Alexium International Group Ltd

ASX:AJX

Earnings Call Transcript 2023-Q2

[Rosheen Garnon, executive]

[Audio Gap] results investor presentation. So this of you who may not know me, I'm Rosheen Garnon, Chair of Group. I like to welcome you today to this presentation. We have with us our CEO, Bill Blackburn; and also our CFO, Jason Mills. So they're going to take through the presentation. I'm going to [indiscernible] to speak first. Through this webinar, we are able to ask questions as you know. [Operator Instructions] So I know you're all needs to talk to the management. So why don't I hand over to Jason.

[Jason Lewis, executive]

Thank you, Rosheen. Revenue for the half, it was down 35% for the same period last year, and up 19% from the second half of FY '22. Customer retention remains strong, except the 1 customer in the North American market. However, this [indiscernible] was recovered by new manufacturer for the same brand. We also experienced first current sales with 3,000 customers. [indiscernible] Margins are down 240 basis points for FY [ '22 ] due to product mix. Gross profit was down $826,000 with lower results in margin compression and up $84,000 from the second half of FY '20. Operating changes were flat compared to the same period last year and down $598,000 from H2 FY '22.

We experienced change in headcount, which included the addition of Billy Blackburn as CEO, offset by [indiscernible] redundancy with over Brookings moving to the Chief Technology Officer position. These combined factors have led to a $681,000 EBITDA improvement versus the previous [ half year ]. Some additional comments to the P&L at EBITDA versus same period of last year. Amortization is lower due to a year-end [indiscernible] write-off of [indiscernible] tangible asset due to accounting standards. Interest incidences higher with the issuing of the [indiscernible] credit, which began in Q4 of 2022. There was [ $57,000 ] loss on the debt expense offset by a gain [indiscernible] value of the derivative of $192,000 as a result of the removal of the existing note with [indiscernible]

Cash [indiscernible] down $2 million and product purchases low $2.6 million decreased [indiscernible] The [indiscernible] operating activities were lower by 2,000 of which half was due to the deferral interest on our term note. Investment activity were up with the increase in development customer [indiscernible]. There was a cash influx of AUD 1.5 million due to the converted note [indiscernible] on the balance sheet side. Working capital increased $100,000 due to increase in AR and AP offset by a decrease in inventory and lower revenues.

We continue to utilize our open line of credit using our cash management process. At the reporting date, the lane availability was the cash on into $2.1 billion. Existing from a note of AUD $5.5 million was coming due in December 2023 was with a $7 million convertible note in December with [indiscernible] and capital. The new note [indiscernible] repaid the base value of the [ 5.1 ] accrued interest of $350,000 and continue an additional AUD 1.5 million to support work capital needs. The general term of new recent cash coupon [indiscernible] and 12% when company sides to defer any crude interns payments, which we are currently doing.

So the conversion price was set $0.03 was greater than 75% premium versus stock price at the end of these. That's a happy review.

Thank you. Billy?

[William Blackburn, executive]

Hello to all our friend in Australia and I look forward, hopefully leading most of you someday soon. Next [indiscernible] would be here, the early spring there. We did have a nice November for AGM in [indiscernible]. First time to Australia, first time to Sydney, lovely place, lovely people and look for the coming back. Some effectively it over 6 months into the job here. And I'll speak with presentation little bit, I wanted to speak to you all about how things are going. And so far, so good. The team at Alexia has been really gracious to me and very supportive of me coming in. Especially doctor Brinton as a partner in the executive management help me in [indiscernible] and get me up to speed quickly. Dr. [indiscernible] has been woeful in the transition from CEO to CEO and the good partner bringing me up to speed on the nuances of business and introductions in our key customer base.

And that really is my charter for coming to let minute to drive virtualization in the customer facing. A lot of my activity and energy spend in that capacity each day. So what about the business. And most of you've seen a lot of before, so I'm going to speak to it a little bit differently. So in review of our business is -- we're a performance of [indiscernible], we have the emphasis on the word trials because some of the process that we're rolling out currently and taking to market right now are indeed rolled goods. So [indiscernible] products or active materials where we're selling a treated fabric substrate, [indiscernible] management and comp management solutions. It's a little bit different than the Alexium of this pass where it was more of a pretty chemical [indiscernible] business.

