Member Info for Elsol

Itaconix (ITX), an innovator in plant-based specialty polymers used to decarbonize everyday consumer products, is pleased to provide a trading update for the year ended 31 December 2024 which is in line with expectations. Unaudited 2024 revenues of $6.5 million and an increase in unaudited gross profit margins to c. 35% from 31% in 2023. reflect the Company’s success at adjusting market positioning in 2024. ITX said it has ended 2024 in a strong position, with trading in line with expectations and continued progress in diversifying its revenues. Its growth in Europe, customer diversification, and the development of our SPARX™ program underpin its optimism for 2025.

Comment: ITX is certainly shaping up to be a serious international, scalable business, which is relatively immune to swings in the economy. That said, we await the market coming to this realisation, which so far it has only briefly done.

I think John has already eluded to the answer to this $100m rev. goal if we think about it - some of ITX's new markets and major long-term R&D investments are actively focused on multiple times bigger payback vol. tonnage applications relative to the present domestic/industrial cleaning markets. The analogy is that we are presently a little basking shark swimming in the Mediterranean Sea (and feeding very well thank you), but aiming soon for the Atlantic and Pacific Ocean and much bigger feeding grounds.

Not good form my friend and especially given past blowing in the wind messaging changing from overtly "excessive sell" to "very strong buy" recommendations for ITX during 2024 that was called out by others here. This is clearly personally aligned and not necessarily aligned to all other rationale investor aims. Obviously DB can decide, I certainly will not be following you since there is also large upsides over here.

In addition to Smart Investor updated Broker /commentary - based on my own review of granular updated report content:

• Estimated balance sheet at cash year end 2025 => $4.3m, even after CAPEX spending expected to be c.$1.35m (itself a +88% on 2024A!). This massive expected 2025F capex spending is telling a major growth and diversification story for ITX in 2025F (or if we don’t spend it all it adds to stabilizing free cash on BS).

• Possibility of Q’terly diversification added RNS newsflows: John’s overall messaging and sentiments within the RNS news announcement today was much more bullish than normal for growth and especially much wider client uptick /diversification so my advice is hold onto your shares (you need to be in it to win it). I believe the small sell off was some day traders taking some S/T profit and as the stellar performance outlook sinks in the SP will re-trace.

• Granular revenue growth in non-cleaning segments looks much more material with higher margins:

o Beauty (Velasoft, Amaze SP) $254k (23A) – $625k (24A) +146% y/y growth

o Hygiene (Zinador, Velafresh) $351k (23A)– $525k (24A) +50% y/y growth

o Other Emerging diversification (Leather + 10+ new customers+?) 2024 $200k (24A), growing to $750k/$1.5m (2025F/26F) - implies +375% y/y growth FY24-FY25.

• Run rate monthly snap-shot (akin to plant output), now appears to be running at sales level of c.$8.0m+ if equated at company Revenue level. This is as per my previous analysis so anticipate 2025F revenue performance goal is already largely de-risked (Full year is c.$9.5m subject to possible upgrade given SPARX/paints/super Abs upside/price inflation pass-throughs to existing and new clients).

• EBITDA positive in 2026F with +$467k (Broker est).

DYOR - but in summary in my mind everything is coming together really well for the ITX business, its new strategy, major marketing/R&D efforts and client demand/diversification perspectives.

Thx Mike if that is true great, we may be 'under the radar' as simple basic chemical ingredient feedstock (itaconic acid) supply. Importantly though, I do not believe China is our only source of cheapish supply feedstock below the likes of BASF prices etc (ie China may be the most "economic" to date but there are certainly other options that must be not too pricier than Chinese imports to avoid any major Trump price effects on ITX:

As per Gen AI: In India and Latin America, several companies produce itaconic acid in large volumes. Here are some notable producers:

India:

1. Alpha Chemika: A well-known chemical manufacturer that produces itaconic acid in significant quantities

2. Kehai Biochemistry: Another major player in the Indian market, known for its large-scale production capabilities

Latin America:

3. Guoguang Biochemistry: While primarily based in China, they have operations and partnerships in Latin America to supply itaconic acid. In any possible worst case tarriffs, the priamary Chinese entity may divest their local Latin American ops since "business value in use" could be then much higher to a local manufacturing company and hence makes sense to divest the plant and take the asset $$$ to China instead of lower production volumes/lower margin profit $.

