Danimer Scientific Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 10, 2023

There are 9 speakers on the call.

Operator

Greetings. Welcome to the Danamer Scientific 2023 First Quarter Earnings Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Wednesday, May 10, 2023.

Operator

I would now like to turn the presentation over to Mr. James Polzinski, the company's Investor Relations representative.

Speaker 1

Thank you, operator, and good afternoon to everyone, and thank you for joining us today for Danamer Scientific's 2023 First Quarter Earnings Call. Leading the call today is Steve Cross Creek, Chairman and Chief Executive Officer and Mike Hajjost, Chief Financial Officer. I'd like to note that there is a slide deck that accompanies today's discussion, which is available on the Investor Relations section of our website at danemerscientific.com. I'll call your attention to the company's Safe Harbor language, which is published in our SEC filings and on Slide 2 of the presentation I just referenced. On today's call, we may discuss forward looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended.

Speaker 1

Forward looking statements include, among other things, Statements regarding future results of operations, including margins, profitability, capacity, production, customer programs and market demand levels. Actual results could differ materially from what is expressed or implied in our forward looking statements. The company assumes no obligation to update Any forward looking statements to reflect events or circumstances after the date hereof, except as required by law. Today's presentation also includes references to non GAAP financial measures within the meaning of SEC Regulation G. We believe these non GAAP measures have analytical value, but note that they should be taken as an additional measure of performance to GAAP results.

Speaker 1

We have provided reconciliations for non GAAP financial measures to the most comparable GAAP financial measures in our earnings release and our presentation. Thank you. And it's now my pleasure to turn the call over to Steve Cross Creek, Chairman and Chief Executive Officer of Danamer Scientific.

Speaker 2

Thank you, James. Good afternoon and thank you for joining us to talk about our progress thus far in 2023. When we reported our 2022 year end results, we were just a few days shy of completing our Q1 and as you might anticipate, Our quarterly results are in line with our expectations. They show the pressure of a timing shift in top line revenue, which impacted gross profitability, but that temporary situation is now behind us. What's also clear in the first quarter numbers and is Expected to remain clear in future quarters is the progress we've made in controlling our operating costs.

Speaker 2

We continue to expect with the impact of new commercial opportunities to accelerate our growth through the remainder of the year. We are gathering momentum in the business, Harnessing our research and development to drive new solutions into the market and growing in confidence about the path in front of us, We have gained additional and specific visibility into the levels of demand associated with a discrete set of near term commercial opportunities. If captured in full, this business would require the lion's share of our remaining production capacity. We have a solid strategic and competitive position to those programs with uniquely capable material and ready capacity. We are increasingly confident that we will finish 2023 on a strong pace.

Speaker 2

I'd like to walk through a few recent operational and strategic highlights that should demonstrate why we feel that way. I'll start by reviewing some important advances in our customer and product portfolio. While it is premature to make any customer or program announcements, We are energized about the near term opportunities that are materializing in the quick service restaurant channel for straws and for cutlery especially, but also in the cup category with our coating materials. As we speak, our product is in a multi store test for straws with a new major QSR chain with 1,000 of locations in the United States. We anticipate a successful test will lead to a wider rollout in the 3rd quarter.

Speaker 2

Additionally, we are in the late stages of an opportunity with another major QSR chain for straws, also numbering in the thousands of locations in the United States alone. Further, we are excited to be moving quickly forward with our biodegradable cutlery resin. As we announced last quarter, we were pleased to capture with Hobby cutlery for an important snack line with Zespri. We made the first shipments to execute that program at the end of the Q1 and believe that a fully biodegradable solution for this high visibility application will prove to be brand enhancing. We are also pursuing a large and high priority opportunity in the cutlery market with a major QSR that we expect Are becoming increasingly visible and we were honored to be invited to ring the closing bell of the New York Stock Exchange on April 17th to help recognize the importance of Earth Day.

