Itaconix plc (ITX.L) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Itaconix plc Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to John Shaw, CEO. Good afternoon, sir.

Good afternoon. We look forward to presenting our 2023 full year results to you. After I present an overview, then our CFO, Laura Denner, will present the financial results and I'll come back and talk about our strategic progress. In terms of the headlines, we had record revenues in 2023 in line with expectations, $7.9 million in revenue, 40.5% revenue growth over 2023. Equally important, we increased our gross profit margins to 31%. It is an important milestone for us. And we had our adjusted EBITDA loss down below $1 million. On the -- developing the -- our future -- and continued investment in our future, we did complete a $12.7 million fund raise in early 2023. We are using those proceeds for selective increases in our head count to support commercial growth, but more importantly, using it for new revenue opportunities for our next chapter of growth. A key metric for us is what our revenues are for households. We want to bring a safer, better performing products. It is in everyday use in consumer products. A key metric for us is what our revenue is for 1,000 households. We've grown from a relatively small level to actually brining -- reaching $49 per 1,000 households in North America and overall across Europe and North America $22 per 1,000 households. North America has been a key for us because that's a metric in terms of what the potential is for our ingredients and a leading indicator for us. Our goal is to expand that reach into Europe and to raise our revenue per household across Europe and North America. We have achieved some important milestones in terms of bringing safer ingredients to consumer products based on performance and cost with the additional advantages of sustainability. First of all, in cleaning, we're really a take-off stage. We've established the use of our ingredients across a broad range of cleaning products, in particular, our Itaconix TSI 322, which is used for generating shine, particularly in automatic dish detergents. It has expanded its use from North America and into Europe, a very important milestone for us in 2023, it will continue in 2024. We are continuing to expand our sustainability credentials for our products as demands from consumers, regulators and brands increased around the sustainability of all the ingredients, including the life cycle analysis with the carbon footprint and the environmental fate of the products when they go out into the environment post use. We continue to do work on improving those credentials. And as I said before, we're increasing our gross profit margins really across all of our areas. It was important milestones for us in beauty and hygiene after a bit of a post-pandemic low in activity, that in 2023, we did restore revenue growth in that area where volumes and activity kind of recovered from that in both areas for it. In terms of technology side, we're continuing development of a new hair care ingredients. We do have our VELASOFT BR 300, that's continuing under development. We had hoped to launch it last year and we are continuing to work on the stability of the product in end-product formulations. So we did not fully achieve our goal that year, that's something we hope to do this year. And then we do have a new dry form of our zinc [ ricinoleate ] for odor control for nonliquid formulations. We have that now available in inventory and we'll start the sales and marketing of it this year. In terms of large potential, what we have for safer ingredients for performance and cost across our areas, we had $7.2 million in revenue in cleaning, $400,000 in hygiene and $300,000 in beauty. These are still very small numbers relative to the market potential of the addressable market that we see in each one of our areas. In cleaning, our lead product is Itaconix TSI 322, use of automatic dish detergents to manage water hardness and create shine in [indiscernible] on it. In the odor neutralization, we have 2 lead products. One is ZINADOR, which is sold through Croda in various forms. And then we have our own version, the ZP30 and ZP20 in liquid form, and VELAFRESH ZP75 and ZP95, which are the solid forms. In beauty, we sell Amaze SP through Nouryon for hair styling. We also have our own version of VELASOFT NE 100. And then in -- for foam enhancement that give nice creamy foam, we have VELASOFT [ SF505 ]. These are all great products for bringing safer ingredients for performance and costs, and we have minor penetration so far into what are very large, addressable markets where we think there's great potential for us to be a much larger company. I'll turn it over to Laura Denner, our CFO, for the financial review.

