Origin Materials Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 14, 2024

There are 8 speakers on the call.

Operator

Thank you for standing by. This is the conference operator. Welcome to the Origin Materials First Quarter 2024 Earnings Call. As a reminder, all participants are in 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 Ryan Smith, Co Founder and Chief Product Officer. Please go ahead.

Speaker 1

Thank you. Good afternoon and thank you for joining us everyone. Speaking first today is Origin's Co CEO, Rich Riley. He will be followed by Co CEO and Co Founder, John Bissle and CFO, Matt Plavan. 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 2024 Q1 press release and presentation, which we will refer to today. These can be found on the Investor Relations section of our website at origematerials.com. Please note that during our discussion today, we will be making 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 result of any revision 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 further discussion on the material risks and other important factors that could affect our financial results, please refer to our filings with the SEC, including our quarterly report on Form 10 Q filed today. 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 a substitute for in isolation from the GAAP results. You will find additional disclosures regarding the non GAAP financial measures discussed 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, Ryan, and thank you, everyone, for joining us. Today, we are reaffirming our path to profitability, which is entirely independent of the scale up of our biomass conversion technology and related manufacturing plant construction. We are reaffirming that as we execute our business plan to achieve sustained profitability, we believe our cash runway is sufficient to eliminate the need for an equity capital raise. Origin ended the Q1 with just over $146,000,000 in cash and cash equivalents and marketable securities. Consistent with our prioritization of revenue generating projects with the greatest contribution to near term cash and our continued deferral of research expenses or other programs targeting longer term paybacks.

Speaker 2

Today, we are reaffirming our expected 2024 net cash burn of between $55,000,000 $65,000,000 We continue to make strong commercialization progress with Origin's caps and closures business, which we expect will begin to generate revenue within the next 9 months with significant gross profit generation beginning in 2025 and a healthy growth trajectory thereafter. As such, we continue to forecast a solid minimum cash floor on our way to sustain profitability and hence the expectation that we will not require additional equity capital. During the Q1, we made strong progress in our journey to profitability led by our groundbreaking PET caps and closures business. We announced a few of our caps and closures manufacturing partners, including Paxos Global and IMD Vista. And we continue to make good progress with prospective and as yet unannounced customers who are excited about our revolutionary caps offering and the benefits it brings for recycling circularity and performance.

Speaker 2

Today, we are announcing that we have accelerated the procurement of multiple additional high throughput caps production lines to complement the initial line, which we have already purchased. We aim to bring our first manufacturing system online during the Q4 2024. At full capacity, following ramp up, our initial systems are expected to generate between $45,000,000 $65,000,000 in annual revenue. The caps and closures opportunity is massive, an over $65,000,000,000 market with currently engaged prospective customers alone consuming tens of 1,000,000,000 of caps per year. We look forward to rapidly standing up additional lines addressing multiple product types including tethered beverage caps and caps for non beverage home goods applications.

Speaker 2

Today, we are also announcing the caps and closures technical milestone with the completion of a successful capping trial on a commercial bottle line applying Origin PET caps. In fact, Origin caps made 100% recycled PET to thousands of filled beverage containers. I'll let John speak to that in greater detail. We also announced the initial product lineup of our PET caps and closures manufacturing platform. We are starting with the world's 1st CSD or carbonated soft drink, PET cap, the lightest of its kind ever produced at commercial scale.

Speaker 2

There are hundreds of different kinds of caps and closures in container packaging, but the PCO-eighteen eighty one neck finish is considered a leading standard for carbonated soft drinks and is often used for other products such as juices or even still or sparkling water. Because of the ubiquity of bottles using the PCO 1881 finish, it's an area where our PET cap can make a tremendous difference by improving recycling circularity and product performance in a massive addressable market. We followed that initial product announcement by introducing the first ever tethered PET cap. Cap tethering mandates are coming into effect later this year in Europe through the EU single use plastic directive. Tethered caps are designed to stay connected to the container and thereby improve cap collection rates for recycling.