Speaker 2

In conjunction with that event, we announced that we have successfully developed a partnership with Total Energy's Korbion, A new engineered resin for the manufacture of single use coffee pods. That material, which is used in an injection molding process, Has been in development for a little over 2 years. While any new resin we develop benefits from decades of research into various blends, This is a challenging material to formulate given the combination of requirements for heat tolerance, barrier properties and stringent biodegradability standards required within the EU market for this product. Importantly, we have experience in this category and currently have a PLA based We are pleased to have received certification for this new material from TUV Austria for home compost and are currently in testing with multiple potential customers. While somewhat obvious, this means that our material biodegrades safely and quickly In home as well as industrial composting can eliminate a tremendous amount of waste from the environment.

Speaker 2

While the EU legislation is still a bit into the future, We expect that demand for our material may be strong even in advance of the legislations in action as major suppliers seek to pre position themselves to avoid potential disruption to their business. I'd like to turn to cup coating materials, which provide a barrier to contain liquids. In the aggregate, this is a significant application for single use plastics. Currently, paper cups achieve functionality With the petroleum plastic liner making them essentially non recyclable. Our PHA based biodegradable coating materials We were very excited to see WindCup launch A new paper cup product with a nodax based coating under its distinctive FADE brand.

Speaker 2

FADE is an increasingly meaningful and visible brand in an otherwise Commodity oriented set of categories. We think that is a powerful statement to the market and we're proud to provide the unique PHA based resins that enable their products. While we share a vision for the future with many customers, we think what Wingup is doing in the market speaks exceptionally well to that mission. As we look toward the second half of the year, we're confident that our Kentucky manufacturing plant is capable of operating at a high level. It has consistently performed at or above all requested throughput targets.

Speaker 2

Further, we are working toward improved product quality and process efficiency, all of which should benefit our margins. In closing, I'll just note that we have no information provided regarding the Department of Energy's process. We will communicate any developments as soon as the DOE Now, I'll turn the call over to Mike Hajos for a discussion of our Q1 results.

Speaker 3

Thank you, Steve, and good afternoon, everyone. I'll start with our financial results on Slide 7 of our presentation for those of you following along. 1st quarter revenues were $11,900,000 as compared to $14,700,000 in the same quarter of 2022. We experienced a modest decline in both product and service revenue. 1st quarter product revenue was $2,100,000 lower versus prior year, driven largely by an unfavorable shift in the timing of PHA based shipments to a large customer Relative to the Q1 of 2022, this was partially offset by modest growth in the PLA based product sales in the quarter.

Speaker 3

I'd also note that the PLA business now shows normalized comparisons as disruption to that business from the war in the Ukraine impacted both this year's and last year's quarter. 1st quarter services revenue continues to be lower, reflecting as was the case in the Q4 that certain customers that have of $6,300,000 compared to a gross loss of $1,300,000 in the Q1 of 2022, An increase of $3,400,000 in non cash depreciation and amortization expenses was by far the largest driver. After adjusting for depreciation, stock based compensation and certain non recurring items, we reported an adjusted gross loss of $1,000,000 as compared to adjusted gross profit of $2,000,000 in the Q1 of 2022. On top of an increase in fixed production costs Associated with greater capacity in Kentucky, we also had unfavorable leverage of those fixed costs due to decreased production volume. We expect gross margin to recover nicely with growing volume.

Speaker 3

R and D and SG and A expenses, Excluding depreciation and amortization, stock based compensation and one time items totaled $7,600,000 in the first quarter compared to $12,300,000 in the prior year quarter. This improvement was a result of a broad cost control program It yields savings in many areas of the business. Adjusted EBITDA loss for the Q1 improved to $8,900,000 Compared to an adjusted EBITDA loss of $10,600,000 in the Q1 of 2022. Despite the revenue timing impact And fall off in adjusted gross margin, the positive operating cost factors permitted adjusted EBITDA to improve by $1,700,000 year over year. Adjusted EBITDA excludes stock comp, other income and other add backs as reconciled in the appendix, Including $12,000,000 of restricted cash that has since become unrestricted, effective liquidity at the end of the first quarter was $114,000,000 as compared to $62,800,000 at the end of 2022.