Thank you, John. As John has already indicated, we had an amazing financial and commercial year. We did improve on all of our financial KPIs this year. We improved our revenue volumes by 41% from last year. We also improved our gross profit margin. We improved our EBITDA loss, so we reduced our EBITDA loss as well as the company was in a good financial position for cash. So as we get to kind of the revenue growth. Revenue growth was really driven by our current existing customers. So we saw revenue growth of $1.8 million from those existing accounts, which represent about 78% of the overall growth. Another key indicator of our future growth is our new accounts that we brought on. So we had more than 10 new accounts this year that came on, only representing about $0.5 million in revenues for this current period, but we anticipate that these will continue to grow in the future as they will get a full year, next year of revenue volumes and then continue to proliferate into their end markets. One thing we did want to kind of go over the revenue concentration. We do have 2 key customers that represented about 63% of our overall revenues. When we look at our customers, we really look at the contract manufacturing site that we deliver to. So sometimes, we will work with a merchandiser or a retailer to generate a formulation, that retailer then goes to a contract manufacturer. We sell to that contract manufacturer. So contract manufacturers can do various products for many different customers. So 1 contract manufacturer can do multiple products that we have formulated into. Customer 3 and 4, which to highlight them, were new in 2022, had substantial growth in 2023. They had about $300,000 to $400,000 in revenue growth for Itaconix. They're well positioned to continue growing in their respective markets as well. So we're very excited about a lot of our customer growth going forward. So -- moving down the income statement. The gross profit margin, we moved from 26.6% to 31%. A lot of this is attributed to the improvement in cost of sales. So we have better play in utilization. We are putting more products through the plant as well as we did see kind of raw materials come back down. So ocean freight kind of came back, back to a new norm kind of that pre-pandemic pricing. So we did see some relief on just logistics costs for our raw materials. Two other key areas were the sales mix. As John indicated, we grew across all 3 end markets, so in cleaning, beauty and hygiene. Our beauty and hygiene have very good gross profit margins, so they did help kind of contribute to the improvement in our overall gross profit margin. Lastly, we didn't do a lot of pricing adjustments for our customers this year, but we had one pricing adjustment at the beginning of this year that did attribute to some strong gross profit. So as we move down to the very bottom where we talk about EBITDA. One of our key goals is to continue to make it to breakeven EBITDA. Part of what has been the -- improvement in our EBITDA was just an improvement in our gross profit. So we brought down an additional $1 million to our EBITDA line this year. We did continue to invest in the growth of the company from increased head count, applications testing, polymer testing, improving our commercial team. So across all areas that did represent some additional spending to continue on the growth concept that we're moving on. And our last KPI is cash and investments. Big thanks to our existing shareholders as well as the new shareholders that came on to our registry in 2023. We had a very successful fundraise in February of 2023, we brought in gross proceeds of $12.7 million. We did utilize some of this to just grow the business. So also that did impact our EBITDA loss. We did increased our working capital so that we're well positioned with inventories in the right locations to meet all of our customer needs. Lastly, we did have some CapEx investment that was primarily in the lab so that we can develop new applications and new [ formula ] and new work, new polymer work that we're doing. So a lot of great growth, but in a really good cash position at the end of the year. So just to kind of dig into some of the revenues by market. Cleaning is kind of our flagship. It continues to drive the business. We saw a lot of growth in our cleaning side of the business, about 42%. We did bring a substantial improvement to gross profit margins. We brought them up to about 28%. So good progress there. We're going to continue to see this gross profit margin improve as our polymer sales continue to increase. Beauty and hygiene as well had good traction. Beauty nearly double this year. Again, as we get out of the pandemic, more formulation were completely done. We're seeing that now translate into revenue growth. Beauty and hygiene, although representing a small portion of our overall revenues, have a huge impact on our gross profit as their gross profit margins are in the upwards of 60%. What that translated into was is an overall gross profit margin for the company is 31%. So bringing us down our targeted gross profit margin for the company of 35%. So we're on that path to continue to improve gross profit margin. And then as we kind of look for revenues by segment, performance ingredients are polymers that we generate here. They are those TSI, the VELAFRESH, the ZINADOR that we sell into the market that can help provide key claims. We did see revenue growth in our polymer sales by about 27%. We saw a good improvement in our gross profit margin. So in that segment, we had about 38% gross profit margin in our polymer sales of the business. Formulation solutions is a service that we offer to some of our cleaning customers, so that they can help generate a fully formulated product. So these are support ingredients that are identified. When we do the formulation work, we don't provide those into the pod manufacturing. That grew as well as the overall pod market grew as well as the overall cleaning market grew. They do represent a small portion of gross profit. They only contributed about 9% gross profit margin, but they do help us to provide those key claims that our customers are looking for, of certain performance shine and clean. So I'll turn it back over to John to kind of walk you through what our next stages are. Thanks.

