Q4 2020 Danimer Scientific Inc Earnings Call
Hello, and welcome to the data from scientific fourth quarter and full year 2020 conference call currently all participants on them.
A question and answer session will follow from the presentation.
If anyone should require operator assistance during the conference you May press Star zero on your telephone keypad.
As a reminder, this conference is being recorded I would now like to turn the call over to your host Russ.
Zuchowski Vice President of corporate finance. Thank you you may begin.
Thank you sure Molly and thank you everyone for joining us today for our fourth quarter and full year 'twenty 'twenty earnings call.
On the call today are Dan Murphy, CEO, Steve Cross Creek, and CFO Scott Dowty.
They'll be on Trump, our Chief Science and Technology Officer is also on the line for questions and answers.
During our discussion today, we will be referring to our earnings presentation, which is available on the Investor Relations section of our website.
Yeah on the more scientific platform.
On slide two please.
Please note that we may discuss forward looking statements within the meaning of the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
These forward looking statements include among other things future results of operations capacity production and demand levels that could differ in a material way from those expressed or implied in the forward looking statements.
We assume no obligation to update any forward looking statements to reflect the venture circumstances. After the date hereof.
As required by law.
Today's presentation also includes references to non-GAAP financial measures.
A reconciliation.
And the most comparable GAAP financial measure can be found in the investor presentation.
I will now turn the call over to Steve who will begin on slide three.
Thank you Russ.
Good afternoon, everyone.
Before we get started I want to express my appreciation to our team for their strong execution as well as to our new shareholders for their exceptional support.
During 2020, we completed construction of the world's first commercial P. H a facility and went through a rigorous east backing process all during a pandemic, while simultaneously negotiating development agreements with Mars and Bacardi.
For your hard work dedication and support.
I will start with a review of our business highlights following that I will turn it over to our Chief Finance Financial Officer, Jack Daddy, who will provide financial highlights from the fourth quarter and full year 2020.
I will then wrap up with some exciting updates on our gross strategy.
I'm extremely pleased with our numerous accomplishments during 2020 to end the year with an outstanding customer base and an unrivaled commercial scale bioplastic technology platform.
Coming public was an important milestone for our company, providing us with additional financial flexibility to achieve our long term expansion objectives.
2020 was a year of record revenues for Danaher and we are still on the early stages of an immense opportunity to grow our business and build long term shareholder value.
On today's call, we're going to address four key takeaways from.
First the depth and capabilities of our high growth next generation Eco Tech company that produces 100% biodegradable polymers for use in plastic applications.
Our massive addressable market spanning 500 billion pounds.
Third our unrivaled growth potential from intense demand by blue chip multinational customers and finally, the progress we have made to significantly expand our business to meet customer demand.
Moving to slide four.
Those of you who met us during our spec merger transaction no debt, we view P. H a as the best end of life solution for single use plastics and that there are no other marine degradable materials available today with ph as performance characteristics.
We are even more bullish about P. H a now that we more we are even more bullish now about PHA than we were a few months ago.
The tremendous demand, resulting from the powerful tail winds of corporate sustainability commitments governmental regulation and consumer awareness of the environmental impact of plastic waste is expected to only make our future brighter.
We are in a very unique place within our industry that sets us apart from peers.
We had the market know how a large portfolio of patents developed over the past 13 years commercial scale and long term customer contracts all of which puts us well ahead of our industry.
We have already built our first commercial scale production facility and we have a significant pipeline of new capacity to extend our leadership position.
We have a line the majority of our expansion plans based on long term partnerships with customers. Our customers are mainly major blue chip multinational brands debt at all made long term commitments to make their plastic packaging recyclable reusable or biodegradable.
With bioplastics, representing less than one percentage of the addressable market today, we have only scratched the surface of what we believe to be the immense upside moving forward on.
Our team is comprised of acknowledged leaders in the Bioplastics space and I could not be more pleased with their measureable achievements at Denver and in this industry on that.
