Agilyx ASA (AGLX) Earnings Call Transcript & Summary

Welcome, everyone, to the Agilyx 2024 Annual Review presentation. I'm Ranjeet Bhatia, Chief Executive of Agilyx ASA. I'd like to remind all of you that this presentation is being recorded, and also that there will be some time available for Q&A at the end of this presentation. Skipping the disclaimer, going straight to the beginning, I have some comments. I'm pleased to share with you an update on our 2024 activities and current priorities. 2024 was a really transformative year for the company as we took continued steps to adjust to both market dynamics and to capitalize on emerging opportunities within the advanced recycling industry. In summary, the Cyclyx joint Venture is now Building 2 rather than 1 in 2023. Now we're up to 2 industrial-scale sorting facilities in the U.S. with a combined output capacity of 300,000 metric tons per year, and total committed capital has been raised and committed as $270 million. We recently announced our Plastyx joint venture, which is headquartered in Madrid and is building waste plastic sourcing capability within the EU market. And in 2024, our wholly-owned Styrenyx business completed construction of a polystyrene recycling plant outside of Tokyo, Japan. We feel pretty good about our position in the marketplace, the capability of our team, and our industrial expertise. In a truly rapidly changing landscape, I don't believe it's an overstatement to say that Agilyx plays a meaningful role in the advancing of the industry. We do have scars that come from having navigated a pretty complex and shifting strategic landscape, but I am very pleased that Agilyx has emerged stronger, more efficient, more focused, and we clearly have a valuable contribution to make to the industry. Over the last years, the development of advanced recycling capacity has been less aggressive than I think many of us anticipated, but we are certainly now seeing acceleration and projects being commissioned and coming online. We made, as a business, strategic decision in 2023, which took part of 2024 to implement to focus on the feedstock supply element of our core competencies and to maintain and streamline our efforts in the conversion business, as we've mentioned before. Accordingly, as Bertrand will cover the specific financial results later in the presentation, I did want to make reference to it that we decreased our central overheads by over $6 million per year between late 2023 and mid-2024. Our executive team decreased from 9 to 5 people, with a significant corresponding decrease in overheads. Our board was decreased from 7 or 6 to 4, so by 2, and we reduced sales and marketing expenditures in the conversion business. But critically, and I think crucially, we preserved our technical and engineering capabilities to support our technology and IP portfolio. So I'm really grateful to all of our employees who have worked so diligently through these transitions over the last year and a half, and I think we're really landing in a good place. I'd say that while implementing our overall streamlining of our operating footprint, we did increase our resource allocation and our commercial commitment to building a feedstock management supply business. While initially slow to start, the industry's pipeline of announced conversion plans, as I mentioned, is growing primarily for mixed waste plastic to pyrolysis-type of applications, but the plant footprints are growing, and there are several plants now scheduled to come online over the next few years. So we do see a significant shortage in waste plastic feedstocks to meet that capacity, and we feel like we're very well positioned to step into that opportunity. So just to summarize the 3 legs of Agilyx, really, we have Agilyx ASA as a holding company with Styrenyx is our capital-light business that is commercializing our styrene monomer recycling technology. We'll speak a little bit more about that later. Plastyx Limited is identifying EU waste plastic sources and preparing for rampant EU demand, and our Cyclyx JB is working to source, sort, and deliver advanced recycling feedstock through Cyclyx-owned facilities to meet recycling needs of ExxonMobil, LyondellBasell to start and ultimately for other petrochem companies who are operating conversion operations in the U.S. So by positioning our business to focus on the supply of waste plastic feedstock to all conversion technology platforms, we do remain technology agnostic, and that really decreases the risk associated with the success of any one single solution. But at the same time, we are focused on our Styrenyx platform within the conversion space as a really unique opportunity to create a solution for polystyrene recycling. This might be perhaps a useful visual for where we sit in the value chain, both Cyclyx and Styrenyx. So Cyclyx, as I mentioned, is sourcing, sorting, and custom compounding to meet the needs of advanced recycling companies, which are really in the second column. I often refer to it as producing green oil, or pyrolysis oil is a technical term. But that green oil, pyrolysis oil, is replacing itself, replacing crude oil in the production of plastic. So plastic manufacturing companies, which is in the third column, need to decide whether to source green oil or crude oil to produce new plastic, and that's really a function of the demand from the market. So on the right, the packaging and the consumer brand companies, there's over 80 global brands and retail companies that have committed to recycle content targets in their packaging in 2025. So there's an immediate need, really, from these customers, and they're placing demands and pressure on the plastic manufacturers, who in turn are looking to the feedstock to product pyrolysis companies in the second column. And to meet those demands, those companies are then looking for feedstock at reliable volume and quality. But that market for provision of advanced recycling feedstock is really not well developed yet. So Cyclyx is really a leader in this segment. We're already providing feedstock to ExxonMobil each month, and that will continue until we significantly increase scale when the first circularity center comes online later this year. So taking a look at the market opportunity, as we see it, McKinsey identifies total demand of brands' recycled content targets to be more than 14 million tons per