Origin Materials, Inc.

Thank you for standing by. This is the conference operator. Welcome to the Origin Materials fourth quarter 2022 earnings call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. I would now like to turn the conference over to Ashish Gupta, Investor Relations. Please go ahead.

Thank you and welcome everyone to Origin Materials' fourth quarter 2022 earnings conference call. Joining the call from Origin Materials are co-CEO Rich Riley, co-CEO and co-founder John Bissell, and CFO Nate Whaley. Ahead of this call, Origin issued its fourth quarter 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 on this call, we'll be making forward-looking statements based on current expectations and assumptions, which are subjects 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 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. For further discussion of 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 10Q, dated November 3rd, 2022. In addition, 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 a substitute for or in isolation from GAAP results. You'll find additional disclosures regarding the non-GAAP financial measures discussed on today's call and our press release issued this afternoon and our filings with the SEC, each of which is posted on our website. The webcast of this call will also be available on the Investor Relations section of our company website. With that, I'll turn the call over to Rich.

Thank you, Ashish, and thanks to everyone for joining us. For today's presentation, we will be referring to the slides that were posted to the investor relations section of our website earlier this afternoon. I will start by reviewing Q4 highlights, then provide a commercial and regulatory update. I will then turn it over to John, who will discuss construction progress on Origin 1 and Origin 2, our Origin 1 platform development and application strategy, and our new strategic partnership with Avantium to accelerate the mass production of FPCA and PEF. Nate will wrap up with a financial overview. We will begin on slide three. We continue to execute on our plan and make progress on our mission to enable the world's transition to sustainable materials. First, we have seen a more than nine-fold increase in our customer demand since our announcement to become a public company in February 2021, with offtake and capacity reservations increasing to $9.3 billion as of today. Customer demand remains strong and broad-based, and we continue to expand the breadth of industries and end markets that we serve. As previously disclosed, due to strong customer demand, we are substantially committed for our Origin 2 paraxylene and PET capacity. As such, beginning in the fourth quarter, our sales and marketing team has shifted its focus from active marketing of PET towards higher margin products such as carbon black and advanced CMF-derived products including FDCA and PEF for Origin 2 and beyond. Second, as announced in January, Origin 1 is mechanically complete and commissioning is underway. with the completion of plant commissioning and startup expected in Q2 2023. Since mechanical completion, work onsite has continued, including electrical work and further technology refinement. Third, continuing on the next slide, regarding Origin 2. In early January, we announced the final approval from the Louisiana State Bond Commission and preliminary approval from the Louisiana Public Finance Authority for the issuance of up to $1.5 billion of taxes and bonds, inclusive of the previously announced expected $400 million in private activity bond volume cap allocation for financing the construction of the plant. We continue to expect that Origin 2 can be fully funded from its existing cash on hand, previously indicated traditional project financing, and potentially strategic partnerships. As Origin has an ongoing global technology licensing effort and an active government affairs team, we anticipate potentially strategic partnerships and federal incentive programs to play a meaningful role in the financing of Origin 2. We continue to make progress on front-end design, construction planning, and financing. We've also made progress developing new products and applications, which may be incorporated into the design of the plant, such as FDCA, BEF, as well as biofuels from an oil and extractive stream co-produced alongside CMF and HTC, and which has not been included in previous plans. We expect to provide an update on new product offerings and construction plans for the Origin 2 plant in mid-2023. Fourth, as I just touched on, we are seeing significant opportunities outside of PET and paraxylene to leverage our versatile platform technology to commercialize pathways for higher value applications for our intermediate CMF and HTC, such as FDCA and carbon black. We are exploring or qualifying FDCA, epoxies and resins, surfactants, sustainable carbon black, bioasphalt, fuel pellets, as well as biofuel and biosolvents. As part of this development work, Origin has entered into a strategic partnership with Avantium to accelerate the mass production of the advanced chemicals and plastics, FDCA, and PEF, which John will discuss in more detail. And finally, we are providing 2023 guidance for revenue of $40 to $60 million and adjusted EBITDA loss of $50 to $60 million. Our estimates assume a gradual production ramp at Origin 1 as the new supply chain becomes established with revenue expected to be booked starting in Q3 2023. Now turning to slide five, I'd like to provide a brief overview of Origin for those who are new to the story. Origin was founded with the mission to help solve climate change by enabling the world's transition to sustainable materials. Our patented drop-in core technology, attractive unit economics, and carbon impact have gained the support of a growing list of major global brands and investors spanning an increasingly diverse range of consumer and industrial end markets. Our list of strategic partners includes industry leaders such as Danone, Nestle Waters, PepsiCo, Ford Motor Company, Mitsubishi Gas Chemical, Cologne Industries, Primaloft, Solvay, Mitsui & Co, Minifin Group, LVMH Beauty, Revlon, Mitsubishi Chemical Group, Karare, Intertex