Next several slides I'll provide some context to address some questions that we get on PHA in Danvers proprietary approach.
Turning to slide five.
Dan numbers No day X P. H a is certified as marine degradable by T V Austria.
I'll give you some context on why that is positive for customers and the environment.
The two questions, we think about with respect to polymers for plastic or is it renewable and what happens at the end of its life.
Fossil fuels are nonrenewable and typically accumulating on landfills and in nature. Most biopolymers that'll go away and those that do can obtain industry certifications for five different environments industrially composed to bowl is the easiest standard to achieve but requires the high heat and moisture of an industrial accomplished facility home could possible.
It was similar but requires less heat and moisture.
So on degradable does not require heat or more moisture as the polymer is broken down in dramatically by bacteria.
Freshwater and finally marine degradable certifications such as those node actually has received are the most difficult and highest standards to achieve because there is less bacteria in those environments and so more difficult to degrade.
On slide six we show the lifecycle with PHA.
We make PHA by feeding canola oil to bacteria. The bacteria then convert the carbon from the canola oil into another form of carbon for their own metabolic process. That's P. H a.
The resulting product is the bio plastic resin that we turned into a finished product.
The product is not degraded in your home or on your shelves, but after it is discarded it will be enzymatically degraded by bacteria. As this is their preferred energy source.
We believe our PHH beginning through end of lifecycle puts us at the forefront of sustainability.
Moving to slide seven.
We are excited about our PHA leadership position and a significantly large addressable market. It's an 800 billion pound total market and today virtually all of that ends up accumulating in landfills or nature.
Even recycled products have to be discarded at some point buyout.
Bioplastics, particularly P. H a R. A viable end of life solution to truly address the growing need to reverse the global plastics crisis.
We think bioplastics can replace about 500 billion pounds of the total market and so far I've only achieved less than one percentage of that figure to put that into perspective, Danaher has announced plans to add 315 million pounds of nameplate production capacity by 2024.
That makes us by far the largest producer of PHA globally, and that's still pales in comparison to the over 200 billion pounds discard the nature 200 billion pounds of fossil fuel based plastics discarded in nature, including the 17 billion pounds of plastic dumped into the ocean every year that don't make their way into landfills.
On slide eight.
We have a long journey that we believe puts us significantly we have had a long journey that we believe puts us significantly ahead of our industry in terms of patents commercial scale production and long term commitments from customers.
It has made us a pioneer and a world leader in producing natural biopolymers that are biodegradable and compostable, we have growing alongside of our customers as partners and our mission to address the global plastic crisis.
They're long term contracts and commitments with us continuing to fund our R&D efforts capacity build outs and revolutionary products. This history of continuous innovation that has brought us to this current inflection point now.
Now as a better capitalized company, we plan to accelerate our growth trajectory and further investing in capabilities to support this growth.
We have continued to build out our R&D engineering sales and marketing teams to prepare for the expected ramp up in production.
We have hired a number of highly experienced leaders in engineering manufacturing technology development and finance and support of this growth.
We have entered into new partnerships, including our March announcement of a two year partnership with Mars to develop biodegradable packaging as part of their supply chain we.
We entered into an agreement with bacardi to make a biodegradable and compostable spirits bottle to help bacardi replaced 80 million plastic bottles.
And more recently, we announced that we intend to double the size of our planned Greenfield facility to further capture the growing demand from customers.
I'll now turn it over to Jan for an update on our financial results.
Yeah.
Thank you, Steve I'll speak to sliding on given the early stage of our trajectory I'll focus my comments today on the full year 2020 results with force or context as applicable followed by some color on 2020 one.
Revenues for the full year 2020 grew 46% to 4.4.
$47.3 million compared to $32 $3 million in the prior year.
This increase was driven by higher sales of our legacy base resins as well as significant sales of PHA resins.
We commenced the scale up of commercial PHA production beginning in March of last year.
