Origin Materials, Inc.

Q1 2023 Earnings Conference Call


spk09: 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, customer demand remains strong and broad-based, with offtake and capacity reservations exceeding $9.3 billion. As of February 2023, our commercial strategy has evolved from demand generation to revenue generation and the development of higher margin products. As such, we do not plan to provide quarterly updates to our total signed offtake agreements and capacity agreements going forward, but we'll provide updates as appropriate. We are also pleased to announce that we are reporting our first revenue this quarter generated by joint development agreements and our supply chain activation program. Our supply chain activation program is the set of activities we engage in to develop our commercial and logistical capabilities for delivering product and to establish relationships with vendors and customers across the supply chain. 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. Third, we continue to make progress on the front end design, construction planning, and financing of Origin 2. We continue to expect that Origin 2 can be fully funded from a combination of existing cash on hand, previously indicated traditional project financing, and potential strategic partnerships. We plan to provide an update on new product offerings and construction plans for the Origin 2 plant in August 2023, during our Q2 earnings call. And finally, we are maintaining 2023 guidance for revenue of $40 million to $60 million and adjusted EBITDA loss of $50 million to $60 million. We continue to see strong, favorable tailwinds for our technology and business model. Turning to slide five, the Inflation Reduction Act, or IRA, is expected to provide approximately $369 billion in direct investment related to climate solutions. Origin is actively exploring several IRA-funded programs, including the Department of Energy's Advanced Industrial Facilities Deployment Program, or AIFD, which we expect to hear results from by the end of the year, and the Section 48C Advanced Manufacturing Tax Credit. We remain optimistic these programs could provide meaningful support for the construction of Origin's plants. Finally, in March, the Biden administration released a report titled Bold Goals for U.S. Biotechnology and Biomanufacturing. The report's stated objectives include both climate and supply chain related directives that we believe could create positive momentum for Origin in securing additional funding and deploying our platform. Turning to slide seven, in early May, we were thrilled to announce a strategic partnership with Indorama Ventures Public Company Limited. For those not familiar with Indorama, they're one of the world's leading petrochemicals producers and the world's largest producer of virgin and recycled PET resins. With about 26,000 employees worldwide, and close to 19 billion in 2022 sales. This is a highly strategic relationship for Origin as Indorama Ventures has made meaningful pledges related to sustainability as part of its Vision 2030 plan, including commitments to invest $8 billion in recycled and bio-based plastics in pursuit of its goal of increasing the use of circuiter for bio-renewable feedstocks. Origin's technology could enable Indorama to enhance the value of its existing global petrochemical manufacturing footprint while supporting the company's Vision 2030 plan building on its industry leadership and sustainability. As part of the strategic partnership, we have signed a memorandum of understanding to explore initiatives related to the rapid commercialization of low-carbon bio-based materials. The initiatives include evaluating the use of existing Indorama units in the USA, with some modification to commercially produce bio-based materials. Under this arrangement, Indorama would convert derivatives of Origin's platform chemical, CMF, into various sustainable chemicals and bio-based plastics. Under the MOU, Indorama and Origin will also study the potential to use production samples of biobased materials in limited-volume product launches in partnership with high-profile brands. The materials are anticipated to be used in packaging, textiles, films, and automotive applications and could include biopet, biopta, the advanced biobased chemical FDCA, and copolyesters that have an advantage over traditional PET plastic. Turning to slide eight, in mid-April, we were excited to announce a strategic partnership with SCGP, a leading multinational consumer packaging solutions provider, to explore a licensing origin technology for use in an Asia-based manufacturing facility. The strategic partnership includes a joint development agreement between Origin and SCGP, whereby we aim to develop sustainable carbon-negative products from eucalyptus feedstocks provided by SCGP for applications in food packaging, logistics, automotive, and construction. As part of the JDA work, we have successfully processed and tested SEGP's eucalyptus feedstock at our West Sacramento, California pilot facility, confirming similar yields to other sustainable wood residues that we have evaluated. As a feedstock, eucalyptus offers several benefits, including rapid growth, adaptability to the diverse environments, and other properties useful for industry. Turning to slide nine, in late March, we were pleased to announce a strategic partnership with Tia Sung Advanced Materials Corporation. a Korea-based industrial materials company to industrialize sustainable high-value specialty materials for use in a wide range of end markets and applications, including batteries, automotive, and apparel. As part of the partnership, Hyesung signed a multi-year capacity reservation agreement to purchase sustainable carbon-negative materials from Origin, including PET and a hybrid polymer PETF, which is a blend of PET and FDCA for use in power cord applications, as well as HTC for use in battery materials, and puranic derivatives for use in spandex applications in the apparel industry. Turning to slide 10, in mid-April, Origin and the Green Chemistry Division of the Minifin Group, a global fine chemical company, announced a new commercial arrangement whereby Minifin will become Origin's manufacturing partner for the downstream supply chain of Origin 1. The initiative, which expands upon our previously announced strategic partnership with Minifin to industrialize sustainable chemicals, aims to further build on the strengths of Origin's patented technology platform and Minifin's manufacturing capability, process know-how, supply chain strength, and deep expertise in puranic specialty products. As part of the manufacturing initiative, CMF produced by Origin at Origin One will be delivered to Minifin, which will convert the CMF into downstream intermediates and products. The initiative is expected to position the company's complementary technologies to grow the value of the bio-based supply chain for high-value chemicals and materials, including bio-based PET.
