Danimer Scientific, Inc.

Greetings. Welcome to Dannemeyer Scientific's second quarter 2022 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 would now like to turn the conference over to Russ Dukowski, President of Corporate Finance. Thank you. You may begin.

Thank you, Operator, and thank you, everyone, for joining us today for our second quarter 2022 earnings call. Hosting the call today are Danimer's CEO, Steve Crossgree, and CFO, Mike K. Jost. 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. Danimer continued to make significant progress during the second quarter of 2022, and we believe that we remain on track to achieve our outlook for the full year and beyond. Our customer conversations and business development efforts have been productive, and our leadership position in research and development is bolstering our existing relationships while also creating new interest in our best-in-class biodegradable offerings. As a result, we are working hard to expand our capacity, which is tracking to plan. Today, I will discuss our second quarter highlights, recent business development updates, and the progress of our capacity expansion plans. As we have discussed over the past couple of quarters, every initiative we have undertaken aligns with our key strategic priorities shown on slide three. These priorities are, number one, expand our capacity to achieve substantial economies of scale through both organic production capacity in Kentucky and Georgia, and by leveraging third-party manufacturing and license agreements. We are also happy to announce that our Kentucky Phase II expansion started commissioning successfully in June, which I will discuss later in the call. Number two, lead with innovation to address a broad range of customer needs as we focus on leveraging our core competency of formulation and application development in addition to licensing agreements. An important example of this is our license and supply agreement with Chimera that we announced in May. Number three, grow customer partnerships and product volume commitments with global blue chip customers with the expectation of securing future demand for our increasing capacity. Number four, secure cost-effective inputs such as our research collaborations with institutions to evaluate attractive alternate feedstocks that can serve as an important input in our leading biodegradable formulations. Furthermore, we are developing capabilities for in-house production of key raw materials. Number five, attain favorable unit economics to enhance margins, first through increased capacity utilization at existing facilities, then ramping up production of Renovo. And number six, enhance team capabilities to support growth across manufacturing, business development, R&D, information technology, human resources, and finance. We remain focused on these strategic imperatives to drive our business forward. Turning to slide four, we continue to execute our growth strategy during the second quarter. We grew our PHA revenue by approximately 85% year-over-year, which now represents 61% of our total revenues, compared to just 29% in the second quarter last year. Additionally, we made further progress towards expanding our capacity and successfully started commissioning Kentucky Phase II operations in June. This was in line with our plan. Phase 2 operations are initially hitting the upper bounds of our expectations for individual assets, and we have found that we may have opportunities for CapEx savings in the future as we increase production. In regards to financing, we were pleased to be invited to submit a Part 2 application for a loan guarantee under the United States Department of Energy Title 17 Loan Guarantee Program. Although this invitation does not assure that we will secure the loan, It does represent further progress in our discussions with the DOE and reflects the loan program's office's determination that our project satisfies the technical eligibility requirements. While we continue to work closely with the DOE, we are also evaluating alternatives for financing our capital needs. Moving to slide five, as a reminder, our customers are primarily major blue chip multinational brands that have all made long-term commitments to make their plastic packaging recyclable, reusable, or biodegradable. As previously announced in May, we entered into an exclusive license and supply agreement with Chimera to commercialize biodegradable aqueous barrier coatings to be used on paper-based food and beverage applications globally. Importantly, this license and supply agreement lays the foundation for a new revenue stream where Danimer has already been cash flow positive from day one without significant CapEx investment, while further supporting the global commercialization of this material. Since our announcement of this collaboration in May, our relationship with Chimera remains strong. We are meeting necessary development goals and expect to have materials available for market testing by the end of this year. We have also continued to make great R&D progress with Mars Wrigley and note as a recent update that the packaging for Skittles is passing all of their internal tests and encouraging development. While we are advancing projects with our existing multinational developmental partners like Mars Wrigley, PepsiCo, and numerous others, we are also focused on discussions with major quick service restaurant chains. We spoke to you about our relationship with Starbucks last quarter, which is progressing well. Bodegradable Nodax-based straws have been well received in Starbucks stores and are reaching millions of consumers. We are also excited to note that