Danimer Scientific, Inc.

Q2 2021 Earnings Conference Call


spk00: Greetings. Welcome to the Danimer Scientific second quarter 2021 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the call over to your host, Russ Sikowsky, Vice President of Corporate Finance.
spk02: Thank you, Operator, and thank you, everyone, for joining us today for our second quarter 2021 earnings call. Hosting the call today are Danimer's CEO, Steve Crossgree, and CFO, Jad Dowdy. Phil VanTrump, our Chief Science and Technology Officer, and Jeff Urig, formerly CEO at Novomir, and now General Manager and President of Danimer Scientific Catalytic Processes, will also join us for Q&A. During our discussion today, we will be referring to our earnings presentation, which is available on the investor relations section of our website at dannemarscientific.com. On slide two, please note that we may discuss forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, future results of operations, capacity, production, and demand levels that could differ in a material way from those expressed or implied in the forward-looking statements. We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date hereof, except as required by law. Today's presentation also includes references to non-GAAP financial measures. A reconciliation to the most comparable GAAP financial measure can be found in the earnings presentation. I will now turn the call over to Steve.
spk06: Thank you, Russ. Good afternoon, everyone. Thanks for joining us. Today we will discuss our second quarter results, the expected benefits from our transformational acquisition of November, and the resulting enhancements to our capacity expansion plans, among other business updates. During the second quarter, we made further inroads in our mission to create biodegradable consumer packaging and other products which addressed the global plastics waste crisis. building on our team's many accomplishments since we became a public company just over seven months ago. In the second quarter alone, we helped launch the U.S. Plastics Tax Roadmap to 2025. Virtually all of our outstanding public warrants were exercised, providing funding to propel exciting new growth initiatives. We made further progress on the construction of our Kentucky Phase II expansion. We successfully completed the previously announced de-bottlenecking initiative at phase one of our Kentucky facility to increase efficiencies and, in turn, increase our overall output of NODACs-based resins at the facility. And finally, the animal was added to the Russell 3000 Index. I would also like to highlight that, year to date, we have filed for a total of 54 new patent applications, an encouraging accomplishment that further reinforces the caliber of our intellectual property portfolio. We remain attuned to our customers' ESG goals and are committed to eliminating plastic waste in the environment. That's why in June we helped launch the U.S. Plastics Pact's Roadmap to 2025, an aggressive national strategy led by the Recycling Partnership and World Wildlife Fund as part of the Ellen MacArthur Foundation's Global Plastics Pact Network. This roadmap illustrates how Dannemere Scientific and other signatories will seek to achieve each of the U.S. four targets to realize a circular economy for plastics in the United States by 2025. This represents an important milestone in the fight against plastic waste, and we are extremely proud to help make this roadmap a reality. In terms of customer developments, our partner plastic suppliers recently announced the successful completion of its first commercial run of PHA-based home compostable packaging film, utilizing Dannemer's signature Nodax polymer. The new film is designed for a wide range of applications across food, beverage, grocery retail, quick service restaurants, and stadium food service. This is just the first in a strong lineup of new advanced solutions in home compostable films that Plastic Suppliers plans to launch. Additionally, another partner of ours, Columbia Pappaging Group, has secured large PHA straw purchase orders with blue chip brands in the quick service restaurant, hospitality, and food service distribution segments, including national fast food chains, Las Vegas hotel holding companies, and national food service distributors. Furthermore, as an extension to the current orders and growing demand from these customers, Columbia is working on fixed commitment contracts with these large brands for both no next base straws and no next base bags. We were also pleased to have been recognized by our partner Camara on their recent earnings call where they reiterated their commitment to sustainability and their excitement with progress on testing NODACs for inclusion in their bio-based product lines. I would like to reiterate that we maintain a sharp focus on our core competency of product application development as we continue to support various R&D projects for our Blue Chip customers to help them achieve their sustainability goals. Our customers are well-respected global consumer-focused brands that have expressed confidence in us because of our intellectual property, because the science behind our technology is proven and because we have the depth and expertise to provide commercialized and scalable solutions. These are all key differentiators for us. We have been scaling this technology for 14 years. Because of our close collaboration with our customers, we know what solutions they want and continuously evaluate areas where we can both enhance existing applications and also explore possibilities for innovative new applications across a variety of industries, all in an effort to help build a foundation for a circular economy while building value for our shareholders at the same time. We believe our transformational acquisition of Novomer should accelerate our ability to deliver next-generation solutions to leading consumer product clients, and