Speaker 3

Capital expenditures in the Q1 were $16,400,000 mainly related to pre existing obligations for the Greenfield facility. This should represent the highest budgeted quarterly spend for CapEx this year. We continue to guide to full year CapEx spend in the range of 26 to $31,000,000 We ended the Q1 with a total debt balance of $380,000,000 This now reflects the term loan We closed on during the Q1. I'll remind you that this includes about $46,000,000 of new market tax credit loans, which we expect will be forgiven starting in 2026. As we noted on our year end call, the key to our performance in 2023 Will be the magnitude and timing of the customer demand ramp up for PHA based resins and our increased utilization to serve that demand From our Kentucky operations, our Q1 was fully consistent with our expectations and therefore has had no impact on our full year guidance.

Speaker 3

We are maintaining our expectation for adjusted EBITDA in the range of negative $31,000,000 to negative $23,000,000 in 2023 An improvement in profitability of between $14,000,000 to $22,000,000 over the negative $45,000,000 we reported for 2022. I'll now hand the call back to Steve for his closing remarks.

Speaker 2

Thank you, Mike, and to everyone for joining us. Even in the short time since our last Call, we've been able to make progress across the board. We feel really good about a few recent developments in particular, identification of some specific High volume sales opportunities, which we expect to be decided very soon, ongoing process engineering work in Kentucky, Increasing discipline on our expense line, have progress on research and development specific to a number of significant market opportunities. The momentum in our business is tangible. Major customer opportunities are now very close at hand, and we are very excited about the future we are creating.

Speaker 2

Thank you to everyone listening to today's call for your attention and your support. And operator, we're now ready to take questions.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Also as a reminder, you are only allowed to ask 2 questions. And first question comes from Laurence Alexander with Jefferies. Please go ahead.

Speaker 4

This is Kevin Estock on for Laurence Alexander. Thank you for taking my questions. I guess my first question Hi. Hi. Yes, so I actually have more than 2, so I'll maybe hop back on the line after.

Speaker 4

But I guess if you were to roll together all the brand launches that your customers 10 for this year. You talked a bit about this in the call already, but I guess what is the implied run rate of demand if those all scale as expected? And I guess what is the potential demand just from those customers if those launches go well and then they flip the switch and then embrace PHA in a more aggressive fashion? I guess like Sort of an upside scenario, just curious to hear your thoughts there.

Speaker 2

Yes. Thanks, Kevin. This is Steve. If every one of the forecasted launches hits And hits at the scale that's forecasted, I guess the first step is that we would fill up Kentucky. If those customers then get even more aggressive and

Speaker 5

Move forward

Speaker 2

with follow on applications, we could fill up the greenfield as well.

Speaker 6

Okay. Thank you. That's really helpful.

Speaker 4

And then I was just wondering if you could provide an update on the adhesive partnership. I guess, Any progress there? And I guess, what would be a reasonable timeframe for seeing a revenue stream and maybe another monetization event?

Speaker 2

I'm sorry, Kevin, which partnership?

Speaker 4

Adhesives. Yes. Any your Acetis partnerships or even, maybe an update on the Navomer applications in acrylic acid. I guess, any Progress there. Just curious to get some updates on partnerships you have.

Speaker 2

Sure. So On the Danamer Catalytic Technology side, which was the Novomer acquisition, We are building out the pilot plant. All the modules have been delivered and booked up and we're well along the way in commissioning that Facility, in terms of the partnerships, as we've talked about in the past, we're negotiating A co location agreement in the Gulf Coast and we're also negotiating an offtake agreement with a major Those conversations are still going well and they're still actively being negotiated. So we still expect to be able to complete those or at least make some announcements about those towards the end of the year.

Speaker 4

Okay. Thank you very much. I appreciate it.

