Agilyx

Agilyx has announced that Cyclyx, alongside Cyclyx partners ExxonMobil and LyondellBasell, have reached FID for their first Cyclyx Facility (Cyclyx Circularity Centre, or “CCC”) and have approved to move forward into the construction phase. As a reminder, the Cyclyx Circularity Centre will be able to take on board a range of plastics currently going into landfill, process them, and produce 136ktpa of plastic feedstock for advanced and mechanical recycling. The company will receive cash flows in the form of a management fee (c. USD 7m to Cyclyx which is then distributed to Cyclyx’s partners on a proportional basis – this quantum could rise in the future if Agilyx provides project capital), as well as a royalty (USD 2.5m relating to use of background intellectual property) that goes straight to Agilyx.

Agilyx released a Q3 update this morning, with the focus being on the company’s recent repositioning of its business model. Revenues for the first 9 months came in at USD 10.9m, 14% down y/y, driven by customer facility maintenance affecting the Cyclyx side of the business in 2023. Down the P&L, the company noted continued improvement to gross margin contribution, while a reduction in headcount has resulted in a lower opex base (currently running at around USD 0.6m per month vs. USD 1.8m in H1 2023) which combined with the recent capital raise results in a fully funded business through 2024 (net cash of USD 8.2m in September, which was followed by a USD 20m capital raise in October). Away from the numbers, the company highlighted the recent changes to its business model; on the Agilyx side, the company will focus on waste-to-product applications whereby they are unique (asset-light model set to continue), while on the Cyclyx side the new business model will target construction of sequential cyclyx circularity centres (CCCs) with the first operational next year. Elsewhere, the company confirmed that the first customer plant, Toyo Styrene, remains on track for commissioning in Q1 2024, while the company has repaid their USD 5m bond thus leaving them debt-free.

Agilyx will hold a Q3 trading update investor call on 28 November. We expect the primary focus to be on the recent transaction and strategy update announcements, as well as a brief update on operations. The first point includes a capital injection of around USD 135m by ExxonMobil and LyondellBasell in Cyclyx for a stake in the waste sourcing platform, with the use of proceeds meant to push the Cyclyx Circularity Center (CCC) forward to FID, as well as cover construction costs through commissioning. As part of this announcement, the company also highlighted an update to the strategy of Cyclyx, with the company moving to a build-own-operate model on the Cyclyx side in the form of the future CCC; we expect the company to touch upon further details regarding future CCC economics in the trading update call. Elsewhere, we expect to hear details around operational developments on both sides of the business (as this is just a trading update, we do not expect to see a full set of accounts); on the conversion side, we hope to hear about progress at the Toyo Styrene project, as well as any updates on the Kumho and Technip partnerships. On the Cyclyx side, we are looking for updates related to Cyclyx volume deliveries. Lastly, we expect the company to share progress on the search for a new CEO, after the departure of Tim Stedman.

Agilyx released several operational and organizational announcements this evening which positions the company for a new phase of growth. First, the company announced that it has signed a binding agreement with ExxonMobil and LyondellBasell to invest in Cyclyx, the sourcing platform of Agilyx. In the agreement, LyondellBasell and ExxonMobil will together invest USD 135m (NOK 1.5bn) in Cyclyx for a stake in the platform. The use of proceeds will be to advance the Cyclyx Circularity Centre (CCC) to FID (expected in short order) as well as fund construction costs through commissioning (expected 2025). The first CCC is supported by offtake agreements from ExxonMobil and LyondellBasell, with the agreement also envisioning a second CCC. Post the transaction, Agilyx will own 50% of Cyclyx, with ExxonMobil and LyondellBasell owning 25% each. In addition to the initial investment, Agilyx this evening announced a proposed placing of around USD 15-20m in order to fund/support commercialization of key projects and the transformation to more of a “build/own/operate” approach. Finally, the company announced that Tim Stedmen will be stepping down as CEO of the company for personal reasons. Tim will remain as CEO until the end of the year with a search for his successor underway.

Agilyx's H1 2023 report noted progress, but macro uncertainty and lower customer production activity resulted in a softer-than-expected financial result, while the company's strategic update indicated a lower number of projects coming into development. We adjust our model to account for the lowered guidance, resulting in downward revisions to our estimates. EBITDA is still set to be positive for H2 2025, however, and the strategic update seems to be playing more to Agilyx's strengths. We continue to view Agilyx as uniquely positioned and our new fair value range of NOK 56-77 (62-85) continues to suggest long-term upside, while Cyclyx FIDs could be near-term triggers. Marketing material commissioned by Agilyx.

