Q3 2022 Danimer Scientific Inc Earnings Call
Thank you for scanning by this is the conference operator.
Welcome to the Panama Scientific Inc. Third quarter 2022 earnings conference call.
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I would now like to turn the conference over to Brad Cray ICR.
Please go ahead.
Thank you operator, and thank you everyone for joining us today for Dan <unk> third quarter 2022 earnings call hosting the call today are Danaher CEO , Steve Cross Creek, and CFO , Mike Hey, Jess.
During our discussion today, we will be referring to our earnings presentation, which is available on the Investor Relations section of our website at denim or scientific Dot com.
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.
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 events or circumstances. After the date hereof, except as required by law.
Today's presentation also includes references to certain non-GAAP financial measures reconciliations to the most comparable GAAP measures can be found in the earnings presentation I will now turn the call over to Steve.
Thank you Brad good afternoon, everyone. Thanks for joining our.
Our third quarter results were in line with our expectations as we progress further against our multifaceted growth strategy to transform the plastics market.
We produced third quarter revenues of $10 $4 million with PHA revenues up 26% year over year, now representing 51% of our revenue.
With additional capacity available to us from the expansion of our Kentucky facility. During the second quarter. We believe we are extremely well positioned for several significant expected customer product launches in the months ahead.
We have been through a long journey that we believe puts us significantly ahead of any competitors in terms of our core competencies of application development and commercial scale production.
Even as Covid inflation and supply chain issues have impacted the timing of R&D projects and customer launches over the past couple of years, we have been able to expand our capacity and maintain strong relationships with existing customers.
We continue to see strong interest for our biodegradable solutions.
It is important to reiterate that we are focusing on the factors that are in our control and our strategic priorities as shown on slide three remain unchanged.
We believe our experiences in overcoming the challenges of the past several years have made us a stronger company and we are now better positioned than ever to accelerate our growth trajectory as customers are expected to launch new products and as we secure new customers to fill our capacity at Kentucky and beyond.
While our Georgia, a greenfield facility expansion remains a core part of our future leap forward. Our operations in Kentucky are situated today to provide us with positive cash flow to run the business effectively as volumes grow.
Turning to slide four we continued to execute our growth strategy during the third quarter with P. J revenues up 26% year over year, now representing 51% of our revenue.
Following the successful expansion of our Kentucky operations in June we have continued to ramp up our production capabilities at that facility.
We still believe that we may have opportunities for both better raw material utilization and other cost savings at the Kentucky facility in the future as we increase production.
Additionally, our learnings from our Kentucky facility construction now provide us with confidence that we can reduce our capex costs by up to one third on future plans following the construction of our Georgia Greenfield facility.
And our efforts to enhance team capabilities to support growth. We were pleased to hire Steven Barton as our new Chief legal officer, and corporate Secretary is broad skill set familiarity with numerous industries and experience managing the legal affairs of publicly traded companies will be vital as we continue our growth journey.
On the business development side, we are thrilled to announce that we recently signed a distribution agreement with former formerly AVN a leader in specialty polymer formulations and distribution across the globe I'll.
I'll discuss this agreement in more detail shortly.
I'm sure. Many of you are aware of my recent trip to the White House in September .
I was honored to speak on behalf of Danaher at the recent White House summit on biotechnology and bio manufacturing for the American bio economy.
The animal was the only Biopharma company invited to the band, which was held in conjunction with president by the September 12th Executive order watching a national biotechnology and bio manufacturing initiative to ensure that products invented in the United States can be manufactured here as well.
The summit included a high level Roundtable with members of Congress cabinet secretaries, and other industry and academic leaders as well as the panel and biotechnology research and development to solve.
<unk> challenges across our industry.
The President also recently signed the landmark chips and Science Act, which makes historic investments to strengthen American manufacturing research and development Science and technology.
Overall I left the visit highly encouraged that our federal government is really getting behind the biopolymer industry and is taking the plastic waste issue seriously.
In addition to the executive orders I just discussed Congress's recent introduction of the inflation reduction Act also provides an additional $40 billion of loan authority for the U S Department of energy titled 17 loan guarantee program.
As a reminder, Denver is currently in the part two application process for a loan guarantee into this program and we continue to work closely with the D O to secure this funding.
In regards to other important updates on the regulatory side, a new amendment was recently passed as part of California's previously announced ban on single use plastic bags provided at the point of sale.