Now we're really but is solving come solutions or FR solutions for customers and move a little bit further up the in the several goods where our chemistries are applied. So it gives us basically the ability to have a bigger share of the wallet in revenue [indiscernible] same risk profile. So if look at that from a dip, we have the same risk of our chemistry was on whether we hold the fabric or not. So that's a little bit of [indiscernible] change for the commercial agency for election and it moves us a little closer to to ultimate end users. It's also get a little more control over how the plays out. [indiscernible] global patent applications and on regulation and [indiscernible] builds. Really -- we're really pushing right now to be focused on our core market and deliver value. A lot of the investment that happened over the years like until now can be realized and that being disciplined before we change data markets right now, making sure our lean resources are very focused on delivering the invented first.

And as that plays out, we'll be more into those adjacent areas. I'll speak more to that as the presentation we move forward. [indiscernible] is a pioneer base change materials. And phase materials are still an evolving place, and I believe it would even have been to all the potential application of PCM. But we are knowing the benefits of those improvements to the price right now, and that is adding up some new markets. hopefully more than that as we go forward here. And we're now moving global, and that's part of our strategy also is to really concentrate on trading in the U.S. and North American markets in Canada and Mexico as well.

And then leverage that in some of the international brands and our international supply chain to move distribution and sales in other markets such as Europe, Australia and both countries in Latin America and Asia Pacific. And I'll report that we had success there tell plan to leverage that to a more sales globally. The product that you heard out in the asset is our workhorse PC, and it's really brought along into the bedding market, top ad market and continues to be one of our best sales products. Big is really transitioning right now.

There's a lot of folks that are looking for that bio-based being emission. So those are actually growing faster than electrical HCM base, and we expect that to continue to be the case. It's a waterfall product intestine that's 90% bio-based and USDA certified being bio-preferred. It's really just in class. So it's not forever chemicals. There's no tax of species. It's just opening door for us. And as we continue to improve our [indiscernible] processes, we'll be making waters and powder versions of [indiscernible] to take to market and those are high solids power it opens up new markets, of applications, potential packaging and automotive [indiscernible].

So [indiscernible] group is continuing to refine their projects. Eclipsys has been a little slight catch on, and we're actually gaining a lot of momentum right now. We really concentrated the efforts last year -- last fiscal year in pushing Eclipsys bedding. And that's still an a lot of this opportunity. It's just -- it's going into masses and met a very long cycle, 12 to 18 months at that to see the equipment sales embedding with major brands start to catch on end of this fiscal year in the June time. We'll see some more sales for [indiscernible] bills later in the calendar year and then those [indiscernible] go commercial in January of '24, which is when the republic sales and bedding I'll speak to the tackle your sales for close shortly, but a lot of development work there.

And really, last year, January of 2022, we participated in as shown it was early in the launch of Eclipsys. We had a lot of interest from folks that tackle best helmets and shoes. And we started on the path of development with them and expose some improvement areas that we needed for closes. And so we've got a thicker micro drill now different process for manufacturing.

We've moved the manufacturing location to a world-class facility. And all of that is halted a much better really new proves this is for tackle gear. And that has led to the folks where we kind of stumbled a little bit last year in development to new developments going on several new companies launching in local military tactical best. So we're confident now that we've got to figure out and that we ramp up throughout this calendar year. [indiscernible] is one of the most exciting about going on to the right now for a handful of reasons.

First is, it's really a game changer technology for thermal comfort netting space. And it gets to go cover in heat index from site and the combination the feeling of being cute. So this medication technology can be easily adhered to the construction of a matches can be quilted in, can it be sold as a layer, layer it in a liner to acres as well. And the really interesting part makes a novel is the tenure. So the truck and heat that you get heating.

And we're seeing different results that are highest [indiscernible] height but we're holding the advertising claims to 12 degrees share in high. There's nothing in the bedding market that does that now. So it's a game changer to the actual data in technology to really revolutionize thermal comfort.

And that's a big question betting right now is cooling and dermal cover. Part of that was driven by a lot of phone MAXes have begun the more popular brands like timber purple in the U.S., lease some of the brands. And for particularly fairly hot at bereave well as a textile mattress. This solves for that in a very growing space and bedding. And I'll speak to our concentration for that. The other really interesting part of the cool is should be biased in position.

And let me use this as part Eclipse has really played well because of the cost structure and the way it manufactured in beds, play well on the top end of the space. So a luxury brands, where Delco brings us to a price point where we can get into a mid-tier metrics and not be prohibitive. So it should open high volume turnover in sales and 2 mattress sales that hundreds of thousands and millions of mattresses a year. So that's really our commercial strategy has pushed that into a high-volume channel. [indiscernible], we've got traction on testing with our [indiscernible] in the [indiscernible] segment and all results to the positive so far, and that will deeper into that here. The things I will post understand that's going on is there's a little bit of change out of lean right now is we're bringing a disciplined focus to resource case and where we select to put our focus in the market and certain customers. So our core focus in the green is where we're aiming to spend 70% of our and we're executing quite well get the strategy now. That's a post for our [indiscernible] inter screen, it could be phone maxes, could be [indiscernible] volume, BDNO, e-retail type [indiscernible]. And top of [indiscernible] mattress towers. Interesting for top of that, we've had a really fast launch, and we'll speak about this in an announcement [indiscernible] here soon. But we turned to put the launch in 90 days. And from the concept of the pillars through the build of samples through the testing of the material. This was a Dell coal pillar.

