Calix Limited (CXL) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Calix Limited Financial Year 2024 Full Year Results Conference Call. [Operator Instructions]. I would now like to turn the conference over to Natalie Barrington, General Manager of Investor Relations. Please go ahead.

Thank you, Cole. Good morning, everybody, and welcome to Calix's full-year results presentation for the financial year 2024. My name is Natalie Barrington and I've recently taken on the role of General Manager of Investor Relations at Calix. I'm thrilled to join the team, and I look forward to growing our Investor Relations function. Joining me today are Phil Hodgson, Calix's Chief Executive Officer and Managing Director; and Darren Charles, our Chief Financial Officer. They will take us through the details of our FY '24 results, which were released to the ASX this morning. Before we begin, I'd like to remind you that we will have a Q&A session at the end of the presentation.[Operator Instructions]. I'd now like to hand over to Phil and Darren to take us through the results.

Thank you very much, Natt, and thanks all for joining this morning. If we could just move to Slide 3 of the investor presentation that was released to the ASX this morning about Calix. When I have a look at this slide as we're putting it all together, I did a bit of reflecting about why I joined Calix back in 2013. And if you have a look at the symbol down in the right-hand side of the slide there, one platform technology, multiple opportunities it's really those opportunities that lie along that diagonal, if you like, that really attracted me to Calix when I joined. You can see there some entolimod steel, lithium alumina, direct air capture and of course, water and agriculture, which we've been in for a while. These are huge opportunities facing huge global challenges. And with one core technology that can address those challenges, it was a very exciting company to join. And if I reflect back again to 2013, I think there was just under 20 people. We managed to RPO the company in 2018. We still had less than 30 people at that time. And we've now, as you can see on those numbers across the top, over 155 employees in 7 countries, 25 different languages spoken, 9 operational sites. When we IPO-ed the company, we had 2. So we've gone through a dramatic growth. And that growth is all about building capability, and it's about building capability to prepare the technology to decarbonize and make more sustainable those industries that I covered off before. So a really exciting company, a really unique company in my view, and it's been an incredible journey. But there's still plenty to go, still plenty to go. If we go to the next slide, which I think is 4 in the deck. The core technology, for those who aren't familiar, it's a new type of kill or furnace, a new way to heat step up, if you will. It's a rather large steel too. The biggest ones we've built are over 1.8 meters in diameter and over 30 meters high. And we heat these tubes to over 1,000 degrees centigrade. We can heat with fossil fuels, we can heat with alternative fuels, waste materials, biomass, and we can heat with renewable electrons. So the new way to heat step up, the first advantage of it is we're sort of energy agnostic. We don't really mine the energy we use. And of course, as industry decarbonizes and electrifies, it places the technology really at the forefront of those efforts across multiple industries. And in fact, in the picture, you can see there are some solar panels that we've installed on the roof of our warehouse at our facility in Bakesmarch and Victoria. And behind, you can see this blue sort of column, that's our fully electric calciner running off solar power. So it's a kiln that's able to run off renewable electrodes. That's very unique amongst kilns, the ability to start up and shut down and run off renewable electrodes is highly important as the industry decarbonizes. This particular steel tube, we've heated it to over 1,000 degrees externally. Whatever we heat goes down the center of the tube, it needs to be a small particle size, anything smaller than about 1/3 of a millimeter. So imagine dust or flower, sort of that sort of particle size. And then imagine dropping a lump of dust or cloud at the floor and watching it float down, that's basically what we do inside our tube. We drop whatever we're heating up down the tube. It just floats down over, say, 20 to 30 seconds, and the red hot walls of the tube radiate heat into those particles. So there's no flames touching rocks or anything like that. It's a radiative from the hot walls of the tube heating up those particles. So why do it that way? When you're heating different things, just say you're heating what's called a carbonate. Limestone is a very well-known carbonate, calcium carbonate. What a lot of people don't realize is half the weight of the lump of limestone roughly is CO2. And when the cementer lime industries heat up limestone, it releases that CO2 out of the rock. And currently, that CO2 is released inside a standard cement fuel, is mixed with all the furnace gases and air, and is injected into the atmosphere. And that's the cement line industry responsible for over 8% of global CO2 emissions, and over half of those emissions are coming from the rock. So with our particular technology, it just slots into the process in a cement fuel. And the limestone that the cement industry is using to make cement clinker when dropped down our tube releases that CO2. And because it's inside a tube, that CO2 is not lost to the atmosphere. It basically comes at the top of the tube and is a pretty pure stream. And at the bottom comes the lime, which is then used to make cement clicker or indeed lime is used in many industries such as steel, pulp and paper, aluminum, et cetera. So the first application of the technology that we're developing that we'll be developing is in carbon capture from processing things like limestone that have a lot of CO2 in it. And that particular part of our business, we're calling a low emissions intensity lime in cement. And I'll cover that off as I go through the businesses. The second application that we're developing in the technology really to do with the fact that we can power it with different energy sources and more specifically renewable electrons. And we call that sustainable processing part of our business. So the compatibility of the kiln with electricity and alternative fuels is going to allow industries who