year by 2030, which we will require, by our estimate, about 20 million tons of feedstock, waste plastic feedstock. So total advanced recycling projects are only projected to be 7 million tons per year. So you can see just between the difference between the 7 and the 14, there's a pretty major shortfall in supply. There will be a shortfall in supply of recycled plastic resins available for the brands. And as a result, the margins are quite significant and available for those who participate in the marketplace. There is a premium paid for advanced recycled plastic over version. It can be over 100% of over version prices in terms of uplift. And so we see a really tremendous opportunity to take advantage of that marketplace and to take significant market share in supplying waste plastic feedstock. And Agilyx is really uniquely positioned to build a market as really as the first industrial supply platform. So we're focused on that 20 million tons of advanced recycling feedstock required to feed that demand. And I just want to emphasize, this is a really large financial opportunity. So if you just make a rough assumption of $250 a ton sale price of feedstock, that's a $5 billion market opportunity for those who wish to play there, and at 10% margin, that's a $500 million in potential profit. So there'll be other players in that market, but it's really a significant one, even though it's only now really emerging. We do have a first-mover advantage through Cyclyx. I think our partners there are really market leaders, and the credibility and network that we have as a business, and the technical expertise, gives us a really unique opportunity to move forward there. Looking at it more granularly at our own business. As we've mentioned before, we are producing about 200,000 -- we are scheduled to produce from our 2 -- Cyclyx's first 2 facilities, 20,000 tons of feedstock -- advanced recycling feedstock, which if we look at what ExxonMobil, Lyondell, our partners in Cyclyx have indicated as their potential needs and goals in 2028, about 600,000 tons. So there's a 3x opportunity to increase volume from where we sit today, just in terms of natural demand with existing partners. Of course, they have other places they're going for feedstock as well, but we have a good opportunity to participate there. And then if we look at in the EU, where we've recently launched plastics, the current estimates of what's in development for advanced recycling project is about 560,000 tons by 2030, which will require about 1 million tons per year of waste plastic feedstock, which is a very significant increase over the current estimated availability of 65,000 tons. So again, just a huge opportunity to step in and try to solve for the needs before the market develops further. So we're really prioritizing our resources to try to address that opportunity. During the year, we -- as we've announced previously, we did -- Cyclyx did approve a second Cyclyx circularity center, this one in Dallas-Fort Worth. The project was FID-ed in late 2024 to support that financing, which required $135 million commitment by Cyclyx. There was therefore a $67.5 million financing, our 50% pro rata from Agilyx. So we raised that capital in the Oslo market, and we raised a $40 million equity offering in August of 2024, and we raised a $50 million green bond in November '24 with primarily the proceeds to support that project, our share of that project. So we're -- also relative to the bond market, we're very pleased to have achieved first-time issuer status. We believe that access to the bond market will be a very valuable element of our financial strategy in the future. The first circularity center is being built in Houston, as we've mentioned. As we previously communicated, ExxonMobil, LyondellBasell will purchase 100% of the offtake from that facility to feed their requirements for advanced recycling feedstock. The project will produce approximately 100,000 tons of advanced recycling feedstock and 50,000 tons of mechanical, give or take. The agreement is a 10-year cost-plus contract and provides profitability to Cyclyx for this first project. So that's really unique for a first-of-a-kind facility. Relative to update on the status of that Houston project, the project has completed several structural and equipment orders, and it's ramping up general contractor activities with an expectation of reaching mechanical completion at the end of the year. Since equipment has already been ordered and received, we don't anticipate material impacts from tariffs. I anticipate that's going to be a question that we'll probably receive at the end of this presentation. There have been some delays since the original FID schedule, but we're generally -- this is a first-of-a-kind. The facility is one of the largest of its kind, over 520,000 square feet, more than 7x larger than the average municipal recycling facility of 70,000 square feet. So after full commissioning, it will produce 150,000 metric tons, as I mentioned. It will be one of the largest facilities of its kind able to process plastics for multiple recycling applications. The design updates and learnings are being incorporated into the facility and ultimately will better ensure its safety and operability. We're very grateful of ExxonMobil and Lyondell for their significant technical and project management assistance as Cyclyx brings the project to completion. We often receive questions from shareholders with regards to sourcing activities. Due to the sensitivities -- commercial sensitivities, it is challenging to discuss in much detail. However, the company is currently in an inventory ramp-up to commissioning, and we are pleased to report that the Q1 prebuild inventory volumes are 20% ahead of schedule. Cyclyx will increase its contractual sourcing commitments as it approaches commissioning. And the current sourcing pipeline, we're very comfortable. It covers the target requirements, and similarly with pricing, which is consistent with our expectations. And then lastly, the second circularity center, which as you know, is in Dallas with FID in November '24. That continues with final engineering, and it will incorporate learnings from the Houston project before finalization. We anticipate mechanical completion in mid-'26. And lastly, on Cyclyx, we've had a lot of changes on the strategic -- sorry, on the leadership side of