Evolva Holding S.A.

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00:37 Yes. Thank you very much.

Good morning, ladies and gentlemen. Welcome to our full year 2021 results presentation.

Together with me here in the room is Carsten Daweritz. And let me say that I'm very happy that Carsten decided to stay on board and to be an integral part of the new leadership team to bring Evolva to the next level.

00:59 I draw your attention to the typical disclaimer on slide 2. That seems to take a while.

And if we could then go to the agenda [Technical Difficulty] introduce myself and share with you my first impressions during the first 2 weeks with Evolva. Second, we will discuss the most important business highlights of 2021.

And third, Carsten will go through the full year 2021 results in more detail. And fourth, we would like to give you a first outlook towards 2022 and forward, with a Q&A session at the end of the formal presentation.

02:07 So, let me introduce myself briefly. My name is Christian Wichert.

I'm 40 years -- 48 years old and German. However, I lived and worked in Brazil, Switzerland, U.S.

and Portugal. So by now, I shouldn't be too German, I guess.

I'm a husband and proud father of 3 daughters and a runner skier and wind surfer when time allows. Passion is very important for me for everything I do, and colleagues would describe me as people driven as 50% on my time is HR related, because I do believe that I'm passionate for people.

I value transparency a lot, which I would like to bring to the table, because only if you focus and face the brutal effects, you can do something about it and find the best possible solution to a problem maybe internally or for customer. 03:02 I bring to the table 20 years of experience in life sciences, which mostly happened in specialty chemicals, but also in medical devices and accelerating commercial growth as well as transformation and change has always been my sweet spot, focusing on creating value for customers and maximizing that value to capture -- capturing the value for the company and its shareholders.

Coming from the performance culture, focus and deliver is one of my models. So let's make Evolva a great place where results count and people met up.

03:39 On the next slide, I would like to share with you my first impressions after 4 weeks as CEO of Evolva. And I can tell you, I have met really good people, very experienced, highly skilled and knowledgeable and most importantly, open and willing to win.

Especially the operations team has impressed me a lot with substantial improvements to our manufacturing capabilities. Furthermore, we are serving very attractive market segments with products, which are addressing the mega trends of our world.

But there is also clear improvement potential visible, and that is actually good news, because that ultimately drive the potential going forward. 04:25 We will certainly look at our business model, how we create value and how we capture that value.

This will be further detailed in Chris go to market strategies, per segment and per product. And there's also improvement potential with regards to the sales effectiveness area.

How we manage our sales pipeline and our sales process. And finally, we will need to ask ourselves, not only how to improve our cost discipline, but also what we can afford going forward.

04:57 Overall, I think Evolva is an exciting early stage company with a great purpose, people and technologies. And I'm very excited to be on board now to help boost our commercial performance and reach our full potential together with the entire team.

05:19 Let now come to the business highlights of 2021. Headline news, Evolva is continuing its transformation to commercial stage biotech company, and that you see on the left side.

Evolving from a pure R&D focus towards a business model based on product ingredients sales. Well positioned at the core of the 3 megatrends, health, wellness and sustainability.

We have now 6 products on the market, and we have strengthened our operations capabilities with higher capacities and delivery quality at lower cost. This is reflected in growing product related revenues, which is here on the right hand side of the slide, over the last 4 years at CAGR of 46% with 2021 being now at 40% sales growth.

06:18 On the next slide, actually on the next 3 slides we would like to give you a little bit more insight and more transparency on the business units. So here the business segment, as you can see, we have 3 promising business segments, 2 of which are core with flavors and fragrances, F&F and health ingredients, HI.

So in F&F, we provide nature based ingredients the to flavor and fragrance industry that helps solve nature supply chain and resource bottlenecks. Products here are Valencene, Nootkatone, Vanillin and L-Arabinose.

In the middle here in HI, we supply nature based ingredients for dietary supplements and cosmetics, contributing to health and wellness of consumers And here we see our Resveratrol, L-Arabinose and EverSweet’s Stevia as our products. On the right is health protection, which is our developing business segment with NootkaShield being a nature based solution with high efficacy to protect humans and pets against insects and corresponding illnesses.

07:37 Now going a little bit further into detail. Flavors and fragrances grew in 2021 over 2020 by 48% from CHF2 million to CHF2.9 million based on increased customer activity during 2021.

New product development projects have partially restarted after the pandemic slowdown in 2020 and we see an increased number of product approvals at key accounts. While our recurring business was picking up, we also broadened our customer base with new customers.