I'll go through some key aspects of our strategic progress, both in 2024 and what we achieved in 2023. As I've described in the past, we are in a new era of development. We started the company in 2008, after many years of work was done, they're trying to make polymers of itaconic acid. We established the use of polymers of itaconic acid as ingredients. And really by 2018 is when we really were able to position a number of ingredients for key values in formulations. We are now well into that phase. And with the funding that we have, we're going to continue to advance a broad range of applications into a customer base of recurring revenues. The key aspect that we focus on is itaconic acid as a starting material. Again, we purchase itaconic acid on the open market. We run it through our production process here to create a polymer. And what we do, from the functionality of our polymers, compete against a lot of acrylic acid polymers primarily and also some styrene polymers. A key aspect of itaconic acid is its safety profile and its feedstock base. Itaconic acid is produced by fermentation, using some form of sugar. Right now, it's corn sugars, where its fermented, an organism eats the sugar, it spits out itaconic acid. Right now, all of the plants, production facilities for that are in China, and we imported here into our facility and run through our proprietary process. As itaconic acid is a natural metabolite that's actually produced in our bodies and it's produced in the plant world, there's an excellent safety profile. It also has excellent functionality to have relatively acrylic acid, where in certain applications, we have unique functional advantages to be able to bring to bear in certain applications. There's a wide range of potential applications from water -- industrial water solutions, food and agriculture, paints and coatings, composites, hygiene, very broad area, which we -- the kind of the $20 billion sandbox that we get to operate in. To date, we have identified with specific products that we brought forward, $2.3 billion in addressable market. Our targets for 2024 are to increase our volumes from existing European cleaning accounts. As Laura said that some of these just came on in 2023, and we tend to see a -- we expect to see a steady progression with new accounts where they might have started the middle of the year, earlier in the year, relatively low volumes, and then they start increasing the use of our polymer progressively over a number of years. We expect the increase of the volumes from existing cleaning accounts, where we're seeing some excellent success. We also expect to bring on some new accounts in the cleaning area in both Europe and North America and to increase our revenues from non-cleaning applications. These are important milestones for us. We also do want to increase our gross -- continue to increase our gross profit margins. We want to get more sales from some smaller accounts, increase our revenues from non-cleaning applications where, as you can see from Laura's data, our gross profit margins are higher in non-cleaning applications. We are also updating prices for our larger accounts to make sure we maintain our gross profit per pound. So even though some of the prices may come down because our material costs have come down, we still want to keep that absolute dollar per pound gross profit the same. And we also want to increase our production throughput to get our overhead rates per pound down. And we think we can achieve all 3 of these. And lastly is to diversify our revenue base. We are pursuing a new purpose to the North America cleaning brands that have the need for our formulation expertise that we could bring to them. A number of new European cleaning accounts and some importantly, some non-cleaning accounts and applications. One of the areas we've discussed in the past is in the sustainable fashion area, which is for us is in leather. We expect that to be a very attractive area for us, a growing area for us. And we actually have had our first pair of shoes made with leather that's been used where polyitaconate acid, our [indiscernible] has been used in the retaining process to produce the leather and actually get into shoe production with these, very exciting progress for us. So we think these are important targets for us. I do want to come back and specifically address the situation that we've run into the first quarter here regarding a large merchandising that we work with, and our adjustments and our revenue expectations for 2024. Take a step back and just take a look at what the composition of dish wash detergent. The costs are -- the ingredient cost level, and I've indexed it to 100 for a North American premium formula. If you look at the two green, starting from the bottom, the two green colors are the shine, what creates a nice shiny glass for you that where you need to manage the calcium and the water hardness, so it does not leave a deposit on your glasses. The second portion up in the lighter blue is cleaning. That's to make sure that the pasta and the minced meat and all the soils on your plates get removed. And the top darker blue part is aesthetics, fragrance, any colors that might be in it. So anything that kind of catch the eye in the [ century ] aspect of it. As you'll know is that when you go from an economy formula to a premium formula, actually, the shine part of it that we contribute to is that doesn't increase that much, actually. The big difference between an economy formula and a clean -- and a premium formula will be the amount of cleaning that it does. Within the shine portion, we're about 50%. Our polymer would be about 50% of the cost of the shine aspect of it. So that tends to be maybe $0.005, $0.6, $0.7, $0.8 per pod in it. And then there are other ingredients that go into making -- creating the shine. So as you all -- on an overall aspect, although our polymer is an expensive portion of it and maybe one of the single most expensive ingredients in it, and the overall formulation in terms of achieving the desired performance and cost for a formula are relatively small portion of it. And even further, to take a look at what that formulate, the ingredient cost is relative to what you'll see in the price up in the market, the total ingredients costs that I just talked about is usually less than half of the total production cost of an automatic dish detergent pod in North America. And then you'll see that those pods, so they'll sell -- the cost may be anywhere from $0.7 to maybe $0.10, just under $0.10 per pod. And then these pods will then go out in the market to sell from anywhere from $0.12 to $0.35 per pod. So again, the