Alexium International Group Limited (AJX) Earnings Call Transcript & Summary

Thank you for holding, and welcome to Alexium International Investor Presentation FY 2022 Half Year Results. There will be a presentation followed by a verbal question-and-answer session. I would now like to hand the conference over to your host, Bob Brookins. Please go ahead, Bob.

Thank you, Erika. Thanks, everyone, for joining us here for Alexium to review the half year results for this fiscal year. I'm joined today by Rosheen Garnon, our Chair. It's nice to have here in Greer. It's been a lot of -- been quite a long time due to COVID. I also have Jason Lewis, who is our CFO. And you'll be hearing from all of us talking about where we are at this point with Alexium. I think as everyone is aware, this has been a good year for Alexium on all fronts, including increased revenue, growth in our customer base, and also with significant expansion of our product portfolio. And we'll be walking through all of that here today with our presentation. And also we'll be going through a Q&A session where we can allow you to talk to us 1-on-1 with any questions that you have. I do want to turn it over to Rosheen briefly, and so she'll have a few opening words.

Thanks, Bob. Hi, everyone. And can I say to you it's greetings from a very sunny South Carolina. The sun actually hurt my eyes when I got to Dallas, it was -- but it's so nice and warm. But I do feel for everyone who's impacted by the floods and my thoughts are with all of you. Look, this trip is really to catch up with the team here and understand at a deeper level, exactly what's been happening over the past 2 years. It is 2 years since I've been here. And a lot has changed about Alexium in that time. I've spent a bit of time with the team individually, but in particular, 2 strategic new hires that have joined us. And I thought it would be useful just to talk about them for a couple of minutes. The first one is Dan Miller. He is a very experienced supply chain expert, and he's joined us at a great time. His focus is around optimizing the outcomes to the customers, and that's making sure that the product gets to [indiscernible]. Spend a bit of time with Dan. He has worked in the clinical industry and understands what we're doing here, which is great. The other one that I wanted to highlight is, Gina Lucia, and she is a Business Development Manager for Alexium. She's hit the ground running. So she's been with us about 8 weeks. And so, she gave us a presentation on what she's doing and she's focused on Eclipsys and in particular, body armor. And I have to say, the response that she's had from the market so far has been really positive. And so, we're looking forward to hearing more from Gina in due course. Using this time, it's really important to sort of stand back and think about that journey that I mentioned, and just where we are in terms of how we face the market. The way I would describe it to you is that, we wanted to be a trusted partner to our customers. I'd say it's more today. We're seen as a true trusted innovation partner for the customers. And that's important because we are helping them solve some of their issues and being able to take products to market that leverage our technology. And that has unfolded, in particular, over the last 2 years. The strength of the relationship is really deepening, and we look forward to telling you more about that in due course. Finally, we've been doing some reviews of the technical pipeline and also the commercial pipeline. What I would say about the technical pipeline is that, we have really spent time to understand the near-term opportunities, medium-term and the long-term. Why is that important? Well, that talks to you about our future growth. And so, spending time with Jonas Larue on that with some of the other team members was a really -- well, an excellent presentation. And finally, on the commercial side, I mentioned Gina's presentation, that we've been hearing more about Eclipsys for bedding and some of the other products as well. So look, that's a really quick run-through of some of the highlights of the past couple of days. It's fantastic to be here with the team. And I'll hand over to Bob, who will take you through our presentation. And can I ask the team [indiscernible] the presentation, please.

Thank you. Okay. Erika, if we can take the next slide. And actually one more to that. Next slide, please. There you go. Thank you. Actually go back one.

We have the Alexium company overview slide on at the moment. Sorry, there just might be a short delay.

Thank you. Erika just so you're aware, it's still showing core technologies on our side.

Okay. Sure. Just one moment. We've got -- we just stopped sharing and share again.