Key drivers for 2022 are further expanding our direct customer base, developing Vanillin sales with our partner IFF and an increased focus on our launch activities for natural Nootkatone. 08:35 Regarding HI, we grew in 2021 over 2020 by 46% from CHF4.3 million to CHF6.2 million on the back of proven benefits of our products.

Most important highlight here was that we were able to secure the production of Resveratrol as of Q2 2021. We have seen global interest in new product development using our Veri-te trademark for cobranding and especially for immune health applications.

09:10 Key drivers for 2022 are expanding our direct customer base and increased focus on new product development projects with key customers in the U.S. and Europe.

2 ongoing clinical studies are expected to further strengthen the value proposition of our products here. We will also accelerate our market activities both for animal helps, as well as for the launch of L-Arabinose.

And finally, we expect growing EverSweet royalties in 2022. 09:46 You saw a bullet point on the former slide regarding the RESHAW study.

We would like to highlight specifically this award winning study, the largest clinical study investigating the effects of Resveratrol on women's healthy aging. Evolva’s Resveratrol called Veri-te was exclusively selected for its differentiated quality and high purity here.

And the results clearly prove our Veri-te’s strong benefits for cognitive health, well-being, bone mineral density, reduced risk of fractures and lower pain perception. With that, Evolva’s Veri-te is a very effective ingredient for customer formulations for this growing segment of women's health aging.

10:41 Next slide regarding operations. I think we mentioned that already a couple of times, but let me go into more detail here.

Gerhard Lobmaier, our Chief Operations Officer and his team have significantly strengthened our CMO network and reduced our cost structure, which can be seen already in the positive gross contribution in Q4 2021. They stabilized main production processes and eliminated production issues of the past, especially regarding Resveratrol.

11:14 Four products are on stock for customer deliveries and we are moving additional products through the scale up towards production, like Resveratrol API, L-Arabinose , Valencene and Valencene 94% as well as Nootkatone. And with our partner IFF, we further expand the development and commercialization of Vanillin during 2022.

11:41 For the financial part I would like to hand over to our CFO, Carsten.

11:46 Good morning, ladies and gentlemen, and welcome to the financial part of our results presentation. Thank you, Christian for your initial statements.

I'm also very happy to be back on board, and I’m looking forward unfolding Evolva’s potential together with Christian and the team in the years to come. 12:05 Let us first look at the financial highlights.

Our financial highlights for 2021 is, first and foremost, our continued sales growth. With total revenues close to CHF10 million, a 31% growth rate versus prior year performance.

And with our continued shift from R&D to commercial revenue, our product related revenue grew even more by 40% to CHF9.1 million. We are introducing gross contribution as a key performance measure, where we now achieved breakeven even in Q4 2021.

I will come back to the definition of gross contribution later on in the presentation. 12:54 In terms of profitability, adjusted EBITDA came in at minus CHF22.6 million, which is a decline of 41% compared to 2020 and is mainly driven by operational startup costs.

We ended the year with a cash balance of CHF11 million and available financing lines of $26 million. 13:22 On the next slide, I would like to comment on the P&L.

We see the already mentioned 40% increase in product related revenue, growing from CHF6.6 million to CHF9.1 million. As we continue the shift from R&D to commercial revenue, a reduction in R& D revenue from CHF1 million to CHF0.7 million and total revenue increasing from CHF7.5 million to CHF9.9 million.

Gross profits declined from minus CHF2.2 million to minus CHF9.3 million, which is mainly driven by the operational startup up costs and costs for enlarging our supplier base. These costs amounted to $5.6 million in 2021.

14:16 Our recurring expenses remained almost flat with an only 2% increase versus prior year. And total operating expenses increased by CHF10 million due to a non-recurring impairment charge which is related to patents and patent applications of CHF9.6 million following a strategic review which we already communicated at our half year results presentation.

The extraordinary operating expenses of CHF0.7 million relate to expenses from government contracts originating in prior years. 14:55 So overall, this resulted in an adjusted EBIT of minus CHF31.2 million down from minus CHF24.2 million in 2020 and an adjusted EBITDA of minus CHF22.6 million, which is CHF6.6 million below 2020 EBITDA -- adjusted EBITDA.

Basically reflecting the CHF5.6 million startup up costs which I previously mentioned. 15:23 So to summarize the P&L.

