Q1 2024 Danimer Scientific Inc Earnings Call
[music].
Greetings and welcome to the Danny Merck's scientific 2024 first quarter earnings call.
Operator: Welcome to the Danimer Scientific 2024 First Quarter Earnings Call. At this time, all lines are in listen-only mode.
Operator: At this time all lines are in listen only mode.
Operator: Following the presentation, we will conduct a question and answer session. If at any time during this call, you require immediate assistance, please press star zero for the operator. I would now like to turn the presentation over to Mr. Blake Chamblee, the company's investor relations representative. Please go ahead.
Operator: Following the presentation, we will conduct a question and answer session.
Blake Chamblee: If at any time during this call you require immediate assistance.
Blake Chamblee: Please press star zero for the operator.
Blake Chamblee: I would now like to turn the presentation over to Mr. Blake <unk>, the company's Investor Relations Representative. Please go ahead.
Blake Chamblee: Thank you operator.
Blake Chamblee: Good afternoon, everyone, and thank you for joining us today for Danimer Scientific's 2024 First Quarter Earnings Call. Leading the call today are Steve Croskrey, Chairman and Chief Executive Officer, and Mike Hajost, Chief Financial Officer.
Blake Chamblee: Good afternoon, everyone and thank you for joining us today for Danaher scientific 2024 first quarter earnings call.
Blake Chamblee: Leading the call today are Steve <unk>, Chairman, and Chief Executive Officer, and Mike <unk>, Chief Financial Officer.
Blake Chamblee: I'd like to point out the slide deck that accompanies today's discussion, which is available in the investor relations section of our website at danimerscientific.com. As we begin, I'll call your attention to the company's Safe Harbor language, which is published in our SEC filings and on slide two of the presentation I just referenced. On today's call, we may discuss four looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended.
Blake Chamblee: I'd like to note the slide deck that accompanies today's discussion, which is available on the Investor Relations section of our website at Danaher scientific Dot com.
Blake Chamblee: Overlooking statements include, among other things, statements regarding future results of operations, including margins, profitability, capacity, production, customer programs, and market demand levels. However, actual results could differ materially from what is expressed or implied in our foregoing statement. 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 know that they should be taken as supplementary measures of performance, not as an alternative to GAAP results.
Blake Chamblee: As we begin I'll call your attention to the company's Safe Harbor language, which is published in our SEC filings and on slide two of the presentation I just referenced.
Blake Chamblee: 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.
Blake Chamblee: Five as amended.
Blake Chamblee: Forward looking statements include among other things statements regarding future results of operations, including margins profitability capacity production customer programs and market demand levels.
Blake Chamblee: Actual results could differ materially from what is expressed or implied in our forward looking statements.
Blake Chamblee: 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.
Blake Chamblee: Today's presentation also includes references to non-GAAP financial measures within the meaning of SEC regulation G.
Blake Chamblee: We believe these non-GAAP measures have analytical value, but they should be taken as supplementary measures outperformance not as alternatives to GAAP results.
Blake Chamblee: We have provided reconciliations for non-GAAP financial measures to the most comparable GAAP financial measure in our earnings release and our presentation.
Blake Chamblee: We have provided reconciliations for non-GAAP financial measures to the most comparable GAAP financial measure in our earnings release and our presentation. Thank you, and it's now my pleasure to turn the call over to Steve Croskrey, Chairman and Chief Executive Officer of Danimer Scientific.
Speaker Change: Thank you and it's now my pleasure to turn the call over to Steve Cross Group, Chairman and Chief Executive Officer of Danaher scientific.
Stephen E. Croskrey: Good afternoon, and thank you for joining us. When we last spoke to report on our 2023 fourth quarter and fiscal year-end results, we were just a few days away from the completion of the first quarter, and our quarterly results are in line with our previously announced expectations. We are pleased with the increase in PHA revenues of 64% on a year-over-year basis. PHA revenues during the first quarter made up 82% of product revenue during the quarter compared to 45% of product revenue in the prior year quarter.
Stephen E. Croskrey: Good afternoon, and thank you for joining us.
Stephen E. Croskrey: When we last spoke to report on our 2023 fourth quarter and fiscal year end results. We were just a few days away from the completion of the first quarter in our quarterly results are in line with our previously announced expectations. We are pleased with the increase in PHA revenues of 64% on a year over year basis.
Stephen E. Croskrey: <unk> revenues during the first quarter made up 82% of product revenue during the quarter compared to 45% of product revenue in the prior year quarter we.