And to all the way through processing samples to now we're ramping manufacturing as this week actually. And it was in a record time for us in 90 days to turn that. That is so much faster in launching the mattress. So we're putting a lot of focus on our marketing and business development short term in [indiscernible] bed because we can get to market in a very slow depressed mattress it right now.

Consumer index is quite low match turnover is low now. But we're really focusing in those areas because we know, A, our products are proven to work. We have some growth areas with the whole eclipse that could really pin the revenue for Ligand. And then lastly that's what our investment is what we know and the investment is not in the resources for technical developing a patent and ramping production, it's also investment in relationships with the market customers, and we had the most traction there. So this focus you're seeing is for fiscal year to the remainder of this year, through the June. And really all of next year for '24 is it's -- we launched this strategy, it was about 18-months horizon. So we're really going to focus this way in that 18-month window to deliver cash positive results and renew significant revenue growth election by leveraging where our investment has certainly happened. So it really is an operational discipline. To that [indiscernible] in the purple are some really large opportunities that also large investments have been made and they don't require as much of resources in [indiscernible] right now to see these [indiscernible] and that the eclipses tactical that's my number. As more [indiscernible] not, we're probably going to have laboratories to [indiscernible] but those are big requirements on new require a few days each -- for each customer, and there are several customers in [indiscernible] right now.

And I'll report on the R&I code with the military shortly, but we have finally delivered an FR that the initial requirements and it moved into testing and trials, which very crossing. Lastly, the smallest bucket of our focus will be in breakthrough areas. We have needs a new business in these areas, but we're having pumped the brakes on those initiatives right now to really folks in our core and adjacent markets Fortune ready lies. And that doesn't mean we won't take call. We won't look things just not going to let the company as a whole chase right now distract from core focus of really good positive revenue and part result. But there are some really big longer-term leads that could lead to significant growth over a 3- to 5-year win out for election. I won't read this. I'll take them as read keeping to this I can see this. So our focus built I just said, is to grow and diversify bank market revenue very broad state, right? And it sounds like just a big overall brush of what might happen, but there's a lot under that statement that really matters to grow revenue that's a no-brainer.

And there looks to be -- we're doing a lot of research out our business in. We're rolling that out with our budget in the May, June time frame. But in that research, what we found is there's a lot of space for growth for our PCM and our other thermal management technologies and bedding. So I believe based on search, we're discussing servicing both. We're in a 50-year low market reading right now. And I can tell you the PCM customers that had right now. There's enough customer base, if there's a were where they should be in a market. So if you go back to 2021 and the volumes around that time being. The market penetration and customer base we have right now, if the market were to restore that level on would already be positive, it's just a very best market right now, and we're weathering the storm. But with that said, there's enough customers out there that we grow the customer base and diversify in the beaten diversifying the bank space can mean 2 or 3 things. Diversifying from traditional actresses textile interesting mattresses to the phone market, with the developments and improvements.

We've done PCM over the last 12 months or owns stores now, and we're starting to bring a lot of new ground in from -- it also can be diversifying in that market globally. So we've been out in North America into Europe, Australia, Asia and Latin America. And then this number to that is not just mattress folks focusing on top of bed like pillar in late copper, which we are live. So there'll be growth in diversification best with embedding. And then we'll speak to the growth and diversification outside of that in all of the MS renew. And we've seen this [indiscernible] has a growing percentage of our PC right now. So we've taken over more of the electrical edition cells intangible customers are moving to more sustainable claims and more interested in biobased product. And that's going well. So I anticipate that we're positioning as such all cool commission pillar applications. You're going to see at an announcement go out in the next week to 10 days in that market announcement, we are commercial. So we're in production this week and starting low rate production, derisking it, starting line order.

