Thank you for standing by. This is the conference operator. Welcome to the Origin Materials Second Quarter 2024 Earnings Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] At this time, for opening remarks and introductions, I would like to turn the call over to Ryan Smith, Co-Founder and Chief Product Officer. Please go ahead.

Thank you. Good afternoon and thank you for joining us everyone. Speaking first today is Origins Co-CEO, Rich Riley; Co-CEO and Co-Founder, John Bissell; and CFO, Matt Plavan will speak next. Then we’ll open the call to questions from analysts and discuss questions submitted as part of our Ask Origin campaign. Ahead of this call, Origin has issued its 2024 second quarter press release and presentation. These can be found on the Investor Relations section of our website at originmaterials.com. Please note that during our discussion today, we will be making forward looking statements based on our current expectations and assumptions, which are subject to risks and uncertainties. These statements reflect our views as of today, should not be relied upon as representative about views of any subsequent date and 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 that 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 on Form 10-Q filed today. During today’s call, we will discuss non-GAAP financial measures, which we believe are useful as supplemental measures of Origin Materials performance. These non-GAAP measures should be considered in addition to and not as substitutes for or in isolation from GAAP results. You will find additional disclosures regarding the non-GAAP financial measures discussed on today’s call in our press release issued this afternoon and our filings with the SEC, which will be posted to our website. The webcast of this call will also be available on the Investor Relations section of our company website. With that, I will turn the call over to Rich.

Thank you, Ryan, and thank you everyone for joining us. I will begin with a commercialization update as our caps and closures business is making significant strides and we are closer than ever to producing and selling products in significant volumes. Today, we are announcing our first signed customer for our PET caps and closures. We anticipate delivering multiple billions of caps to this customer, which we expect will generate over $100 million in revenue in the initial two-year term, with revenue ramping from 2025 to 2026. Therefore, to fulfill demand for this MoU, as well as anticipated demand from other customers, we expect to build capacity well beyond our initial system purchases, which we previously announced as having expected capacity to generate between $45 million and $65 million in annual revenue. We plan to announce future customers as appropriate, taking into consideration contexts such as the timing of our prospective customers’ product launches involving our caps and our customers’ related marketing activities. Concurrently, we are negotiating potential licensing agreements with key players. We anticipate that licensing our technology in addition to selling the caps we produce with our world-class manufacturing partners will drive explosive growth for our PET caps business. This will further catalyze the revolution in recycling, circularity and product performance that we are bringing to beverage packaging, food packaging and home goods. We expect to be first to market with PET caps. We expect to produce them cost-competitively. We can make them with any type of PET, making the use of 100% recycled PET possible from cap to container for the first time ever. Our caps perform better than today’s HDPE and polypropylene caps in ways that can improve product shelf life and our caps are designed for circularity with no additives used to modify the polymer.…

Thank you, Rich, and good afternoon, everyone. This quarter, we announced a European PET cap mass production partnership with Bachmann Group, a respected Swiss packaging production and logistics company. Bachmann Group will assist in the end-to-end operation and automation of our PET cap mass production lines, helping us produce billions of caps by taking pellet or flake, including recycled material, all the way to finished closures using Origin equipment. Earlier this month, we announced a North American PET cap mass production partnership with Reed City Group. Reed City Group is a full-scale injection mold builder, injection molder, hydraulic press maker and automation solutions company. This partnership enables a geographic expansion complementary to our European manufacturing capability. We look forward to operating caps lines with the Reed City Group team, which includes skilled machinists, mechanical engineers and operations professionals with impressive capabilities in toolmaking and clean room manufacturing. Bachmann Group and Reed City Group are joining us alongside our previously announced world-class partners in PET cap manufacturing, PackSys Global and IMDvista. In the past several quarters, you have seen us assemble this incredible team and we couldn’t be happier with how the manufacturing, technology and people are all coming together. We remain on track to begin commercial production later this year. This quarter, we achieved multiple caps and closures manufacturing milestones. We crossed the milestone of over 1 million caps produced. The testing and scaling of our cap production technology and manufacturing system has been going very well, and our manufacturing partners, prospective customers and team are energized by the success. As mentioned last month in Switzerland and Germany, we ran each subsystem of our manufacturing line at full speed, including industry standard high-speed camera systems with the system operating as expected. We validated QA/QC indicators that operators can use to…