Stephen E. Croskrey: We expect PHA as a portion of total revenue to increase throughout 2024. The award to provide £20 million annually of resin for cutlery and £3 million for cutlery wrappers to a large global QSR chain continues to progress as we anticipated. We are well into the first stages of scale-up, and I am very excited to tell you that the first commercial order has been received with planned deliveries of cutlery to at least one customer distribution center during the third quarter of 2024.
Stephen E. Croskrey: We expect PHH a portion of total revenue to increase throughout 2024.
Stephen E. Croskrey: The award to provide 20 billion pounds annually of resin cutlery at 3 million pounds per cutlery wrappers between large global key westar chain continues to progress as anticipated.
Stephen E. Croskrey: We're well into the first stages of scale up and I am very excited to tell you that the first commercial order has been received with planned deliveries of cutlery to at least one customer distribution center during the third quarter of 2024.
Stephen E. Croskrey: As a reminder, we expect this award to reach full run rate in the second quarter of 2025 and are excited about the previously announced opportunity to expand geographically and into additional end product categories. We continue progressing towards the 2024 commercial launch of our straw resin with another large QSR, which has led to an exciting joint development agreement with that QSR for lids and coated paper containers. Additionally, we have received a Star Resin order for a new customer in Asia.
Stephen E. Croskrey: As a reminder, we expect this award to reach full run rate in the second quarter of 2025 and are excited about the previously announced opportunity to expand geographically and into additional product categories.
Stephen E. Croskrey: We continue progressing towards a 2020 for commercial launch of our star resin with another large <unk>.
Stephen E. Croskrey: It led to an exciting joint development agreement with <unk> for bids and coated paper containers.
Stephen E. Croskrey: Additionally, we have received a star right in order for a new customer in Asia.
Stephen E. Croskrey: We also continue to advance in the commercialization process of compostable cups using our PHA resins for both aqueous and extrusion coating. This represents a huge market opportunity with over 250 million pounds of petroleum-based plastics used annually in the creation of cups. We made our first commercial shipments of compostable single-use coffee pod capsule resin to Delta Coffees during the first quarter. These pods are in full compliance with proposed new EU regulations requiring any coffee pods sold to meet new compost standards.
Stephen E. Croskrey: We also continued to advance in the commercialization process of compulsive cups, using our PHA resins for both equities and extrusion coatings.
Stephen E. Croskrey: This represents a huge market opportunity with over 250 million pounds of petroleum based plastics used annually in the creation of cups.
Stephen E. Croskrey: We made our first commercial shipments that could possible single use coffee pod capsule resin to delta copies during the first quarter.
Stephen E. Croskrey: These positive in full compliance with proposed new EU regulations, requiring any coffee pods sold to meet new combos standards.
Stephen E. Croskrey: We also want to reiterate our excitement about the progress made in regards to our collaboration with Ego Fishing, an innovation leader in the sports fishing industry. Full-scale testing of our PHA-based soft plastic technology for fish bait should be underway by mid-year. We believe the commercialization of these fish baits will drive legislation limiting the use of petroleum-based plastics.
Stephen E. Croskrey: We also want to reiterate our excitement with the progress made in regards to our collaboration with Eagle fishing and innovation leader in the sports fishing industry.
Stephen E. Croskrey: Full scale testing of our PHA based soft plastic technology for fish base should be underway by mid year.
Stephen E. Croskrey: We believe the commercialization of these fish base will drive legislation limiting the use of petroleum based plastic dates.
Stephen E. Croskrey: The sports fishing industry represents an opportunity of approximately 50 million pounds of soft baits alone, and major players within the industry are positioning themselves for purchasing rights. We need to alert you to a development that will result in some short-term revenue headwinds that will impact our second and possibly third quarter results. We recently learned that our end customer Starbucks has awarded a portion of its Knodex-based straw business to WinCup from their previous sole source provider. This is a lengthy process, and in anticipation of this award, WinCup built up a straw response.
Stephen E. Croskrey: The sports fishing industry represents an opportunity of approximately 50 million pounds of soft base alone and major players within the industry are positioning themselves for purchasing rights.
Stephen E. Croskrey: On the other hand, the incumbent converter partner is now drawing down inventory to adjust to this decision. This had a negative impact of approximately half a million dollars on our first quarter sales, and we currently anticipate these inventory adjustments will impact our second quarter sales by approximately $2 million. While we anticipate these adjustments will carry over to our full-year results, we fully expect this business will rebound to historic levels before the end of the year. It is important to reiterate that we work with both of these converters and have retained 100% of the Nodex-based straw resin business with Starbucks.