spk11: In addition, this quarter we amended our existing agreement with PepsiCo.
spk09: We have increased the flexibility of the agreement by expanding the slate of products that may be supplied, as well as which plants may supply those products, with final volumes, product mix, and plants to be mutually agreed upon. To wrap up our commercial update, our sales pipeline remains strong. We continue to expand the breadth of industries and in markets that we serve and identify opportunities to direct our intermediates towards higher margin products. Turning to slide 11, in early April, we were thrilled to announce the appointments of Craig Rogerson and Tony Trippany to the Origin Board of Directors. They bring a wealth of experience in operations, strategy, corporate finance, and M&A to the company from leading world-class chemicals and material science companies, which will prove to be a tremendous benefit as we begin commercial production. Craig Rogerson has four decades of executive experience leading private and publicly held special chemical companies, having most recently served as chairman and president and CEO of Hexion Inc., a leading global producer of adhesives and performance materials that enable the production of engineered wood products and other specialty materials. Prior to being acquired for $1.9 billion in 2022 by American Securities, Hexion had over $2 billion in annual sales. Previously, Craig served as chairman, president, and CEO of Kim Chura Corporation, a global developer, manufacturer, and marketer of engineered industrial specialty chemicals. Prior to being acquired for $2.5 billion in 2017 by Lanxess AG, Kim Chura generated $1.7 billion in 2015 revenue. Tony Chippney brings over three decades of significant operational strategy and M&A experience. Extensive knowledge of the manufacturing, technology, and material science industries and a background in international corporate finance. He most recently served as director at Mesa Laboratories, a global leader in the design and manufacturing of life science tools and critical quality control products and services, many of which are sold into niche markets driven by regulatory requirements. Previously, Tony had a 36-year career with Corning, a global leading innovator in material science with more than $10 billion in annual revenue. where he had held various progressive leadership roles in corporate accounting and finance, including chief financial officer. Craig and Tony will be outstanding additions to our board of directors, and we are thrilled to welcome them. We would also like to thank Ben Odor, who resigned from the Origin board on May 8th and who was recently appointed CEO of VF Corp for his contributions during his tenure with Origin. With that, I would like to turn it over to John, who will discuss Origin 1, Origin 2, and product development.
