Origin Materials Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 29, 2024

There are 5 speakers on the call.

Operator

Thank you for standing by. This is the conference operator. Welcome to the Origin Materials 4th Quarter and Full Year 2023 Earnings Call. As a reminder, all participants are in a listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions.

Operator

At this time, for opening remarks and introductions, I would like to turn the call over to Matt Levin, CFO. Please go ahead, sir.

Speaker 1

Thank you. Good afternoon, everyone, and thanks for joining us. Speaking first today is Origin's Co CEO, Rich Riley. He will be followed by Co CEO and Co Founder, John Thistle and myself. After that, we will open the call to questions from analysts and discuss questions submitted as part of our Ask Origin campaign.

Speaker 1

Ahead of this call, Origin has issued its 2023 Q4 and full year press release and presentation, which we will refer to today. These can be found on the Investor Relations section of our website at originmaterials.com. Please note that some of what you will hear during our discussion today will consist of forward looking statements based on current expectations and assumptions, which are subject to risks and uncertainties. These statements reflect our views as of today, should not be relied upon as representative about views of any subsequent date, and we undertake no obligation to revise or publicly release the results of any revisions to these forward looking statements in light of new information or future events. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations.

Speaker 1

For more information, please refer to our filings with the SEC, including our annual report on Form 10 ks, which will be filed Monday, March 4. During today's call, we will discuss non GAAP financial measures, which we believe are useful as supplemental measures of Origin Materials' performance. These non GAAP measures should be considered in addition to and not as substitutes for or in isolation from GAAP results. You will find additional disclosures regarding the non GAAP financial measures discussed on today's call in our press release issued this afternoon and our filings with the SEC, which will be posted to our website. The webcast of this call will also be available on the Investor Relations section of our company website.

Speaker 1

With that, I will turn the call over to Rich.

Speaker 2

Thank you, Matt. Good afternoon, everyone, and thank you for joining us. For Origin, 2023 was a watershed year, which included the commencement of production at OriginOne, a key milestone improving the scalability of our biomass conversion technology. Furthermore, we made great progress on initiatives that significantly de risk the business on the path to profitability. Indeed, today we are pleased to announce that owing to the strong momentum of these initiatives, we now have a path to profitability entirely independent of the scale up of our biomass conversion technology and related manufacturing plant construction.

Speaker 2

These initiatives are led by our all PET caps and closures business, a highly differentiated solution for the over $65,000,000,000 caps and closures market. Expected revenue from these initiatives coupled with our cost reduction program extend our cash runway and eliminate the need for an equity capital raise to achieve sustained profitability. Origin ended the 4th quarter with just over $158,000,000 in cash and cash equivalents and marketable securities. Having prioritized revenue generating projects with the greatest contribution to near term cash and seizing opportunities to defer research expenses or other programs targeting longer term results, our expected 2024 net cash burn is between $55,000,000 $65,000,000 with meaningful gross profit generation anticipated to begin in 2025. This is primarily due to the strong commercialization progress of Origin's caps and closures business, which could begin to generate revenue within the next 12 months.

Speaker 2

With an expected 2024 cash burn of less than 65,000,000 and our expectations for significant gross profit generation beginning in 2025 with a healthy growth trajectory thereafter, We forecast maintaining a solid minimum cash floor on our way to sustained profitability and hence the expectation that we will not require additional equity capital. We anticipate our all PET caps and closures business to be transformative for packaging. We announced this initiative in August 2023 after quietly developing the program for several years as a natural outgrowth of Origin's polymer expertise and platform development efforts. This is squarely on mission for Origin as we are transitioning a hard to recycle material into an easy to recycle one and supported the global transition sustainable materials. We are positioned to be first to market with a commercially scalable PET cap, something the industry has long sought, but never achieved.

Speaker 2

Origin PET caps and closures are expected to be cost competitively produced with any type of PET, making made with 100% recycled PET possible from cap to container. They perform better than today's HDPE and polypropylene caps in ways that can improve product shelf life and they are designed for circularity. For a wide variety of containers, our technology enables the lightest cap, reducing plastic waste and improving sustainability. This business continues to make excellent commercialization progress. We successfully completed our 3rd manufacturing development run on production scale equipment, producing thousands of caps per hour.