the business. Chris Yandell joined as CEO in December of '24. We're very confident that Cyclyx is in great hands with -- under Chris' leadership and also very grateful for his very diligent work, commitment, enthusiasm for the mission at Cyclyx. Cyclyx did earlier this week announce further additions to its leadership team. The company hired its first Chief Operating Officer, Walter Sopp, who brings really strong expertise in project execution and delivery. It also hired a new VP of Commercial, who brings global strategy and commercial expertise, and hired a Chief Impact Officer, Leslie, who's been with us now for a few months, and while Exxon -- while she was with Exxon to find and led the lines to waste plastics. So really talented people who are joining, a lot of good energy, and we're looking forward to working with this team over the next several years. Actually, one other point on Cyclyx is that it has also signed a lease for a new corporate headquarters in Woodlands, Texas, a short drive north of Houston, and started to centralize activities into that location. Switching gears to plastics. While it was announced after year-end, we began work in 2024 to launch Plastyx Limited, which really recognizes the opportunity presented by increasing EU demand for waste plastic feedstock. The EU's PPWR, the Packaging and Packaging Waste Regulations, were implemented in early 2025 and are projected to increase demand for advanced recycling from circa 600,000 tons to well over 1 million tons by 2030 and upwards in that by 2040. So there's a lot of anticipation and growth in that market segment that we're looking forward to be participants and to facilitating. We have partnered with Circular Resources to bring plastics to market. Carlos Monreal serves as its Chairman, as Chairman of Plastyx. He's the Founder and former Chairman and CEO of Plastic Energy, which -- and therefore, brings really unparalleled experience in the advanced recycling market. So we're working to identify waste plastic streams that can be prepared for delivery in 2027 as demand comes online. We are now -- for now, our investment in plastics is pretty modest, but really sufficient to engage a talented team of waste industry and chemical recycling executives who have really hit the ground running and leveraging their market knowledge and networks to identify potential sources. We're pleased to have early traction with plastics, including an MOU recently signed for 60,000 tonnes per annum of waste plastic for 2027 delivery. That's in collaboration with a major European waste company, and certainly, we'll have more details to share as it progresses. So I'm personally very excited about this initiative. I think there's a lot to be done there, and there will be a lot more to share over the course of 2025. And then Styrenyx, as I've mentioned, I think, a few times today, we've continued to shift and emphasize our waste plastic feedstock sourcing businesses, but -- which is really a defining priority. But at the same time, we do continue to commercialize our polystyrene conversion technology. It's unique. We -- in 2024, we delivered a 10-tonne per day facility -- 10,000 tonnes per -- 10 tonne per day facility to Toyo Styrene in Japan. In Q4, that project achieved its product specs and milestones, and we began to the process of handover and training so that Toyo could operate the plant independently. And that required updates to automation and controls, which are now complete, and that we're in the process of switching to an ongoing support role under a maintenance contract where Toyo will fully operate the plant on its own, which I think is really impressive milestone. I would say the Toyo facility in general is really truly impressive. It's Toyo's commitment to the project also included plastic sourcing, but also building of dedicated purification and distillation units, and the produced styrene monomer is being mixed directly into the polystyrene production operation to make recycled content. So -- and to our knowledge, this is really the only currently operating commercial system for polystyrene and styrene recycling of this quality. And in the chemical industry, of course, styrene is considered a small segment, but it's still an $80 billion a year business, and recycled styrene demand is expected to reach 30% of global demand in 2032. So that's 18 million tonnes a year. So it's a large -- it is a large opportunity for us, and we continue to go after it. Yes. To support that growth, we're investing in engineering and expanding the scale of our equipment design. So we do have efforts going on in that domain. And then I'd say that an important part -- important goal of the polystyrene industry is reducing the carbon footprint of production. So to that end, we partnered with Sphera Solutions this last year to complete a carbon footprint analysis of our Styrenyx technology. Sphera's results were -- are in peer review. So they're not completely final, but the initial findings identified an up to 86% reduction in carbon versus traditional styrene produced from conventional fossil-based production. So -- and since our systems are already electrified, the higher range of savings is really accessible to our customers using renewable energy as an input source. So we're seeing real interest in the Japanese market from both Toyo and other players in that region with regards to additional facilities. As discussed earlier, we're maintaining a very rigorous cost focus with regards to sales and marketing, but we are actively pursuing interest in the region and the licensing of our technology. And then we are also in discussions globally with styrene demand. And so we have indicative interest in recycled styrene offtake of about 180,000 tonnes per annum just from the 3 largest prospective customers in our pipeline. So that's volume equivalent to the production of 10 Styrenyx plants. And so Agilyx remains committed to a capital-light model in its conversion business. And our path forward is to execute offtake agreements with the parties with whom we already are in dialogue and then to raise outside capital into a joint venture that will develop these project opportunities, similar to what we did with Cyclyx. So I think -- so that wraps up my comments for now. I'd like to turn it over to Bertrand Laroche, the Agilyx CFO, to provide his comments on our 2024 financials.