portion that we are putting a very important value into the overall performance of the formulation. But in terms of the overall impact of the cost of the formulation, being relative to retail prices relatively minor. The situation that we got into with a leading merchandiser is that, if I look back at the -- we've done the full formulations. There's been a lot of cost pressure on the overall ingredient cost. And the situation came into, what did we deserve? And where are the cost issues? And what did we deserve for our -- the value of our ingredient? And it's -- these are ongoing discussions, but the merchandiser has concerns about the overall cost of their formula. And then we have terms that we need to get for the value of our ingredient for that small portion of it. So it's a dynamic situation. These are the ongoing discussions. But it's important for us going forward as a company to make sure that we capture the value for our ingredient and not start absorbing the cost of -- any issue with the overall cost of the formula by decreasing the cost of our polymer. It's just a very difficult cycle to get into. One of the key values that we had with raising -- or the money that we raised last year is that it actually gave us the freedom to make sure that we could go out and make sure that we get the value for our ingredient within this aspect. We know -- we've done the full formulations. We know what the value is. We believe we do have a low-cost formulation on it. And we believe that if we can present our polymer that way and maybe extract ourselves out of some of the rest of the overall formulation costs, that will be helpful. That being said, I can assure you that every customer that we have out there has alternative formulations that they may or may not include our material in it. That's just the competitive nature of it. There are many formulations out there that do not use our polymer. The brand leaders, the global brand leaders like Procter & Gamble and Reckitt Benckiser do not use our polymer and they have very effective products out there. But we also know that there is a segment of the market where we can deliver that value, and it's very important for us going forward that we cash to that value to -- for what we bring to the formula on it. So that's what got us to the point a few weeks ago where the negotiations have got to the point where we did not believe we were come to reconcile it, and the decision was made by the Board that with Lauren and I certainly in an agreement in it, that it's something we needed to announce this to the market. It was a significant potential change in our business conditions. And that's the transparency that we need to have, that we want to have and do have and will have with the market in terms of what our immediate business condition is. So that's why we took that action a couple -- a few weeks ago. We're not convinced to that back in February, in our previous trading update, but it did come to the point where we believe that, that was required for us to do. We do know in the midst of that, though, that we have very high value in delivering low-cost, high-performing shine into automatic dish formulations. We are finding that in Europe. We are finding that with new customers in North America. And I think that as we go forward, being the cash position that we have will allow us to negotiate better terms and diversify our customer base to build a large company. In terms of our outlook, our current market expectations are $6 million to $6.5 million for revenues, this is what we've put out to -- what we put in our RNS. We still stand by that. We have current market expectations for adjusted EBITDA of $1.6 million loss of EBITDA. So we've actually -- with that loss, we've moved that end of the year to it. We -- that's where we are now. We hope to do much better than that during the year. Most importantly, though, is setting up for a profitable years ahead, is to be able to improve our profit margins and our mix of customers and applications to have that diversified customer base and application base at high margins and grow from there. It's important to take that action now while we have the freedom to do that. So that as we go forward, we can build the type of company that we want to, to be a $100 million company with a broad range of diversified customers and applications. From an investment standpoint, we've already made important investments in lab upgrades. You'll be seeing developments coming out of our work in the lab in the coming year. And we will -- some of those will eventually make it out into some improvements in our production process. We would expect to spend some money. We are not planning on -- we plan to continue production here in North America in this facility. We have plenty of capacity available here and we have some production improvements we can do to expand our product offerings from this site. We do not see a need for a new plant elsewhere at this time. We have done some selective increases in our operating expenses. We've added some staff. We were running extremely lean at the end of 2022. We needed to build up our back venture support. We've selectively done that with some head count on it to support our commercial development and operational growth. But we think we're pretty -- we have some hiring done and we have some replacements to do to fill in some positions where people have rotated out. And -- but overall, it's something that we expect a -- and get a very manageable amount on operating expenses, particularly relative to what actually develops on the revenue side. So we continue to bring a performance cost and sustainability to the marketplace. We do have an established customer base that's going through a bit of an adjustment right now. We think that's a healthy adjustment to make sure that we have value for our polymer within our revenue base on it. We have a 16-patent family of proprietary technologies to build off of. Relatively low-level direct competition. We doubt that those anyone is producing -- no one is producing our polymers. We do, in each application area compete against specific formulations on it. But in terms of direct competition, low level. Continue to have relatively low capital requirements and have high-quality recurring revenues that we want to make sure they maintain their high quality [ revenue ] by having high level of profitability within those revenues. So we're excited about our position. It was a difficult decision that we made in the beginning of this year, but we're excited about where we could build off from it. That's our presentation for today. We look forward to answering your questions.