Speaker 2

We look forward to our 1881 compatible caps being available in Q4 later this year with ramp up to follow throughout 2025. Apart from our caps and closures business, we continue to grow the long term value of the Origin platform by engaging potential strategic partners around the scale up of our biomass conversion technology, including exploring high value application development initiatives that could generate near term revenue. Other technologies with near term revenue generating potential are also in development at Origin. Like our PET caps and closures, these new applications enabled by Origin Technologies are not dependent on Origin 1 or Origin 2 for production and sale, but are capable of using materials these plants are designed to produce. We look forward to providing more detail on these initiatives in the future.

Speaker 2

With that, I'll turn it over to John.

Speaker 3

Thank you, Rich, and good afternoon, everyone. As Rich indicated, we're incredibly excited about the progress we're making in Origin. In particular, our caps and closures business is driving us toward profitability and we are pleased with its progress, both technical and commercial. As a recap of the value of this business, we anticipate that our PET caps and closures business will 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.

Speaker 3

This initiative is squarely on mission for Origin as we are transitioning a hard to recycle material into an easy to recycle one in support of the global transition to 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. Notably, Origin's 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. They can be made from recycled PET or RPET and they are designed for circularity with no additives used to modify the polymer.

Speaker 3

For a wide variety of containers, our technology enables the lightest cap, reducing plastic waste and improving sustainability. We are working with world class manufacturing partners to bring this technology breakthrough to market. This quarter, we announced a few of them. We announced our partnership with Paxos Global, the leading packaging machine producer for plastic closure splitting machines to produce the world's 1st PET cap and closure manufacturing system. PaxSys Global is a respected leader in packaging machines for cosmetics, beverage, pharmaceutical and packaging industries with facilities in North America, Europe and Asia that has operated for over 50 years.

Speaker 3

We announced our partnership with IMV Vista, a global leader in high speed testing systems headquartered in Switzerland with locations around the world including the United States, Germany and Taiwan, with systems in use on every continent. IMV Vista manufactures advanced camera systems that inspect thousands of closures per minute and which in the future are expected to give Origin the ability to inspect billions of caps per year. As Rich alluded to, today we are announcing another technical milestone with the completion of a capping trial on a commercial bottling line applying Origin, our pet caps to thousands of filled beverage containers. A trial like this where we use a commercial bottling line to apply our caps to thousands of bottles is a great opportunity to not only collect data, but observe and learn how our product performs in the context of a high throughput commercial bottling line. The trial went well and we look forward to parsing the data in the weeks ahead to inform and fine tune our design for future production runs.

Speaker 3

For our trial run, we used origin caps made with origin caps made with recycled PET, a material which performs just the same as virgin PET for this application. The recycled PET is off the shelf, meaning we don't use any additives to modify the PET polymer for our process. Shifting to the scale up of our biomass conversion technology beyond Origin 1. For Origin 2, we continue to engage customers as part of our asset light strategy for technology scale up. As we indicated last quarter, timelines and economic forecast will depend on the partner and the deal structure, which can explore a range of scenarios and locations, including Geismar, Louisiana and Asia brownfield scenarios, with updates to be provided as we finalize those partnerships.

Speaker 3

Despite near term macroeconomic challenges to which we are adapting through less capital intensive revenue generating initiatives, customer demand remains strong as reflected by our total offtake agreements and capacity reservations in excess of $10,000,000,000 We continue to engage with multiple parties to explore a variety of plant designs and evaluate potential brownfield sites. We continue to perform development work, including testing and optimizing various feedstocks to generate information that could influence our scale up strategy. As we deliver samples and testing data to partners, we continue to gain market feedback, including that our carbon black derived from our HTC intermediate is currently the most promising alternative to fossil Carbon Black for rubber reinforcement, such as for tire applications. The reason is simple. The performance of Origin's Carbon Black sets it apart from other sustainable rubber reinforcement alternatives that are being considered for making renewable tires.

Speaker 3

OriginOne, our plant in Sarnia, Ontario, Canada continues to provide valuable insights into the scale up of our biomass conversion technology. We achieved a major milestone this quarter by converting sustainable wood residues at our plant into versatile chemical intermediates. The introduction of wood residues marked an evolution from the cornstarch based production we had employed since commencement of plant operations in October of last year. We are using locally sourced Forest Stewardship Council, FSC, controlled wood residues produced by a sawmill as a byproduct of lumber and wood flooring production. From that mills, wood chips, shavings and sawdust, we produced our sustainable intermediates, which can be used to make a wide variety of products that normally would be made from petroleum.