Thank you, Ranjeet. Good afternoon, everyone. Let me start with our 2024 financial performance shown on Slide 14. Our revenue declined from $5.9 million in 2023 to $1 million in '24, primarily due to the Toyo Styrene project transitioning from active construction to commissioning. It's worth noting that Cyclyx generated $11.2 million of revenue last year, which is not consolidated in our financials as the JV is now accounted for under the equity method. On the cost side, we made meaningful progress. Total operating expenses declined 36% from EUR 16.4 million to EUR 10.5 million. This was driven by deliberate actions over the past 18 months to realign our team, simplify operations, and implement disciplined cost controls. Salaries alone dropped 42%, with further reductions continuing into 2025. I want to acknowledge the tremendous commitment from our team, many of whom have taken on broader responsibilities to help us stay lean and effective, one are well-positioned with the right cost structure and resources to deliver on our growth plan. In terms of profitability, we reported a net loss of $21.9 million in 2024 compared to $96 million profit in 2023. As a reminder, 2023 net income included a one-time $11 million gain tied to the value of the IP contributed to Cyclyx. Following Cyclyx's $135 million capital raise in October '23 to fund its first security center, Agilyx ownership stake declined from 75% to 50%, triggering the consolidation. Cyclyx results are reflected through our share of earnings in equity affiliates and the $22 million loss in 2024 mainly breaks down into $10 million operating loss at Agilyx, $9 million equity accounting loss at Cyclyx and a $2 million noncash loss from an adjustment to the fair value of the warrants due to our rising share price in 2024. Despite the accounting loss, we have created substantial value at Cyclyx, its assets more than doubled from EUR $76 million to $197 million over 2024, mainly driven by funding for CCC1 and the initial $40 million capital call for CCC2, of which Agilyx contributed EUR 20 million. Once the first 2 facilities now under construction reached steady-state operation, they are projected to generate $15.7 million in annual cash flows, with 12.8 million flowing directly to Agilyx, which will offer a strong foundation for long-term profitability. Turning now to the balance sheet. We ended 2024 with a strong cash position of $58.3 million, including $4.2 million of restricted cash from our green bond proceeds earmarked exclusively for CCC2. This follows our successful $40 million equity raise in August '24 and $50 million green bond issuance in November '24. Our current cash reserves will fund our $67.5 million CCC2 commitment and give us flexibility to advance the key initiatives mentioned by Ranjeet at Styrenyx and Plastyx. Looking ahead to Slide 15. Our priorities over the next 12 months are clear. At Cyclyx, we're focused on completing CCC1, progressing CCC2 towards mechanical completion, and working towards FID for CCC3. Feedstock qualification and contracting remain a key priority to support these facilities. On the Agilyx side, at Styrenyx, we aim to launch a JV with a strategic partner and reach FID for our first commercial-scale polystyrene project. At Plastyx, we will complete the European market mapping and begin initial feedstock deliveries. Financially, we will list our green bond on the Oslo Stock Exchange by September to enhance liquidity and continue advancing towards a dual listing in the U.S., which will further improve stock liquidity. Finally, we remain committed to tight cost discipline and continued reduction in operating expenses. In summary, 2024 was a year of transition and foundation building. With a major investment behind us and a lean-focused organization in place, we are entering 2025 well-positioned to scale and deliver long-term value. With that, I will hand the call back to Ranjeet.