John, Laura, thank you very much for the presentation this afternoon. [Operator Instructions] Just as the company take a few moments to review those questions submitted today, I'd like to remind you that a recording of this presentation along with a copy of the slides and published Q&A can be accessed by Investor Dashboard. As you can see, we received a number of questions about today's presentation. I please ask you to read out the questions and give responses where appropriate to do so, and I'll pick up with you at the end.

Great. We always enjoy the question-and-answer period here to make sure we address all of your concerns directly. First question submitted was, please provide guidance on revenue growth expectations? As I said earlier, it's about -- our guidance is $6 million to $6.5 million on revenues for this year. Second question, the company had previously referred on many occasions the sticky revenues. The recent loss of Itaconix largest customer has, therefore, shaken investors' confidence as reflected in the share price. What assurance can the company give the investors about future growth trajectories? We believe our revenues are sticky. We have some control over that in terms of what terms and conditions our customers are asking for or whether or not that's attractive business to do. At some level, we're -- customers do have alternative -- there are always alternative ways and alternative formulations. There's a certain level that we get to, where we believe that by our analysis, that we have priced the product right and we will see whether the market can -- the customer could formulate can better product out of it. That's a very fluid situation, but I can say, overall, we are gaining more customers because of the value of our polymers, and we want to make sure that we capture the profitability from the value of our polymers. Why did the Board have to announce customer loss when it did instead of including it in the RNS announced in the full year results? That was a matter of timing and meeting the main requirements for disclosing changes in business conditions. We -- and here, we want to maintain very high transparencies and meet all of our obligations as a aim company for disclosure to our investors on it. Next, I understand that your share price fell recently because a U.S. customer did not wish to pay more. You're trying to improve your gross profit margins, so I can understand what is involved being accountant. But did you not say whether the customer would still have dealt with at the existing price? It's a very complex set of negotiations across a number of formulations and a number of ingredients of it. The Q1 was -- the industry is generally aware that raw material prices have come down, soda ash prices have come down, citric acid prices have come down, surfactants prices have come down. And the question was how much of a decrease in price we're going to pass on, decreasing costs we're going to pass on. And so it's not -- we're trying to increase our price. We're trying to reduce our price while maintaining attractive gross profit margin. Those are always ongoing negotiations of it, but it really is around pricing to the value. I think the second part here is that you have recently performed a share consolidation to help with dealing in the U.S., but this appears to have the opposite effect. I would be tempted to have a look at your figures if you had been closer? So the -- a question about the share consolidation that was done last year. For our U.S. shareholder base, it's important that our U.S. shareholders, which they're a sizable number of them, have the same benefits that our U.K. shareholders have in terms of holding their Itaconix shares in their brokerage account. That was not possible prior to the share consolidation and now it is. That was our first step and goal with the share consolidation. And now we actually do -- we actually can hold it in our brokerage account like U.K. shareholders' account. The next step is to expand awareness of the Itaconix shares. Beyond the U.K., we do have efforts underway in that we've contracted with Proactive. We do have equity research coming out that's avail -- that will be available outside of the U.K. on it. So we'll be -- we are expanding our sales and marketing capabilities. They are not all in place yet, but they will be. What efforts do you use to obtain new customers? Do you have an active sales force, or you rely on cold calls from your office? We have several channels that we go through. First and foremost, we have a direct sales force that calls on all the major detergent companies in North America and Europe. We have very good relationships with all of them, even the global brands that aren't using us yet. And then we have partnerships in certain channels in hairstyling. We use Nouryon that takes our Amaze SP globally. Croda's in home care area takes our odor neutralization globally. And then we have selected distributors in both Europe and the U.S., the bring us to market. So it's primarily directly to -- it's direct sales either ourselves through or through a distributor or a partner. The recent [ Canaccord ] brokers report contains major CapEx of -- in '24 and through '26? I'll just address that is that to date, we have funded lab upgrades and some selective upgrades to our sales and marketing capabilities, which will be emerging. We are reserving, spending for some of the development -- process development work that's coming -- that we expect to come out of a laboratory that would turn into improvements to our production process that would expand our production capabilities. So that's what we've reserved that in there, well within the cash that we have available and important to advancing the company further. Laura, do you want to take the number of positions?

There are a number of positions -- the question is, there are a number of positions currently open on [indiscernible] HR chemical production operator, overnight chemical production et cetera, et cetera. Are these positions still a requirement, given the projection reductions in revenues, presumably reduction -- reduced production over the coming months? Or do you still have something in the pipeline which will replace/increase our production requirements going forward? So we are taking a look at our growth plan, our growth strategy going forward. We'll assess each of these -- these roles that we have. We're always on the look for a good fit for our growing operations. So we do have kind of just general HR efforts out there to make sure that we've got the best team in place to keep growing the business.