Speaker 2

Our initial product passed 3rd party tests validating that performance meets or exceeds industry standards and we have conducted preliminary consumer testing. Our partners have conducted extensive diligence and demonstrated strong organizational alignment across procurement, R and D, marketing and sustainability to move forward with Origin solution. And we are now at the letter of intent phase with multiple leading CPG companies that collectively consume tens of billions of caps per year. There are other technologies with near term revenue generating potential in development at Origin. Like our ALPT ETCOPS and closures, these new applications enabled by Origin Technologies are not dependent on Origin 1 or Origin 2 for production and sale, but capable of using materials produced from these plants.

Speaker 2

These applications leverage Origin's chemical expertise, depth of application knowledge and intellectual property strength with further details to be provided as development progresses. Regarding Origin 2, we are launching an asset light strategy for core technology scale up. Beyond Origin 1, we intend to scale our biomass conversion technology in partnership with other major companies. With potential strategic partners to provide substantial portion of construction capital, Origin's costs are expected to be reduced significantly, enhancing our optionality with respect to the ways we can deploy our technology. Customer demand remains strong as reflected by our total optic agreements and capacity reservations in excess of $10,000,000,000 With that, I'll turn it over to John.

Speaker 3

Thank you, Rich, and good afternoon, everyone. I'll begin by building on Bridge's commentary regarding Origin 2 and our asset light strategy. Notwithstanding the industry wide capital construction project setbacks experienced over the past few years due to inflation, higher interest rates and supply chain shocks, the demand for our biomass conversion technology remains strong. As such, I am particularly proud of team's innovation, agility and accelerating caps and closures to become our primary path to profitability, which allows us greater flexibility to implement our asset light strategy. Accelerating the lower capital intensity caps and closures business is a natural prioritization given the continued escalation of capital project costs as reflected in our revised front end engineering design for the first phase of Origin 2, which we received during Q4 2023, as well as our expectation that industry wide large capital project execution costs will continue to be inflated for some time.

Speaker 3

Thus, to best deliver on the demand for our technology in the midst of these industry wide headwinds, we intend to commercialize and scale our biomass conversion technology in partnership with other major companies with potential strategic partners to provide a substantial portion of the capital for construction. Doing so is expected to optimize scale of synergies, significantly reduce project execution risk and significantly defray costs that would otherwise be borne exclusively by Origin. Time lines, economic forecasts and plant phasing with respect to separating oils and extractives for biofuel production will depend on the partner and the deal structure, which can explore a range of scenarios and locations including Geismar, Louisiana as well as Asia brownfield scenarios with updates to be provided as we finalize those partnerships. Regarding the scale up of our biomass conversion technology, we continue to engage with multiple parties to explore a variety of plant designs and evaluate potential brownfield sites. We continue to perform funded joint development work with our strategic partners, including testing and optimizing various feedstocks to generate information that could influence our scale up strategy.

Speaker 3

Regarding progress at OriginOne, we are pleased to report it is demonstrating Origin's biomass conversion technology as expected. The plant located in Sarnia, Ontario, Canada is first and foremost an asset that is used to support Origin market development, including customer materials testing and formulation in preparation for Origin 2 scale up. While continuing to be highly focused on safety and training, we are running the plant at appropriate rates to learn as much as we can in support of further tech scale up. As we run batches, we continue to prove out at scale the various unit operations such as pumps, reactors, filters, heat exchangers and utility systems, gathering information from these activities that will inform future technology designs. During this early stage of plant operations, we are using cornstarch for our feedstock to produce CMF and HTC.

Speaker 3

This allows us to focus on chemistry and unit ops, which is standard industry practice when enabling new technology processes. We expect to introduce wood handling in the months ahead. Strategic partners associated with OriginOne supply chain remain engaged as we collaborate in market development activities. Lastly, our Board of Directors continues to evolve. Karen Richardson has served as Chairman of the Board for 3 years and as her term concludes, we thank her for her exemplary service.