need to use kilns to start to lower their carbon emissions. And that part of our business is quite exciting. We're looking at iron, green iron, we're looking at lithium, we're looking at green alumina. And so that part of our business touches quite a few major emitting industries. The last part of our business is the magnesia part of our business. This is our earliest business. When I first joined, we just started processing magnesite from our mine in South Australia into a product called magnesium hydroxide, and that particular product is used in wastewater treatment. And when we go through the financial numbers, Darren will update us on how that business has grown over the course of the last few years and the sort of prospects that we see for it as well. That particular business is earning its revenue. It is earning an increase in gross margins. And that's a very important part of our business, not only for those aspects but in terms of the ability to have a look at some really interesting materials that we're making for what we call high surface area or reactive magnesium oxide in things like marine coatings, agriculture, and possibly even pharmaceutical and veterinary applications. And so we've made a lot of progress during the year in that area as well, and we'll update you all on that as we move through the presentation. So that's the core platform technology. If we move to the next slide, which I think is Slide 5. Those businesses across the top, carbon capture sustainable processing in magnesia. And I've just broken those down a little bit into the different sort of applications that I've hinted at before. First of all, our subsidiary focusing on carbon capture, we're calling LEILAC; low emissions intensity lime and cement. That's actually a subsidiary of the company, which has also been invested in by a group called Carbon Direct. Our U.S. impact funds came in for 7% of LEILAC for EUR 15 million, valuing that business at over EUR 215 million post-money back in 2021. At that stage, that business had no licenses. It had applications only in cement and lime. And since 2021, we've doubled the number of applications and almost doubled the addressable market with a move into direct air capture. So that's using the ability of LEILAC to process limestone into lime and capture the CO2. And that particular process is useful in direct air capture. And there, we're partnering with a company called Heirloom, Bill Gates DAC, Ford CO2 credits already sold to Microsoft, recipient of USD 300 million in Inflation Reduction Act financing to put a plant together in Louisiana in the states. And so again, since 2021, some significant progress has been made down that particular line, direct air capture. We've got a perpetual global license with Heirloom that's going to generate USD 3 per every tonne they capture. They're targeting 1 billion tonnes by 2035. So that's quite a target if they can get 100 of the way there. That's still a great business for us. And of course, the original cement lime business, significant market size, as you can see there, over 1.4 billion tonnes per annum of CO2 already. And again, since '21 put a perpetual global license agreement with Heidelberg Materials in place. There are multiple other partners in our pipeline. And the business model is really as evidenced from the Heirloom and the Heidelberg Materials licenses. It's a license fee per tonne of CO2 captured. As I said, the Heirloom one is pretty indicative of the type of license fee. We're going to be extracting in these businesses, USD 3 a tonne. And with sort of addressable markets in excess of 2.4 billion tonnes. That's a huge part -- a huge potential opportunity for the business. Moving along to sustainable processing. You can see there are 3 different aspects that we're progressing. Pilbara Minerals, we're progressing a lithium unincorporated joint venture. That's a UJV. And lithium, obviously, is one of those materials essential for the future battery industry, essential for electric vehicles. And despite the recent market lows, obviously, there's some significant demand forecasted as electric vehicle fleet starts to grow or continues to grow as I should say. That particular project there, I'll cover off a bit further down the presentation all going very well there. The next one across, we're calling ZEAL, Zero Emissions Alumina, big market, aluminas only behind iron and steel in terms of size of market as a metal. We're working with multiple parties through the heavy industry low emissions transition CRC or HILT CRC. And the last one that we're also working with Hilton with many members in cement and lime in and steel and Illumina is ZESTY, so that's focusing on 0-emission steel technology. Again, it's an application of our core technology, but that industry is huge, as everyone can probably imagine, $640 billion per annum worth of iron made every year. And so the business model across all of these is to look at license fees, which are typically a percentage of revenue, and even a tiny percentage there, you can see, represents a significant addressable market. The last line of business is magnesia. We've got a business in the States, a subsidiary called Inland Environmental Resources. They're really starting to fire on all cylinders in the water business there, taking a magnesium hydroxide product and selling it into water treatment as a replacement for caustic soda. We think the addressable market in the States is in excess of $100 million. But in terms of caustic replacement, it could be over 10x that depending upon how well we can penetrate into new areas, both geographically and also in terms of application. And so there's a lot of caustic using fresh water treatment, for example. So that's an area that we're looking at for magnesium hydroxide as well. In sort of magnesia doesn't just end there. There are applications that we've been developing for quite some time in agriculture, marine coatings, and biotech. All of those, of course, involving the food chain or the environment. Approvals and those sorts of things take a bit of time, but those all hitting some pretty interesting milestones during the year, which I'll cover off in the line of business updates. So hopefully, Slide 5 gives a good overview of the different lines of business we're progressing. The size of the markets we're looking at, who we're working with, and the revenue model. Okay. On that note, I might hand over to Darren, if we move to Slide 6 to cover off the financial highlights.