Stephen E. Croskrey: We need to alert you to a development, which will result in some short term revenue headwinds that will impact our second and possibly third quarter results.
Stephen E. Croskrey: We recently learned that our end customers Starbucks has awarded a portion of its <unk> based <unk> business to wind Cup from their previous sole source provider.
Stephen E. Croskrey: This is a lengthy process and in anticipation of this award when it got built up straw resin inventory.
Stephen E. Croskrey: On the other hand, the incumbent converter partner is now drawing down inventory to adjust to this decision.
Stephen E. Croskrey: This had a negative impact of approximately half a million dollars on our first quarter sales and we currently anticipate these inventory adjustments will impact our second quarter sales by approximately $2 million.
Stephen E. Croskrey: While we anticipate these adjustments will carryover to our full year results. We fully expect this business will rebound to historic levels before the end of the year.
Stephen E. Croskrey: It is important to reiterate that we work with both of these converters and have retained 100% of the Nordics based for our resin business with Starbucks.
Stephen E. Croskrey: As we ramp up our capacity to meet forecasted demand levels, we would like to note our increased operational efficiencies at our Kentucky facilities. Installation of new equipment and technological process changes in conjunction with our R&D department have improved our downstream processing to improve product quality, stop production waste, and increase throughput. We continue to refine our proprietary PHA manufacturing process and are excited for the benefits of incorporating these improvements into our future greenfield facility.
Stephen E. Croskrey: As we ramp up our capacity to meet forecasted demand levels, we would like to note our increased operational efficiencies at our Kentucky facility.
Stephen E. Croskrey: Installation of new equipment at technological process changes in conjunction with R&D Department having.
Stephen E. Croskrey: We have improved our downstream processing to improve product quality that production waste and increased throughput.
Stephen E. Croskrey: We continued to refine our proprietary PHA manufacturing process are excited for the benefits of incorporating these improvements into our future Greenfield facility.
Stephen E. Croskrey: Our emphasis on continuous improvement has enabled us to increase our technical and process-specific lead over our nearest competitors. Customer orders tend to spike in the last month of each quarter, and with that spike in shipments and the previously mentioned facility improvements, our Kentucky facility broke even in March, which further validates our production model for profitability at higher production levels.
Stephen E. Croskrey: Our emphasis on continuous improvement has enabled us to increase our technical and process specific lead over our nearest competitors.
Stephen E. Croskrey: Customer orders tend to spike in the last month of each quarter and with that spike in shipments and the previously mentioned facility improvements our Kentucky facility broke even in March which further validates our production model for profitability at higher production levels.
Stephen E. Croskrey: We recently completed two financing transactions, the first being an equity offering generating approximately $13.5 million of additional cash after customary closing fees. Secondly, we entered into a $20 million revolving asset-based credit agreement secured by our accounts receivable and inventory. This agreement can be expanded by an additional $5 million to accommodate growth in our business. These new liquidity infusions provide flexibility to operate our business and help maintain an adequate cash runway to enable us to reach full capacity utilization at our Kentucky facility as forecasted.
Stephen E. Croskrey: We recently completed two financing transactions, the first being an equity offering generating approximately $13 $5 billion of additional cash after customary closing fees.
Stephen E. Croskrey: Secondly, we have entered into a $20 million revolving asset based credit agreement secured by our accounts receivable and inventory.
Stephen E. Croskrey: This agreement can be expanded by an additional $5 million to accommodate growth of our business.
Stephen E. Croskrey: These new liquidity infusions provide flexibility to operate our business and to help maintain an adequate cash runway to enable us to reach full capacity utilization at our Kentucky facility as forecasted.
Stephen E. Croskrey: We also recently announced the proposed pro rated distribution of warrants to our stockholders.
Stephen E. Croskrey: We also recently announced the proposed prorated distribution of warrants to our stock. Under the terms of this transaction, each stockholder of record will receive one dividend warrant for each three shares of common stock held as of the record date. This unique transaction will allow us to improve our balance sheet leverage, strengthen our capital structure, while at the same time maximize our shareholder value. I will note that this transaction is in contention to find our stockholders approving an increase in the number of authorized shares of our common stock.
Stephen E. Croskrey: Under the terms of this transaction each stockholder of record will receive one dividend for each three shares of common stock held as of the record date.
Stephen E. Croskrey: This unique transaction will allow us to improve our balance sheet leverage strengthen our capital structure, while at the same time maximize our shareholder value.