Thanks, John. Good afternoon, everyone. We’ve provided second quarter results in the tables and the earnings release, so I’ll focus my comments on a couple of key financial highlights. We ended the quarter with $132 million in cash, cash equivalents and marketable securities, $26 million less than at December 31, 2023. As a run rate for cash burn at the halfway point in the year, this amount is slightly below the low end of our cash burn guidance range of $55 million to $65 million. However, we remain confident and comfortable in maintaining that range as our guidance for the full year. Origin’s second quarter revenue was $7 million, compared to $6.9 million in the prior year quarter, and also trending in line with our revenue guidance for the full year, which is between $25 million and $35 million. Also, as expected, these revenues are comprised of what we’ve referred to as supply chain activation revenue generated in conjunction with Origin 1 operations. Looking ahead, as just highlighted by John and Rich, we expect the onset of new revenue from our caps and closures initiative to be as of Q1, 2025. Beyond 2024, we anticipate caps and closures revenue in 2025 to be significant, recurring in nature and with a margin growth profile that will drive us to overall cash positive operations within our existing cash resources, eliminating the need for an equity capital raise on our way to sustained profitability. Now I’d like to open the call for questions. Operator, may we have the first question, please?

[Operator Instructions] The first question is from Steven Byrne with Bank of America. Please go ahead.

Yes. Thank you. Where are you seeing the most interest in the products coming out of Origin 1? Is there still interest in a bio-based PET or is this really moving more towards, these furan-based derivatives or the variety of products you can produce from HTC? Has there been a change in the level of interest of these products?

Hey, Steve. Nice question. Yeah. I think we have focused ourselves more on the furan and HTC. We see HTC really as a subset of furanics more broadly. But on furanics-specific products, that’s for a couple reasons. One is because we are seeing real performance improvements and pretty unique functionality in some of those furan-based products. So we think that’s interesting, especially in a more capital-efficient environment that we need to be operating in, performance is going to drive margin or differentiated performance, I should say, is going to drive margin and margin’s a lot easier to manage in a more capital-light environment. So that’s been really our decision. I think we have seen in the broader market still a lot of pull on bio-base and lower carbon polyester, and I’d say polymers more broadly. But our view is we have a lot of demand for that. We’ve demonstrated that demand. We don’t think incrementally demonstrating more of that demand really changes the picture very much. But what we think is new and differentiated is for us to bring furan, I’ll say specific, in some cases even unique functionality to these applications that people can’t get anywhere else. We think that’s a place where we can really show the breadth and strength of the platform.

Okay. Got it. And now that you’ve been running Origin 1, using cellulosic materials and so forth, you’re running a lot of things through there. Do you think that you would design a new plant, whether it’s Origin 2 or something in between, would you design it differently? Have you learned anything about this process from Origin 1 that could help you reduce the capital costs of building another plant and/or what about just doubling the size of Origin 1? Is that an opportunity? You already have the infrastructure at that site. Could you expand that site as kind of a lower cost approach to getting more capacity of the CMF and HTC?

