Origin Materials Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 9, 2023

There are 8 speakers on the call.

Operator

This is the conference operator. Welcome to the Origin Materials Third Quarter 2023 Earnings Call. As a reminder, all participants are in a listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Ashish Gupta, Investor Relations.

Operator

Please go ahead.

Speaker 1

Thank you, and welcome everyone to Origin Materials' 3rd quarter 2023 earnings conference call. Joining the call today from Origin Materials Our Co CEO and Co Founder, John Ditzel Co CEO, Rich Riley and CFO, Matt Plavin. Ahead of this call, Origin has issued its Q3 press release and presentation, which we will refer to today. These can be found in the Investor Relations section of our website at originmaterials.com. Please note on this call, we will be making forward looking statements based on current expectations and assumptions, which are subject to risks and uncertainties.

Speaker 1

These statements reflect our views as of today and should not be relied upon as representative of our views of any subsequent date. We undertake no obligation to revise or Publicly release the results of any revision to these forward looking statements in light of new information or future events. These statements are subject to a variety of risks and uncertainties could cause actual results to differ materially from expectations. For further discussion on the material risks and other important factors that could affect our financial results, Please refer to our filings with the SEC, including our quarterly report and Form 10 Q filed on November 9, 2023. In addition, during today's call, we will non GAAP financial measures, which we believe are useful as supplemental measures of Origin Materials' performance.

Speaker 1

These non GAAP measures should be considered in addition to and not as a substitute for Or in isolation from GAAP results, you will find additional disclosures regarding the non GAAP financial measures discussed on today's call and our press release issued this afternoon and are following with the SEC, each of which is posted on our website. A webcast of this call will also be available on the Investor Relations section of our company's website. With that, I'll turn the call over to John.

Speaker 2

Thank you. Good afternoon and thank you for joining us. Before we begin, I'd like to welcome Matt Plavan, Origin's new Chief Financial Officer. I'm confident Matt will be a tremendous addition to the team. Matt brings 16 years of executive level experience within publicly traded technology driven companies operating in complex business environments.

Speaker 2

He has a proven track record of leading initiatives to fund the commercial scale of obstructive technologies into well established industries. As a CFO, We have successfully led all finance functions including equity debt and strategic partner capital acquisition, long range project budgeting, forecasting and private reporting. We look forward to working with Matt. Welcome. I'll start by reviewing our recent success initiating commercial scale production at OriginOne.

Speaker 2

We believe that this is a historic milestone not just for Origin, but for Renewable Manufacturing more broadly. I will then provide a brief update on Origin 2. Next, I will turn it over to Rich, who will provide a commercial update and Matt will conclude with the financial overview. In early October, we announced the commencement of production at Orchard 1, Our first commercial scale plant and the first plant of its kind. As a founder, I have never been prouder of our team.

Speaker 2

OriginOne scales up our core technology for converting sustainable wood residues into intermediate chemicals including CMF, HCC and oils and extractors. The scale up of a new fundamental chemical technology like our platform Not to be taken lightly and we are thrilled to have reached this moment. We are very pleased with our plant's initial performance. The plant has worked as close to flawlessly as we could have hoped. Producing at commercial scale entails far more than flipping a switch.

Speaker 2

The preparation is extensive. The moment the plant came alive and made its first product was unforgettable. The Origins team did it despite a pandemic, a snarled global supply chain, some occasionally horrendous weather, high inflation and many other challenges. And they did it with uncommon poise and professionalism. Congratulations, Origin team.

Speaker 2

You got us to the biggest inflection point in our company's history. As an operating chemical plant, OriginOne proves our technology scalability, a key milestone for advancing our strategic partnerships. We are more excited than ever to deploy our platform and begin to meet the growing demand for our technology and products. Having produced CMS and HTC at OriginOne, We are in the process of sending materials to customers and strategic partners. For CMF, this includes a specialty chemical company and a major surfactants company.