World Resources, and ATC Plastics. Our CPG partners have publicly disclosed their intent to migrate 100% of their current petroleum-based PET consumption to decarbonized and recycled materials. After extensively evaluating our technology and testing our products, these market leaders have made significant financial contributions to Origin, both as investors and customers, demonstrating their environmental commitment and confidence in our technology and products. They have signed multi-year uptake contracts worth hundreds of millions of dollars. Over the past year, geopolitical tensions, inflation, rising interest rates, and escalating energy prices have highlighted the urgency with which the world needs to transition to more sustainable and less volatile energy solutions. The carbon-intensive nature of the plastic industry, where over 99% of product is made from fossil fuels, has placed the industry under considerable pressure to dramatically transform the way it produces and uses plastic, both for environmental and economic considerations. Origin offers an entirely circular plastic solution. carbon-negative recyclable PET, which the world's plastic recycling infrastructure is already designed to collect, sort, and reuse, with the critical added benefit of removing CO2 from the atmosphere. With 91% of the global economy now covered by net zero pledges, the urgency with which businesses need to adopt more sustainable practices extends well beyond plastics. And while there has been some progress made in reducing greenhouse gases from shifts to renewable energy sources and electric vehicles, it is clear that reducing emissions from energy use alone is insufficient to achieve the goals and commitments established by companies and governments. As a result, in the near term, we believe that these companies will need to integrate decarbonized materials into their supply chains. As such, we expect demand to remain well ahead of our projected supplies for the foreseeable future. Further, we remain encouraged by the strong favorable tailwinds that we continue to see for our technology and business model. with some of the world's largest public companies committing to zero carbon mandates and governments increasingly enacting regulations and funding investments to tackle climate change. Turning to slide six, the Inflation Reduction Act, or IRA, which passed in August 2022, is expected to provide approximately $369 billion in direct investment related to climate solutions. As we detailed in our last call, we are excited by the support the bill has received and see multiple meaningful funding opportunities that we plan to provide more detail on as the legislation is finalized. We remain optimistic that the funding offered by the IRA is relevant to us and are exploring several paths of eligibility for programs, including the Section 48C Advanced Manufacturing Tax Credit and the Advanced Industrial Facilities Deployment Program. These programs are expected to start receiving initial applications in March with decisions anticipated by year-end. In addition to the IRA, we are exploring opportunities for funding and financing under the 2021 Infrastructure Investment and Jobs Act, or IIJA. ORIGIN has identified more than a dozen IIJA initiatives that may potentially assist in financing a variety of ORIGIN investments, most notably ORIGIN II and infrastructure improvements in and around the Geismar Louisiana site. Turning to slide seven, We continue to make steady progress commercializing the business and have grown customer demand by more than $300 million since our third quarter earnings call for a total of $9.3 billion today, made up of off-take agreements and capacity reservations. This represents a more than nine-fold increase since we announced our intent to go public in February 2021. As a refresher, capacity reservations are signed agreements designed to lead towards take-or-pay contracts and revenue once our plans are complete. They give us and our customers more time to negotiate a take-or-fay offtake agreement, which typically is a much longer document that meets the requirements for project financing. We are also pleased to tell you about a new strategic relationship with a major global chemical company. We continue to see considerable opportunities to expand into new in-markets and applications, and we look forward to providing more detail about this partnership, as well as others, when appropriate. As previously mentioned, we continue to expand the breadth of industries and in-markets that we serve. From global CPG brands like Pepsi, Danone, and Nestle Waters, to automotive leaders like Ford and specialty chemical innovators like Solvay and Mitsubishi Chemical Group, to ultra-luxury brands like LVMH Beauty and iconic cosmetic brands like Revlon. We also continue to see significant opportunities to direct our intermediates toward higher margin products, such as carbon black, For example, where new strategic partnerships in 2022 with Mitsubishi Chemical Group, Intertex, and ATC Plastics provided us with significant momentum in this promising new product category. Notably, as we approach the start of origin one operations, we expect to accelerate the development of high performance products through technology collaborations and joint development agreements, or JDAs. As we previously mentioned, our customers require more development and testing for some of these higher margin products than for drop-in ready, paraxylene, and PET. OriginOne will produce CMF, HTC, and other intermediates and volumes that will enable customers to explore and qualify products and applications beyond PET and HTC fuel pellets. In summary, our sales pipeline remains strong as reflected in over $9 billion in customer demand. We continue to make inroads into new industries and have numerous active discussions with existing customers to expand their current agreements and with prospective customers to adopt our sustainable products. With that, I would like to turn it over to John, who will provide an update on Origin 1 and Origin 2, discuss our Origin 1 platform development and application strategy, and our recently announced strategic partnership with Avantium.