Thanks very much, Bill, and good morning, everyone. It's really my pleasure now to talk across the next few slides about our financial highlights for FY '25 with a couple of key messages from my perspective, record revenue growth, record revenue results, diversified revenue streams diligent investment to support the capability and commercial opportunity that we've been developing and a focused capital strategy to pursue the opportunities we have in various different specific applications that Phil talked about. So just talking a little bit further about each one of those elements, then starting with revenue. We're really pleased this morning to announce a record revenue result for FY '24, with revenues from products and services, up 30% to $24.2 million and overall revenue up over $30 million for the first time. We saw revenue increases and gross margin increases in our Magnesia business, which was Magnesia business was up 14% and on the previous year at accelerating improved gross margins. We've seen significant material contribution from our LEILAC Carbon Capture business again for the first time with material revenues recorded. And even within our sustainable processing business, we've been able to recognize in the second half as we did in the first half, again associated with our intellectual property contribution to the PLS joint venture, that again contributed $12.2 million to our results in the full year. The second element that I just wanted to focus on as well for everyone is a diligent investment focus on building capability and capacity to pursue our commercialization opportunities. As we flagged over a couple of years now, we would accelerate our investment in research and development to pursue the many opportunities that we have. That's been done in a dad deliberate way, and we're very pleased with the platform that we have created. That investment has been offset by several grants that we've been able to receive and we will continue to receive over the coming years to help offset that investment. And finally, again, just to touch on our capital strategy and our cash position. So at 31st of December 2023, we reported our first half results, our cash position was just a little over $47 million. With everything that we've done and accomplished throughout the year, we ended the full financial year with $43 million in the bank. So it's down just 10% in the half despite the significant increase in pursuit of the various applications that we've undertaken. And we're very happy with the strong financial position that we are in at the end of the financial year. This position enables us to continue to focus on our core equity strategy to identify opportunities to accelerate the industrial application of our technologies across specific industry segments. So just turning to the next slide now. I'll just quickly again, touch on some of the P&L. Again, growing and diversified revenue streams at significant improvement in gross margins. A significant gain resulting from our investment with Pilbara Minerals in our midstream demo plant that we hope to have come online towards the end of this current financial year and that is currently on time and on budget as reported again by Pilbara yesterday and our sales, obviously today. There are several noncash items as well that I just wanted to draw everyone's attention to on the P&L. So things such as share-based payments expense, depreciation, and amortization, although those are important elements for us to report, they don't actually impact the cash position of the company. So we continue to pursue the investment plans that we've laid out, and we're very happy with the position that we find ourselves in right now, delivering strong and accelerating revenue growth across various different lines of business. So the next slide then in terms of our balance sheet. A couple again of key highlights. It's a strong financial position with an essentially debt-free balance sheet. And again, as we've talked about, we're looking at pursuing the right capital and commercialization strategy for each specific application of our platform technology across areas such as lime and cement decarbonization, ZESTY with iron and steel, and Pilbara Minerals for the application of a fully electrified version of the calcination technology to deliver a low carbon lithium cell product. Finally, the last slide for me then, which is Slide 9. Again, to reiterate, our cash movement for the second half was down just 10% and on the cash position at 31st of December. And we've been able to deliver significant results, again, which Phil will talk to. We've built a growing pipeline of projects that present significant opportunities to generate revenues for the business, again, which Phil will talk to. At the same time as investing in expanded capability in the United States with 2 new manufacturing plants that are both fully online now. That work is complete with new plants in Ripon and Luckin to support and move into the Southwest of the United States. We've also obviously made a significant investment into the midstream demo plant together with Pilbara Minerals, which we're excited to complete construction, hopefully, later this financial year. So those are the key takeaways from my perspective, strong, robust financial position record revenues, accelerating revenues at great gross margin, and diligent investment in the commercialization opportunities our platform technology presents. So I'll hand back to Phil now to go over the highlights from last year.

