Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Origin Materials Inc (ORGN, Financial) announced its first signed customer for PET caps and closures, expected to generate over $100 million in revenue over the initial two-year term.
- The company is on track to begin commercial production of caps in Q4 2024, with revenue ramping up in Q1 2025.
- Origin Materials Inc (ORGN) has over $130 million in cash, which is sufficient to avoid the need for an equity capital raise.
- The company has established multiple partnerships for PET cap mass production in Europe and North America, enhancing its manufacturing capabilities.
- Origin Materials Inc (ORGN) is seeing strong demand for its PET caps, which are designed for circularity and offer performance benefits such as improved product shelf life and reduced plastic waste.
Negative Points
- The company reported a net cash burn of $26 million in the first half of 2024, which is slightly below the low end of its guidance range.
- Origin Materials Inc (ORGN) only generated $7 million in revenue for Q2 2024, showing minimal growth compared to $6.9 million in the prior-year quarter.
- The company is still in the early stages of commercializing its biomass conversion technology, which may take time to scale up and generate significant revenue.
- Operational costs for caps and closures manufacturing are expected to be higher initially, which could impact margins in the short term.
- The stock performance has been poor over the last year, raising concerns among investors about the company's long-term viability.
Q & A Highlights
Highlights of Origin Materials Inc (ORGN) Q2 2024 Earnings Call
Q: 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?
A: John Bissell, Co-CEO, Co-Founder, Director: We have focused more on furan and HTC products due to their unique functionality and performance improvements. While there is still demand for bio-based and lower-carbon polyester, our strategy is to leverage differentiated performance to drive margin in a capital-efficient environment.
Q: Now that you've been running Origin 1 using cellulosic materials, do you think that you would design a new plant differently? Have you learned anything that could help reduce the capital costs of building another plant?
A: John Bissell, Co-CEO, Co-Founder, Director: Yes, there are improvements we would make for the next plant based on data and experience from Origin 1. We are also considering expanding the functionality of Origin 1, depending on partner needs and commercial strategies.
Q: Can you provide any additional color on OM2-related discussions and progress on Origin's capacity expansion strategy? Are we already negotiating the manufacturing plant partnership?
A: John Bissell, Co-CEO, Co-Founder, Director: We see various directions for the Origin furanics platform, driven by commercial needs. The next steps will depend on factors like geographic location, scale, partner, and feedstock. We are in discussions with partners and evaluating different configurations for the technology.
Q: 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?
A: Matthew Plavan, CFO: Initial operational costs will be higher, but we expect significant revenue from our caps and closures business starting in Q1 2025. We anticipate a decline in EBITDA loss in 2025 and aim for profitability by 2026, driven by strong demand and capacity ramp-up.
Q: Has a buyer been lined up for the caps? Why haven't any offtake agreements been executed?
A: Rich Riley, Co-CEO, Director: We announced our first major caps customer today and have a robust pipeline of potential customers and licensing partners. Several are highly engaged and involved in the scale-up process. We feel confident about the demand picture.
Q: What do I have to look forward to in the next six months?
A: Rich Riley, Co-CEO, Director: We expect additional customer announcements and to begin commercial production of caps, leading to revenue generation starting in Q1 2025. This will mark the beginning of our revenue ramp and a significant milestone for the company.
Q: Why should I continue to hold this stock despite the performance over the last year?
A: Rich Riley, Co-CEO, Director: The current stock price undervalues our technology, talent, and potential. Personally, I have placed an order to buy 300,000 more shares, reflecting my confidence in the company's future.
Q: Is the two-phase OM2 plan as presented last August still the current plant design strategy?
A: John Bissell, Co-CEO, Co-Founder, Director: The two-phase approach is one of several options we are considering. The final design will depend on commercial partnerships and specific application needs. We have a variety of configurations for the furanics technology, and commercial factors will guide our decision.
Q: What are the next steps for Origin 1 and potential expansions?
A: John Bissell, Co-CEO, Co-Founder, Director: We are exploring ways to expand or adjust the functionality of Origin 1 based on partner needs and commercial strategies. This could include expanding capacity or other modifications to better align with market demands.
Q: What is the state of play on the expansion strategy for Origin's capacity?
A: John Bissell, Co-CEO, Co-Founder, Director: We are in discussions with partners and evaluating different configurations for the furanics technology. The direction we take will be driven by commercial needs, geographic location, scale, and partner requirements.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
