Q2 2021 Danimer Scientific Inc Earnings Call
Greetings and welcome to the Danaher Scientifics second quarter 2021 earnings call. At this time, all participants are in a listen only mode.
And answer session will follow the formal presentation, if anyone should require operator assistance during the conference. Please.
Please press Star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the call over to your host, Russia, Koski, Vice President of corporate finance.
Thank you operator, and thank you everyone for joining us today for our second quarter, 'twenty or 'twenty one earnings call.
Hosting the call today are Dan Moore, CEO, Steve Cross Creek, and CFO John Duffey.
They'll then Trump, our Chief Science, and Technology Officer, intra Europe, formerly CEO of Nomura and now general manager and President denim, our scientific catalytic processes will also join us for Q&A.
During our discussion today, we will be referring to our earnings presentation, which is available on the Investor Relations section of our website.
And the more scientific dotcom.
On slide two 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 bench or circumstances. After the date hereof.
As required by law.
Today's presentation also includes references to non-GAAP financial measures a.
A reconciliation to the most comparable GAAP financial measure can be found in the earnings presentation.
I will now turn the call over to Steve.
Thank you Ross.
Good afternoon, everyone and thanks for joining us.
Today, we will discuss our second quarter results the expected benefits from our transformational acquisition of November and the resulting enhancements to our capacity expansion plans.
Business updates.
In the second quarter, we made further inroads in our mission to create biodegradable consumer packaging and other products, which invest in global plastic waste crisis building on our team's many accomplishments since we became a public company just over seven months ago.
In the second quarter alone.
<unk> launched the plastics <unk> roadmap.
<unk> hundred 75, virtually all of our outstanding public warrants were exercised to providing funding propel exciting new growth initiatives.
We made further progress on the construction of our Kentucky phase two expansion.
We successfully completed the previously announced Debottlenecking initiative at Phase one at our Kentucky facility to increase efficiencies and in turn increase.
Our overall output of no tax base resin jet facility and finally animal was added to the Russell 3000 index.
I would also like to highlight that year to date, we have filed for a total of 54, new patent applications and encouraging accomplishment further reinforces the caliber of our intellectual property portfolio.
We remain attuned to our customers' Es G goals and are committed to eliminating plastic waste in the environment.
That's why in June we helped launch the U S plastics pact roadmap 2025, and aggressive national strategy led by the recycling partnership and the World Wildlife Fund as part of the Ellen Macarthur Foundation's Global plastics back network.
Its road map illustrates how danaher scientific other signatories will seek to achieve each of the U S tax for targets and realized a circular economy for plastics in the United States by 2025.
Yeah.
This represents an important milestone in the fight against plastic waste and we are extremely proud to help make this roadmap a reality.
In terms of customer development, our partner plastic suppliers recently announced the successful completion of its first commercial run of PHA based home compostable packaging film utilizing danaher signature node <unk> polymer.
The new film is designed for a wide range of applications across food beverage grocery retail quick service restaurants JDM foodservice.
It's just the first in a strong lineup of new advanced solutions combustible films that plastic suppliers plans to watch.
Additionally, another partner of our Columbia packaging group and secured large PHH drop purchase orders with Blue chip brands in the quick service restaurant.
Fatality, and foodservice distribution segments, including National fast food chains, Las Vegas Hotel, holding companies and National Foodservice distributors.
Furthermore, as an extension to the current orders in great demand from these customers Columbia's working on fixed commitment contracts with these large brands for both know next base price and no next eggs.
We were also pleased to have been recognized by our partner Amira on their recent earnings call, where they reiterated their commitment to sustainability and their excitement with progress on testing node acts for inclusion in their bio based product lines.
I would like to reiterate that we maintain a sharp focus on our core competency of product application development as we continue to support various R&D projects for our Blue chip customers.
Their sustainability goals.
Our customers are well respected global consumer focused brands that have expressed confidence in us because of our intellectual property.
The science behind our technology is proven.
We have the depth and expertise to provide commercialized and scalable solutions.
These are all key differentiators for us.
We have been scaling this technology for 14 years.
Because of our close collaboration with our customers, we know what solutions, they want and continuously evaluate areas, where we can both enhance existing applications and also explore possibilities for innovative new applications across a variety of industries.
All in an effort to help.
There will be a foundation for a circular economy, while building value for our shareholders at the same time.
We believe our transformational acquisition of November should accelerate our ability to deliver next generation solutions to leading consumer product clients are we at.