Speaker 3

Karen supported the company as we have advanced our technology platform, started up OriginOne, built a world class board of industry experts and enhanced senior leadership with the recruitment of Matt Plavin as CFO. Today, we announced Karen Richardson's retirement from the Board effective March 1. Concurrently, Tony Tripeny, our current Audit Committee Chair, who has served on the Board since May 1, 2023, will succeed Karen as Chairman of the Board. We're incredibly fortunate to have Tony who brings over 3 decades of significant operational strategy and M and A experience to the Chair position, extensive knowledge of the manufacturing, technology and material science industries and a background in the international corporate finance. During his 36 year career with Corning, a global leading innovator in material science with more than $10,000,000,000 in annual revenue, Tony held various progressive leadership roles in corporate accounting and finance, including Chief Financial Officer.

Speaker 3

In addition, John Hickox has been appointed to the Board and will serve as our Audit Committee Chair, succeeding Tony and as a member of the Nominating and Corporate Governance Committee. John has been on the cutting edge of advising mid range to Fortune 10 companies on economically responsible sustainability, including having spearheaded the KPMG America Sustainability His distinguished career spans 40 years in auditing, accounting, FP and A, corporate governance and executive leadership. He was an advisory partner at both KPMG and Ernst and Young, servicing a range of public clients, including chemical and packaging industry clients in the areas of SOX, regulatory compliance, internal audit and risk management and sustainability, focusing on impactful corporate stewardship strategy reporting and profit maximization. Welcome, John. And finally, we would like to again thank Karen for her outstanding leadership during her term these past 3 years.

Speaker 3

We look forward to a seamless transition to Tony, who has proved himself a strong successor for the Chairman role. With that, I'll turn it over to Mac.

Speaker 1

Thanks, John. We've provided the quarter and full year results in the tables of the earnings release. So I will focus my comments on a couple of key financial highlights. 2023 was Origin's 1st year of revenue generation since becoming a public company, with revenue of $13,100,000 $28,800,000 for the Q4 and full year respectively. This is primarily comprised of what we refer to as supply chain activation revenue generated in conjunction with the initiation and initial scale up of Origin 1 operations.

Speaker 1

Looking ahead, we expect the onset of revenue from our caps and closures initiative just highlighted by Rich and John could be within 12 months. We anticipate this revenue will be significant, recurring in nature and with a margin growth profile that will drive us to overall cash positive operations within the means of our existing cash resources, eliminating a need for an equity capital raise on our way to sustain profitability. Our confidence in this revenue outlook is predicated on a risk adjusted aggregation of demand projections provided to us by prospective customers with whom we are in contract negotiations for our PET caps. Their individual demand estimates reflect gradual adoption rates within their existing production volumes, risk adjusted for potential delays. Our confidence in a significantly reduced expense forecast for 2024 is due primarily to the impact of our asset light strategy on how we will finance our forward capital project costs.

Speaker 1

During 2023, we incurred just over $100,000,000 in property, plant and equipment costs in service of our biomass conversion technology development. With these costs now expected to be contained within our potential strategic partnership arrangements coupled with the roll forward impact of our previously announced cost reductions made in Q4 of 2023, we are well positioned to execute our 2024 plan at less than a $65,000,000 net cash burn. Turning now to our operating expenses for the Q4, they were $19,800,000 compared to $13,000,000 in the prior year period, an increase of $6,800,000 The increase was driven primarily by increases in manufacturing costs of 2,000,000 dollars increased depreciation costs of $2,000,000 due to Origin 1 coming online during the quarter and increases in R and D costs of $1,000,000 For the full year 2023, operating expenses were $60,100,000 compared to $38,900,000 in the prior year period, an increase of $21,200,000 driven by cost increases proportionally consistent with those in the Q4. With that, I'd like to reiterate our financial guidance for 2024 including revenue of $25,000,000 to $35,000,000 and net cash burn between $55,000,000 $65,000,000 with significant gross profit generation anticipated to begin in 2025. In closing, as you might imagine with our existing cash on hand and good visibility into a path to sustained profitability without the need to raise additional equity capital, we believe the company is exceptionally undervalued at its current stock price.

