Q2 2023 Origin Materials Inc Earnings Call

[music].

Thank you for standing by this is the conference operator welcome to the origin materials second quarter 2023 earnings Conference call. As a reminder, all participants are in listen only mode and the conference is being recorded after the presentation there will be an opportune.

To ask questions to join the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you May signal, an operator by pressing Star then zero I would now like to turn the conference over to Ashish Gupta Investor Relations. Please go ahead.

Thank you and welcome everyone to origin materials second quarter 2023 earnings conference call joining the call today, if margin materials co CEO , Rick Trily co CEO and co founder John vessel and CFO Nate Wally.

This call, Oregon has issued its second quarter press release, a presentation, which we will refer to today.

These can be found on the Investor Relations section of our website at origin materials Dot com.

Please note on this call we will be making forward looking statements based on current expectations and assumptions, which are subject to risks and uncertainties.

These statements reflect our views as of today should not be relied upon as representatives about views of any subsequent date and we undertake no obligation to revise or publicly release the results of any revision to these forward looking statements in light of new information or future events. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially.

Really from expectations.

For further discussion on the material risks and other important factors that could affect our financial results. Please refer to our filings with the SEC, including our quarterly report on Form 10-Q filed on August nine 2023 and.

In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful as a supplemental supplemental measures of origin materials performance. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results.

You will find additional disclosures regarding the non-GAAP financial measures discussed on today's call in our press release issued this afternoon and our filings with the SEC each of which is posted on our website.

Cast of this call will also be available on the Investor Relations section of our company website with that I'll turn the call over to John .

Thank you Ashish and thanks to everyone. Joining us today, we will be referring to the slides that were posted to the Investor Relations section of our website earlier. This afternoon I will begin with a discussion of origin. One startup provide an update on the origin to discuss profitable rich.

Rich will then review our Q2 highlights and provide a commercial and regulatory update Nate will conclude with the financial overview.

Regarding working one and the continued progress made by our team I would like to point you to a new video that we posted to the Investor Relations section of our website, providing a closer look at plant startup.

I'll begin on slide five with an update for origin won.

In late June we announced the origin won the world's first commercial scale plant to produce origins intermediates, CMS, HTC and oils and extracted and initiated startup in line with prior guidance. This is a tremendous milestone in our journey to Decarbonize. The wealth materials. It is also a testament to the strength of our team, which faced considerable COVID-19, another related supply chain.

Any headwinds or.

Fortune, one located in Sarnia, Ontario, Canada scales up our core technology platform for converting sustainable wood residues into intermediate chemicals, and we expect the power of our platform intermediates to be transformative for the chemical industry and how the world makes physical goods.

Origin won its first and foremost a strategic asset to qualify applications of our intermediates apart from para xylene and bio P. T using product for March one we plan to explore or qualify at TCA Pax East resins surfactants sustainable carbon black Bayou asphalt and Biofuels.

We expect to gradually ramp up working one operations and we aim to optimally fulfill customer demand, while we produced samples and qualify them trails, we remain confident that we'd be able to meet our production goals to support our revenue guidance.

Origin, one enabled commercial scale production of CMS, a versatile chemical building blocks can be used to make numerous downstream products, including para xylene, which is a precursor to phe plastic <unk>, which can be used in numerous sustainable products and channels such as the nexgen polymer P F.

Commercialization of a molecule like CMS is historic on the order of the commercialization of the ethylene molecule after working with CMS for over a decade, we couldn't be more enthusiastic.

Turning to slide seven we see the see them up as a new chemical building block, but what do we mean by that unimportant chemical building block has a low cost of production high versatility across applications and differentiated performance. What we've seen historically is that when you combine those three qualities you have a high impact building blocks broad history are relatively small.

A number of key chemicals have unlocked and transformed the chemical industry.

Most recent ones polycarbonate acro eight urethane were commercialized in the 19 eighties, introducing a new building block chemicals, it's hard it takes time, but it's worth the effort and 1942 ethylene reached a major milestone the first production about playing through the catalytic cracking of I think.

What followed was decades of process improvements market penetration and the rise of ethylene to $125 billion market feedback.

Similarly powerful molecule due to its low cost production high versatility and differentiated performance in the case of CMS the.

He has got low carbon intensity when it's Bruce from biomass using the origin process and the performance advantages of some of its applications over the next decade growing C. M. F will be analogous to growing at Oaktree for the first few years, most of and Oaks growth occurs underground as the route system has established only than just the trigger toller stronger branches and become a mature.

Similarly in the chemical building block thickness. The first phase is to establish a foundation for long term growth. We are engaged in these foundation building activities every day and we're excited about and committed to the journey ahead of us.