Speaker 2

For HTC, this includes several major carbon black companies for use in green tires and other applications. Major tire Rubber companies and specialty carbon users spanning plastics, batteries, pigments, inks, coatings, dispersions and other applications have expressed interest in our HDC produced at OriginOne. Our process at ORGIN 1 is part batch, part continuous. One benefit of our ORGIN 1 system is that we expect a more modular configurable setup to allow us to adjust operating parameters more easily than if we were running a fully continuous process. For a closer look at Orchid 1, I encourage you to watch our latest video Released this afternoon and available on our website, it shows you the plant, provide the first look at CMF and HGC produced on-site, Let's you get to know our team and walks you through taking samples from our CMS storage tanks for analytics and testing.

Speaker 2

We're proud of our OriginOne operation which is doing the hard work of running a plant while creating a culture of operational excellence and maintaining safety as a core value. They are doing an exceptional job. Looking ahead, we aim to ramp up production and vary feedstocks over the coming months. For Origin 2, we continue to advance the project with an appropriate focus on We're happy to report that many of our strategic partners have leaned in and asked how they can help us bring world scale plants online as soon as possible. This could include co development with 1 or more strategic partners.

Speaker 2

We look forward to providing additional detail on these less capital intensive strategies for building world scale plants our February 2024 clinics call. We continue to expect that Phase 1 of Origin 2 will be cash flow positive once operating at capacity. The next step for Origin 2 is a revised FEED or front end engineering design package. We will periodically update on FEED progress and project costs As appropriate based on guidance from our engineering procurement and construction partners and relevant macro indicators. Regarding product development, continue to find what we believe are higher value applications for each of our product revenue streams.

Speaker 2

For example, we expect the market for the polymer PEF to quickly emerge in as an adjacent value add market to the PTC market. We are developing high value HCC applications beyond carbon black versus sustainable tires, Such as batteries and pigments, we are also focusing on developing fuels from the first phase of Origin 2 to generate profits from our oils and extractor stream. With that, I will turn it over to Rich, who will provide a commercial update.

Speaker 3

Thanks, John. I would also like to add my welcome to Matt, who we are very happy to have on board. First, demand for our products remains strong. Inbound inquiries remain broad and inclusive of our higher value products. Our over $10,000,000,000 in signed offtake agreements and capacity reservations reflects the profound level of alignment and incentive for bringing our technology platform to the market.

Speaker 3

The world is struggling to decarbonize the traditional routes to making products across $1,000,000,000,000 addressable market. Most are trying to find solutions within the confines of what they have done historically. With the freedom to operate outside those confines, we have developed new pathways that meet the needs of the low carbon future. They are low cost, Renewable and upper performance at least identical to if not better than incumbent fossil based solutions. As we move ahead and as John alluded to, We are laser focused on responsibly managing our cash flow.

Speaker 3

We see a great future for Origin's technology and the vast range of products that we can bring to market. We also understand that what we are doing like many hard science efforts is challenging work. As such, we are taking great care To responsibly manage our cash, so that we can navigate the road ahead in a way that best serves our shareholders. As we advance our Origin 2 project, We are at the same time implementing a rigorous cash conservation program. We expect this program to balance our need to reach EBITDA with the need to maintain our forward momentum.

Speaker 3

Under this program, we are prioritizing revenue generating projects with the greatest near term contributions to cash and seeking opportunities to defer research expenses or other programs targeting longer term results. These actions are consistent with feedback that we've heard from our investors with whom we have spent substantial time this quarter. Opportunities to generate or conserve cash include funded joint development agreements. Our JDA program continues to gain momentum with more funded programs in our pipeline than ever. Other cash generating opportunities include continuing to apply for government grants and related programs, Managing our expenses and developing other unique origin technologies and products such as our caps and closures business.