Speaker 1

Moreover, we believe the execution of our plan in 2024 will be well received by investors and as such, we expect Origin will satisfy the NASDAQ minimum bid price rule within the requisite grace period. Now I'd like to open the call for questions. Operator, may we have the first question please?

Operator

We will now begin the question and answer session. The first question comes from Frank Mitsch of Fermium Research. Please go ahead.

Speaker 4

Good afternoon. Good afternoon, folks. I wanted to come back to the use of wood, introducing wood, waste wood and wood chips into Origin 1. John, you indicated that that's going to happen in over the next few months or several months, I forget exactly what you said. But the way I was thinking about it, the $10,000,000,000 plus that you have in capacity reservations and offtake agreements, I presume is tied to the use of wood and waste wood as the feedstock and not cornstarch.

Speaker 4

So I'm just curious as to why we might not have seen an acceleration to try and introduce wood and have the OriginOne facility running on what's obviously a much cheaper feedstock. Any color around that would be very helpful.

Speaker 3

Yes, sure. Hey, Frank. So it's a really good question. Actually, a lot of our customer arrangements, I wouldn't say most, but a lot of our customer arrangements actually are pretty agnostic to the feedback that's being used for them to make the product. And that's because, well, I'd say it particularly corresponds to applications where we're providing a performance advantaged product.

Speaker 3

So when we talk about paraxylene and PET, really the dominant value proposition is sustainability and of course changing where sort of how the supply chain is organized, since you don't need to use petrochemicals or oil to produce it. But when you look at products that can't really be made outside of our platform, these are things like pure land derived products or FPCA, HTC derived products that are unique. We're often using a value proposition that is not just sustainability, but also just flat out performance. The products that we're making are performing better than what they have in that same application. And while cornstarch really doesn't provide the same sustainability benefits that you get for wood, it is still sustainable.

Speaker 3

And of course, the buy decision for customers like that is driven by the performance of the end product. CMF is CMF, whether it's coming from wood, starch or something else. And so we actually do have a lot of customers and a lot of applications, which don't really care so much about what the feedstock is on the front end.

Speaker 4

Okay. That's very helpful. But the intent is certainly by the early July timeframe that the NASDAQ has threatened for delisting. The intent is before then, you will have introduced and demonstrated the use of of wood and waste wood in Origin 1?

Speaker 3

Yes. The intent is for us to demonstrate that not so far out of it.

Speaker 4

Okay, great. And then I guess just lastly, with respect to Origin 2 and the Asian brownfield sites, which is kind of an interesting side. So obviously, you've got something cooking there. I'm wondering if you could elaborate on that. But your expectation in terms of the partnerships that you want to form, would we also expect to see something announced before mid year in that regard as well?

Speaker 2

Hey, Frank, it's Rich. It's hard to give timing guidance, but I can share that we have multiple potential partners who are deeply engaged exploring a wide range of plant build scenarios, including Asian brownfields. As we mentioned in the remarks, these partners bring a variety of some of them are long particular forms of feedstock that's very attractive or have brownfield sites that are attractive, capital projects expertise, capital generally. And so we're approaching these partnerships with very open minds and thinking of ourselves as really the technology provider. And we can also bring customers obviously with our massive order book.

Speaker 2

And so looking at these various opportunities of different types of companies wanting potentially different focuses in terms of the end materials that the plant would be geared towards. And so we're working those through. Hard to give guidance on timing, but continue to make progress.

Speaker 4

Understood. Understood. Thanks so much for the color.

Speaker 2

Thank you.

Operator

The next question comes from Eric Stine of Craig Hallum. Please go ahead.

Speaker 1

Hi, everyone.

Speaker 2

Hey, Eric. Hey. So

Operator

maybe we could just start off with

Speaker 1

the guide. I'm just trying to get a handle on that. I mean, so revenues $25,000,000 to $35,000,000 You just came off $29,000,000 And certainly on a run rate in Q4 that would exceed that. I mean, is this because you are done with as you termed it supply chain activation activities and it's more of a I don't know, the production is more tempered based on customer needs, what they want to test, etcetera, Or maybe I'll just start there, how to think about that revenue level and why in 'twenty three or 'twenty four, sorry? Yes.

