Q4 2022 Danimer Scientific Inc Earnings Call
Greetings and welcome to the Danaher scientific 2022 fourth quarter and full year earnings call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
Minder This conference is being recorded.
I would now like to turn the presentation over to Mr. James Paulsen ski the Companys Investor Relations representative.
Thank you operator, good afternoon, everyone and thank you for joining us today for Danaher, Scientifics, 2022 fourth quarter and full year earnings call.
Leading the call today is deep cross Greig, Chairman and Chief Executive Officer, and Mike, Hey, Jos Dan <unk>, Chief Financial Officer.
I'd like to note that there was a slide deck that accompanies today's discussion which is available on the Investor Relations section of our website at Danaher scientific Dot com.
I'll call your attention to the company's Safe Harbor language, which is published in our SEC filings and also on slide two of the presentation I just referenced.
On today's call we may discuss forward looking statements within the meaning of the safe Harbor provisions of the private Securities Litigation Reform Act of 1995 as amended.
Forward looking statements include among other things statements regarding future results of operations in putting margins profitability capacity production customer programs and market demand levels.
Actual results could differ materially from what is expressed or implied in our forward looking statements. The company assumes 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 non-GAAP financial measures within the meaning of SEC regulation G.
We believe these non-GAAP measures have analytical value, but note that they should be taken as an additional measure of performance to GAAP results. We have provided reconciliations for non-GAAP financial measures to the most comparable GAAP financial measures in our earnings release and our presentation.
Thank you and it's now my pleasure to turn the call over to Steve <unk>, Chairman and Chief Executive Officer, Dan <unk> scientific.
Thank you James.
Good afternoon to everyone and thank you for joining us as you know, we pre released preliminary fourth quarter and full year results for 2022, I marched the 20th when we announced the successful completion of our new $130 million senior term loan.
There are three things I'd like to point out about the term loan that we just started this afternoon.
Burst this that achieves an important strategic financial goal to take near term liquidity risk completely off the table.
It provides us with the financial runway, we need to easily navigate timing and unforeseen circumstances as we realize expected customer demand that we expect will fully utilize our recently expanded capacity.
Second I want to be clear that we have no plans to use the proceeds of this term loan four capital projects.
We remain confident that we can obtain the required project financing to complete the greenfield facility.
Pleased that we've now completed our application to the D O loan guarantee program.
Third.
The high capital cost of this debt, we were absolutely unwilling to utilize equity to create a liquidity cushion.
We view the dilution to shareholders that would have resulted in slightly unacceptable.
As you know for the past week, our fourth quarter and full year 2022 financial results were in line with the guidance that we first provided in may of last year on our first quarter call.
The numbers alone don't do proper justice to where we are today.
The opportunities we have going into 2023 continue to improve and are certainly better relative to what we could have reasonably expected at this time last year.
I'd like to walk you through step by step the path, we've laid out for the year ahead.
First as I said, we've taken liquidity issues off the table.
Second.
Over the past 18 months or so we continue to assemble a very special team of executives.
Mike Hey, Jos Desk, Chief Financial Officer, who brings significant public company experience.
Keith Edwards, a leader in business development at B a S F.
Anthony Austin, a chief Human resources officer, with large company HR experience that Delta Airlines and Pepsico.
Debra Mcdonald from Nestle, who serves as our chief corporate development Officer.
Fred Rogers, who came to us from Pepsico and serves as V P technology and development.
And Steve Martin, our new Chief legal officer, and excellent attorney with significant public company and intellectual property experience, who also holds two engineering degrees, including a masters in electrical engineering.
Finally, with regard to our executive team I'm, particularly pleased to call out that Danaher catalytic technologies under Jeff <unk> leadership has successfully retained every key teammate from November and that business is fully integrated onto the danaher operating platform.
I know every company makes a statement that they have a quote world class executive team, but when you put the animals new talent together with the season, Dan I'm, a leadership cadre of folks like Scott Chief.