Turning to slide eight we see CMS versatility and transformative power here, a simplified chemical product manifold describe some of the chemistry that CMS makes possible on an industrial scale.

From CMS, we can develop new classes of dials means and I ask that in addition to drop in molecules like paradigm in which you are familiar with is the precursor to PTT plastic.

Chemical families in turn can be used to produce a range of surfactants epoxy polyurethane polyamide and more.

Growing in cultivating the branches of our CMS tree is the job of R&D and the work we do in collaboration with our partners.

Turning to slide nine we are excited to announce the mass production of after you see a high value downstream application for CMS.

We'll move forward to origin to rather than origin three as initially planned in April 2020 one.

We're bringing at TCA forward for several reasons first we have seen stronger at TCA commercialization progress than we anticipated two years ago second FCC applications tend to be performance advantage and that offer higher margins than cars I E.

Third we have validated the drop in deployment of after you see within the P. E T market, providing a clear pathway to commercialization that is on strategy for us and our customers fourth we are excited for the potential of FCA in other polyester and nylon applications and we look forward to providing updates on these as appropriate.

In summary, we are seeing broad support and momentum for FTC commercialization. Indeed, the U S Department of energy has previously Shortlisted. After you see I suppose the most promising biochemicals with the future.

Turning to slide 10, our S E T. A go to market strategy is to begin with dropping applications before moving into higher margin applications, requiring additional development work. These dropping applications are not expected to require meaningful retooling at existing methods of production. We expect to develop after you say within existing P. E T market with the following page approach one cause.

Herschel ice drop in Nextgen hybrid P E T F polymers operating performance advantages compared with traditional P E T.

To commercialize the advanced polymer P F, which also offers performance advantages compared to traditional P. T.

Today, we're providing an update for working to our second commercial plant to be built in Geismar, Louisiana.

As mentioned, we continue to make progress developing products and applications related to the design of origin to including F. T. C. H P, yes, and liquid biofuels derived from our oils and attractive stream.

While origin to will focus primarily on N. P. C production and some of our P. E T customers, who have already begun expanding their orders to include Ft's, yet we remain committed to providing para xylene for our bio P. G customers and plan to bring commercial quantities of hers out into the market before 2030.

While our current plan is a rational prioritization of origins resources towards more profitable typically performance enhanced chemical applications that Oracle too. We also see massive demand for our drop in bio para xylene we.

We believe that the best way to meet this demand will be through collaborations with others. We've been in active discussions with multiple strategic partners, who are interested in licensing or co developing low carbon bio para xylene plants using technology, both in the U S and across the globe and most of which are large well capitalized industrial producers of Petro P. T. H P G and other downstream products.

Who recognize the need for more sustainable products.

We're also updating our previously disclosed capital budget and construction timeline for Orchard chip as we first indicated in May 2022, we were facing a higher cost capital project environment than another way 2021 when we announced the initial plan for origin to add.

As such we are revising the plains outlook and introducing a phased approach to construction adapting and that's made it to the high cost environment helps to reduce project risk as we move forward on the path to profitability.

Turning to slide 11, since origin became publicly traded into 2020. One we have witnessed profound market chefs presenting both opportunities and challenges.

Factors influencing our updated plan include significantly higher than anticipated demand for higher margin products, including F. D. C E D E F and liquid biofuels.

Increased cost of labor materials processing, and metallurgy due to volatile global market, Joe markets, requiring engineering, rework inflation and higher interest rates.

And higher costs due to COVID-19 related supply chain constraints and additional value engineering requirements that have extended project timeline.

Turning to slide 12, we now expect origin two to be completed in two phases with phase one estimated to be completed in late 2026 to 2027 and phase two estimated to be completed in 2028 compared with our initial expectation for a mid 2025 completion.

So in case, one the company expect to achieve profitability from its oils and extract constraints from midstream origin plans to produce a drop in biofuel with potential applications, including marine fuel and heat and power generation.

Potential benefits include improved energy density compared with existing renewable alternatives and the sustainability benefits of increased bio content.

Value proposition expected to be in high demand given among other things the de carbonization goals set out by the international Maritime organization, a body of the United Nations Phase.

Phase two will expand production to include the mass production.

Platform chemical CMS and H D C.

Phasing the plant is intended to enhance the overall efficiency, while improving short term and long term economics.

The capital budget for Phase one of working two is expected to be up to $400 million, while the capital budget for phase III is projected to be up to $1 2 billion. This compares to the original 1.07 billion dollar aggregate capital budget estimate first provided in February 2021.

As Nate will discuss in more detail, we are exploring multiple opportunities to finance orchard to including a combination of existing cash previously indicated traditional project financing federal and state government programs licensing agreements and strategic partnerships.

