Origin Materials, Inc. Q1 FY2023 Earnings Call

Thank you for your patience. This is the conference operator. Welcome to the Origin Materials First Quarter 2023 Earnings Call. I will now hand the conference over to Ashish Gupta from Investor Relations. Please proceed.

Thank you and welcome everyone to Origin Materials' first quarter 2023 earnings conference call. Joining the call today from Origin Materials are Co-CEO, Rich Riley; Co-CEO and Co-Founder, John Bissell; and CFO, Nate Whaley. Ahead of this call, Origin issued its first quarter press release and presentation which we will refer to today. These can be found on the Investor Relations section of our website at originmaterials.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 representative of 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 from expectations. For further discussion of the material risks and other important factors that could affect our financial results, please refer to our filings with the SEC including our Annual Report on Form 10-K out on February 23, 2023 as amended on April 28, 2023. In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful as 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. The webcast of this call will also be available on the Investor Relations section of our company website. With that, I will turn the call over to Rich.

Thank you, Ashish, and thanks to everyone for joining us. Today we'll be referring to the slides that were posted to the Investor Relations section of our website earlier this afternoon. I will start by reviewing Q1 highlights to provide a commercial and regulatory update. I will then turn it over to John who will discuss Origin 1, Origin 2, and application development. Nate will wrap up with a financial overview. We will begin on Slide 3. We continue to execute on our plan and make progress on our mission to enable the world's transition to sustainable materials. First, customer demand remains strong and broad-based with off-taking capacity reservations exceeding $9.3 billion. As of February 2023, our commercial strategy has evolved from demand generation to revenue generation and the development of higher-margin products. As such, we did not plan to provide quarterly updates to our total sign-offtake agreements and capacity agreements going forward. But we'll provide updates as appropriate. We're also pleased to announce that we are reporting our first revenue this quarter generated by joint development agreements and our supply chain activation program. Our supply chain commission program is the set of activities we engage in to develop our commercial and logistical capabilities for delivering product and to establish relationships with vendors and customers across the supply chain. Second, as announced in January, Origin 1 is mechanically complete and commissioning is underway with the completion of plant commissioning and startup expected in Q2 2023. Third, we continue to make progress on the front-end design, construction planning, and financing of Origin 2. We continue to expect that Origin 2 can be fully funded from a combination of existing cash on hand, previously indicated traditional project financing, and potential strategic partnerships. We plan to provide an update on new product offerings and construction plans for the Origin 2 plant in August 2023 during our Q2 earnings call. And finally, we are maintaining 2023 guidance for revenue of $40 million to $60 million and adjusted EBITDA loss of $50 million to $60 million. We continue to see strong favorable tailwinds for our technology and business model Turning to Slide 5, the Inflation Reduction Act or IRA is expected to provide approximately $369 billion in direct investment related to climate solutions. Origin is actively exploring several IRA-funded programs including the Department of Energy's Advanced Industrial Facilities Deployment program, or AIFD, which we expect to hear results from by the end of the year, and the Section 48C advanced manufacturing tax credit. We remain optimistic that these programs could provide meaningful support for the construction of Origin's plants. Finally, in March, the Biden Administration released a report titled bold goals for U.S. Biotechnology and Biomanufacturing. The report stated objectives include both climate and supply chain-related directives that we believe will create positive momentum for Origin and securing additional funding and deploying our platform. Turning to Slide 7 in early May, we were thrilled to announce a strategic partnership with Indorama Ventures Public Company Limited. For those not familiar with Indorama, they are one of the world's leading petrochemicals producers and the world's largest producer of virgin and recycled PET resins, with about 26,000 employees worldwide, and close to $90 billion in 2022 sales. This is a highly strategic relationship for Origin as Indorama Ventures has made meaningful pledges related to sustainability as part of its vision 2030 plan. Including commitments to invest $8 billion in recycled and bio-based plastics in pursuit of its goal of increasing the use of circular for bio renewable feedstocks. Origin's technology could enable Indorama to enhance the value of its existing global petrochemical manufacturing footprint while supporting the company's vision 2030 plan building on its industry leadership and sustainability. As part of the strategic partnership, we have signed a memorandum of understanding to explore initiatives related to the rapid commercialization of low-carbon bio-based materials. The initiatives include evaluating the use of existing Indorama units in the USA, with some modification to commercially produce bio-based materials. Under this arrangement, Indorama would convert derivatives of Origin's platform chemical CMF into various sustainable