Chief marketing sustainability Officer, Phil Van Trump, our Chief Science, and Technology Officer, and Michael Smith, Our Chief operating officer, the statement could not be more true.
Okay.
In addition to having derisked, our liquidity position and cemented our team as we go forward into 2023 the third critical advantage. We have is that our Winchester, Kentucky facility is now fully capable of serving as the growth engine for production that we need a.
The team on site at the plant is also extraordinary they're showing us in no uncertain terms just what they can do.
On slide four of our presentation, you'll find a simplified visualization of the manufacturing process in Kentucky.
Each of our five fermentation units is fully commissioned and running at much higher than expected yield levels.
When we designed future production capabilities relative to earlier designs, we expect to see significantly lower capital expenditures for future fermentation capacity due to the progress we've made in yield.
Those five units feed into three downstream processing lines or trains each drank apt produced about 900000 pounds of meat PHA per month from any combination of fermentation tanks.
We have now commissioned all three downstream processing trains.
The final stage of the process is the two extrusion lines that blend neat PHA with other biodegradable materials into finished dredging.
I'll remind you that PHA is roughly half or the final material weight in our engineered materials.
At design capacity this enables us to produce depending on customer mix, roughly 2.7 million pounds per extruder per month are formulated PHA based resin our finished product.
The almost 20 years of formulation and application development experience that informs the blending and extrusion process is far more valuable and far more difficult than I think is generally appreciated the ability to engineer or formulate high performance materials is an important barrier to entry into this market.
It is as significant as the ability to make neat PHA itself.
The specific resin formula as we provide all have a challenging and intensive research and development effort behind them as.
As a result, our materials are able to run on customers' existing process equipment, whether they are using blow molding injection molding machines or other equipment.
Our products also performed well in their end use applications as straws cutlery or films for instance.
As of today with a little increase in plant staffing, we can push the plant to support the shipment of $3 6 million pounds of formulated resin per month.
An additional incremental staffing would be necessary to get to a $5 4 million pounds of formulated resin per month, that's our full design or nameplate capacity roughly 65 million pounds of finished product out the door each year.
We believe we can reach this level of capacity by year end if needed.
So here's how you should understand the critical math for Kentucky.
E P. H a capacity of 32 and a half million pounds enables us to produce about 65 million pounds of formulated resin.
At an average price of just under $3 a pound the Winchester plant can deliver roughly $190 million of revenue per year.
Well, we won't know the peak margin capability for sure until we actually reach a sustained full capacity utilization. We believe the contribution margin of Kentucky tops out at North of 30%. This would drive positive cash flow at the facility level of roughly $60 million a number that would generate positive EBITDA for the company.
We're incredibly proud of what our entire team has accomplished in Kentucky and pleased to have such a powerful manufacturing engine to propel us forward.
So to quickly recap.
We have the financial resources and liquidity, the expertise and talent and a world class production facility to execute well for our customers around the world.
We are enabling our customers to grow their business with branded high value high margin environmentally responsible products are formulated residents combined unique by the degradation of performance qualities that only a PHA based material can't provide.
We can design our products to meet any level of the different biodegrade ability certifications issued by independent agencies around the world certifications that governments are increasingly requiring and that consumers are increasingly seeking out.
Category by category, we are poised to disrupt large commodity markets dominated by petroleum based plastic.
The demand for ecologically responsible materials is clearly coming from today's consumer, particularly younger adults with quickly growing purchasing power.
They are passionate about the big global issues that PHA can help solve and they're educated about the products and companies they spend with this.
This is why the and consumers for our products tend to be large global brands.
Without adoption, they risk losing share over what often boils down to what could be fractions of a penny for a straw bag or a cup.
Starbucks Dunkin Donuts and Mars Wrigley are great examples as our Pepsi and Nestle both key early partners of Danaher.
These are the types of companies and have embraced their leadership position on sustainability.
Others will follow their example.
And for those of you following along I'll turn your attention to slide five of our earnings presentation.
We had a number of specific wins that I'll talk about.
One is jaspery, a hobby partner and the largest global marketer of Kiwi fruit, who will use PHA based cutlery and its snack assortment.