Speaker 3

We are currently engaged with many of the world's largest consumers and producers of caps and closures by market share and we are in advanced Discussions with a few of the leading machine manufacturers in the world for our technology. Just last month, we reached another milestone in caps and closures commercialization. We ran our 1st automated production line trial with encouraging results. We're very excited about these initiatives and we look forward to providing further updates in the future. Our engagements with some of the world's leading companies to deploy our technology platform continue to accelerate.

Speaker 3

Since becoming a public company, have fields of interest from multiple parties who recognize the unique value of our platform. As John mentioned, we are now seeing many of our strategic Partners ask how they can help us bring world scale plants online as fast as possible. With OriginOne having commenced operations and started making products, This interest has only increased. Our potential licensing and commercial partners are world class and include large well capitalized market leaders. Achieving productive mutually beneficial arrangements is a priority and one that we expect will be well received by the market.

Speaker 3

We look forward to providing updates as appropriate. Before I turn it over to Matt, I will mention that this quarter we were pleased to announce the funding award from Biomate to advance U. S. Department of Defense sustainability goals. As part of our project, we will be providing sustainable carbon black and polymers to aid the federal government in fleet decarbonization.

Speaker 3

We are grateful for the award and see it as a positive validation of our attractiveness as a funding target for grants and a further demonstration of alignment and the value we offer with respect to Federal decarbonization goals. As we look ahead, we remain committed to bringing our sustainable products to market, while maximizing shareholder value. With that, I will turn it over to Matt to discuss Finanthus. Thanks, Rich, and good afternoon, everyone. First, let me say how pleased I am to have joined Origin.

Speaker 3

Rarely, if ever in a career, does one have an opportunity to be part of an industrial revolution, Much less lead 1, Origin is clearly leading the way in the transformation from fossil fuel based materials manufacturing To decarbonize materials manufacturing, Origin's novel biomass conversion technology is truly game changing And a vital element in our fight against climate change and providing the better performing materials that the world needs To have brought such a novel and complex technology online and already be producing product at OriginOne in such a Short time frame is a remarkable technical achievement and it's estimate to an exceptional team. Most of all, I look forward to helping this team execute The forward plan for exceptional shareholder value creation. With that said, let me provide some commentary on our results. With regards to revenue, we reported our highest quarterly revenue thus far, a total of $7,100,000 as compared to no revenue in the prior year period. These were mostly comprised of supply chain activation revenues in preparation for our OriginOne scale up.

Speaker 3

The remaining revenues were from JDA agreements. 3rd quarter operating expenses were $12,900,000 as compared to $9,700,000 during same period in the prior year, the difference driven primarily by increases in general administrative expenses. Net income was $30,900,000 for the Q3 compared to net income of $8,300,000 in the same period prior year. Included in the $30,900,000 of net income was approximately $28,000,000 more in gains from increases in the fair value of our warrant and earn out liabilities than in the prior year net income. And that's illustrated and our reconciliation of GAAP to non GAAP results included in the earnings release.

Speaker 3

Turning to our balance sheet. Origin ended the 3rd quarter with 189 point $5,000,000 in cash and cash equivalents and marketable securities. Regarding Origin 2, as Rich referenced earlier in the call, The expected mix of funding for project development is evolving with increasing interest from strategic partners. Turning OriginOne's operational scale has catalyzed interest From well capitalized strategic partners to participate in scaling our technology in order to better secure access and priority regarding this essential capability. We expect to be able to provide more insights during our February 2024 earnings call.

Speaker 3

I will conclude with our 2023 outlook. Prioritizing near term cash generation, Origin intentionally scaled back Its supply chain activation business during the quarter. Although this business has long term strategic value, it has low short term margins and high working capital requirements. In addition, some joint development programs we previously projected to close in 2023, we now project to close in 2024. Therefore, we are expecting 2023 revenue of $25,000,000 to $30,000,000 versus $40,000,000 to 60,000,000 As a result of this reprioritization, we expect a beneficial impact on EBITDA loss improving our guidance range to $45,000,000 to $50,000,000 from $50,000,000 to $60,000,000 Lastly, We intend to provide 2024 guidance on our next earnings call expected to take place in February.