spk06: Thanks, Rich. I'll begin on slide 12 with an update for Origin 1. Origin 1, our first commercial manufacturing plant located in Sarnia, Ontario, remains on track with commissioning, expected to complete and plant startup to take place in Q2, in line with prior guidance. As announced in January, Origin 1 is mechanically complete and commissioning is underway, with work on site progressing favorably. During the first quarter, we hired our director of manufacturing, who brings valuable experience to the team, including experience working at carbon black producers such as Cabot. Looking ahead, we're excited to start up the plant, begin commercial production, deliver product and samples to customers, and take the next step in our journey to decarbonize the world's materials. Origin One is first and foremost a strategic asset that we will use to qualify higher value applications for our intermediate CMS, HCC, and oils and extractives. Apart from paraxin and biopet, using product from Origin One, we plan to explore or qualify FTCA, epoxies, resins, surfactants, sustainable carbon black, bioasphalt, and biofuels. We expect to gradually ramp up origin one operations aiming to optimally fulfill customer demand while we produce samples and qualify materials. We remain confident that we will be able to meet our production goals to support our revenue guidance. In product development, we continue to strengthen our IP position with additional patent filings and five new patent families, including for some very interesting potential intermediates, products and applications. Advances in FDCA related polymers that improve overall polymer performance, HTC and the use of HTC and rubbers, among others. In March, we announced the achievement of a significant milestone in our carbon black program, validating the suitability of our HTC-derived carbon black for automotive tires and mechanical rubber goods. To understand how we achieved this milestone, I'd like to offer some additional background on HTC and what makes it so special and valuable to our customers, starting with slide 13. Origins HTC, or hydrothermal carbon, is believed to be a unique material, not produced anywhere else in the world by any process other than origins. HTC forms from the interaction of lignin and degraded CMS, or chloromethylferpro, and related compounds during the conversion of the biomass in our core process. Turning to slide 14, a scanning electron micrograph, SEM, image of origins HTC is shown alongside an SEM image of carbon black made from petroleum. Origins HTC is morphologically quite similar to the carbon black from fossil-based materials, with primary particles clustered into grape-like or assiniform aggregates with complex structure. Beyond the immediate morphological similarity, Origins HTC offers an enhanced ability to manipulate surface chemistry and morphology, or the shape, size, and connectivity of the particles. This tunability makes HTC a particularly versatile material in addition to HTC offering sustainability and performance benefits for a given application. The value of this tunability is that it allows us to tailor our material to meet the needs of customers and to deliver product for a wide range of carbon black specifications, such as for tires and mechanical rubber goods, as well as develop products for applications like inks and paint pigments. HTC has two characteristics which can be readily tuned. First, we can control its surface chemistry. Origin to HTC starts out with a level of surface functionality that fossil carbon black can obtain only with great difficulty and expense. Typically, carbon black from petroleum starts out hydrophobic with few functional groups, and expensive treatment is required to make it more hydrophilic to attain the desired performance. Furthermore, the treatment of fossil-based carbon black has a limit, and fossil-based carbon black cannot practically attain the hydrophilicity that HTC naturally has. In contrast, by treating HTC, we can remove functional groups to vary the hydrophobic and hydrophilic behavior. Second, we can change the morphology of HTC. This is valuable for carbon black, where the ability to meet different specifications and performance criteria is determined in large part by particle size, shape, and structure. We can affect both the micromorphology and macromorphology of the HTC clusters. Micromorphology by the process conditions in our ovary reaction and macromorphology by post-processing. Putting it all together, the tunability of HTC gives us the ability to adjust surface chemistry and morphology, thus providing us with tremendous power over the material's performance. Having established this context, I'd like to tell you about our recent HTC milestone. Turning to slide 15, we were excited to provide an update in March on our continued strong progress in carbon black development. Specifically, we produced a carbon black that, when blended with fossil-based carbon blacks, performed better than existing fossil-based carbon blacks. specifically N660, a widely used and technically demanding performance specification for automotive tires and mechanical rubber goods. The achievement validates the potential for our sustainable, biobased, low-carbon carbon black to be used broadly in the large, rapidly growing carbon black market. The N660 specification represents a gold standard which Origins product has achieved, indicating the potential for widespread adoption of our carbon black, not only in N660 applications, but in less technically demanding specifications as well. We look forward to bringing a host of benefits to this application space. One, our material is a sustainable replacement for fossil carbon black with up to 100% bio content and low carbon intensity. Two, our material shows no detectable levels of polycyclic aromatic hydrocarbons or PAHs. Three, our material is expected to provide stable pricing largely decoupled from the petroleum supply chain, which is exposed to more volatility than supply chains based on sustainable wood residues. Four, we can expect our carbon black to be an attractive alternative to reclaimed carbon black since it does not suffer the same performance limitations and, as we have shown, can even exceed the performance of fossil-based materials. Five, we don't expect the production of origins carbon black to be affected by the same regulatory limitations in the United States as fossil-based carbon black. And six, finally, our studies have demonstrated that we can achieve superior dispersion and 10 delta qualities which offer performance advantages in tires related to durability and fuel economy. Now, having made several carbon black blends that exceed the performance of N660, a highly technical carbon black specification, we look forward to further increasing the proportion of our material in similar blends in the future, typical of carbon black development programs for tires and other applications. Turning to slide 17, our HTC team has done an incredible job getting us to this point. We have a spectacular group of scientists, engineers, and commercial folks that specialize in carbon black and other carbon products. Everything from application development, process ensuring, materials ensuring, materials analysis, and regulatory management are represented at the highest level in our team. And we are tremendously excited about this group of people and what they can accomplish. Regarding Origin 2, our second plant to be built in Geisman, Louisiana, we continue to advance for end design, construction planning, and financing. We continue to make progress developing new products and applications, which may be incorporated into the design of the plant, such as FDCA, which can be converted to BEF and carbon black biofuels. We expect to provide an update on new product offerings and construction plans for the plant in August 2023. To summarize, I'm proud of how our team continues to execute against our origin one and origin two milestones. The approaching startup of origin one is an exciting milestone in our mission to enable the world's transition to sustainable materials. We continue to advance our product development and commercialization roadmap, create valuable new strategic partnerships, and deepen our existing relationships to carry out our shared vision of a more sustainable, better performing chemicals and materials industry. With that, I will turn it over to Nate to discuss some of the financial details.