Stephen E. Croskrey: I will note that this transaction is contingent upon our stockholders approving an increase in the number of authorized shares of our common stock.
Stephen E. Croskrey: In closing, we have made great progress in regards to the DOE loans program and are in the final stages of the process. I will now turn the call over to Mike Hajost, our Chief Financial Officer, to update you on our financial results for the first quarter of 2024.
Stephen E. Croskrey: In closing we have made great progress in regards to the Doe loan program that are in the final stages of the process.
Michael A. Hajost: I will now turn the call over to Mike <unk>, Our Chief Financial Officer to update you on our financial results for the first quarter of 2024.
Michael A. Hajost: Thank you, Steve. And good afternoon, everyone.
Michael A. Hajost: Thank you, Steve and good afternoon, everyone I'll start with our financial results on slide seven of our presentation for those of you following along.
Michael A. Hajost: I'll start with our financial results on slide seven of our presentation for those of you following along. First quarter total revenue was $10.2 million, compared to $11.9 million in the prior year quarter. PHA-based resident sales increased by 64%, or $3.2 million, in the first quarter of 2024.
Michael A. Hajost: First quarter total revenue was $10 2 million compared to $11 9 million.
Michael A. Hajost: Higher year quarter.
Michael A. Hajost: Hey, based resin sales increased by 64% or $3 2 million in the first quarter of 2024.
Michael A. Hajost: This increase did not completely offset a decline in PLA-based resin sales of 71% or $4.3 million due to continued disruption from the Ukraine conflict and lower R&D service revenue. We expect first quarter PLA sales of approximately 1.8 million, and we simulate a forward run rate in the second half of 2024. First quarter 2024 PHA sales represented 82% of product sales, and we expect this percentage to increase throughout the year as we continue to ramp up PHA volume.
Michael A. Hajost: This increase did not completely offset a decline in PLO based resin sales of 71% or $4 3 million.
Michael A. Hajost: Due to continued disruption from the Ukraine conflict and lower R&D service revenue.
Michael A. Hajost: We expect the first quarter Pls sales of approximately $1 8 million.
Michael A. Hajost: Stimulate a forward run rate in the second half of 2024.
Michael A. Hajost: First quarter 2020 for PHA sales represented 82% of product sales and we expect this percentage to increase throughout the year as we continue to ramp up PHA volumes.
Michael A. Hajost: We reported a first quarter 2024 gross loss of $6.3 million, which is in line with the prior year quarter's gross loss of $6.3 million. After adjusting for depreciation and stock-based compensation, we reported an adjusted gross loss of minus $1.2 million, as compared to an adjusted gross loss of minus $1 million in the first quarter of 2023. The positive impact on adjusted gross margin from higher PHA volumes and lower costs under the Kentucky operation were more than offset by the combination of lower PLA volumes and reduced R&D margins.
Michael A. Hajost: We reported a first quarter 2024 gross loss of $6 3 million, which is in line with the prior year quarters gross loss of $6 3 million.
Michael A. Hajost: After adjusting for depreciation and stock based compensation, we reported adjusted gross loss of minus $1 2 million as compared to an adjusted gross loss of minus $1 million in the first quarter of 2023.
Michael A. Hajost: The positive impact on adjusted gross margin from higher PHA volumes and lower cost at our Kentucky operations were more than offset by the combination of lower volumes and reduced R&D margin.
Michael A. Hajost: Combined R&D and SG&A expenses, excluding depreciation, amortization, block-based compensation, and certain non-recurring items totaled $7.5 million in the first quarter of 2024, compared to $7.9 million in the first quarter of last year. The year-over-year reduction in these operating costs was a result of continued cost control initiatives across many areas of the business. Adjusted EVA to loss was $8.7 million in the first quarter of 2024, which was an improvement over a loss of $8.9 million in the first quarter of 2023. Adjusted EBITDA excludes stock-based compensation, depreciation, amortization, interest, and other non-recurring items as reconciled in the appendix.
Michael A. Hajost: Combined R&D and SG&A expenses, excluding depreciation amortization stock based compensation and certain nonrecurring items totaled seven 5 million and the <unk>.
Michael A. Hajost: First quarter of 2024 compared to $7 9 million in the first quarter of last year.
Michael A. Hajost: The year over year reduction in these operating costs was a result of continued cost control initiatives across many areas of the business.
Michael A. Hajost: Adjusted EBIT loss was $8 7 million in the first quarter of 2024.