Speaker 3

As we operate the plant, we continue to get confirmation of the expected operating parameters for items such as reactors, pumps and heat exchangers. Our early batch runs have been very helpful in determining wood handling and transfer parameters, biomass slurry transfer behavior, reactor batch loading sequence optimization and reactor thermal performance, just to name a few. To share an example of the kind of typical process adjustments you make during this part of running the plant, we recently adjusted how we control the airflow in the woody biomass conveyance system then doing so achieved the design performance of the wood mill. This is exactly the kind of learning we expected to gain by operating Origin 1 and we will incorporate this valuable information into future plant design. The plant is 1st and foremost an asset used to support Origin market development, including customer materials testing and formulation in preparation for Origin 2 scale up.

Speaker 3

Strategic partners remain engaged as we collaborate in market development activities. All of this is exciting progress for our customers and our team as we continue to execute in our mission to drive the once in a planet transition to sustainable materials. With that, I'll turn it over to Matt.

Speaker 4

Thanks, John, and good afternoon, everyone. We've provided the quarter results and the tables of the earnings release, so focus my comments on a couple of key financial highlights. We ended the quarter with $146,000,000 in cash and equivalents and marketable securities for a net burn of approximately $12,000,000 On a quarter run rate basis, this is in line with our net cash burn guidance for the year of between $55,000,000 $65,000,000 Origin's 1st quarter revenue was $6,800,000 up substantially from the $1,700,000 in the prior year quarter and also on a quarterly run rate basis in line with our revenue guidance for the year, which is between $25,000,000 $35,000,000 Also as expected, these revenues are 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. Looking ahead, as just highlighted by John and Rich, we expect the onset of new revenue from our caps and closure initiatives to be within 9 months from now. And to provide investors with additional context as to the quantum of revenue we expect, Rich indicated earlier in the call that our initial cap manufacturing lines are projected to create an aggregate capacity at scale production for between $45,000,000 $65,000,000 in annual cap and closure revenue depending upon product mix.

Speaker 4

Furthermore, in order to fully serve our expected caps demand in 2025, we'll need to expand our production capacity beyond that of our initial lines and therefore intend to acquire additional equipment lines before year end. We believe the equipment is highly financeable with attractive return on invested capital cycles and we are in active discussions with both customers and a number of well established equipment financing companies. The associated debt servicing costs for these lines is baked into our existing forward cash flow and profitability guidance, the specifics of which I will reiterate in a moment. Before I do, however, I'd like to highlight what a positive quarter we had engaging with our investors. As outlined in the earnings release today, we announced several fundamental milestones during the quarter revealing proprietary and compelling aspects of our products, our partners and strategies for near term growth and prosperity through the caps and closures market.

Speaker 4

During the quarter, we see the opportunity discuss these advances in greater detail and to answer the many thoughtful questions along the way. We believe our efforts were a big success. We look forward to more of the same with continued progress and we thank our investors for their sincere engagement and dedicated support, especially the support we've seen across forums like LinkedIn, X, formerly known as Twitter, Discord and various message boards. With that, I'd like to reiterate and reaffirm our financial guidance starting with 2024 specifics, including revenue of $25,000,000 to $35,000,000 and net cash burn between $55,000,000 $65,000,000 Beyond 2024, we anticipate caps and closures revenue in 2025 to be significant, recurring in nature and with a margin growth profile that will drive us to overall cash positive operations within our existing cash resources, eliminating the need for an equity capital raise on our way to sustain profitability. Now I'd like to open the call for questions.

Speaker 4

Operator, may we have the first question, please?

Operator

Absolutely. Today's first question comes from Frank Mitsch with Fermium Research. Please go ahead.

Speaker 5

Yes, good afternoon. And first off, I want offer my congratulations to Ryan Smith, who I've not met yet, but you're a heck of an interviewer, Ryan. I really appreciated the interviews that you guys posted on the website. I thought that was very helpful. I want to so Matt, if I understand correctly, the cap and closure lines that you are buying such that you can get $45,000,000 plus in sales in this first round.

Speaker 5

It's mainly going to be equipment financed and not eat too much into the cash burn?

