Elixinol Global (ASX:EXL) Presentation, FNN Online Investor Event, June 2020

Company Presentations

Elixinol Global Limited (ASX:EXL) CEO and Executive Director Oliver Horn presents on the company's strategy to create a global nutraceuticals brand, its US hemp-derived CBD products and the benefit of greater regulation for established suppliers in its key markets of the US and Europe at FNN's Investor Event.

Just a quick introduction to who we are, but just wanted to introduce myself to the audience. So my name is Oliver Vaughn. I literally started as a new global CEO for Elixinol as of six weeks ago. My background is really classical CPG. I was before MD and CEO for Swiss Wellness in Australia and New Zealand and the Americas. And before that, 13 years was Treasury Wine Estates in various sales and marketing leadership positions around the world. And before that L'Oreal Paris. So I joined in particular, the company at this exciting time to drive for consumer led brand building strategy across our global markets. And Clive, will you please go to the next slide?

It's sort of an overview on who Elixinol Global is. We are truly a global lead at hemp derived CBD products. And we have a global presence. We are operating in Americas, which is our Heartland market started already six years, almost seven years ago. So very established player in the market with a very strong reputation for quality and innovation in the market. We have about a team of 60 people based there. We're really working on manufacturing, research and development and sales and marketing for our consumer led products, but also some bulk and private label business. And we do that in the US and also with reach into Latin America. And we are based in Colorado there. We are also ventured into Europe and UK, and we are very proud of being a fairly early mover there. We've been two years in the market now invested $10 million and created a team throughout Europe that is working with contract manufacturers and a capital light model to develop new products and sales and marketing capabilities with our partners, wholesalers and distributors around Europe to develop and sell our consumer products.

Yeah, in Australia, we have a global executive office, which is based in Sydney. It's really providing unified planning support to the entire group. Provides governance services, and most importantly, the strategic direction which comes here from the team. And then we have various relationships around the world was wholesaler distributors who are very reputable to enter new and emerging CBD markets. If you go to the next slide please, Clive.

Now just want to take a step back and forgive me if I get a bit scientific here, but I just want to take the time to educate on what hemp derived CBD actually is because it's a very confusing environment out there. CBD is short for cannabidiol, and it's one of over a hundred cannabinoids found in the cannabis plant. Now CBD is really well renowned for a numerous wealth and health benefits. And it's used for numerous indications, such as seizures, inflammations, pain, depression, anxiety, and a number of others.

What is really exciting about CBD, which is not very new, but a recently sort of endorsed active is that the World Health Organization ruled that CBD is generally safe. More important though is that CBD is well tolerated, even in large doses where there's very little side effects. Now it's important to understand that we produce a hemp derived CBD and there's two kinds of CBD. One is hemp derived, and one is marijuana derived. M derived CBD has a very low proportion of THC, generally 0.3% or less. Now, what does THC do? THC is really responsible for the euphoric or the high associated with marijuana and deriving CBD from hemp keeps those THC levels to a minimum. And that means when you consume CBD, you don't have any psycho activity or any high associated that comes usually with a THC. So the question that we often get is, is CBD illegal?

And in our markets in the US hemp derived CBD products are legal at a federal level. And that has been in place for a while now and now most states updated the state legislation to make it legal on a state level as well. And there's a few States who are still updating the legislation to legalize it in [00:04:16] In EU CBD products are legal if they are for less than 0.2% in THC, in most countries. And there's new legislation coming into the EU to regulate it, which I will comment on in a couple of slides. If we go to the next slide, please. And another one.

So what makes us different as Elixinol? And there are six things which I like to bring to attention. Firstly, we are a very recognized and established global player. Now you need to understand that the market, the CBD market, is a very nascent and young and dynamic industry.

A lot of players out there jumped recently on it, don't have the IP or the credentials to produce quality product. So we have been in this journey for a while and in the US for example, we have the second most trusted brand when it comes to consumer reputation, which is a really strong position to be in. We also enjoy very diversified revenue streams. That means we operate a number of sales channels, whether it's our own eCommerce bricks and mortar, retail, grocery, pharmacy, even in home TV shopping channels, we've gotten a really wide reach in terms of sales channels. Combined with our global reach across US Europe and the UK and other countries outside of those regions makes us really a differentiated player. But something that we're really proud of is our 25 year history in hemp through our fonder Paul Benhaim and the science and the IP that we built up over this time has really been reflected into our class leading products that are now developed using CBD.

We are also an absolute innovator and ahead of the curve in the markets that we operate. And we are the first to operate, to investigate and develop new formulations and arranged, I'll be showing to you in the next slide, is a testament of that. We are the first ones to take CBD out of the topical CBD space in turn creating a nutraceutical vitamins and supplements range to create [inaudible 00:06:26] consumer appeal. And lastly, we're just really important in this really dynamic and young industry. We have a quality first approach. It's our obligation to provide safe, compliant, and high quality products because that is the reassurance that consumers need as they enter this new and excitable category.

And next slide, please Clive. So this is the range that we recently launched, and it's really at the core of our strategy. Just to reiterate, we are building a global CBD led nutraceutical business, and this new product range in front of you is fully launched only two or three months ago. And it's a vitamins and supplement range with a lot of actives minerals and supplements targeted at specific health benefits, but using and harnessing our IP and the power of CBD. So what you see are products that are geared towards inflammation, for example, with turmeric sleep problems, anxiety, and we've got an entire range that caters for a variety of needs. And that also comes not only in capsules, but in different formats, whether it's a tinctures powders and we're developing more formats as we go along.