Year over year growth of 38% in the fourth quarter was more modest compared to the full year.
This is accelerating CLA based resin sales earlier in the year as customers sought to increase inventory levels in order to prevent potential supply chain disruptions from depends on it.
Both the day that we are currently producing PHA base resins out of our Kentucky facility had on her having recently completed the first on the two phased expansion for PHA production.
They used one added 20 million pounds of finished product and they complain nameplate production capacity with fermentation run starting in March 'twenty 'twenty at the same time dependent and the related Lockdowns began.
New construction has commenced in December.
Yeah.
Based on construction has commenced in December of 2020 and is expected to add an additional 45 million pounds of finished product nameplate capacity in the second quarter of 'twenty 'twenty, two with production ramping up thereafter.
Completion of both phases will bring our total nameplate DHA capacity up to 65 million pounds of finished product per year.
'twenty 'twenty, we'd drive 10% of our revenues from sales of PHA based resins.
You can increase compared to 1% in 2019.
In the fourth quarter DHA base resins climbs at 19% of sales, reflecting our expanded production capabilities.
Full year gross profit increased to $11 $5 million compared to $11 $1 million in the prior year.
Adjusted gross profit, which excludes depreciation and stock based compensation and rent related to our manufacturing operations increased to $16 $6 million compared to $48 million in the prior year driven by higher revenues from.
On a margin basis adjusted gross profit was 35, 1% compared to 43, 2% in the prior year, primarily the result of having limited PHA manufacturing activities in 2020, and incurring incremental costs associated with the ramp up inefficiencies.
R&D and SG&A expenses, excluding depreciation and amortization stock based compensation rent and one time items were $16 $3 million compared to $12 $5 million in the prior year, mainly attributable to an increase in headcount and salaries to support R&D efforts and our future expansion plans.
<unk>.
The adjusted EBITDA loss was $3 $2 million as compared to a loss of $1 $6 million on the prior year.
With a slight increase in gross profit more than offset by the higher operating expenses adjusted EBITDA excludes stock based comp other income and other add backs is reconciled in the appendix.
Adjusted EBITDAR was $402000 in 2020 compared to $1.5 million in 2019.
We are separating out rent as rent expense was primarily related to a sale leaseback agreement associated with the Kentucky facility.
Turning to slide 10, we'll look at 2021.
From that several items to keep in mind.
Increased availability from the completed phase one capacity expansion will provide for a significant ramp up in revenue for 2021.
We expect adjusted EBITDA on cash flow from operations in 2020, one as the Kentucky phase one facility ramps up utilization levels from approximately 50% at the beginning of the year to fully ramped at the end of the year, noting however that we are planning a turnaround in Kentucky in the latter part of.
Of the second quarter of 2021, bottleneck and accelerate ramp up.
As I noted earlier the phase two expansion is now expected to be completed in the second quarter of 2022 compared to on our initial assumption of late 'twenty, one resulting from the shift in timing of our clothing as a public company transaction.
Total operating costs are expected to be approximately $27 million for 2021, excluding depreciation and amortization stock based compensation and one time items in.
In addition, we expect net zero.
Zero cash taxes due to the significant NOL. So the company has available.
For the full year of 2021, we anticipate capital expenditures to be in the range of 100 million to $125 million.
Merely to invest in the planning and the planned capacity expansions.
Now I'll turn the call back to Steve.
Thank you Jan please.
Please turn to slide 11.
We have seen customer demand grow as a blue chip multinational customers develop more sustainable products made from Bioplastics. It's.
It's important to highlight at the growing plastic waste market does more than just increase our addressable market. It also pushes customers to adopt the best solutions amongst plastic alternatives.
We therefore continue to experience intense demand and accelerating growth for our marine Degradable PHA products. As you can see here, we have a mix of very tenured customer partnerships with major consumer packaging brands, such as Pepsi or nationally.
The recent announcements of partnerships with Bacardi and Mars among others are a testament to the growing appeal of our PHA as a solution to plastic waste.