Speaker 4

That's a correct assumption, yes.

Speaker 5

All right. Great, great. And can you talk in a little more detail with respect to government funding? I noticed on your various financial statements today that you received, it looks like $8,000,000 from the Canadian government, but it also increased your liability. So I assume that you need there's some expectation that you would pay that back and part and parcel of speaking to the what's going on with the Canadian government and potential funding for Origin, what if progress has been made here in the good old U.

Speaker 5

S. Of A?

Speaker 4

So, yes, the funding that you referred to was in connection with OM-one and it is associated with the company building that plant, something we're working on for a while. So we're very pleased to receive those funds. And there is a very generous debt servicing that goes along with that, that is really tied to your path to profitability and your ability to pay, which is over extended period of time. So we think that is very helpful with regard to managing our cash and managing it effectively.

Speaker 5

There is an expectation that the $8,000,000 that you received, you are obligated to pay that back. So this is not a grant. That's right. Okay. Okay, great.

Speaker 5

And then to that end, what's going on here in the U. S. In terms of government funding?

Speaker 4

Well, we continue to pursue such for potential of OM2, as Geismar, that's still available to us as well as there are Title 17 funds available to assist in the caps and closures ramp up in time. And we are in line for an application for some of that funding as well.

Speaker 5

Okay, great. Any thoughts on orders of magnitude?

Speaker 4

Well, there are $60,000,000,000 in funds available and there are a number of companies that are applying for it, but we feel really well positioned with the sustainability profile of caps and closures to be a contender for those funds. It would likely take at least a year from now before those would be made available to us though.

Speaker 5

Got you. All right. Thank you so much. Sure.

Operator

Thank you. Our next question today comes from Steve Byrne with Bank of America. Please go ahead.

Speaker 6

Yes. Thank you. I'd like to better understand that understand that $45,000,000 to $65,000,000 revenue target. How many lines does that require you to purchase? The first line that you would have would be just for the 4th quarter revenue, I assume.

Speaker 6

Can you provide any more disclosure on how many lines are involved in that 45 to 65? What kind of revenue do you think you could actually generate in the 4th quarter and in 2025?

Speaker 4

Yes, that's a great question. Thank you. Sorry, John, you want to take that?

Speaker 3

That and I crossed. Yes, so thanks, Steve. By the way, good to talk to you. So for those lines, it's just to give you a sense, we are first, we aren't disclosing exactly the number of lines it is. And there's some very specific sort of commercial reasons for that.

Speaker 3

But to give you sort of a sense that I think might be useful, we're not talking about dozens of lines to get to that kind of revenue, but it's also not just 1, right, or 2. And so we think it's very operationally manageable. We're pretty excited to do it. And there's also a little bit of variability, if not these lines depending on exactly which SKU, is it a tethered cap, is it not a tethered cap? Is it 38 millimeter cap or a 48 millimeter cap?

Speaker 3

There are different kinds of caps. They have different pricing and sort of revenue implications there per line. And so there could be a little bit of variability between those as well. So just in general, sort of not all lines are created equal in this particular case. Does that help?

Speaker 6

Yes, it does. And I guess I'm still struggling with is the best path forward for you to purchase these manufacturing lines and get into the business of making caps versus licensing the technology to existing companies that already have this equipment? What's your view on that?

Speaker 3

Yes. So it's a great question. It's something we talk about. What's the right order and sequencing and balance of portfolios here around those kinds of things? We talk about it regularly.

Speaker 3

And I think our opinion gets informed by the market on that topic pretty regularly as well. So it's not fire and forget on that opinion. I think what our view is always that we want to control our own destiny as much as we can. And so that means that we need to be prepared to carry this through. And in fact, our sort of default plan is to carry this through on our own, if we need to.

Speaker 3

But I don't think it's going to be quite as simple as we just go buy all these machines and operate them ourselves. What we're finding is that the industry and ecosystem is quite receptive to using this kind of technology and making this product and quite excited. And so I think there are a combination of ways that we can interact with the industry. One is actually going to other parties that manufacture plastic parts and using our caps. I think there's another option, which is more closer to what you were just describing, which is where we're providing the technology and sort of the systems associated with producing our caps, but it's operated by one of the large existing players in caps and closure space.