4. Local Chemical Companies: Various local chemical manufacturers in countries like Brazil and Argentina also produce itaconic acid, often in collaboration with international firms.

These companies can provide itaconic acid in tonne-sized batches, making them suitable for industrial-scale applications. There will also be other producers in Asian growth economies.

FYI @ SmartInvestor - I have already raised the point to John & Laura by email at the end of last year that it would be pragmatic to issue a public statement (perhaps at the 2024A results notification) re: supply alternatives to provide greater transparency on feedstock. They can reflect and consider this. I'm sure it will feature on the ITX presentation agenda as an aside to ITX financial performance/vol outlook for 2025F.

Trump's obviously taking counsel from concerned US macro economists and wealthy NYSE friends. Not sure his strategy will "Make America Great Again!". Maybe coin has finally dropped.

You are right of course SmartInvestor but mainly from a pure external 'short-term' investor perspective. Mgt time and strategic focus is the scarce resource and ITX's Board primary mission is to create long-lasting shareholder value which means a massive focus on delivering business growth and keeping the hopper filled with happy new clients and new diversification investment opportunities. This will ultimately lead to multi-bag returns for us all, rather than micro managing investor external tactical messaging. I totally get your frustration and am totally aligned too (wish ITX mgt could do both) but lets give John and his team the benefit of the doubt for now. I just watched back the 2023A Feb company update that inspired a very large uptick in SP, offset later by the April 23 loss of low value client. I'm expecting the same from 2024A results guidance and this time without the negative client loss. but re; Trump, yes he will create volatility but he cannot stoke up large US inflation and job losses and kill the US economy - its a very difficult balancing act and he knows it, he is not as stupid as many believe. Even if he bangs up US import duties, lets not forget its exceedingly difficult for global ITX clients to side-step environmental, social and decarbonisation initiatives for the planet so I expect if we may have some input cost inflation to pass onto clients in the worst case, but we might even be able to pass on a slight price uplift in the process above our cost impact lets see. Im not too worried about Trump; he will not be able to change directional policy inertia and public buying trends towards GREEN/ECO products (think of tides coming into the beach and Trump being able to stop them - no way)

Hi Wacca, you are correct we could certainly do with more generalised N American/EMEA public noise and appreciation of ITX’s ECO progress for what has been accomplished over the last 2 years.

Investor demand-side considerations for everyone to think about:

1/ Presumably ITX heavy congress attendance agenda 2024/25 will help drive new stock buyer interest within personnel in the ECO/Green/branded FMCG/spec chem manufacturing supply chain industries;

2/ Social media efforts may also help reach new untapped investor audiences, since it directs them to our new professionally designed ITX web site (massively improved v’s prior outdated 1990s ITX web design);

3/ The SPARX and partner BD investment with new go-to-market channel strategies should also drive gradual uptick of new private spec chem/ECO savvy investors and poss. other specialised small cap IIs /ECO/ESG investors (as confidence grows with diversified revenues/cusp of profit breakeven);

4/ My own candid view is that immediately after the Board's rejection of said ‘low profit customer’ almost 1 year ago, this strategic mgt. decision was possibly overly labelled as a “major catastrophic event” by some investors, without considering the wider ITX strategic routemap to profitability. With full benefit of hindsight, this difficult Board decision appears to have been a very smart move and I'm thus expecting a gap-up in SP alongside 2024A results / 2025F $9.5m-10m+ rev. confirmation. We may even see share price aligned at @255p investor round (5.1p in old share currency) again fairly soon since rev. growth/profit objectives are getting delivered with more diversified clients alongside (business plan playing out and delivery risk being unwound).

Given full facts and observations on 2024 performance, this should finally put to bed most if not all of any residual lack of investor confidence and past overly negative investor sentiments (optical SP blip) that resulted from what appears to have been a solid, pragmatic Board decision.