we are currently in discussions with and providing sample products to a total of five of the top ten largest quick service restaurants in the world. Separately, our converter partner Genpak is now testing takeout containers at select locations and remains on track to launch their Gen Zero product line in the fourth quarter of this year. Another converter partner of ours, Columbia Packaging Group, recently started selling Nodax-based straws to HEB, the largest grocer in the state of Texas, for their in-store dining, and also now sells the straws to HMS Host, the primary food service provider for almost every airport in the country. Furthermore, in May, our customer, Plackers, launched the first-ever 100% biodegradable dental flossers utilizing Danimer's Nodax. Since pioneering the first dental flosser over 45 years ago, Plaquers has been at the forefront of oral care innovation for nearly half a century, and we were honored to partner with them on their initiative to provide a biodegradable alternative for this everyday household item. In regards to potential new application formulations, we are currently in discussions with a packaging supplier for the potential development of items such as protective biodegradable plastic packaging for shipping materials. On the regulatory side, Additional legislation banning traditional plastic use has also helped fuel interest in our solutions. Canada, India, and the State of California have each recently announced legislation against types of traditional plastic use, with all having certain exemptions for biopolymers, representing a positive tailwind for our industry. Additionally, Dannemere has been working to engage and educate local, state, federal, and global governments on NODAC's PHA as an alternative to traditional plastics. As I have mentioned in the past, timing of customer launches is the most variable factor as it relates to the shipment of our products. There are really two forces currently at work in this complex environment as it relates to customer readiness for our products. One is interest in our solutions, which is higher than it's ever been. On the other hand, many existing and potential customers still face supply chain bottlenecks, inflation, and overall economic concerns that impact the timing of orders and deliveries. As an example, several straw converters are sold out and some have had supply chain issues delaying new equipment that they require to increase their own capacity. While these factors may continue to impact customer timelines in the near term, we currently expect several significant customer product launches starting as early as Q4 and running into 2023. In total, these product launches will collectively require an amount of our PHA-based product that is well in excess of our Kentucky capacity. It's important to remember those launches show up in our results gradually, largely in step with the typical cadence of a customer's new product rollout. So we expect to see an initial benefit to our volume next year, followed by a more pronounced step up in shipments as we move into 2024. Moving to slide six, looking at our facility expansions, we were pleased to start commissioning phase two of the Kentucky facility during the second quarter. Based on how we operate the facility and report information, I would like to note that phase one and phase two outputs moving forward will be communicated as a single entity, the Kentucky facility. The facility now has an annual nameplate finished product capacity up to an expected 65 million pounds, which as a reminder, includes both PHA and other compounded biodegradable materials. As I mentioned earlier, Based on early performance at the expanded Kentucky facility, the new fermentation yields are higher than we previously anticipated and have exceeded our initial expectations for both pounds produced and time required. While we are still evaluating potential future time and cost savings from these efficiencies, we believe that some of the value engineering we have been able to perform has provided opportunities for additional cost savings down the road at the Kentucky facility. Furthermore, Dannemer has now demonstrated the engineering, procurement, and construction management skills necessary for future startups, including the Georgia Greenfield Plan. Turning to our Greenfield facility in Bainbridge, Georgia, on slide seven, as we discussed with you last quarter, while we are committed to instituting this critical capacity for growth, we remain nimble and flexible as to the pace of capital spending, and we have slowed spending on this project in the near term to be prudent with cash. I would note, however, that we are encouraged by the learnings from our successful expansion in Kentucky, which should allow for further value engineering to maximize the efficiency of the Greenfield facility. Based on our current plan, we continue to expect the Greenfield facility to start up in 2024. As it relates to our operations at Dannemere Catalytic Technologies, Based on our development work to date, we're even more confident in the long-term opportunity to improve our cost profile through combining Renovo with Nodax at commercial scale. Additionally, our discussions are progressing with several major ethylene oxide producers in the U.S. Gulf Coast for supply arrangements, site co-location, and other ancillary agreements related to the manufacturing of Renovo products. We are also excited about the progress we are making in discussions with several potential partners about licensing the renovo technology. With that, let me turn the call over to Mike for an update on our financial results. Thank you, Steve.