On slide 12, I'll spend a moment on our gross strategy, which has two primary financial objectives accelerate our top line growth and expand our adjusted EBITDA margins. Our gross strategy our growth strategy is comprised of three elements.
First expanding our market share by developing products in partnership with customers to grow demand. We are working on improved versions of our existing products and are currently in the process of filing several new patent applications.
Second.
Derisking our growth strategy by securing multi year purchase commitment to work contracts do you have the customer demand in place before beginning production.
Three.
Finally, attaining favorable unit economics. This includes putting our contracts to place that are mutually beneficial to danaher and customers as well as approaching expansion decisions with a focus on returns that are well above our cost of capital so that should be finally.
As a third bullet obtaining favorable unit economics.
Based on all these objectives, we are accelerating and increasing our announced expansion plans and the timing and size of future expansion will follow that similar framework.
To that point on slide 13, we are moving toward a bioplastic world even faster than we projected six months ago.
Considering that we have announced our intention to double the size of our planned greenfield facility to catch up with demand.
We have chosen Bainbridge, Georgia based on a detailed site selection process.
Our plan is not to increase the anticipated greenfield capacity from 125 million to 250 million nameplate finish pounds of product annually the new.
New state of the art facility is currently in the Preconstruction engineering stage. It is expected to break ground in 2022 with the first half of the project coming on line in mid 2023 in the second half operationally in 2024.
The cost of the facility is now projected to be around $700 million, which incorporates the doubling of the facility plus additional enhancements for efficiency.
The unit economics remain very attractive on this larger scale.
Upon completion, we will be in a much better position to serve our growing order commitments from customers.
Moving to slide 14.
Even with a planned doubling of the facility we continue to forecast that the Greenfield plant will be sold out.
Fact, based on our conversations with customers and the trends we are seeing in the business. We believe that the market demand and unit economics support additional capacity more than 250 million pounds of finished product per year beyond currently announced capacity additions.
We expect our expansion plans to bring considerable benefits to danaher in coming years, as we reduce lead times and costs served more customers concurrently and leveraged the operational infrastructure that we're putting in place today.
As you can tell we have been very busy.
P. H a demand is growing rapidly our products are winning with customers and we are laying the foundation to accelerate growth.
We couldn't be more excited with our leading position to deliberate dramatic solution to the global crisis of plastic waste.
I will wrap up with the four simple reasons why we were excited for 'twenty, one and beyond.
We believe our high growth next generation, 100% biodegradable plastics have no match.
We are on our way to tapping the 500 billion pound market opportunity of which only 1% is currently served by Bioplastics.
Our unrivaled growth potential from Blue chip customer demand is intensifying.
We are accelerating our investments to significantly expand expand our business supported by customer commitments.
We are at an exceptional point in our company's history, and I cannot be more optimistic about our growth prospects in coming years.
Thank you for your time today, we'll now open up the line for questions.
Okay.
And at this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue. You may price start to if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys one.
One moment, please while we pull from our questions.
Our first question is from John Campbell with C. G C. J on Securities. Please proceed with your question.
Hi, Good afternoon, everybody. Thank you for taking my questions and congratulations on your first quarter as they are a public company.
Thank you John.
My first question I guess.
Can you provide an updated expectation in terms of the profitability you're.
Do you expecting compared to what you had on your investor deck last fall.
On your new growth and expansion plans and what looks like a significant inflation.
That's coming through the supply chain right now.
Uh huh.
Could you be a little more specific in terms of time frame that you're asking about sure sure I mean over the next two or three years, what would be perfect. If you could go into.
How do you expect.
Your profitability to ramp, especially on these nuclear incomplete.
So.
We expect our margins to improve over time as we increase capacity. The more scale. We have you know the better we can spread out those fixed costs.
So I think when you when you look at the out years as compared to the previous models that you've seen.
You know profit you know there'll be a tremendous increase in profitability really just driven by volume.