We're starting off 500 can do all of our QC/QA validation since it's the first run. And then we'll move to a [indiscernible] and so on. We have a 70,000 [indiscernible] in hand right now that we're the production. Buckle sales commence in euro, we're in [indiscernible] with the first of 2. And these are fabric industries textiles that was to one of the top brands rely. And they've moved some of their business from Turkey -- or excuse me, from China, Turkey for another low-cost textile option outside of in that's a little bit more stable. So that actually starts our sales at PC as Europe as we start to reach to grow our business there and with the same approach following the Tier 1s and some of the work that we do in North America and outdoors globally, with the large [indiscernible]. From there, we'll start participating in sort of international trade show thing of regional and national comers to the countries and Congress. We do plan to continue to diversify globally as well. And wondering that with the pricing of our products, we look at that versus freight to deliver to other countries, able to do that. And we learned that from supporting Tier 2 producers that we're utilizing low-cost production in China. And that told us that we go into the propanes of the Erection deliver in some very difficult chains. So that embrace us to start the globally. And we've gotten be products where we need them.

We're very confident in going that far out with them in supporting the quality. Quarter 4, we or here in few weeks, Eclipse sales will start in our case, and this is for a large brand one of our largest brand customers. It's going to is going to ramp slowly through this year as they build test best, get to get a lot of burns, latches, validation and testing. Late this calendar year and build the models that are going to go into German floors etail outlets, big box department stores and then retail stores. It did a starting sales and plan to ramp inventory starting in January at least 4. Like Group, we really worked on our PDM enhancements and we made a change to Test in the PC that is really opened up some doors versus to start getting into better ways of processing filtering the materials, get to higher solid content, high solids, more cooling and then ultimately get into a a formula. These open up applications in as to [indiscernible], but other phones that are using cooling applications outside of the edge, we start to move into other markets. These dry high-salt formulas open stores. And those could be a number of applications to be automotive, component packaging. Those are in our spokes right now is [indiscernible] Chief Success been through into '24 and '25 and start to open those markets. These ascent folks in quarter 3, we had numerous customers. We came out at [indiscernible] January. At least does a new leads that are coffin but half of those right now are in testing.

They receive the samples. They're -- we changed the application of [indiscernible] to a much easier in factoring step where it's soon. And it's seen better clines as well, and we've had 6 field trials. Recently, the other order field games, a lot of military fighters where they're competing in full trials. And we had overwhelming testimony [indiscernible] could work it as like basically exactly expedited testing with the full focus center made. We expect to start to see revenue in earnest late quarter 4 from that. And that's as folks start to put more bill material there and need are to make additional to get more users. And as for that is our FIC military uniforms.

We completed that testing and we're now evaluations for our ever treated micro roll good -- the military has simple of our material. We're waiting on the results a little past due. We expected in late early February, but now we're hearing it should be in the coming weeks. So they're behind in their testing, but all initial results were as we ran the same test in our laboratories in South Carla. And we have now delivered FR and ICO that meet the requirements, meets the terrestrial the weight and the ability that they were looking for.

They've got to validate their laboratory, but they have stepped up their approvals and ordered additional average right now to go ahead and button make still test uniform in advance of the final testing. So they're showing a lot of confidence in our results. We still have major to get over with them. We call them the iron in the [indiscernible] to I'm going to explain it later terms, but it's a dumb in a power-burn test at room if they put their formal and potentially with flames open plan. And there's a 4-second burn result of the looking point-driven Thailand piece, which is the port protects. And then they look for certain Charlie, the materials stay intact, it protects, obviously, the cells are used from an [indiscernible] to their skin. And that's really the book standard but all the other testing and starting up with our hurdle that fill in to come. What we're doing to position Alexion to respond to the commercially, we're working. There's really 4 companies that will be in a supply spot military. There's the -- this fiber maker of the cotton on the Weaver that pulls together the supplier [indiscernible] and ultimately, the Fisher that puts [indiscernible] and the FRO and does the heatset dredging and gets cut. So it's quite a layer cake of companies that get involved in these supply chains. So we're in it and we're confident we're going to be successful. So in any commercialization we're working with these potential partners to qualify the and make sure we do of any agreements to move to the military get the approval in place for us than what it were significant yards.

So we have to run that in very little. Where we today, Mexico and Bako are established as premium brands. We received an award in the last year with certain and that's St. [indiscernible] within presell being the first lunches. We've advanced our ECM chemistry and our manufacturing, that's opening a lot of new sales. So as I mean the potential to do higher solids and power opens some markets, but also our brands are really gaining components, the folks that now have been using them for a get period of time.