We're excited to be working closely with hobby, a global leader in sourcing for quick service restaurants.
We are working to build on strong initial interest from some of hobbies major global partners and they have delivered validating trial results for a range of products, including straws Cups cutlery and other applications.
Additionally, we're pleased that our customer Columbia packaging group has partnered with U S foods to launch no tax base draws under their evolve brand.
We're excited to see our partnerships and our degree of penetration into the market grow in strength and in scope.
The demand for our solutions is not only coming from customers. It is also coming from governments across the world consumers are increasingly serious about pushing change on these issues, particularly with respect to the unnecessary pollution of our marine environments.
That is a powerful electoral issue, particularly for single use plastics.
Recent proposed legislation in Europe will if enacted at the end of next year create a 24 month window, after which petroleum plastics will be banned for the manufacturer of single use coffee pods among other categories.
We've launched development efforts with three of the five largest producers in Europe and have anticipated our first test market launches in the second half of this year.
To put this opportunity into perspective, a 10% share of coffee pods just in Europe .
It required the entirety of Kentucky's nameplate capacity.
That emerging opportunity is just another data point that illustrates why we increasingly see significant demand growth as inevitable the trends and activity in the market confirmed for us that we will need the greenfield plant capacity.
We're pleased to announce that we have now submitted our part to application to the department of energy loan guarantee program for our Greenfield manufacturing facility in Banbridge, Georgia, and we look forward to working with the D O E as it evaluates our application.
I'd now like to turn to the additional production technology Underdevelopment in Rochester, New York with Danaher catalytic technologies or D. C. T, where we continue to make progress scaling up renova a type of PHA that isn't just evolutionary it's truly revolutionary the production of our Renova P. H a non chemically.
S. P. Three H P through catalyst rather than fermentation should be a game changer that drives tremendous efficiency into the process and drives tremendous capital and operating costs out of the process.
These features are driving advanced discussions with global Blue chip chemical companies for large scale commercial offtake agreements.
As we complete Ara Novo demonstration plant, we have simultaneously begun its commissioning.
This plant serves two important purposes.
Burst.
It provides product at a sufficient scale to support our customer tests and trials second because we have specified reactor in distillation column designs that are scaled down versions of full sized commercial equipment. The demonstration plant will provide us with useful data that allows for optimization of our commercial plant.
This demonstration plant will help to make clear to extremely important partners. All household names in the chemicals industry that there are compelling economics and tremendous utility associated with the catalytic production of PHA.
They should see clear opportunities for advantaged capital investment lower per pound production cost for PHA and the development of novel applications that incorporate the renewable polymer.
Strategic partnership approach to scale, our catalytic technology platform is intended to enable the rapid deployment of low cost alternative supply chains for a range of materials.
D C t's potential continues to be validated everything pointing in the direction. We have seen since we acquired this technology and we are increasingly confident that the capital we invested in that deal back in August of 2021 could ultimately generate perhaps by far the highest ROI see if any of our capital investments.
I'll reserve a few comments for closing, but this is a good time to turn the call over to Mike for a closer review of the numbers and some comments on our outlook.
Thank you, Steve and good afternoon, everyone I have several items to cover and I'll start with our financial results on slide six and should mentioned that all of our numbers are consistent with our March 20th pre announcement.
Fourth quarter revenues were $15 $3 million as compared to $17 7 million in the same quarter 2021.
We experienced a modest decline in both products and services revenue.
The lower product revenue was a result of an unfavorable shift in the timing of PHA based shipments to a large customer relative to the prior year quarter and lower P. L. A base product sales due to the war in Ukraine, which did not impact sales in Q4 2021.
Service revenue was down which indicate our customers are moving from R&D contracts into commercialization.
We reported a fourth quarter gross loss of $2 $7 million compared to a gross loss of $2 4 million in the prior year period.
After adjusting for depreciation and stock based compensation rent and certain nonrecurring items. Adjusted gross profit was $2 6 million or 17% of sales compared to 400000 or 2% of sales in the fourth quarter of 2021.