This amendment caused for the banner petroleum based grocery store pre checkout plastic bags by the year 2025.
These pre checkout bags are often seen as the fruits and vegetables section in grocery stores, California will be the first state to discontinue this common grocery store item, which can be replaced with danaher is biodegradable solutions.
Moving to slide five I'll speak in more detail to some of our recent customer and business development updates as a reminder, our customers are primarily major blue chip multinational brands that have all made long term commitments to make their plastic packaging recyclable reusable or biodegradable in the years ahead.
Multinational partner Mars Wrigley is still on track to launch in no tax base bag for their skills brand, which we believe to be the world's first time compostable candy packaging and we expect to provide more details on their progress in the coming months.
Separately, our partner Pepsico has been successful with their compostable chip bags for their off the eaten path brand of chips, which are currently sold in whole foods stores across North America.
As I mentioned earlier, we recently signed a distribution agreement with four Meera, formerly AVN, a leader in specialty polymer formulations and distribution across the globe.
For mirror offers highly specialized technical processing design and regulatory support for critical end market applications in the health care consumer industrial and mobility markets.
Support leading blue chip customers and suppliers of the value combination of commercial and technical expertise global market knowledge and industry, leading logistics and service capabilities.
With their extensive customer base and knowledge, we were excited for the future in Danvers, no tax to reach a broader array of customers and applications.
In regards to <unk> based products that are currently sold through our converter partners. Our partner wind Cups phage draw brand made from no tax is now in approximately 315 distribution centers and 238 cities across the U S based.
Page drives are now wind cups fastest growing product.
Separately. We're also happy to report that all Costco store food courts in the U S. Now offered Danvers Nordics based straws.
These drives are produced and distributed by our partner Eagle beverage.
Additionally, our note X based drives are performing well at Starbucks locations and we are pleased with the growth of this business.
As it relates to our progress with quick service restaurants, denim are still in discussions with and providing sample products to five of the top 10 largest Qs stars in the world many of which have 2025 goals to replace their current materials with recycled composed to bull or biodegradable materials.
We expect these prospective customers to represent significant business for danaher in the coming years as we continue to help our customers meet their sustainability goals.
The timing of customer launches is the most variable factor as it relates to the shipment of our products as I discussed with you last quarter interest in our solutions is increasingly strong on the other hand, many existing and potential customers are still dealing with supply chain bottlenecks inflation and overall economic concerns that impact the timing of orders.
And deliveries.
These factors may continue to impact specific customer timelines in the near term we have a diverse lineup of several significant customer product launches starting as early as this year.
That said, we expect the bulk of these launches to occur in the first half of 2023.
These new products will consist of a wide array of applications ranging from quick service restaurant materials, Tpg's food packaging protective packaging films and industrial applications. We project that these specific product launches over the next several months will eventually require an amount of PHA based volume that.
Well in excess of our Kentucky capacity.
To be more precise once fully commercialized we expect the combined volume and again just from these specific product launches to require over 100 million pounds of PHA based finished volume annually by 2026.
Now it.
It is important to remember that we expect these launches to benefit our results gradually in step with the cadence typical of our large global customers that launched new products in stages, but we have a strong line of sight on demand that scale up is not linear we expect to see an initial benefit to our volume in the first 12 months of the launch followed by a more pronounced step up in <unk>.
Shipments as we move beyond the first 12 months. These planned launches support our expectation to dramatically increase volumes through 2026 based on our current customer schedules.
Now I'd like to turn the call over to Mike to discuss our financial results and outlook.
Thank you, Steve I'll speak to slide six we closed out the third quarter with sales of $10 $4 million, which were down $2 9 million or 22% compared to 13 $4 million in the prior year third quarter the.
Sales decrease was driven primarily by $4 $4 million year over year reduction in P. L. A resin sales.
This was partially offset by $1 $1 million or 26% increase in PHA based resin sales.
With PHA based resin sales now at $5 $3 million that product now represents 51% of total sales.
As a reminder, a portion of P. L. A sales was negatively impacted by customer operations in Ukraine and Russia.
We reported a third quarter gross loss of approximately $4 $1 million compared to a gross loss of $230000 in the prior year period.
On an adjusted basis gross loss was approximately $800000 compared to gross profit of $2 $6 million in the prior year quarter.
The decrease in adjusted gross profit was primarily driven by lower Pls volumes, which continued to have a higher adjusted gross margin. The PHA, although that differential is diminishing as the volumes of each product change.