Extremely excited to provide you with a bit more detail on our plans for integrating this bioplastics innovator onto our platform.
In July we signed a definitive agreement to acquire Nova a leading developer of thermal catalytic conversion technology that produces high performing.
Inefficient cost effective polymers and chemicals.
We closed the transaction on August 11th.
I'd like to take a moment to reiterate why this transaction is so compelling for our business our customers and for our shareholders.
This transaction opens up new avenues to build upon our core competency of application development enhancing the strength of product applications. We can develop due to the complementary nature of Nova nurse polymer, which when combined with no tax.
None of them are technology will enable us to increase the expected overall volume of finished product, we will be able to deliver all while significantly lowering our production costs and capital expenditure per pound produced.
We further quantify that we expect production cost of P. Three H E b approximately half the cost with no tax.
Initial feedback from our customers has been very positive.
Many of them are already familiar with November and their technology and are enthusiastic about the benefits of better barrier properties. Among other advantages that are expected to result from the integration of November onto the <unk> platform.
I would also like to note that we are adding amidst talent to our team recognized scientists and business leaders.
Jeff Europe.
Mirsky, former CEO will now report to me as our general manager unprecedented at Danaher scientific catalytic processes and his team in Rochester, New York, well I'll remain with the company.
Jeff is an outstanding leader with over 15 years of experience in the industry.
Integrating november's team of scientists and engineers will allow them to readily access our application development expertise and the regulatory expertise that we already have in place.
Separately in addition to welcoming Jeff and the talented developers and scientists at November. We're also happy to announce another New addition to our team.
And further rest of our efforts to commercialize the production of PHA and to expand our business development initiatives I'm happy to announce today, but we have hired Debra Mcdonald as our chief of corporate development was reporting to me.
Beverly joins us from Nestle, where she led technology licensing within their open innovation adventuring debated.
Now, let me provide you with a bit more detail on how exactly none of them are well fit into our current manufacturing network.
Last quarter, we walked you through the process by which the Ameren creates our same mature node <unk> based products from the initial sourcing of feedstock such as canola oil through the three step process of fermentation downstream processing and then into extrusion, where we produce finished resins that we shipped to customers for use in their product manufacture.
Right.
None of them are utilized as feedstocks as an input interest proprietary thermo catalytic conversion process to produce a unique type of BHA P. Three HP.
Otherwise you referred to under its brand name as Renaud, though.
<unk> process is 10 times faster than typical fermentation processes with fewer steps leading to less energy usage banning instrumentation.
We know it can be blended with no tax extrusion process to produce resins for customer application or it can be sold on a standalone basis for films or fibers.
Additionally, it can be sold into the acrylic acid market, where it can be used in applications such as the production of Super absorbent polymers for diapers feminine hygiene products industrial wipes and other nonwoven materials.
When combined through the extrusion process with unique strengths and superior structure of note acts our signature PHA Reno, though offers numerous technical operational and financial benefits for <unk>, and our blue chip customers, including improved barrier properties for food packaging.
Lending or novo in our formulations, we expect to be able to produce our residence at a substantially lower overall cost.
I think our customer mix, we expect that when an average of 30% renewable wind to our presence through the exclusion process at our Kentucky and Georgia facilities.
This should substantially reduce our capex per pound produced with additional production cost benefits expected as well.
Let's make it clear that although renaud, who is highly complementary as you blended formulation with no tax there's not a replacement for node.
And be used in many of our applications.
<unk> remains the backbone of our formulations, including many of which were novel will not be used.
Yeah, we are.
Excited to show you a bit more quantification around the expected benefits of the deal as we stated on our November conference call. Several weeks ago. It meet the growing demand of our resins, we regularly evaluate our manufacturing capacity.
The most effective and efficient way to produce materials.
In this case, we believe our best course is to move forward with our plan includes <unk> expansion through the construction of our commercial renewable plan.
We intend to modify the plans for our Banbridge facility to include preferred members in the near term compared to the six for matters. We have previously stated.
That said, we do intend to add the second set of three for matters to the Georgia, the Greenfield facility in the future.
I refer you to slide seven where we have included a visual of the old plan versus the new plan in.
In July we received an updated engineering estimate for the old plan as shown on the left side of the slide.
Based on continued deflation in construction materials throughout 2021, the new estimate we received for Europe.
$826 million plus or -25%.
By expanding capacity are utilizing november's technology as shown in the new plan on the right side of the slide we'll be able to produce more volume at a lower capital expenditure per pound, reducing our near term need for fermentation.