In the near term I would expect less profit less profitability at the bottom line.
And what was previously disclosed because in order to accelerate that growth, we're pulling in quite a bit of opex, mainly with new hires we're hiring quite a bit of people. This year that we didn't intend to prior to the.
The announcement to double the size of the Greenfield plant.
Yeah.
Understood that makes a lot of sense.
Can you just comment on on the spreads that you're making on your product. These days, how you price them to customers just given on the price of feedstock.
Going on.
Yeah.
Let me say one more thing in terms of you know kind of longer term before I address that one specifically.
We were just getting started the and you've heard me say this before probably with it you know the fossil fuel industry has been optimizing for 70 years.
So we know this is one of those things you you you know you talked about no known unknowns and known Knowns and all that this is one of those things, where we know we're going to be able to take cost out of this business as we grow both on a capex per pound basis and on a cost of goods sold basis.
As we kind of look at that in the next five to 10 years. We think we can easily take a 25% out of of those costs are versus just you know what work kind of currently forecasting and then as far as your question John about margins, that's a little more in the short term.
Canola oil is going up in price.
About half of our current contracts have escalators in them that allow us to pass that on to the contracted customer we put that language in every contract that we had a that was a multi year. So in the the one.
Year contracts that we did we didn't have that in there, but we had hedged. So we don't we won't really see impacts.
Impacts from that canola, a margin or a canola pricing increasing till the.
The later part of this year.
Got it. Thank you very much and then just on the new expansion plans $700 million about half of that you already have on the balance sheet. How do you plan to finance the rest.
We're exploring every option available and we'll get back to you on that and go back to your last question to John I would also just wanted to remind you that we are not limited to using canola oil as a feedstock and so we are also as you know.
Aggressively looking at alternatives are which we know there are a lot of alternatives, but obviously, we're looking for economical more economical alternatives. If you will so.
You know that that's an ongoing project.
Okay, Great actually if you don't mind, one more just.
Has there been any change in the competitive environment now that you know you've shown on the world that you're sold out for the next two years and maybe for the next four or five.
Perhaps companies that can't get on your list at the moment, who it turns the other peer players and maybe willing to fund them.
So to accelerate their growth over the next couple of years in order to get their hands on similar products.
Well, we're not aware of any other.
Major brand owners that are doing that.
You know we have let's say this that we have not ever engaged with one of these major brand owners and then had them go somewhere else.
I think we're far enough ahead that are you know they see the benefit of dealing with US now and we're working really hard which is one of the reasons why we are you know.
Announced doubling of the Greenfield, we're working we're working really hard to make sure that we can satisfy all of these customers that have kind of interested there you know future packaging to us. So that's the goal is to try to keep keep them all happy and keep adding customers.
Due to the the <unk> in the fold.
But we have not seen anything yet that would indicate that.
Our lead is in jeopardy.
Got it thank you very much and congrats again.
Thanks, John.
And our next question is from Laurence Alexander with Jefferies. Please proceed with your question.
Good afternoon first on the new expanded capacity targets do you already have an anchor tenant for the extra volume or to what degree of that capacity sold out.
On under contract Yep.
In the in the early years I would say, it's roughly 10% under contract Laurence.
But we still have a lot of time to get to actual contracts.
And so the answer is yes, we have two new anchor tenants.
Which would be Mars and bacardi on Mars and Bacardi, we're not.
Contemplated in our financial models, when we were marketing the pipe.
And so those are new customers. We've also added a third brand which we.
We can't talk about because they view it as a competitive advantage. So we really have three significant new customers in the pipeline from.
The financial model that debt, we used to build a greenfield plant originally.
Model for the plant.
And so we while we don't have off take agreements yet with those customers, we have forecasts and plans are in place.
And then with respect to the state of Georgia are the is the support from the standard George was significant and if so is that factored into the 30% cash ROIC.
It is we believe it is significant its a valued in the tens of millions of dollars and it's not factored into the ROIC.