Thank you. So just to give everyone a brief overview on who Alexium is and what it is we do. Obviously, we're listed on the Australian Stock Exchange, but we -- all operations are based here in Greer, South Carolina, which is about 2 hours north of Atlanta, Georgia. We're really focused as an advanced materials provider for thermal management and flame retardant applications. And in this presentation, we'll be going over each of those market areas and give you some insights in terms of how things are going there. Now, our focus is really in performance-driven products, looking to provide something that is a unique value, and we'll be talking through that. You'll see in each case with the products that we're taking to market really brings something that is a significant improvement over what our incumbent products and competitors are currently doing out there in the market. Now, along with that, obviously, given the focus on environmentally-friendly materials today, that really is front and center with all the work that we do. We want to make sure that we're providing products that are very much, say, eco-consciously to wear. I also want to add that typically, we want to focus in areas where Alexium can take a patent-based position, which will help to cement our -- the company's position in the markets that we're developing. Now, one significant aspect of Alexium that I think differentiates it from competitors is that, we do work through contract manufacturers, which helps provide us a flexible and a capital-light operation. This really helps us in the nimbleness we have in developing new products like Eclipsys, which we'll be talking a great deal about today. Eclipsys is a great complement in our thermal management portfolio, what we typically [ know of ] PCM, but it is a significant departure in terms of what exactly it is we sell to our customers. And that contract manufacturing model really gives us the flexibility to adapt as we have innovations in key areas. Next slide, please. Perfect. I've got it. So here, you see an overview of Alexium's core technologies. We now have 5 platforms that we have taken to market. The first 2 are our PCM-based materials. And for those who are not, say, too familiar with Alexium, this really is the core of our sales that we have today, which goes into the bedding and top-of-bed market. Now, the next 2 areas, we have Eclipsys and Alexiflam. Eclipsys is the last part of our thermal management portfolio and is used as a really novel approach for how you can minimize heat buildup in textile and foam-based products. And then with Alexiflam, this is a flame retardant that really has a pretty wide range of applications, but a key focus area for us is FR sock. These 2, while are not a significant part of our revenue today, looking forward over the calendar year, these are going to be the areas of most significant growth that you'll see going forward. We also have our Alexiguard product. This really goes into a wide range of applications, but most significantly for investors, this really is the core product that we use for our FR NyCo applications, which is for flame retardant military uniforms. Now, we talked about these core technologies, obviously, whenever we get a chance to talk with investors, something that we do want to keep everyone to have in mind is that, our product development work, our innovation has not stopped here. This is continuing to expand. And principally in the thermal management area, you will see some new technologies that we're bringing to market and are going to further expand what type -- different ways in which we can address some critical flaws in some consumer and industrial applications of textile and foam-based products. Always looking at how can we help keep the wear comfortable so they're not thermally stressed and they're able to do their job. Now, if we can go to the next slide, please. So here, we're going to go into an overview of each one of these product areas to help you get an understanding of where we are today and what you can expect to see over the coming half year. Now, first, starting with our Alexicool and BioCool products. As I said at the beginning, this is a very well-established product line for us in the bedding and top-of-bed market, where Alexium is recognized as a premium supplier -- sorry, a supplier of premium-based PCM materials. Really proud of the fact that over the past half year, Alexium received the innovation award from Serta Simmons Bedding in recognition of all the work that we've done with them. It really has been a great partnership that we've developed there. And also what you've seen this year is the development of our -- not development, the commercialization of our Total Mattress Cooling System. And this is where we work with our customers on how you can integrate Alexicool or BioCool products so that you get a full mattress design that allows the customer to get -- have a much more aggressive marketing claims. We have our first Total Mattress Cooling System was released this year and -- fiscal year, and we will have similar products that will be coming out over the coming, say, 12 months. Now, one thing that we really don't get too much of an opportunity to talk about here that I want to address is that, based on the growth that we've had over the past year, Alexium is now at a point where we've achieved approximately 30% market share. I do that as a little bit of arrow bars there, I'm just saying greater than 30%. And it really makes it quite difficult given COVID right now, and the changes in the market to gauge exactly what level of market penetration based on typical sales because the past 2 years just simply haven't been typical. But based on a conservative estimate, greater than 30% is a good indicator where Alexium is. When you think about where Alexium was just 2 years ago, it was a massive statement of the development that we've had as a company and something we're very proud of. Now, looking forward to the next -- the remainder of this fiscal year. Again, you're going to see continued growth in textile applications for mattresses also -- and top-of-bed applications, also for foam applications. And really continuing to expand our customer base and bringing in new revenue streams. Some of that work has already initiated in January. We have a number of new customers who are coming along as we go through the year. Now, obviously, what this means for Alexium is new revenue streams, improved profit and also greater market penetration, which helps to diversify our customer base. The one thing I do want to touch on is, as we addressed in our last quarterly report, the bedding market has been soft that we are seeing continue. This does parallel the U.S. Consumer Confidence Index, which has been shown in all prior years, really tracks well with this market segment. This is something obviously we're looking closely and so that we can manage things properly on the operations side. Now, obviously, these new revenue streams are going to help counterbalance this sluggish market, but I think it really positions Alexium well for continued growth as we work through this time. If we can go to the next slide, please?