Thanks, Rich. I'm going to begin on slide 8 with a construction update for Origin 1. For those interested in the Origin 1 story and the continued progress made by our team, I'd like to point you to a new construction update video that we posted today to the investor relations section of our website. As announced in January, Origin 1, our first commercial manufacturing plant located in Sarnia, Ontario, is now mechanically complete, in line with our previously disclosed timeline. As part of mechanical completion, the plant's critical mechanical systems have been successfully installed and commissioning has begun. Work on site will continue, including electrical work and further technology refinement. We expect the completion of commissioning and startup in Q2 2023. The mechanical completion of Origin 1 is our most important construction milestone to date. This is a large commercial-scale manufacturing plant with a lot of moving parts, and what we've been able to accomplish today, despite the pandemic and related supply chain headwinds, demonstrates the capability, efficiency, and efficacy of our projects team. Leading up to the mechanical completion of the plant, we received and installed additional equipment, including wood handling equipment, piping, tanks, and control systems. Additionally, during the fourth quarter, we further strengthened our Origin One operations leadership team and support staff. In our construction video, you can see the progress we've made since our last update in November. To give you a sense for the overall project, the construction of Origin One required over 17,000 meters of pipe, 730 metric tons of steel, over 75,000 meters of cable, and about 10,000 metric tons of concrete. Looking ahead, we're excited to start up the plant, begin commercial production, deliver product to our customers, and take the next step in our journey to decarbonize the world's materials. As we enter this next phase, I'd like to remind everyone of the purpose of Origin 1 and tell you about what we have planned for Origin 1 during 2023. While Origin 1 is a substantial commercial plant, Origin 2 is expected to be much larger with far greater economies of scale. Origin 1 is first and foremost a strategic asset which we will use to qualify higher value applications for our intermediate CMF and HTC. We will use Origin 1 not just to scale our technology, but to produce samples in higher volumes than we've ever produced our pilot facilities. The samples and what we and our customers expect to learn from them are extremely valuable. And in the years to come, we expect we'll be instrumental in helping us deliver on the full promise of our carbon negative technology platform. We expect to gradually ramp up OriginOne operations throughout the year, aiming to optimally fulfill customer demand while we produce samples of all time materials. We expect that revenue this year will be driven mostly by the pace at which the supply chain for these materials can be activated and by customer readiness to accept our materials. As noted, we expect Origin 1 to finish commissioning and start up in Q2 and are confident that we will be able to meet our production goals to support our revenue guidance. Turning to slide 10, I'd like to tell you more about the products. At Origin 1, we expect to develop new performance-advantaged products beyond PET and HTC fuel pellets so that customers can conduct development work and testing. Apart from paraxylene and biopet, Using a product from OriginOne, we plan to explore or qualify FTCA, epoxies, resins, surfactants, sustainable carbon black, bio asphalt, fuel pellets, and biofuels. These products, which tend to be higher margin applications for our materials than PET and HTC fuel pellets, were part of the plan we initially articulated to investors during our GoPublic transaction. While some of these application development initiatives could be considered early or exploratory, We expect to ultimately produce and sell our materials into some of these applications at commercial scale from Origin 2, Origin 3, and beyond, depending on what we learn during our product qualification at Origin 1. The applications I've mentioned are higher margin for two reasons. First, they tend to be performance advantaged. And second, technologically, they are a natural fit for our platform and difficult for oil-based platforms to produce. Our customers are very interested in developing products with our materials, and we expect to generate revenue not just through the sale of materials, but as Rich alluded to earlier, by engaging in joint development programs and achieving product qualification milestones like feedstock testing, sample delivery, and others. We look forward to updating you on these new product initiatives in the future. Turning to origin two on slide 11, we continue to make progress on the front end design, construction planning, and financing of our second plant to be built in Geismar, Louisiana. The overall site plot plan and logistics plan have been developed. Notably, we have made progress on developing new products and applications which may be incorporated into the design of that plant, such as FDCA, PEF, as well as biofuels from an oils and extractives stream co-produced alongside CMF and HTC, and which has not been included in previous plans. We expect to provide an update on new product offerings and construction plans for the plant in mid-2023. As Nate will discuss in more detail, in January, we announced the Louisiana State Bond Commission final approval of up to $1.5 billion in tax-exempt bonds for the construction of Origin 2, providing further positive momentum for project financing and potentially putting us on a path that would enable the debt financing of Origin 2 using entirely tax-exempt bonds. I'd also like to provide you with some additional detail about what we're currently working on for Origin 2 in the area of product development. We've made progress developing new products and applications which may be incorporated into the design of Origin 2, such as FDCAPF and biofuels. I highlight this because the markets for some of these new functionally-advantaged products are showing up sooner than we initially anticipated. While we originally expected our Origin 1 product development activities to result in new performance-advantaged products that we would make at Origin 3, we now believe that some of those products could be pulled forward meaningfully and produced at Origin 2 as well. We're pleased to potentially add some of these products into the demand slate of Origin 2. Turning to slide 13, I'd like to tell you more about our new biofuels initiative. We're excited to announce this quarter that we are exploring application development for biofuels from an oils and extractive stream co-produced alongside CMS and HTC. Biofuels are a rapidly growing market where demand is currently being met primarily via food-derived feedstock sources such as soy, used cooking oil, and tallow. In contrast, cellulosic biofuels or biointermediates made from wood waste reflect the future of the biofuel industry and are highly sought after as they do not compete with land for growing food. Origin is uniquely positioned to deliver these renewable fuels using a third intermediate strain, oils and extractives, which, as mentioned, was not included in our previous plans. Over the long term, we see the potential for these cellulose-derived, low-carbon intensity fuels to be used in transportation and marine fuel, industrial applications, and heat and power generation. We are currently in preliminary discussions with multiple strategic partners to advance this exciting development, and we plan to provide you with periodic updates as we make progress on this important new business initiative. Moving to slide 14, in February, we announced a strategic partnership with Avantium, a leading technology company in renewable chemistry, to accelerate the mass production of FTCA and PEF for advanced chemicals and plastics. The partnership aims to bring together the strengths of origins patented carbon negative technology platform, which turns the carbon found in sustainable wood residues into useful materials, including chlorameth furfural or CMF and its derivatives, with Avantium's ICSI technology, which can be used to convert origin CMF derivatives into FTCA, the chemical building block for the polymer PEF. The partnership represents a potential breakthrough in the commercialization of PEF, a polymer that we've been excited about for a long time. PEF offers an attractive combination of performance characteristics for packaging and other applications, including strong gas barrier properties, high heat resistance, improved degradability, and full recyclability. PEF can also serve as a replacement for glass and aluminum, offering superior brake protection and inexpensive light weighting for shipping, making it well-suited for oxygen-sensitive products like carbonated sodas, protein shakes, and teas. The PEF produced is expected to be 100% plant-based, fully recyclable, have attractive unit economics, and to offer a significantly reduced carbon footprint with superior strength, thermal properties, barrier properties, and degradability compared to today's widely used petroleum-based materials. We see an approximately $225 billion TAM for PEF across apparel, packaging, and PET applications. If you're on dicarboxylic acid or FDCA, the precursor to PEF has many additional applications beyond PEF. Some have called FDCA the sleeping giant, named for its potentially massive impact across a broad range of industrial molecules, including polyesters, polyamides, polyurethanes, coating resins, plasticizers, and other chemical products. At the molecular level, the structure of FDCA is kinked, and consequently, it doesn't lie flat. When FDCA is assembled on a plane, it tends not to internally rotate. It turns out that a polymer's ability to rotate, or not, affects its functionality in important ways. One of those functions is gas barrier. When the molecules of a polymer can spin freely, gas molecules can pass through it like a revolving door. Since FGCA has a kink, it cannot rotate, and gas cannot pass through it as easily. The structure of FGCA also changes the way it crystallizes. When FGCA is incorporated into a polymer, it crystallizes differently than a planar molecule like PET. and this feature allows us to change the applications that we can consider for polyesters. These are just some of the reasons why we are excited not just about PEF, but about incorporating FDCA into polyesters more broadly. Regarding our relationship with Avantium, to accelerate the mass production of these materials, the partnership includes a licensing agreement providing Origin with access to Avantium's process technology for making FDCA and a conditional offtake agreement under which Avantium will supply origin materials with FDCA and PEF from its plants while we incorporate Avantium's process technology into the supply chain for future plants. By combining our platform, which can produce the FDCA precursor CMF and its derivatives from sustainable wood residues with Avantium's ICSI process technology, we aim to do something truly special in the polymers and materials industry at Unit Economics that work for our customers and us. To summarize, I'm proud of how our team continues to execute against our Origin 1 and Origin 2 construction milestones, The mechanical completion of Orchid One is an important milestone in our mission to enable the world's transition to sustainable materials. We are seeing significant opportunities to leverage our versatile platform technology to commercialize pathways for several interesting higher-value applications, and we are excited to accelerate the development of high-performance products through innovative partnerships. And with that, I will turn it over to Nate to discuss some of the financial details. Thanks, John.