spk07: Thanks, John. I'll begin with a commentary on our first quarter results, then provide our financing expectations for Origin 2, and finish with an update on our 2023 outlook. Speaking to slide 18, we reported quarterly revenue for the first quarter of $1.7 million associated with JDAs and Origin's supply chain activation program compared with no revenue in the prior year period. First quarter operating expenses were $13.0 million compared to $7.6 million during the same period in the prior year. Net income was $9.8 million for the first quarter compared to a net income of $7.3 million in the same period in the prior year. Adjusted EBITDA loss was $9.7 million for the first quarter compared to a loss of $6.5 million in the same period of the prior year. Turning to our balance sheet, Origin ended the first quarter with $263.9 million in cash and cash equivalents and marketable securities, a meaningful portion of Q1 cash expenditures related to the completion of Origin 1 and are therefore non-recurring. Regarding the financing of Origin 2, in early January, we announced 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 the plant. This amount is inclusive of and builds on the strong foundation of the previously announced expected $400 million in private activity bond volume cap allocation. Origin's use of solid waste feedstock to produce carbon-negative materials enables the company to use these tax-exempt bonds toward the financing of the Origin 2 project. Bank of America has been engaged by Origin to underwrite the bonds and market them to investors, which could enable the financing of the debt of Origin 2 using entirely tax-exempt bonds. 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. And as we previously discussed, we also anticipate various state, local, and federal tax credit, grant, loan, and other programs, including those promoting advanced manufacturing from the Inflation Reduction Act, to be incrementally beneficial for the financing of Origin II. As Rich mentioned, we continue to expect that Origin 2 can be fully funded from a combination of existing cash on hand, previously indicated traditional project financing, and potential strategic partnerships. Given Origin's ongoing global technology licensing effort and an active governmental affairs team, we anticipate strategic partnerships and federal incentive programs to play a meaningful role in the financing of Origin 2. Again, we expect to provide an update on Origin 2 in August 2023. I will now wrap up with our 2023 outlook. We are maintaining our guidance for revenue of $40 million to $60 million and an adjusted EBITDA loss of $50 million to $60 million. And with that, I will turn it back to Rich for closing remarks.
spk09: Thank you, Nate. In closing, I would like to thank our customers, our team, and our partners for their contributions to our company's success and our shareholders for their support. I'm incredibly proud of our team's continued execution as we draw closer to commercial production and taking the next step in the world's once-in-a-planet transition to sustainable materials. And with that, I will ask the operator to open the line for questions.
spk01: Thank you. We'll now begin the question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. You'll hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your questions, please press star then 2. We'll pause for a moment. as callers join the queue. The first question comes from Frank Mitch from Fermion Research. Please, go ahead.
spk08: Thank you so much, and congratulations on the numerous partnerships that you formed. I'm curious about Indorama, you know, given that it's the largest PET company out there, and obviously that's a natural thing outlet for CMF into Paris Eileen. And, you know, obviously, you've had relationships with the brand owners, the Pepsi's and Danone's over the last couple of years, but Indorama is kind of a Johnny come lately into the into the partnership. How did that come about? Was that a was that a push from the brand owners or any sort of color that you could talk about the relationship that you have with Indorama? And you know, where do you think that that can go?