chemicals and bio-based plastics. Under the MOU, Indorama and Origin will also study the potential to use production samples of bio-based materials and limited volume product launches in partnership with high-profile brands. The materials are anticipated to be used in packaging textiles, films, and automotive applications and could include bio-PET, bio-PTA, the advanced bio-based chemical FDCA, and co-polyesters that have an advantage over traditional PET plastic. Turning to Slide 8 in mid-April, we were excited to announce a strategic partnership with SCGP, a leading multinational consumer packaging solutions provider to explore a licensing Origin technology for using in an Asia-based manufacturing facility. The strategic partnership includes a joint development agreement between Origin and SCGP, whereby we aim to develop sustainable carbon-negative products from eucalyptus feedstocks provided by SCGP. We're applications in food packaging, logistics, automotive, and construction. As part of the JDA work, we have successfully processed and tested SCGP eucalyptus feedstock at our West Sacramento California pilot facility, confirming similar yields to other sustainable wood residues that we've evaluated. As a feedstock, eucalyptus offers several benefits including rapid growth, adaptability to diverse environments, and other properties useful for industry. Turning to Slide 9, in late March, we were pleased to announce a strategic partnership with Hyosung Advanced Materials Corporation, a Korea-based industrial materials company to industrialize sustainable high-value specialty materials for use in a wide range of markets and applications including batteries, automotive, and apparel. As part of the partnership, Hyosung signed a multiyear capacity reservation agreement to purchase sustainable carbon negative materials from Origin including PET and a hybrid polymer PDF, which is a blend PET and FDCA for use in power cord applications, as well as HTC for use in battery materials and furanic derivatives for use in spandex applications in the apparel industry. Turning to Slide 10, in mid-April, Origin in the green chemistry division of the Minafin Group, a global fine chemical company announced a new commercial arrangement whereby Minafin will become Origin's manufacturing partner for the downstream supply chain of Origin 1. The initiative, which expands upon our previously announced strategic partnership with Minifin, aims to further build on the strengths of Origin's patented technology platform and Minifin’s manufacturing capability, process knowhow, supply chain strength, and deep expertise in furanic specialty products. As part of the manufacturing initiative, CMF produced by Origin at Origin 1 will be delivered to Minifin, which will convert the CMF into downstream intermediates and products. The initiative is expected to position the company's complementary technologies to grow the value of the bio-based supply chain for high-value chemicals and materials, including bio-based PET. In addition, this quarter we amended our existing agreement with PepsiCo. We have increased the flexibility of the agreement by expanding the slate of products that may be supplied, as well as which plants may supply those products with final volumes, product mix, and plants to be mutually agreed upon. To wrap up our commercial update, our sales pipeline remains strong. We continue to expand the breadth of industries and end markets that we serve and identify opportunities to direct our energies towards higher-margin products. Turning to Slide 11, in early April, we were thrilled to announce the appointments of Craig Rogerson and Tony Tripen to the Origin Board of Directors. They bring a wealth of experience in operations, strategy, corporate finance, and M&A to the company from leading world-class chemicals and material science companies, which will prove to be a tremendous benefit as we begin commercial production. Craig Rogerson has four decades of executive experience leading private and publicly held specialty chemical companies, having most recently served as chairman and president, and CEO of Hexion, Inc., a leading global producer of adhesives and performance materials that enabled the production of engineered wood products and other specialty materials. Prior to being acquired for $1.9 billion in 2022, by American Securities, Hexion had over $2 billion in annual sales. Previously, Craig served as chairman, president, and CEO of Kimura Corporation, a global developer, manufacturer, and marketer of engineered industrial specialty chemicals. Prior to being acquired for $2.5 billion in 2017 by Ag, Chemtura generated $1.7 billion in 2015 revenue. Tony brings over three decades of significant operational strategy and M&A experience, extensive knowledge of the manufacturing technology, material science industries, and a background in international corporate finance. He most recently served as director at Mesa Laboratories, a global leader in the design and manufacturing of life science tools and critical quality control products and services, many of which are sold into niche markets driven by regulatory requirements. Previously, Tony had a 36-year career with Corning, a global leading innovator and material science with more than $10 billion in annual revenue. He has held various progressive leadership roles in corporate accounting and finance, including Chief Financial Officer. Craig and Tony will be outstanding additions to our board of directors and we are thrilled to welcome them. We would also like to thank Ben Noora, who resigned from the Origin board on May 8, and who was recently appointed CEO of VF Corp for his contributions during his tenure with Origin. With that, I would like to turn it over to John, who will discuss Origin 1, Origin 2, and product development.