Operator

Thank you. And next question, we have Thomas Boyes

Speaker 7

Thanks for taking my questions. Maybe the first one, just Looking at the kind of the coffee pod opportunity more broadly, I mean, I

Speaker 3

know you kind of articulated what it looked like

Speaker 7

in Europe. But since you already have a PLA version here in the U. S, just wondering if you could kind of give me a sense of maybe Potential demand or size of opportunity that you could see here, I know that overall policy landscape is a little bit more fragmented in the U. S. Than in Europe, But I was just trying to get

Speaker 8

a better sense there what's going on or what could go on?

Speaker 2

Yes. Thanks, Thomas. Good question. Off the top of my head, I do not know the market share for that particular application in the U. S.

Speaker 2

So I can't answer that, but we could find that out and get back to you. So that we do have a PLA version of the pod, which we've been selling in the U. S. For quite some time. But I don't see that growing.

Speaker 2

It's part of our PLA business, which We don't really see as strategic, but we could see those sales flipping over to PHA and then potentially become A growth driver, but it's not a current part of our forecast.

Speaker 7

Got it. I appreciate the insight there. And then Maybe another question would just be on The work that you're doing with Korvan, since you're both kind of committing resins there, is it the same kind of Litt, are you fifty-fifty as far as what that final product looks like? Is there still more work to be done on final formulation and kind of Getting it exactly where you want it to be or is that set in stone and you know what kind of fillers and additives you need to get it to perform the way you want?

Speaker 2

The formulation is set in stone, although sometimes we think that and then there could be Potential tweaks along the way as you scale up. But right now, we think that's in final form and it's in the very final stages of testing to be able to go live with a specific customer, a specific customer testing To be able to go live this year with that, as far as kind of how that arrangement works, it's really similar to how we have always Done business in terms of formulating with PLA. It's a buy sell. So we buy the PLA from Total Energy's Korbion and then reformulate it and sell into the market.

Speaker 8

Got it. Yes. Thank you very much. I have

Speaker 7

a couple more housekeeping ones, but

Speaker 3

I'll jump back in queue. All right. Thanks, Alex.

Operator

Thank you. Next question, we have John Tanwanteng with CJS Securities. Please go

Speaker 6

ahead. Hi, guys. Thanks for taking my questions. It's nice to see that you're getting better visibility here. I was wondering if you could give us a little bit more sense of how you expect utilization in your Kentucky facility to trend With all these new and large, I guess, projects that are in the pipeline, any hope of getting it towards full utilization By the end of next year, is there any milestones you want to reach before that?

Speaker 6

Just help us get a sense of how quickly these things are actually going to ramp from a volume perspective.

Speaker 2

Yes. Thanks, John. Yes, I think it's a reasonable expectation to think that by the end of 'twenty four, We would be at full utilization there.

Speaker 6

Okay. And your sense of full utilization is like what 80%, 90% or Thereabouts,

Speaker 2

the nameplate? In that range? Sure. Yes.

Speaker 6

Okay, got it. The cutlery announcement is Because my understanding is that, that probably uses a lot more PHA per unit than a straw would. Could you help us understand the economics of So something like that and how it's being distributed and kind of the use cases?

Speaker 2

Sure. So as far as the amount of PHA, I don't think that you could say that it uses more PHA on a percentage basis than a straw resin would. What it really comes down to is what end of life standard you're trying to achieve in terms of the amount of PHA that we need to put in it. So to achieve industrial compostable, we use we don't need much at all. To achieve home compostable, we need more and then to Achieve marine degradable, we would need even more.

Speaker 2

So we're right now, we have more than one formulation out in On market trials, and so there's sort of a range, but it's in the mid it's still kind of in that mid Like 50%, 60% kind of area as far as the amount of PHA that's in the formulation.

Speaker 6

Okay. I was actually thinking of like the absolute amount, just in comparison to a straw. I assume that it would be significant.

