Danimer Scientific, Inc.

Greetings. Welcome to the Danimer Scientific 2023 first quarter earnings call. At this time, all lines are in the listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, May 10, 2023. I would now like to turn the presentation over to Mr. James Polzinski. the company's investor relations representative.

Thank you, Operator, and good afternoon to everyone, and thank you for joining us today for Denimer Scientific's 2023 First Quarter Earnings Call. Leading the call today is Steve Crosscreed, Chairman and Chief Executive Officer, and Mike Hajost, Chief Financial Officer. I'd like to note that there is a slide deck that accompanies today's discussion, which is available on the investor relations section of our website at dannemerscientific.com. I'll call your attention to the company's safe harbor language, which is published in our SEC filings and on slide two of the presentation I just referenced. On today's call, we may discuss forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Forward-looking statements include, among other things, statements regarding future results of operations, including margins, profitability, capacity, production, customer programs, and market demand levels. Actual results could differ materially from what is expressed or implied in our forward-looking statements. The company assumes 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 within the meaning of SEC Regulation G. We believe these non-GAAP measures have analytical value, but note that they should be taken as an additional measure of performance to GAAP results. We have provided reconciliations for non-GAAP financial measures to the most comparable GAAP financial measures in our earnings release and our presentations. Thank you, and it's now my pleasure to turn the call over to Steve Crossgree, Chairman and Chief Executive Officer of Denimer Scientific.

Thank you, James. Good afternoon, and thank you for joining us to talk about our progress thus far in 2023. When we reported our 2022 year-end results, we were just a few days shy of completing our first quarter, and as you might anticipate, our quarterly results are in line with our expectations. They show the pressure of a timing shift in top-line revenue, which impacted gross profitability, but that temporary situation is now behind us. What's also clear in the first quarter numbers and is expected to remain clear in future quarters is the progress we've made in controlling our operating costs. We continue to expect, with the impact of new commercial opportunities, to accelerate our growth through the remainder of the year. We are gathering momentum in the business, harnessing our research and development to drive new solutions into the market, and growing in confidence about the path in front of us. We have gained additional and specific visibility into the levels of demand associated with a discrete set of near-term commercial opportunities. If captured in full, this business would require the lion's share of our remaining production capacity. We have a solid strategic and competitive position to secure those programs with uniquely capable material and ready capacity. We are increasingly confident that we will finish 2023 on a strong pace. I'd like to walk through a few recent operational and strategic highlights that should demonstrate why we feel that way. I'll start by reviewing some important advances in our customer and product portfolio. While it is premature to make any customer or program announcements, we are energized about the near-term opportunities that are materializing in the quick service restaurant channel for straws and for cutlery especially, but also in the cup category with our coating materials. As we speak, our product is in a multi-store test for straws with a new major QSR chain with thousands of locations in the United States. We anticipate a successful test will lead to a wider rollout in the third quarter. Additionally, we are in the late stages of an opportunity with another major QSR chain for straws, also numbering in the thousands of locations in the United States alone. Further, we are excited to be moving quickly forward with our biodegradable cutlery resin. As we announced last quarter, we were pleased to capture, in coordination with Hobby, cutlery for an important snack line with Zespri. We made the first shipments to execute that program at the end of the first quarter and believe that a fully biodegradable solution for this high visibility application will prove to be brand enhancing. We are also pursuing a large and high priority opportunity in the cutlery market with a major QSR that we expect to begin shipping to in early 2024. We believe that the unique environmental benefits of our PHA-based resins are becoming increasingly visible, and we were honored to be invited to ring the closing bell of the New York Stock Exchange on April the 17th to help recognize the importance of Earth Day. In conjunction with that event, we announced that we have successfully developed, in partnership with Total Energy's Corbion, a new engineered resin for the manufacture of single-use coffee pods. That material, which is used in an injection molding process, has been in development for a little over two years. While any new resin we develop benefits from decades of research into various blends, this is a challenging material to formulate given the combination of requirements for heat tolerance, barrier properties, and stringent biodegradability standards required within the EU market for this product. Importantly, we have experience in this category and currently have a PLA-based material used for the manufacture of coffee pods for a U.S. brand. We are pleased to have received certification for this new material from TUV Austria for home compost and are currently in testing with multiple potential customers. While somewhat obvious, this means that our material biodegrades safely and quickly in home as well as industrial composting and can eliminate a tremendous amount of waste from the environment. While the EU legislation is still a bit into the future, we expect that demand for our material may be strong even in advance of the legislation's in action as major suppliers seek to pre-position themselves to avoid potential disruption to their business. I'd like to turn to cup coating materials, which provide a barrier to contain liquids. In the aggregate, this is a significant application for single-use plastics. Currently, paper cups achieve functionality with a petroleum plastic liner, making them essentially non-recyclable. Our PHA-based biodegradable coating materials can change that as an important customer of ours is demonstrating. We were very excited to see WinCup launch a new paper cup product with a Nodax-based coating under its distinctive Fade brand. Fade is an increasingly meaningful and visible brand in an otherwise commodity-oriented set of categories. We think that is a powerful statement to the market and we're proud to provide the unique PHA-based resins that enable their products. While we share a vision for the future with many customers, we think what WinCup is doing in the market speaks exceptionally well to that mission. As we look toward the second half of the year, we're confident that our Kentucky manufacturing plant is capable of operating at a high level. It has consistently performed at or above all requested throughput targets. Further, we are working toward improved product quality and process efficiency, all of which should benefit our margins. In closing, I'll just note that we have no information to provide regarding the Department of Energy's process. We will communicate any developments as soon as the DOE informs us of our status. Now, I'll turn the call over to Mike Hajos for discussion of our first quarter results.