spk09: Yeah. Hey, Frank. This is Rich. Thanks. Thanks for asking. Indorama is an incredibly strategic partnership for us as the world's largest producer of PET. And for some of our other listeners, you know, the paraxylene that we make is 80% of what goes into PET. So in terms of partnering with the absolute global leader in the market to convert our paraxylene into biopet for our customers around the world, We couldn't have a better partner than Indorama. We also line up very well with their stated sustainability goals that they call Vision 2030, and where they've committed to invest $8 billion into this initiative and really have sustainability at the top of their agenda. So you have incredible strategic alignment, and it's a multifaceted partnership that we think will continue to grow. But initially, we're evaluating using Indorama to facilities in the U.S. to handle the conversion and to produce bio-based materials. And then secondly, to work together on creating bio-based samples, kind of like smaller scale in the near term so that we can get those in the hands of our mutual customers. So a lot of ways to work together.
spk08: Fantastic, fantastic. And if I could ask, in the press release you talked about hiring a financial firm to underwrite the bonds and so forth for the Louisiana State tax exempt bonds. Just curious as to what, you know, roughly what thoughts you have in terms of a timeframe that you might be coming to market with those bonds, understanding that Origin2 is a 2025 startup, so we are a little ways away from that.
spk07: Sure. Frank, this is Nate. So first, as we announced back in February, we have hired Bank of America to help us bring that financing to market. Really, as far as timing, like we said earlier in the call, we are going to have a full update on Origin 2 and all of our expectations around that in August. So I'm going to hold on that until our full update at that point.
spk11: Understood. Thanks so much.
spk01: The next question comes from Steve Barn from Bank of America. Please go ahead.
spk03: Yes, thank you. The chemistry of what you guys are developing is continually evolving. I just find it really fascinating. Every time we get on a call with you, you're going down a new path. And putting the interest in the chemistry aside, can you talk a little bit about your view of the potential value of these different pathways? I mean, if we think about where, you know, this process initially started as a way to produce PET, and now you can go down the FDCA pathway and maybe produce PEF or any of these other furan derivatives. Robert Forrant, Would you, how would you characterize the potential value of those versus PT and then now you're going down this path of being able to convert HTC into effectively, you know, a carbon black Robert Forrant, You know, derivative of or a carbon black alternative perhaps is a better way to describe it. The, the, the value proposition here seems to continually evolve? Can you characterize it in your own view of the size of the value proposition versus the way you look at it now versus where it was previously as just a PET, a bio-based PET?
spk06: Yeah. Hey, Steve. This is John. Thanks for the question. Really appreciate it. So I think if you zoom all the way out, what we're really doing is developing a platform upon which you can build lots of other products in chemistry. And I think what you're referring to in this sort of evolution of additional products is we're exploring and discovering the highest value places to put the intermediates that come off of our platform. I think when you look at the value proposition, as you said, of each of these individual products and markets, really, I think generally speaking, and I am speaking quite generally, when we talk about things being performance advantaged, that usually means better margin and higher value for the individual product itself. But then also, when we go look at a new product, we're usually saying, okay, well, This is something that isn't in the industry right now. It's performance advantage, so it feels justified to do the additional work with a partner to develop that new product. And the reason why we look at that is usually both because it's a higher value product and because it's a sort of easier, lower cost material to make off of our platform than just a drop in sort of incumbent. So you were sort of getting it on both sides in a nice way. um on the price side and the cost side usually when we're looking at these sort of new performance advantage materials and that's one of the reasons why we get so excited about them you know the other side is obviously the world uses an enormous amount of pet right now we don't have to do a bunch of product development around pet to understand that there's an enormous amount of demand for it so from an impact perspective products like pet are just so important for for us because we know we can scale, I would say almost arbitrarily into that market relative to our ability to bring online capacity in the near term. But the more we can get into these performance advantage, higher value kinds of products and believe that we can actually penetrate into the market reasonably, the happier we are is sort of the short, I guess that's maybe a longer answer there. I think the other side is you asked about HTC. I think the same generic principles apply to our HTC products. What's been really interesting with the carbon black product from HTC is we're finding as we get more sophisticated in our integration of that product into its applications in rubber, we're finding that it not only performs better than N660, which is the data that we published recently, but it did better without reformulating the rubber. And, you know, a critical part of a lot of these applications is how do you actually formulate the material into the end product, right? So what are the other components or additives you're putting in with the rubber alongside the carbon black to make that carbon black perform just as well? You know, generally speaking, if you're willing to do a little bit of reformulation, you're going to get higher value of the ultimate product. So we think about the HTC and the carbon black as sort of the same way. In all these cases where we're talking about performance advantage materials and bringing it forward, we think of that as higher value, lower cost kinds of materials as compared to PX going into PET.