Agilyx published its H1 2023 report this morning, with progress in place and a back-end loaded 2023 on the cards, however a tough macro backdrop has caused an impact on pipeline conversion. The company posted revenues of USD 8.1m ( 4% growth y/y, 12% below NDA), with an almost doubling of conversion revenues (driven by Toyo Styrene) offsetting a decline in Cyclyx revenues. The reasons for this decline was due to lower customer production capacity due to facility maintenance. Down the P&L, gross margins remained positive (8%), and EBITDA came in at USD -10.5m, remaining negative as the company expands its footprint. Cash came in at USD 8m, which includes around USD 4m in pre-payments for the Cyclyx Circularity Centre in H2. Going forward, the company has noted that the macroeconomic backdrop has caused a slowdown to pipeline conversion, and alongside a sharpening of strategy (Agilyx will focus on select waste-to-product projects across polystyrene, PMMA and BTX) will target the development of three new projects per year (down from four).

Agilyx is reporting its H1 2023 results on 22 August, for which we pencil in revenue of USD 9m (18% y/y growth) and EBITDA of USD -9m. Away from the numbers, we see operational progress on both sides of the business as key; on the conversion side, we expect further details on Toyo Styrene and other announced facilities, while on the Cyclyx side, we are looking for updates around the Cyclyx Circularity Center (CCC) with ExxonMobil, as well as any further partnerships. We lower our near-term top-line estimates by single-digit percentage points to reflect our expectation of muted activity, but this does not affect our blended fair value range of NOK 62-84 – here, we calculate a conversion NPV of NOK 39, which implies that the market currently assigns no value to Cyclyx. Marketing material commissioned by Agilyx.

Agilyx released a positive update to their 10 tonne-per-day facility progress with Toyo Styrene this morning, with the project on track for commissioning in the first quarter of 2024. As a reminder, the facility in Japan will be the first polystyrene chemical recycling facility in Japan, which will have a capacity of 10 tonnes per day. In terms of progress specifics, the company confirmed that equipment testing had been successful in the US, with the equipment modules been shipped to Japan and Agilyx/Toyo Styrene teams completing site preparation and reassembly of the system.

Agilyx published its 2022 results on 25 April, with the report highlighting significant demand momentum for the Agilyx product. Revenues were USD 16.5m for 2022, up ~240% y/y, while the implied 15% gross margins for H2 resulted in a 2 pp gross margin increase for the year versus 2021 levels. Segmentally, Cyclyx output volumes tripled with the consortium now holding 37 members, while on the conversion side partnerships are delivering results. Going forward, continued construction revenues from Toyo Styrene and Cyclyx volumes will drive near-term sales, while triggers include FIDs on both the Cyclyx and conversion sides for 2023. Despite softening near-term sales growth and increasing our cost base, our fair value range of NOK 62-84 points to over 2x current share price levels at the bottom of the range, and thus Agilyx is a strong value proposition. Marketing material commissioned by Agilyx.

Agilyx published their FY 2022 report this morning, with USD 16.5m (above NDA expected USD 16m) representing a 237% growth rate y/y, driven by tripling Cyclyx volumes and conversion construction tickets. Down the P&L, an implied 15% gross margin in H2 turned margins positive for the year (3% vs. 2% NDA estimates), while EBITDA remained negative as the company expands its footprint (USD -21.1 vs USD -20.4m NDA estimates). The company also released financial and non-financial KPIs for the first time (see below), with Agilyx conversion revenues 42% higher than we expected (Cyclyx revenues 5% below). The company’s non-financial KPIs show Cyclyx volumes were 3x higher than 2021 levels, with Cyclyx now having 37 members. Cash came in at USD 14m, lower than expected, however this was impacted by timing of receipts – the company provided Q1 cash of around USD 12m, highlighting lower cash burn going forward. Other datapoints included the development of the Cyclyx Circularity Centre, whereby the company expects construction to begin in the second half of the year. Going forward, the company re-iterates their targets (USD 200-300m in FY 2026), with the TruStyrenyx partnership yielding tangible results (INEOS Styrolution progressing development of first large scale plant, Shell European project development) as well as other developments (recent BioBTX agreement).