That's another way our PHA margin improved as volumes of the product increased and our PLE margins decreased as fixed costs were expense across our lower volume base.
As we have mentioned previously we expect our average cost per unit at our existing facilities to improve his PHA production scales.
For the third quarter, 2022, R&D and SG&A expenses, excluding depreciation and amortization stock based compensation rent at one time items or $11 $2 million compared to $9 $2 million in the prior year quarter.
Mainly attributable to an increase in headcount and salaries to support R&D efforts at our future expansion plans as well as increases in costs associated with having a larger asset base, such as property and liability insurance and.
In addition, this quarter includes three months of R&D and operating expenses related to Danaher catalytic technologies, which we acquired in August 2021.
Adjusted EBITA was a loss of the third quarter of $12 $9 million compared to a loss of $7 $4 million in the prior year quarter, primarily due to the factors I discussed in our gross profit SG&A and R&D results.
Adjusted EBITDA excludes stock comp other income and other add backs is reconciled in the appendix.
I want to briefly mention the noncash goodwill impairment charge that we took in the third quarter given.
Given the decline in our market capitalization during the quarter to a level well below our book equity value, we determined that the value of our goodwill was impaired.
Goodwill originated from the <unk> acquisition in August 2021.
It is important to note that the impairments of termination considers that entire danaher business and does not reflect a change in our view of the value of the danaher catalyst technologies business.
We remain confident in our ability to execute against our strategic objectives with a prudent focus on profitability and cash management.
Beyond the potential funding from the Doe loan program to support our expansion projects, we have multiple avenues to fund and run the existing business as we look forward.
We continue to believe that our operations at Kentucky should provide us with the ability to run the business and manage cash effectively as we work to reel in additional customer contracts, while our current customers ramp up more significantly in volume.
It is important to note that we have a cost structure, which is largely built out to support the expansion of our business through the coming years that said, we have the ability to flex our spending to an appropriate level to meet demand while controlling costs to improve cash flow.
Our cash position at the end of the quarter was $99 $1 million.
This was augmented by net cash inflow of $5 5 million of additional forgivable, new market tax credit loans during the quarter. Additionally.
Additionally, in the third quarter, we initiated a new at the market or ATM program.
Since that time, we have issued a modest amount of shares to cover the cost of implementing the program, making net program launch cash neutral.
I would like to emphasize that we will carefully look at opportunities to enhance our liquidity and we'll be very disciplined in the levels of which we issue shares.
Looking at our outlook for the full year 2022 on slide seven.
Based on our results year to date and our updated visibility through year end, we are sharpening our full year 2022 expectation for adjusted EBITDA to be in the range of negative $45 million to.
To negative $40 million.
As we finish up 2022 factors.
Factors, we discussed over the last few quarters have and will continue to remain intact.
Positive year over year contribution from higher PHA based resin volumes will be more than offset by several factors.
This includes lower Pls sales expenses associated with higher head count and other costs to support our asset base and a full year of operating costs and Danaher catalyst technologies to support the future commercial commercialization of these products.
Regarding cash flow, we now expect capital expenditures in 2022 to be in the range of $165 million to $170 million inclusive of capitalized interest and internal labor as.
As mentioned on prior calls we will remain flexible with our capital spending so that we can speed up or slow down the greenfield facility construction with.
With this flexibility in our spending we expect to end the year 2022.
With cash between 60% and $65 million.
Looking beyond 2022, we continue to believe that our PHA revenue is poised to drive a significant increase in our overall profitability.
Pele revenues will likely remain challenged we've already made significant investments in our SG&A and R&D that we can now leverage overtime as revenues grow.
Additionally, we remain confident in the future profit contribution for our investments in Danaher catalytic technologies.
Now I'll turn the call back to Steve for some closing remarks on slide eight.
Thanks, Mike.
In conclusion as we move into 2023, we will continue to focus on executing the six priorities of our growth strategy, while maintaining a prudent approach to cash management.
With our industry, leading application development expertise and our expanding production capacity. We believe we are better positioned than ever to capitalize on new customer contracts in conjunction with preparing our current customers' expected product launches.
Interest and our best in class Biopolymers remains strong and we are excited to capture growing share of the market as we move forward.
You for your time today, and we look forward to updating you on our progress.
We will now open up the line for questions.
We will now begin the question and answer session. Thank.
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I'll pause for a moment as callers join the queue.