And then can you address some sort of average selling prices, how theyre doing now and do you still expect them to be in roughly the 250 range on or walk or.
To what degree day Asps are moving.
Yes, the average selling price.
Is pushing about 270 right now.
So I would say that it's it's been increasing.
Slightly you know over the last few months.
And then just the last one on my side can you address the criteria that you would have to do.
Project overseas I noticed on.
Slide 14, you go from two Green line, three green lines to four green lines on.
There's all sorts of interpretations for that so just wondering how you think about geographic expansion, we're doing multiple projects in parallel.
Yes. So as you may have heard me say before Lawrence after we finish this FERC by the time, we finish completion of this first Greenfield project we.
We need to have the internal resources and competence built up to be able to build two plants at once.
And one or both of those could be overseas. So we're you know we're proceeding.
Heating with that in mind.
When when you see that the green lines on that slide I guess, what when you you know goes from two at once to three at once to four at once.
That's sort of a it represents you know are on.
Our.
Medium term goal, if you will to develop that competence and resources in house to be able to build four plants at once.
Okay, great. Thank you.
And our next question is from Vincent Andrews with Morgan Stanley. Please proceed with your question.
Thank you good afternoon, everyone. One just dig in a little bit on the $700 million for the two greenfields.
If you could just sort of bridge us from I believe the original estimate was $2 85 for one so I'm just curious what's changed in terms of the cost of each greenfield and I thought maybe there might be some scale benefits of building too.
Rather than one so maybe you could just help us understand what's what's happened to sort of the day.
The per unit cost of construction since our since since your last update yes, so really it's three things.
Vincent the first is <unk>.
And again some of you will have heard me explain this in the past, but on a refresher that original estimate we spent about $200000 on.
It's been well over a year since.
That was done.
And now.
Since we closed on the spec deal and.
Cash we've star.
Started of $13 million engineering project to finalize not not just the price quote estimate but the actual.
Plants.
Be constructed with so that started in late December and we just about a week and a half ago, we got a plus or minus 30%.
Estimate.
That estimate by I believe July will be done we will go to a plus or minus 20% and before construction it'll get down to a plus or minus 10% estimate.
So we're hoping to no no guarantees it could go the wrong direction, but we're hoping to be able to drive that that costs lower over time with value engineering. So the three things that I would point to that are are different.
First of all is it just maybe the.
The the level of the thoroughness of the estimate at this point relative to the first one that was made as part of it secondly.
And we were surprised at some of the inflationary.
Things that we saw both with the cost of steel, but with labor as well.
And I think I think what one of the things that's happening right. Now is as people are are we.
We see ourselves you know coming out of the pandemic I think there is a lot of activity like this going on.
And then thirdly, it's debt we've added.
Tangibly added some cost to the project, where we can drive Cogs lower or you know drive expenses out. So so theres been some optimization and some efficiencies develop that will cost more money.
But but ultimately you know have a great return and that's why we're when we look at the efficiencies that we're getting by between those things and doubling the size of the plant that's why we're still.
Reporting that we believe it's a.
30% on ROIC.
Okay, and just as a follow up to that.
Is the timing of how long it will take to build the Greenfield is that you know what.
And that sort of plus or minus 10% estimate or is that subject to change as the engineering.
You know sort of work is completed in the coming months, Yeah right right now the timing is.
The same on a relative basis, but it's going to the entire project is going to take longer than than the the three fermenter version.
The way we're doing it.
We're starting with three firm enters initially and then when those are complete.
We'll turn to the next three or so so that that second half will take longer to complete.
And then the.
Than originally proposed so the entire project is is a longer project now.
And then what it was originally.
Did I answer that question I understand you're sitting on the first Greenfield can take as long as you previously thought but now that you've added the second one is obviously it takes longer to do both but the timing of constructing each project Hasnt changed is that correct. Yeah. It's pretty much. That's that's that's correct. The way you said it although we are thinking of it really is.
