Evolva Holding S.A.

Thanks operator, and good morning, everyone, and welcome to the call. Before we begin, we need to take care of a few formalities.

So, during this call, we will make forward-looking statements about the events and circumstances that have not yet occurred, including projections of Evolva’s operating activities, our strategic plans, and the anticipated financial impact on our business and financial results in 2019 and beyond. So such forward-looking statements are subject to known and unknown risks, uncertainties and other factors, which may result in a substantial divergence between the actual results, financial situation, the development or performance of the Company and those explicitly or implicitly presumed in these statements.

Against the background of these uncertainties, participants in this call should not place undue reliance on forward-looking statements. The Company assumes no responsibility to update forward-looking statements or to adapt them to future events or developments.

In today's call Oliver Walker and Scott Fabro will elaborate the progress achieved in the first half and will be available for Q&A afterwards. Before we begin, I'd like to note that the press release and the slides and the accounts are available for download on our website.

The call is being recorded and will be made available for playback as a podcast on Evolva’s website later on. With this, I’ll turn over the call to Oliver.

Thank you, Paul. Good morning, good afternoon and welcome also from my side.

Let's jump right into our presentation deck starting with Slide 4. We have made further significant progress since we reported last time.

It started to benefit from improved operational structure and business processes, which is not only materializing in the lower cash flow, but it helps also in both driving the business operationally and in preparing to open major new markets. And we have made the major steps in becoming a predictable company.

To this effect, the half year 2019 results confirmed our full-year guidance. Our current businesses F&F as well as dietary supplements are delivering market share gains.

F&F at a higher pace as dietary supplements have a longer sales cycle and as we continue to follow a selective approach in order to build a sustainable dietary supplements business. Two ongoing landmark studies are expected to generate robust data on the health benefits of Resveratrol.

This will heavily support our approach in not only driving market share gain but in creating growth too. The expansion of our product portfolio is ongoing and will support future product revenue growth.

At this point, we talk about variance of existing products such as different grades that cover additional customer needs thereby opening additional business opportunities for Evolva. Last but not least, our preparations are ongoing to open major new market segments.

Over the past months, we have been in a good constructive dialogue with EPA. By mid September, we will have answered all the questions that have been raised by EPA.

The additional information will help to interpret the one specific study for which EPA could not yet complete its review. Additionally, our product pipeline activities have progressed well.

We expect to launch a new product i.e. a new compound in the course of 2020.

Let’s switch over to Slide 5, which is summarizing the progress that we made from a financial as well as the business point of view. With this, we continue to be on track to reach cash breakeven in the 2021 to 2023 timeframe.

Now before running through some of our financials and providing a strategy update, can you please, Scott, provide an update on our different businesses? Scott, please?

Yes, thank you, Oliver. Good morning, good afternoon everyone.

So as usual, my comments refer to the commercial portion of the update. So on Slide 6, you will see the business update for the F&F segment, our Flavors & Fragrances segment, which has been growing with global and local customers in the first part of the year.

Our valencene 80, a new variant of nootkatone, were well received by customers. We are preparing an additional Contract Manufacturing Organization or CMO for starting and scaling up manufacture.

We continue to progress on product portfolio expansion and further additions to the F&F product portfolio are anticipated in the near future. If you look at Slide 7, you can see we have been in close interaction with the EPA, as Oliver stated, since March 2019.

So, we are providing answers to all of their questions. The agency identified one study for which it could not complete its review and requested further information to interpret the study.

MOVING on to Slide 8, we see here how Resveratrol continues to generate solid sales in 2019. We are opening up new markets for Resveratrol with recent approvals in Australia and Canada received in this spring of 2019, and we also launched the Veri-Sperse brand in April of 2019.

Moving on to Slide 9, just a quick update on EverSweet, as Cargill was building out a new fermentation facility at the site in Blair, Nebraska in the United States, which will result in an increased capacity. EverSweet royalty payments are expected to increase upon the completion of Cargill’s new fermentation facility.

I think reiterating, what we’ve already told you, that we’ve made good progress on our key products in the first half of the year. So with that, I can hand it back to you Oliver.

Thank you, Scott. Let me now provide you with some additional comments on our financial performance for this we move to Slide 10.

As you can see from the slide, we have made progress on all levels in supplies as well to the product contribution, so sales minus product manufacturing cost, as we have made progress in lowering product costs. In the meantime, the share of product revenues, with the positive product contribution has increased to about 50%.

Finally, when looking at the cash position at the end of June 2019, please remember that the last payments of liability related to the EverSweet business in the amount of around CHF5 million has been done in the course of the first half of 2019, which is in the end non-recurring item. The next two slides Slide 11 and 12 are further detailing the financials and show the improvements achieved with respect to our operational structure and business processes.