Just want to check, any question about the consolidation was done to facilitate increased activity in the U.S. directed to the investors of the company? I think this is all about the consolidation again. Again, the first most important part of it was that the U.S. shareholders have the same right, they have the rights and benefits to holding their shares in brokerage accounts that U.K. shareholders have. And then the next stage for us is to expand our investor relationship promotion outside of the U.K. Itaconix has a project partner, a funded grant looking into new branch polymers, excipients? This is a -- I think this is relative to a U.K. grant that was done, one of the universities. We do support university and research while we can. Part of that is to make sure that -- that we maintain some connection with the university research that they are looking at itaconic acid use. There's nothing specific coming out of any of the university research we've done to date that we see commercializing in the near future. When will VELAFRESH SAP80 and VELASOFT BR 300 be launched? In both situations, we are working on optimizing the products. The VELASOFT BR300, we're continuing to work on the optimization of that ingredient, [indiscernible] and formulation. We had good optimization of it as a stand-alone ingredient, and then you have to go test it in a wide range of formulations or where customers might use it, and we found that we need to do some further optimization work on that. We will probably know by the end of this year, whether or not that that is -- the result of that is that we continue to bring it forward. There's some probability that we -- that it does not -- we can't optimize a satisfactory for commercial use. The SAP80 is a current -- was a prior -- was a current method for producing the SAP that got us to a certain level of performance. We decided that we only had about 50% of the absorption capacity of a polyacrylate and we were at a price premium. What we believe is that we can get to equal absorption capacity per gram as a polyacrylate. And again, it will be a price premium to the polyacrylate, but not as high. So the combination of lack of lower absorption and high cost, although there wouldn't be -- we think there would be some market for it, we did not want to go out with an inferior product when we think we have a superior one available. It does -- it will take some process development work to be able to produce what we -- one that matches the performance. We do have prototypes of that working in our lab and in testing, but it's going to take some process improvements to do that. We expect that that will be -- there's a number of steps to get us there. We expect that that more progress to be coming in late 2024 in terms of the technical development of it and step towards commercialization more to come in 2025.

I think there's one last question. What is happening with sustainable fashion first quarter in December of 2021? We're still seeing a lot of activity in sustainable fashion. We've successfully had some products made with the itaconic polymers, in the leather tanning. So we've got some itaconic shoes. So hopefully seeing the fall fashion season of 2024 [indiscernible].

Yes -- no, we're making excellent progress on the leather side right now. We think this will be one of our more exciting year this year. And even in the -- this year and 2025 and 2026 as the major progress in that area. Major players come apparent from research that there are many cosmetic products available to purchase online are now being produced by a number of bigger players. Is this an area you were looking to increase your presence? Unilever, just some [indiscernible]? We are -- this is work that is being done, excellent work by Nouryon. They've been a great partner for us. After that [ load ] of pandemic, we see a nice increase in activity there. It's great to see more products coming out and to see more activity coming. Are you talk to a newly formulated product for the Croda collaboration? Yet, there is nothing on their website. We are -- we do have a new form of dry form of our zinc polyacrylate that we have for ourselves in our -- in these ongoing discussions with Croda to make available to them. There is such a large loss of business with your major merchandise. How do you expect them to replace your polymer? We'll be watching closely to see how they do it. There is ways to do it with using petroleum-based ingredients that we think that -- there's ways -- there are ways to do it. We do not know exactly how they plan to do it, whether they're going to be able to do it across all of the brands that they participate in. But we will be watching intently on it. What chance with SAP are becoming a success has now been pushed back? I think I've covered that pretty closely, that is really the performance per gram, absorption per gram that we wanted to advance. It's a -- they're there it's a fairly sophisticated polymer to make. It's not as straightforward as our DSP 2K or TSI 322. It takes some -- quite a bit of optimization to have a competitive one, particularly it's like our first generation one, and we're competing against 10th-generation polyacrylates that have been optimized for the last 30 years.

The expansion of the ingredient portfolio, how do you prioritize new development initiatives here?

We go through to -- say, I think, our CTO, Dr. Yvon Durant, brings forward ideas for what we have for novel chemistries of it. Our sales and marketing department, primarily myself and other and Jim Gordon in Europe bring forward what customer needs are and we line those up to see what we think the revenue opportunities are, how quickly we can get into it and what the development time will be. One thing that having some cash allows us to, whereas before, we're cash constrained, we had to work on very short-term opt to some prioritization was sort of how fast can we get it out in the market and get revenues of it. Almost -- even if some were relatively smaller opportunities, the cash that we have available does allow us some flexibility to pursue larger opportunities that might take longer to develop. I would like to highlight this is that what you see here, we have -- through our bio [ experts ], we have developed a prototype for [ artistic ] we paint. We've actually had our first professional artists -- artistic piece done using paints that we're actually formulated here in our lab. They are not optimized by any standpoint. But it's a pretty nice painting on it though too. So this is an area, again, where the funds that we have available are going to give us an opportunity to move forward in an area that we weren't able to do before.