Blending ever Novo with no tax.
Additionally, as you can see on slide eight we have displayed several return metrics comparing our previously announced Georgia Greenfield expansion with the anticipated combination of in November and Danaher plant network.
Looking at the economics of the transaction with her I said on the year 2025.
As you can see the expected synergies are clearly compelling.
On the completion of Kentucky Phase, one and two the Georgia Greenfield expansion and the renewable commercial plant. We expect to produce more finished product path based on estimated customer mix, while experiencing a reduction in growth capex, while also reducing manufacturing cost per pound produced.
Ultimately this should return value to shareholders through an expected ROIC see a greater than 35%.
We look forward to updating you further on our plans for the renewable commercial plant. Once we have completed the site selection process.
As we take a step back and look at the near term we are making good progress on our other previously announced expansion plans.
The successful and on time completion of our Debottlenecking initiative for Phase one of our Kentucky facility in Q2 marked a significant achievement.
This positions us well to further scale production kodak's towards our expectation of reaching 100% of the phase one facility's annual run rate capacity of 20 million pounds of no tax base resins by the end of 2021.
After taking steps to optimize our processes and equipment.
He was brought back online in late May we used early June to confirm that both fermentation and downstream processing of our material is running at the projected levels.
In July our neat PHA production, which is an intermediate step in our finished product process was over 60% of capacity up from approximately 50% during the first quarter and we continue to expect to be at 100% of capacity by the end of the year.
Our Kentucky Phase two expansion is continuing on schedule and as you can see from the aerial view on slides nine through 11, we have made significant progress so far in 2021.
As a reminder, phase two construction at our Kentucky facility commenced in December of 2020 and is expected to come online in the second quarter of 2022, ultimately providing us with 45 million pounds of finished product capacity.
The completion of both phases will collectively bring our total capacity up to 65 million pounds of finished product per year.
The facility.
Separately, our new state of the art Greenfield facility in Banbridge, Georgia remains in the Preconstruction engineering stage and we have already placed orders for many of the long lead time items needed to complete the modified construction plans.
We still expect to break ground in 2022 with the three <unk> and extrusion facility is expected to come online in mid 2023.
As we continue to focus on enhancing capacity and lowering our capital expenditures and production costs on a per pound basis.
Also plan to carefully evaluate more brownfield opportunities.
Selection for the renewable plant is in process.
While completion of Kentucky phase to the Greenfield facility and the renewable plan. It should provide us with an overall finished product capacity of approximately 390 million pounds.
Please save up approximately 60 million standalone pounds of Renova.
This compares favorably to our prior estimate of 315 million pounds under our old plan.
We are still in the early stages of our long term journey to ramp up our manufacturing capacity, we remain extremely optimistic about the future for Denver.
With that let me turn the call over to Jeff for an update on our financial results.
Thank you Steve.
I'll speak to slot Quill overall, it closed out in the first half of the year with DHA, representing a growing share of our revenue.
I will discuss our second quarter results followed by some color on the full year 2021.
Revenues for the second quarter of 2021 grew <unk>, 2% to $14.5 million compared to $11.9 million in the second quarter last year.
This increase was primarily driven by the scale up with PHA production for phase one of the Winchester, Kentucky facility that we brought online in 2020.
In the second quarter, we derived 29% of our revenues from sales of PHA based resins compared to 7% in the second quarter of 2020.
We also benefited from a $1.8 million increase in revenue related to research and development projects, primarily reflecting the addition of several customers compared to the prior year quarter, including Mars Wrigley Panera Authority.
We calculate our average sales price based on actual sales that both PHA based and DLA based finished products to our customers.
Our average selling price was over 270 per pound in the full year 2020.
Over $2.75 per pound for the second quarter of 2021 and it was over two eight for the year to date period in 2021.
Our I S. T and then he gets in theory, it is impacted by customer and customer mix and product mix.
Quantity sold can differ from quantities produced just volumes might be added or taken from inventory.
Second quarter gross profit was $2 million compared to $3.4 million in the second quarter of 2020.
Adjusted gross profit, which excludes depreciation and stock based compensation and rent related to our manufacturing operations was $4.1 million compared to $4.5 million in the second quarter of last year.
Adjusted gross margin declined to 28, 1% from 37, 6% in the second quarter of last year, primarily due to elevated fixed cost absorption as production scales up at the Kentucky facility.
Both periods the average cost per pound of PHA based product sold was significantly higher than CLI based products sold as a result of commencing limited DHA manufacturing activities in early 2020 at the Kentucky facility and the incurrence of associated incremental cost as production scaled up.