Now let's move on to Slide 13. Focus areas over midterm, a lot of the items on that list are already known others however are even new or have changed in terms of their characteristics and quality.

Regarding commercial execution, we generally operate the combination of the account management and the network of distributors, while we continue to strengthen our approach in the markets we address currently. We are working on the future structure of a pest control business that is capable to service customers in different categories such as skin repellent or backyard.

Building on our core R&D capabilities, we are stepwise strengthening our skills to systematically lower product manufacturing costs and to built and effectively manage a network of CMOs. These capabilities may well become a significant competitive advantage too.

The third follow up point on the business development refers A, to continue developing variants of existing products, as already explained and thereby making our product portfolio more comprehensive. And B, to continue developing compounds that are already part of our pipeline and time to marketing of more than 36 months, seen over everything discipline and relentlessness will breed success.

Let's move on now to Slide 14, which shows you which markets we are currently already addressing and which ones we will address in the future. You find on the X-axis, the year when opening a market segments and on the Y-axis the level of market share, which we have achieved so far.

The size of the bubbles indicates the size of addressed markets in the year generating the first product revenues. As you can see, we operate currently in much smaller markets compared to the segments we plan to open over the foreseeable future.

The comparably smaller markets potential of the current market segments is consequently limiting the product revenue possible to generate. However, having said this, we are making solid progress gaining market share in these rather small market segments as already also explained by Scott.

This also confirms customer demand for our products, their specific characteristics, quality and our consistent supply. In order to break into the new market at a good pace, we have amongst other things built a pipeline of close to 100 customers' prospects in pest control and for our new products we plan to launch in 2020.

We will be able to leverage existing distribution channels in the market segments we already operate in F&F as well as dietary supplements and therefore already have customer addressed. Before concluding our presentation, some few remarks on our full-year guidance, you find it on Slide 15.

As already mentioned, half year 2019 results confirm our guidance. As the year 2019 is progressing, point in time when Cargill U.S.

fermentation facility to EverSweet will go online is approaching as Scott just mentioned. And since we will have answered all the questions asked by the EPA by mid-September, we look forward to the next step in the registration process.

With this, we conclude our presentation and we can now start with the Q&A session. So, operator, please?

Good morning gentlemen. I have three questions.

First of all, are you prepared to give any more detail on this new product that you are preparing to launch in 2020? And secondly, in terms of the EPA, you’ve outlined that you will be answering all the questions by mid-September and you look forward to the next steps.

Are you prepared to give any kind of indication of the timeline in terms of these next steps? And in terms of vanillin specifically, you seem to be a little bit more positive on this than you have been in the more recent past.

Can you give us an update on what you think has changed here? Thank you.

Thanks Sara, for all these questions. So, the new products actually we will disclose eventually some more details, I think we will sort of become descriptive for comparative reasons we will actually not disclose everything upfront.

But we will give you actually sufficient information that you can sort of, how to say, get your arms around understanding the potential, what kind of market segments and applications it is addressing, how the take up will go. So again, talking about distribution channel and how we leverage existing distribution channel, sales organization, so that’s really our approach.

In terms of EPA, yes we’ve been actually not really say anything on top of what we have said, because, in the end, it is a registration process that is driven certainly by EPA that’s their, how to say, ultimate function as well to protect the environments and the American population. And they certainly do a very diligent job, which we all are appreciating also us even though certainly it is taking time.

I can only say, we have never been closer to the registration finalizing than we have been now, that’s all I can say and we hope that it’s doesn’t take actually too long from now onwards. But in the end we have to satisfy and we have to make sure that EPA is satisfied in terms of their assessment.

Now the three questions you have brought up, vanillin, I already did some, how to say statements a little bit regarding vanillin that there is more potential in the past. We have in the meantime a little bit looked more closely into this market opportunity, and from our perspective actually there are ways of unlocking a little bit the potential in general, that’s something that’s actually being sort of, how to say, tackled by our partnership that we have with IFF.

So this is ordinary course of business. And I think, we just have not mentioned vanillin in the past years even anymore, which is a missed opportunity, because it’s significant market, it’s a significant opportunity.

And in the end it has taken certainly time on build, let’s say, everything is matured enough to start executing also on the sales front. So, in this respect, we don’t want to create huge expectations absolutely not, but it’s something that we are having put back on our radar screen and should actually be sort of one of the many topics actually we discussed when discussing Evolva.

My first would be on the discussions with the EPA surrounding the approval of nootkatone. As far as I remember, back in the January, February times, the time of the full year results, your Evolva was comfortable in providing more explicit guidance of when it's expecting approval to occur.