Out of our products revenue growth of 40%, we still have a negative EBITDA due to the operational startup costs and costs for enlarging our supplier base, which is obviously included in the EBITDA. And which leads me to the next slide to the gross contribution.

As gross contribution going forward will serve as a key performance measure for us. 15:58 We differentiate the variable direct production cost, which are basically the manufacturing costs at our CMO partners from our internal fixed cost components.

In order to become profitable, our top line growth will need to deliver a positive contribution margin, meaning, we will sell above our external manufacturing costs. We were now at breakeven even gross contribution in Q4 2021, and we expect to deliver a double digit gross contribution margin for the full year 2022.

So growing forward, gross contribution will help us to steer and grow profitability by product and customer, materializing on further efficiency gains. 16:51 Now, I would like to give a bit more insight into our balance sheet moving to the assets.

Intangible assets reduced by CHF9.6 million as already mentioned due to the extraordinary impairment charge in patents and patent applications. Our net working capital increased, driven by a buildup of finished products in the amount of CHF6.8 million.

This is mainly driven by an increase in finished goods. This will help us to allow -- this will have us for sales opportunities across all products this year.

And as you remember, we were not able to fulfill all customer orders in 2020, this is very important for us as we have now a completely different situation able to supply our customers with the full range of products. At year end 2021, we had a cash balance of CHF11 million and available financing lines of CHF26 million with Nice & Green.

18:01Looking now at the other side of the balance sheet, our equity increased through placements to Nice & Green in the amount of CHF20 million and Veraison CHF7.5 million. Through our net loss of minus CHF41 million, the overall equity balance reduced to CHF131.8 million.

Non-current liabilities increased due to the settlement agreements for our government contracts which shifted liabilities from current to non-current. Current liabilities include an increase of the convertible loan with Nice & Green.

18:42 Moving now to the operating free cash flow on the next slide. Coming from a cash opening balance on CHF19.7 million end of 2020, cash outflow from operating activities amounted to CHF29.8 million in 2021.

This includes the previously mentioned CHF5.6 million startup related costs, and the increase of net working capital in the amount of CHF7.5 million. 19:13 Investing activities, totaling cash flow -- cash outflow of CHF4.6 million include capitalized development expenses of CHF3.4 million and a loan to one of our manufacturing partners in the amount of CHF1.9 million We freed up CHF1.1 million in cash by reducing our rent deposits in the amount of CHF1.1 million.

Cash flow from financing activities of CHF25.7 million reflect [indiscernible] from Nice & Green during the year and additional capital in Q4 from our new anchor shareholder Veraison. 19:56 With this, I would like to hand back to Christian for comments on our business outlook.

20:02 Yeah. Thanks, Carsten.

So to give you an outlook for 2022 and forward, we will immediately focus on 3 levers. First and foremost, boost our commercial performance, the moto here is focus and deliver.

Focus on target customers with clear value propositions and manage our sales process effectively. Second, foster across discipline culture, the model here is run a tied ship where we will allocate our capital to focus areas with real impact and execute our activities with spending discipline.

And then third, change our culture to become more entrepreneurial, fast, agile and work as a team. Here the moto is all hands on deck.

20:55 In addition, we are exploring several potential strategic partnerships to further strengthen our operational and commercial capabilities for which we proposed the creation of 20% conditional capital at the AGM to allow for strategic and financial flexibility. 21:15 For our shareholders, we will provide better transparency on our business performance and visibility on the progress we will make from now on.

We are committed to provide a clearer yearly guidance and have skin in the game for higher accountability. Most important, we will walk the talk and are committed to deliver our promises.

Regarding governance, the board considers to propose several measures to strengthen the shareholder rights at the next AGM. 21:50 Our guidance for 2022 is to grow our revenues by around 50% to CHF15 million at a constant exchange rates at a positive double digit gross contribution margin.

We are currently reviewing our strategy and midterm targets and we will present more details at the latest with our half year report in August 2022. 22:20 So in summary, Evolva is well positioned to capitalize on the global megatrend, health, wellness and sustainability.

Providing products from a precision fermentation platform with proprietary technology. Operations capabilities are strengthened and positive gross contribution margins will now allow for profitable growth going forward.

And finally, we have reinforced governance and leadership. And I'm excited to bring Evolva now to the next level, together with the entire team.

And we're now happy to answer your questions in the Q&A session. 23:08 Operator, we are ready to take the questions.

23:37 Good morning. I have two questions, please.