I'll begin with commentary on our fourth quarter results, then provide our financing expectations for Origin 2, and finish with our outlook for 2023 revenue and adjusted EBITDA. Speaking to slide 16, fourth quarter operating expenses were $13.0 million compared to $7.8 million during the same period in the prior year. Full year 2022 operating expenses were $38.9 million compared to $26.9 million in the prior year period. Net income was $16.0 million in the fourth quarter compared to net income of $5.2 million in the same period in the prior year. Full year 2022 net income was $78.6 million compared to $42.1 million in the prior year period. Adjusted EBITDA loss was $9.2 million for the fourth quarter compared to a loss of $6.6 million in the same period in the prior year. Full year 2022 adjusted EBITDA loss was $31.0 million compared to $20.0 million in the prior year period. Turning to our balance sheet, Origin ended the fourth quarter with $323.8 million in cash and cash equivalents and marketable securities. Regarding the financing of Origin 2, in early January, we announced that the Louisiana State Bond Commission unanimously passed a resolution granting its final approval of the issuance of up to $1.5 billion of tax-exempt bonds to support the construction and commissioning of Origin 2. This amount is inclusive of and builds on the strong foundation of the previously announced expected $400 million in private activity bond volume cap allocations. Origin's use of solid-weight feedstock to produce carbon-negative materials enables the company to use these tax-exempt bonds towards the financing of the Origin 2 project. Bank of America, a global investment bank and financial services company, has been engaged by Origin to underwrite the bonds and market them to investors, which could enable the debt financing of Origin 2 using entirely tax-exempt bonds. As we've previously discussed, we also anticipate various federal tax credit, grant, loan, and other programs promoting advanced manufacturing from the Inflation Reduction Act to be incrementally beneficial for the financing of Origin 2 once the details of those programs are finalized by the relevant government agencies. We expect to provide an update on Origin 2 in mid-2023. As we've highlighted on our previous earnings calls, inflationary pressures remain an area of focus and something that we continue to monitor closely. Origin continues to work with leading financial institutions on other forms of traditional private financing and federal loan programs, including through the United States Department of Agriculture and Department of Energy. pursue other local, state, and federal incentive programs to optimize the financing of Origin 2, including certain 2021 Infrastructure Investment and Jobs Act and 2022 Inflation Reduction Act provisions. As John mentioned, we continue to expect that Origin 2 can be fully funded from its existing cash on hand, previously indicated traditional project financing, and potentially strategic partnerships. Given Origin's ongoing global technology licensing effort and an active governmental affairs team, We anticipate potentially strategic partnerships and federal incentive programs to play a meaningful role in the financing of Origin 2. To wrap up with our outlook for the full year 2023, we are providing 2023 guidance for revenue of $40 million to $60 million and adjusted EBITDA loss of $50 million to $60 million. As Rich mentioned, our estimates assume a gradual production ramp at Origin 1 as the new supply chain becomes established, with revenue expected to begin in Q3 of this year. With that, I will turn it back to Rich for closing remarks.