spk03: And in addition to the higher value and lower cost, it would seem to me that this new pathway that you're pursuing with HTC going down and becoming a carbon black alternative. The other benefit it would seem would be a significant reduction in the CO2 emissions. And maybe you would have some data on that. My understanding is carbon black generates a significant CO2 emission source. And I'm just curious as to whether this might be The end product that might enable you to get more DOE funding, if the DOE is looking for products that reduce the CO2 emissions, this HTC product versus carbon black could be pretty compelling for just the CO2 footprint.
spk06: Yeah, I mean, we see a huge opportunity to reduce the CO2 footprint of carbon black. And then, of course, one of the major markets that carbon black is used in, which is tires. And of course, tires are a really significant part of the materials consumption for for automobiles. Right. So I think huge industry, lots of opportunity for positive impact. I think we're pretty optimistic about sort of our ability to impact CO2 footprint broadly. And so we think there's lots of opportunities for us to get various incentives and things like that for our work there without being specific about exactly which one. But I think there's actually another interesting dynamic in the carbon black world. And that's that in the carbon black world, there's the CO2 emissions, which, of course, as we just discussed, I think we have a big opportunity to improve that. But they're actually just general pollutant emissions associated with carbon black production as well, which, especially in North America, has really limited the ability to bring online economically new supply using older processes. Because of the way we make our carbon black from HTC, we don't think that we will be subject to those same kinds of constraints in bringing online supply. And so we think there's actually sort of another layer to the opportunity in carbon black where we can expand production capacity in North America in a way that other players may be challenged. to do in the future.
spk11: Thank you.
spk01: The next question comes from Eric Stein from Craig Hallam. Please, go ahead.
spk11: Hi, everyone. Eric. Hey, Craig. Hi. Hey.
spk02: No worries. Happens all the time. So I can appreciate the strategy change a little bit to look more at the revenue generation and higher margin products. I mean, given where demand is or the offtake value is now, and I think that probably fills plants three or four or gets close and you've got scarcity value. I'm just curious, I mean, how is that? driving interest on the licensing side, companies that feel like maybe they could get to market faster if they go that route?
spk09: Yeah, Eric, that's a great question. So we were excited to announce our first licensing exploration partnership this quarter with SEGP, which is an example of a of a company that has a lot of different assets, including a lot of eucalyptus and a need for sustainable packaging and a lot of other capabilities. And so working with them to explore an Asia-based facility is an example of our licensing efforts. We do continue to receive inbound interest and we'll sort of announce and share those as appropriate. But yeah, I would say more and more companies with various feedstocks And obviously with Origin 1 being mechanically complete and online soon, I think we'll only increase the interest. And that's also the kind of thing that we can use Origin 1 to do is test yields and do various tests for some of these various licensing scenarios that our partners want to explore.
spk02: Got it. And I guess good segue to origin one. I mean, I know that this plant obviously smaller than what you envisioned for origin two and beyond, you know, just curious how that plays into things, obviously making a lot of different products, getting those out into the market, increasing your reach. Do you think that other companies go the route of what, what you just disclosed about Pepsi in terms of amending agreements to get into some other areas?
spk09: Yeah, I think, you know, we continue to have a lot of customers who want access to multiple materials. You know, we recently announced a deal with Hyosung and they are interested in, you know, PET and PETF and HTC to go into a really wide range of in markets. And, you know, as a lot of our customers are chemical companies and companies that can, you know, take these materials in a lot of different directions. we think that'll continue to be the case. And on the polyester side alone, we do think there are a lot of companies that, you know, need a lot of PET and will need a lot of PET for a long time, but are really interested in the value propositions around PETF and PEF and certainly, you know, excited to explore those sort of next generation polymers. Got it.