We have the next slide showing on the screen. Is it frozen again for you, Bob?

It is.

All right. Just a moment. So sorry, we'll share it again.

We're good. Thank you. Next, we'll talk about Eclipsys. This is the newest technology that we've introduced on the -- in our thermal management portfolio. And really is, like I say, without qualification, the most revolutionary product that we have that's out in the market today. It allows our customers to achieve a level of marketing claims, a level of performance that we've never been able to do before. Just to give you as an indicator of some work we've done with Premier Body Armor and some marketing work that they've done, it's just in a 12-hour shift of someone wearing an Eclipsys body armor, this provides the same level of cooling as if you have a 5-pound block device that would be keeping you cool. Really is -- and this is only happening with basically a textile laminate, which integrates all of our -- a couple of different technologies for Alexium. That is something that no one has been able to claim before. And as Rosheen attested to here a moment ago, really are seeing that the market is recognizing that. Now just this year, we've had our Eclipsys products have been fully commercialized body armor with our first sales in last -- first half of the year, and we'll see continuing sales going through this year, working with multiple segments in the market -- multiple customers in the market for adoption of this product, and it's proceeding very well. We're also supporting our bedding manufacturers for commercialization of Eclipsys. This is -- probably I would expect some investors have been a bit surprised that the bedding integration took longer -- has taken longer than the body armor. And it really has come down to ease of integration. If you look at that picture at the top of the slide there, for body armor application, you're really just including it as a liner for where the ballistic panel is integrated into the vest. Very easy integration. And so, adoption by the market is easier. When you're talking about Eclipsys for mattresses, really becomes that Total Mattress Cooling System design. And so, we end up having multiple products that have to be integrated and it just takes a longer bedding process. But that work is proceeding extremely well, and we'll be providing some significant updates on that front here in the second half of the year. Now, looking at key next steps. Obviously, as I said, we'll be expanding our market adoption into -- for body armor applications, begin the commercialization process for Eclipsys-based mattresses. And we'll also begin expanding that work on body armor beyond just body armor, it will actually be a focus, broadly speaking, to first responder and military products, as you can see the list here, helmets, shoes and tactical gear. One thing that we're seeing with this market segment is that, many of the customers that we're working with body armor, they're already supplying into these other product areas. And so, it becomes just sort of the natural part of the conversation that it's not limited to body armor. We actually look at it across their product range. So it's going to -- you'll be seeing some wider range of market adoptions there. Again, just as we saw with our PCM products, this is obviously helping to drive new revenue streams, improved profit and also increasing our market penetration, which is really a key focus for the company this year. Thank you. Excellent, my anticipation there. So next is Alexiguard and Alexiflam. So, again, now this is our flame retardant segment of our product portfolio that goes into very different market segments. First, I just want to talk about Alexiflam. Key areas of our application here is for FR barrier fabrics as would be used for foam mattresses. Foam mattresses -- the foam used in the foam mattress is extraordinarily flammable. Think about it as basically like gel gasoline. And it is to have a barrier fabric that allows you to limit the flammability of that foam is a standard that you have here in the U.S. And we have been the first supplier of FR treated cotton-based fabric that can be used for this application. We've actually been able to complete UL testing for that. And we have multiple manufacturing and commercial partners who are moving forward on this front. Not something that we talk about too much on an investor talk simply because these are not activities driven by us at this stage. All the customers that we have are basically going through their commercialization plans, and they'll be taking these products to market in the coming year. But all of that is proceeding very well. Everyone has been able to reproduce everything we've seen. So really has been a quite easy adoption process. Next I'll talk about Alexiguard, which, as I mentioned earlier, is an integral flame retardant as we use for nylon/cotton fabrics for military uniforms. And all of that work has been completed, and we're now moving forward with the testing and evaluation work as we used -- is needed for military applications. One significant thing that we haven't shared just because we've had a lot of other points we've been discussing is, in the production work that we've done now working from a rule of [ goods basis ], this is -- now we're able to claim that it's 50 cycles wash [ launderable ], not simply 25. This does take you up to a new category of evaluation. It basically dictates how -- what is considered the life of the garment at that stage. So it really positions us well for conversations with -- I'll describe it the supply chain within the military of how they work on adoption. We are -- in contrast to what Alexium has previously done on FR NyCo really are treating this with a multipronged approach, driven in part through Gina Lucia, who is our Business Development Manager, also working through some outside parties who are helping us to expand our network of contacts where we take this. And we're working with the military and looking at where the different programs are, where our FR NyCo product is a good fit and also supporting their testing and evaluation. This work is going well, and it's nice to really have this fully transitioned out of the technical pipeline and fully with the commercial team at this stage. Now, obviously, as you can see from what we said here in terms of key next steps in the second half of the year, it's much simpler for our inflammatory products. It's just supporting the customers and helping them do their evaluation and commercial planning, which is fairly straightforward. If we can go to the next slide, please? Now, looking back at first half of the year, what we see coming in the second half of the year. Key point we're trying to make with this slide is, what does success look like for Alexium in FY '22. Now, key milestones that we laid out at the beginning of FY '22 where the 4 milestones you see here: a stronger revenue growth; FR NyCo success; Total Mattress Cooling System; and getting Eclipsys into the body armor market. All those milestones were met and we are moving forward with all those on the commercial side. Now, in terms of key milestones for the coming -- the second half of the year that we're in now, driving greater BioCool market penetration is, first and foremost. In terms of what drives revenue in the near-term, as Rosheen was talking about here a moment ago, that's really what's going to be a key driver for that. And then the Alexiflam for FR sock and Eclipsys for bedding, these are new areas that we have customers going to market with and completing that commercialization process with our customers is, first and foremost, what we're focused on for this year. Again, new revenue streams helped to drive the growth of the company. And you'll be hearing from us as we go through this quarter or next as we check off these milestones and really helping give you more insight in terms of exactly what this means revenue-wise and profitability-wise for Alexium. So with that, Jason, I will be handing it to you. So I'll turn it over to Jason, who will review our half year financial results.