Speaker 1

This is Matt. I think certainly we expect supply chain revenues to recur in 2024. And as we said in our prepared comments, within 12 months, we do expect the caps and closures revenues to set in. So for 2024, I think that's kind of the general guidance you should rely on. And as we talked about, 2025 is where we really expect to see caps and closures revenues ramping.

Speaker 1

So I think you picked up on the guidance pretty well.

Speaker 2

The Eric, this is Rich. So I'll just add that our commercial focus is really what we expect to be substantial 2025 revenues from the caps and closures business. And so it's a that's the priority for our commercial efforts, not as focused as we were on joint development agreements or supply chain activation partnerships.

Speaker 1

Got it. And then just trying to get a handle on it squared up with the reduced cash burn, which is obviously good to see. I mean, you just came off a quarter of total OpEx of almost $20,000,000 Clearly, that number got to come down if you're going to hit that reduced cash burn. What maybe kind of what level should we think about for OpEx here in 2024 as you build towards 2025? Yes.

Speaker 1

So I think the on the year, we talked about 55 to 65. I think it's fair that to assume that to be relatively linear throughout the year, not a lot of lumpiness in that. And of course, as the casting closures revenues build in 2025, that margin substantially reduces and results in cash positive thereafter. So I think that's the way to think about OpEx in 2024. Okay.

Speaker 1

Well, I mean, at this level, should we take this to mean then that because you're no longer taking on the spend for plant activity with OriginOne complete, I mean the CapEx is virtually 0 in 2024 or at least your portion of it. I'm just trying to square the 2 because that revenue at this CapEx level just doesn't work. Yes. I think we think about bifurcating spend between the caps and closures initiative and the asset light initiative, which as Richard mentioned is really something we're working through with our partners. So we don't see significant CapEx capital projects spend in 2024 coming out of our capital on the balance sheet at the moment.

Operator

Okay. I guess maybe I'll take

Speaker 3

it. Eric, what might help square for you a little bit is, so when we look at capital that's required for the caps and closures business, it's much more modest life sizes. And we see those, as Matt said, I think in his prepared remarks, we see those as very financeable. And so even though there is certainly capital outlay that goes towards the Cats and Closures business. It's not the net cash burn as a result of that capital outlay is not particularly large relative to the rest of the spend of the company.

Speaker 1

Okay. All right. No, that helps. That makes sense. Maybe just turning to caps and closures.

Speaker 1

I mean, obviously, an attractive path to go down. But and I know you're optimistic, but 12 at least 12 months away. I mean, maybe just talk about what are the steps that we need to see between now and say this time next year? And I'd love some details like, I mean, for instance, are you using a tolling arrangement and where would these be produced? Maybe that's still to be determined.

Speaker 3

Yes, that's a great question. So the way to think about the caps and closures business specifically is much if you have sort of a chemicals hat on or something along those lines, this is much smaller operations than you would typically see for a chemicals plant. And so scale that down, but the idea of a plant is still valid, right? They're just small and they're different kinds of technology, right? This is mechanical plastic part production technology rather than a big industrial process plant.

Speaker 3

And so these units are procured from existing sort of complex mechanical equipment manufacturers. They require adjustments to the existing equipment, but largely it is still produced by them. So it's really equipment purchase and installation rather than lots of tanks and pipes and things like that, right? So it's just sort of a different risk profile associated with those. It also because of that structure has a different delivery and sort of time to production profile.

Speaker 3

So really the independent components that we're talking about in these systems can actually have lead times as short as 6 to 9 months. We've been giving ourselves a little bit longer than that because we want to make sure that we have time to integrate them and bring them online. But you're really talking about you said 12 months, I think that's pretty reasonable for a given system. But this is not a one big system and then you sort of fill it out kind of business. This is a business where we're going to be bringing online systems as we go along and they won't be separated by that much time most likely.