$2 2 million improvement in adjusted gross profit was the result of a favorable shift in the mix of revenues caused by a major customer that while unlikely to be repeated came at a very high rate of profitability.
This more than offset the impact of lower sales.
R&D and SG&A expenses, excluding depreciation and amortization stock based compensation rent and one time items totaled $10 $3 million in the fourth quarter compared to $9 7 million in the prior year quarter, mainly attributable to an increase in head count and salaries.
To support our future expansion plans.
Adjusted EBITDA loss for the fourth quarter of $8 $6 million compared favorably to a loss of $10 2 million in the fourth quarter of last year.
The year over year improvement was driven at the gross margin line.
Adjusted EBITDA excludes stock comp other income and other add backs is reconciled in the appendix.
I'll now turn to our full year results.
We book revenues of $53 $2 million for the full year of 2022 as compared to $58 7 million in 2020 one.
Product revenue for the year was $48 4 million compared to $58 million reported for 2021.
PHA related sales increased by $7 3 million or 34%, but this increase was more than offset by a decline in P. L. A base resins of $9 9 million.
As we've discussed previously our pellet business has been impacted by disrupted customer operations in Ukraine and Russia.
PHA related revenues increased to 53% of total revenue in 2022 from 36% in 2021.
We completed several funded research and development projects over the course of 2021 and 2022 leading to a decrease in service revenue in 2022.
$4 8 million as compared to $8 million last year.
We reported a full year gross loss of $10 $4 million for 2022 compared to a gross profit of $900000 in 2021.
After adjusting for depreciation rent stock based compensation and certain nonrecurring items. Adjusted gross profit was $4 4 million in 2022 compared to $11 million in 2021.
The decrease in adjusted gross profit was primarily driven by a change in product mix away from relatively higher margin P. L. A base resins.
PHA based resin margins reflected increased costs related to the ramp up of capacity at our Kentucky facility.
We expect gross margin.
Improved dramatically over time.
So these capacity utilization numbers increase.
R&D and SG&A expenses, excluding depreciation and amortization stock based compensation rent and one time items totaled $46 million in 2022 compared to $31 million in the prior year, mainly attributable to an increase in head count and salaries to support our future expansion.
Plants as well as increases in costs associated with having a larger asset base, such as property and liability insurance.
I'll also note that the closing of the November acquisition was in August of 'twenty 'twenty. One so we picked up a full year of expenses for their operation I guess a partial prior year.
Adjusted EBITA before year, which provides a view of results that exclude the impact of several noncash and nonrecurring items was a loss of $45 million.
This is consistent with the range of our guidance that we established on our first quarter call in early may of last year.
Our cash balance at the end of 2022 was $62 $8 million, which was within the guidance range, we provided of $60 million to $65 million cap.
Capital expenditures totaled $165 million in 2022, which was at the low favorable end of our guidance range of 165 to 175 million.
We also ended the year with total debt balance of $288 million up slightly from the prior year end balance of $261 million.
Mainly due to additional forgivable, new market tax credit borrowings during our third quarter.
Our year end financial statements of course do not reflect the cash proceeds or additional debt from our recently completed $130 million term loan.
It is our intent to generally preserved this new cash on the balance sheet to maintain a strong liquidity position.
That enables better management of the business in general and in the event of unforeseen challenges could have additional importance.
A strong liquidity position means that when do we need to move quickly we will not hesitate.
When do we need to slow down consider options and come to a deliberate and thoughtful decision. We will have the time and resources to do that as well.
We will continue to treat our cash very dearly and maintaining a disciplined approach and its use.
Before I turn the call back to Steve I'd like to provide our outlook for 2023 that corresponds with slide seven of the presentation.
Yeah.
The key to our performance in 2023 will be the magnitude and timing of customer demand to ramp up for PHA based resins and the degree to which we utilize the increased production capacity at our Kentucky operations.
We are confident in our ability to produce PHA based residence at much higher levels.