Just one plant sure.
So.
It's not really Greenfield one on Greenfield two its really just greenfield one and it's just going to have six per mentors.
Gotcha, and maybe just one last clarifier for me did you earlier say that.
You have about 10% of the new greenfield capacity contracted or was that.
Is that not correct.
I said that.
Alright, Thank you very much I'll pass it on.
Yeah.
And our next question is from Jon <unk> with CJS Securities. Please proceed with your question.
Hi, Thanks for the follow up so I just wanted to ask about the CLO business and what's your expectations for that this year are kind of on that tracks going forwards as well.
Sure so.
We had a really strange year last year on.
On the Pls side of the business. We really are we should just kind of call that the base business. Because you know where we are agnostic as far as the final formulation of a product we're trying to solve.
Customer problems and.
If those formulations you end up with all PHA all P. L a or some combination in between it doesn't really matter to us, but but the base business is as all you know PLO based and and other biopolymer. So are.
We had a strange year last year when Covid cash.
Came on.
Our foodservice business just went away.
And honestly we've had customers.
That had not ordered since before March so some of that are the folks that are in there in the restaurant business some of that is.
Still we're still seeing the effects of that.
We made up for it.
Last year in large part because of one, particularly large customer was concerned that Oh, you know what might happen if Denver had a shut down due to COVID-19 and so they ordered in.
About 25% of their annual requirement as just as stocking inventory.
And that.
Had a significant positive impact last year now Unfortunately, we won't see that again this year. So it will it will we've got that in the history now, but it won't be in the in the new in the growth numbers for this year. So I think on a on a year.
Over year basis.
The Pls business is.
It is not going to look it's not going to grow as rapidly as we're used to this year.
Okay, I got it but it's still growing just to clarify.
Yes.
Okay great.
Maybe just going back to the expansion on the 30.
Percent ROIC in year, two sounds great I was just wondering what the timeline is to actually reaching profitability. After you complete construction.
What do you define that in terms of cash flow or EBITDA net income and you know what.
You've been modeling to six months is it.
Nine months, how are you thinking about them, starting with the Kentucky, and then going on to the Greenfields.
I don't know if I know that answer off the top of my head John.
I I I do know that when we've modeled these these projects.
At we hit breakeven when we are rough at roughly a third of the stated capacity when we get when we get to that point, where we're breakeven.
Okay.
Got it okay. That's great. Thank you and then finally just wanted to get the difference between GAAP.
The GAAP on the non-GAAP in terms of the deal.
Other costs that were expected to come through the stock comp fee.
The depreciation and just wondering what the differences are.
Between GAAP and non-GAAP as we go forward.
J D I'll take that one.
Yeah I'll take it.
And as we go forward, we're planning on I guess reporting adjusted EBITDA, and adjusted EBITDAR and with adjusted EBITDA will be adding back.
Depreciation and amortization.
Yes taxes stock based comp and and then Theres. Some unusual one time items I think debt.
And this year for example, we will have some expenses that we would term.
One time expenses that the company might incur as we are.
Make the transition that depending on a public company and that would be things like the.
Next year, we'd have to be compliant with Lasalle xactly. So we will have.
Some sort of readiness project that the company will have to undertake.
In the current year that we think would be like an incremental expense.
Thanks.
So.
The types of things and then we also have.
Some rent expense that we've added back to get to EBITDAR.
It's primarily related to our facility in Kentucky.
Acquired that facility, we we leased it back.
To a REIT.
And you know.
As an alternative to borrowing money. So we'll also provide that metric our results with pack as well.
Okay and I was just wondering do you have a non-GAAP estimate for the Opex this year.
No.
For the Opex over the non-GAAP estimates.
Yes.
Okay.
Bear with us from a second.
H.
Right.
Yeah, Hey, John will easily.
I'll give you a little color.
On the BLA business this year.
I would just make the point that we are still growing because we're in programs that are growing.