we are extremely excited to provide you with a bit more detail today on our plans for integrating this bioplastics innovator onto our platform. In July, we signed a definitive agreement to acquire November, a leading developer of thermocatalytic conversion technology that produces high-performing, carbon-efficient, cost-effective polymers and chemicals. We closed the transaction on August the 11th. I'd like to take a moment to reiterate why this transaction is so compelling for our business, our customers, and for our shareholders. The transaction opens up new avenues to build upon our core competency of application development, enhancing the strength of product applications we can develop due to the complementary nature of Novomers polymers when combined with Nodax. Novomers technology will enable us to increase the expected overall volume of finished product we will be able to deliver, all while significantly lowering our production costs and capital expenditure per pound produced. To further quantify that, we expect the production cost of B3HP to be approximately half the cost of NODACS. Initial feedback from our customers has been very positive. Many of them were already familiar with NOVAMER and their technology and are enthusiastic about the benefits of better barrier properties, among other advantages that are expected to result from the integration of NOVAMER onto the Danimer platform. I would also like to note that we are adding immense talent to our team of recognized scientists and business leaders. Jeff Urich, November's former CEO, will now report to me as our general manager and president of Bannemer Scientific Catalytic Processes, and his team in Rochester, New York, will all remain with the company. Jeff is an outstanding leader with over 15 years of experience in the industry. Integrating November's team of scientists and engineers will allow them to readily access our application development expertise and the regulatory expertise that we already have in place. Separately, in addition to welcoming Jeff and the talented developers and scientists at November, we are also happy to announce another new addition to our team. In furtherance of our efforts to commercialize the production of PHA and to expand our business development initiatives, I'm happy to announce today that we have hired Debra McRonald as our Chief of Corporate Development, who is reporting to me. Debra joins us from Nestle, where she led technology licensing within their Open Innovation and Venturing Division. Now, let me provide you with a bit more detail on how exactly Nodemer will fit into our current manufacturing network. Last quarter, we walked you through the process by which Danimer creates our signature Nodax-based products, from the initial sourcing of feedstocks such as canola oil, through the three-step process of fermentation, downstream processing, and then into extrusion, where we produce finished resins that we ship to customers for use in their product manufacturing. November utilizes feedstocks as an input into its proprietary thermocatalytic conversion process to produce a unique type of PHA called P3HP. or otherwise referred to under its brand name as Renovo. Bovomers process is 10 times faster than typical fermentation processes with fewer steps, leading to less energy uses than in fermentation. Renovo can be blended with Nodax through the extrusion process to produce resins for customer applications, or it can be sold on a standalone basis for films or fibers. Additionally, It can be sold into the acrylic acid market where it can be used in applications such as the production of superabsorbent polymers for diapers, feminine hygiene products, industrial wipes, and other nonwoven materials. When combined through the extrusion process with the unique strengths and superior structure of Nodax, our signature PHA, Renovo offers numerous technical, operational, and financial benefits for Danimer and our blue chip customers, including improved barrier properties for food packaging. By blending Renovo in our formulations, we expect to be able to produce our resins at a substantially lower overall cost. Depending on customer mix, we expect to blend an average of 30% Renovo into our resins through the extrusion process at our Kentucky and Georgia facilities. This should substantially reduce our capex per pound produced with additional production cost benefits expected as well. I want to make it clear that although Renovo is highly complementary as a blended formulation with Nodax, It is not a replacement for Nodex, but can be used in many of our applications. Nodex remains the backbone of our formulations, including many in which Renovo will not be used. Now, we are excited to show you a bit more quantification around the expected benefits of the deal. As we stated on our November conference call several weeks ago, to meet the growing demand of our residents, we regularly evaluate our manufacturing capacity to pursue the most effective and efficient way to produce materials. In this case, we believe our best course is to move forward with a plan that includes November's expansion through the construction of a commercial renovo plant. In turn, we intend to modify the plans for our Bainbridge facility to include three fermenters in the near term compared to the six fermenters we have previously stated. That said, we do intend to add the second set of three fermenters to the Georgia Greenfield facility in the future. I refer you to slide seven where we have included a visual of the old plan versus the new plan. In July, we received an updated engineering estimate for the old plan shown on the left side of the slide. Based on continued inflation and construction materials throughout 2021, the new estimate we received for the old plan was $826 million plus or minus 25%. By expanding capacity by utilizing November's technology as shown in the new plan on the right side of the