Michael A. Hajost: Which was an improvement over a loss of $8 9 million in the first quarter of 2023.
Michael A. Hajost: Adjusted EBITDA excludes stock based compensation depreciation amortization interest and other nonrecurring items as reconciled in the appendix.
Michael A. Hajost: Unrestricted cash and equivalents at the end of the first quarter were $57.3 million as compared to $59.2 million at the end of 2023. Restricted cash was $14.2 million, which is mainly held for future interest payments under our Senior Secure Term Loan. Capital expenditures were $2 million in the first quarter compared to $16.4 million in the prior year's first quarter, which included sizable required equipment payments for the Greenfield project that have substantially diminished in the current year. We ended the first quarter with a total debt balance of $385 million.
Michael A. Hajost: Unrestricted cash and equivalents at the end of the first quarter was $57 3 million.
Michael A. Hajost: Compared to $59 2 million at the end of 2023.
Michael A. Hajost: Restricted cash was $14 2 million, which is mainly held for future interest payments under our senior secured term loan.
Michael A. Hajost: Capital expenditures were $2 million in the first quarter compared to $16 4 million in the prior year first quarter, which included sizable required equipment payments to the Greenfield project that has substantially diminished in the current year.
Michael A. Hajost: We ended the first quarter with a total debt balance of $385 million price mainly of our convertible senior notes the senior secured term loan and our new market tax credit loans, which we expect will be forgiven starting in 2026.
Michael A. Hajost: The price mainly of our convertible senior notes, the senior secure term loan, and our new market tax credit loans, which we expect will be forgiven starting in 2026. Liquidity remains a big focus for us as we seek to manage cash and support our customers' demand forecasts. Our recent financing transactions include an equity offering that generated approximately $13.5 million of additional cash after fees, as well as a revolving asset-based lending credit agreement with a loan commitment of $20 million, with an option to expand the facility by an additional $5 million.
Michael A. Hajost: Liquidity remains a big focus for us as we seek to manage cash and support our customer's demand forecast.
Michael A. Hajost: Our recent financing transactions, including equity offering that generated approximately $13 5 million of additional cash after fees.
Michael A. Hajost: Well as a revolving asset based lending credit agreement with a loan commitment of $20 million.
Michael A. Hajost: With an option to expand the facility by an additional $5 million.
Michael A. Hajost: Availability under the credit agreement at any given time is subject to a borrowing-based formula based on our accounts receivable and inventory balances. Let me take a minute to discuss the four-year guidance expectations that we initially provided on our call last month. With respect to our 2024 Adjusted EBITDA, we expect there will be a four-year negative impact from the changes that Steve described earlier related to the Starbucks, Windcup, Straw, and Resin inventory issue.
Michael A. Hajost: Availability under the credit agreement at any given time is subject to a borrowing base formula based on our accounts receivable and inventory balances.
Michael A. Hajost: Let me take a minute to discuss the full year guidance expectations that we initially provided on our call last month.
Michael A. Hajost: With respect to our 2020 for adjusted EBITDA, We expect that there will be a full year negative impact from the changes that Steve described earlier related to the Starbucks Wind Cup strong resin inventory issue.
Michael A. Hajost: This will not cause us to change our adjusted EBITDA guidance range that we previously provided of minus 22 million to minus 32 million, but we do believe now we will be closer to the lower end of that range. We will get more clarity on that situation as we progress through the second and third quarters. Our CapEx expectations remain unchanged, and we reiterate our prior guidance for CapEx spend in the range of $8 million to $10 million.
Michael A. Hajost: This will not cause us to change our adjusted EBITDA guidance range that we previously provided.
Michael A. Hajost: $22 million to minus $32 million, but we do believe we will be closer to the lower end of that range.
Michael A. Hajost: We will get more clarity on that situation as we progressed through the second and third quarters are.
Michael A. Hajost: Our capex expectations remain unchanged and we reiterate our prior guidance for Capex spend in the range of $8 million to $10 million.
Michael A. Hajost: With the recent completion of the revolving asset-based credit agreement, we will now guide toward year-end liquidity instead of just unrestricted cash. At this point, we estimate that our end-of-year liquidity, comprising unrestricted cash and availability under a revolver, will be in the range of $25 to $30 million. I'll now hand the call back to Steve for his closing remarks.
Michael A. Hajost: With the recent completion of the revolving asset based credit agreement will now guide towards year end liquidity instead of just unrestricted cash.
Steve: At this point, we estimate that our end of year liquidity, comprising unrestricted cash and availability under our revolver will be in the range of $25 million to $30 million.