Thank you, Nate. In closing, I'm incredibly proud of our team's continued execution as we draw closer to commercial production at Origin One, and encouraged by the strong momentum that we continue to see for our industry-leading technology as the world moves aggressively to a zero-carbon future. I would like to thank all of our customers for their commitments to Origin, our team and construction and engineering partners for their contribution to our company's success, and our shareholders for their continuous support. And with that, I would like to ask the operator to open the line for questions.

Thank you. We'll now begin the question and answer session.

To join the question queue, you may press star then one on your telephone keypad. You'll hear a tone acknowledging your request. If you're using a speakerphone, please pick up the handset before pressing any keys. To withdraw your question, please press star then two. Our first question is from Frank Mitzen with Ferium Research. Please go ahead.

Thank you, and good afternoon, guys, and congrats on the Origin One progress and, of course, the progress in the other areas. I was struck by the discussion of the third intermediate line on the biofuel side that had not been discussed. previously discussed. Did this come about in terms of research, or why is this now a possibility for your production process? Any more color on it would be terrific.

Yeah, sure. Hey, Frank. So I think the way to think about our technology platform is really sort of a refining platform. So the mental model I use is one that looks kind of like a refinery where you're putting in a few stock and you're converting into a variety of different streams. And the way we've looked at this has always been, you know, CMF and HTC are the two primary streams. But we've always had a collection of other sort of minority materials that end up getting produced. And generally speaking, we had expected to either decompose those into HTC, which can be done with our process, or frankly, just feed it back into the centralized boiler for our facilities and use them for BTU value to drive the process. Of course, if you're using it for energy to drive the process, that sets sort of a cap on the maximum value that you can get from those materials. And I think we all know that liquid fuels command a much higher premium than boiler fuels. And so really, we had always expected that eventually we would be able to take these materials that we were feeding back into our boiler and turn them into some sort of liquid fuel or even a chemical product. We just didn't really expect it to happen so soon, frankly speaking. And so this is, I'd say, In the broader sense, this is just part of this sort of wave of acceleration of market interest in newer materials coming off of our platform. Does that make sense?

I hear you. I hear you. And as you look at the process economics for generating these renewable fuels, where is the price point or where do you think the price points are relative to you know, what's out there on the market today. And obviously it's very volatile, but, you know, given where it is today. Can you talk a little bit about the process economics?

Yeah, sure. So the first thing to understand is that since we were anticipating originally to use them for boiler fuel, that means that that basically sets our alternative disposition value, which is pretty low value when it comes to biofuels, right? So incrementally, we view the ability to put these into a transportation fuel market as a significant benefit to our overall unit economics performance. You know, that said, it's not, let's call it straight-run gasoline coming out of our process, right? So the materials that we take out of our process, natively, you don't just put in a gas tank. You've got to do a little bit of work to those to get them into the various kinds of transportation fuels. And part of what we're doing right now is we've sort of checked the box on, yeah, this is really interesting and is over the hurdle that this should go into a fuel of some sort. And now we're in the work with customers and partners to understand what's the right spot to put them and in what order and what time sequence. Does that make sense? So I think that the overall unit economics may be a broader way to say that. The overall unit economics, we aren't sure yet, but we are sure that – it's going to be significantly more valuable in a liquid transportation fuel than it is as a boiler fuel, which was the original sort of estimation of where this stuff was going to go.

Okay, understood. Thanks so much, John. Thanks, Frank.

The next question is from Steve Byrne with Bank of America. Please go ahead.

Yes, thank you. Is it fair to say that existing PET users are those that you're in discussions with about PEF? Are they the most likely, you know, off-takers of this product? And can you characterize their level of interest? Is this something they would move towards replacing PET with PEF? Or is this a, you know, a few percentage inclusion in the PET as a blend? Where are you seeing the most interest?

Yeah. Hi, Steve. Great question. So, we see interest across the board. So, certainly from our existing large PET users, they are almost all familiar with FTCA and PEF in concept and interested in it. And I think excited to see it coming to commercial scale with our partnership. But it also opens up a new set of potential customers, and John alluded to some of these. But, for example, companies that today are required to put a lot of things in glass because of the barrier qualities now have an alternative to glass they didn't have with PET. And so there's examples like that that open up some really new interesting conversations with people who need very large quantities of materials, some of which have, you know, very challenging carbon footprints. and are heavy or hard to recycle, et cetera. And so this really, really opens up the door to those kinds of conversations.