Thank you, Laroche. So then just to wrap up before Q&A, as we see it, it's always helpful to review sort of the investment case as we see it. Firstly, we are a first mover in a dynamic market. There's AR feedstock supplies not keeping up with advanced recycling capacity build-out in the market, and that's an opportunity for us that we're really moving quickly to capitalize on. Our strategic partners have invested several times in Cyclyx over the last several years, and we think really provides validation for the business opportunity at Cyclyx. And Agilyx, as Bertrand mentioned, Agilyx will be cash flow positive in 2027 on the back of these initial projects coming online into production. And lastly, we really have benefited over the years from long-term shareholder support, which really provides stability and gives us the flexibility to pursue stable and well-thought strategic plans. So that's what we had to present today, but we'd be happy to take any questions from anyone who has any. Thank you.

Just a couple of questions. One, I think the bond looks great, but I just really wondered about what the prospects for project financing are as Cyclyx CCCs. And particularly what sort of things lenders might be looking for in terms of VPC wraps, length of offtake contracts? Or would they look at merchant and similarly also on the feedstock side, would they look at getting contracts in place? Or would they be happy to go merchant at that level? And then second question, really just wondering, can you give us a feel for Cyclyx's thoughts on Europe, especially given the Plastyx JV and JV? And perhaps also do Plastyx have any views outside Europe, or really they just entirely focused there?