I’ll start with an update on Origin 1. Origin 1, our inaugural commercial manufacturing facility in Sarnia, Ontario, is on schedule, with commissioning expected to conclude and plant startup set for Q2 as previously indicated. In January, we announced that Origin 1 is mechanically complete, and commissioning is in progress, with on-site work advancing well. During the first quarter, we brought on board our director of manufacturing, who has valuable experience, including work with carbon black producers like Cabot. Looking ahead, we are eager to launch the plant, commence commercial production, supply products and samples to customers, and progress further on our path to decarbonizing materials worldwide. Origin 1 is primarily a strategic asset that we will utilize to qualify higher-value applications for our intermediate CMF, HTC, and oils and extractives. Besides parasailing and bio-PET from Origin 1, we plan to explore or qualify FDCA, epoxy resins, surfactants, sustainable carbon black, bio-asphalt, and biofuels. We aim to gradually ramp up operations at Origin 1 to optimally meet customer demand while producing samples and qualifying materials. We are confident in our ability to achieve our production targets to support our revenue guidance. In product development, we are enhancing our intellectual property with additional patent filings and five new patent families, including for promising potential intermediate products and applications, advances in FDCA related polymers that enhance overall polymer performance, HTC, and HTC's application in rubbers, among others. In March, we announced a significant achievement in our carbon black program, confirming the suitability of our HTC-derived carbon black for automotive tires and mechanical rubber goods. To elaborate on this milestone, I will share some context about HTC and its unique value to our customers. Origin's hydrothermal carbon (HTC) is believed to be an exceptional material not produced elsewhere in the world through any process besides Origin's. HTC results from the interaction of lignin and degraded CMF during the biomass conversion in our core process. A scanning electron micrograph of Origin's HTC alongside an SEM image of petroleum-derived carbon black shows that Origin's HTC exhibits a similar morphology to conventional carbon black, with primary particles forming aggregates of grape-like structures. Beyond this resemblance, Origin's HTC provides an enhanced capability to fine-tune surface chemistry and control particle shape, size, and conductivity. This adaptability makes HTC particularly valuable, offering both sustainability and performance enhancements for various applications. The significance of this tunability lies in our ability to customize our materials to fulfill customer requirements and deliver products that meet a range of carbon black specifications, such as those needed for tires and mechanical rubber goods, as well as for inks and paint pigments. HTC features two characteristics that can be readily adjusted. Firstly, we can manage its surface chemistry. Origin's HTC naturally begins with a level of surface functionality that fossil carbon black can only achieve through expensive treatments. Usually, petroleum-derived carbon black starts hydrophobic, requiring costly processing to enhance hydrophilicity for desired performance. Moreover, there are limits to how hydrophilic fossil-based carbon black can become. In contrast, we can modify HTC, removing functional groups to vary between hydrophobic and hydrophilic behavior. Secondly, we can adjust the morphology of HTC, which is critical for carbon black to meet different specifications and performance criteria based largely on particle size, shape, and structure. We can influence both the micro-morphology and macro morphology of HTC clusters—micro-morphology through process conditions and macro morphology via post-processing. By leveraging these capabilities, we can fine-tune surface chemistry and morphology, giving us substantial control over material performance. To share our latest progress with HTC, we were pleased in March to announce continued advancements in carbon black development. We produced a carbon black that, when blended with conventional fossil-based carbon blacks, outperformed existing options, successfully adhering to a demanding performance specification for automotive tires and mechanical rubber goods. This achievement underscores the potential for our sustainable bio-based low carbon black to gain broad acceptance in the rapidly expanding carbon black market. The N660 specification is considered a gold standard, which our product has met, highlighting the opportunity for widespread use of our carbon black not only in N660 applications but also in less technically stringent ones. We are excited about bringing many benefits to this market. First, our material is a sustainable alternative to fossil carbon black, consisting of up to 100% bio content and having low carbon intensity. Second, our material contains no detectable levels of polycyclic aromatic hydrocarbons (PAHs). Third, we expect our material to maintain stable pricing, largely independent from the petroleum supply chain, which is prone to volatility, unlike supply chains based on sustainable wood residues. Fourth, our carbon black is anticipated to be a favorable choice compared to reclaimed carbon black, as it does not face the same performance challenges and can even outperform fossil-based materials. Fifth, we do not foresee that the production of Origin's carbon black will encounter the same regulatory constraints in the United States as fossil-based carbon black. Lastly, our studies indicate that we can achieve superior dispersion and 10 Delta qualities, which enhance performance in tires regarding durability and fuel economy. Having created several carbon black blends that exceed the performance of the N660 specification, we look forward to further increasing the percentage of our material in similar blends moving forward, typical of carbon black development programs for tires and other uses. Our HTC team deserves commendation for reaching this stage, comprising an exceptional group of scientists, engineers, and commercial professionals specializing in carbon black and carbon products. Our team excels in application development, process engineering, materials engineering, materials analysis, and regulatory management. We are immensely excited about what this talented group can achieve. As for Origin 2, our upcoming plant in Louisiana, we are progressing on design, construction planning, and financing. We are actively developing new products and applications that may be incorporated into the plant’s design, such as FDCA, which can be converted into PDF, carbon black, and biofuels. We expect to share updates on new product offerings and construction plans for the plant in August 2023. In conclusion, I’m proud of our team's execution toward the milestones of Origin 1 and Origin 2. The imminent startup of Origin 1 is a thrilling step forward in our mission to facilitate the global transition to sustainable materials. We are making strides in our product development and commercialization roadmap, forming valuable new partnerships, and strengthening existing relationships to pursue our shared vision of a more sustainable and high-performing chemicals and materials industry. I will now hand it over to Nate to cover some financial details.