And is there a reasonable way we could estimate the value of PEF versus PET given the additional functionalities that you described the PET bottle would have to have other additives or unit ops to provide those functions. So is there a way to value this PDF that would lead to this higher margin? We're also of the view that you might be able to produce it for less than PET. Is that also a component of your assessment of higher margins?

Yeah, so I think both parts, both things you just mentioned are salient. So the value of PES, and let's say more broadly, FTCA-based polymers, because you were alluding to polyesters that may not have just 100% FTCA as the diacid, but may include some FTCA and some other diacids in the polyester. But I think in those applications, on an application-by-application basis, you can you can understand exactly what the improved value proposition is to the customer. So in the case that Rich was just mentioning, and I'll just give sort of a hypothetical logic around it, right? So there's, you know, glass has, has breakage rates, which are meaningful. It has a high carbon emission, even when it's recycled, it has relatively high carbon emissions. It's heavy. And so you can look at PEF and say, okay, well, if we reduce the breakage rates and we reduce the carbon emissions significantly by using PEF instead of glass, and we can lightweight significantly the package, then that's a really attractive value proposition in practice for PEF. And you can do sort of similar kinds of value estimations in different applications. But broadly speaking, we see a significant value uplift for a lot of these applications in using PEF versus using PET. So I think that's in your allocation of where the margin is coming from. I would say, especially in the earlier days, most of it is coming from the value of the applications, right? PEF in those applications is much more valuable than PET. Over the medium to longer term, I think the other thing you said, which is that we expect to be able to produce FTCA less expensively than PTA or paraxylene correspondingly, That's also true, but I think that's something that probably will obtain over a longer period of time, not so much necessarily right off the bat.

Thank you.

The next question is from Eric Stein with Craig Helen. Please go ahead.

Hi, everyone. Thanks for taking the question. So great to see the demand, obviously, at $9.3 billion now. That has slowed a little bit versus the growth rate in the last few quarters. I mean, is that simply this change in focus to these higher margin products? I mean, is that something that we should think about here, at least in the near term?

Yeah, our customer demand continues to be to be exceptionally strong. And as we said on our last earnings call, and you're alluding to, we have evolved our go-to-market strategy to focus more energy on higher margin products, developing the platform, and really accelerating some of the products that we previously thought were many, many years out, and doing joint development agreements and those kind of things. So as we focus there, that could impact the overall growth in the order book. But since we've really proven out the demand for paraxylene and PET, we think it makes a lot of sense to focus on these other markets.

Yep, absolutely. I mean, maybe the better question is, obviously, you've got a pipeline beyond the, you know, what you quote for total demand. You know, curious if you're able to, you know, maybe from a size, but, you know, at least from a high level, kind of characterize this new focus into some of these other areas that have developed faster. what has that meant for your pipeline beyond the total demand that you quote?

Yeah, well, it certainly opens up a lot of markets that we had previously characterized as sort of longer-term addressable markets into what feel now not as far out as we once thought. And those include some of the markets like surfactants and epoxies and adhesives and, you know, large classes of products where we think we can bring our carbon advantage as well as functional advantages and some truly unique properties. And so, you know, our pipeline reflects adding those kinds of conversations into the mix.

Got it. Maybe last one for me, and I'm just curious, obviously, we're getting really close to to start up of origin one, I mean, is that an event that you think of as something that can really accelerate the total demand, that 9.3 there, or do you think it's more that that potentially spurs conversion of the capacity reservations to full off takes?

Yeah, we think of it as a significant milestone. We think, one, our ability to get large-scale samples to lots of potential partners is very exciting. So getting, you know, CMF, for example, into the hands of lots of partners to go develop on top of the platform and accelerate in that manner is exciting. We also think the proof of technology scale-up is meaningful to many that we have a, you know, large operating commercial scale plant. And so, yeah, we view it as a significant milestone and think it'll really help across the board.

Okay, thank you. Thank you.

Once again, if you have a question, please press star then 1. the next question is from with Raymond James. Please go ahead.

Thanks for taking the question and appreciate the guidance. You're obviously giving guidance on a full year basis rather than quarterly, but can you maybe just looking kind of further ahead, what timetable do you anticipate for Origin 1 to reach steady state operations, which I think is 35 million pounds a year, as I recall? Per quarter? Yeah.

Yeah, hey, Pavel. I think, you know, first I'd like to emphasize that, you know, we've talked about this before, but just to be really clear, we view OriginOne as an asset that really can strategically produce materials for application development of higher value products, such as some of the ones we just mentioned, you know, FGCA, epoxies, resins, surfactants, carbon black, asphalt, that kind of stuff. And so since we're using it for those kinds of strategic applications, We really expect that we're going to be doing, you know, some combination of campaigning and then also, you know, tuning it to produce those kinds of materials. So, I think you could say, you know, we're going to take a little bit of time to bring it and run it at nameplate capacity. Now, that said, for the purposes of OM2 technology demonstration, right, we will run campaigns with this plan at the OM2 relevant parameters for some extended periods of time to generate data and learning from those kinds of things, and we'll report back with that. But I think it will be probably sometime in 24 that we're actually trying to run this for extended periods of time at nameplate capacity. It's going to be – because the demands of – application development and market development really supersede, frankly, the just produce as much product as possible that we possibly could off the plant, if that makes sense.