Our opening doors referrals for and to some of their other customers that want to apply. So we're not just selling at 2 Tier 1s that make beds and pillows and [indiscernible] brands. So [indiscernible] out or wanting to [indiscernible] be their house a PC to go to solar brands, which opened up some of the home markets we would have seen Again, we're pushing out Asia and Europe, and that's already underway. We launched the boost for Del Col, and that will be hitting resales the spring at this point to May, maybe early summer June. And [indiscernible] is finally rolling out this year and starting to realize significant sales from that embedding next calendar year -- half of fiscal year '24 for us. steps second half where we are right now in the half of fiscal year '23. We're continuing to push for growth applications and the next top or bid. And that's really our core bread winner business. We're looking to grow into side from ending applications. And a lot of the competes in our pipeline right now are doing testing of our PGMs and phone that we've got a handful of customers in eco for liner that would be gainer, as I said earlier, cooling technology for phone mashes. [indiscernible] is so if you think of the betting market in a triangle with the top of the trying be the premium brands where they sell less masses per year. And then you get to the bottom of the triangle, where it's low cost, less than 100 kind of out of box [indiscernible]. We're really going to have that middle tier, where there's millions of is sold a year where the piston supports additional cooling technologies. And we believe Delco is to open that door [indiscernible]. And getting into the sales channels where [indiscernible] traditionally will position premium brands that where we can get into that mid-tier, which turnover, and we have a significant cooling technology that meets pricing and cost demand should open a large volumes over the next 18 months. Eclipsys from the high-end side brings in high dollars. It's a much higher dollar per unit sales. So you don't have to sell as a match to it EBITDA revenue there. A 20,000 acres a year long term placement retail for Eclipse is substantial for us. Next, the value from all this is new revenue growth from our CM actually being secure and really growing and focus -- establish more trust in the product. We've got reduced concentration from a single market vertical. Really where Alexia is very concentrated with 1 brand and also very concentrated in the tech staff side of the mattress. So the innerspring is now diversifying the way to that risk. And the good old fashion is roll sleeves, hardware sales is what we're in right now. We're making a lot [indiscernible] sales cost to a wider market, and we're putting for our profit about wider into the global market. So the club system tackled year, the improvements I mentioned earlier have really opened up some new doors. A lot of new customers looking at product reduction. And a lot of that we -- we're not successful with last year, first half of 2012, have come back to us even as a second change. So and that's the comment when you want something that's the technology and it's some new -- there's a lot you have to learn, and there was a lot of tribulations they had to learn the hard way. And we're is learning now to get greater leverage and a much better percentage tens of success. And the trial is commencing now. I can tell you, one of the really -- it's a handful of exciting out there. I can't give you too many specifics to the confidentiality. But if you look at the global market for technical gear. It's about $2 billion in some reports. And there's some disputing in the port. So it's the large market globally. And there are significant players in that market that dominate about 80% of volume for titer. We're working with 1 of those right now in a pushed the second time they run this wood. The first time we did have a lot of extending the adherence on the chillies -- we're having great success. So they're fast-tracking trials 2 different law is, and these are staff sales channels so they can drop it into an existing product line to sell ENHANCE at a high price point to give a cooling benefit to alter use it. If it goes well with that customer will make it through the rigors of ramping, basically, our commercial strategy will shift to bring after the other non in that space clips for tactics a little bit of a different marketing strategy being in the bedding space, brands are key and the brands have brand work are going on all time. So we have to be very careful about elective branding in that base if we've been working on a wide bucket.

So said differently, we put a lens name or audits on everything in that space. It will carve out a market where others wouldn't work with us because they want to use the same technologies that others are. So we have to stay more huescenesbein eclipses of category is a little different. And ultimately, as we move to markets and start taking closes into other channels like sport goods, we'll use than eclipses in that. So it's completely a way different than it is in being where we actually were strong branding there and how if you think of the cut, you're probably looking at -- probably has a figure on it that says [indiscernible] this case, we would want eclipse to be the intel side for talent alter the betting space, both want to be the like inside because the general conflicts at created branding. So the improved second lien and testing allocation protocol, that's leading to all these opportunities [indiscernible] are starting here in Q4 to last bringing early summer here at states. A new revenue stream diversifying us away from being overconsumed and bedding in profit, really the margins in Eclipse for tactical. It's not as positive as the bedding space, and it gives greater market penetration and a diverse customer base. So a lot of a to be had there. for military deployments, this is a long story for election, the original election out of FR I'm lucky become breakthrough that half last year. So we can finally get into [indiscernible], but we got -- we basically hit right results for the FR adult way, the tear strength in the fats to company that breathability. And we believe, ultimately, it's going to be the right price. Well, we know there's one that plays in that space now. I won't say the brand, but they're really high price, not high price precludes them being a broader, higher volume military uniforms. It really only gets put in really nice specific applications for deployed solars where they can afford a bigger budget.