slide, we'll be able to produce more volume at a lower capital expenditure per pound, reducing our near-term need for fermentation through the blending of Renovo with NODACS. Additionally, as you can see on slide 8, we have displayed several return metrics comparing our previously announced Georgia Greenfield expansion with the anticipated combination of a Novomer and Danomer plant network. We are looking at the economics of the transaction with our eyes set on the year 2025. As you can see, The expected synergies are clearly compelling. Upon the completion of Kentucky Phase 1 and 2, the Georgia Greenfield expansion and the Renovo commercial plant, we expect to produce more finished product pounds based on estimated customer mix while experiencing a reduction in growth capex while also reducing manufacturing costs per pound produced. Ultimately, this should return value to shareholders through an expected ROIC of greater than 35%. We look forward to updating you further on our plans for the Renovo Commercial Plant once we have completed the site selection process. As we take a step back and look at the near term, we are making good progress on our other previously announced expansion plans. The successful and on-time completion of our de-bottlenecking initiative for phase one of our Kentucky facility in Q2 marked a significant achievement. This positions us well to further scale production of NODACs towards our expectation of reaching 100% of the phase one facility's annual run rate capacity of 20 million pounds of NODAC-based resins by the end of 2021. After taking steps to optimize our processes and equipment, the facility was brought back online in late May, and we used early June to confirm that both fermentation and downstream processing of our material is running at the projected levels. In July, our neat PHA production which is an intermediate step in our finished product process, was over 60% of capacity, up from approximately 50% during the first quarter, and we continue to expect to be at 100% of capacity by the end of the year. Our Kentucky Phase II expansion is continuing on schedule, and as you can see from the aerial view on slides 9 through 11, we have made significant progress so far in 2021. As a reminder, Phase 2 construction at our Kentucky facility commenced in December of 2020 and is expected to come online in the second quarter of 2022, ultimately providing us with 45 million pounds of finished product capacity. The completion of both phases will collectively bring our total capacity up to 65 million pounds of finished product per year at our Kentucky facility. Separately, our new state-of-the-art greenfield facility in Bainbridge, Georgia, remains in the pre-construction engineering stage, and we have already placed orders for many of the long lead time items needed to complete the modified construction plans. We still expect to break ground in 2022 with the three fermenters and extrusion facilities expected to come online in mid-2023. As we continue to focus on enhancing capacity and lowering our capital expenditures and production costs on a per-pound basis, we also plan to carefully evaluate more brownfield opportunities. The site selection for the Renovo plant is in process. Upon completion of Kentucky Phase II, the Greenfield facility and the Renovo plant, it should provide us with an overall finished product capacity of approximately 390 million pounds, inclusive of approximately 60 million stand-alone pounds of Renovo. This compares favorably to our prior estimate of 315 million pounds under our old plan. We are still in the early stages of our long-term journey to ramp up our manufacturing capacity, and we remain extremely optimistic about the future for Dannemere. With that, let me turn the call over to Jad for an update on our financial results.
spk04: Thank you, Steve. I'll speak to slide 12. Overall, we closed out the first half of the year with PHA representing a growing share of our revenue. I'll discuss our second quarter results followed by some color on the full year 2021. Revenues for the second quarter of 2021 grew 22% to $14.5 million compared to $11.9 million in the second quarter last year. This increase was primarily driven by the scale of the PHA production for phase one of the Winchester, Kentucky facility that we brought online in 2020. In the second quarter, we derived 29% of our revenues from sales of PHA-based resins compared to 7% in the second quarter of 2020. We also benefited from a $1.8 million increase in revenue related to research and development projects, primarily reflecting the addition of several customers compared to the prior year quarter, including Mars Wrigley, Camara, and Bacardi. We calculate our average sales price based on actual sales of both PHA-based and PLA-based finished products to our customers. Our average selling price was over 270 per pound in the full year 2020, over 275 per pound for the second quarter of 2021, and it was over 280 for the year-to-date period in 2021. Our AFP in any given period is impacted by customer mix and product mix. Quantities sold can differ from quantities produced, since volumes may be added or taken from inventory. Second quarter gross profit was $2 million compared to $3.4 million in the second quarter of 2020. Adjusted gross profit was excluded depreciation, stock-based compensation, and rent. related to our manufacturing operations was $4.1 million compared to $4.5 million in the second quarter of last year. Adjusted gross margin declined to 28.1% from 37.6% in the second quarter of last year, primarily due to elevated fixed cost absorption as production scales up at the Kentucky facility. In both periods, the average cost per pound of PHA-based products sold was significantly higher than PLA-based products sold as a result of commencing limited PHA manufacturing activities in early 2020 at the Kentucky facility and the incurrence of associated incremental