CALIX LIMITED — M&A Activity 2019

Dec 10, 2019

December 11, 2019

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ASX Announcement

Calix accelerates US growth strategy with the completion of Inland Environmental Resources Inc. acquisition

North American MHL business with increasing revenues and strong foothold in wastewater treatment market

HIGHLIGHTS:

• Calix completes the acquisition of Inland Environmental Resources Inc. (‘IER’), a US supplier of Magnesium Hydroxide Liquid for wastewater treatment in US food processing, municipal and industrial markets.

• IER has well-established and growing revenues, with good gross profit margins.

• The acquisition will be value accretive for Calix and contribute a 500% increase in core sales revenue to AU$16.7 million, as well as adding EBITDA of AUD$1.1 million to Calix’s earnings on an FY19 proforma basis (before synergies and excluding acquisition costs).

• The acquisition delivers an accelerated and de-risked US market entry for Calix.

Sydney, Australia | December 11, 2019 – Calix Limited (ASX: CXL ‘Calix’ or ‘the Company’) is pleased to announce the completion of the transaction to acquire Inland Environmental Resources Inc., a US supplier of Magnesium Hydroxide Liquid (MHL) for the treatment of wastewater in food processing, industrial and municipal markets. The acquisition follows the successful completion of a A$12 million institutional placement to fund this strategic acquisition announced by Calix to the ASX on 27 September 2019.

Introduction to IER

Founded in 1997, IER is a well-established customer-centric business with a proven history of successful MHL sales into US wastewater treatment markets, particularly in the Pacific North West and Mid-West. IER has demonstrated steady growth in product sales with annual reported revenues of AU$13.4m spread across 80+ customers. In addition to having 4 manufacturing facilities and well-established distribution capability in Washington State and Iowa, IER has 2 patents in MHL chemistry, which, when combined with Calix’s multipatent portfolio, brings considerable IP synergies.

Acquisition Strategy

This acquisition delivers an immediate and de-risked US entry – a large and growing market for MHL wastewater treatment. It also allows Calix to utilise the Company’s patented IP in stable MHL manufacturing technology to add differentiated value to IER products and services, bring logistical advantages to operations and distribution networks, expand into new vertical and geographical markets, and grow the US customer base and revenues.

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Growing Market Opportunity

The IER acquisition capitalises on growing demand across North America and around the globe for safe, sustainable and low-cost solutions for industrial and municipal wastewater treatments. This is being fuelled by population growth, urbanisation, increasing compliance requirements and public demand for environmentally friendly applications that are priced competitively.

Calix-IER Competitive Advantage

Calix, with IER, is uniquely placed to exploit the US market through its proven, higher performing (higher reactivity and surface area) MHL. Unlike hazardous caustic or ferric chemical solutions, MHL dosing is a safe, sustainable and cost-competitive wastewater treatment process. Until now however, the challenge in the US has been the availability of stable MHL that retains its properties and does not settle over time, limiting its distribution and market reach. Calix’s MHL overcomes this problem as a result of its patented manufacturing processes, which produce a highly reactive product with significantly enhanced stability. This opens more opportunities, both geographically and in new applications, on top of IER’s current established markets and territories.

Phil Hodgson, Calix’s Managing Director and CEO, said of the acquisition’s completion: “The closing of this acquisition achieves yet another significant milestone in Calix’s growth strategy. We are now in a strong position to accelerate our US business by combining our stable MHL manufacturing capability with IER’s US presence and distribution network in one of largest water and wastewater treatment markets globally. There is authentic mutual respect for what each company has achieved to date and great anticipation about what we can build together moving forward. We expect the acquisition to bring a considerable boost to Calix’s growth.”

Doug Kelly, President of IER, said of joining Calix: “All of us at IER are extremely excited to now be part of Calix. We are committed more than ever to our customers and partners across North America as we continue to grow with Calix’s support, their world-leading sustainable calcination CO2 capture technology platform, and their incredibly valuable IP in high-performing, settling-stable MHL, all of which is enabling new low-cost, environmentally-safe market applications and opportunities.”

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About Calix

Calix is a team of dedicated people developing a unique, patented technology to provide industrial solutions that address global sustainability challenges.

The core technology is being used to develop more environmentally friendly solutions for advanced batteries, crop protection, aquaculture, wastewater, and carbon reduction.

Calix develops its technology via a global network of research and development collaborations, including governments, research institutes and universities, some of world’s largest companies, and a growing customer base and distributor network for its commercialised products and processes.

Because there’s only one Earth – Mars is for Quitters.

Website: www.calix.global Twitter: @CalixLimited

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For more information:

Phil Hodgson Managing Director and CEO phodgson@calix.com.au +61 2 8199 7400

Darren Charles

CFO and Company Secretary dcharles@calix.com.au +61 2 8199 7400

Simon Hinsley Investor Relations simon@nwrcommunications.com.au +61 401 809 653

Michelle Taylor

Media

Michelle_Taylor@recognition.com.au +61 2 9252 2266