James just asked, what is the cash runway? We believe that the fundraising that happened in February of 2023, we're well positioned for any cash needs that we'll have. We do expect that with the loss of our major merchandising customer that our cash runway or projections, that moves kind of 1-year to the right. So we have enough cash to kind of deal with that, but our cash runway is more than sufficient to get breakeven EBITDA.

Mr. [ Shaw ] at the start of his talk, he said there was a large increase in turnover in '23 or '23, I presume you had in '22? Yes. One cup of coffee short this morning on that one. Yes, it was -- increase in 2023 over 2022. After the recent loss of a major existing customer in North America, how long is your cash runway expected to last? We have plenty of cash. We don't see any scenario where we don't have plenty of cash to make it through for a number of years and meet our objectives for growth. Can we expect to see a concentration of revenues move away from current levels as clients increase? Yes. We -- it is one of our goals. If you were to look at us -- when we look strategically to be a $100 million company, we have ideas of what we'd like in terms of diversity of concentration, of customers and of applications of it. We think that's important to have leverage on your pricing to any one customer and exposure in any particular application. It is not healthy to have a high concentration where a customer may have undue negotiating pressure on you in terms of what your overall revenues are.

What are the targeted EBITDA breakeven and positive cash flow from operations?

Sorry, I do this.

Okay.

Can you give us some idea of the size of other customers with whom your margins may not be at levels acceptable to you? They're all -- I think the early on, in the leather area, we are giving some pretty aggressive pricing in that area so that the -- early on in an application area like that, you need to keep the threshold pretty low for trial when we look at what the opportunity is to get people used to using your product and seeing the benefits of the product out in the market. So sometimes you have to get the use of your product out in the market, so they can see the value of it, you can keep some relatively aggressive pricing, which I think there is in leather. The rest of it is all really volume commitment, volume related in terms of getting the commitments that we need, so that we can really optimize the supply chain into a particular customer or a particular volume. Sorry about that. So go.

So we kind of touched on already EBITDA review then it's kind of [indiscernible] 12 months to the right. So we expect probably, not this year, but in 2025, when the EBITDA -- our target is to be EBITDA breakeven and then subsequently positive cash flow from operations would be in the coming year after that.

Yes. Itaconix products offer a cost advantage then why don't the majors of P&G and [indiscernible] right look to use in their products? So they do love to use that, they do look at it. We have very good relations with both companies. The main area we have is in Europe, is that they continue to use phosphonates. Phosphonates are very inexpensive product for scale inhibition. And -- but they are in the realm of -- they aren't phosphate, but they're kind of in the realm of phosphates. So we think, as they look at taking the phosphonates out, we think we are an excellent alternative to it. But every brand is making a choice. Some of our customers in Europe have already taken the phosphonates out. And we expect over time as they come out, and you see those coming off of labels, that we'll continue to have growth around that. While -- so while Reckitt, Unilever already have alternative formulations that can deliver the same quality functionality is achievable through that country, but are those alternative formulas should be equally cost-effective as well? They are -- they're cost effective on it, particularly when they're bundled, and bundled pricing to the large companies that the Unilever's -- will get very aggressive pricing from the margin, from the very large specialty chemical companies. That's why we find some of the smaller accounts better for us on it because they just get better pricing of it. I think the -- we are going to continue to be able to put pressure on those. We have very good discussions and engaged with all of them in discussions around it. One is it, as we -- as I mentioned earlier, we are continuing to work on the environmental profile and substantiating the environmental profile of our polymers relative to other ones. We continue to work on areas like what the environmental fate is for our product when it gets out into the marketplace. We're making technical presentations to the industry with a very pretty significant investment we put into through our laboratories of substantiating the sustainability credentials of our polymers. And those are important to bring to the largest companies. Reduction in ocean shipping costs helped the 2023 growth. Is there a risk that the recent rise in prices on the back of -- might hurt? Are routes unaffected by it?

It currently has not affected the pricing. We continue to monitor it with our vendors. They constantly keep us informed of our international freight costs. So as of right now, there's not an impact on our current raw material pricing.