Which will have a favorable impact on our gross profit margin.
Our guidance also reflects reductions to our SG&A and R&D cost and effort that has already begun and is reflected a sequential improvement over the past few quarters.
Two.
In terms of quarterly flow, while we don't provide quarterly guidance, we have good visibility into the first quarter.
First quarter will show modest decreases in products and services revenues compared to the prior year.
On the revenue line, we've seen a shift in the timing of shipments to one customer relative to last year, which we expect to normalize in the second quarter.
Service revenue will also continue to reflect the completion of some projects.
We have some major programs launching mid year, but it's not yet clear how much of the initial impact will be recorded in the second quarter or the third quarter.
We do expect to return to year over year growth beginning in the second quarter strengthening through the third quarter and then the fourth quarter of the year should show the benefits of a number of major launches the highest levels of utilization that Kentucky, and we expect it to be our strongest quarter of the year.
With respect to adjusted EBITA I'll note the obvious connection between utilization and gross margin as we scale up production activity over the course of the year.
Looking out beyond 2023, we expect our PHA gross margin to strengthen further as we utilize Kentucky school capacity.
We expect our P. L. A business will stabilize at around the level, we ended with in 2023.
We also believe that our current SG&A and R&D spending levels are generally adequate to support the growth of the business.
In terms of full year Capex, we haven't baseline expectation of 26 million to $31 million for 2023.
This range captures prior commitments for the Greenfield facility maintenance expenditures spending to complete the November demonstration plant in Rochester, but a few minor projects.
This range excludes significant additional spending cause banbridge greenfield facility.
Once we have received feedback on our application from the D O.
We will be in a position to provide you with guidance beyond this baseline.
I'll now hand, the call back to Steve for his closing remarks.
Thanks, Mike.
There is momentum in our operations momentum in the biomaterials category and momentum and sustainability as a mandate for responsible brands and businesses around the globe.
The pace of new customer inquiries continues to track at significant rates.
This past quarter the way, we track that activity, we saw a 41% year over year increase.
But that number doesn't reflect though is the increase in urgency and seriousness of those calls the world continues to move in our direction.
We have financial flexibility and strength.
We have an outstanding team.
The production capacity, we need and most importantly, we have the ability to translate all of those advantages into value for our customers who need not only great solutions, but also great execution.
We think we have a powerful formula for success.
When he 22 was an important year that held a great deal of success, but I think our most important accomplishments. This past year was that we completed the foundation, we need for a strong 23 and beyond I believe and our entire team believes that 2023 will be a watershed year in danaher history.
Thank you and operator, we're now ready to take questions.
Thank you we will now 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.
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In the interest of time, we ask that participants limit themselves to one question and one follow up.
Please while we poll for questions.
Thank you. Our first question is from John 10, one thing with CJS Securities. Please proceed with your question.
Hi, good afternoon, everyone. Thank you for taking my questions.
My first my personal Steve was just a question of regulation or the topic of regulation. You mentioned you had some potential out there to you know move to move away from petroleum based plastics. It sounds like you. If they do that you know you don't have the capacity to meet even just a small portion of that well.
What are the other options that are out there for these large companies to do so.
And if there's not that much out there what are they doing if anything to help you guys. You know rich you know that could kind of classy sooner just to meet those needs.
Well. Thank you for the question John .
Right now I'm not aware of any other really elegant solutions to that particular problem.
Cause of heat.
Tolerance quality some a lot of the other biopolymers that could be used got won't work.
It's obviously a great thing for us.
But this is pretty early in.
The news cycle on this so I don't really have anything to report yet John about any possible cooperation with with those potential customers to help increase our capacity.
Okay Fair enough you also mentioned that you have.
Catalytic DHA opportunity was getting stronger than it could be a very high return investments could you just give us a little bit more detail on what you're expecting out of that just in terms of timing of profitability, whether it's a licensing agreement or some kind of you know it's one facility help us understand you know what what's new you know compared to six or six months ago or a year ago when.
When you you know, we're just starting out with that.
