Danimer Scientific, Inc.

Greetings and welcome to Dannemere Scientific fourth quarter and full year 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Russ Zukowski, Vice President of Corporate Finance. Thank you. You may begin.

Thank you, Operator, and thank you, everyone, for joining us today for our fourth quarter and full year 2021 earnings call. Hosting the call today are Danimer's CEO, Steve Crossgree, and CFO, Jad Dowdy. Mike Hajost will also be joining 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 danimerscientific.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. Reconciliations to the most comparable GAAP financial measures 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. I am proud of the focused execution by our team and our many accomplishments during 2021 as we conclude our first year as a public company. In 2021, we progressed further on our journey to profitably deliver leading biodegradable packaging solutions and products as we dramatically increased customer deliveries to generate record fourth quarter and full year 2021 revenue. As we look back at our achievements for the year, I would like to note that every initiative we have undertaken as well as all of our current initiatives aligns with our strategic priorities. As shown on slide three, these priorities drive us to, number one, expand our capacity to achieve substantial economies of scale, which is not just about increasing organic production capacity in Kentucky, Bainbridge, and beyond, but we're also evaluating third-party manufacturing and licensing agreements to preserve our available capital for key strategic allocations. A good example is the potential partnership between us and Chimera developing solutions for aqueous coatings that our customers clearly want without us having to invest all the capital needed to drive this growth initiative. Another example of executing against this strategic priority is our recently announced Hyundai Oil Bank collaboration, which could be a capital-light approach. Number two, lead with innovation to address a broad range of customer needs. which means leveraging our core competency around formulation and application development. This will be done through our proprietary technology and experienced team of researchers and scientists and includes the pursuit of new R&D development and licensing agreements with customers. Number three, grow customer partnerships and product volume commitments as we continue to negotiate development and supply agreements with global blue-chip customers to secure future demand for our increasing capacity. We have several exciting discussions underway which could give us orders fully in line with our ambitious long-term growth objectives. Number four, secure cost-effective inputs. While canola remains the most attractive route today and we are engaged in managing the price of our contracts, we also continue to explore the viability of lower-cost alternative feedstocks. The Total Corbillon collaboration will provide us with enough cost-effective PLA inputs for our PHA formulations as the business scales. Number five, attain favorable unit economics to enhance margins, first through increased capacity utilization, then ramping up production of renovo following our November acquisition. Separately, we are continually working to reduce utility costs and chemical usage, and our Chevron-Phillips collaboration could represent a step change for renewable manufacturing costs. And finally, number six, enhancing team capabilities to support growth. It is imperative that we increase the knowledge and capabilities of our leadership team as we grow in size and complexity. This includes increasing the overall experience levels in manufacturing, business development, R&D, information technology, and finance, as well as other areas to support global growth. Examples include the additions of Deborah McRonald as Chief Corporate Development Officer, Keith Edwards as Vice President of Business Development, Brad Rogers as Vice President of Technology Development, R&D, and Mike Hajost, who will be our CFO upon the filing of our annual report on Form 10-K and who is with us on the call today. Everything we have worked on and communicated during the last year and everything we are focused on going forward can be connected to one or more of these strategic priorities. We hope this provides you with a clear view of our strategic vision as we move into 2022. Dannemer is dedicated to creating a highly profitable business that supplies the growing unmet need for biodegradable polymers and addresses the global issue of plastic waste. Moving to slide four, looking at our facility expansions, we remain well positioned to substantially scale production of NODACs in 2022. At phase one of our Kentucky facility, We made significant progress in scaling up production levels as the year progressed. Most of our step functions and downstream processing continued to operate on average at nearly twice the speed required, and in the first half of December, we were able to meet our goal of testing phase one operations at full capacity. In the second half of December, we had a small fire which did not impact our ability to supply customer needs. The incident had the silver lining of leading us to perform additional safety evaluations and make some process improvements which will benefit from in all of our facilities. Having tested the plant at near maximum operating rates both in December and February, we are now comfortable we can run this plant at full capacity on a go-forward basis. Recent operations suggest that we may be able to operate above 100% of nameplate capacity at some point in 2022. Looking at Kentucky Phase 2, we are excited to report that construction progress remains ahead of schedule, and as you can see from the pictures on the bottom of the slide, exterior construction is nearly complete. We continue to expect Kentucky Phase 2 to come online in just a few months. As we have discussed in the past, the completion of both phases will collectively bring our annual nameplate finished product capacity to an expected 65 million pounds, which, as a reminder, is PHA plus other compounded degradable materials. The completion of this expansion will be an exciting milestone for our company, and we expect a year one benefit to our operating results. For the full year 2022, we expect the Kentucky facility to have a favorable impact to adjusted EBITDA as we increase capacity and drive operational efficiencies at the expanded facility. Turning to slide five, We are showing a schematic of the site of our new state-of-the-art greenfield facility in Bainbridge, Georgia. As we discussed with you last quarter, we accelerated our groundbreaking to occur last November in order to retain the contractor team that did such a great job on our Kentucky expansion. We also acted prudently in the current inflationary environment to order several key pieces of equipment and materials in advance of expected price increases. Having taken these