Our first question comes from Jon <unk> with CJS Securities.
Please go ahead.
Hi, good afternoon, everyone. Thanks for taking my questions I was wondering.
Could you be more specific in what kind of ramp youre expecting it would be the initial volumes on these new launches maybe just over the next one to two quarters, what kind of visibility do happen to the timing of that and the initial volumes and then maybe just a little more specificity in how much they ramp from there.
John what was the follow on question.
And just how quickly do you think they ramp from there.
Well the complete scale up will take several years and it won't be linear it will be dictated by the actual timing of the product launches that we've been forecasting.
We expect significant growth in a dramatic improvement in the utilization of our Kentucky facility next year.
But that the volume next year would be on the low end as compared to the volume obviously at the full run rate as I said, it's not going to be linear.
These things will start smaller and then grow quickly into 2024.
Okay got it.
The reduction in Capex this year.
Is that just a change in the timing of your spending or is there something else going on there maybe a change your estimates I think.
Mentioned or somebody mentioned in the prepared remarks that.
Your capital spending estimates are coming down going forward, but I wasn't sure if that got reflected this year's spend as well.
Yes, John Great question, we've kind of just looked at being just very frugal with our capex spend and we've just identified areas, where we can slow down the capex spend so we're committed to some spend out through the years, but we've been able to move those out and that's just taken some immediate pressure off of the <unk>.
Cash flows and I think the slowdowns will be impactful as we're kind of waiting for the volumes to ramp up into Kentucky facility and kind of lessen the burn rate of cash in that direction. So there's nothing significant that we've stopped other than the Greenfield project, but thats. The majority of the cash Capex that we had.
Really had in our estimate before so the majority of us are related to the Greenfield.
Okay, Great. That's my two ill jump back in queue. Thank you.
The next question comes from Laurence Alexander with Jefferies.
Please go ahead.
Good afternoon, I guess just to follow up on that can you just.
Unpack, a little bit what utilization rate, Kentucky needs.
To hit to be free cash flow breakeven.
And secondly can you unpack your comment that it will take several years to hit the high end of utilization rates were at the very low end next year or do you are you scheduling a scenario where you're at five.
<unk>, 10% utilization rate next year, and you get to 80%.
<unk> in five years or seven years or can you give some sort of framework around how you think.
The order book relates to the production ramp.
Yeah I'll take the first part of that Steve I think in terms of we think of Kentucky, Kentucky should be a strong cash generator for us and asset levels that are certainly well below its capacity and.
They don't have any SG&A for the most part and very little R&D. So everything they've got kind of going through its just going to be really gross profit is going to be pretty representative of the.
EBITA at that point so.
We're estimating levels that are probably even in.
In the range of.
20% or so of as capacity utilization on a consistent basis.
Be able to make that facility breakeven from an EBIT standpoint.
So.
That has got to kind of grow to the point, where we're can it start to cover then the roughly $50 million or so that we have in R&D and SG&A at the corporate level.
And we don't think it's it's probably in the range of maybe maybe two thirds two to three quarters. So that you actually use them its nameplate nametape plate capacity to reach that so even on top of that.
It has the ability to generate cash when fully utilized that.
That can even than support it.
Some capex for the organization, but certainly not enough to fund things like a Greenfield project.
And Laurence Steve here.
Credit answer your second question. So we're saying that just with these product launches that are in front of us and not looking at the rest of the pipeline, but just these launches that we're expecting over the next several months.
We will do over 100 million pounds of product shipments in 2026, which implies we have to hit that run rate at some time in 2005.
We will accelerate rather quickly from 'twenty to 'twenty, four, but we're not giving specific guidance in 2023, just because of the variability of cash.
Timing of customer launches, but we do expect it to be significant.
Growth improvement and as I mentioned earlier, a dramatic improvement in the utilization of the Kentucky facility in 'twenty three.
Great and then if I may and then I'll hop back in the queue can you just tie that to how youre thinking about the.
The minimum cash balance.
Want to carry in 'twenty, three and 'twenty four.
And the timing of any further expenses on the Greenfield.
Oh sure, yes, we've kind of in your kind of carefully plotted out where we believe the cash balances are going to go and.
Comfortable in the $60 million to $65 million range ending this year that we've guided towards and I think as we've said in the past we believe you know.
Cause ebbs and flows we'd certainly love to stay above $20 million or so on a kind of a go forward basis and with the various levers that we feel like we have the most importantly, just getting volume improving through the Kentucky facility, reducing the burn rate managing our costs and.