Great. Thank you, Bob. Next slide, please. Revenue for the half was up 46% compared to the same period prior year. This is a direct result of the introduction of our BioCool product line last fiscal year. Gross margin is consistent with the prior half ending 30 June and up from prior year. Gross profit is up $946,000 year-over-year at $2.1 million. Operating expenses are up about 6%. These combined factors have led to an $800,000 EBITDA improvement with a loss of $344,000. Next slide, please. Cash receipts are up $1.8 million with strong sales. Product purchases are higher by $2 million with the increased sales level along with the targeted purchases for upcoming demand. The balance of the operating activities is higher by $300,000, primarily due to the decrease in internal development costs. This is also evident in the decrease in development costs in the investment activities area. Next slide, please. The main changes in the P&L compared to the previous year are due to increased revenues and gross profit. Operating expenses are up slightly. Amortization of capitalized intangibles have increased. There was a loss for the derivative related to the convertible loan as a result of a change in share price at 30 June. Next slide, please. This slide --. Thank you. Working capital increased $800,000 due to increase in AR and inventory offset by decrease in AP. As mentioned in the P&L commentary, the derivative liability increased due to an increase in share price. Alexium received their forgiveness on the second U.S. SBA PP (sic) [ PPP ] loan of $680,000. And as a side note, we have completed our due diligence process for upcoming line of credit and expect to have this available in the coming weeks. Thank you. Bob?

All right. Erika, I believe with that, we'll turn it over to the Q&A portion of the session.

[Operator Instructions] We have our first question from Jeff.

Just a question on the cooling products like Alexicool, BioCool, and Eclipsys. Is there a different pricing structure with those 3 products and a different margin structure? I mean, I guess, why would that customer select a certain product over others?