Speaker 2

Oh, I'm sorry. Yes. Okay, John. I misunderstood. From what I've seen from individual customers, I would say that The size of those two markets are at least when you look at like 1QSR, any 1QSR, The size of those markets are similar.

Speaker 2

If what cutlery might be a little larger than Strauss, but not a whole lot larger.

Speaker 6

Okay, understood. Got one for Mike, just your OpEx was just A little bit under $8,000,000 on adjusted basis. Is that a good run rate to be using going forward? Or what are the puts and takes as you progress through the year?

Speaker 3

I think overall, we're continuing to Related to reversals of bad debt reserve and things like that. So we'll have to kind of see

Speaker 6

if we We continue to

Speaker 3

move the needle on things like that. But from an overall cost perspective, we are very cautious of looking at those costs. As you know, when we came out as a public company, we had to stand up a lot of things very quickly and that cost that took a lot of external spend to get us in position We'll be able to manage those and we've been able to reduce a lot of those costs by bringing those in house just by having more internal experience now and skills. So we're really pleased with how we've been able to get rid of outside services. We brought in our own internal general counsel And we believe that saves a lot of money in legal expenses there.

Speaker 3

So I'll say a lot of things between outside services, consulting and all of that, Well, we would expect to maintain those levels going forward, and we'll continue then to look at the next tranche of cost that we can kind of manage. So we're hopeful it can go down further. Certainly, we don't expect it to go up.

Speaker 8

Okay, great. Thank you.

Operator

Thank you. Next question, we have Charles Neivert with Piper Sandler, please go ahead.

Speaker 5

Good afternoon, guys. Just a couple of things. 1, When you looked at the build out of the things that you mentioned, the cutlery, the straws, some of the other end markets, And I know you talked already about the size of those markets as they are, I guess, today. When we get The more full use, not the Viasat, but the period of introduction in there, where Which products are the biggest in terms of sort of split of where the PHA is going? And where you estimate them, looking out longer term, which one has The strongest the best possibility for volume.

Speaker 2

So, Charlie, let me take a stab at that. I'm not 100% sure I got the question, but I'll give you an answer. And if it's not the right question, you can repeat. So straws and cutlery are sizable opportunities for us given the amount of capacity that we have available. But cups is kind of the next domino to fall and that is a much bigger opportunity.

Speaker 2

Coatings for cups, Those coatings can be extrusion, which are PHA based or they can be aqueous coatings that are PHA based. Order of magnitude, again, from what I've seen with individual customers That the size of that business can be 8 to 10 times larger than straws or cutlery.

Speaker 8

Got it. And so I think

Speaker 5

no, that's perfect. And also though, So if I look going forward, your opportunities you've got some opportunities in straws, they're growing, got some opportunities in utensils, they're growing. But is there any reason that over the course of the next year and a half, you're going to, for lack of a better term, reserve some Cassidy, for the cup coatings, if they start to move, is that something you're going to have to do? I mean, you just said this potentially is the biggest thing we got And you might be getting some traction on it in the over the course of the next, let's say, 12 months. Given the fact that you won't have the new plant up For a while, how do you strategize going forward in terms of gaining volume?

Speaker 5

Is that something you're going to have to it's Nice problem to deal with, but is it how do you deal with that considering

Speaker 2

the value here? Yes, good question. So when I answered John's question earlier on, it was John or Thomas asked about our run rate at the end of next year. I'm including in that assumption that there's going to be some cup business in there. So our plan would be To try to match the timing of the greenfield coming online with the timing of customers ramp ups.

Speaker 2

And that doesn't mean that there's you're not going to hit some point where that means you're flat on the top line For some period of time, but obviously, we want to compress that as much as possible.

Speaker 5

And one last question, this one's a little sort of off beat. Is the cutlery that you guys put out with the resin and we'll call it for the on the commercial side, Not marine side. Is that, well, let's say, for lack of a better term, flimsy like polypropylene or stiff and firm like Polystyrene would be in the cutlery business. What's the

Speaker 2

Yes. Good question, Charlie. I mean, we think the quality is fantastic and the items that our customers have seen Are getting good reviews? I would say that the answer to me, it depends on the thickness Of the cutlery. So different molds, as you're aware, have different thicknesses.