What to say is seeking is an [indiscernible] that they can put on all to soldiers and marines. So that's really the politic grail here is to get the price with the ad attributes, the qualities and the MR safe for the soldier and that gets into a lighter channel. We believe we're on the right path on to achieve that. So we created the flame resistant oleic cotton, and we're working with an advanced noon fiber and piecing supply chain now. We have delivered production scale for fabric and passed all these tests.

But like I said earlier, we got a few heads to get over that a matter of timing and getting to the testing. We have learned Well, some of the steps are actually already happened. So we had delivered right now fabric for Cussouniforms, and they actually asked for more because we want to put more pop there. And this is where the military has a front a little bit because typically they wouldn't do field tests until they pass all lab results. But I believe the need is so dire and they have such an appetite for they're now ring those plans even in the States. So we're actually giving more are right now. And our team was at the facility last week overseeing the quality of that fab being produced. And the average will get treated and then go through a cut so whether makeable test uniform. And again, we're working on supply chain so we're ready if they will move forward commercially that we have the partner us with agreements to respond the commercial offering. This is a large opportunity for us. It could be a game changer for the revenue overnight. That's the size of the opportunity. So that's a revenue really could portion on in more product suite to over the cash positive and we also solves for market concentration and and product concentration in PCM. So it diversifies market customers and a significant improvement to profitability, not only through healthy margins. obviously, revenue pacing mixed costs drop it more close to the byline. We're going to open it up for questions from here and really where we want to spend our time to just having a conversation with the investors in trying to address any questions you all might have. So I'm new to the technology sobering we still do it a little bit, but we'll open it up here. This is my we please enter your questions through the Q&A section. And while we're waiting for to come on, we have some that we're seeing.

[Jason Lewis, executive]

Yes. But I'll start with one that was in a what you said in the ration. It says imply that a burn test might be a delta -- is this the case? Or was there some interpretation?

[William Blackburn, executive]

It's an unknown, but no, it's not a doubt pass for us and expand on that. It's a very rigorous test. And that's where a lot of new FR fabrics have been tabled. It's a very -- to get 4 seconds and to get the charts that they need the fabric and the north the military seeing they have to sacrifice 1 of the attributes of [indiscernible]. So you can get the tear stream or the weight of the , which is the retail comfort for older treatment or some that mixture of each percentage, right? I believe right there at it. We don't have the way to relate the test and there's really their point of replicating that test because they won't only certify their -- so it wouldn't matter if we use a third party or our own testing apparatus. The best thing that we've done here suggests that we'll pass. We don't know if we're going to pass from fly holers again because we can't rotate it. But we are very confident Clearly, the military confidence we they're moving forward, it's a pace that they're not -- let it be a topper. The other thing that can happen there is they may relax their -- let's call it most spec -- and that's the shorthand for military specification. They may relax their specifications of the burn. So as power [indiscernible]. And so that could come in a number of ways. It could be the max the specifications on nominal specification literarily which are due, the attributes that protect the solar melting on or just in [indiscernible] plans or could relax the time of the burn from 4 seconds of the 3 or some other able don't know it. And that's totally project. That's a sofa such high barber fewer is the reason they don't have a low-cost, high-volume option that works with bicarbonation economics and attributes right now. So it's -- we're a big confident, and we're looking forward to that test. And also should we do that test not pass, the posture we're seeing right now suggests that they would work with us to make the improvements to the right petition. So it's not a low competency for us. It's just we hopefully.

[Jason Lewis, executive]

Okay. Is it [indiscernible] shareholders know who are core example contract are supposed to minimize soon? If not, why not?

[William Blackburn, executive]

Well, simpler is no, and we can't announce things before billing because that's obviously we cost ourselves in the foot disclosures under secrecy agreement or disclosures we hold in the market late for competitors. And in some cases, we're dealing with companies that do that out in a put venue as well so that proves from announcing as well. In other cases, if we do have an express provision that wing an agreement, we can announce the 1 announcement agreement is sound. So the great you're referencing is currently being negotiated the terms are negotiated. So we can't announce that customer yet. But typically, we don't use custom in the pool. I'm happy to expand on that if I did make sure sorry to -- exactly how this company really going to the new direction, taking initiatives like contracts, et cetera.

[Jason Lewis, executive]

Are these new directions in to show in the company's along example, increase in revenue.