That's a really good question, Jeff. I would say in terms of cooling performance, Alexicool and BioCool are comparable. But BioCool, obviously, has the bio-based aspect of it, which is really critical for the bedding market at this stage. Frankly, we see our customers moving just across our portfolio going over to that. But the -- that is typically why people do that. Now, given our manufacturing process for BioCool, we typically get better margins there. And obviously, that's something that our sales team would leverage given that. It allows us to also be more cost competitive given our manufacturing process that we've used. Now, Eclipsys, to be honest, Jeff, it's almost like -- it's not like -- it's not enough to say it's apples and oranges. It's apples and rhinoceroses. I mean, they're completely different products. And just to clarify, realize in that picture, I showed you in the Eclipsys where you see the liner in the body armor. We literally are selling the liner itself, okay? It's all of the different technologies that we've integrated that we then provide to the customers there as a textile laminate. So it's a very different model in terms of supply chain of what we need to do. And the type of marketing claims that a customer could make with that is just significantly different. What you can do with Eclipsys, you never could do with PCM by itself. Now, there are some applications where PCM is better suited. And then there are certain applications like body armor, PCM never could accomplish with -- in body armor -- a PCM product couldn't accomplish in body armor the way Eclipsys could. So it's really about the value proposition to the customer and what type of marketing claims at the end of the day they're looking to achieve. I will tell you that, as I said earlier, the product portfolio is not stagnant here. We have new products that are coming online in this year that we'll be commercializing, they address different market segments, also address different aspects of what does thermal management mean and how we relieve thermal stress for people who would integrate our products. And they are -- all bring different, I would say, value to the end product. And our real focus -- in terms of our strategic vision of where this is going, is how do you integrate these very different technologies for one final benefit to the consumer at the end of the day.

Is there a flame or fire retardant element to Eclipsys? And to the -- potential to the body armor [ miss ]? Is it built into the...

It's -- there is an element of that, although the customer does not integrate it for that purpose. To give you a sense of how rapidly aggressively, I'll say, Eclipsys will move heat away from a heat source, I talked earlier about how flammable polyurethane foam is. If you take a piece of Eclipsys and hold a foam, Eclipsys and then hold a blowtorch to it. We had it there for 60 seconds and the foam never caught on fire. It's moving the heat away that rapidly. Now we don't sell it for that, okay? It's sort of just a side benefit of it, if you will. And there's values to it, to being there. But at the end of the day, the reason someone has been integrated, is because of that extraordinary thermal management performance that it has.

And just probably last question, in regards to the [indiscernible], can someone cut those and fit on top of it, or if they are cut and [ worn ] in operation, does that affect the operation of the cooling element?

If it was to get haggard enough, I'm sure that there would be a point where it could affect it. But no, I think in terms of basic wear and tear, it would maintain itself, it would still maintain the cooling properties. It's more about just that -- having that continuous sheet there, is really what is critical, and little defects here and there are not detrimental. For instance, I wish I had a piece here, but we don't have any in this room. In bedding, we actually integrate some say, cuts into the design, so it suits the unique needs of a mattress. So -- and in that, we're removing a significant portion of material, and it still achieves that high level of performance that we're striving.

[Operator Instructions] We have our next question from [ Darryl Barber ].

Bob, just wondering if you could give perhaps a little more color to your global plan on business development? My understanding, my sense is, obviously, the focus is on the U.S. at the moment, but interested in your plans there? And perhaps, talk to an outlook, if you could, for perhaps either 12 years or 2 months?

I mean I assume by 12 years, you mean 12 months?

I'm sorry, 12 months.

That's a lot of patience you have there, Daryl. So on the -- what we're seeing, frankly, is embedding the work -- the way we work with customers like we do with Serta Simmons, as part of the innovation work we do with them. You really need the Alexium team to be well integrated there, and it's not something that could be handled well from afar. And I can tell you, anything that we do in bedding, is largely going to be U.S.-centric. Now some of our -- that doesn't mean manufacturing doesn't happen outside the U.S., much of pillows and sheets, that's all manufactured overseas, [indiscernible] back here. But in terms of the end consumer, it will be U.S. focused, and I would see it staying that way for at least the next 24 months, I would say. We've got so much opportunity here in the U.S., frankly, we want to make sure we get this right before we try and expand beyond that. Now with body armor, that model is completely turned over, okay. And the issue is, there is no regional market from what we're seeing in body armor. You have people who are selling body armor to the U.S., but also have manufacturing sales in Australia, Canada, Europe, so on. So once you get integrated with a given customer, it nets to the total effort. Now we are very fortunate in that, because as I described earlier, the Eclipsys is integrated easily. And so we don't see any barrier to -- for commercialization there. So really, we can manage from within the U.S. going -- being a more a global supplier for the body armor market. Now in other adjacent markets, I really -- couldn't speculate, but we really adapt our commercial strategy, based on the -- I would say, the way the market itself operates. But that's what I would say for the next -- for 2 years, would be our focus. And I'll also say now just to clarify, as I said, body armor -- if you're talking to body -- someone who's working body armor, you're pretty readily getting into helmets and tactical gear. So I would say, that the same would apply for those areas as well.