Speaker 3

And I think all of those are possible. I think those they're actually not mutually exclusive either. So we're sort of pursuing all of these at the same time to make sure that we have the ability to deliver on the product in the way that we're most excited about.

Speaker 6

And maybe just one more for you, John. You mentioned the use of HTC and the carbon black and so forth. What about all of the myriad products that have been explored with TMF? Is the interest in going down that pathway of developing these furan based products? Has that diminished any?

Speaker 6

I mean, this $10,000,000,000 of capacity reservations, I think you hit that in 2022. Is there interest out there in helping you finance OM2? Yes.

Speaker 3

So there's our interest in Furrion based products or CMF derived products has not diminished at all. In fact, I think one of the threads of conversation that we've had over the years is really the level of opportunity in Furan products broadly, right, across specialty chemicals and sort of performance chemicals all the way through to, of course, paraxylene. We have a lot of interest still from our customers in paraxylene. And there's we said before that people are sort of leaning in to try to help us work out what OM2 should look like from a location and development perspective, and that continues. Those are bigger conversations, and we're, as you might imagine, a little bit reticent to try to forecast exactly how those are going to land.

Speaker 3

And we've said that in our prepared comments. But I think the specialty and performance side of CMF molecules or CMF derived molecules is getting, if anything, more interesting. And I think that trend has been one that we started to see a couple of years ago and it just keeps going. So we're pretty excited to talk to the public about some of those molecules in the near future more specifically, but we don't we're not doing it yet, not ready yet.

Speaker 1

Okay. Thank you.

Operator

Thank you. And this concludes our question and answer session. Like to turn the conference back over to the management team for any closing remarks.

Speaker 7

Thank you, operator. So prior to our earnings call, we invited all investors to submit questions as part of our Ask Origin campaign. So thank you so much to everyone who participated. We received a lot and you asked some really questions. These questions were, of course, submitted before our call today, and we answered many of them thoroughly with our prepared remarks and our analyst Q and A.

Speaker 7

And in this session, we will generally be answering the first submitted questions first. And for the questions we couldn't get to today, we plan to release an investor Q and A video addressing them. So please stay tuned for that. But in the remaining time, our first questions are for John, I'm going to ask you. An investor asked about the caps and closures program asking, at a high level, could you explain what enabled Origin to figure out PET caps?

Speaker 7

Was it a mechanical engineering breakthrough that created a new manufacturing process or machine or chemical engineering development that slightly modified PET to make it a viable material for cats?

Speaker 3

Yes, that's a great question. And it's incredibly reasonable to ask because we get asked this a lot. And I think the answer is actually pretty straightforward and somewhat tied to the question that Steve asked earlier, which is around unique molecules that can be produced from CMF. And so as we have looked at applications and we use this term pretty regularly, applications And in our industry, what that usually means is when you're actually using the chemical or the material in something that a consumer or sort of an end customer might see, that's sort of an application. It's not quite exclusive to that, but that's a good way to think about it.

Speaker 3

And so we started looking at applications for CMF derived and particularly unique CMF derived molecules some time ago in an sort of an interest of understanding where those would be most valuable and frankly how to market them best. And part of that was to bring on a really sophisticated team around polyesters in general. So capable in PET, but also very capable in polyester that might be produced from FDCA or other CRM molecules. And one of the things that that team identified was that making a PET cap is something that's always been on sort of the industry docket or wish list, but it was very challenging for some pretty specific material science reasons. And so we thought that our unique furan molecules might allow us to modify the PET in a way that would enable it to be used for a cap while retaining the recyclability of the PET, which is somewhat unusual.

Speaker 3

Most of the ways that you would modify PET to work in cap synthesis make it less recyclable or maybe even completely unrecyclable. And so that was sort of the starting point. And you can see sort of the natural line between our core intermediates technology and that application and why we didn't get involved there. But it turned out by the time we were done developing the application, we found out for better or for worse that we didn't need our unique molecules to make the cap effectively. And so consequently, you could do it with just off the shelf P and T.