Continuing to moderate spend on the Greenfield until we have that funding in place we feel like we can actually make.
Make it through for quite some time.
Thank you.
Alright, Thanks Laurence.
The next question comes from Thomas Boyes with Cowen and company.
Please go ahead.
Great. Thanks for taking my questions, maybe just I wanted to follow up on the Greenfield facility, just because I know that it was in the deck.
Any more was there any spending in <unk> I think I. Originally there was maybe a $136 million as of <unk>.
And then is that now that we're kind of decelerating there or is that the expectation that you could still do start production in 2024 is that like we're going to circle up but this was later date in time once we have better volumes and.
In Kentucky.
I'll go ahead and take part of that question, Mike I'll, let Mike answer the Q3 Greenfield spend.
But.
What I would say as far as 2024 startup that will depend on when we get the loan.
<unk>.
At this point, it's still possible to hit late 2024, but.
It's probably more than likely it will slip into 2025 at this point again, just depending on the timing.
<unk> financing.
Okay.
To answer your first question.
We spent just a tick over $16 million on Capex for the Greenfield in Q3.
Got it.
Should there be some nominal spending going on just over time, just as youre continuing to do small amounts of worker.
The crews that you had moved over from Kentucky to go to the Green facility are they kind of going home or.
How do we think about that kind of Capex Luke.
Well okay.
Okay.
We didn't really move the crew over from Kentucky to to the Greenfield Thomas We did have a small staff there.
Running the project, which we've handed those responsibilities over to our engineering firm.
And so we've reduced our footprint there considerably.
Yes, just to add to that so yes, theres a couple of different major buckets, we spend out for the Greenfield one of those engineering and for the most part at the end of 2022, we believe that spend will be be completed the construction is really where the slowdown is occurring there says we don't really have much activity going on there. So we do think theres, a very nominal amount of that too.
In 2023, there are some pieces of equipment that we've already ordered and those are coming in and we do have obligations to pay for that but overall the spend on the greenfield for Capex for next year will be a fraction of what it was for this year and.
Again, we've pushed some of these payments out a little bit further, especially on the procurement side is really the area. We've had some success in pushing out payments and Thats whats given us I think a little bit.
And he's on the cash burn from a capex standpoint.
Got it appreciate it and then maybe just I want to make sure you didn't Miss it it was just on.
Originally we were thinking that there would be kind of EBITDA breakeven for the Kentucky facility some time exiting the year.
Is it 20% utilization is the right number.
13 million pounds.
So at that facility is that something you could reasonably.
The reason, we see in the first half of next year or is it kind of too early to say just based on the variability of the customer lunches.
Yeah, I would say that we certainly have stated that we believe that Kentucky facility would be.
Breakeven on a run rate basis at some point in the fourth quarter of this year and necessarily that's still our view on that and so as we kind of move into 2023, and again things are lumpy and we don't know the exact timing.
When these launches will occur, but it would be our expectation certainly.
That facility would be breakeven.
As we enter into 2023.
Okay. Thank you very much I'll hop back in queue.
Yeah.
The next question comes from Jon <unk> with CJS Securities.
Please go ahead.
Hi, I just wanted to follow up on the comments on the deal we alone and maybe the push out of a greenfield startup.
What is the change there just in terms of timing and the various moving parts out there.
You guys are discussing with them.
Yes.
I think as we stated we believe that we'll be in a position to submit our our park two application before the end of this year and we're assuming that's going to take them.
Four plus months or so to probably work with that so I think we're we still don't believe there'll be any any funding opportunities really in Q1, we are hopeful that we will be able to have a funding.
And draw starting in Q2 of 2023.
And Thats really kind of the best knowledge, we have at this point.
Okay great.
And just with the timing and the financing in question and the construction.
What is the sentiment of your customers and potential customers, who would probably need to greenfield what are they thinking in terms of.
Signing agreements with you you know.
Just given that all the stuff is in the air.
Well thanks for the question John .
Customers.
We are obviously.
Checking in with us on volumes and commitments as.
As they plan their launches so they understand that we have limited volume, but we are making those commitments individually to each customer to make sure that we can support that our plan and.
Going going into the future.
We will clearly need the greenfield facility to support that growth.
But that's a ways off yet and we have enough material on hand here to support these product launches that are coming out.
Customers are.