Wacca, you mean advertising to public market / US / EMEA Inst investors and PI investors ? Presume you don't mean normal product/ business marketing since this aspect seems to be going at pace given SPARX , alliance partnerships, global conference attendance and European cleaning push. The 2024A performance update in few weeks may easily change sentiment if outturn and 2025F are indicating strong growth to $10m sales in 2025 (and closer breakeven). As we know company diversification news and other catalysts can change ITX share dynamics quite rapidly.

Thank AJP - four roles advertised - 2x production (day/night) and 2x financial/operational mgt to support higher vols - all looking good.

I don't disagree with a partial discount for small size as you mentioned Chilting, but not sure I would classify ITX's technology platform with "extreme uncertainty" as if a start up venture. ITX cashflow risk is offset by broad cashflow diversification (and increasing), largely strongly A++ branded end clients, plus competitive IP ringfenced patents. Professional investors financed the $10m round at 5.1p (c.255p today) and the business is on balance further forward strategically and derisked with marketing channel partnerships so I still believe we are under valued given the above.

Food for thought - been running some current Jan 25 Revenue to Valuation multiple calcs. using ITX FY 2024 financials as base and adopting the c.$6.5m full year revenue performance advised by mgt. during November (ie the upper end of prior guidance).

Basically, this means that ITX 2024 H2 ‘like for like’ (LfL) portfolio sales grew at c.80% (Y/Y) excluding the rejected ‘low profit’ customer. As per Cannacord this equates to around c.$3.7m H2 revenue in their updated Nov 24 Broker report and $2.8m H1.

Since the “new base client supply portfolio” of the ITX business is growing at c.45-50% (2025 from 2024), this means a snapshot at mid-Jan 2025 (today), the average revenue run-rate must be at minimum c.$4.0m expressed as a H2 equivalent ($3.7m x 10% growth from H2 midpoint assuming averaged client revenue new adds expansion/existing client growth). Assuming a current valuation of ITX as at mid-January 2025, this means the current client portfolio is generating at least c.$8.0m in full year equivalent sales revenue and the forecast full year of $9.6m 2025 is largely de-risked, all other things held constant. I’ve stated ‘largely derisked’ because since ITX clients' majorly invest to reformulate and integrate ITX ingredients into their branded end-products they are largely “locked into” the end-formulation and hence difficult for competitors to switch out.

The current portfolio (c.$8.0m in sales run rate) equates to a current EV/Revenue multiple of only c.3.3x as at 166p/share and 13.486m shares outstanding (22.38m GBP/27.0m USD). Assume we will maintain some material cash balance (as normal working capital) and consume some of the existing healthy cash balance for usage for c.11 months before we are close to breakeven. So, my conclusion is that given the high rev. growth profile of ITX/performance outlook we are looking pretty cheap at 166p with lots of SP upside due for 2025. May cheer up the Jan greyness. GLALTIs.

DYOR.

Hi Waccamacca,

Good questions my friend and clearly everyone is more than intensely interested in ITX SP trajectory from hereon in 2025.

Goes without saying everyone needs to do their own investment research but welcome other shareholder comments on the below value perspectives/assumptions:

A. Stand-alone ITX (Organic growth option):

1. For absolute clarity, when mentioning “steady SP growth” I was certainly not referring to modest 10%-15% p.a. SP growth since my conservative case for price accretion is at least aligned with revenue growth (c.50% p.a), so doubling every 2 years as a minimum in other words.

2. However, in the background, I still believe ITX stock is sitting at an unreasonable discount (hence material SP upside) to the past professional institutional investor round of c.5p in old money, equating to c.250p in current aggregated new money (ie c.33% optical disc gap). This discount could easily unwind at any point going forwards during 2025 (e.g. if its confirmed good 2024A results and possibly upscaled Mgt/Broker 2025F consensus). The business has moved on considerably in many ways since the original fund raise (but obviously partially offset by year delay to breakeven by customer being rejected by Board from position of strength). Nevertheless, I still see there to be a mis-alignment from prior large professional investor round.

3. Unpredictable further additional SP upside/cream from new diversification channel advance wins (super absorbents, paints etc), or more rapid ITX adoption by any single large customer accts in leather/EMEA/Asia may materially uptick the SP further in lumps.