Speaker 2

Now, honestly, I can't personally tell you that At a 60 mil thickness, is it softer or stiffer than polystyrene or polypropylene? I'm not sure because I know I see the differences at So I'm not 100% sure.

Speaker 5

Yes. I mean, I asked the question because of who might be the buyers that The better cutlery, the firmer stuff is done by sort of higher end places than places that use the polypropylene are looking for really cheap. And again, you can hardly cut anything or pick anything up with your fork. So it's sort of a problem, but I'd like to We move into a

Speaker 8

higher end of the market.

Speaker 2

Yes, good question. I will tell you that Every sample that I've seen is not floppy, okay? They're firm enough to be able to cut food with and things like that. But here's a key point is, it depends on the customer. What does the customer want?

Speaker 2

We can formulate to meet either Brian, are you there?

Operator

Sorry, I was on mute. Next question, we have Laurence Alexander with Jefferies. Please go ahead.

Speaker 4

Hi, thanks for taking my questions. This is Kevin again. I guess I was just wondering if you could unpack, I guess, trends you're seeing in ASPs. So I mean, like in different applications and product categories, are they relatively stable or are they sort of moving just As sort of there's kind of rising uncertainty in the U. S, but just curious to hear what you're seeing in terms of pricing And your end applications?

Speaker 2

Yes, Kevin, good question. What we saw through 2021 2022 was some really rapid inflation And that drove up a lot of our raw material costs. And so we were passing on costs that pushed the average selling price up, But that has stabilized. And so we have not seen as far as trends go, there has not been any trend Up or down with respect to current products that are on the market.

Speaker 4

Got it. Okay. Thank you. And I guess my last question, I guess, just curious to hear what you're hearing from your customers and further downstream. I guess, what are you hearing and what do you expect maybe in the cadence of launches?

Speaker 4

Like do you could they change if there's a recession in Back half of this year and in 2024, just curious to hear what you're hearing from customers?

Speaker 2

Yes. I wish I was that good at predicting the future, but obviously anything could happen, especially if there's A dramatic change in the economy, but the things that we're focused on right now are a long way down the road. I would expect that even in the event of some as long as it wasn't some kind of massive economic upheaval in a mild recession, I wouldn't

Operator

Thank Next question, we have Thomas Boyce with C. D. Cohen.

Speaker 7

Thanks for taking the follow ups here. Just, I didn't see in the deck, can you let us know what percentage of revenue was attributable to PHA for

Speaker 2

Yes. I never calculated that personally. Do you have that, Mike?

Speaker 3

I do. I'm not sure if that's something, yes, let me get that for you here.

Speaker 2

If you have another question, I'll get that information for you. Great, Thomas.

Speaker 8

Sure. Yes. I just wanted

Speaker 7

to kind of better understand the nature of the restricted cash release. Was that performance related with something that's going on or is there something else there?

Speaker 3

Yes. I'll take that here as I go. We had changes in our restricted cash For the most part, we're kind of related to the IP term loan and those are short term in nature. The one that It has really stuck with us is the interest reserve account where we had to put about $12,500,000 into that and roughly maintain that balance over the next couple of years They have reserves for the interest payments on the loan. There was, I would say, some short term, I would say, cash availability constraints that we had.

Speaker 3

We had to go through and get some consents from the new market tax credit lenders for our Kentucky operation and which we have gotten in place already. And but prior to that, we did have some restrictions on about $45,000,000 of minimum cash balance that we maintained of those proceeds. And we also had to put $12,000,000 into a restricted account, a blocked account, just for any kind of subsequent Those loans in the event that we never did get that consent. So there's a lot of noise in the restricted cash line this quarter, A lot to do about nothing, but we've got all of that kind of worked out at this point. And the only real change we, for The most part I have is just a restricted interest payment.