[William Blackburn, executive]

Yes, I'll start with SP1 Obvious No, it's not shown yet. -- emphasis won't get. I've spent my career in commercial positions and capacities and I've made a career out of using terms contracts to close business. So it's not a strategy, it's tactic I also believe it's business is planning to have known terms and conditions between customers and suppliers, where everybody knows the rules a game. Lexia really spent the last 3, 4 years developing a lead good technology and product suite that's really important the opt to bring in to drive the commercial success. So there weren't a lot of agreements in place that had supply terms price over volume and lease of the contract and the accountability. We're now positioned to do that. Results aren't showed up yet because we're really early in the journey. I'm 2 months in, I can tell you, we have about a half dozen agreements in negotiation right now. that will lead to bottom line results that will lead to the forecasting better terms and better management of the commercial outcome altogether. And the -- these are bilateral agreements. We wanted to order the customer and [indiscernible] so we're not looking to be harsh or be heavy handed looking for fair dealing and rate margins and more importantly, taking our IP. So the answer is not yet, but that is coming. And I would welcome that question repeatedly as we move forward because I know this approach will show on the bottom line.

[Jason Lewis, executive]

Okay. SP1 I'll take -- as your revenue fences in PAR drive up requirements, how are you thinking about this?

[William Blackburn, executive]

We have dipped in place with sort of capital agent we had for a number of years now. What we do is we realize SLP dissident sales and premium planning for capital, coupled with billings into material these orders plan module in our EP teams. This helps us to time purchases and manufacturing to coincide with investing in AR, which in turn helps us to crash our cash conversion cycle and keep it tight. The forecasting is not perfect. [indiscernible] times low. For the most part, we are able to keep that to be close.

[Unknown Analyst]

And Jason, question there, I guess, is how we use the line of credit.

[Jason Lewis, executive]

Yes. So we and pay back the line on a, call it, weak basis, so a frequency. We're looking out our cash needs I'm not going to say a daily basis, but pretty close to it. We have a really good handle on what's going up the door and what is coming in. this company has can serve clean as receivable. There are times when we do batches, not external collections with interaction with customers. That's just normal course business in the 4.5 years I've been here, we've not written off in account. So customers, good suppliers and our suppliers also work with us and understand what we are at in our growth cycle. So we say clot our suppliers as much as segment customers.

[Unknown Analyst]

And can I just so everyone's aware, the direct effect look through the S&P process and the models. And so my ads for disposable organization, it's robust. The other comment I would make is that, I call overseas recycler in fantastic change.

[Jason Lewis, executive]

Right. [indiscernible] for me. I came in before the meeting here. says, can you provide an update on the multiyear Delco supply too far first. Yes. I can't -- it's actually -- we're in exciting terms right now in advance because of the October show in New York and then again, the best in January in Las Vegas, -- they've got some placements and that to us moving straight into production. So we're actually pushing in filling orders working periods right now while we set the terms and conditions of a more master agreement and slide agreement in the backroom, which we will finish up in some quarter and make an announcement. They have agreed to us announcing that as one. So we will announce that with the market soon. Second part of the question on top of betting in regards to international licensing. So I was asking for an update on that. had a meeting with one of their level executives last week. We are do a template license in agreement now may explain that clearly because it's not us is an technology for someone else to use our brand or to make our technology. It's actually partnering with a large major tail brand embedding to basically coal arising into 400 other continents where they actually have approach make then pillars on there and sell under the brands is the whole supply chain and the products in North America, they use LXP and smallest. So we're already working with them to a supplier under those licenses to offer some thermal management products to the licenses. So not let that license not to live elections or to make products or ores, but actually to go through license of the large retail brand. that's in its startup right now, working on the terms. That's going to be added to a border agreement that's going to be doing -- that will be around is launch in bed launch next year. it will be tethered to a agreement that will also announce that will probably be there in this calendar year. But it is in market [indiscernible] and and well.

[Unknown Analyst]

Really be pending test on the convertible note. There is a lot us to pick the interest, which means that we will grow it on our balance sheet. The interest -- cash interest rate under new note is 10%, that [indiscernible] is 12%. So we will take advantage also assist in work management, cash management until further notice. Bill, how long will the material build testing run for their standard requirement for [indiscernible]

[William Blackburn, executive]