We therefore saw the mix impact the gross margin given that PHA represented a higher proportion of revenues in the second quarter of 2021.
Compared to the second quarter of 2020.
We expect our average cost per unit sold to improve as the plant scales up production.
R&D and SG&A expenses, excluding depreciation and amortization stock based compensation and one time items were $6.7 million in the second quarter of 2021 compared to $4 million in the second quarter of 2020.
Mainly due to an increase in head count and salaries to support our future expansion plans as well as increases in costs associated with having a larger asset base, such as property taxes and property and liability insurance.
Public company expenses added approximately $1 million of incremental costs for the second quarter of 2021, which we did not incur in the second quarter of last year and include items, such as D&O insurance increased public company auditing and accounting Pos and Sox readiness fees.
The adjusted EBITDA loss in the second quarter was $2.7 million compared to $4 million in the same period last year attributable to the factors I just discussed adjusted.
Adjusted EBITDA excludes stock comp other income and other add backs is reconciled in the appendix.
Adjusted EBITDA was a loss of $2.6 million in the second quarter of 2021 compared to a gain of <unk>.
$4 million in the second quarter of 2020, yeah.
We add back our rent expense is primarily related to the sale leaseback agreement associated with the Kentucky facility and this is essentially a replacement as depreciation and interest expense.
Turning to slide 13, I'll provide an update on our outlook for the full year 2021.
The increased availability from the completed phase one capacity expansion and the successful completion of our Debottlenecking initiatives. In Q2 are expected to allow us to significantly scale up production from recent levels as we move through the year that being said based on the timing of customer product launches we expect.
Our revenue for the second half of the year to be weighted towards the fourth quarter.
We continue to expect adjusted EBITDA cash flow from operations to benefit in 2021 from operational efficiencies as the Kentucky facility increases utilization levels.
We now expect total operating costs to be approximately $31 million for 2021, including the post acquisition period for November and excluding DNA stock based compensation of one time items.
Additionally, we expect zero cash.
Cash taxes for the year.
For the full year 2021, we now expect capital expenditures to be in the range of 125 million to $150 million inclusive of investments in November for the post acquisition period.
Looking at our balance sheet during the quarter, we streamlined our capital structure by redeeming our public warrants 99, 6% of the public warrants or voluntarily exercised by the holders thereof. Prior to the redemption date, resulting in approximately $138.4 million in proceeds.
Which were used to fund the majority of our November acquisition.
We have a strong balance sheet in place our total long term debt was approximately $30 million a quarter in that includes $21 million or below interest new market attachment at loans that are expected to be forgiven in 2026.
Cash position continues to provide us with ample support to fund our planned capacity expansions in 2021 as.
As a reminder, in May we disclosed that we entered into a 21 million revolving credit facility with truest that provides us with additional flexibility to invest in ongoing initiatives as an animal grows.
Now I will turn the call back to Steve for closing remarks.
Thanks Jed.
We believe gammer holds the keys to disruptive technology that provide a scalable and highly effective solutions at one of the world's most significant issues plastic pollution.
According to the Ellen Macarthur Foundation, 32% of the world's plastics and up in nature, while the environmental Protection Agency reported in 2018.
Less than 9% of all plastic waste in the U S was recycled.
This is not an acceptable path forward for humanity or our planet and we have to act now to build a circular economy that will protect future generations.
Our customers are aligned with us on this mission and we remain a key part of their sustainability strategies.
Continue to work very closely together with each of them to create innovative and customized solutions for their specific needs.
Our market opportunity remains unmatched and we expect demand to continue to grow as more companies look to us for bio based consumer product solutions.
In conclusion, we are excited by our progress and accomplishments in the first half of 2021.
It's our application development expertise, our large portfolio of patents and our enhanced path to commercial scale through the acquisition of November we remain at the forefront of the Bioplastics industry. We are the premier supplier of PHA Biopolymers to global Blue chip corporations that are committed to eliminating single use plastic waste.
We are still in the very early stages of a unique opportunity to grow our business and build long term shareholder value.
We are poised to transform the bioplastics industry at a global level.
Thank you for your time today, we will now open up the line for questions.
Thank you we will now be conducting a question and answer session. If you would 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 Press Star two if you would like to remove your question from the queue for participants using speaker equipment it may be necessary.
I need to pick up your handset before pressing the star keys. Please limit to one question and one follow up question.