All of our product is really important. Are developed using full of broad spectrum oils, and we believe that that gives us the best efficacy of the full range of cannabinoids that are found in the plants.

And go to the next page, please. This is obviously the range that you've seen is fairly new, but we're not resting on our laurels. We are increasing our innovation capability and our innovation pipeline is really exciting. On the left hand side, you see our new immune boost arrange. It was the recently launched in Europe and we're rolling out to other geographies now. And it's a really exciting product, particularly in the times that we are currently in, it's using vitamin C, zinc, and vitamin B's to really boost your immune system with the help of CBD. On the right hand side of your screen you see our new Elixinol skincare range, but the expertise that we developed in CBD we're now applying also to topical products, launching a range of eight new products in the second half of the year really using and harnessing the efficacy on topical application of CBD through a new consumer range.

Next slide please. One more please. So how do we see the future? The Brightfield group, which is the preeminent research organization that really provides data to the CBD market, suggests that the CBD market, both in US and in Europe, it's expected to grow at 46% to 40% on a KKR rate over the next couple of years. So this is really truly exciting for us as an organization who has been in those markets very early to participate in this growth. Now, obviously given it is a very nascent and young dynamic industry regulation is very varied across all industries. And we're very careful when we navigate that, because we have pride ourselves on being a very compliant business. In the US, a regulatory framework is still what I would call relatively under-regulated. We had an influx of a number of competitors. Well, thousands of competitors who entered the market in the recent two years, I would say, and increased fragmentation, but we believe new regulation will come in that regulates the market in our favor.

Europe, the same, the food standards authorities are tightening regulations. And so of 2021, you need to have the normal foods accreditation application proved in order to continue trading. Again, we believe Elixinol is well positioned. And lastly, here in Australia, we're all watching in great anticipation as a TGA is assessing descheduling CBD from a schedule four to schedule three, which means it could be available over the counter, which could open further opportunities. If you go to the next slide, please.

Quickly on the Americas. In the Americas, we're changing really our business to a consumer led business. So moving away from lower margin [inaudible 00:10:38] and private label business, and really focusing on margin accretion and cost optimization, particularly as we're navigating the challenging time of COVID. At the heart of the strategy of our B2C strategy life investment and our eCommerce capability. We invested into a new eCommerce platform, which had its challenges, but it's now been resolved and it's being optimized and that should drive significant growth in the second half.

We very fortunate that we have over 25 million or worse in inventory on our books that gives us over 18 months of growth. And I can fuel our revenue growth without buying extra ingredients. As for business challenges, I think we all know about COVID. So I don't need to comment on that. And we talked about the lack of regulation at the moment in US market. So in general, we are quite positive about the long-term outlook of the US. Once COVID restrictions ease, our NPD hits the market. And we now got our eCommerce platforms well, and truly working. We are quite excited about second half in the US next slide, please.

In terms of our financial highlights, and these are the last publish quarterly results, of Q1 of this fiscal year, we had 3.3 million revenue. You can see in orange at our retail revenue, importantly brew, reflecting our shift towards a consumer strategy B2C strategy, really. But unfortunately we got caught out by the transition of our eCommerce platform, and this is a blue area which declined versus Q4 last year. Now this as well, and truly been fixed and we're looking forward to reclaiming the lost revenue that we had from the fourth quarter last year. You go to the next slide, please.

Our corporate profile on the ASX ticker is EXL. We currently have just shy of 200 million shares on issue a million options on issue. And at the share price of just under 28 cents. As of the end of May, we have a market cap 44 million. Importantly, we just raised $11 million in a capital race leaving us with $21 million of cash in the bank. Plus an inventory position that I mentioned before the 25 million annual debt. So we have a really strong balance sheet position. Next slide, please.

On the last couple of slides, I just want to remind everybody on our cross strategic focus areas. First of all, it's building a consumer land global CBD nutraceuticals business. And that is obviously built on building our B2C channels at its core, being our eCommerce platform. The new product development that you've seen will be exciting growth for us in the second half and beyond.

And hopefully with my experience in the consumer groups and premium global brand building and innovation, I'm hoping to bring that to the team, in order to drive our strategic growth even further. And obviously in the short term, ongoing cost control and capital management, as we navigate a challenging environment is absolutely paramount as for targeting a breakeven position and improve our cashflow.

Last slide, please. So the key takeaways for the audience today really is that we are really well positioned in our global exciting growth category in spending on consumer trend. We are a very trusted and established player in a very new and dynamic market. We have a global presence with established route to market relationships and the biggest global CBD markets. We have exciting new branded consumer products that are really geared on responding to consumer health trends. At the moment, we are well positioned to navigate the regulatory environment that is dynamic, and we remain very positive that regulatory changes are working in our favor. And lastly, we have a very strong balance sheet with debt free $21 million in cash, $25 million in inventory, which puts us into a strong position to fuel the growth of Elixinol Global in the future.

You go to the next slide, please. So that's it for me. Thank you all for giving us 15 minutes of your time. If you have any more questions, please don't hesitate to get in touch and email our chief financial officer, Ron Dufficy on Ron.Dufficy@elixinolglobal.com. Thank you very much.


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