Yeah sure John Thank you.
Timing wise Ah well, let me let me just start with you with a little detail on what we're actually doing so what we're working on days negotiating two agreements one is a co location agreement in the Gulf with a major supplier of ethylene oxide.
And the second is an off taker.
A major chemical company.
That offtake agreement Ah would take enough volume to cover our cash flow needs to operate that facility. So it will allow us I believe.
We believe to get attractive project financing and that's about all I can really tell you right now other than you know both of those.
Gaucher patients are moving forward are the off take agreement in at LOI drafting stage at this point and we expect to have some kind of agreements in place by the end of this year. Once you know once we have financing lined up then it'll be you know roughly two years.
To start shipping product.
And and you know just as a reminder, that the plant that we're talking about here is it a 168 million pounds of capacity.
Great Thanks for that detail.
My question for you I think you had mentioned that you would be a very good utilization levels.
For Kentucky exiting the year any sense of what that run rate might be I understand that you know through the year you have some questions about timing and volumes for the ramp but it sounds like you've ever been more shortly as you approach. The end of the year can you talk about that that expectation.
Yeah, Yeah. Thanks, Jon I appreciate the question.
Yeah, I think as we are you know we're expecting our volumes to pick up you know quarter to the next quarters. The next one obviously being stronger at the end of the year and we believe that our you know.
We're not gonna be necessarily consistent all the time is there still will be some lumpiness, albeit we think that with a higher customer base will take a little bit of the volatility out of our capacity utilization than what we've seen over the last couple of years, but I think for you know the expectations. There is that we would certainly be running.
Oh, well above the breakeven.
The capacity required for the Kentucky facility itself and I think probably we're making very good headway towards levels that would cover.
You know make the overall company EBIT positive, but again a lot of work to go on between now and then to achieve the customer demand to come through on the pace that we are expecting it to do to achieve that.
Okay, Great and then second just what what is your current cash burn rate with the new financing in place and you know the adjustments, you're making to the SG&A and R&D.
Yeah, I think overall, we're pleased with some of the changes I mean, our guidance range that we gave out.
Provides I think a pretty good pathway to look at what the cash flows are going to look like for the year and when you look at the ranges of the adjusted EBITA that we gave out the Capex ranges. We believe you know cash interest this year will certainly be higher than it has been and it's probably closer to.
Maybe like a $23 million right considering that the new financing, it's just for the most part starting up here.
As we exit Q1, but you know you could put those together and get a sense of what the cash burn would be.
The savings that we're expecting you know kind of at the in SGA and R&D.
We think that year over year that can be in the $8 million range. So it's a pretty sizable.
The amount of reduction and we're pleased to be able to kind of pull through and get more granular to a to achieve that but you know with the the ending cash balance we had the we use you know we paid off a $10 million loan.
And then we added the term loan net proceeds.
We believe that.
We'll probably end up the year.
Somewhere in the low fifties to mid sixties up liquidity and I think we're very comfortable with that considering what we've said before about.
Being comfortable at the $20 million range.
Okay.
Got it that's very helpful. Just one more and I'll jump back in queue, what what is the nature of the reductions in expenses you're.
Looking at are they are they more efficiencies.
It does it is it something else.
You know I think the I think a number of those are again, they're kind of spread out across SG&A and in R&D and.
There are a lot of things that we looked at it just more granularly as part of their budget process. This year, we did take out some head count.
We are going to have less R&D going on as we've got more projects sort of established and do we have the products that we can sell.
Just a lot of other you know sort of external spends that we've now.
<unk> been able to manage more effectively inside so less consulting things like that but again, we watch these costs very very carefully as you know our SG&A and R&D as a percentage of our sales remains high we were eventually going to grow into that but while we're doing that it's very important for us to continue to sharpen our pencil there as well.
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Our next question is from Laurence Alexander with Jefferies. Please proceed with your question.
Hi, guys. This is actually Kevin I stuck on for Laurence Alexander Thank you for taking my question.
I guess my first question is.
Are you guys counting.