Yeah, no, I appreciate that. And then, you know, as far as the entry into the fuels market, you know, historically, I mean, you and plenty of other biomaterials companies have looked at specialty biomaterials as a higher value, right, source of revenue compared to fuels. Are there certain fuel categories, you know, maybe jet fuel, for example, that can match chemicals, you know, in terms of, you know, dollar per pound, dollar per gallon basis?

Yeah, so certainly there are fuel categories that can pretty easily match even high value chemicals on a dollar per pound base. So no question about that, especially in today's environment. I think, you know, from our perspective, as I mentioned, the alternative disposition or alternative use for the material that we're looking to use for biofuels was really a pretty low value boiler fuel kind of application. So for us, we don't really see it as a tradeoff. between the value of the chemicals that we're going to produce and the value of the biofuel that we put into the market, we see it as sort of, frankly, it's just a straight-up net add to the value of all the materials that we're producing off of our plant. But to your point, we think there are some pretty high watermark kind of interesting molecules that you can produce even just for fuels. And so I think this is – you know, this is, frankly, for us, it's pretty exciting. You know, this is a meaningful opportunity, and I think over the medium to long term, we have the opportunity to really generate meaningful value off of biofuels in addition to, off of this material stream, in addition to the CMF-derived chemicals and the HTC-derived products that we can make.

Okay. And then lastly, kind of an ESG question. As you guys are well aware, there is, let's say, a faction of the environmental community that does not appreciate the use of forestry in bioenergy. Particularly if you're getting into fuels, how are you going to be addressing this pushback that trees are being chop down, so to speak, for putting it into vehicle engines? Yeah.

So I think there are two layers to that. The first is, of course, we're actually using residuals in the first place to fuel our plant. So I think these are materials and residuals that were going to be produced as a result of other product production anyway, for example, dimensional lumber, etc., So I think the first layer is, you know, we really see that as the predominant feedstock for our process, which is very different than, you know, purpose growing timber specifically to harvest and put into our process. I think the second layer to that is that, you know, even this fuel is actually a you know, you could think of it as a byproduct of the production of our materials and chemicals. And so I think in both cases, You know, this is finding the highest and best use and value for a material that was going to be produced anyway, rather than on-purpose production exclusively of fuels or something along those lines.

Thank you very much, guys. Thanks, Babel.

That concludes today's live Q&A session.

I'd now like to turn the call over to Anish Gupta, investor relations, to conduct the next segment of our investor Q&A.

Thank you, Gaylene. Before we get into investor Q&A, I want to apologize to everyone on the line who had problems connecting to the webcast due to technical issues. Obviously, something we strive to avoid, but in this case, it couldn't be. As we've done on previous earnings calls, for today's call, we invited all investors to submit questions as part of our Ask Origin campaign. Once again, we are pleased to have such a high level of participation and want to thank everyone who participated. In the interest of time, we'll be taking the most commonly asked questions. Our first question is for Rich. Rich, does the IRA provide any benefit to Origin? Is Origin seeking money from the IRA or other federal opportunities?

Yeah, that's a great question. We remain optimistic that the funding offered by the IRA is very relevant to us, and we're exploring several paths of eligibility for programs, including the Section 48C Advanced Manufacturing Tax Credit and the Advanced Industrial Facilities Deployment Program. And these programs are expected to start receiving initial applications in the next month or two in decisions anticipated by the end of the year. And in addition to the IRA, we're exploring opportunities for funding and financing under the 2021 Infrastructure Investment and Jobs Act. And in that act, we've identified more than a dozen initiatives that we think could potentially assist us in financing a variety of origin investments, and most notably Origin 2 and infrastructure improvements in and around the Geismar Louisiana site.

Great. Thanks for questioning that out a bit. Just turning to geographic expansion, can you help us understand if Origin will expand to the EU and Asia?

Yeah, so we have extensive customer relationships in the EU and Asia, so we certainly have a very global set of partners and customers. We don't have any specific plans to share at this time in terms of building plants, you know, outside of North America. But there's certainly plenty of interest in our materials from those parts of the world. And so, you know, would hope over the long term that we would certainly have assets around the world, but nothing to announce at this time.

Thank you, Rich. With that, we'll now turn to some questions for John. John, could you discuss some of the longer-term product opportunities where you see the highest potential?