We expect capital expenditures of up to $50 million for 2024 with the majority of ordering to capital spend to occur following the project's final investment decision or S. E. Two.

2025.

Summary.

Origin to project represents significant scale up of our technology core processing capabilities. This scale up will be instrumental in enabling origin to execute on its mission and greatly expands our ability to deliver product that address customer demand.

Deeply committed to the project and we will do the work make the investment and build the relationships to make the origin to have success with that I would like to turn it over to rich who will review, our Q2 highlights and provide a commercial and regulatory update.

Thanks, John moving to slide 13 customer demand remains strong with off taking capacity reservations now exceeding $10 billion up from $9 3 billion in February 2023, we're.

We are excited to have crossed a significant milestone and to highlight that the majority of the growth in demand for F. D C, which is where our team has been focused.

As mentioned in prior calls we do not plan to provide updates on this number every quarter, but we'll provide updates as appropriate.

We are maintaining 2023 guidance for revenue of 40 million to $60 million and adjusted EBITDA loss of 50 million to $60 million.

We're also pleased that revenue generated by joint development agreements in our supply chain activation program continued to grow in the second quarter in line with guidance.

We continue to see strong positive tailwind for our technology and business model origin continues to explore several programs funded by the IRA or inflation reduction Act.

Including the department of Energy's advanced industrial facilities deployment program or a I S T, which we expect to hear feedback on by the end of the year and the section 48 advanced manufacturing tax credits.

We remain optimistic that these programs can provide meaningful support for the construction of origins plants.

Turning to slide 14 in early August we were excited to announce a strategic partnership with sustained here.

Oh glad calls a joint venture between Braskem, the largest thermoplastic resin producer in the Americas and a global pioneer in Biopolymers and <unk> Corporation, a Japanese global trading company with wide ranging market networks and a strong presence in Asia.

Our partnership centers on advanced bio based materials and it's part of the partnership sustaining assigned to multi year capacity reservation agreements to purchase renewable chemicals from origin, including Biobased PTA in Biobased at TCA.

Turning to slide 15 in late July we were pleased to announce that origin and husky are pioneering technology provider of injection molding equipment and services to the food and beverage packaging and consumer products industries and achieved a milestone in the commercialization of P. T incorporating the sustainable chemical F. D C E for advanced packaging and other applications.

Specifically origin successfully polymerized biobased sustainable chemical F. PCA entered the common recyclable plastic P T.

She then molded the resulting P. D F hybrid polymer into pre forms that were then blown into bottles.

The company has used husky's injection molding technologies and manufacturing equipment, our commercial manufacturing scale level of processing demonstrating the ability of P. T F. The polymer made with FCA to be integrated into existing P. Jeep production systems. This innovation demonstrates a pathway for the drop in market adoption of F. D. A to produce superior polymers Costa.

Actively from biomass using origin technology.

R. P. ETF polymers offer improved performance compared with traditional P. T plastic with properties like enhanced mechanical performance and superior barrier properties controlled by adjusting manufacturing conditions and the quantity of the F. D C. A co polymer.

Turning to slide 16 in early August we announced a strategic partnership with turbine a global leader in specialty P. T polyester films to produce sustainable high performance Biopolymer films.

As part of the partnership terrifying signed a multiyear capacity reservation agreement to purchase the advanced biopolymer.

We're using film applications, including food and beverage packaging and high value industrial applications.

Turning to slide 17 in early August we announced the strategic partnership with Chrome and a leader in natural gas derived products and one of the world's leading producers of methanol centered on low carbon biofuel production utilizing origins technology platform and prominence worldwide fuels capabilities and expertise.

Part of the partnership permanent origin materials signed an agreement to explore the production and global distribution of low carbon biofuels.

Low carbon intensity Biofuels made from wood waste reflect the future of Biofuels as the industry moves aggressively towards de carbonization.

Origins technology platform is uniquely positioned to deliver these renewable fuels using our oils and extracts intermediate stream.

We're excited to partner with a company that brings significant expertise across engineering procurement and construction related to world scale sustainable technology development.

Over the long term, we see the potential for biomass derived low carbon intensity fuels to be used in marine and other transportation fuels industrial applications heat and power generation and more.

Turning to slide 18 in early August we announced the Recyclability innovation and new product line with origins all P T bottle caps and closures.

In 2020, one the global caps and closures market with 65 billion. This market is expected to grow to approximately 100 billion by the end of the decade.

Today captured typically made from a different materials and bottles presenting challenges for recycling and separating material streams and putting a ceiling on the amount of recycled content that can go into a bottle.