For any recessionary risk I'd say in the back half of 'twenty three and 'twenty.
24.
And you're not looking and I guess, what's your view on sort of the biggest risk to your volumes going forward.
And then in the next few years.
Thanks, Kevin Thanks for the question you know in terms of a risk.
Recessionary risk.
I would say that we we haven't built anything necessarily into the financial model.
But you know it was one of the important considerations in doing this term loan.
As.
I know most of you have heard me say many times whenever I've been asked about risks to our business I talked about the timing of these customer launches because we really don't have control over when those happen we could do our thing on our end and then we then we have to wait for the customer. The one thing we can control that that takes that risk off the table is improving our liquidity.
Quiddity and so that you know with an uncertain economy out in front of US we felt like it was important to do that now rather than wait.
No way for a moment in time, maybe win perhaps if things got really bad in the economy that we wouldn't even be able to do that so that that's really why why we have taken on this additional debt.
Got it thank you.
And you actually may have referenced that's already baked in to confirm the approximate utilization rate that would make you guys break even at your Kentucky facility.
Just wanted to confirm that.
Yeah. We stated this a couple of times, Kevin and what we've said is that about it about a 20% utilized capacity utilization rate would make the facility itself a breakeven from an EBIT perspective, I think you know gross profit for the most part equal see because a lot of SG&A and R&D there and then obviously at higher levels. So we can.
Cover the you know the corporate costs as well.
Great perfect. Thank you very much I appreciate it.
Thank you. Our next question is from Jon <unk> with CJS Securities. Please proceed with your question.
Thanks for the follow up can you just can you guys just give us an update on the daily loan programs and kind of what you're expecting on a timing basis.
Yeah sure. So as you heard in the in the script and I and it was in our press release as well, we've just completed the a part two application.
That was about an 8000 page document so just to give you an idea the comprehensive nature of that application.
The next step of our R&D is to wait for a response from the D O E, but if our application.
Application is approved then we'll move on to negotiation of terms and a due diligence period.
We're hopeful of seeing funding in the second.
The second half of the year, but but obviously.
That's something we have to wait wait and see what it does.
Okay, great well can you use part of that I'm, assuming you get it to pay down the high cost debt that you have or would that.
Sure they go to Capex.
No that would just go to Capex for the project.
You know there there would be some management fees and a license.
Licenses and things like that back to the company, but all all those details would.
Part of the negotiation with the department of energy.
Okay is our off take agreements for the Greenfield.
To be on hold until you get that financing is that safe to assume.
Well a good question John we of course are are you know kind of always working on offtake agreements just are in the natural course of time with customers as our relationships develop.
But what we are kind of determined what we were going through this the.
The application process is that are we.
We.
They have enough contracts and support now.
To get through the approval process, but as we get more more detail.
That would allow us to go back to customers, if we needed to round out those contracts with a kind of a clear understanding of what we need out of the contract to get it across the finish line. So you know prior prior you know prior to them coming back to deal with coming back in and and Oh.
You know proposing terms and those kind of things.
We're flying a little bit blind in terms of what they might need in that respect.
Got it Okay, and then just any update on that.
The cost to complete the Greensville. That's at this stage is that something you're still working on.
Yeah that that will that that number's going to.
Project approval and all those sort of things, but we.
We did recently bump up our estimate are in and our ranges I think we brought the low end up by 15 million and the top end up by around $50 million in terms of our expected.
Cost of that facility. So I think we're at 515 million to 665 million now.
Is that the remaining or is that the total.
That's the total.
Okay. What would have you spent so far.
I might you can catch me if I'm wrong here I want to say 171 million through the end of the year, but you have a better number.
Yes, that's exactly the number.
Okay, great. Thank you so much guys.
Alright, Thanks John .
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Thank you there are no further questions I would like to turn the floor back over to Stephen Croskey for any closing comments.
Thank you operator, and 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 when we report the first quarter.
This.
Today's conference you may disconnect your lines at this time, thank you for your participation.
Okay.
All right. Thanks, Paul.