Yeah, sure. So, you know, obviously we've been talking about FECA, PEF, and biofuels quite a bit on this call, which I think we're incredibly excited about. You know, with a lot of these materials, you're talking about not just a 10% or 20% value uplift relative to drop-in materials, but really sometimes, you know, 100%, 200%, even more increase in the value of those materials. So that's obviously, you know, really exciting because it demonstrates that, you know, we can get a great margin and profitability, but also that we're actually adding that much value to the economy by producing these materials. The FDCA, I think we talk about it in the context of PEF and polyesters all the time, but it's a material that's relevant quite a bit beyond that as well. So you can see it in, you know, obviously there's been work done with nylons or polyamides, using FTCA that's incredibly interesting. And then, as we've mentioned before, you know, epoxies and coatings is another area where FTCA has some pretty unique properties that we think that make it a really, really interesting material or monomer to add into those materials. So, we continue to be, you know, really excited about FTCA, again, even beyond its use in polyesters and PEF, more specifically. For biofuels, you know, we've talked about some of the shape of the biofuels opportunity from our perspective. But I think to Pavel's comment earlier, I think it was, you know, there are a lot of different fuels. Not all fuels are created equal. And so as we penetrate into the biofuels market and can qualify our material in different areas, I think there's a lot of opportunity for large value uplift, even beyond just getting into liquid transportation fuels in the first place over time. So I think that's going to be a really exciting and, frankly, pretty rich and deep area. for us. I think just to pick another one that is exciting and maybe is worth talking about a little more is surfactants. You know, surfactants are interesting because they sound incredibly esoteric, but they're something that we do with everywhere in our life. So everything from, you know, paint and coatings, right? So when people talk about things like latex paints or emulsion paints, those emulsions are typically stabilized by surfactants. That's sort of the key component of the paint that drives the fact that it stays relatively stable and that it disperses nicely and then it smooths and coats nicely whatever surfaces you put it on. And surfactants are, you know, so that makes them really a key functional component of that. But also things like personal care, laundry detergents, right? The detergent component of a laundry detergent or a dish soap is in fact the surfactant itself. So, you know, you could say surfactant is another way of saying soap for a little bit more colloquial definition. And performance of those kinds of materials is really, really important. So, you know, people are relatively familiar with it and things like shampoo and hair care that you actually need different kinds of surfactants depending on the environment that they're living in, right? So if the surfactant is in a hard water versus soft water environment, you need a different kind of surfactant formulation. And similarly, the less surfactant you need to use to accomplish your goal, not only does that give you a higher value for the amount of surfactant you're putting in. But that also means that because surfactants are characteristically washed into the environment, right? So as you wash your hair, you're putting it down the drain. And then that surfactant is ultimately going to go through. And it sounds like there's a little bit of background noise. Ashish, is that you?

Yeah, apologies. Sorry.

So, yeah. surfactants, obviously, as you wash your hair, you're actually going to wash that surfactant down the drain, right? So it's going to end up going into the water treatment system and the drainage system and ultimately in the water. So being able to use less surfactant in those kinds of situations is really valuable because it means that you're putting less stuff down into the environment. And what we've seen with furan-based surfactants is that they really do perform exceptionally well in almost all of these categories. So they often perform better in more rigorous surfactant environments, like a hard water kind of environment. And they do it at a lower, what's called critical micelle concentration, or CMC. And that means that you don't need as much surfactant to get the effect that you're looking for. So what we're seeing is that these furan-based surfactants really do just straight up perform better in a whole bunch of applications, and sometimes by almost an order of magnitude. And then the second thing is that Not only are they performing better in the application itself, but then after the application, you know, when do you wash it down the drain? Furans are inherently a much more degradable material than the associated aromatic species that you would usually replace with the furans. And so when you wash your shampoo down the drain, you want to make sure it degrades as quickly as possible so it's not, you know, contaminating your river water with shampoo or conditioner or whatever else. And it turns out that the purine-based and CMF-based surfactants do that better, too. So we're really excited about applications like surfactants that really are incredibly relevant in sort of everyday life for people. And so I think, you know, that's just one example among the others like FTC and biofuels that I mentioned of really exciting products that we can develop over the medium and long term. thank you for that very thorough explanation john and my apologies for interrupting your thoughts there um can you provide us with an update on the company's plans for origin three yeah sure you know um it's a it's a great question because obviously on our schedule we we have indicated that uh we would begin project development for origin three uh right around now and in fact we have so um we we've started project development for origin three and we're making Good progress, but we don't have anything else beyond that to update at this time.

Great. Thanks so much, John. Really appreciate it. We'll wrap up with a question for Nate. Nate, will the Louisiana private activity bonds cover all of Origin 2, or are there other financing options being considered?

So first, and again, we're very grateful to the state of Louisiana, the State Bond Commission, the Louisiana Public Finance Authority for their continued support of the development of Origin 2. Our recently announced approvals from the State Bond Commission and LPFA for up to $1.5 billion, which is inclusive of the expected $400 million in private activity bond volume cap allocation. There are important milestones towards potentially using entirely tax-exempt bonds for the debt financing of Origin 2. That said, we continue to simultaneously pursue other forms of financing, grants, federal tax credits, including programs from the USDA and the DOE and others, which have come out of the IIJA and IRA that Rich was referring to earlier to optimize the capital structure and financing costs for Origin 2.

Great.

Thanks again to Rich, John, and Nate. That'll conclude the investor Q&A portion of today's call. I'll now turn it back to Rich for closing remarks.

Thanks, Ashish, and thanks, everyone, for your interest in Origin and for joining us today. This concludes our call.

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