed Experiencers Content Spiritualists Local Purists TM ® Explore new flavors and innovation First to try new things Willing to spend more for quality Social animals Indulge in guilty pleasures View vaping as more acceptab
Slide 52: Vertically Integrated E-Liquid Portfolio
Vertically Integrated E-Liquid Portfolio ® TM ® TM
Slide 53: Slide 53
Slide 54: Video
VIDEO
Slide 55: Industrial Hemp Category Growth
~11-12mm CBD Users Potential to Triple Category Consumers Potential CBD Consumers 10% of U.S. (millions of people) Industrial Hemp Category Growth 6% of Canadians ~37M Potential consumers Barriers include a lack of information and transparency. Pyxus Companies participate in industrial hemp in the U
Slide 56: Extraction, Purification, Formulation: Wilson, NC Facility
Extraction Purification Formulation ± 200 acres FY2019 55,000+ square foot facility in Wilson, NC TM Criticality TM 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 Natural Hemp-Derived CBD
Source: Commissioned primary research; IPSOS, May 2018 Profile of category usage, purchase dynamics, usage habits, consumer attitudes and perceptions and demographics. Current users defined as past 12-month usage. “Since you began using CBD, how has your usage/ consumption of the following products
Slide 58: Product Quality Assurance
Product Quality Assurance SM SENTRI SM Picture of partner production facility in Pittsburgh.
Slide 59: Pyxus
I PYXUS
Slide 60: Slide 60
Slide 61: Cannabis Video
CANNABIS VIDEO
Slide 62: Legal Medicinal Cannabis Category Growth
Legal Medicinal Cannabis Category Growth Pyxus Companies do not participate in markets where cannabis is illegal. Source: Commissioned primary research; IPSOS, May 2018 Profile of category usage, purchase dynamics, usage habits, consumer attitudes and perceptions and demographics. Current users defi
Slide 63: FIGR Operations Norfolk East
FIGR Operations Norfolk East TM TM
Slide 64: FIGR drone flyover video
FIGR drone flyover video
Slide 65: FIGR Advantage: Product, Process, People
FIGR Advantage Product Process People
Slide 66: Flowers, Oils, Pre-Rolls
THC: 9% CBD: 11% Indica Terpenes Myrene: 28% Limonene: 12% Pinene: 34% THC: 17.7% CBD: <0.07% Hybrid Terpenes Myrene: 40% Pinene: 25% Caryophyllene: 12% THC: 20.0% CBD: <0.07% Indica Terpenes Myrene: 14% Limonene: 48% Caryophyllene: 26% Flowers Oils Pre-Rolls TM
Slide 67: Master, Craft, Artisan
Signature TM TM Hand Crafted, Sorted & Trimmed Signature Curing Process Best-in-Class QC Fully Traceable All Master Benefits Exclusive to Maritimes Fresh from the Plant Hand Trimmed & Made to Order All Craft Benefits Hand Burped for Ideal Aging Hand Selected Premium Buds All Artisan Benefits Only Wh
Slide 68: Master, Craft, Artisan Products
TM TM Master TM Craft TM Artisan TM Loose Flower Pre Roll Oil
Slide 69: TM TM 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.
Slide 70: Strategy
Strategy Strengthen & Build With Consumer-Driven Products Leverage Core Capabilities Enter New Categories Build CPG Capabilities Expand Distribution Capabilities Develop a Stable of Brands ® TM TM TM TM
Slide 71: Value-Added Agricultural Products
Value-Added Agricultural Products is not a new idea for us. Change is already happening.
Slide 72: Alternative Crops: farmer relationships and field technicians
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) Alternative Crops
Slide 73: Alternative Crops
Alternative Crops
Slide 74: Transforming Lives
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 SECURITY. Transforming Lives Malawian farmer began growing in 2006.