costs as production scaled up. We therefore saw the mixed impact, the gross margin, given that PHA represented a higher proportion of revenues in the second quarter of 2021 compared to the second quarter of 2020. We expect our average cost per unit sold to improve as the plant scales up production. R&D and SG&A expenses, excluding depreciation and amortization, stock-based compensation, rent, and one-time items, were $6.7 million in the second quarter of 2021, compared to $4 million in the second quarter of 2020. mainly due to an increase in headcount and salaries to support our future expansion plans, as well as increases in costs associated with having a larger asset base, such as property taxes and property and liability insurance. Public company expenses added approximately $1 million of incremental costs for the second quarter of 2021, which we did not incur in the second quarter of last year, and include items such as D&O insurance, increased public company auditing and accounting costs, and stocks readiness fees. The adjusted EBITDA loss in the second quarter was $2.7 million compared to $0.4 million in the same period last year, attributable to the factors I just discussed. Adjusted EBITDA excludes stock comp, other income, and other add-backs as reconciled in the appendix. Adjusted EBITDA was a loss of $2.6 million in the second quarter of 2021 compared to a gain of $0.4 million in the second quarter of 2020. We add back our rent expense because it is primarily related to a sale-leaseback agreement associated with the Kentucky facility and thus is essentially a replacement of depreciation and interest expense. Turning to slide 13, I'll provide an update on our outlook for the full year of 2021. The increased availability from the completed Phase 1 capacity expansion and the successful completion of our debottlenecking initiatives in Q2 are expected to allow us to significantly scale up production from recent levels as we move through the year. That being said, based on the timing of customer product launches, we expect our revenue for the second half of the year to be weighted towards the fourth quarter. We continue to expect adjusted EBITDA cash flow from operations to benefit in 2021 from operational efficiencies as the Kentucky facility increases utilization levels. We now expect total operating costs to be approximately $31 million for 2021, including the post acquisition period for November and excluding DNA, stock based compensation and one time items. Additionally, we expect zero cash taxes for the year. For the full year of 2021, we now expect capital expenditures to be in the range of $125 million to $150 million, inclusive of investments in November for the post-acquisition period. Looking at our balance sheet, during the quarter, we streamlined our capital structure by redeeming our public warrants. 99.6% of the public warrants were voluntarily exercised by the holders thereof prior to the redemption date, resulting in approximately $138.4 million in proceeds, which were used to fund the majority of our November acquisition. We have a strong balance sheet in place. Our total long-term debt was approximately $30 million at quarter end. It includes $21 million of low-interest new market tax credit loans that are expected to be forgiven in 2026. Our cash positioning continues to provide us with ample support to fund our planned capacity expansions in 2021. As a reminder, in May, we disclosed that we entered into a $21 million revolving credit facility with Truist that provides us with additional flexibility to invest in ongoing initiatives as Danmar grows. Now, I will turn the call back to Steve for closing remarks.
spk06: Thanks, Jed. We believe Danmar holds the keys to disruptive technologies that provide a scalable, and highly effective solution to combat one of the world's most significant issues, plastic pollution. According to the Ellen MacArthur Foundation, 32% of the world's plastics end up in nature, while the Environmental Protection Agency reported in 2018 that less than 9% of all plastic waste in the U.S. was recycled. This is not an acceptable path forward for humanity or our planet, and we have to act now to build a circular economy that will protect future generations. Our customers are aligned with us on this mission, and we remain a key part of their sustainability strategies. We continue to work very closely together with each of them to create innovative and customized solutions for their specific needs. Our market opportunity remains immense, and we expect demand to continue to grow as more companies look to us for bio-based consumer product solutions. In conclusion, we are excited by our progress and accomplishments in the first half of 2021. With our application development expertise, our large portfolio of patents, and our enhanced path to commercial scale through the acquisition of Novomer, we remain at the forefront of the bioplastics industry. We are the premier supplier of PHA biopolymers to global blue-chip corporations that are committed to eliminating single-use plastic waste. We are still in the very early stages of a unique opportunity to grow our business and build long-term shareholder value. We are poised to transform the bioplastics industry at a global level. Thank you for your time today. We will now open up the line for questions.
spk00: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Please limit to one question and one follow-up question. Your first question comes from Lawrence Alexander with Jefferies.
spk01: Good afternoon. Two questions then. One would be, with the new capacity that you have, including the Renovo capacity, should we expect, what would be a reasonable timeline for expecting Sort of another anchor tenant to support that capacity being announced. And secondly, can you give an updated perspective on raw material cost inflation and what kind of headwinds Danimer might be facing in 2022? Yes.