Thanks very much, Darren. If we move to Slide 10 in the pack that we've popped up on the ASX this morning. So what we're trying to highlight here is the operational achievements for the last financial year against the KPI scorecard, if you like, the set of key performance indicators that we talked about at the start of the financial year. And when reviewing the performance of each of those lines of business, effectively, what we do is we give a market of 10, if you like, for how those businesses have progressed. You can see the colored dots representing completed and uncompleted pivots where we decided not to do something, but I'll pursue an alternative value stream or not delivered, which is a red dot. So if you have a look across the different lines of business, we've popped the red dot against like 2 outside of our control. Heidelberg Materials decided to close the Hanover facility, where we're building our -- what we call our LIII module, 42 modules, if you like, 100,000 tonnes a year CO2 separation capacity, and we had to lift that project up and move it. Within 3 months, we've found a site. We've done the basic engineering, and that new site is called Ennigerloh. And so what we want to do, of course, this financial year is really get that project back on track. But suffice to say, despite largely outside of our control or that's out of our control, we record that as a miss. So that was not delivered to get all permitting and civil works completed at LEILAC too. When I talk about the completed bits, when I talk about continuing to move projects down the pipeline, there's a significant project pipeline there with LEILAC. You're seeing some of that coming through, and that's manifest in the revenues that Darren talked about earlier. The engineering revenues where the line business is starting to generate income from customers who are paying us to do studies to look at the application of the technology at their sites. So that's been very successful. I think from just over half $50,000 or $40,000 to $50,000 of work, the prior financial year to over 3 million, so it's a significant move up. So that's been very successful. And of course, the basis of design for the green methanol calciner project, which we completed, and also post the balance date, post-June 30, just into July this year, we announced $15 million from the Australian government to support that project. And I'll talk a little bit about that in the more detailed operational reports. For sustainable processing, we judged about an 8 out of 10. The area that we only part-completed was really the iron steel. We wanted to try and get to a financial investment decision or final investment decision during the course of the financial year, which we did not do, but we did complete the FEED study supported by ARENA and a significant and expanded and successful or testing program with 9 different ores from 6 different iron ore majors in Australia. So overall, the sustainable processing business and I'll talk a bit about the spodumene projects a little bit further down as well. But overall, the standard racing business did very well. Magnesia was an outstanding result, as Darren said, growth in revenue, and growth in gross margin. We pivoted from MAG metal having a basis of design ready. Our chief scientist, Mark Sceats, as is his want, has discovered a new way to make magnesium metal, and we decided to pivot away from getting a basis of design done to putting a patent in place. So watch this space on that one. So you see the number of our patent families has moved at the half year 28 to now 29 patent families. So overall, a pretty good year operationally. I might just go to the next slide and start to have a look at it. And these slides are a little more project-project. They're not necessarily line of business by line of business, but I'll summarize it all at the end. First of all, on Slide 11, you can see there the direct air capture projects that we're developing with Heirloom under our LEILAC business. And recently, we were able to announce after being sort of GAG for several months by Heirloom as they were getting their local permitting and engagement process sorted, but we were finally able to talk about the projects we're working on with Heirloom. They're targeting 1 billion tonnes by 2035. So they better get a rig along. And so what they're doing is they're building a single tube version of our calciner with the direct air capture facility targeting 70,000 tonnes per year of CO2 removal. And virtually in parallel, they're working on a 300,000-tonne facility. And that particular facility obviously starts to get quite material in terms of its CO2 capture. It's license revenues that it would generate for us. And so this particular partnership that we have with Heirloom is very exciting and accelerating. The other thing about Heirloom, of course, is we're getting paid. We're getting paid to do the engineering for our technology. And as we said before, the engineering income that's starting to be earned by Heirloom is material. And so there's no capital needed for anything we're doing on this page. We've been paid the engineering, the capital is being paid for by Heirloom, including for the calciners. So this is a straight run-through to targeted first revenues from licensing. And all the way along, we're going to be earning revenues from engineering. So targeted next steps with respect to Heirloom. Obviously, we continue to deliver those paid services. We'd really love to get into the construction of the 17,000 tonnes per annum facility pretty soon, closely followed, say, within about 12 months by the 300,000-tonne facility. So semi-parallel development, but a very exciting project with Heirloom, backed hugely by the Inflation Reduction Act, backed hugely by Bill Gates, backed hugely by Microsoft who would purchase CO2 from this particular project. Very exciting for us and a huge market opportunity. If we move to Slide 12. Our LEILAC 2 project, as I mentioned before, we got a little bit sideswiped by Heidelberg. Obviously, they needed to keep things confidential while they dealt with staff and stakeholders, but they've decided to close the Hanover facility as a result of open capacity in Germany. But we did lift up and move the project pretty quickly to a new site called Ennigerloh. And so Ennigerloh is actually a little better for us. It's a little closer to the planned CO2 infrastructure. And it's a plan as big as Hanover, and obviously, one of those plants at Heidelberg are going to be running into the future. So they've already done their studies on which plants are keeping open. But this one here is an excellent opportunity for us. During the year, we formed a joint venture with Heidelberg for the construction operation and future ownership of that facility. Heidelberg will be contributing to it. The amount they're contributing is commercial in confidence, but it is a significant contribution. There will be -- we've got secured grant funding through to the start of the construction phase and a bit beyond. There will be some financing or working capital cover that will be required for that facility, but that will be recycled, should all go well because Heidelberg as part of the agreement, joint venture agreement with us will pay us back that money should everything hit the operational targets that we're trying to hit. And that facility will move into Heidelberg ownership. So if we have a look at targeted next steps there, we're obviously moving through to completing the detailed design given the news site. That's close. We're moving through and we'll aim to complete a permitting process and then commence construction in 2025. So hopefully, this financial year, site works will commence. And then obviously, operations and commissioning about a year after that point that we commenced site works. So LEILAC 2 project is disappointingly a bit delayed. We're probably running about 6 months behind our original schedules. But suffice to say, there's huge support that is continuing from Heidelberg and huge support that is continuing from the European Union and the consortium where we have to build this project that includes CEMEX, that includes Lhoist, that includes CRH, so some of the largest cement and lime companies in the world. And also part of that