spk02: I mean, do you think, do you kind of view what Pepsi's doing as kind of tip of the iceberg and that more companies go that route? Or, I mean, at this point, do you kind of view that as a one-off and you'll, you know, see how things progress going forward?
spk09: You know, it's hard to say. I would say I think there's obviously an enormous demand for PET, and I don't think that's only going to, you know, continue to grow. But there is interest from, you know, multiple of our customers in FECA and PEF, and so that's a newer trend. polymer for them, and I think that demand, I do think, will continue to grow as they learn more about it and, you know, test it and develop on top of it. So, I think we'll continue to see more of those.
spk11: Okay, thank you. Thank you.
spk01: The next question comes from Joan Roberts from Credit Suisse. Please, go ahead.
spk10: Thank you. Is the revenue capacity for Oregon 1 still $120 million? And do any of these new contracts pull that forward from a 2025 target that you had before?
spk11: Yeah. Hi, John.
spk09: This is Rich. I think we reaffirmed our revenue guidance for this year. given it for next year yet, but as OriginOne, you know, comes online this quarter and continues to ramp, and we continue to use it as a strategic asset to get, you know, large-scale samples in the hands of customers and do joint development agreements around those samples and explore licensing arrangements and those kind of things. I don't think there's any reason to think our outlook on OM1 has materially changed.
spk10: Okay. And then secondly, will Origin 1 have any HTC sold commercially as N660 carbon black or in blends with fossil N660?
spk06: That's a great question. I think that it's pretty clear that we'll be making some material from Origin 1 off of the HTC that's going to be, you know, I'm not sure that we're ready to call it N660 since it seems to perform a little better than N660, but I think we'll be making a carbon black grade that we'll be using those applications. Can't speak to the volume. I don't think we're ready to talk about the volume that will specifically be allocated to that application at this point, but I'd say, you know, I'd be, I'd be surprised if we weren't making some pretty meaningful volumes of that off of OM1.
spk11: Thanks, and congrats on the progress. Thank you. Thanks.
spk01: The next question comes from Pavel Moshinov from Raymond James. Please, go ahead.
spk05: Thanks for taking the question. I saw in the press release that after this quarter you will no longer be reporting the offtakes and capacity of reservations, what led to the decision to stop disclosing that number? It was quite useful over the years.
spk09: Yeah, thanks, Bob. This is Rich. We felt like that number has grown 9x in a relatively short period of time, and the reason we were focused on that was to prove that we had a lot of demand beyond packaging. And so that number grew very rapidly. And in fact, I would say it grew kind of more rapidly than we would have expected. And we talked about a couple quarters ago that we really feel like we've proven that demand and we've got demand for several OM2 scale plants. And so continuing to just keep growing that demand wasn't really the right focus. And instead, we would focus on joint development agreements and you know, licensing relationships and revenue generation. And, you know, some of that's what you even hear in our product advancements like we've been talking about. You know, some of that stuff comes from working with other companies closely and spending our partnership resources on developing, you know, deeper relationships, you know, for example, with companies that make carbon black or tires or things like that in the case of HTC. So, you know, we think it's going to keep growing. we'll continue to update that number as appropriate, but we just thought it increasingly sort of, you know, wasn't super helpful. And we generally get the feedback from investors that they, you know, have really no doubt that there's massive demand for our materials and that we'll be supply constrained for a long time. So that's, that's some of the rationale.
spk05: Understood. But let me follow up on origin. So you're obviously, you know, right on the cusp of startup. Have you ever, thoughts changed about how long it will take for origin one to reach steady state operation. I think 36,000 pounds, a quarter of production, something like that. Uh, are we still looking at a 12 month kind of timetable for that or what's, what's the latest?
spk06: Yeah. Thanks for that. I think, um, Generally speaking, our view hasn't really changed there. You know, a meaningful part of that is really not us looking at it and saying, okay, we're going to make sure that there's exactly this increase in percentage ramp, capacity ramp up on a month-by-month basis, but more reflecting that, you know, generally speaking, both on the demand for specific kinds of customer, for specific kinds of materials from customers, is a little bit uncertain and probably a stronger driver for us than just maximizing capacity as fast as we can. And then the second is sort of reflecting our recognition that there's always some uncertainty around exactly how fast you get these things up to scale. And we want to try to under promise and over deliver to the extent that we can for those kinds of things. So I think, you know, It's not to say that we haven't learned anything at all from OM1 at this point, you know, since the last time we talked about this. But I think we haven't learned something that would materially change our view of the sort of time scale of bringing OM1 all the way online.