First of all, could you perhaps talk about cash breakeven? You had talked about it in the past, and I understand there's probably a midterm target that is currently being reviewed, but can you give any indication on that?

And secondly, you've talked about discussions with strategic partners at both an operations and a commercial level. Can you expand on this, please?

Thank you.

24:08 So, Carsten, would you like to take the first one, I would then take the second.

24:14 I’m happy to take the first question. Thank you, Sara.

We are currently reviewing our strategy and also our midterm guidance, which we will present at latest in August at out half year results presentations. So at this point, we cannot give you a concrete date for cash breakeven.

24:35 Regarding your second -- Sara, regarding your second question, regarding strategic partners. Also here, I would like to come back to you later this year in August, because we obviously cannot disclose any kind of activities going on at the moment.

But for better transparency, we are evaluating various strategic partnerships to strengthen our operational and commercial activities, as well as clearly working on our business model and therefore, allow me some more time to work with the team over the next weeks and months and come back to you on that.

25:15 Okay. Thank you very much.

25:26 Hi. 2 questions for me.

So firstly, now that the majority of the cost optimization has been done, what will be the main source of operating costs going forward? And then secondly, do you have any -- is there any progress with NootkaShield like with the formulation work that was ongoing?

Thank you.

25:54 Yeah. Thanks for the questions.

I think I will take both. In regards to cost optimization done.

I would not go so far, because we will obviously over the next weeks end months refine our value proposition and also our strategy overall. And cost optimization will be a constant topic in operations, but we will obviously now shift our focus towards commercialization where we will concentrate on topics around sales, process management, as well as clearly also how we capture the value which we create.

26:34 In regards to your second question with NootkaShields, I think we are making a lot of progress, you have seen in recent calls, the regulatory environment and we are now working on market ready [indiscernible] which are going to be sold in Southeast Asia with interesting partners there. And we believe that this is very interesting for us as proof of concept, which will obviously also be used for the market entry in the U.S.

27:13 Okay, thank you. And sorry, I just have one more question on inventory.

So what do you expect inventory to be in 2022?

27:25 Carsten.

27:26 We expect inventories to be at a similar level basically as we are growing sales, we also improve all our operations network and continue to optimize our costs going forward.

27:40 And maybe some addition to that. Obviously, whenever we start activities in regards to commercial -- boosting commercial performance, this will take some time until we really see the full impact in the market.

And therefore, this position will obviously fluctuate over time.

28:06 Okay. Thank you.

28:16 Yeah. Good morning gentlemen.

I’d have 4 questions. Shall we do it in 2 round?

28:26 Well, why not?

28:29 Okay. So I keep it short, sorry.

The first one on your ramp of extraordinary cost, you had significant one in ’21, how big might they be in ‘22? That's the first.

Then on the EverSweet royalties, how big are they? I think you were also a little bit disappointed, how this is going [indiscernible] ?

And the third, your CMO problems you have are they solved or is it work in progress? And finally, the fourth, you didn't mention the EBITDA breakeven, again.

So is it a fair assumption that the target ’23 is very much out of range for you? Thank you very much.

29:19 Can you take the first one Carsten?

29:21Yes. I'm happy to take the first and actually the fourth one as well.

So starting with the extraordinary cost. We expect a significantly lower level in extraordinary cost for operations and startup costs in 2022 across customer majority of the work with enlarging also the supplier base adding CMO partners has been completed.

It doesn't mean that in the future we will not introduce new products and incur additional startup costs, but in 2022 certainly not at the level as in 2021. 29:57 And on the last question, EBITDA breakeven.

I mean, what we can say is that we will not reach EBITDA breakeven in 2023. As previously communicated or expected.

however, as mentioned earlier, we are now reviewing the midterm plan and we'll issue a midterm guidance at half year.

30:23 Yeah. If I then take number 2, number 3.

Eversweet royalties were disappointing in 2021. I think there we are obviously dependent on our partners here, we cannot influence that.

So in 2021, I think there were some impact of the pandemic, what we have heard also from our partners. But looking forward, we are expecting 2022 to see royalties picking up.

But unfortunately, we are also in a position to see and wait how 2021 will evolve, but our expectation is, as I outlined. 31:14 The third one regarding CMOs.

Yes, problems are solved because we have product available on stock across the board. And now it's up to our commercial team to show what we are made off and boost commercial performance.

However, I also want to outline that working with our CMOs is constant to always strive for efficiency gains and working with our COMs as strategic partners going forward. So this definitely a recurring activity.