Your first question comes from Laurence Alexander with Jefferies.
Good afternoon, two questions then one would be good.
The new capacity that you have including the <unk>.
You bet.
Should we expect what would be reasonable timeline for expecting.
Sort of another anchor tenants to support that capacity being announced.
And secondly, can you give us updated perspective on raw material cost inflation.
And what kind of headwinds that number might be facing in 2022.
Yeah.
Thank you Laurent thanks for the questions.
As far as a new anchor tenant.
Not going to give a specific projection, but we're talking to our customers know about signing up for 'twenty, three and 'twenty four volumes.
That's high on our list as far as raw materials.
During the second quarter, we averaged about 47 cents a pound for canola oil.
And we are still contracted out through the rest of the year. We don't expect that cost to go up more than about a dime through the rest of the year.
We do see.
Significantly higher prices next year, which we have not contracted for yet we are actively working on alternative solutions.
Turning to have us materials relative to canola oil.
And I expect it to have some options before.
Too much further into next year.
Just.
Iterate that we view canola long term as as a commodity and we expect.
These prices to come back down at some point in time, there's been four refineries announced four new refineries announced two canola oil so as those come online we would expect those prices to.
Kind of revert to the norm, but we're not going to wait for that we're as I mentioned were actively looking at alternatives.
Yes.
And just to be clear you can switch feedstocks without changing the grade of polymer that your customers are receiving.
Yes, that's correct.
The end product is does not really have any bearing on what what youre feeding the the microbe.
Thank you.
Your next question comes from John Ken Wang Cheng with CJS Securities.
Hi, good afternoon, and thanks for taking my questions.
I just wanted to be clear the latest updates of the capital cost plus the no more acquisition at $600.700 million.
As recent as the.
$826 million update that you gave on the original greenfield or if not what's the what are the brackets and then timing of estimates around that.
Yes, John knows you could assume those estimates are based on the same time period for relative to.
Inflation I'm sure that's why why you're asking that question right.
Alright.
Okay, Great and then second I was just wondering if there's any update on the other contracts that you said you are hoping to land. The next you know.
Six to nine months on the last earnings call.
Can you tell us about the progress that youre, making with these customers and if theres anything more on the pipeline that we should be looking forward to as you progressed through the year.
Those contracts are all still in process. They are three months closer than they were on the last call.
As we talked about before.
We're essentially already sold out so we're trying to kind of figure out how to shoe R&D as additional customers and because we want as big of a base as possible so that as we grow.
We will be.
Benefiting from the extra revenue in the years out so those are still in process and as you saw on the.
You heard during the.
Script read that our partner Columbia packaging group has had several success.
Successes recently, and we hope to be in a position to start making some announcements on those as well.
Okay. If I could just follow up on that with Walmart I know I'm supposed to be too, but when your partners have success like that can they increase their order volumes with that provision for within your current contracts.
How does that figure would be.
<unk>.
Phil about status of what you have already.
Yes, no there John they are.
They have signed contracts with us based on there.
Forecast with their customers and so as they get these actual contracts those are those pounds are fulfilling their contract with us now.
Now what will happen.
As has happened.
So far we will have some of those customers come back and ask for more.
And then that's where we got to do a little horse trading and a little evaluating on whether or not we can kind of swaps in pounds around between them and other customers.
Okay, great. Thanks for that color I'll jump back in queue.
Do you have any follow up question from Laurence Alexander with Jefferies.
Hi could you elaborate on your thinking around.
Debt financing versus project finance versus grants.
For them, helping fund the expansion and what.
What level of cash balance that you need to keep just for.
Ongoing operations.
And secondly for the research payments that you call out in the release. This time round, what you see as kind of the cadence of those research and development projects and should that amount grow over time or should it stay roughly the same kind of run rate.
Okay I'll answer the second one first John are on Laurence I'm sorry.
We would expect that to grow over time, but it won't necessarily grow in fact, I know it won't grow.
Straight up it will kind of go up and down but over time, it's going to increase and just to remind you that is really kind of the entry level for a really big customers and big projects.
Towards supply contracts.
<unk> volume.
As far as the first question.
If I had to prioritize them, obviously grants would be great would be preferable.
Project financing.
Is something that we're looking at and.
As you know very attractive if we can get it.
And last in that order would be dead.
In that.
In the project financing, we're actively looking at government backed.
Debt nonrecourse loans.
Thank you.
Next question, Jon <unk> with CJS Securities.
Hi, I was wondering if you could talk about the possibility of using novembers on catalytic process for producing other PHA.