Thanks, John. I'll begin with a commentary on our first quarter results then provide our financing expectations for Origin 2 and finish with an update on our 2023 outlook. Speaking to slide 18, we reported quarterly revenue for the first quarter of $1.7 million associated with JDAs and work in the supply chain activation program compared with no revenue in the prior year period. First quarter operating expenses were $13.0 million, compared to $7.6 million during the same period in the prior year. Net income was $9.8 million for the first quarter compared to a net income of $7.3 million in the same period in the prior year. Adjusted EBITDA loss was $9.7 million for the first quarter compared to a loss of $6.5 million in the same period of the prior year. Turning to our balance sheet, Origin ended the first quarter with $263.9 million in cash, cash equivalents, and marketable securities, a meaningful portion of Q1 cash expenditures related to the completion of Origin 1 and are therefore non-recurring. Regarding the financing of Origin 2, in early January, we announced Louisiana State Bond Commission unanimously passed a resolution granting its approval for the issuance of up to $1.5 billion of tax-exempt bonds to support the construction and commissioning of the plant. This amount is inclusive of and builds on the strong foundation of the previously announced expected $400 million in private activity bond volume cap allocation. Origin's use of solid waste feed stocks to produce carbon-negative materials enables the company to use these tax-exempt bonds toward the financing of the Origin 2 project. Bank of America has been engaged by Origin to underwrite the bonds and market them to investors, which could enable the financing of the debt of Origin 2 using entirely tax-exempt bonds. Origin continues to work with leading financial institutions on other forms of traditional private financing and Federal loan programs, including those through the United States Department of Agriculture and Department of Energy. As we previously discussed, we also anticipate various state, local, and federal tax credits, grants, loans, and other programs, including those promoting advanced manufacturing from the Inflation Reduction Act, to be incrementally beneficial for the financing of Origin 2. As Rich mentioned, we continue to expect that Origin 2 can be fully funded from a combination of existing cash on hand, previously indicated traditional project financing, and potential strategic partnerships. Given Origin's ongoing global technology licensing effort and an active governmental affairs team, we anticipate strategic partnerships and federal incentive programs to play a meaningful role in the financing of Origin 2. Again, we expect to provide an update on Origin 2 in August 2023. I will now 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.