But we don't forecast to add any pure play it straight P. L. A business this year all of our business. This year that we're forecasting growth.
Or getting new gross new program growth.
Would be P have PHA on it.
Okay.
Got it.
Thank you guys and if I can ask one more just what is the share count at the end of.
Q1 did you expect them to have.
Could you repeat that question please.
Yeah, well, what do you expect the diluted share count at the end of the first quarter.
So, yes, I don't have the.
What I can tell you is that as of the day, we have about.
88 million shares outstanding and.
And we also have about 11 million.
Options outstanding they have a weighted average exercise price of about $13.94.
Sure.
In addition to the $16 million warrants that the company has outstanding as well.
Okay, great. Thank you.
And our next question is from Laurence Alexander with Jefferies. Please proceed with your question.
Just one last one could you give some detail on kind of the cadence of customer inquiries types of end markets. If you have any new app, new end markets or applications that are requiring you to develop new grades of PHA or if they're all just spoke.
On the same narrow the same set of PHA grades yeah, great Great question Laurence.
So kind of depending on where where you want to compare where you want to make the comparison. Our incoming leads are two to three X up.
Over what they were prior.
To us making the announcement that we were going public so that the number of incoming leads has picked up considerably.
Our pipeline of Big brand.
Owners is as robust as it's ever been.
And you know just to kind of give you the history there.
We signed up Pepsi in Q4 of 16, we signed up nationally in Q4 of 18, we signed up Bacardi in Q4 of 'twenty and then in Q1 of 2021 we signed up Mars.
And I I expect that kind of compression to continue.
Going forward.
As far as applications.
There you know I would say the majority of.
The inquiries are usually responding to two things where they've seen a press released on an article about another on existing product or or a product thats being you know, we're announcing is being developed but.
A good number of them.
It's it's on.
Obviously smaller on a relative basis I I don't want to put a percentage on it but.
There are some new applications coming to light there are inquiries coming and development in process on applications.
That.
Don't even have anything to do with plastic I can't talk about any of the specifics.
But but that's one of the things that we've always thought could happen that would happen and we're excited to see it debt. There are definitely some opportunities to expand outside of the the 500 billion pound.
Dressed bull market that we've talked about in the past.
Okay, great. Thank you.
Our next question is from Vincent Andrews with Morgan Stanley. Please proceed with your question.
Thank you I just wanted to follow up on the sort of customer contracting sort of the greenfield and I get that there is a sort of a chicken and egg thing here, where you can't you.
You can't contracted plant that you Havent announced yet and now you've announced it so presumably the conversation are going to change and probably multiply, but I guess, what I'm trying to understand is if you're if I'm looking at slide 14 in and it looks like Youre going to break ground in early 2022 according to that.
How much of the plant would you would you think you'll have contracted by the time you break ground.
Yeah.
How should we be thinking about that maybe let's just start there.
Well Hum.
What I would like to see is to have a third of it the whole plant contracted by the time, we break ground on the second half.
So I'd like to you know that that's a goal.
Not a.
You know not not a hard forecast, but a goal.
So just to be clear a third of the overall greenfield by the time you Youre doing the second three from from interest or.
Third by the time you start the whole thing.
It would be like if you could break it down and do our sixth in a sixth.
I'd like to have a sixth of it.
Under contract by the beginning of next year and then another six before the end of next year.
Okay, alright, thanks very much.
Okay.
Yeah.
Okay.
We have reached the end of our question and answer session.
And I'll now turn the call over to Steven Cross Creek for closing remarks.
Thank you. Thank you everyone for joining us today.
I'm proud of our team and excited for our future I'd like to thank our shareholders for their tremendous support and we look forward to updating you on progress in the future have a good day.
Okay.
This concludes today's conference and you may disconnect your lines at this time.
Thank you for your participation.
Yeah.
Yes.
Yeah.
[music].
Uh huh.
[music].
Yeah.
Yeah.
[music].