Speaker 3

So we can satisfy demand much more incrementally rather than just sort of one big step change. So some of the things and I give that color because I think it helps make sense of some of Matt's comments around us getting to profitability in 2025. That's not us all just waiting around saying, okay, well, when is that system going to come online and then boom, we get to profitability or gross margin, I should say, positive gross margin, I should say. But the instead, we're going to see pieces all the way along, individual systems coming online, satisfying demand for different customers as we go. So I think that's going to provide lots of opportunity for milestones and to see sort of real progress in meaningful amounts of time.

Speaker 3

I think the other things to think about are, 1, we've done 3rd party testing and manufacturing with these systems, with the suppliers of the systems. And we've made, as we said in our both our prepared remarks and then I think also in the release, a lot of these parts for validation. We've been working closely with customers to put them into their systems. We're very excited about that. I think we will continue to see progress in terms of efficiency.

Speaker 3

We're pretty happy with where we are on efficiency right now, and we think that we have actually a pretty good path forward. So those will be things that we can talk about. But again, I think this is characteristically a much more quickly moving technology than you see for that sort of large capital project driven businesses in the chemical industry.

Speaker 1

Okay. And so just to be clear though, you these are so these would be Origin facilities. They would just be it's not a plant, they're much smaller. Or is this something where it'd be your tooling at a supplier location and they're making it on your behalf?

Operator

Yes, it's

Speaker 3

a great question. Glad you reasked it since I didn't answer it the first time. So I think it's going to be a combination. I think there are going to be places where it makes sense for us to have origin operated facilities and they're going to be places where it makes sense for us to take our equipment and our capital and put it into another facility that's operating. But I think that the balance between those two is going to be driven by the economic opportunity that exists inside of some other party's facilities.

Speaker 3

I don't think that we want to make ourselves entirely beholden to any third party manufacturing organization, but there are clearly places where we can have one of our systems operating inside of a larger manufacturing context and take advantage of efficiencies that they would have and it's sort of a win win for both parties on either side. So we'll do that when we can. And then I think Origin operated and owned facilities as well, definitely. Okay. Thank you.

Operator

Thanks. That concludes today's live Q and A segment. I will now turn it over to Matt Flavin, CFO to conduct the next segment of our investor Q and A.

Speaker 1

Thank you, operator. Prior to our earnings call, we invited investors to submit questions as part of our Ask Origin campaign. Thank you to everyone who participated. We're grateful for the significant volume of questions submitted and really encouraged by the thoughtful and engaging nature of your questions. As you might expect, we have tailored our prepared remarks to address many of those questions as practically as we could, which ended up being a majority of your questions we've got to refrain from answering those.

Speaker 1

However, there are a few that fall outside of those two categories and we'd like to quickly cover those. So our first question for John is about 14 Dioxane. Is the use of 14 Dioxane highly likely or unlikely to be used anywhere along the chain to produce PDF from CMS?

Speaker 3

Yes. So this was an interesting question in part because it is an example of where people are diving into sort of technical detail on things that is surprising, but at least for me kind of gratifying. I enjoy it when people look into this kind of stuff. So I think the providence of this question is likely from one of our patents, specifically one of our patents around the production of paraxylene from dimethylpurane and our Geels Alder chemistry to do that. And I think the interesting thing to understand about this is, first, when you're developing technical systems like this, you typically are going to start with either a model system or a system that really clearly elucidates the properties that you're looking for.

Speaker 3

And then of course, once you hit on something that you like, you end up writing a patent around it or whatever you're going to do. And then you include the work that you've done, which includes this model system or model compounds. And so it's quite common in fact to have species chemical species in the patent that are maybe not exactly what's going to be used commercially. So I think keep that in mind as you look at these the patents that we write and frankly patents in general. Now that all said, so I think it's interesting to ask about the onefour dioxane.

Speaker 3

That's sort of the relevant information on it. But the question actually was around the pathway from CMF to PEF. Now what's interesting about PEF is that it's made out of FTCA or pure anticryboxylic acid as a replacement for terephthalic acid. The terephthalic acid, of course, would have been made from the paraxylene that we produce from dimethyl purean using the Diels Alder chemistry that I just referenced. So what's interesting about the question about PEF is that, of course, we don't use our Diels Alder chemistry on the way to make FDCA or PEF.