Yeah. Oh man. Asking an engineer if they would do things differently on a plant is, that’s a deep well, Steve. I think, of course, there are lots of things that we would like to do differently for the next plant. That’s not necessarily because we have regrets or something like that about OM1, but of course, we’ve got not just some data from OM1, but also just our own ideas about what are things that we can improve as we go to next iterations. And of course, when you’re developing a technology like this, you’re going to see improvements in the plants, item-by-item or plant-by-plant for a long time. So I think, that’s the long version, the short version, and yeah, definitely, there are things that we would do that we think for the next plant that we think could improve it. I think in terms of expanding OM! at the Sarnia site, we have some really interesting ideas, I think, around what we can do to expand the functionality of that plant over time or adjust the functionality of that plant over time. And some of that is going to depend on not just our own thoughts on it, but as we talk to partners for the next phase or the next step of this technology, what those partners want and how they want to deploy this technology with us is going to inform the way that we operate and perhaps even make adjustments to the operation of OM1, which could be expansion, it could be other things too. So I think those two things are things that we would expect to be in pretty close lockstep going forward.

Very good. Thank you.

Thank you.

Thank you. Now I’ll turn it over to Ryan Smith, Co-Founder and Chief Product Officer for a Q&A section answering Ask Origin questions submitted by investors prior to today’s call.

Thank you, Operator. Prior to our earnings call, we invited all investors to submit questions as part of our Ask Origin campaign and thank you so much to everyone who participated. We received a lot and you asked some great questions. These questions were, of course, submitted before our call today and we answered many of them thoroughly with our prepared remarks and our analyst Q&A. We will generally be answering the most popular and relevant questions during the time we have. And for the questions we couldn’t get to today, we will look to cover them in our mid-quarter update. Our first questions are going to go to you, John. And it pertains to the biomass conversion technology and scale-up and this is a multi-part question. So I’m going to give you the whole thing here. Can you provide any additional color on OM2-related discussions and progress on Origin’s capacity expansion strategy? For example, will it progress beyond OM1 in the next five years? Specifically, could we get more insight as to what stage we are at with partners and their decision-making? Are we already negotiating the manufacturing plant partnership? Are partners working on further application development and testing? Are they waiting for macro conditions to become more favorable before pulling the trigger? What can you tell us about the state of play on the expansion strategy?

Yeah. Well, I think, to your point, these questions got submitted before the conversation we just had. So I think Steve sort of front-ran some of that question with his own questions. But I think the short version is that, we see a variety of different directions for the Origin furanics platform to go from here. And I think the commercial drivers for that are really going to drive that direction. It’s the same core technology for a lot of the same applications, but geographic location, scale, partner, even potentially feedstock are things that could meaningfully change the way that we expect that next step. And so I think we’re reading off of the commercial environment and the partners that we’ve been talking to. I think that’s the big lesson there.

That’s great. And I think there’s a follow-on question here and you’re partially answering it, I think, but let’s explicitly touch it, which is they ask, is the two-phase OM2 plan as presented last August, is that still the current plant design strategy?

Yeah. That’s a really interesting question because we view the Origin platform technology, the furanics platform technology as sort of like a refining technology in that they’re, of course, we’ve always talked about the different feedstocks that you can put in and how that can adjust the ratio of products at the other side. But of course, when we talked about the two-phase approach, that’s also a way to sort of instantiate the core technology in a way that performs slightly differently than if you were lumping it all together. And so -- and that’s not the only way that you can adjust some of those parameters. And so in the same way that we’re really waiting for the commercial side to lead what direction we take for next steps beyond OM1 on the furanics technology. I think we’re also -- we have a variety of options for how you could configure the furanics technology. And yeah, as you said, I sort of mentioned the feedstock and scale. But some applications or commercial partnerships could really drive it towards that two-phase sort of biofuels first architecture of the technology. But there are others which look different. Some which are closer to sort of our original vision for the way that process architecture would work and some that are not ones we’ve talked about yet. So I think it’s going to be interesting to see how that turns out. But yeah, I think commercial leads the way.

That’s great, a kind of menu of plant designs. This next question, I’m going to take over to Matt. It pertains to caps and closures. And Matt, the investor asks, previously it was said that caps and closures manufacturing will have higher operational costs at the beginning. Will that have a significant effect on margins? And if yes, will we see that normalizing in weeks, months, quarters of years?