31:53 Thank you.

32:06 Yes, Hello. Good morning gentlemen.

I have 2 questions. So first, can you maybe explain me what is the reason for the lower sales in absolute numbers that you have achieved in H2 versus H1?

I expect this also the case for Veraison. So is there a lower customer demand in the market or maybe if you could shed a little bit light on that?

32:29 And then the second question is on your ’22 sales growth target where you want to achieve 50% sales growth in local currencies, maybe if you could give a little bit more insight on the key drivers you expected to achieve that performance and also how much initial impact do you expect from your very new product? Thank you.

32:51 Yes. Thanks, Laura.

On the first question regarding lower sales in H2 versus H1. I think this is twofold.

First, the pandemic has definitely had an impact on new product development projects with our customers and have slowed that down. I think that should not be underestimated.

The second is, 2020 as you know, was characterized by production issues. And when we solved this in Q1 2021, I think our customers have then restocked with our available products over proportionally in H1.

And therefore, I think H1 has been stronger than H2. However, after 4.5 weeks, I always have to take this with a grain of salt.

But we are definitely a little disappointed on the H2 results. And now it's -- all hands on deck to boost our commercial performance going forward in 2022, which leads me to your second question regarding the 50% growth target.

34:11 We clearly see Vanillin as one of the key drivers for our performance in 2022, as well as much more focus in regards to our market activities, managing our sales processes, moving new and existing opportunities through the sales process by sales pipeline management, working with the team on clear value propositions along the first half of 2022, which I hope then will have an impact already in H2 2022 and then going forward.

35:05 Yes. Thank you.

Just one question, because I think I didn't really get the numbers. So what did you the royalties you received for Eversweet.

Could you actually give a number? Thank you.

35:20 We are not disclosing a number for the Eversweet royalties. They are part of the health ingredients number that we showed in the presentation.

35:31 Okay.

35:43 Hi. Just 2 follow-up from me.

First of all, just in terms of the shape of 2022, from all you said so far, is it therefore fair to assume that given the comparators being tougher in H1 and everything that’s going on, there will be -- effectively be a weaker H1 and a stronger H2? And secondly, on your product [indiscernible] do you expect it to contribute to sales for 2022?

Or is it going to be further out? Thank you.

36:18 So in regards to H1 versus H2 2022, as we are now starting to work with the team and all transformation and change related activities need some time. I would not be surprised if H2 would then come in stronger.

Also looking at our contributions from the Vanillin partnership with IFF. I would agree that H2 [Technical Difficulty] especially in comparison to H2 2021.

37:01 In regards to L-Arabinose. We have -- L-Arabinose is an interesting product, very interesting product for both of our business units.

Allow me to come back to that in more detail in August, because although I have a pretty good overview after 4.5 weeks, I would not like to comment on the representation of a specific product, especially when it's so new in regards to launch activities, but I think I have outlined before that we will accelerate our launch activities in regards to L-Arabinose, because it's a fantastic value proposition behind that product. But for 2022, I would see the focus probably on other products just like Resveratrol for example in regards to impact on our -- in regards to impact on our P&L.

38:08 Okay, great. Thanks very much.

38:32 Yes. Good morning, gentlemen.

A question regarding the relationship you guys have with Nice & Green. Can you be a little bit more specific.

i.e., Part of being sort of a life line in term of financing, what are there you'll keep it hold with Evolva? Thank you.

39:05 We had a little bit of difficulties to clearly understand every single word here, but that's probably more a technical issue. So I think your question is regarding the relationship with Nice & Green?

39:21 Yes.

39:22 Could you specify what exactly the -- where are you going with this question?

39:29 Well, I wanted to your guys to be more specific about the relationship with them in terms of your lifeline financing? And what are their Nice & Green interest with your guys?

39:51 So part of being there with the financing. I mean, we can’t comment on Nice & Green in regards to information available publicly out there.

I would refrain from any kind of comments in regards to their ambitions or intentions. I guess, that's the question probably you need to ask Nice & Green.

We have a very good relationship with Nice & Green and saw no issues to comment on.

40:29 Okay. Thank you.

40:42 Okay. I would like to thank you for your time and attention.

Ladies and gentlemen, as I said before, excited to help boost our commercial performance at Evolva and lead together with the team Evolva to the next level. And I hope that we see each other in the near future, hopefully in-person.

Thank you again for your time and attention. Goodbye.