consortium. Port of Rotterdam, one of the largest CO2 hubs being constructed in the world, and also companies such as Solvay, interested in CO2 for chemicals, and companies such as Engie interested in the energy flexibility of our technology. Very important project for us and great to have that one moving again. If we move to Slide 13. We've got the project ZETA. This is what we're calling our project in South Australia. This is where we're building a cement/lime facility initially lime, but will ultimately move through to make a future cement product. Initially focused on lime. This project will be supplying CO2 from our technology to 2 companies, Vast, which is a solar energy company, Vast Energy and a company called Mabanaft. Mabanaft is probably about a second-tier oil trader and very probably substantive company, I should say, several billion dollar revenues and very interested in ethanol -- sorry, methanol for green shipping. And so their interest is really to have a look at how you can combine CO2 with hydrogen produced by Vast in off-the-shelf technology to make an e-methanol for shipping. This is a particular project that was granted AUD 15 million in funding in July, just very recently. And so that particular one is now on a pathway. You can see the indicative time line there. We've secured the grant funding. There's that grant funding for the next couple of years will basically be revenue because we're going to be using our in-house engineering to progress pre-front-end engineering design and front-end engineering design and then come sort of 2026, we're targeting construction. And so that's where the grant funding will need to be matched with some project equity or finance. We'll be selling the material from this particular project, including the CO2 into the e-methanol facility. So financing is also an option for us there. But suffice to say, the government is tipping in probably about 50% of the cost during that period. And then we move into commissioning and operations. And as I mentioned before, product revenues, selling the CO2, selling the loan. So that particular project there, you can see the indicative time line below is targeted early to mid-2027 to move through its commissioning and start-up phase. If we move to the next slide, which is Slide 14. LEILAC full scale. So what we're calling LEILAC 3. LEILAC 2 is 100,000 tonne per annum module. LEILAC 3 will be several of those modules. So scale up from LEILAC 2, 3 should be fairly straightforward. I'll emphasize in these particular applications no capital needed. We are undertaking paid front-end engineering design and FEED studies on behalf of clients. It sort of says a little bit about the potential for the technology when you are being paid by potential users of the technology for our engineering studies. And so this particular line, there are multiple opportunities in our project pipeline. We reported over 82 at the half year. And so several of those to continue to move down this pipeline similar to the way Heirloom did to result in paid engineering studies is what we're targeting under this particular work stream. And so as we move towards full-scale deployment all going well, with LEILAC 2 up and running, LEILAC 3s will start to tip past their final investment decision point, and again, all going well should come online sometime in 2028. So several projects here. We'll talk more about those as we can. Heidelberg Materials have committed to exploring the development of full-scale commercial installation with us. And under targeted next steps here, you can see they pursue funding support in target markets. So that's not for us. That funding support is for our clients. So it's combining our technology with grant programs such as the innovation fund on behalf of our clients to move those projects forward. So no capital needed for this particular work stream. And as I say, I'm looking forward to FY '25, when hopefully, I can talk about a few more of those in the public domain. Next slide is Slide 15. This is our midstream demonstration project with Pilbara Minerals. As Darren mentioned before, this project remains on track, both on time and on budget. Construction has commenced. And so we're really looking forward to have this project commissioning sometime in late quarter 1, early quarter 2 next calendar year. And so if we have a look at the project timelines there, as Darren mentioned, we've got a good strong balance sheet. There's secured capital in that balance sheet to continue to move this project through to commencement and also grant funding there, $20 million that was provided by the Australian government to help with that particular facility and getting that one on track. So with that one there, moving through into targeted joint venture revenues following successful commissioning, all going well. Even though the lithium price is somewhat depressed, as you're probably all aware of the last 18 months to 2 years, I think 70% down or more, 80% down, 3,000 tonnes per annum of the lithium phosphate sold will still generate this joint venture just close to USD 40 million, just under, of which we're a 45% joint venture partner. So still a significant project in terms of revenue. So that particular one there is all going well. Move to Slide 16. There, we have 0 emissions steel technology. This one here, we want to move real quick. We filed for a patent in 2021. Most of the technologies were up against to be the technology of choice for green iron, are probably 10 years older than that, if not more. We've moved quickly since 2021. We had the first tests conducted on a modified facility, a completely solar power facility in 2022 and early '23. And then as we've moved into 2024, you can see a much more extensive test work program took place. We've taken the iron we've produced into bracketing form. And so we've produced our first green brackets which is the way that the loan will be shipped around. We've completed the front-end engineering design study. The test work in the brackets and the ponengine-designed study all had funding support from ARENA, the Australian Renewable Energy Agency to which we're very grateful. And the output from that particular port was some very prospective techno-economic findings for the technology, targeting minimum hydrogen use, hydrogen is the most expensive part of producing a green iron. And the key thing that we want to do here is progress this now as quickly as possible to a financial or final investment decision. What would take us to do that, we'd obviously look at some grant funding. ARENA obviously funded the first bit, and it is a big option for us for the second bit. But green iron, as you're probably aware, is right in the crosshairs of the current government's programs to promote local manufacturing, critical minerals, and renewable energy. So that one there is in a very good sweet spot for that funding. We'll also look at financing opportunities. We could be bringing equity into a subsidiary, much the same way we did with lime to continue to move that forward. And then similar to the LEILAC business model, anyone interested in looking at this with respect to studies for their particular facility. We'd look at paid engineering work. And so we take that through to a demonstration plant, targeting 30,000 tonnes a year of iron and steel. We really want to have that plant in Australia somewhere. So the discussions are in the advanced stage on site works and where we're going to locate this, and so we really want to move this into a position where we can reach this financial year. We'd be targeting first-tolling revenues. So we've run the demonstration facility to cover its cost by tolling. But obviously, longer term, it is a license play. Similar to LEILAC, it will be a percentage of the value of the product you produce, which in this case is iron. If you look at how much iron is produced globally, there are USD 640 billion tonnes $1 billion per annum worth at about USD 400 per tonne assumed there. So huge opportunity there, very much in the target range of what the government wants to do here in Australia with respect to the green industry. And so they watch this space as we move through FY '25. If we go to Slide 17, our Magnesia liner business. This one has been a sort of lunch provider for many years now