Speaker 3

So, while I think the provenance of the question is interesting and certainly relevant, It actually turns out not to be relevant for the production of FTC and PEF despite some of the comments that I made around sort of model systems earlier. So an interesting question. The answer is, I think, very unlikely that we're going to use dioxane anywhere in the system, specifically going from CMF to PDF.

Speaker 1

Okay. Thank you. The second question is about the TRL or technical readiness level of Origins Biomass Conversion Technology. Has the technology been proven to work in its final form and under expected conditions? Have there been demonstration of actual system prototype in relevant environments?

Speaker 1

And how far along is the technology in terms of TRL?

Speaker 3

Yes. That's another great question. And something we think about a lot internally as sort of assessing things via their technology readiness level. And by the way, the TRL system was developed originally, I think, by NASA early on to assess sort of how far along were each of moon and get them back. And so it's a great system that was very rigorously put together.

Speaker 3

What I think is particularly interesting for the chemical process industry, which is where we live, is that you have to look at a chemical process oriented technology readiness definition set, which is out there. It's on you can Google it and find a PDF of it. And it's subtly different than the one that you typically see for mechanical systems. But it makes it a little bit easier to set up the relationships. Now that all said, we have done a lot of system and subsystem development through the years.

Speaker 3

So that's really what's happening when we're doing bench scale work, integrated bench scale reactions, scaling it up to pilot. You could set TRL numbers associated with each of those steps as you go forward. And then of course with OriginOne, OriginOne is essentially by the TRL system a full scale operating plant. And so once something is operating in OriginONE, then it's it's sort of off the top end of the TRL scale, right? Or I think it's technically TRL mod, which is fully commercial.

Speaker 3

So that's sort of the from a technology risk perspective, that's the way to think about that. Now, of course, we always have additional technologies that are that we're working on. We like we have improvements to technologies, even technologies that are have been implemented at OM-one. We're working on things that can make those process steps better, more efficient. In some places, we're really excited about those, and we may be working on them even though they're a little ways out.

Speaker 3

And so as you look through all of those improvement proceeds, you're going to see a smattering of different technology readiness levels, depending on when we started or how difficult it is, etcetera. But essentially, when something is operating at OM-one, that's sort of off the top end of the technology rating of scale.

Speaker 1

Okay. Thanks, John. Now a question for Rich. His question is about the share price. Can you provide some insight on organically addressing the share price to maintain Origin's NASDAQ listing?

Speaker 1

It's top of mind for many retail investors.

Speaker 2

Yes, it's a good question. Here's how I think about that. First, we have a very strong plan to get to profitability without needing to raise additional equity capital led by our breakthrough caps and closures product, which really highlights the innovation and capabilities that we have at the company. In addition to the intrinsic value of our core biomass conversion technology, which we now plan to scale via partnership. And so that plan is something we feel really good about.

Speaker 2

And to be clear, we believe that the stock is extremely undervalued at its current levels. And we're confident that as we continue to execute this plan, the results will be very well received by investors and that the stock price will reflect that reception in those results. And so we really think this is going to be a very exciting year for Origin and are highly confident that we will continue to be listed on the NASDAQ.

Speaker 1

All right. Thanks, Rich. Thank you, everyone, who joined. We're looking ahead with confidence and excitement for 2024 and we look forward to our next update. This concludes

Operator

our call for the day. Thank you. This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

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Key Takeaways

  • In 2023, OriginOne began production and the company now has a path to profitability independent of large‐scale biomass plant construction based on revenue from new initiatives and cost reductions.
  • The all‐PET caps and closures business is expected to generate material revenue within 12 months, featuring 100% recycled PET caps that outperform HDPE and PP, and the company has completed three pilot runs with LOIs from leading CPG partners.
  • Origin is pursuing an asset‐light strategy for Origin 2 by partnering with major companies to share capital costs and execution risk, supported by over $10 billion in offtake agreements and capacity reservations.
  • With $158 million in cash and marketable securities, Origin forecasts 2024 net cash burn of $55–65 million, revenue of $25–35 million, and meaningful gross profits beginning in 2025, eliminating the need for an equity raise.
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Earnings Conference Call
Origin Materials Q4 2023
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