Yeah. Thanks, Ryan. It sounds kind of like a question that involves giving some guidance around 2025. And I think I’d like to speak to that, but maybe dial the lens back a little bit and reiterate and maybe provide a little better clarity on the guidance that we’ve given to-date and start with this announcement that we made today, which we’re pretty excited about. That is a commitment -- initial commitment for two years that in total is over $100 million in revenue. We wanted to share that to provide visibility into a few things. One, kind of a quantum of revenue per customer that we could see in this business and really illustrate that when we think about rolling into 2025, we expect a number of additional customers beyond the one that we announced here. And that together, they give us great confidence that our EBITDA loss will decline significantly during 2025 and it would be our expectation if things unfold on plan, that we would be crossing over into positive EBITDA territory on a monthly basis, somewhere between 18 months and 24 months between now and the future. And so, there’s this great confidence in our plan and the guidance that we do have out there with regard to being able to achieve sustained profitability on our own capital and that the trajectory, if you think about it over the two years is a significant decline in EBITDA loss in 2025, likely profitability in 2026, hopefully as early as possible. It’ll all depend on how quickly we can ramp capacity to serve what is an increasing and very attractive demand for the product. So, that is our expectation at a high level. And I think as we close out some of these customer agreements and continue to execute operationally, we expect to be able to share more specifics around our 2025 financial expectations in the coming months and we look forward to doing that. But for the moment, I think, I just wanted to kind of restate what we’ve said with regard to kind of overall guidance and express our confidence that the strength of that guidance continues to grow.

Great. And I’ll take these last few questions over to you, Rich, if Matt and John want to chime in, that’s fine as well. But this first one, the investor asks, and again, this was before today’s earning, of course, and some of the news, but they ask, has a buyer been lined up for the caps? Why haven’t any offtake agreements been executed? Rich was saying they had letters of intent since Q4 earnings six months ago?

Yeah. Well, we’re very excited to announce our first big caps customer today and I can add that we have a robust pipeline of potential customers, including potential licensing partners lined up. And this pipeline represents fairly overwhelming demand in terms of our challenge will be to satisfy it, not to get more. But we, of course, continue to engage new customers. And there are various stages of the sort of buying process. Several of them are highly engaged, including traveling to join us on some of the scale-up trials and testing and things like that. So they’re very much deep in the process and looking to modify their own product plans and things like that to incorporate our caps. So we feel great about the demand picture, and like I said, we’re very excited to announce our first customer today.

Great. All right. Now, this next question sort of gets right at it and asks, what do I have to look forward to in the next six months? So big question there.

It’s going to be a really exciting six months. I would say we have a high degree of confidence, one that we’ll have additional customer announcements over the next six months and that’s certainly going to be exciting. We expect to be commercially producing caps, which is a very major milestone in terms of once we’re commercially producing caps, then we’re effectively just adding more equipment to do the same thing and so we sort of will have started our ramp and what comes with that ramp is revenue. And so if we can start that revenue ramp really going in Q1, which is within six months, then we feel like we can really be showing a great trajectory and continuing to accelerate it. So next six -- we’re really excited about the next six months and hope you are as well.

That’s great. That’s exciting. And then the last question, the investor asks, why should I continue to hold this stock despite the performance over the last year of the stock?

Yeah. Well, I think, you don’t have to do too much evaluation math to see that there is the current stock price is placing very little value on our technology and our talent and our possibilities. I personally was disclosed in the 10-Q today, placed an order to buy 300,000 more shares in addition to the shares that I already have. So can’t really give stock advice, but I can tell you what I’m doing.

That’s great. All right. Thank you, Rich, John and Matt, and thank you everyone who joined and to everyone who sent in questions. We’re looking ahead with confidence and excitement for 2024 and we look forward to our next update. They Ask Origin questions we couldn’t get to today. We’ll be looking to address them in our next mid-quarter update. So thanks again and this concludes our call for the day.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.