Speaker 3

With that, I will turn the call back to John for closing remarks.

Speaker 2

Thank you, Matt. I would like to briefly remind everyone what a massive opportunity our technology represents. Our aim is profound To change how the world makes its materials, including some of the basic ingredients found in nearly everything. Doing so will improve the performance of materials across many sectors, Adding new functionality to the existing chemical industry as well as eliminate a major source of carbon emissions today and thus take a step towards preserving the future of our planet. Our technology is unique and strongly protected by patents.

Speaker 2

The magnitude of the opportunity with an over $1,000,000,000,000 addressable market It's stunning in its scope and the level of alignment between customers, governments and strategic partners in bringing our materials to market. Scaling up our technology as we have done with OriginOne is a win not just for Origin, but for all these stakeholders deeply committed to bringing Origin's solution to market. In closing, I'm incredibly proud of our team's continued hard work and want to congratulate all of those who made the scale of our technology at OriginOne a reality. Thank you to everyone who has put tremendous effort into building and now operating our first of its kind plant. I would like to thank our customers for their commitment to Origin, our team and our partners for

Operator

Thank And our first question will come from Frank Mitsch with Fermium Research.

Speaker 4

Hey, good afternoon, John and Rich, Nice to meet you over the phone, Matt, and congrats on the commercial operations on OriginOne. I'd like

Speaker 3

to drill a little bit

Speaker 4

more into OriginOne and how it's operating and so forth. I think you mentioned that you'll be testing out various feedstocks With the unit operating both on a batch freight basis and on a continuous operation basis, you speak to the diversity of feedstocks that you've been able to run, I assume successfully, since it's been up and running? And can you talk about How the yields are turning out relative to your initial expectations?

Speaker 2

Yes, sure. Hey, Sykes. Thanks for the question. And we've we know there's a lot of issues around this. So first of all, we haven't been running a lot of different feedstocks yet.

Speaker 2

We're really Still running on starch. We want to make sure that we're we understand the performance of each individual piece of equipment on starch We start transitioning to the other feedstocks. But we're so far we've seen really, really excellent performance at OM-one. You asked about yields in particular. I think that's an area where we were pleasantly surprised by the performance of the plant so far.

Speaker 2

We really often with these plants you 1st time plant like this you would anticipate that maybe your yield performance pretty subpar from the very beginning and then you sort of learn how to ramp it up hopefully quickly. What we saw was even from the very beginning, We saw really excellent yield performance. We're not ready to talk about sort of overall productivity metrics for the plant yet. We want to get there. We just haven't had enough data yet.

Speaker 2

But so far, really pleased, although, as I said, still running on starch, Haven't transitioned over to biomass yet.

Speaker 4

Got you, got you. Very helpful. And if I could drill down also into the sales Guidance for 2023, taking it down somewhat you mentioned on the supply chain activation and some joint development programs Pushing out into another year. But I want to talk about the and you also mentioned that you're in process of delivering materials That you're producing off of the starch base. And so where are where do you stand in terms of the timeline for approvals by The various customers that you're sending the materials to, meaning product specs and so forth.

Speaker 4

And when are we going to be Looking at the top line being influenced by the delivery of those on spec materials.

Speaker 3

Hey, Frank, it's Rich. Great question. The as we've said before, OriginOne gives us an incredible capability to deliver Large scale samples to our many customers. And so getting meaningful quantities of CMF and HTC Into the hands of multiple customers drives our near term funded JDA revenue, which is the principal way that these materials will be sold In the near term. And so as we said in the script, we're already sending materials to customers and expect that to only continue and ramp as we go forward.

Speaker 3

So That will be a meaningful driver of our revenue in the short to medium term.