Our shipping comes from Asia directly, across to the West Coast of the U.S. So that none of it goes through the Suez Canal or around those shipping channels. Clearly, the cleaning side of the business is well advanced compared to the beauty and hygiene. What have you learned from the cleaning market that you're putting into practice in the other 2 markets as you evolve your business? I think what we've found is we want to be closer to that -- we want to be as close to the customer as possible. What we found in cleaning, and this happened a little bit to us with our large account, our products are passing through too many people's hands. And for everybody that puts their hand on your product, they like to add their margin on top of it. So you start adding 10%, 15% on top of it at the blender and then people add it on. So that all takes away from the actual value that we can charge for that. So we are learning to be closer -- to be closer to the customer and the actual formulations that are being done to make sure that we can have that value. And I think you'll see some initiatives later on this year that will demonstrate that.

Thank you for addressing directly and openly the problem with North American dishwashing detergent customer. Can you explain where that customer sits within the customer concentration diagram? They want the one thing behind the contract manufacturer, are they one of the other direct customers? So -- yes, they are sitting behind one of the contract manufacturers. They use multiple sites within our customer concentration to produce their pods. So they produce pods through customer 1 and customers 2. So they do not -- they're not 100% of those customers, but they do work with 2 of our customers to produce pods. So it is not a direct relationship, it is through the contract manufacturers -- our customers.

I see that you don't capitalize much almost anything in terms of development cost for the products. Please, could you talk about why that is and whether your auditors might pressure you to capitalize certain expenses in the future?

We have discussed this with our auditors. We do continue to look at our research and development costs. The rules and guidance around that is pretty specific. We have to be doing certain activities that can capitalize. We've not determined that those costs that we are currently incurring or capitalize, but we extend them in the current year.

Do we understand that the revenue loss is a strategic decision based on pricing negotiations? Yes, it is. These pricing negotiations go back well over 1.5 years of discussions, when discussions began in terms of where to price it, particularly as raw [indiscernible], as some of the other ingredient costs started coming down, the surfactants, the soda ash, citric acid. So there have been ongoing negotiations. We have actually extended into this year of what our 2024 pricing was going to be. We had not come to terms for what the 2024 pricing was going to be. And it really gets to the point where we did not see the opportunity to -- we saw many opportunities to reduce the overall cost of the formulation. And what got down to what part of it we were willing to do by the decrease in ours, we just -- we came to a point where we really needed to hold the line on our pricing of it. There are continuing negotiations in it and we shall see. Are you aware of any new regulations that would be favorable to Itaconix products? I mentioned the phosphonates. I don't think there'll be a regulation necessary on phosphonates. I think there may be more pressure -- super pressure on the phosphonates, but that remains to be seen. Phosphonates are very effective product in formulations of it, but that remains to be seen. What are your timelines to become a $100 million company? We don't specifically give ones. I think that our next goal is to get to profitability. That really set the next stage of development for us, is to get to profitability with a broad range of applications and customers. And that we have progress made in each one of the areas that we need to make -- to be a $100 million company. So that would be in cleaning and in hygiene, and you get off into some paints and coatings areas like we've talked about here.

Well, I can't find up-to-date company investor presentation on our website? We will upload it following kind of this presentation. So you should have access to that.

How do I get access to your projected financial forecast. I'm not a not premium account of Canaccord? We'll have to get back on that. Laura and I are not -- I think there are ways to access our research through some portals, but we think we'll have to come back on that one. Would you be issuing an RNS for any kind of new first diversification order wins? We will be updating the market on progress that we're making across the board on it. We expect to have new supply agreements. We expect to have the -- keep the market updated in terms of any change in our business conditions, positive or negative, but we do expect to be able to bring news to the market in the coming months. And those are the questions, and those are our answers to your questions.

John, Laura, thank you for answering all those questions you have from investors. And of course, the company can review all questions submitted today, and we'll probably send responses on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, we're not -- which are those particularly important to the company, John, can I please just ask you for a few closing comments.

We just -- it was a great 2023 in many respects. We have the resources that we need to be -- create a great company and expand it, meet our ambitions of being a $100 million company. It is difficult to start the year out with -- how we have in the first quarter, having to adjust our revenue expectations. That does not change at all our ambitions and potential to be what we -- to be what we want to be as a company. And it really shows you the capabilities and the efforts we're going to make that when we get there, there's a very healthy set of revenues that we have and the margins that we know we deserve for our ingredients on it. I think that's our obligation to -- all the work that we put in, it's our obligation to shareholders that we get the value that we know are our ingredient sprang to it and to find more and more opportunities to do, which I think we are, and we look forward to reporting on continued progress through the rest of 2024. Thank you for your time. Really appreciate it.

John, Laura, thank you for taking investors today. Can I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of Itaconix plc, we'd like to thank you for attending today's presentation, and good afternoon to you all.

Thank you.