We haven't seen the defined requirement for that, but in casual discussion, we say a year, which is starting the quarter so that would push it out into spring the answer, we don't know yet. It would have come in the form of their proposals terms, they're going to put forward as they commercialize they even finish the trials. And stay is the reason that could happen. So -- but you're looking additionally a 12-month horizon of testing, and that's about them saying it's been in the filter year. It's working. It's sending the rigor to washing and all the use missions sold deliveries back, I think we may have missed an earlier question to because I wanted to cover a lot of FR in the presentation, but there were a couple of specific questions. And one of the questions was regarding U.S. Army, U.S. a review, are they at the same stage review. And the answer is maybe not exactly. Army was ahead of the Marines in the review. And so we've seen -- we haven't seen before in Bios attempts at this is the Marines Catching Army results and moving all those results. So what it really means is they're looking at deposit tests, reinitialize -- and that's gotten the interest and they've stepped up their view and are closely closing in over I think sometime the coil probably be a long time to come on. There is a lot in the marine is -- had different requirements. It's a smaller population in the Army. The Army could take longer because of the size of it. there's a lot more initiatives within the Army that have to go to [indiscernible]. You could see marines move ahead of it just on that basis. we're not at the same stage.

The other specific question to that was we had foreseen mortgage are as per build trials. Not one, twice. So there's a second question for additional factor for that, and we're pursuing that last week here in the Carolinas. So that will be shipping to material this week.

[Unknown Analyst]

Okay. You don't -- many competitors, does that mean there aren't any and all problems are with market development.

[William Blackburn, executive]

So we have competitors comma, we see as we on this commodity are clinical producers they have it's called [indiscernible]. We see that occasionally in the market. More of the law, we've seen further applications. We got into a company called Devon, the VAN, European-based, I believe, in Belgium. And we run into the recently in Europe. I haven't seen them as much in the state, but they are starting to make their present help seeing that some of the shows some of the customers have brought them up. We're seeing caps 1 that's out there on Millican we run into them in the textile coding woven fabric space. we're actually winning against doing the market right now on price quality. [indiscernible] world leader textiles there based here in the [indiscernible].

And it appears they were more interested in that business for the microcapsule technologies and the fact that they go and do things like us for washing clothes and other cases in food reagents and that the PM business was an adjustment part of that that they bought. But we are seeing the competition in the market, more times than not rooming in its quality right.

[Jason Lewis, executive]

Well, dangerous, we offer a lot of tech services that competition does it. We help the customer learned how to apply the product to analytical to do have a bad that differentiates XTM and it is working. And there was another part of the question.

Market development. Yes. So all of our problems developed, not on. So we know we have a market for products and it's not a problem of development. It's really the time and energy to there. So it's going to be -- now that the pectoralis going to make time to bus market. We're not running in saying no or that were no, we're not interested. It's not what we are -- it's have a long development cycle. It's new to us. We've got to learn how it apply electroless Eclipse single coal, which are very new. So you'll see the recon from those as a slope we're heavily consecrated market, which has a long developed side, anywhere from 12 to 18 months. That's a part of it. It is a slow moving market. And then it's a 50-year low market, and that's quite the negative combination. I'll speak to the market. We have seen some little blips of improvement over this first quarter of this calendar year. Reports after the present day sell here in the state, which is really a big mark for mattresses. They were a little slow off -- so what really means is folks are expecting a slower recovery of mattress market to be prolonged throughout this time year and to reach back the historical switch was 2020 2021. by early 2024 to such in those cell levels again. So we should recover in the next 9 months [indiscernible] in the market. I hope that answer that question. It's a very general one. And ever ask you if you need more specifics, please expand on happy nature.

Okay. I think that's through Okay. Well, Well, in closing, we'd like to take all of you you kit to a screen to questions. So hopefully, I can take your hands and get them to when I can alter or should come to the stage, we've always opened the door to [indiscernible]. We'll take out for [indiscernible]. Thank you for being the best here in Alexithank you for all your support. Thanks for the good questions and sticky, [indiscernible] that's real.

[Unknown Executive]

Thank you so much. Thanks, Justin, for conducting the Q&A. Just just an update from me. I'm going to be over there out weeks end week with is, and that's primarily to work through strategy, business plan but also some of the strategies are not what we've been talking about today. And so I'm a U.S. reinforce with them. The one point we've been at the team of [indiscernible], Jason and Bob do you need to be coming together and working. And the transition Billed was smooth, I have to take the hand off to he was absolutely professional and bundle through the whole process. So I'd specifically like to call that out. I do acknowledge that Billy was also coming in and being aware of how hard those incisions are. But I think the kicking hopefully that you've seen from today is working the -- the fact that we have many opportunities on the horizon and the team were to close them and there for an analysis of what we're going to send out of time has been really important. So look, I too want to say thank you to all our investors. Some of you had long-standing investors, and we really appreciate is the call. And both Billy, and I think we can probably close of the recession.

[William Blackburn, executive]

Okay. Have a great day and also. Thank you, everyone.