Speaker 4

So, Rich, if I could just follow-up, what are the customers saying in terms of The product quality for the materials that you've already sent them. I mean, I'm hoping that you're going

Speaker 3

to say it's on spec and they're ready for us to produce more etcetera, But I'd rather hear you say that rather than me put words in your mouth. Yes. I would say so far so good in terms of The materials we're producing being what we expected to produce and being what our customers expected us to produce. So I So we've had no surprises and everything is going very smoothly.

Speaker 2

Okay, great. Thank you so much.

Speaker 3

Thank you.

Operator

And our next question will come from Steve Byrne with Bank of America.

Speaker 5

Yes. Thank you. Would you characterize the level of interest that you're getting from partners to be more Focused on Origin 2 and the product slate you are targeting there, the FDCA derived products? Or would you say it's more from interested parties to license your technology and build their own plants? And could this latter bucket actually achieve commercial scale faster because This would be an existing plant.

Speaker 5

They would already have a lot of the infrastructure that you would be building from scratch at Origin 2. Your thoughts on that?

Speaker 3

Sure. Thanks for the question, Steve. I would say it's really all of the above. So Our customers are very understanding that scaling a new platform technology is challenging and they also understand that they really have few alternatives For scaled solutions. And so the reaction we get from our customers is them leaning in and saying, how can we help?

Speaker 3

How can we help you guys scale? And so that's from customers. And then from potential licensing partners, we'll call them, It's similar in terms of their continued interest in working with us to scale our technology. And we even now have customers Wanting to get involved in those conversations to help partners scale our technology. And so think of those partnerships as They can take a wide variety of structures, but at the core we're providing the technology, which we spent 12 years developing This highly proprietary technology platform that can go on to make all kinds of things into a $1,000,000,000,000 TAM and partners have a variety of things.

Speaker 3

Some of them have Feedstocks. Some of them have brownfield sites that could be highly relevant. A lot of them have construction and capital projects expertise. Some of them have Capital and are looking to deploy capital against these kind of goals. And so really a wide range of opportunities for us to bring our technology to market at scale.

Speaker 5

And if you could get funding for Origin 2 that was for Bio PET, would you consider going back down that Pat, I know you have made a change in your focus for Origin 2, but just wondering if you would consider those alternatives?

Speaker 3

Well, we're absolutely open minded and realize there's a lot of different permutations that could help bring our technology to market. I mean, we are very excited about FPCA and I would say continue to find more and more reasons to be excited About that PCA as we develop that product capability. But we're also very committed to paraxylene and PET, Which is a massive market and there's enormous interest and demand for it. So we're looking at a variety of options to bring both products to market At scale.

Speaker 5

Okay. Thank you.

Speaker 3

Thank you.

Operator

Your next question comes from John Roberts with Mizuho.

Speaker 5

Thank you. You were having some problems with some of the gauges and measuring equipment I think in OriginOne. Have you solved all that?

Speaker 2

Yes. So with a plant like Origin 1, excuse me, and by the way, hey, how are you? So with a plant like Origin One of the interesting components of it is, is what's the right way to instrument a plant like that. And especially with a first of a kind plant, We really want to understand as much as we possibly can of the data that's coming off of it. And so in a lot of places, we had Multiple instrumentations or sensors associated with a given sort of component or process step or whatever it is that you're looking Measurement system.

Speaker 2

And what was sort of interesting was to see and this is sort of part of the purpose of a plant like this Frankly, is to see which of those are the right ones to use in our particular system and triangulating on the Measurement systems that work the best. And so, yes, we've definitely learned some things there. I think we didn't see anything that was shocking. Frankly, in a lot of cases, We would look at it and say, well, this seems like an unlikely measure right measurement system for this, but let's put it in there anyway, Because we might be surprised and sometimes we were surprised and things worked when we didn't expect them to from a sensor perspective and sometimes we weren't surprised and they didn't work really all that well. Yes.