And perhaps the best worst-case forecast for that 12-month period?

I would love to tell you that, but that's how I get ASX regulators on me. The best thing I would say, Rosheen, and I have talked about this earlier, if you want to comment on you can, but you can see the trend line of where we are. You can also see, based on the financials, as Jason reviewed, and you also see that we have whole new products that are going into market now. So I think that should give you some indication of where things are headed. And I'll also say in upcoming announcements, we will be providing some more specifics in terms of forecast, but it would be premature for me to go into those now, we'll wait till we actually get those announcements out there. That will give you a better sense of it. But the level of growth that you've seen over the past year, is absolutely what we see is -- we'll see continuing that trend.

Our next question is from [ Danilo Castro ].

Can you hear me okay?

I hear you great.

Good. The Eclipsys body armor applications is pretty revolutionary, as you said. Would you say the commercial traction has been proportional to that requisition? That's the first question. And the second question is, are we primarily focusing on the partnership with Premier Body Armor at this stage, to take that to the military?

I will let you answer that [indiscernible] so I'll hand it over to you, since you got a [ nice outlook ] yesterday.

Yes, look, what we're seeing is great traction in the marketplace. We are not self-concentrating on Premier, and so Gina and the team have been able to go out, and they're working with a number of potential customers. I think the one thing that I would say to you, is when you see some of the information about the fatigue that our first responders and also the military have with wearing those vests. And the easy way to think about it is, you don't see police in winter wearing sweaters, jumpers, those sorts of things. They've always been short sleeves. And they carry a lot of heat in there, and so anything that gives a relief to the individual, is absolutely the key. And so fatigue is probably the biggest issue that they're working with. Now the fact that the vests are giving that cooling, in a way that does not add significant weight to the vest, means that we are setting ourselves apart from the competition. And so having really effective really effective cooling, plus also a little weight and it's really easy to actually adapt, so you can take an existing product and adapt it, means that it is of interest to the body armor industry. And as I say, Gina is doing a good -- having a good crack at contacting as many of them as possible. And as you can see, I have been getting some briefings.

Anything else Danilo?

Quick one, I don't know if you'll be able to answer both, but I understand the cooling sort of mechanics of phase changing materials, and so now that's [ limited ] response to the phases change and that's it. How does eternal cooling work? How does -- how does Eclipsys work, or is that something?

No, I think we can talk about it. The patent is published, so someone can figure it out from that. But we were more evasive in early days before the patent was published. So what Eclipsys does, think of this way, what -- we go to PCM. PCM works because it absorbs heat, and much like an ice cube in a drink absorbs heat. What Eclipsys does, is move the heat away very effectively. So it makes it so, the heat is not concentrated in just one region. And if you look closely -- if you look closely at the Premier Body Armor, some of their marketing materials, which I felt they did an excellent job of. you'll see that, we'll have an area that is in contact with a person, and then we have an area that we call radiator panel that comes around, and is not in contact with the person. And what that's allowing you to do, is funnel that heat. Heat is never intelligent. It just goes from hot area to a cold area. So the heat moves away from the person over to the radiator panel and then it gets dissipated out to the environment. So what's interesting and whether we're talking about Eclipsys for a mattress or Eclipsys for body armor, where you're ultimately taking that heat, is just dumping it back into -- just putting it into a sale of PCM. Now in terms of how the person perceives comfort, which is much more complicated than what an analytical test does -- integration of complementary products like PCM is really key for making sure the person feels the benefits -- I'll say, perceives the benefits as opposed to just getting the benefits physiologically. But the key thing, again, is just that it helps to move that heat away. And to that point, someone came to us with the idea at one time, why wouldn't you give this to a racecar driver, and it would be the worst idea you could have, because now the cockpit of the race car is probably hotter than what the person is. And you're actually funneling heat... But I offered that just as a -- just so you understand kind of the dynamics, or the mechanism of how that operates.

We have our next question from [ Sue ].

I've got a couple of questions here. I hope that's okay.

Absolutely.

Okay. Just on the Soft-Tex agreement. I know that initially, we signed up with that for a couple of years, that would just do about, is that going to be ongoing?