spk11: Yep. No, that's clear. Appreciate it, guys. Thanks. Thanks, Pavel.
spk01: That concludes today's live Q&A segment. I will now turn it over to Ashish Gupta, investor relations, to conduct the next segment of our investor Q&A.
spk04: Thank you, operator. As we've done on our last four earnings calls, for today's call, we invited all investors to submit questions as part of our Ask Origin campaign. Once again, we were pleased with the very high level of participation and want to thank everyone who submitted a question. In the interest of time, we'll be taking the most commonly asked questions. Our first questions are for Rich. Rich, what is Origin developing with SCGP? Is it retrofitting a factory? Can you talk about the terms or possible revenues from future licensing?
spk09: Yes, it's a great question, and SCGP is a really interesting company, as I discussed previously. And what we're really doing is working with them to explore the feasibility of them being able to make large commercial quantities of PET in Asia using eucalyptus as a feedstock. And so we were excited to have received eucalyptus from them, have processed that in our pilot plants, and to have proven out that the yields on eucalyptus are attractive and that that seems like a very feasible feedstock for an origin plant. And so we'll continue working with them on the feasibility assessment and look forward to working with other companies on similar sort of projects.
spk04: Do you think licensing could be a significant source of revenue over the next few years?
spk09: I do. You know, certainly a source of some revenue is we will likely be able to be compensated for some of these explorations that we do with various partners. And, you know, how serious and the timing is still not all that clear. But, you know, it is clear that a lot of companies need an entire Origin 2 scale plant, you know, or more for their own needs, which quickly leads us to a licensing kind of conversation. In terms of it, it wouldn't make sense for us to build a plant for a single customer as part of our initial plants. And so I think that could lead to a pretty meaningful revenue in the relatively near term. It's just really hard to say how much and by when. But we continue to make, I would say, a lot of progress on the licensing front.
spk04: Great. Really appreciate that color, Rich. With That will now turn to some questions for John. John, are there any key learnings from OM1 building commissioning process that you think you want to take into consideration for OM2 and beyond?
spk06: Yeah, sure. I think there are quite a few things that we have been learning. I think probably the most important set of things that we've learned are around the way that we specifically will do capital project execution. I remind investors pretty regularly when we talk to them, but we're really doing two things. We're both scaling a technology, but we're also scaling the organizational capabilities of origin with these kinds of projects. And so when it comes to a capital project like GoM1, it's a good size project where you really have to test our sort of fit and form of our processes and the way that we execute that. And I think we've learned quite a bit about how to do that right and what did we have to end up muscling our way through because we frankly didn't do it as efficiently as we could have. And what are things that, man, that really just worked fantastically and we'd like to make sure we do that in the future every single time. And so I think that's been pretty significant in terms of the number of things that we've learned there. I think a lot of that is is going to be very transferable to OM2. And the other thing along that same line is we brought together a lot of spectacular people from a lot of different organizations, each of which individually are capable at capital project execution, engineering, design, and manufacturing. And so across each of those areas, we're trying to understand what are the pieces of the way that some of those great companies, the people from those great companies do each of the parts of the capital project execution and meld that together in a really clear way that is sort of where you get a great sum of the parts in terms of our organizational capabilities. So I think there's been quite a bit there. I think on the technology side, you know, there are some small things where we say, boy, I think we'd rather do that a little differently, or maybe we want to change the stack of, of, um, particular components in the process. But I'd say at this point, it's still quite modest. I'd say sort of nothing that really jumps out for us. But of course, as we started up and ramp up capacity on OM1, we're going to learn a different set of things about the technology and organizational capabilities. So I think we're all looking forward to that.
spk04: That's fantastic. Really appreciate all the detail there, John. And it sounds like we can take a lot to OM2 and beyond. And thank you so much to both Rich and John. Absolutely. That'll conclude the Q&A portion of today's call. I'm going to turn it back to Rich for closing remarks.
spk09: Thanks, Ashish. And thank you all for joining us today for all the great questions and for your interest in origin.
spk11: This concludes today's call.
spk01: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

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