The industry has long sought a mono material solution for caps and bottles. So we are thrilled to have launched our all P T bottle caps and closures business.

Apart from improving post consumer recycling, our design and manufacturing innovation makes made with 100% recycled D. G possible from capped the bottle origins.

Origin CG caps may be cost competitively produced with any type of P. E. T from recycled D. E. T. The origin is 100% bio based carbon negative urgent P T.

Notably <unk> performs better than H D. P E and P. P common cap materials offering improved oxygen and C O two barriers.

With our BG caps business, we identified a global sustainability challenge and opportunity to solve it but all P. T bottling cap enclosure system isn't obvious necessary next step in beverage packaging and recycling. We are proud that our team's expertise in P. T led to this tremendous advancement for recycling and we look forward to providing updates on this new business line.

I'd like to take a moment to spotlight, how our platform is stronger today than when we first became public and provide a look ahead.

Turning to slide 19 over the last two years our platform evolution can be summarized in one word performance when.

When we first listed on the NASDAQ we call ourselves the world's leading carbon negative materials platform, emphasizing a competitive cost of production and powerful carbon advantage. Since then we'd felt higher margin higher performance products, such as carbon black for automotive tires and products such as F. P. C. A P F and our hybrid polymer P E T F.

And the strong pace of innovation, we now have intellectual property across 31 patent families more than a 50% increase since February 2021.

Our performance advantage products carry all the benefits of our platform in terms of competitive cost of production and low carbon footprint, but include additional benefits specific to their applications because.

Because of our success in these development efforts today, we are proud to say high performance low carbon better materials start with origin.

Turning to slide 20, the origin platform stands apart from other technologies by offering the best value uplift for biomass origin is fundamentally economically advantaged compared to other biomass conversion technologies. This is because of the simplicity of our technology, which is able to chemically convert what are your biomass into chemicals are more direct means of producing intermediate chemicals.

Then alternative processes like paralysis with almost zero carbon lost during the conversion.

Our products can command a premium for their sustainability performance characteristics across a wide array of applications. The result is that our platform, which is which like something like a petrochemical refinery kept utilizing biomass as the key feedstock instead of oil is able to deliver several times the margin of competing technologies.

Turning to slide 21, we expect the gross margins of our intermediate streams to grow stronger with time product development. The versatility of our intermediates and economies of scale will drive long term value creation.

For those who have followed our story you've already witnessed our platform of Bulks, taking advantage of higher margin opportunities, most notably with the acceleration of F TCA to origin to.

This is just one example of our strategy of pursuing the highest value most impactful opportunities for our versatile platform.

Turning to slide 22, often we're asked to where our competition is the answer is simple capacity as our competition the chemical industry, our supply chain partners consumer brands all of US are working together to achieve the same goal better materials that help like climate change our ability to grow our business is not limited by competition, it's enhanced by cooperating.

<unk>.

Why we win is to bring on additional capacity as quickly intelligently and safely as we can.

Our strategy is twofold built in license, while we plan to build own and operate origin won an origin to licensing is key to our ability to scale rapidly last quarter, we announced our first potential licensing agreement with S. C. G. P. We continue to explore other licensing agreements with many of our customers and we are well positioned to take advantage of a whole.

Strategic opportunities around the world to increase production strategically in a way that plays to local strengths, whether its feedstock availability government incentives skilled industrial talent converting existing facilities or other opportunities.

Turning to slide 23 in early June we were thrilled to announce the appointment of Jim Stefano to the origin Board of directors, Jim its proven track record, leading manufacturing and technology initiatives for global companies is highly complementary to the skill set of our board and will prove invaluable as we ramp up origin, one operations throughout the year and began commercial production.

Jim brings to origin over 30 years of experience in the manufacturing operations and engineering, including his current role as CEO of integrated project services and engineering and construction services provider to the life Sciences sector.

With that I will turn it over to Nate to discuss some of the financial details.

Thanks, Rich I'll begin with commentary on our second quarter results, then provide our financing expectations for origin to finish with an update on our 2023 outlook speaking to slide 24, we reported quarterly revenue for the second quarter of $6 $9 million associated with J D. As in Orchard supply chain activation program compared to no revenue in the prior year.

Period second.

Second quarter operating expenses were $14 $4 million compared to $8 $7 million during the same period in the prior year net.

Net loss was $6 $3 million for the second quarter compared to net income of $46 $9 million in the same period prior year adjusted EBITDA loss was $11 $7 million for the second quarter compared to a loss of $6 $9 million in the same period in the prior year.

Turning to our balance sheet origin ended the second quarter was $217 $7 million in cash cash equivalents in marketable securities a meaningful portion of Q2 of cash expenditures related to the completion of origin water and are therefore non recurring.