We're still in discussions with them. I think that in terms of what we're going to do with that agreement, it doesn't -- I would say it doesn't well reflect the way we're working together now. So it would need some significant updates of whether it makes sense to have that agreement as we had it before or else we just want to make it as -- still work with them, but just not under that agreement. That's something Chris Crawford and his team are currently looking at. So that's under discussion now.

Right. So we'll still be -- well that still be utilizing our services or that's just up to them, I guess, in the future?

Yes. Well, that's up to them, right. As they have a need for PCM products, obviously, we'll be there to support them.

Right, okay. Okay. With Alexiflam, you've obviously got lots of customers interested in that. Is the revenue expected for that in this half of calendar year or the second half of the financial year? Is that going to be more towards the end of the year?

It's a yes and yes in a way. It's -- we will see revenue this fiscal -- the second half of the fiscal year, but it's not going to -- it will be, I'll say, not a significant move in terms of what you would see in the numbers. It's going to be more towards the latter part of the [indiscernible] that you would see if having a more significant impact. And that's just driven by the commercialization process of our customers. It's one thing that's always a burden, when you're dealing with flame retardants, is there's a lot of regulation and liability associated with that. So for them to go through and check all the boxes that they need to, it just simply takes time. We do have some customers who are moving forward more quickly, but their opportunity size is not as big. So I don't think -- again, as I said, it will be smaller in comparison to something like the sales we have in BioCool. But going through the end of the year, you will see that -- a significant increase there.

Okay. And you said the COVID restrictions and everything still playing a part in the slowness of that industry, because I know that was affected originally with that, or that seems to be moving forward?

You're right. Yes, 100%. It was really impactful in 2020. I'd say by the latter half of '21, it got much better. At this point, there's no impact of COVID, it is simply a matter of just what their processes are. So I wouldn't care even by some standards, you could say it's slow. I would say by their standards of what they live for those customers, that's the time that it takes.

Right. Okay. No worries. And just -- I don't know if you can answer these other ones. Just, we don't hear much of ICL moving forward, we've done that -- and for military progress, if you can shed any light on either of them.

ICL is moving, frankly, at a glacial pace. It is still moving though. We're still working with them. It has been critically impacted by COVID, and it's because, their position as a global supplier, not just for flame retardants, but for -- just [indiscernible] they do agricultural fertilizers, range of industrial products, but it's -- they've had a very complicated time through COVID. And new innovations like this just moved slower during that time. But they are making progress. Actually had a program review meeting with them last week, and we're selling products to them. They are very much focused in the European segment of FR fabrics.

It's great to see the company where it is at now. Been a long...

Great.

Yes, it's great moving forward and yes. Great to have a chat.

So if there are any other guests that would like to ask a question now, please join the Q&A queue. Sue, did you join the question-and-answers section again?

No, sorry. Okay.

We have our next question now from Jeff.

Can I just clarify something that Sue mentioned and that's about the Soft-Tex contract. I know you probably don't discuss this particularly, you're renegotiating it now. But would any change in that contract potentially have an impact on market share. I guess, can Soft-Tex really work with Serta?

They do have a relationship with Serta Simmons broadly and Serta in particular, around the Arctic mattress. And -- but mattresses are a much smaller share of their overall sales, and they're predominantly in top of bed, so pillows, mattress hoppers and these type of things. That's really has been their core areas. And so regarding that, you're asking in terms of market share or what that means for Alexium in terms of sales...

Contracts more than anything...

It was -- no, I think anything in the contract is not going to necessarily impact what -- how they go to market or what our place with that is. I would say that the big thing we're seeing with top of bed market, they tend to be very campaign-oriented. They make a lot of products at one time, because they're typically working out of -- with overseas manufacturing, which is all really volume-based. And so whenever they have that need for those types of campaigns, that's what we work with them on. But I don't see that dictated by the contract. The contract was quite, I would say, more complicated than need be, in terms of how we work together and how pricing is handled, and so it's a bit cumbersome. But I think it is the way we look at it right now, and does need to be.

Again, if there are any last questions, please join the Q&A queue now. We don't appear to have any other questions coming through at this time. So with that, I will close the web Q&A.

All right. Well, I appreciate everyone for joining, and we look forward to keeping you updated on how things are proceeding through the fiscal year, and we'll keep you all updated. If anyone has any follow-up questions, just feel free to reach out to us by email. We appreciate you all for joining. Thank you.

That now concludes the Alexium International Investor Presentation Half Year Results. Thank you for attending. You may now disconnect in the top left-hand side of your screen.