Speaker 2

So we've certainly been going through and learning a lot about that. Additionally, when you bring online a plant like this and you're not quite sure which of the measurement systems are going to work out You have to do a little bit of navigating through the data that you're getting. And that's sort of a fun ride, frankly. And if you spend time with our engineers at OM-1, they'll tell you about that. But yes, generally speaking, I think things have worked out pretty much the way that we anticipated All the way through, it's been surprising.

Speaker 2

It was as I said in my earlier comments, It was a challenging project, first because all first of a kind plants are relatively challenging, but also because doing it through COVID and supply chain challenges etcetera Made it even more so. But once you consider all of that, I think the plant has performed really quite well. It's been More well behaved than we expected it to be frankly.

Speaker 5

And then how long has Origin run continuously Near rated capacity, has it run continuously near rated capacity for weeks or at a time You have to actually take it down and make an adjustment and so forth. And welcome Matt as well.

Speaker 2

We're not really running that close to rated capacity yet. We weren't planning to at this point. I think when we originally put together the run the ramp schedule For this plant, it was we gave ourselves lots and lots of room to bring it all the way up to capacity. Specifically, this as I mentioned in my prior comments and I know you and I have talked about before, it's really you could think of this as a semi works on the front end and then it's a continuous plant on the back end. And so part of what drives this is we're running Batches on the front end and then accumulating enough material that we can run the continuous back end.

Speaker 2

And so there's some judgment involved in what's the Optimum way to learn on these different systems and we're definitely still in that phase. We're producing product and we're really happy with the way that we're doing that. But we're definitely not at the point that we can really give productivity data around much of the plant at this point. We can speculate and engineers Some engineers like to do that, but we're not really prepared to make comments at that like higher level yet, just not an update yet.

Speaker 1

Okay. Thank you.

Operator

And our next question will come from Eric Stine with Craig Hallum.

Speaker 6

Hey, this is Batal Fuad on for Eric Stine here. Can you guys just provide more details about Progress being made for financing for Origin 2 and is the $1,600,000,000 still anticipated for the CapEx?

Speaker 2

Yes. So with respect to CapEx capital estimates, we really don't have materially more information than we provided last quarter at this point. As we mentioned, we're going through the revised feed package development. It takes some time to do the feed package development and then it takes time after that to do the re And so we really won't have more information in the really near term. Of course, we'll report back on that when we get a chance to.

Speaker 2

The other point around sort of financing more broadly for Origin 2, I'd really refer back to Rich's points on partnerships and partner interest there. We've seen a lot. I think a big part of this is going to be understanding what's the right way to approach Origin 2 financing Origin 2 with respect to partners and then also Folding in some of the considerations around sort of licensing technology licensing and partnership and scale up That could be other than this,

Speaker 5

but in origin to the change in that as

Speaker 2

well. Yes. So I think that's it. By the way, it sounds like there might be an open line, so if people could check their mute.

Speaker 6

Got it. And then so noticing that the $10,000,000,000 in demand has surpassed. Are you guys expecting that kind of number for SCCA? And if so, do you guys have a timeline for that?

Speaker 3

So I would say the $10,000,000,000 includes a wide variety of our products including FDCA. We do not think we will have any problem with FPCA demand. And like I referenced earlier, we continue to find More and more interesting applications for FPCA where we get not just the sustainability benefit from the material, but also improved functional performance In really a wide variety of applications. And so similar to our PX and PET Story for Origin demand is just not it's just not a problem.

Speaker 6

Awesome. All right. Thank you, guys.

Speaker 3

Thank you.

Operator

And our next question will come from Pavel Molchanov with Raymond James Financial.

Speaker 7

Thanks for taking the question. So whenever we see revenue guidance coming Down by EBITDA improving, obviously that speaks to A negative margin profile. In that context, I guess you're not formally giving guidance for 2024 yet, but Will you be attempting to minimize cash burn by Minimizing production or the opposite where you'll want to kind of test out the Full capacity of OriginOne and be willing to burn some extra cash along the way. Yes.

