Release Date: November 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) achieved product market fit with their caps and closures business, indicating strong customer demand.
- The successful factory acceptance test of their initial CMER system produced several million fully functional PET caps with over 98% efficiency.
- Origin Materials Inc (ORGN) plans to bring eight or more cap former systems into production by the end of 2025, which could enable them to achieve positive EBITDA.
- The company expects significant revenue generation from their caps and closures business starting in Q1 2025, with a healthy growth trajectory.
- Origin Materials Inc (ORGN) has a strong pipeline of potential buyers for their caps, with multiple prospective customers engaged in testing and qualification.
Negative Points
- Origin Materials Inc (ORGN) is not yet providing specific guidance on the ramp-up of their $100 million MOU, leading to uncertainty about revenue distribution.
- The company has not disclosed the operating rate of their Sarnia plant, which has been lower in recent months, reflecting a reallocation of resources.
- There is still uncertainty regarding the timeline and location for Origin 2, with discussions about potential Asian brownfield facilities but no definitive plans.
- Origin Materials Inc (ORGN) is currently focusing resources on the caps and closures business, potentially delaying progress on their biomass conversion technology.
- The company is not yet ready to provide specific guidance on gross margins for their caps, which could affect investor confidence in profitability projections.
Q & A Highlights
Q: Can you provide more details on the $100 million customer agreement and the expected revenue ramp?
A: Rich Riley, Co-CEO, explained that the $100 million memorandum of understanding (MOU) has an initial two-year term with an aggressive ramp expected in year two. While specific figures were not disclosed, the company anticipates more customer announcements in the coming months as they progress through qualification processes.
Q: Are there any discussions about Origin 2 being located in Asia, and what is the status of those discussions?
A: John Bissell, Co-CEO, mentioned that while the Geismar site is no longer a focus, Asian brownfield scenarios are being considered as efficient options for Origin 2. However, no specific details or commitments have been made at this time.
Q: Is there potential for selling or licensing the cap manufacturing technology to prospective customers?
A: John Bissell noted that there is interest in licensing the technology, and while they are open to it, the current focus is on building out capacity and monetizing the technology through production. Licensing could be considered if it presents a more efficient way to monetize the technology.
Q: What is the current operating rate of the Sarnia plant, and how does it reflect market interest in CMF and HTC?
A: John Bissell stated that the operating rate has been lower recently due to resource reallocation towards the caps opportunity. Interest in CMF and HTC remains strong, with a slight increase in interest for HTC, particularly as a carbon black alternative.
Q: What can investors expect in terms of margins and unit economics for the caps business?
A: Matt Plavin, CFO, explained that while specific guidance on gross margins is not provided, the company is confident in attractive margins due to the premium nature of their 100% PET caps and the cost-effectiveness of thermoforming compared to injection molding. The larger the cap size, the more cost-effective the production becomes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