But now, the statements are limited to saying well, the submission have been completed with regards to the EPA's questions on this one study. What prevents the Company from making any prediction about when it will receive approval?

My second question is on the start-up of timings for the Cargill facility under construction in Blair, Nebraska. When is this expected, my understanding is that it is sometime in mid-2020, is this correct?

Do you have any visibility over how the order book is looking, if this is going to be ramped very quickly or if there'll be some spare capacity for several years? And my final one is on the tax.

Just more technical question, for modeling purposes, is it correct to simply assume a tax charge of zero for the next few years given with the deferred tax assets? I think the release refers to them as being exhausted.

Thanks Sebastian for these questions. I think and actually our Head of Finance, Alessandro Del Fabro is also present with us in the room, and he was also nodding.

So, your assumption on taxes is absolutely correct. And in terms of EPA, in the end, there is always upfront a certain time schedule that is sort of officially in place.

And once you hit delays, which we have and which I don't know if I should really call it delay, because in the end it is really to make the case more robust, and in this sense, actually probably it's not really a delay is perhaps a delay over what we have said before, but not in terms of the ultimate registration process. It's a solidification on list and in this context, I have to say that we have started to abstain from coming up with any expectation because if there would be some further questions we would be proven wrong that actually our predictions were again sort of too optimistic.

And in the end, as I've already mentioned, EPAs has which we support to do a fine job diligently assessing, not only the compound, but also everything around. And in this context, I think it's only fair actually to somehow abstain from predictions, precise predictions on timing.

As I mentioned before, we have never been closer. I would say to the final stage of the registration process, both EPA will do the assessment of the additional information, which we have submitted, which certainly is we are heavily supported by service providers, multiple of them, which has exhausting experience in that field and some of them have even worked at EPA themselves.

So in this respect, we are well, well, well, how to say, supportive that's all fine. But overall and you will hear me talking, you understand why we want to abstain from specific how to say, schedule or predictions in terms of timing.

The Cargill question, I'll actually hand over to Scott because then it's not only me talking, and Scott actually, that's one of his favorable topics, actually the whole beverage area and him coming also from Cargill, he is certainly the right person to answer or the best person to answer this question.

Yes, hi. Thank you for the question.

Thanks, Oliver. With regards to any commercial questions, of course, that are asked regarding EverSweet and Cargill et cetera, and the new organization formed named [Avancia] should be directed to [Avancia], as they've taken over and are responsible for all commercial activities with regards to the comments on Blair, the expectation is sometime late 2019.

Yes, but I think earlier than what you have assumed Sebastian.

That makes sense. So, a quick last one on market share since this was mentioned on the call.

Could you give an idea of what the market share is in nootkatone? So I remember back when Evolva was publishing market share data on this and there were things available.

The total market share given for nootkatone was typically all global size was about $30 million worldwide, maybe a touch more. If I think, if I just say, what majority on product sales that Evolva is making $3 million or so in half one, let's say, you do 9ish million or $8 million for the full year and the majority of that is nootkatone.

Am I right in saying that you are heading towards 25%-ish market share in the Flavors & Fragrances area for this product? Or...

The numbers are probably in terms of market side a little bit clearly too high in terms of what nootkatone concerns. On the internal numbers, I think I abstain from any comments because our numbers, because we have issued and confirmed the guidance, so the guidance remains the guidance.

In terms of market share publication, we don't do that for the simple reason that, and that's one of the comment that we have also made, the product portfolio, we are expanding and with all product portfolio expansions we are actually increasing the market that we can address. And sometimes and which happens now to be the case for nootkatone and actually valencene in the future also very much, we can offer both compounds actually at, how to say, you can call it affordable prices, which all sudden is triggering some of our customers to think of taking up our compound into some of their formulations and some of their products, which have not been the case yet, because it was not the available at affordable prices.

Some of these compounds have not been available at affordable prices. So, which means that, the market size is actually moving target and that's the reason why we abstain from market share numbers because, if the market potential is just increasing, then certainly our market share would come down for a moment until we have exploited this new market opportunities.

And then it looks a little bit stupid you know and it's hard to track, if it's going up and down and up and down. I think, what we want to, how we want to actually guide, all of you is really through the guidance how we do it now with this whole trend line perhaps sometimes we can give more specific numbers.

And in terms of market share, it's more an indication like on slide, what is it 13 or 14 actually, it should be Slide 14 with the bubble where it is classified. So, it’s more a classification rather than specific numbers because for the reasons I explained.

Actually, we may look sometimes a little bit stupid or the numbers may look stupid, much more, and therefore we abstain from specific numbers on this, for this part of the Company.