Regarding the financing of origin to in early January we announced that the Louisiana State Bond Commission unanimously passed a resolution granting its final approval of the issuance of up to $1 $5 billion of tax exempt bonds to support the construction and commissioning of the plant.

The amount is inclusive of and builds on the strong foundation of the previously announced expected $400 million in private activity bonds volume cap allocation.

Bank of America has been engaged by origin to underwrite the bonds to market them to investors. We continue to believe the debt financing of origin to could be achieved using entirely tax exempt bonds.

<unk> continues to work with leading financial institutions on other forms of traditional private financing and buckled down programs, including through the United States Department of Agriculture, and department of energy pursue other local state and federal incentive programs to optimize the financing of origin to these include certain 2021 infrastructure investment and jobs Act in 2022 inflation.

Should act provisions, including the Department of Energy's advanced industrial facilities deployment program or a I S. T and the section 48 C advanced manufacturing tax credits.

Finally, given the origins of ongoing global technology licensing effort and an active governmental affairs team, we anticipate strategic partnerships as well as state and federal incentive programs to play a meaningful role in the financing of origin too.

I'll wrap up with our 2023 outlook, we are maintaining our guidance for revenue of $40 million to $60 million and an adjusted EBITDA loss of $50 million to $60 million and with that I will turn it back to rich for closing remarks.

Thank you Nate.

In closing I would like to thank our customers our team and our partners for their contributions to our company's success and our shareholders for their support I'm proud of our team's continued execution as we draw closer to commercial production and take the next step in the world's once in our plan and transition to sustainable materials with that I will ask the operator to open the line for questions.

Thank you there's a lot to begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad, you will hear a tone acknowledging your request if youre using a speakerphone. Please pick up your handset before pressing any Keith to withdraw your question. Please press star.

Thank you.

The first question comes from Steve Bryan that Bank of America. Please go ahead.

Yes. Thank you won a couple of questions here on origin to.

Is any of the delay and cost increase because of shifting the focus away from para xylene overdo. The F. T C. A I kind of suspect not but wondered if that was part of it and maybe more importantly, when you first rolled out your financials from origin to.

You were targeting a million tons of <unk>.

Biomass feedstock into that plan is that still the design, but more importantly, you were targeting 16 cents a pound of margin from this T. T pathway as you move towards more of a F. T. C. H pathway. What would you suggest is a more reasonable margin.

That plan, you think is going to be able to produce.

Hey, Steve Thanks for the questions good questions. So.

So first I'll go through each one of them in order. So first you asked it.

At TCA and shifting towards that kind of product base part of that capital increase and then and schedule shaft and the answer actually is is in part yes, it's not the only thing, but it's it's meaningful so looking at these other products.

Products, one takes more time right. So we obviously didn't.

Expect to be producing those kinds of products off of O M to when we originally provided our estimates on schedule at cost and so there are changes that get made I'd say generally speaking if you're looking at F. T. C. A that has more of a schedule impact than it does on overall cost impact.

And then for things like carbon black and other higher value H D. C products that has both a schedule and a cost impact. So those are a part of it although again, they're not they're not the only thing that they're not solely responsible for that.

From a scale perspective, you know one of the things that somewhat.

It's somewhat unusual for origin, specifically as a chemical company is that we tend to be more capital constrained than the typical chemical company, that's going after the kind of plants and projects frankly technologies.

That we are and so consequently, we have to adapt to increase cost environments by also reducing the scope of the plants not just by raising additional capital we need to be disciplined with the way that we approach. These types of projects and so consequently in a higher cost environment, where we're going in general.

Right, which includes some of the things that we had numerous but things like higher materials prices, obviously higher labor costs.

Energy all sorts of things like that as a consequence of those we need to adjust by scoping down the scale of the plant.

So we expect that we're going to have a smaller scale plant than the million tons of biomass fat originally and we provide a summary of that on.

One of the appendix slides in our earnings presentation, but generally speaking we're expecting by the time, we're done with this plant to be at about 500, K T a feedstock rather than.

Rather than a million.

Oh, I'm, sorry, and then margin so for margin, we havent given an explicit margin as a result of all of those things. What you can see is if you are on that same slide that I, just referenced which is in the appendix portion of the presentation.

What you can see is that 500 kg of feedstock and we're expecting just under $300 million per year of EBITDA on that.

Yes.

Yes.

Thank you.

<unk>.

The next question comes from Fang Frank Mitsch Fermium Research. Please go ahead.

Good afternoon, good afternoon folks.

It seems like a pretty big pivot on origin to particularly you know when you're when you're going after biofuels.

Can you talk about the risks associated with the with that given the fact that you have all these capacity reservations on para xylene.