Speaker 3

We're very focused on cash. And so generating Products to support our funded JDA revenues, obviously continuing to learn and advance the development for Origin 2 And other potential plants. And so we're focused on cash, but we're also advancing our technology platform. So we'll continue to do the things we need to do to keep learning and keep innovating and keep moving forward.

Speaker 7

Okay. I've asked this question on a couple of previous calls. I thought I would maybe get an When you compare everything that's changed between The original stack guidance up through today in terms of The price of outputs and the but also the cost of inputs, right? Everything is generally inflated. Which side is winning?

Speaker 7

In other words, is the platform benefiting disproportionately on the top line Or kind of losing ground because of a higher cost structure?

Speaker 2

Yes. It's obviously question given the last couple of years. I'd say, we don't try to track On a day by day basis, sort of what all that looks like. We're trying to look at that on a sort of medium to long term basis, especially since we're looking at a plan It'll get built in a few years or be running I should say in a few years. But I think Generally speaking, inputs and outputs right now are actually relatively consistent Compared to the projections that we provided a few years ago, I think if I don't remember if you asked this question, but I don't think so.

Speaker 2

But if you'd asked it, in a particular quarter in 2021, My answer might have been different, right, because energy prices got quite high at a particular point. So from an instantaneous perspective, energy prices went up quite a bit and that was obviously one of our I think the thing that we've seen that's the biggest change that relates to us It's actually generic across the industry, which is the capital costs are significantly up. I think that's Relatively obvious both for us and in the industry, but it really does have a meaningful impact. I'll say what we haven't seen yet is Product prices come up commensurate with capital cost increases. I think that from that perspective, we're just going to have to see existing capacity And be utilized before the investment economics of new plants with higher capital costs Starts to impact pricing downstream.

Speaker 7

Okay. That's I appreciate the color on that. Last question. Are you receiving any RINs or any other Section 45 X or Z credits from your sales In OriginOne, assuming you have some sales in the U. S?

Speaker 2

Yes. So we aren't anticipating we're Generally speaking, the product that we're producing off of OriginOne is for the vast majority of it Going into chemicals and materials applications rather than fuel applications, although there will be some that goes into fuels, but The written component of that is not a major part of our calculus.

Speaker 7

Understood. Thank you, guys.

Operator

And that concludes today's live Q and A segment. Will now turn it over to Ashish Gupta, Investor Relations to conduct the next segment of our investor Q and A. Please go ahead.

Speaker 1

Thank you, Jen. As in prior calls, we have invited all investors to submit questions as part of our Ask Origin campaign. Want to thank everyone who participated. While many questions were answered during prepared remarks and Q and A, we would now like to highlight a few more. Starting with John, or I guess all the questions are for John today.

Speaker 1

On OM-one, what is the intended near term journey the intermediates you're producing.

Speaker 2

Yes. So one of the questions as you mentioned was around The destination for those intermediates and then specifically, we had a couple of questions around whether those were going to be going towards paraxylene. The answer is yes. Some of them will be going to paraxylene. We have some proprietary chemistry that we developed to Both to make that reduction to the dimethylcerin and then also the deals alder for dimethylcerin to kyrazylate.

Speaker 2

So we are going to be doing that At sort of OM-one instantaneous rate scales, maybe a little smaller. But actually the vast majority of the material coming off of OM-one will be going towards other applications. And that's there's a whole variety of them. As we mentioned in our prepared remarks, there are a lot of different things that those materials be going towards. And frankly, that's part of the value of OM-one is that we get to see the value of our intermediates going into Applications making completely new chemicals that we really haven't gotten a chance to play with at those large scales before and neither have our customers.

Speaker 1

Thank you for that added color, John. Moving to unit economics and margins, we've received multiple questions around Economics and margins associated with our products, some of which we touched on here. But can you provide us some additional color?