Up to and including no doubts and kind of if that's possible and what that would do to your production costs.
Choose something like that.
Yeah. Good question, John I'm going to let Phil handle that one.
Yes, most certainly we're excited about the November technology platform and the platform does allow for the flexibility to produce other types of.
Shows.
And ultimately it would be possible to produce some of the node X crudes of materials through catalytic means.
One of the things we will explore.
The coming months as we perform the integration with the November team.
To evaluate opportunities within their technology platform.
To expand.
Additional raw materials and additional materials that we can utilize within our overall product portfolio.
Okay great.
Separate question can.
Can you just talk about the demand for your P. OLED products today, just given the rebound in Covid cases, and I know that that's tied to a lot of foodservice industries.
Are you thinking now what are you seeing now.
And demand for that product.
But the variance going around.
Yes, great question John.
It's a little bit of.
Up and down scenario there.
I think last quarter.
I said that we were starting to see our foodservice customers come back and starting to forecast orders in Q3 and Q4, but since then the Delta variant has reared its head and some of those same customers have have now come back and back off.
Additionally.
We had the benefit last year during COVID-19 that that whats the customers that shut down obviously hurt.
<unk>, but the customers that stayed open one is one of those larger customers.
Was concerned about what would happen if we shut down and so they ordered in six months of inventory. So we're kind of seeing a negative impact from that this year as well as they have become more comfortable that we're not going anywhere.
They have.
Covid they have.
You're starting to using some of that inventory. So we so we've kind of got a double negative effect there on the BLA based business right at the moment.
Okay, Great got it.
Next question.
Laurence Alexander with Jefferies.
Could you talk a little bit about the lags or how long it takes to ramp capacity so for the fermentation capacity compared to.
Renova capacity is there going to be any difference in our lifetimes.
And secondly, can you talk a little bit about the customer feedback as you've now that you've announced the November acquisition in terms of how important is it to them the biodegrade ability.
Functional characteristics.
Or the bio based ingredients.
For labeling kind of.
Right sure.
So.
Just use the <unk>.
We're planning a new plan Laurence tried to outline the difference in timing.
In the <unk>.
Original plan, we were going to bring free firm enters online in 2023, and then another mid 2023 and then another three.
Late 2024.
And it wasn't really possible on at least on the same site to go much fashion that just because of.
Space and physical constraints of the number of people involved and the size of the equipment all of those kind of things now we can we can bring.
<unk> facility online.
By early 2004, so we can actually bring the similar volume online more quickly and that is with us not having had a running start at Lenovo like if it had been in the plan a year ago I'm sure that we could have gotten it done.
At the same time by mid 'twenty three at the same time as the other three firm orders So I think.
That's a significant factor in terms of timing, but then also I just point to the difference in Capex in my own experience. The cheaper something is easier. It is to go get it built so.
That's part of my thinking there in terms of relative speed and then.
On the.
Customer feedback.
We think it's important that to offer our customers optionality.
They can kind of have their own choice if they want to pay.
For the renewable ready they can pay for that if.
If they don't they don't have to.
The important thing here is that either way the material is biodegradable and Thats really our mission is to eliminate plastic waste. So we're kind of leaving it with our customers what they prefer a renewable solution or non renewable solution, but ultimately either way, it's going to be biodegradable.
Thank you.
Next question, Jon <unk> with CJS Securities.
Hi, Yes, just a quick one about the possibility of licensing that you hired.
Nice to hear that you hired a head of corporate development I was wondering what the.
That improves the chances are.
And your process that too.
It's a different companies that are out there and possibly more.
Monetizing your IP quicker than just building factories.
Yes, it does absolutely.
We think that this technology is.
Very readily license a bulk.
It's a common catalytic conversion process and very very easy in our opinion to handoff to a licensee.
And additionally, unlike my concerns in the past of licensing node axe, where we will be creating a competitor we feel that we can kind of carve out a position where we can license. This material to people that do not want to use it in combination with other PHH and so it won't affect our markets.
<unk> it all so we're really excited about that possibility.
And we've got.
And Debra is a fantastic add to the team.
And.
If somebody was with tremendous experience.
Got it okay. Thank you very much.
I will now turn the call over to Stephen for closing remarks.
Thank you everyone for joining us today I'm proud of our team and excited to continue our progress in transforming the bioplastics industry as we move into the remainder of the year I would like to give a special thanks to our shareholders and partners for their continued support we look forward to updating you on progress in the future.
This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.
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