That was the kind of the first thing in hand.

And also in terms of the capacity reservation and so forth you know how are you.

Now that Youre pivoting and delaying.

You know a pretty meaningfully you know what what are the chances that some of those capacity reservations are go away.

But yes, if you could talk about the the you know the timing delay the pivot and.

And why is the F I D and twenty-five not in 'twenty four.

Yeah. So thanks, Frank I. Appreciate the question. So first one is that you know on our end market demand in general so for both the Biofuels product and also for M. D C. A and some of our HTC related products.

We see very very strong demand for each of those three product categories and I think it's worth saying that that was a very significant contributor to our view of the new product slate and the new scope for origin to and absolutely not to be underestimated.

That said of course, a huge proportion of our capacity reservations and off take agreements.

As he said for parents I mean.

We have seen so far customers are very committed to the long term a para xylene with us and we of course are no less excited about perithelium than we have ever been.

And in fact, as we mentioned I think during earnings script, we we really.

C a R.

Attractive pathway forward for parents Eileen that takes advantage of them working with strategic partners of various sorts, who have lower cost of capital for these sorts of things in general as compared to origin right. Now. So we're excited about the Arizona, we remain excited about it our customers remain excited about paradigm and <unk>.

Frankly, a huge part of that look towards products such as.

D C. A N and its biofuels products are the result of demand.

Very strong demand from customers for that product.

Gotcha and you know as you indicated you know capital constrains.

We're also a part of.

All of this decision.

Just curious, let's assume let's hypothetically say that nine months from now we've got really smooth operate we've had really smooth operations at origin, one and and so let's say that would attract a strategic or somehow or another party that would.

It would be willing to make a very large capital commitment.

Capital injection would that accelerate the timeline.

How do you think about taking on a a strategic financial partner as I said sometime in 2024.

Yeah, I think it's a really interesting question and I think we tend not to think in hypotheticals around these sorts of things, but I will say you know just generally as a company that is M.

Small relative to some of the chemical matrix out there are there are limits to the number of things that we can do in parallel and so anytime that we have access to additional resources that can have an impact on schedule.

Have an impact on schedule, Alright, hey, thanks. Thanks, Thanks, so much.

Okay.

The next question comes from John Roberts with Credit Suisse. Please go ahead.

Yes.

Thank you for slide 27 with origin to economic summary.

If I just divide EBITDA by Capex.

The return on Phase one is 20% and the return on phase two drops a little bit to 17 and a half what why is phase two not higher than phase one.

Yeah. It's interesting question I think our view there is that one because it's a little bit further out we have a frankly a different level of specificity around some of the phase two elements and so that just inherently we're gonna we're gonna give that a little bit more of a discount from ours.

Yep.

The other is.

There are.

Significant parts of phase, one and phase two that you could argue we're sort of arbitrary as to whether we count them as part of phase one or phase two we didn't try to load balance to carefully between the two but a lot of benefits are realized with haste to beyond just the fact that we're getting access to larger markets. After those products.

So we're getting access to to all kinds of sort of mission driven.

Sort of objectives with phase two as well so we do see them as relatively well and synergistically linked but to your point phase one standalone isn't attractive project on its own.

And then do you think you'll have a new CFO in place by September 1st or what's the backup plan there.

Hi, John .

But what.

Oh go ahead, Rick sorry.

Well I was going to say, we you know we were active we've retained a large a leading executive search firm. We've got an exciting pipeline of candidates and so we're very much in the process don't don't yet have a start date plan, but we've got Nate with us through September 1st and got an advisory role through the end of the year. So we're confident that we will have a smooth transition.

Thank you.

Okay.

The next question comes from Eric Stine with Craig Hallum. Please go ahead.

Hi, everyone.

Maybe I'll just start with the order book I know 10 billion plus.

You said I mean, most of that's para xylene and I know those customers are committed to the long term, but I mean that this means with this change the timeline that their weight them quite a bit I mean is there any are there any mechanisms within that.

If it's a customer that.

You would have a need for F. D C. A I mean, what's the.

How does that work or I mean is there the potential that you you hand off some of this order book to a potential licensee or I mean, just trying to think about that dynamic from a customer's point of view.

Sure well there.

We're excited to cross the $10 billion milestone and a lot of the recent growth was from FTC, a which has been a large focus of ours in recent quarters.

And many of our parents island customers do also have an interest and in many cases, a capacity reservation with a score at BCA. So there are certainly are synergies in those two materials for for many of our customers, but we do have a large order book for para Xylene N P E T and we are.

Very committed to delivering against that order book and are optimistic that we'll be able to deliver those materials in the timeframe that those customers want and largely in partnership.