Speaker 3

And that was how we got into this business. We obviously said, well, if the application is interesting and novel and economically attractive, we shouldn't force it to be constrained by the scale up of our own materials, even if it provides us with sort of a strategically attractive landing spot for those materials later. So that was how we got into it. And if you look at our polyester team, they're frankly pretty incredible. They're not peripheral players in the world of polyester applications.

Speaker 3

Jay Hannan, who is the technical lead for that team, really he was the he's been a chief scientist at some of the most impressive and largest bottle companies in the world. So he's the guy when it comes to this sort of stuff.

Speaker 7

Great. So the next question kind of builds on that and is about intellectual property and asks, does Origin have patent protection on its tethered PET beverage cap?

Speaker 3

So we file intellectual property on a lot of these sorts of things. We obviously don't get into the details of filings that haven't been made public yet. So I won't go through there. And then also, is sometimes the determination of how protective is a particular patent is something that gets determined by reality, necessarily because we think it is or isn't. But that said, we have extensive intellectual property is basically what we do.

Speaker 3

If we develop technology, of course, we want to get some sort of benefit or economic value out of that technology by operating it. But the ability to protect it with intellectual property is, whether that's patents or trade secrets or whatever else is, that's sort of the that's the bread and butter of origin. And so, we have a plan around pretty much everything that we talk about publicly. Sometimes that plan is something that is easily ascertainable from the outside and sometimes it's not, but we always have a plan.

Speaker 7

Great. Thank you. Okay. So this next investor had sort of a 3 part question or a couple of part question on caps and closures as well. And I'm just going to read the first part to you here.

Speaker 7

The investor says, I understand that the plan is to produce PET caps for the business to breakeven and be profitable. What percent of Origin 1 capacity will be focused on PET caps? And what will the rest be used for?

Speaker 3

Yes. So this is a common misapprehension in the market. And again, I can understand why, especially considering our path to getting involved in caps. But in actuality, the material produced by OM-one is not directed at making caps. So the caps business is interesting in part because it doesn't require any material from OriginOne or from an Origin chemical process at all, even though that was how we got involved in it was that we thought that it would.

Speaker 3

It doesn't. So we can scale that independently. OriginOne, on the other hand, as we've talked about a lot before, is a plant that can produce our intermediate to large scale, which enables us to do application development on our unique materials. And so we think that OriginOne will give us the opportunity to develop and identify more things like CAPS. But there is actually not an explicit linkage of materials between OriginOne and our CAPS business.

Speaker 7

Great. Perfect. So the next part of the question then asks, what percent of the market share will Origin be expected to capture with Origin 1 or if it's not Origin 1, plan to capture with the caps business?

Speaker 3

Yes. So I'll presume that they're referring to the caps business particularly. Our view is the market for caps is large. It's a $65,000,000,000 market. We think there's a lot of opportunity there, both because there's demand for circular solutions in the packaging world and caps and closures in particular, and also because there's quite a bit of growth in that market.

Speaker 3

And so we're excited to bring in the market. We think that we're given what we are seeing in the market, we expect to be supply limited for quite some time. And in fact, those are the kinds of markets that we like. Our markets where we're going to end up being limited instead of demand limited. And so I think I don't have a crystal ball for what the market share percentage is going to be by X time.

Speaker 3

But I think that we're going to be very busy producing as many cats as we possibly can for quite some time. And we're excited about it. Great.

Speaker 7

And then just to round out the question, and this was addressed a little bit in the analyst portion earlier, but I just want

Speaker 3

to call it out

Speaker 7

specifically. They asked, will the tech be licensed or manufactured to scale up? Will there be partnerships to build other plants to ramp up production of PGT caps, if you want to speak a little bit more to that?

Speaker 3

Excuse me, sorry. The answer is, as I said earlier, it's kind of all of the above. I think our view is the more asset light we can be, the better. That's obviously attractive for a variety of reasons. But we don't need to be limited to that.

Speaker 3

We see opportunities for partnership in a lot of different ways with a couple of different segments of the industry. And so I think there's going to be a couple of room for a couple of different ways of engagement.

Speaker 7

Great. All right. Now this other question is comes back to the present day on the CAPS program. How many CAPS have you produced so far?