spk06: Thank you, Lawrence. Thanks for the questions. As far as a new anchor tenant, I'm not going to give a specific projection, but we're talking to our customers now about signing up for 23 and 24 volumes, and that's high on our list. As far as raw materials, during the second quarter, we averaged about 47 cents a pound for canola oil. And we're still contracted out through the rest of the year. We don't expect that cost to go up more than about a dime through the rest of the year. We do see significantly higher prices next year, which we have not contracted for yet. We are actively working on alternative solutions or alternative materials relative to canola oil. and expect it to have some options before too much farther into next year. I would just also iterate that we view canola long-term as a commodity, and we expect these prices to come back down. At some point in time, there's been four refineries announced, four new refineries announced to make canola oil. So as those come online, we would expect those prices to kind of revert to the norm. But we're not going to wait for that. As I mentioned, we're actively looking at alternatives.
spk01: And just to be clear, you can switch feedstocks without changing the grade of polymer that your customers are receiving?
spk06: Yes, that's correct. The end product does not really have any bearing on what you're feeding the microbe.
spk03: Thank you.
spk00: Your next question comes from John with CJS Securities.
spk05: Hi, good afternoon, and thanks for taking my questions. I just wanted to be clear, the latest update for the capital cost plus the November acquisition is 600 to 700 million. You know, is that as recent as the 826 million update that you gave on the original Greenfield? If not, what are the brackets and then timing of estimates around that?
spk06: Yeah, John, you could assume those estimates are based on the same time period relative to inflation. I'm sure that's why you're asking that question.
spk05: Right. Okay. Great. And then second, I was just wondering if there's any updates on the other contracts that you said you were hoping to land in the next, you know, six to nine months on the last earnings call. Can you tell us about the progress that you're making with these customers and if there's anything more on the pipeline that we should be looking forward to as you progress through the year?
spk06: Yeah, those contracts are all still in process. They're three months closer than they were on the last call. As we talked about before, we're essentially already sold out, so we're trying to kind of figure out how to shoehorn these additional customers in because we want as big of a base as possible so that as we grow, you know, we'll be benefiting from the, you know, extra revenue in the years out. So those are still in process. And as you saw on the – or you heard during the script read, that our partner, Columbia Packaging Group, has had several successes recently, and we hope that they'll be in a position to start making some announcements on those as well.
spk05: Okay. If I could just follow up on that with one more, and I know it's supposed to be two, but when your partners have success like that, can they increase their order volumes with you, and is that provisioned for within your current contracts, and kind of how does that figure with the sold-out status of what you have already?
spk06: Yeah, no, John, they have signed contracts with us based on their forecast with their customers. And so as they get these actual contracts, those pounds are fulfilling their contract with us. Now, what will happen, as has happened so far, we'll have some of those customers come back and ask for more. And then that's where we've got to do a little horse trading and a little evaluating on whether or not we can kind of swap some pounds around between them and other customers.
spk03: Okay, great. Thanks for that, Colin. I'll jump back in queue.
spk00: You have a follow-up question from Lawrence Alexander with Jefferies.
spk01: Hi. Could you elaborate on your thinking around – debt financing versus project finance versus grants for helping fund the expansion and what level of cash balance you'd feel you'd need to keep just for ongoing operations. And secondly, for the research payments that you call out in the release this time around, what you see is kind of the cadence of those research and development projects and should that amount grow over time or should it stay roughly the same kind of run rate?
spk06: Okay, I'll answer that second one first, John, or Lawrence, I'm sorry. We would expect that to grow over time, but it won't necessarily grow. In fact, I know it won't grow, you know, straight up. It'll kind of go up and down, but over time it's going to increase. And just to remind you, that's really – kind of the entry level for our really big customers and big projects towards supply contracts and ultimately volume. As far as the first question, if I had to prioritize them, obviously grants would be great, would be preferable. Project financing is something that we're looking at and is very attractive if we can get it. And then, you know, last in that order would be debt. In that, you know, in the project financing, you know, we're actively looking at government-backed debt, you know, non-recourse loans.
spk03: Thank you.
spk00: Next question, John Tanuantang with CJS Securities.
spk05: I was wondering if you could talk about the possibility of using November's catalytic process for producing other PHAs up to and including Nodax and kind of if that's possible and what that would do to your production costs, you know, if you could achieve something like that. Yeah, good question, John. I'm going to let Phil handle that one.