Michael A. Hajost: I'll now hand, the call back to Steve for his closing remarks.
Steve: Thank you Mike.
Stephen E. Croskrey: We remain confident that recent progress in our commercialization efforts and R&D trials will generate increased revenues during 2024 and beyond. As shown in our investor presentation, we continue to grow our sales pipeline with 89 customers in the material selection phase as compared to 85 just a few weeks ago. We have several customers who have reached the commercial launch phase recently. Delta Coffees with their compostable single-use coffee pods, Bolthouse Farms with their compostable produce bags, and a large QSR that is scaling up cutwood in North America, as well as another QSR scaling up straws in North America and a new straw customer in Asia.
Steve: We remain confident that recent progress in our commercialization efforts and R&D prowess will generate increased revenues during 2024 and beyond.
Stephen E. Croskrey: Joining our investor presentation, we continued to grow our sales pipeline was 89 customers in the materials selection phase as compared to 85, just a few weeks ago.
Stephen E. Croskrey: We have several customers who have reached commercial launch phase recently.
Stephen E. Croskrey: Delta copies with their compostable single use coffee pods bolthouse farms with their compostable produce bags and a large <unk> that is scaling up cut were in North America as well as another <unk> scaling up straws in North America, and a new <unk> customer in Asia.
Stephen E. Croskrey: We often say that with just the customers in our sales pipeline, we could fill several plants. I would like to add that considering just our customers that have already launched, our sales are on track to triple by this time next year, and this does not include significant brand owners now in the pre-commercial stage. Thank you to everyone listening to today's call for your attention and your support. We will now open the lines for questions. Thank you.
Stephen E. Croskrey: We often say that with just the customers our sales pipeline, we could fill up several plants.
Stephen E. Croskrey: I would like to add that considering just our customers that have already launched our sales are on track to triple by this time next year and this does not include significant brand owners now in pre commercial stage.
Stephen E. Croskrey: Thank you to everyone listening to today's call for your attention and your support.
Stephen E. Croskrey: We will now open the lines for questions.
Speaker Change: Thank you.
Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press star 1 on your touchtone phone. You will hear a three-tone prompt acknowledging your request, and the questions will be answered in the order they are received. If you would like to withdraw from the question queue, please press star 2. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. The first question comes from Jon Tanwanteng of CJS Securities. Your line is already open.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session.
Jonathan E. Tanwanteng: Have a question. Please press star one on your Touchtone phone.
Jonathan E. Tanwanteng: You will hear three torn prompt acknowledging your request and the questions will be pulled in the order that you received.
Operator: If you would like to withdraw from the question queue. Please press star two.
Jonathan E. Tanwanteng: If you are using a speaker phone please lift the handset before pressing entities.
Operator: One moment. Please for your first question.
Jonathan E. Tanwanteng: Your first question comes from John.
Jonathan E. Tanwanteng: San Juan Tang of CJS Securities your.
Jonathan E. Tanwanteng: Your line is already open.
Jonathan E. Tanwanteng: Hi, good afternoon. Thank you for taking my questions. My first one is, how are you doing? I was wondering if you could talk about the excess inventory at the converter for Starbucks when they realized they were not part of the formula.
Jonathan E. Tanwanteng: Hi, good afternoon, and thank you for taking my questions.
Jonathan E. Tanwanteng: Hey, John My first one I was wondering how.
Jonathan E. Tanwanteng: How are you doing I was wondering if you could.
Jonathan E. Tanwanteng: Talk about the excess inventory at the converter for Starbucks when they realize they were not.
Jonathan E. Tanwanteng: Part of the forward plans are and how long you were selling I guess.
Jonathan E. Tanwanteng: Into both converters versus what that demand was.
Stephen E. Croskrey: Thank you, John. You know, we don't have visibility into the operations of either Starbucks or our converters. But what we know is that, you know, Wincup has been building inventory, and we've learned that Wincup has been building inventory over a significant period of time, but that Eagle did not get word of the change until right at the end of Q1, the last couple of weeks of Q1. You know, the good news here, though, is that we still have a great relationship with Starbucks and we still retain all the business, and, you know, they're a valued partner.
Jonathan E. Tanwanteng: Thank you John.
Stephen E. Croskrey: We don't have.
Stephen E. Croskrey: Visibility into the operations of either Starbucks, where our converters, but.
Stephen E. Croskrey: What we know is that wind Cup has been building.
Stephen E. Croskrey: Learn that went cup has been building inventory.