and continues to do so and continues to grow well. As Darren mentioned, successfully completed a few [Technical Difficulty]. So we nearly 50% upgrade in capacity, $21 million in revenue, which is up 14%, $7 million gross profit from the U.S. Water business. We've achieved some excellent results in other parts of the magnesia, including BOOSTER-Mag, where we've sprayed on some green volumes, and there's going to be an expanded season this year and also working with the CRC, what's called SAAFE, which is about antimicrobial resistance. We confirmed the control of drug-resistant animal and human bacteria with our high-activity magnesium. So obviously, what we're trying to do as far as next steps, we want to accelerate the revenue growth and continue to accelerate our revenue growth from the water business through those expanded capacities that we've completed this year. We'll move and complete a pre-FEED study for magnesia metal, as I say, we've filed for a patent this year. We want to move through and continue to try and progress magnesium metal as an opportunity. We've got a mine in South Australia. That mine is out of Australia and is right in the middle of one of the largest surface outcropping magnesium deposits in the world. And also, we want to continue to develop and commercialize the applications in agriculture, marine coatings, and biotech. So Magnesia continues to be a line of business that is increasingly well-performing for us. Moving through to the next slide. In terms of sustainability, obviously, with new accounting standards coming in and sustained conformance with treasury guidelines around sustainability and disclosure. We've done a lot of work in this space. All of our technology addresses sustainability challenges, of course, but even within our company, we've got to be very conscious and move the ball forward on our own sustainability challenges. We've released a sustainability report at the same time as our annual report. And so that's available on the ASX website as well. And there are key areas that we're targeting with respect to sustainability, including decarbonizing our operations. We're addressing our resource consumption. We're starting with some stuff like IBCs or intermediate bulk containers, but we're going to move tried stuff as we can. And obviously, diversity is highly important for us and so representation at all levels of the organization to conform with the United Nations guidelines. And largely, of course, safety, ensuring 0 harm at our sites. We've enhanced our company-wide health and safety management system. And so we continue to have an absolute focus on safety of all of our employees as we move forward. So just a quick summary and outlook and then we might hand over to some questions. If we have a look at what we're targeting on Slide 20 with our KPI dashboard, as we call it, our key performance indicators. You can see there across the 3 lines of business, all those little dot points that we're targeting. The key thing there is we continue to progress and get site work commenced at Ennigerloh underneath our LEILAC or carbon Capsilon business. We want to get at least 3 scoping and basis of design studies complete and lead into paid pre-FEED studies. So that's about increasing the revenue opportunity in the LEILAC pipeline with those projects moving down the pipeline. We want to get what's called Project DOS, which is that 17,000 tonnes per annum CO2 capture project construction commenced with Heirloom. And we want to complete the front-end, prefront engining design for our high gate project, which was referred elsewhere in the packet as ZETA. Highgate is the initiative that funded project ZETA. So we want to complete the prefer to that. Under sustainable processing, obviously, get our minorate joint venture project with PLS commissioned for spodumene. And we want to start doing some third-party contracted ore studies. So this is where I think we talked about a pipeline of about 6 potential players interested in our process for processing spodumene. We want to move those through at least 1 intercontracted ore study for their particular ore. On steel, pretty simple. We want to get to FID to move ahead with this demo plant. So we want to do that this financial year. Alumina, we want to get a FEED study commenced with a third party for a demo plant on a specific site. In Water business, we want continued growth. Simple as that. So that particular area there, we've got a great base to do it from, but we want to see continued growth in top-line revenue. Gross margins were grown substantially. We want to see continued growth in top-line revenue. So in terms of just an overall snapshot of indicative project timelines and revenue timelines, 21 summarizes all of those other slides I've been through before on to the one slide. You can see there where our priorities are in terms of projects, where those projects are in terms of the pathway to revenue, some earning revenues already, obviously, and others in terms of the pathway to revenue. And so under LEILAC sustainable processing in Magnesia, obviously, Magnesia business, there really focusing on growing direct sales there. But we're going to continue to present this graph as an update so that people can track our pathway to growing revenues and ultimately license revenues down each of these lines of business. If we move forward, one more slide again, 22. So just a quick summary and sort of the outlook, I guess. We still see demand for our technology continuing to grow, not only from governments but from industrials. I know it's been a tough capital and interest rate environment. And the perception might be that the brakes have been on. And certainly, the brakes have been on a little bit in the capital markets. But the tide will turn, and we are very well positioned to take advantage of that tied as it turns. The industry recognition, I guess, is being translated as it says on the slide to paid revenue studies. So this is really helping with our cash position. We're going to keep focusing on those priority projects that were in the previous slide. And if I move down a bit further, as Darren mentioned before, what's really important for us is growing the revenues and growing a diversified revenue stream, including those engineering revenues that are starting to be quite material for us. And look, if I reflect again back to say, 2018, when we IPO-ed this business in July 2018, our product revenue was $3.2 million and our gross margin was $1.3 million. If I have a look at our results from FY '24, our product revenue was $24.2 million, nearly 6x -- or sorry, nearly 8x. And the gross margin was $10.3 million, so again, there, we're nearly 6x the gross margin that we were generating back when we first IPO-ed the business. So the growth in revenue and gross margin is very important for us to enable us to weigh out this turn of the tide while we position the company for when decarbonization really does have to accelerate. And so with respect to that, I think we are very well positioned with those revenues and gross margins growing nicely. Very last final point. There's a sarso there of our Board of Directors. We've had a bit of a renewal through the last couple of years with our Board of Directors. A lot have been around for -- some of our directors have been around for quite some time. So of course, a big [indiscernible] to Jack Hamilton, who retired last year's AGM, and a [indiscernible] had today to Peter Turnbull, this is his last financial year as our Chair. So huge thanks, Peter, for all the service, many 11-plus years’ service on the board. And the new members to the Board, if we have a look across, Helen joined us around 2 years ago, and Sarah Ryan and Peter Dixon joined us in January this year. And Alison Deans, of course, a little earlier than that. But Allison has agreed and will become the chair of Calix from 1st of October. And you can see Alison's credentials there, 2 ASX50 companies including Chair of Cochlear. So we are very experienced. And well, looking forward to working with Allison and the new directors, obviously, as we progress the company forward. So on that note, I might finish hopefully, I've left some time for questions. I don't mind going a little bit over the hour if needed. So I'll hand back to you, Nat.