Sure thing very last one from me and thank you for your patience. Are you intending to ever make use of the Yorkville financing that I think is still available given that your cash breakeven would probably require one last push either on the debt or equity side before you get there have a look to things?

That’s a very good question too. So all of your questions, like the others before, but -- and well, you called it out already, we have the last push which we already also communicated and I think you're clearly set for more of a tactical let’s say instrument, which would be more like if you would see an opportunity to raise capital, because it is, there is good liquidity, what I care we could quickly do it, and it is at reasonable cost.

Yes, then we made -- we would potentially do that, but in general, we prefer actually to welcome all the shareholders equally. I think we are in Switzerland, so write-offering is our tradition, if it would be an equity raise.

And if it actually debt, it has to be certainly also economic for eventually our shareholders to do so. So, therefore, we do not plan exactly now to use like the Yorkville instruments not at all, there is no plan.

If we would do so, the actually constellation would have to actually sort of support utilization of this instrument other than that actually, we prefer of going one of the other directions I just mentioned.

Yes, please my English is not so perfect, but I have already joined Annual Meeting and today and already at Annual Meeting, you are always presenting such positive outlooks. On the other hand, for shareholder, which are already engaged a long time it's great frustration to accept where the worth of the shares are going to.

I really don’t understand how it could be that since the Annual meeting, the shares already lost the gain of more than 50% afterwards. Can you say anything to that?

Yes, I mean what I can say to this is clearly that I cannot say and don’t want to comment anything on this, because I think capital markets is for, how to say, has a lot of influencing factors and now a little bit gloomier in terms of the general economic outlook. That’s one of the discussions, then you have the trade war between U.S.

and China et cetera, there are lots of factors influencing share prices of companies in general including ours. You have asset allocations actually to different categories of investment clusters that may change.

The environment is also changing, that has an impact actually on companies, not only ours, but in general. And we were, how to say, certainly also not surprised about this share price developments, but our duty actually is to do what we have to do from an operational and strategic point of view.

We have to first develop the Company, and it's not upon us actually to comment or trying to influence directly in a bad way. In the end the share price, what we shall do is influencing the share price by doing good things for the Company.

And I think that's the general comment I do or make with many of your colleagues are being invested in us and other start-ups, it is taking time. This is unfortunately the case you have heard, Sebastian Bray asking the question around, predicting timelines on EPA, which we cannot for the many reasons I have explained.

And in the end, you have to understand also that we have to be compliant with law and regulations, which makes us abstaining also from making some comments, which we privately would do make, but actually not in this professional context. So, in this respect, I actually have to refer you back to the bankers, the investors, to how to say, give you more explanation.

I can only tell you what genuinely is taking place in our company and that's what you have already referenced to which the last time you have heard at the AGM which you hear today. I think in the future we try to set up a more constant news flow also, but we try still to come up with meaningful news, so not just a news flow for the sake of the news flow to keep all of your updates, and we will also continue sometimes with shareholder visits at our premises.

We have quite some success receiving 150 shareholders with us here in Reinach. Just so you know because we know it takes time a start-up actually to move things to just, how to say, give you more explanations, more provide you with more information to increase actually the level of understanding on your end what regards the Company, the valuation, respectively share price.

Again, I have to refer you back to your banker or the institutional investors. Unfortunately, I cannot, how to say, tell you anything in addition at this point in time.

Can you give us little bit more details also ramp up of the production of EverSweet and on the sector the license payments were increased?

Well, that's something I think Scott already also mentioned. I mean, if it is about prediction et cetera, Cargill is the much better company to ask and this and probably over time, respectively, a volunteer perhaps the JV will eventually also start communicating itself.

What we were actually only know is, what we received. So, we just know with the hindsight, we only can actually recognize what we received in terms of payment.

I think the only thing that is applicable here today as well is, you know, even though Cargill is a huge company, hugely professional, hugely experienced, has a great footholds, probably best foothold in the beverage business of any other business and is now, how to say, the efforts are amplified by DSM having joined. You see this also that market segments or let's say that compounds to establishing the market takes time.

Even though that's such a professional company and I would, actually, we are very positive in terms of EverSweet's future, but we do not know the information. And in the end, it's a little bit like with us you have to have patience.

I mean, we are showing progress and the same applies actually also to Cargill. We will see eventually the royalties rate increasing.

And as it continues, you know that they are opening up player. Obviously, volume is, how to say, is in ramp-up need.

So, there is need for opening up that site and ramping up volumes, because there is customer demand, otherwise they wouldn't do it.

Okay. Thanks a lot for everybody's attendance.

We hear each other again in some months' time and latest actually probably end of February with the full year results, and you should read from us actually via the news flow in the meantime. And we wish everyone good day and talk to the next time.

Thanks a lot for your attendance. And bye, bye.