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 incredibly proud of our team's continued execution as we draw closer to commercial production and taking the next step in the world's once-in-a-planet transition to sustainable materials. And with that, I'll ask the operator to open the line for questions.

The first question comes from Frank Mitsch from Fermium Research ION Research. Please go ahead.

I'm curious about Indorama, given that it's the largest PET company out there, and obviously, that's a natural outlet for CMF into downstream. And obviously, you've had relationships with the brand owners, like PepsiCo and Danone over the last couple of years, but Indorama is kind of a latecomer to the partnership. How did that come about? Was that a push from the brand owners, or any sort of color that you could talk about the relationship that you have with Indorama and where do you think that will go?

Indorama is a highly strategic partner for us as the largest producer of PET globally. Our production of paraxylene, which constitutes 80% of PET, complements their operations perfectly. Partnering with a market leader like Indorama to convert our paraxylene into bio-PET for our customers around the world is an ideal match. We are also well-aligned with their sustainability goals for 2030, where they have committed to investing $8 billion in this initiative, prioritizing sustainability. This partnership is strategically advantageous and has many dimensions that we believe will continue to expand. Initially, we are considering utilizing Indorama's facilities in the U.S. for the conversion and production of bio-based materials. Additionally, we will collaborate on developing bio-based samples on a smaller scale in the near term to provide them to our shared customers. There are numerous opportunities for collaboration.

And if I could ask, in a press release, you talked about hiring a financial firm to underwrite the bonds and so forth for the Louisiana state tax-exempt bonds. Just curious as to roughly what thoughts you have in terms of a timeframe that you might be coming to market with those bonds, understanding that Origin 2 is a 2025 startup. So, we are a little ways away from that?

Sure. Frank, Nate. So first, as we announced that back in February, we have hired Bank of America to help us bring that financing to market. Really, as far as timing, like we said earlier in the call, we are going to have a full update on Origin 2 and all of our expectations around that in August. So, I want to hold on that until our full update at that point.

Thank you. The chemistry of what you guys are developing is continually evolving; I just find it really fascinating. Every time we get on a call with you, you're going down a new path. Putting the interest in the chemistry aside, can you talk a little bit about your view of the potential value of these different pathways? I mean, if we think about where this process initially started as a way to produce PET, and now you can go down the FDCA pathway and maybe produce PEF or any of these other furan derivatives. How would you characterize the potential value of those reverses PET? Then now you're going down this path of being able to convert HTC into effectively a carbon black derivative or a carbon black alternative, perhaps is a better way to describe it. The value proposition here seems to continually evolve. Can you characterize it in your own view of the size of the value proposition versus where you look at it now versus where it was previously as just a bio-based PET?