With other companies and if you think about.

You know we talked about S. C. G. P. Recently, we've talked about our underarm a relationship or multiple.

<unk> that we're working with that have the potential to lift so help us deliver.

Oh para xylene at large scale and a relevant timeline for those customers and those customers are very much want those materials, there really aren't any other ways of getting them and so we are very optimistic that they'll continue to work with us to deliver.

To deliver those materials.

Got it and then just as we think about the the change to the timeline.

I can appreciate higher obviously higher interest rates.

You know I mean, that's that's a new dynamic since this all started when you first gave that number for origin to back in 2020, one, but it's not new here over the last.

A number of quarters. So I'm, just trying to kind of think about.

How much of this can be ascribed to that.

That higher environment higher rate environment versus as you said its athletes.

Need.

More time, either on the development side.

Yeah, So really I think the first thing it's worth thinking about it is that and keep in mind is how long it takes to turn a new engineering assessment and so you know as we have made.

We made adjustments and thought about sort of how to put both the opportunities that have been presented.

The challenges that have have.

Arisen into a sort of bucket and then figure out well, how what's the best way to navigate through those sorts of things.

Generally speaking it can be very difficult to understand what the impact of those is going to be on something like a final cost or a revenue number or even a schedule frankly until you turn that through tens of thousands of hours of engineering time to convert that into a new scenario right and in our case, we were actually running multiple scenarios.

Put them in you put them into the black box and you get them out for a period of time and so our view was.

You know generally speaking we need to process all of this information and it wasn't really until all that recently that it made sense to take a.

Scenario approach to this and I think it's also worth mentioning that it's not just rates right. So rates are one part of it and they are a meaningful part.

But there are other things as well that have an impact again, I mentioned sort of a labor rates materials costs, even even energy volatility and volatility around some of these things can have a pretty significant impact in the way that you have to structure the risk management around plants like that.

Okay. So I'll take the rest offline. Thanks.

The next question comes from Palo Alto now, but Raymond James. Please go ahead.

Okay.

Thanks for taking the question and.

One of the earlier speakers said appreciate the clarity on the origin to economics I guess my question about that is.

Given that you'll be selling into the biofuel market where.

Policy incentives, you know rains and LCR fast et cetera play such a pivotal role.

What are your assumptions about what kind of.

Our federal tax credit or carbon credits or anything along those lines, what what's embedded in those EBITDA metrics.

Yes, so we haven't we haven't put a significant.

The amount of credit value into our product values. There a lot of it has been driven by the customer application value and then specific offtake conversations and negotiations with specific customers. So generally speaking now.

They are very tightly.

Tightly tied to the regulatory and policy measures around these sorts of things, but we have we've tried to be very customer centric in the way that we're approaching the value there and not really looking to the regulatory aspects nearly as much at this point.

Okay. So you you highlighted the marine market as kind of one of the prime <unk>.

Verticals, where you hope to be selling.

I guess why marine versus let's say sustainable aviation fuel.

Great question has to do with the technical components of the fuel that we're producing.

And so that fuel in particular, while it has it is a somewhat let's say flexible kind of Oh sure. It has some real.

A particular benefit in the marine market.

And you know that's part of the reason why problem in who we announced today is that is a very interesting and relevant partner for us.

Got it thanks very much.

That concludes today's live Q&A segment, I will now turn it over to Ashish Gupta Investor Relations to conduct the next segment of my Investor Q&A. Please go ahead.

Thank you operator has become customer earnings calls, we invite all investors submit questions.

Our second quarter call as part of our ask Oregon campaign in the interest of time, we will be taking the most commonly asked questions.

Our first question is for John .

Okay.

When the origin is producing its first CMS one is already producing its first CMS waste.

How long does it take to produce a batch of CMS from the feedstock.

Yes, so thanks for the question Ashish and whoever similar to last quarter.

So we expect to produce the first batches of CMS from wood waste from March one we expect that to be a matter of really weeks for first CMS production.

And that not not too much longer than that for first CMS from wood waste specifically, so we're quite close now and we're pretty excited about it but generally speaking we often get the question of what's the characteristic reaction of process time associated with converting feedstock into our intermediate products.

Often that can be a useful way for people to think about differentiating you know.

Very slow and capital intensive process from one that's it's a quicker in and are generally less capital intensive.

And our characteristics sort of process times are on the order of.

Sort of minutes, maybe up to as much as an hour. If you include all of the residence times in the various pizza process. It couldnt be on the reactor. So it's pretty quick you know you put a chip in one side and you get a get a chips worth of CMS out the other side in Nevada.

Half an hour to an hour or something on that.

Great. Thanks for that John I'm, just turning to carbon black.