Stephen E. Croskrey: Over a significant period of time, but that Eagle did not get worse change until right at the end of Q1 in the last couple of weeks of Q1.
Stephen E. Croskrey: The good news here, though is that.
Stephen E. Croskrey: We still have a great relationship with Starbucks and we still retain all of the business.
Stephen E. Croskrey: And.
Stephen E. Croskrey: They are a value partner.
Stephen E. Croskrey: Got it. Okay, thank you. And then second, could you talk a little bit more about the DOE timeline and where you've made progress, and if there are any updates to, you know, if and when you expect to get a loan approval.
Speaker Change: Got it okay. Thank you and then second could you talk a little bit more about the timeline and where you made progress and if there's any updates to them if and when you expect to get a.
Stephen E. Croskrey: On approval.
Stephen E. Croskrey: Yeah, once we actually have a confirmed commitment, there'll be a press release on that, but, you know, in the meantime, we can't really talk about the specifics of where we're at, but we are, you know, near the finish line.
Speaker Change: Yes, once we actually have confirmed commitment there'll be a press release on that but in the meantime, we can't really talk about the specifics of where we're at.
Stephen E. Croskrey: But we are nearing the finish line.
Stephen E. Croskrey: Okay, and then regarding the proposed warrant transaction, could you just give a little bit more detail on companies that have gone through this, what happened to their share prices, and, you know, what you expect to happen, assuming it is approved?
Stephen E. Croskrey: Got it Okay and then.
Stephen E. Croskrey: Regarding the proposed warrant transaction could.
Stephen E. Croskrey: Could you just give a little bit more detail on comp.
Stephen E. Croskrey: Companies that have gone through this what happened to their share prices.
Stephen E. Croskrey:
Stephen E. Croskrey: What do you expect to happen assuming it is approved.
Stephen E. Croskrey: Well, we probably need to stay away from share prices, but, you know, what we would like to see happen as a result of the warrants being convertible by using bonds is a deleveraging event that is non-diluted to the shareholders because, you know, the shareholders are the ones that will be getting the warrants. So, you know, we are hopeful that the transaction will work and it'll be a really good move for our balance sheet.
Stephen E. Croskrey: Well, probably just stay away from share price, but what we would like to see happen.
Stephen E. Croskrey: As a result of the warrants being convertible.
Stephen E. Croskrey: By using bonds that we would like to see a deleveraging event that is non dilutive to the shareholders because the shareholders are the ones that will be getting the warrants. So.
Stephen E. Croskrey: We are hopeful that the.
Stephen E. Croskrey: The transaction will work in and it'll be a really good.
Stephen E. Croskrey: Move for our balance sheet.
Jonathan E. Tanwanteng: Okay, great. Thank you. I'll jump back in the queue.
Speaker Change: Okay, great. Thank you I'll jump back in queue.
Laurence Alexander: Your next question comes from Lawrence Alexander of Jeffries. Your line is already open.
Speaker Change: Your next question comes from.
Laurence Alexander: Laurence Alexander of Jefferies. Your line is already open.
Dan Rizzo: Hi, this is Dan Rizzo on behalf of Lawrence. I just have one question. You mentioned the loan approval. I was just wondering if a change in administration, potentially later in the year, could cause a problem with the loan or if it will hopefully be awarded before that becomes a potential issue.
Laurence Alexander: Hi, This is Dan Rizzo on for Laurence I just have one question you mentioned the loan approval I was just wondering if it changes in administration potentially later in the year could cause a problem with the loan or if it will hopefully be awarded before that becomes a potential issue.
Stephen E. Croskrey: Thanks for the question, Dan. I know that everybody involved is focused on that, and so the intent is to try to get it closed before that event.
Speaker Change: Thanks for the question Dan.
Stephen E. Croskrey: I know that everybody involved is focused on that and so there.
Stephen E. Croskrey: That is to try to get it closed before that event.
Dan Rizzo: Okay, but if it does linger, I mean, is it something that is possible, yes, or is it impossible to say?
Stephen E. Croskrey: Okay.
Stephen E. Croskrey: But if it does it does linger.
Dan Rizzo: Is this something that is possible or is it possible.
Stephen E. Croskrey: It's really impossible for us to say.
Speaker Change: It's really impossible for us to say.
Dan Rizzo: All right. Thank you very much.
Stephen E. Croskrey: Okay.
Speaker Change: Alright, Thank you very much.
Speaker Change: You bet.
Jonathan E. Tanwanteng: Your next question comes from Jon Tanwanteng of CJS Securities. Your line is already open.