[Operator Instructions] And our first question today will come from Joseph House with Bell Potter Securities.

Just a few from me. Firstly, just looking at the lithium joint venture with Pilbara Minerals, can you just give us an update of how the lithium phosphate marketing is progressing?

Yes. So Joseph, thanks for the question. So the lithium phosphate is the salt that we will be producing from that facility once constructed and commissioned. The lithium phosphate salt is really the marketing hands of Pilbara Minerals, who have lots of connections as you can tell from their public disclosures into several battery and lithium companies. And so that particular material there certainly remains of interest by several parties that Pilbara are talking to. It is a midstream product. So it will need to be further processed to make a battery-grade product, but that processing is not substantial. And second thing, obviously, is it delivers 2 useful molecules, Lithium itself, which is useful in all lithium batteries, but phosphate, which is useful in the most fastest-growing battery chemistry in China, which is lithium-ion phosphate batteries. So several parties moving ahead with Joseph. And obviously, we'd be looking forward to updating the market as and when any secured offtake contract is put in place.

Excellent. Yes. That kind of led to my second question around potential offtake. So I mean, you flagged that this joint venture or this demo plant can generate about $40 million in revenue I think at current lithium prices. Is there a kind of target of how many offtake agreements you want to get to underpin the commercial rigor of the project?

There's no target. We just target to have the whole lot off taken by one or more. So it may be well, there may be more. The idea of producing 3,000 tonnes a year of that material. The reason we designed the plant capacity at that level was to be able to produce commercial quantities. They're small commercial quantities, but nonetheless, they're still commercial quantities. So that may fill one contract or it may feel 2 or 3 to be determined.

Great. Maybe moving on to your grant position. Are you able to give us some color on how much money or grant money we should be expecting to come through in FY '25? Is it probably going to be similar to FY '24?

Yes. I might take that one, Joseph. It's Darren here. So I think we're very, I guess, fortunate to have significant support from various different governments and projects that have already secured existing funding. There was a, I guess, compared to the prior year, we were eligible to receive the R&D tax incentive, which was an R&D tax cash rebate. But because of our success in accelerating our commercialization strategies, we've actually exceeded the $20 million annual turnover cap for that. So rather than a cash rebate on that activity, we get an accelerated tax deduction. But nonetheless, we've still got significant grants already secured across the PLS project across LEILAC. And even one that we announced just recently with the Australian government to support the ZETA project. So certainly, we expect to see material grant income in the FY '25 year. Again, because of our success, we won't get the R&D taxes set, but we didn't receive that in FY '24, just to point out, but in terms of other income, I mean, obviously, for us, I can't give you an exact number of what revenue or grant income we expect to report, but we've got continued access to significant grants to cover a substantial portion of our operating costs associated with those projects. And as well, we will continue to see accelerated and increased revenue from customers paying for our engineering services over and above what we've reported in FY '24 with LEILAC. So various sources of additional funding and revenues that we'll report in the year ahead beyond just purely the Magnesia business.

That's great. Understood. And maybe just lastly, looking at the water business, great work, increasing your gross profit margin. Just keen to get a better understanding of what are the initiatives that really drove that margin improvement? Or is it just really driven by the scaling up of the water business? And maybe just an extension to that. You spoke about growing the water business in FY '25, that's KPIs. What's kind of within that growth? Like how do you kind of achieve that growth for the next 12 months?