B. Trade Sale (Future exit option):

1. I believe a very large bid premium (of at least c.100%) will have to be offered above the currently observed SP to buy-out all investors even after also assuming the above point 2 discount being unwound to c.250p (a kind of minority base value). So minimum 500p exit is my view equating to 10p old money as at Q1 2025. This is above the last Broker report guidance before the latest out-perform 2024 RNS, but I still do not believe present major II & mgt shareholders would consider an exit at anything less than this threshold (or higher?).

2. Further upside to trade sale possibility as we further grow/diversify/make market impact during 2025.

3. Exact exit price depends on many factors plus synergies with acquiror entity so could be even higher exit price upside to be paid over (aligning with peak share price or above) due to (a) scarcity of ITX and (b) its strong patent portfolio.

Further comments/perspectives welcome. DYOR

Going forwards in 2025, I do believe we are now on the cusp of steady SP growth with our new 'high profit/high performance ingredient focused' business strategy after taking the hit to eject a highly distracting and possibly time wasting 'low profit customer'. With the benefit of hindsight that move appears to have been a supportable, well considered ITX Board action that transforms the company for the better in the medium/long term. So now we have our focused strategy in place with higher margin potential, a great new web site, higher market noise/wider BD aligned with motivated distribution/manufacturing tech. partners and an ability to deliver at scale (on time) given new overnight production capacity. We also have smart, well thought-out marketing campaigns (ie 'together with nature' brand messaging, plus client/BD sales funnel expansionary SPARX catalysts) alongside to encourage collaborative customer switching to ITX).

Lets not forget that much of the specialist ITX ingredients business is supplied to clients & channels of very low embedded diversified risk (strong global/national FMCG brands like RB etc). Shareholders do need not chase the company for immediate results RNS notifications in the 'next week'! Let them deliver the growth then we will all benefit big time either via organic growth alone or via lucrative trade sale exit becoming a R&D tech bolt-on for a much larger player of which there are many in this sector that must be looking at product sustainability/decarbonizing engines of growth.

DYOR.

AJP - I'm not sure its a 'premium ' being paid at 175p (3.5p in old money), just slightly less of a bargain I would say since lots of upside left in C/Y 2025 forecast / growth trajectory :-). Won't be surprised if 175p looks v. cheap in 2 months time.

Typo net worth!

Dont forget that c£ 80m+ has been invested to date from memory but pls verify. ITX has now largely built the protected R&D chemistry platform / IP and global BD engine so as further investment accrues (simple business plan logic) this will eventually feed into the next worth of the company. If we are demonstrating growth in cleaning products plus material diversification applications in new market channels ( new orders in new spaces) this company will get acquired at a premium. Its only steady as we go, keep growing and a handsome payback becomes a step closer. 2025 seems a pivotal year so let's see what the 2024 performance readout is and invest from there.

AI search: Brenntag are an aligned market access collaborator: "Brenntag North America and Itaconix have teamed up to distribute sustainable cleaning polymers. This collaboration aims to promote the performance, safety, and sustainability benefits of Itaconix cleaning polymers to Brenntag North America's extensive customer base in the United States, Canada, and Mexico2. The partnership will help reach over 2,000 household, industrial, and institutional customers2.

Itaconix's CEO, John Shaw, mentioned that this collaboration would allow their plant-based solutions to reach a broader range of cleaning applications2. Brenntag North America, a subsidiary of Brenntag SE, has the market presence and technical support to make this possible"

Happy new years eve all. thx AJP - we have to assume ITX ingredients are now a ubiquitous additive for 2025+ cleaning and homecare product applications otherwise patent filings would not refer to the ITX chemistry. All poditive directionally and especially since Proctor and Gamble is a massive FMCG company with presumably other product lines like super absorbant napies if my memory serves me right.

AJP or others can confirm but I believe we have strong patent moats on all forms of the product variant "Sodium poly itaconate " - its the complex chain polymerised molecule (not simple itaconic acid) that ringfences functionality for certain market applications. The latter is used widely in industry applications but we are targeting solely the high value high functionality value ingredient markets. This is driving the 50% vol growth p.a. since nobody else can legally supply. :-)