spk07: Yeah, most certainly we're excited about the November technology platform, and the platform does allow for the flexibility to produce Nodax other types of PHAs, and ultimately it would be possible to produce some of the Nodex grades of materials through catalytic means. One of the things we'll explore over the coming months as we perform the integration with the November team is to evaluate opportunities within their technology platform to expand additional raw materials and additional materials that we can utilize within our overall product portfolio.
spk05: Okay, great. A separate question. Can you just talk about the demand for your PLA products today? Just given the rebound in COVID cases, and I know that's tied to a lot of food service industries, what are you thinking now? What are you seeing now just in demand for that product? You know, with the variants going around.
spk06: Yeah, great question, John. It's a little bit of an up and down scenario there. You know, I think last quarter I said that we were starting to see our food service customers come back and starting to forecast orders in Q3 and Q4. But since then, you know, the Delta variant has reared its head, and some of those same customers have now come back and back off. You know, additionally, we had the benefit last year during COVID that, you know, the customers that shut down obviously hurt sales, but the customers that stayed open, one of those larger customers, was concerned about what would happen if we shut down, and so they ordered in six months of inventory. So we're kind of seeing a negative impact from that this year as well as they have become more comfortable that we're not going anywhere. They have, you know, with COVID, they have, you know, started using some of that inventory. So we've got a double negative effect there on the PLA-based business right at the moment.
spk03: Okay, good. Got it.
spk00: Next question, Lawrence Alexander with Jefferies.
spk01: Could you talk a little bit about the lags or how long it takes to ramp capacity? So for the fermentation capacity compared to the renova capacity, is there going to be any difference in the lag time? And secondly, can you talk a little bit about the customer feedback now that you've announced the November acquisition? in terms of how important is it to them, the biodegradability as a functional characteristic, or the bio-based ingredients, you know, for labeling kind of, you know, for rights?
spk06: Sure. So I'll just use the old plan and the new plan, Lawrence, to try to outline the difference in timing. In the original plan, We were going to bring three fermenters online in 2023, and then another mid-2023, and then another three late 2024. And it wasn't really possible, at least on the same site, to go much faster than that just because of space and physical constraints of the number of people involved and the size of the equipment, all those kind of things. Now we can bring a Renovo facility online, you know, by early 24. So we can actually bring the similar volume online more quickly. And that is, you know, with us not having, you know, had a running start at Renovo. Like if it had been in the plan a year ago, I'm sure that we could have gotten it done faster. at the same time, you know, by mid 23 at the same time as the other three fermenters. So I think that that's a significant factor in terms of timing. But then also I just point to the difference in capex in my own experience. The cheaper something is, the easier it is to go get it built. So that's part of my thinking there in terms of relative speed. And then on the customer feedback, We think it's important to offer our customers optionality. They can kind of have their own choice. If they want to pay for the renewability, they can pay for that. If they don't, they don't have to. The important thing here is that either way the material is biodegradable, and that's really our mission is to eliminate plastic waste. So we're kind of leaving it with our customers, what they prefer, a renewable solution or non-renewable solution, but ultimately either way it's going to be biodegradable.
spk03: Fantastic. Thank you.
spk00: Next question, John Tanwentang with CJS Securities.
spk05: Yes, just a quick one about the possibility of licensing. I see you hired a – nice to hear that you hired a head of corporate development. I was wondering, you know, what the – does that improve the chances of licensing your process out to the different companies that are out there and possibly, you know, monetizing your IP quicker than just building factories?
spk06: Yes, it does, absolutely. We think that this technology is – very readily licenseable. It's a common catalytic conversion process and very easy, in our opinion, to hand off to a licensee. And additionally, you know, unlike, you know, my concerns in the past of licensing NODACs, where we would be creating a competitor, we feel that we can kind of carve out a position where we can license this material to people that do not want to use it in combination with other PHAs. And so it won't affect our markets directly at all. So we're really excited about that possibility, John. And we've got, and Debra is a fantastic add to the team. and somebody with tremendous experience.
spk03: Got it. Okay. Thank you very much.
spk00: I will now turn the call over to Stephen for closing remarks.
spk06: Thank you, everyone, for joining us today. I'm proud of our team and excited to continue our progress in transforming the bioplastics industry as we move into the remainder of the year. I would like to give a special thanks to our shareholders and partners for their continued support. We look forward to updating you on progress in the future.
spk00: This concludes today's teleconference. You may disconnect your lines at this time. And thank you for your participation.

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