Laroche, do you want to take the first question, and I'll take the second one relative to Cyclyx Europe and plastics?

Sure. So in terms of funding, we do expect CCC1 to come online to be able to access cheaper cost of capital to fund the future facilities. The first 2 facilities have take-or-pay 10-year offtake agreement. And we believe that 10-year framework with some option to renew for a CCC 5-year period provide a great framework for project lenders to get comfortable with the debt financing. And I'll let you answer the second question, Ranjeet.

Yes. So just relative to Cyclyx Europe, Cyclyx right now is very focused on delivering its first couple of projects in Texas and Dallas, and Houston. That's really the priority. I don't think that in the very near term, it will be deploying in Europe. But of course, the membership, the partners there, as well as the customers, petrochem customers, global petrochem companies, who are potential customers, are present worldwide. So there is a glide path when the time comes, but there's no immediate plans for Cyclyx to do that. And relative to Plastyx, I think your question was would we -- are we looking past Europe? Is that what you asked?

That's right, yes.

Yes. I think right now, we're very focused on Europe. I think we've got a local team here. We see an opportunity. We don't want to defocus too much, and it will be some time before we start taking -- delivering plastic waste plastic feedstock. But for now, the focus is really Europe.

[indiscernible]. Would you like to go next?

So I just wanted to touch up on Adam's question about project financing for CCC. And just wanted to hear your thoughts around like how progress do you think that CCC1 could need to be to be able to get cheaper bank financing on a project level?

I'm sorry. How progressively?

Yes, do you think that banks need to see CCC1 being operative for a while, for instance, for getting project finance? Or how soon do you think that could be sort of possible? I guess, banks need to get the case maybe a bit derisked by seeing initial operations?

So I think the bank will want to see like a successful mechanical completion. Right now, we forecast mechanical completion for year-end 2025. After that, we have like a 6-month ramp-up period. I think the banks will want to see like the facility operating at or close to steady-state capacity, which should be like towards the end of the first half of 2026. So I think from that point on, we should be in a good position to issue some project lending at the project.

Yes. So that means that the earliest time for us to expect a new FID on another CCC is likely around mid-'26 then? Is that sort of right or?

Yes, I think that's a fair question. And the other element of that is that that's also roughly the time that the make-whole period on the bond expires. So there's more flexibility to refinance on the bond, and that potentially also could help fund a C3 on the parent company level. So a combination of, as Bertrand mentioned, C1 operations, which gets project-level lenders, investors comfortable, and some more flexibility on our side at the parent, I think mid-'26 is a good estimate.

And I also wondered with respect to you saying that progressing CCC3 to an FID is also a priority now. I was wondering sort of how you see demand for that in the market now? And maybe also if you could add something about which type of companies that are showing that demand.

So as we mentioned, I think C3 is still some time away. But yes, it's always on our mind as to what's next. We are in Cyclyx is engaged with petrochemical companies of large global scale who are looking for access to feedstock. We've had a discussion, I think we shared before that some of that could actually come from C2 to the extent that we want to help people get involved with us sooner. But certainly, there is demand to -- an interest in independent or additional dedicated CCCs for those parties. And as I mentioned earlier in the presentation, ExxonMobil and Lyondell have made announcements as to what their requirements are over the next few years. And so certainly, there's demand there that we would expect to find when the time comes to execute those projects. Any other questions, any more else, anything to ask? Okay. I think we're done. Ana, anything else we need to do to formally wrap up or?

No. Just to thank everybody for joining us today. And as we stated earlier, both the presentation and the recording of the presentation will be available on our website after a few hours later today.

Very good. Thank you, everyone.

Thank you.

Thank you. Bye-bye.