I might make a couple of comments, and if I miss anything, Phil will jump in. So firstly, one of the sources of the growth will come from an expanded platform in the U.S. So we did invest in 2 new plants in Texas and in Ripon, in the Mid East of the United States. They just came online in the last, I guess, now 4 or 5 months. So significant additional manufacturing capacity up 50% on kind of the prior year. So that will be one source of accelerated and growing revenues in the U.S., just a wider platform to serve a much larger market directly. And so that's one core element to the opportunity. In terms of where the margin expansion has come from, it's a combination of a couple of things, just improve and enhance kind of technology, leveraging the technology that Calix has developed over the years, and applying it through the AR business. So efficient manufacturing processes and capability, which is one of the core reasons why we acquired that business in the first place. We saw the opportunity to leverage our technology into that. And secondly, what's clear about our technology and our materials is we produce a very high-quality product that is valued by our customers. And so our teams in the magnesia business deliver great product quality and great service and that is valued by our customers, that all of that enables us to drive and deliver substantial improvement in our gross margins. So that's really the key. Fantastic product quality and service and enhanced technology capability and expanded platform in North America that will help contribute to continued growth in the Magnesia business.

And I might just add, Darren, when we talk about customers' willingness to pay, we have built the reputation of the product to the point that we can extract a premium from that. It was very much around matching a price and they chose us because we had a good product, but we're actually now starting to leverage a bit of a premium. So that's where the continued growth has come from in gross margins, say, for the last 12 to 18 months.

And our next question will come from Conor O'Prey with Canaccord Genuity.

Maybe just a question on the outlook for CapEx in FY '25. And obviously, you've got the ability to do some flexing there depending on grant receipts. So maybe talk about the sort of CapEx that's kind of non-negotiable you're firmly committed to versus the CapEx you might have some discretion over.

Yes. I'll cover that one, Conor, and again, Phil jump in. So essentially, the key project CapEx-wise for us this year is the completion of the PLS midstream demonstration facility. And that's pretty much it in terms of material activities. The -- we've obviously invested a significant amount in the water business in the last couple of years to develop the manufacturing capability that we've got there. That work is complete. There may be a little bit of sustaining capital to support accelerated revenues, but it will be at the margins. Really, the key one is the PLS project. And then obviously, the next cave off the rank will be L2 as and when we complete the -- I guess, the engineering on the new plant at Ennigerloh, but the timing of that, we'll update us as and when that project is -- those projects have been complete. But at this stage, we don't see material incremental PP&E in FY '25 as we complete the engineering. And again, we've obviously got significant grant funding to support that particular project. So in terms of CapEx spend, yes, other than the midstream, that's pretty much the key one. We've invested a lot in the last couple of years. And I think we'll see beyond the 2 projects that I've mentioned, we don't need to repeat the level of PP&E over the last couple of years other than the midstream project.

Great. Okay. So I think $15 million in FY '24, so less in 2025?

Yes. In terms of things like repeating the water business investment and some next-gen plant, to hammer down at back at Smart, yes, those things won't need to be repeated.

Great. And then the last question. Just, obviously, the cash flow a lot better in the second half looked like a strong working capital situation in the second half. One thing I noticed just going through the accounts a bit of an uplift in payables exiting FY '24. Did you have a payment or have you made a payment subsequent to year-end to sort of reduce that $12 million? That seems a bit higher than historical levels.

No, no, we haven't. And that's actually -- so that will be paid by the Australian government, Pilbara Minerals, and about 20% by us. So that's essentially consolidating some of the capital commitments to the Pilbara project that we essentially -- like I said, we get a free carry a fair chunk of that. So that's what that is related to.

Got it. And we'll sneak one more in. So you sort of uplifted the value of the unincorporated JV. And I just want to check, I suspect that just reflects the free carry rather than any other kind of -- it's just a kind of mechanical process of the math rather than anything else, yes.

Yes, 100%. 100% is just basically the work in progress of the project versus -- our ownership of the percentage of the work in progress versus the cash that we have to contribute. It's just a free carry.

And our next question will come from Jim Randall with Ord Minnet.

I feel sorry, my question was covered earlier with just the economics of the -- in the revenue. So no questions for me. Well done.

Thanks, Jim. No problem.

And our next question will come from Matt Perry.

I'm interested to understand the rationale of going ZESTY alone rather than with one or many partners.

So yes, I haven't ruled out ZESTY going with partners, just to be clear. One thing we will be doing or should I say, will not be doing is becoming an iron producer ourselves. So the partnership approach is similar to the way we'd approach the LEILAC project in Europe. There could be industry players there. There could be some impact funding that comes in there as well. But yes, we're not ruling out that a consortium and/or equity structure that we put together that would not have strategic players in there.

And there are no further questions at this time. I would like to turn it back over to Phil Hodgson for any closing remarks.

Excellent. Thank you very much. Well, thanks very much all for your attention this morning. As we sort of outlined during the presentation, we're very pleased with the growing revenues, the growing gross margins, and the ability for that along with pretty prudent cost management to support this business through. You can see in much more detail than we provided before, the revenue sort of indicative revenue timelines that we're seeing across the priority projects in our business. And so the ability of the business, as we've done before to really position ourselves to take advantage as and when capital markets improve, interest rates come down a bit, and the ability to really accelerate these projects. We're in a very good position to make sure we get great value for our businesses by doing just that. So thanks again, looking forward to FY '25 and no doubt speak to all of you, hopefully, again soon. If there are any further questions that you think of post this meeting, I'm sure we'll send them through to Nat, our Investor Relations GM, and we'll be happy to answer them.

And that does conclude our conference for today. Thank you for participating, and you may now disconnect at this time.