Danimer Scientific, Inc.

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.

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.

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.