Speaker 3

So we as we said in the press release, we've made there were a couple I think a couple of 100,000 caps that were in the capping trial, maybe 100,000 or more. And we've been in sort of that tens and hundreds of thousands of caps produced before that. As you imagine, we didn't compile every single cap we've ever made just to do that one capping run since we've done lots of iterations on process and design, all those kinds of things. So we're I'd be surprised if we've broken a couple of million, but I think we're well into the $100,000 plus range.

Speaker 7

Great. With that, I'm going to turn over and have a question for Matt. The question came in asking about the delisting. And you were asking, what is management doing to address the potential NASDAQ delisting? If you can speak a

Speaker 3

little bit about that, Matt.

Speaker 4

Yes, sure. I think it makes sense to maybe start and reiterate what the delisting process looks like. The company a company, if it's a stock price falls below $1 for 30 consecutive days, it triggers an initial grace period with the NASDAQ whereby you need to remedy that situation to get the stock above $1 And we are actually in the first of the 2 grace periods that you get. Ours began in January. And so we actually have through July as our first grace period to get the stock above $1 for 10 consecutive days.

Speaker 4

I'll note that as of the end of the day today, the close today, we're at 6 days, consecutively above $1 So we have 4 more days that we need to close above $1 to regain compliance. If in the case we weren't able to do that, then you could get a second grace period of 180 days that would begin in July, which would get us through the end of the year. And at that point, I think the main criteria the NASDAQ has for giving you that second grace period is that you would need to agree that if for some reason after almost a year you weren't able to get a stock above $1 for 10 consecutive days that you would do reverse stock split, which would immediately make the stock the conversion on a reverse stock split would definitely get the stock above $1 and remedy that issue. So, we do not see that as being a meaningful probability for us. We're going to continue to execute on the caps and closures plan and expect continued positive reception to our successes with caps and closures.

Speaker 4

And we're looking forward to remedying the delisting and regaining compliance organically as we like to call it.

Speaker 7

Great. Thank you, Matt. All right. Well, I'm going to put this last question then to Rich. It's about something that you've mentioned in previous earnings calls.

Speaker 7

You said that there are other technologies in addition to caps with near term revenue generating potential in development at Origin. And the question is, are these technologies that have already been released and are part of Origin's product portfolio that you're expecting to generate revenue in the near term?

Speaker 2

Thanks for the question as we are very much innovators at heart. I think I would answer that by saying that we think as exciting as our caps business is and as big as it can be, there are additional caps like businesses within our platform. And the characteristics of these are highly differentiated functionality in addition to sustainability, big markets, high margins, consistent with but not dependent on OM-1 or OM-2, highly capital efficient and a short time to market and cash flow generation. And so we have several of these in the various stages of development and we're managing these initiatives very thoughtfully and look forward to announcing them as appropriate.

Speaker 7

And I can't agree more with that. So thank you, Rich. I appreciate that. And thank you to everyone who joined and everyone who sent in the questions. We're looking ahead with confidence and excitement for 2024 and we look forward to our next update.

Speaker 7

For the Ask Origin questions that we couldn't get today, we look forward to releasing an investor Q and A video addressing those specifically. And this concludes our call for the day. Thank you.

Operator

Thank you, ladies and gentlemen. You may now disconnect your lines and have a wonderful day.

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Key Takeaways

  • Reaffirmed path to profitability: Origin expects 2024 net cash burn of $55 M–$65 M, ending Q1 with $146 M in cash and believes no equity raise is needed to sustain operations.
  • PET caps commercial launch: The caps & closures business will start generating revenue within nine months, with the first high-throughput production line online in Q4 2024 and full-capacity annual sales of $45 M–$65 M.
  • Key technical milestones achieved: Completed a successful commercial bottling trial using 100% recycled PET caps and announced partnerships with Paxos Global for manufacturing systems and IMD Vista for high-speed inspection.
  • Asset-light biomass scale-up strategy: Engaging strategic partners for Origin 2 plant development—with over $10 B in offtake agreements and exploring sites in Geismar (LA) and Asia to commercialize HCT-derived carbon black and other intermediates.
  • 2025 cash-positive outlook: Projects substantial recurring caps & closures revenue in 2025 with improving margins, targeting sustained profitability and positive cash flow on existing resources.
AI Generated. May Contain Errors.
Earnings Conference Call
Origin Materials Q1 2024
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