Speaker Change: Your next question.
Jonathan E. Tanwanteng: It comes from.
Jonathan E. Tanwanteng: Again, John <unk>.
Jonathan E. Tanwanteng: <unk> of CJS Securities. Your line is already open.
Jonathan E. Tanwanteng: Yeah, I just wanted to ask if you had any update on just input costs as we're heading through the rest of the year, what you're seeing out there, number one, and then if there's been any changes to your plans to, you know, be efficient on OPEX.
Jonathan E. Tanwanteng: Yes, just wanted to ask if you had any update on just input costs as we're heading through the rest of the year, what youre seeing out there number one and then number if theres been any changes to your plans to.
Jonathan E. Tanwanteng: Be efficient on Opex.
Michael A. Hajost: Sure, Steve, I'll take that. So yeah, John, thanks.
Jonathan E. Tanwanteng: Sure Steve I'll take that so yes, John thanks.
Michael A. Hajost: You know, as we said last call, our first quarter prices of about 86 cents per pound for canola would kind of match where we ended up last year. But what we're seeing for, I'd say, our projections for the rest of this year, Q2 through Q4, we expect to trend downward towards sort of mid-60 cents by the end of the year. And we're already seeing some early indications for Q1 of 25, they're going to be sort of in the 60 to 61 cent range.
Michael A. Hajost: Yes.
Speaker Change: As we said last call here, our first quarter prices of about 86 cents per pound for all over to kind of match, where we ended last year.
Michael A. Hajost: Were seeing for I would say our projections for the rest of this year Q2 through Q4.
Michael A. Hajost: Back to trend downward towards sort of mid 60.
Michael A. Hajost: By the end of the year.
Michael A. Hajost: And we're already seeing some early indications for Q1 and 25, they're going to be sort of in the 60 to 61 range. So we're seeing some nice reductions there as we had sort of been communicating to you guys about over the last few quarters and that's continuing.
Michael A. Hajost: So we're seeing some nice reductions there, as we have sort of been communicating to you guys about over the last few quarters, and that's continuing. With respect to operational controls, you can see this quarter that we were lower year over year. We had guided, I think, last time that we expected to be down about $4 million or so in operational costs a year over year in total. And we're still on track to be able to do that through the controls that we had talked about last time of just, you know, reducing the headcount, reducing outside services, and just a whole number of other things to really control the operational costs on the business and preserve liquidity.
Michael A. Hajost: With respect to operational controls that you can see this quarter that we were lower year over year. We had guided I think last time that we expected to be down about $4 million or so in operational costs and year over year in total and we're still on track to be able to do that through the controls that we had talked about last time of just reducing head count.
Michael A. Hajost: Are you seeing outside services and just a whole number of things to really control the operational costs on the business and preserve liquidity.
Jonathan E. Tanwanteng: Okay, great. Steve, one last one for you. Just any changes to the expectation that you will be at, you know, relatively full capacity for Kentucky by the end of next year?
Speaker Change: Okay, Great Steve one last one for you just any changes to the expectation that youll be at relatively full capacity for Kentucky.
Jonathan E. Tanwanteng: By the end of next year.
Stephen E. Croskrey: We still expect to be in that 70-80% range early next year of total capacity. And with these customers that have already launched, that's well in our sights.
Speaker Change: We do.
Stephen E. Croskrey: Still expect to be in that 78% range early next year.
Stephen E. Croskrey: <unk> capacity.
Stephen E. Croskrey: And with.
Stephen E. Croskrey: With the.
Stephen E. Croskrey: Customers that have already launched.
Steve: Well in our sights.
Speaker Change: Okay, great. Thank you.
Stephen E. Croskrey: Okay.
Operator: Ladies and gentlemen, as a reminder, if you have a question, please press star 1. There are no further questions at this time. I would hand over the call to Stephen Croskrey for closing comments. Please go ahead.
Stephen E. Croskrey: Ladies and gentlemen, as a reminder, if you have a question. Please press star one.
Stephen E. Croskrey: There are no further questions at this time I will hand over the call to Steven Cross Creek for closing comments. Please go ahead.
Stephen E. Croskrey: Thank you everyone for your attention and interest in Danimer Scientific, and we look forward to updating you again in about three months.
Stephen E. Croskrey: Thank you everyone for your attention and interest in Danaher scientific and we look forward to updating you again in about three months have good night.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.
Stephen E. Croskrey: Okay.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you.
Stephen E. Croskrey: You for your participation and you may now disconnect.