Speaker 2

Yes. This sort of is related to Pavel's question. I think So far, we really haven't seen enough data out of OM-one to say more than yields are looking really good and the Performance of the plant in general is good. But as we collect additional data, we'll get a chance to compare that to the unit economics that we expect to see off of an OM2 or sort of an OM2 scale plant going forward. So we know people are interested We'd like to be able to communicate it on that more precisely, just not quite an update yet.

Speaker 1

Okay. Thanks for that. We've received several questions about Origin 2, including whether there's any updates on financing of the plant. Can you help us a little bit more there?

Speaker 2

Yes. I think we ended up covering that in a lot of the analyst questions. And so I won't go through all the details of it, but I'd say there's one more generic comment to put on top of it is that we still see the same existing sources of Financing that we've discussed historically, so things like the productivity bonds, etcetera, we still see those as playing a really meaningful role. And then additionally, we're seeing the sort of partners and customers leaning in to participate as well. So I think we're seeing more options for financing, not fewer.

Speaker 2

And we really haven't taken anything off the table yet that was already there.

Speaker 1

Appreciate it, John. Wrapping up here on capsid closures, can you just give us a better sense of the opportunity? Any color you can provide would be great.

Speaker 2

Yes, sure. So we're really excited about this application. We really see it as an application that comes out of The materials and application development that we do for our new materials. So part of Developing new materials is you've got to go have the expertise to work with customers downstream to help them understand the way that your materials could improve what they're doing. And so we have a Could you improve what they're doing?

Speaker 2

And so we have a technical staff that's really quite excellent in order to interface with those customers on those different applications. And one of the things that emerged from that is this caps business. So we're really excited about it. Some of the key points to that CAPS business are CAPS While just one application in this area or actually it's a huge market, it's a $60 plus 1,000,000,000 market. So It's by no means trivial.

Speaker 2

And really the key driver here is that PET caps seem like Frankly, kind of obvious, why wouldn't you make the cap on a bottle out of the same material that you make the bottle out of, especially since the bottle material is so Ubiquitously recycled, whereas the cat material, though theoretically recyclable, is really much less frequently And so this sort of mono material package seems like it's so obvious, but actually there's Some really key technical insights that were required to make that work and that's why people haven't done it in the past. It's been something of the Holy Grail that people have talked about for a long Nobody's done it successfully. So we're really excited about that. As I said, it's the it enables really a single material, a mono material For the whole beverage package and that's a big deal really improves the recyclability of the package overall. You actually get some benefits over using PET as a cap beyond recyclability as well.

Speaker 2

It's got better barrier than the polyethylene and polyolefin caps do. So we're really excited about it. We see customers really excited about it. And so it's very much an adjacent Sort of innovation to our core business and our core technology, but it's one that has a tremendous amount of customer pull and demand. And We're excited about it also because it's something that moves in quicker capital cycles than you see chemical plants moving.

Speaker 2

And so we think that That winds up really nicely with the way we're thinking about the world right now.

Speaker 1

Very exciting. Really appreciate all the extra color and want to thank the investors Those thoughtful questions. That's going to conclude the Q and A portion of the call. I'll now turn it back to Rich for closing remarks. Thanks, Ajish, and thank you to

Speaker 3

everyone who joined today. We're looking ahead with confidence energized by the team's recent achievements and the incredible opportunities in front of us. Our success with OriginOne was a historic milestone that fundamentally proved our technology scalability and we're more excited than ever

Speaker 2

to deploy our platform and

Speaker 3

begin to serve our and begin to serve our over $1,000,000,000,000 addressable market, while helping to solve some of the biggest environmental and performance challenges of our times. We're very focused on managing our cash, including near term revenue and we look forward to our next update with you in February. Thanks again.

Operator

This concludes today's conference call. Thank you for attending.

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Earnings Conference Call
Origin Materials Q3 2023
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