Is the origin materials partnering or running any research for expanded commercial uses of carbon black at this time.

Yeah, we're really excited about carbon black and so we've we've mentioned quite a few times we've mentioned it all the way back to since 2021, but when we talk about it than we thought of it as I sort of far future sort of post owing to a maybe a little bit of know them three and sort of progressively getting are becoming a larger proportion of the product.

Next.

We as I mentioned earlier alongside of TCA, we've seen carbon black b are really much more meaningful.

Part of the demand now and what's really interesting about our carbon black in particular is that it starts with a very different surface chemistry than traditional carbon black made from fossil sources like natural gas or fuel oil or something like that and that gives us.

An interesting cost and performance advantage in a lot of the areas of carbon black that are considered specialty carbon black so in many ways. Our material starts at a very high value specialty type material compared to the existing market and then as we do additional processing somewhat ironically, we actually bring it down closer to.

The performance of that commodity carbon blacks.

Whereas if you look at that that traditional processes for making carbon black it's the inverse right. So they start with something very close to a commodity carbon black and then they do a bunch of work and put a bunch of money and in order to get them to the specialty and so that's sort of unusual position has made us a lot more bullish on carbon black in the near term and at high value. So we're really.

We're excited about it we do work both with.

Other Ah experts and producers in the carbon black industry.

And with our customers. So we do a lot of application development work with customers in general across all of our platform molecules.

But that's still true with HTC and by the way that kind of application development work is what leads to things like the cats fitness.

That we described earlier so it's that working very closely with customers to solve a very specific products and technical problems.

But we think really gives our platform on edge and getting into all of these different markets and getting the value that our our platform intermediates really deserve.

Thanks, so much.

With that we'll turn some questions for rich.

Taking a caps and closures.

Why is the origin pursuing RPT bottle cap opportunity when you already have $10 billion in customer demand.

Yeah, It's a good question.

We really got into this business through serendipity that comes from being very close to our very large customers and their R&D teams and then having world class polymer scientists on our side.

And what ended up happening was we.

Figured out how to solve a real problem in this in this form of packaging and then we could solve it with P. E. T. So today's caps are made from H D P or polypropylene, which are harder to recycle and cause you know.

Reduce the amount of recycled content, you can put into a bottle and cause issues in the recycling chain, we figured out how to do it and secured the IP P. T. In really any form of P. E T recycled D to our P. T and so we're excited that we have this very big and growing market opportunity a product that.

Is performance enhancing and solves a major sustainability challenge that we can do it cost competitively with the legacy products and this business is unconstrained by our construction schedule. So we can be in market very very rapidly. So.

We're excited about this very complementary and very on mission.

The business line.

Yeah.

That is very exciting.

It could move the J D A's.

Can you get into more detail on the JD as they give us more color on the goals and parameters of these types of arrangements.

Yeah, So J D stands for joint development agreement.

And the way to think about it is that we are and upstream.

Fracture of really three principal intermediates, CMS, HTC and oils and extractions and those intermediates go on to make a very wide range of applications, some of which would put them to be.

Earnings presentation today, and so well it makes sense for us to do is partner with companies that have very deep expertise in getting from our intermediate them all the way to do a final application and so.

An example is the carbon black which was talked about earlier. So you know we are talking to multiple carbon black companies that have incredible expertise and in carbon black R&D and so we view them all as potential partners not competitors and it makes a lot of sense for us to leverage there.

Their technical expertise with our expertise with the intermediate level and get to higher value applications get to market faster and prevent us from having to you know have deep.

Deep technical expertise that goes all the way to each application win when we can find partners that have decades of experience in many situations. You know. Another example is the announced partnership with S. T. G T and that's a joint development agreement, where we're working with.

ILUVIEN company that wants to explore using specific feedstock in this case eucalyptus to go through our process to come out with you know bio para xylene is the primary target on the other side and so that's a it's a great chance to partner with someone who has a proprietary feedstock access a lot of expertise in this.

Base and so that's another example of a of an exciting J D for us.

Great. Thanks, so much rich and John of course, as well that will conclude today's Q&A portion of the call I'll now turn it back to rich for closing remarks.

Thanks, Ashish and thank you all for joining US today. This concludes the call.

This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

Yeah.

[music].

Yeah.

[music].

Yeah.

[music].

Yeah.

[music].

Yeah.

[music].

Right.

Okay.

[music].

Yeah.

Okay.

Uh huh.

Yeah.

Hum.

Yeah.

Okay.

Yes.

Okay.

[music].

Yes.

Yes.

[music].

Yeah.

Yes.

Yeah.

[music].

Okay.

Yeah.

Yeah.

Yes.

[music].