Slide 75: Oasis of Prosperity
Oasis of Prosperity Central WATER SOURCE—SOLAR BOREHOLE/WEIR/DAM 10 taps, 10 x 0.5 HA DRIP UNITS Variances will exist between clusters as some might use petrol pumps rather than solar and others may not include the piped water to homesteads. Input Supply Hubs Extension Marketing Capital Water Develo
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 Reduced risk of child and forced labor Increased crop diversification Over
Slide 77: Continuing to diversify
Continuing to diversify Exploring relationships with new partners Expanding our existing capabilities within agronomy and SENTRI SM Our Only Limit is Our Creativity
Slide 78: Tobacco Leaf
Tobacco Leaf
Slide 79: Alliance One institutional video
Alliance One Play AOB 2017 institutional video CANNABIS VIDEO
Slide 80: 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 mindset Customer service - reliable, consistent, open Alliance One Brand Remains with Tobacco HONORING OUR PAST AS WE PROUDLY PURSUE OUR FUTU
Slide 81: Enhance The Leaf Business
Enhance The Leaf Business 03 Evolve the Leaf Business Become the partner of trusted full traceable tobacco supply with integrity and service 01 Move Up the Value Chain Expand cut rag operations 02 04 Expand the Leaf Business Attract new businesses and gain market share Continue to Improve Ops Factor
Slide 82: 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 Strong Relationship With China
Slide 83: 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; many already achieved and res
Slide 84: 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 Ready for Future Regulation
Slide 85: Financials
Financials
Slide 86: Improved Sales, Gross Profit, Adj. EBITDA
Improved Sales, Gross Profit, Adj. EBITDA Revenue 5.1% to $291.0 Gross profit 44.8% to $41.4 Gross profit as a percentage of sales to 14.2% from 10.3% Operating income $4.7 Adj. LTM EBITDA1 22.3% to $179.2 Purchased and cancelled $10.9 in Q1 and an incremental $7.0 in July (aggregate $17.9) of senio
Slide 87: Consistent Volume and Margin
Source: Company SEC filings Average full-service selling price / kg Full-service volume (millions of kg) Consistent Volume 2016– LTM 6/30/18 Consistent Volume and Margin
Slide 88: Solid Financial Performance
1Includes processing and other revenues 2LTM revenue and Adjusted EBITDA are not a measure of results of operations under U.S. GAAP in the United States and should not be considered as alternatives to other U.S. GAAP measurements. See reconciliation tables in the appendix. Note: $ in millions; fisca
Slide 89: Leverage and Capital Expenditures
Leverage and Capital Expenditures Foreign seasonal lines of credit self-liquidate as inventory is sold Adj. Net Leverage after reducing by seasonal borrowings supported by committed inventory Total Adj. Debt less seasonal borrowings supported by committed inventory Capital Expenditures(2) Adjusted N
Slide 90: Investing Diversification of Strategy
Investing Diversification of Strategy: Expand to multiple agricultural products Capitalize on growth sectors Extend go-to-market strategy to include business to consumer Utilize knowledge of large-scale, global operations Increase market share and leadership position Continue to improve efficiencies
Slide 91: E-Liquids Current and Target (FY 2023)
Note: Metrics measured at the end of each Fiscal Year. 1All amounts in millions of US dollars. Current1 Target (FY 2023) Revenue $14.7 Adjusted EBITDA $6.7 E-Liquids
Slide 92: Legal Cannabis Current and 2023 Metrics
(Dollar Amounts in CAD$) Current 2023 # Harvests/Year 5-6 5-6 Total Sq. Feet(1) 44,000 1,060,202 Flowering Sq. Feet(2) 10,560 516,477 Avg. Grams / Flowering Sq. Foot(2) 40.4 $ Per Gram Metrics Price to Retail $6.56 COGS(3) $2.95 Non Marketing SG&A(4) $2.94 Marketing SG&A $1.89 Depreciation & Amortiz
Slide 93: Industrial Hemp Current and Target (FY 2023)
Current Crop Target (FY 2023) # Harvests/Year 1 1 Total Acreage ± 200 Weighted Avg. Price/kg1 $8,366 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. Notes: Acre measured at the end of
Slide 94: Guidance
Guidance We believe everything we do is to transform people’s lives so that together we can grow a better world FY19 revenue and adjusted EBITDA expected to improve vs. FY18 Revenue: $1.950 billion to $2.050 billion Adjusted EBITDA: $170 million to $190 million
Slide 95: Tan Pyxus
TAN PYXUS
Slide 96: Question and Answer Session
Question and Answer Session
Slide 97: Slide 97
Slide 98: Appendix
ae Appendix
Slide 99: Statement of Operations Information
Statement of Operations Information CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Twelve Months Ended Three Months Ended March 31, LTM(1) 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 $1,859
Slide 100: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation Adjusted EBITDA Reconciliation Twelve Months Ended March 31, LTM(8) Three Months Ended Check LTM (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 $84,220 Plus: Inter
Slide 101: Adjusted EBITDA Reconciliation (footnotes)
Adjusted EBITDA Reconciliation (footnotes) Adjusted EBITDA Reconciliation Twelve Months Ended March 31, LTM(8) Three Months Ended Check LTM (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 $84,220
Slide 102: Adjusted Net Debt and Leverage
Adjusted Net Debt and Leverage Adjusted EBITDA Twelve Months Ended March 31, LTM (in thousands) 2016(1) 2017 2018 June 30, 2018 Adjusted EBITDA $,198,356 $,148,862 $,169,815 $,179,186 Total debt $1,386,559 $1,428,868 $1,347,584 $1,491,036 Less: Debt of reconsolidated subsidiary funded by affiliate(2
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Alliance One International — Investor Day (September 2018) on 6ix