Also there are kind of there is kind of a longer queue of customers now that are looking at signing new off take agreement.
Okay got it.
Existing PHA customers.
Not the new launches that you're talking about what are their whereas the volume do you expecting out of them as we go forward.
Q3 was probably it might've been a trough for them, but I don't know if theres more pressure ahead, just given the macroeconomic pressures.
Yes, no good question John .
Kind of looking at the at the macro situation in the economy.
We saw in Q3 was that existing customers are.
Being prudent and conservative in their own business and kind of planning ahead in case, there's a recession and those kind of things and so we see a lot of activity where with things like inventory reductions.
We certainly see that easing into Q4, and we would expect Q4 to have higher volume from existing customers.
Spending in Q3.
Great. Thank you and then finally do you have any update on the catalytic PHA opportunity either with your partners in the Petro Chem industry or licensing.
Yes.
No specific update John except to say that we are and.
Deep discussion and negotiation.
With our potential colocation partner, which is going very well.
And also with an offtake partner, which is also going well so we remain very.
Optimistic and upbeat about the opportunity there.
And continue to our internal work also continues to reaffirm.
I think on last quarter's call I mentioned that we had shown the ability to replace node actions several of our formulations with up to 50% of Renova, which is a significant change versus the 30% that we estimated when we made the acquisition so.
It continues to move in the right direction and we're very excited about it.
Got it thank you guys.
The next question comes from Laurence Alexander with Jefferies.
Please go ahead.
Mike could you unpack a little bit more sort of the technical side of the partnership with <unk>.
How where you are on the Trialing of formulations.
Whether any products has actually moved into testing or even commercial applications at this point.
Sure Lawrence I can't get into.
Too many specifics on the actual technical piece of the question, but to answer the last part.
There is product in trials now product is out with customers being tested and there are several trials scheduled and that.
That project the whole project remains on track and moving forward.
In a favorable way thanks.
And if it does scale up.
Would you be you'd be supplying it from the Kentucky facility is that right.
Yes, Laurence we would supply from the Kentucky facility, we would be supplying.
Either.
Powder or liquid.
Solution.
No. It's for all of US it would be a high class problem, but you have to keep a certain.
<unk> see at Kentucky.
Mailable.
Pork humira to in case, they decided to proceed.
Did you have you always got to creates reflects capacity in reserve for them.
Well, we have some kind of mutually agreed minimum quantities.
Which are built into our plan, but.
But we're not holding.
Millions of pounds without a customer or a contract so its not an issue that would affect us.
Thank you.
The next question comes from Thomas Boyes with Cowen <unk> Company.
Please go ahead.
Thanks.
Wanted to follow up on.
The kind of the macro conditions, causing a bit of delays for potentially new launches, but for previously identified headwinds I know there were some production constraints with certain customers, where they just lack the capital equipment to make the straws and some of that stuff was I guess on boats.
To the extent that you know is it largely been resolved as all of that now installed and up and running for them. If there was to be a return of higher levels of demand.
Would they be caught flat footed or are they kind of just as everyone ready.
Yeah, No. Good question, Thomas <unk>, and my understanding in and all the situations that I was personally familiar with those issues have been ameliorated that things have settled out now and everybody is in good shape.
Got it.
And then just a final one around that kind of all production just use your Bakken pricing what kind of average pricing are you seeing.
On a quarterly basis.
Is there any change in the thought process, there and how far out you kind of look to lock in pricing based on availability in 2023 and beyond.
I'll, let Mike answer the specific questions on the on the pricing, but there is no change in our strategy and we continue to look up as far as a year out and in conjunction with our suppliers.
The best decisions possible as far as locking in those prices, but I'll, let Mike cover the specifics, yes look just to just.
For some of his background and you know our average pricing in Q3 was about $80 88 per pound in terms of what we used in our product. We've we've locked in on average about 86 cents per pound for the first half of 2023.
The ability to go a little further I think we have to some degree prices are probably too far off of that.
And again I think based on our conversations with industry contacts there's still an expectation that prices decline in the future as more capacity comes on.
Great I appreciate the color.
Youre welcome.
This concludes the question answer session I.
I would like to turn the conference back over to Steve Cross group for any closing remarks.
Thank you again to everyone for joining us today I'd like to thank you for your continued interest in Danville scientific and we look forward to updating you on our progress in the future.
Okay.
This concludes today's conference call you may disconnect your lines. Thank you.
Thank you for participating and have a pleasant day.
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