prudent initial steps, we still face uncertainty with respect to key equipment delivery delays and inflationary pressures. For these reasons, we remain committed to putting in place this critical capacity for growth, but we plan to remain nimble and flexible as to the pace of capital spending on this project. Our current intention is to moderate spending until we are comfortable that outside factors won't cause us a delayed startup, thus preserving cash. This can also provide us with the opportunity to capture and better apply learnings from the Kentucky expansion and the pilot plan. In addition, it can allow for further value engineering to maximize the efficiency of the plan and potentially reduce project costs. We will also look to develop a plan to quicken the spending if supply chain issues dissipate and customer contracts allow us to pass through enough costs to justify accelerated spending. The diagram we have provided on slide six provides a view of the opportunity from all of the capacity expansions we currently have underway. Upon completion of Kentucky Phase II and the Greenfield facility, we expect to have overall PHA finished product nameplate capacity of approximately 190 million pounds. Our acquisition of Novomer was a prime example of our ability to identify attractive opportunities that are expected to drive down production costs over the long term, help us achieve scale, and provide further unique product offerings. As shown on slide 7, when including the impact from a future Renovo plant sized to produce 168 million pounds of Renovo, we have line of sight to 330 million pounds of PHA-based resin out of our Kentucky and Georgia facilities, which represents a nearly 75% increase in this product, along with 60 million pounds of standalone Renovo. As it relates to our plans for a renovo plant, we are in discussions with several major ethylene oxalene producers in the U.S. Gulf Coast for an EO optic agreement, a site colocation agreement, and other ancillary agreements related to the manufacturing of renovo products. While we are focused on building out our capacity and operations to serve the increasing demand for PHA, our ambition also includes partnering with others willing to commit their capital rather than ours to build out capacity that would be mutually beneficial. In January of 2022, we announced our collaboration with Hyundai Oil Bank to help drive global growth of PHA. This represents a future opportunity to partner with a major player in Asia who will bring their own capital to the table and speed up market entry in the region. We are grateful for their partnership and support on this initiative. Now, turning to our customer and business development updates, I will speak to slide eight. We are expanding our market share by developing biodegradable products that leverage our unmatched application development expertise, and we have increasingly found that customers are looking for complete biodegradable systems as alternatives to the traditional plastic products they sell. I would also like to note that while customer product launch timelines are always subject to change, we continue to focus on the factors that are in our control to serve customers in a timely manner. The team at Mars Wrigley reports that they are happy with the progress in our partnership to develop an innovative home compostable Skittles bag and are exploring several other applications for conversion. We also continue to make progress with our developmental partners like PepsiCo, Bacardi, and numerous others. We are very excited to confirm that Starbucks has launched Nodak's base straws nationwide to supply biodegradable straws in their stores across the United States as of September 2021. As you can imagine, this is a significant milestone for us and the industry as a whole. Additionally, our converter partner, Genpak, plans to launch NODEC-based home compostable takeout containers this year. Also, major big box retailer Target has initiated sales of biodegradable fade straws sold through our converter partner, WinCup. Fade Straws have also been supported by Yellowstone National Park and the National Football League and other professional sports associations. In fact, SoFi Stadium, the host of Super Bowl 56, has been using Fade Straws since September. Mercedes-Benz Stadium, home of the Atlanta Falcons, the Patriots' Gillette Stadium in New England, TPC Sawgrass, and the 2021 PGA Championship in Kiowa Island, South Carolina, have also all utilized fade straws as an alternative to traditional plastics. You can also find our Nodak straws made by WinCup in retailers and restaurants such as CVS, Walmart, Burgerville, Bonefish Grill, Tropical Smoothie Cafe, Dunkin Donuts, and numerous other restaurants across the country. Our partnership with WinCup has been a great success thus far. We have also made exciting advancements with products sold through our converter partner, Columbia Packaging Group. Columbia Packaging is currently supplying Nodax-based e-commerce mailers and shopping bags for the fashion brand House of LR&C, owned by Russell Wilson and Ciara. CPG is also a sustainability partner of the Kansas City Major League Soccer team, Sporting KC, who supply PHA shopping bags, apparel bags, and straws. Looking at slide nine, I would like to draw your attention to our inaugural ESG report, which we published in February. Our stakeholders are well aware of our mission to develop sustainable alternatives to traditional plastic, and this report provides additional details on our ESG efforts across Dannemere, from supplier and customer partnerships to hiring initiatives. Overall, we expect that our ongoing ESG initiatives and reporting are another important way to align our interests with those of our customers and shareholders that will contribute to maximizing long-term shareholder value. Before I turn the call over, I'd like to take a moment to discuss our previously announced CFO transition. Michael Hajos joined us in February and will be named Chief Financial Officer upon the filing of our annual report on Form 10-K. Mike brings considerable experience in managing global growth and profitability having led the finance and investor relations functions of several large companies across a variety of industries. His skills and perspectives will be instrumental in helping us maintain our leading position as a bioplastics manufacturer during this period of industry growth, and I'm thrilled to welcome him to Dannemere. I would like to thank Jad for his invaluable guidance throughout Dannemere's journey from a startup to a public company. Jad has worn many hats over the years and has helped us build Dannemer into what it is today. I'm grateful to have his continued support as we execute our growth initiatives. He will continue to serve as a valued member of our team and will move into the role of Senior Vice President of Financial Planning and Analysis next month. With that, let me turn the call over to Jad for an update on our financial results. Thank you, Steve.