Speaker 3

So I think going forward as we talk about, we kind of look through all of that. And when we talked about our really our effective Liquidity being $114,000,000 but realizing that $12,000,000 of that was actually In a restricted account for a short period of time, does that help you? No, that makes sense. I appreciate Dean. So I was just kind of Make sure I understand the machinations that were going on.

Speaker 2

Yes.

Speaker 6

Do I

Speaker 7

give you enough time for the PHA percentage or

Speaker 8

we can always take it

Speaker 4

offline, it's easier?

Speaker 3

My stellar staff is pinging me here on that. And PHA was About 42% in the current quarter and again, it was about 52% in the prior quarter. I think this is in the 10 Q.

Speaker 7

Perfect. I appreciate it. Thanks again.

Speaker 3

Okay. Thank you.

Operator

Thank you. Next question, we have Jon Tanwanteng with CJS Securities. Please go ahead.

Speaker 6

I was wondering if you could give us a sense of just what's happening in Q2, just directionally. I know timing impacts Q1. Have those issues been resolved and kind of is regular production resuming, number 1? And do you have any programs Actually, ramping in Q2, I know you mentioned Q3, Q4, Q1, but I didn't hear any mention actually this quarter.

Speaker 2

Yes. John, the issue that caused the tough comparison to last quarter was really the Eagle Starbucks ramp. And so that's behind us. Going forward, we expect year over year growth. But as Mike caveated last quarter, we're still small and these are big customers.

Speaker 2

So it's Still possible that we'll see lumpiness as these things scale up. And as far as any Q2 scale up, We do have one large QSR that's starting store trials This quarter, which is really just the first step in the ramp up. So we have every expectation that we'll continue that ramp, we'll continue to scale and we'll end up with all of their strong business.

Speaker 6

Great. Thank you. And then, Mike, any update on Input costs and where those are going relative to where you thought they would be earlier this year?

Speaker 3

Yes. Look, we've been really pleased with what we're seeing as the direction of canola prices. They kind of Got pretty high last year, especially as the war in Ukraine took off and that put a lot of pressure on commodity prices in general. And we are And our forward outlook, and these are numbers that we're starting to kind of lock in with our contracts. We've seen prices that were up in the mid-90s Sometime near last year and low 90s is some of the things that we're experiencing even our Q1 into our Q2 as we kind of work off some of those inventories.

Speaker 3

But as we look forward here, we're looking at prices now that we can contract in Q1 that could be in the low 70s. And we think that maybe it's a little bit of if we can be a little bit patient, what we're hearing from our brokers And vendors, we can start seeing things that are maybe mid to high 60s, maybe Q2 of next So I think that's very promising compared to where we've been as a sizable input cost that we track.

Speaker 6

Great. Thank you very much. Last one for you. Just how much interest was actually capitalized in the quarter? Could you give us that number?

Speaker 3

There's very little interest capitalized in the quarter. It's, I think, Less than $1,000,000 and probably less than that. Overall, as we've kind of paused the greenfield projects and our CapEx Spend has come way down. Our CIP has gone way down as well. So at this point, majority of our interest is now flowing through the interest expense line As opposed to being capitalized, if we once we get the funding for the Greenfield project and that starts up again, We can see a change on that going forward.

Speaker 3

Right now, the amount of interest that Everson capitalized is pretty de minimis.

Speaker 8

Got it. Thank you.

Operator

There are no further questions at this time. Pete, do you have any closing remarks?

Speaker 8

Yes. Thanks, Brian. I'd like

Speaker 2

to thank everyone on the call with us again for your time and attention today. We're excited about the increased awareness of PHA based materials among consumers and customers, pleased to have major opportunities for growth right in front of us and grateful for the ongoing support, dedication and shared vision of our investors, employees, partners, teammates and customers. We'll be looking forward to speaking to you about our continued progress again next quarter.

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Danimer Scientific Q1 2023
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