Yeah. Hey, Steve, this is John, thanks for the question; I really appreciate it. I think, if you zoom all the way out, what we're really doing is developing a platform upon which we can build lots of other products and chemistry. The evolution of additional products is largely due to our exploration and discovery of the highest value places to put the intermediates that come off of our platform. When you consider the value proposition, generally speaking, performance advantage usually means better margin and higher value for the individual products. Typically, when we go look at a new product, we're identifying materials that provide benefits to the customer. The demand for PET remains enormous and will only increase, but we’re also excited about higher-value products. The more we can develop products with performance advantages, the happier we are. Additionally, the same principles apply to our HTC products. What has been fascinating is that our carbon black product from HTC is showing improved performance without needing to reformulate the rubber. We believe there's a significant opportunity for us in the carbon black market, particularly in automotive applications.

In addition to the higher value and lower costs, it would seem to me that this new pathway that you're pursuing, with HTC going down and becoming a carbon black alternative. The other benefit would be a significant reduction in CO2 emissions. And maybe you would have some data on that. My understanding is carbon black generates a significant CO2 emission source. I’m curious whether this might be one of the end products that would enable you to get more DOE funding, as the DOE is looking for products that reduce CO2 emissions. This HTC product versus carbon black could be pretty compelling. Is that true regarding the CO2 footprint?

Yeah. Well, we see a huge opportunity to reduce the CO2 footprint of carbon black, which is significant, especially in the tire industry. Tires are a major part of material consumption for automobiles. We believe there is a significant opportunity for positive impact in terms of CO2 emission reductions. We have a strong belief in our capacity to improve the carbon footprint and benefit from various incentives for our work in that area. Additionally, there are general pollutant emissions associated with carbon black production, especially in North America, that can limit the ability to bring online economically new supplies using older processes. Our method for producing carbon black from HTC is designed for sustainability, which allows us to potentially expand production capacity in North America where others may face challenges.

No worries. It happens all the time, so I understand the strategy shift towards focusing more on revenue generation and higher margin products. Considering the current demand and the offtake value, I believe it likely fills plants three or four or gets close, and there's significant scarcity value. I'm curious, how is this affecting interest on the licensing side among companies that think they could reach the market more quickly if they pursue that option?

Yeah, that's a great question. We were excited to announce our first licensing exploration partnership this quarter with SCGP, which is an example of a company that has numerous capabilities and assets. Working with them to explore an Asia-based facility showcases our licensing efforts. We continue to receive inbound interest and will share pertinent information as appropriate. More companies are showing interest due to the imminent operational capabilities of Origin 1, which will only increase as we begin production. Additionally, Origin 1 will also serve as a valuable tool for testing yields for various licensing scenarios for our partners.

I guess, good segue to Origin 1. I mean, I know that this plant is obviously smaller than what you envision for Origin 2 and beyond. Just curious how that plays into things, obviously, making a lot of different products, getting those out into the market, increasing your reach. Do you think that other companies will go the route of what you just disclosed about Pepsi, in terms of amending agreements in order to get into some other areas?

I think we continue to have a lot of customers that want access to multiple materials. We recently announced a partnership with another company interested in PET and PEF and HTC, targeting a wide range of markets. Our chemical company customers often explore diverse applications for these materials. We believe this will remain the case. On the polyester side alone, we do think there are a lot of companies that foresee a necessity for significant PET quantities and are showing interest in the value propositions offered by PET and PEF.

It's hard to say, but I think there's a tremendous demand for PET, and I believe it will continue to grow. There is also interest from multiple customers in FDCA and PEF, and I expect that demand will only increase as they learn more about these materials and begin testing. We anticipate seeing more companies exploring these pathways.

Thank you. Revenue capacity for Origin 1 still stands at $120 million. Through any of these new contracts, will that pull forward from a 2025 target that you had before?

I think we reaffirmed our revenue guidance for this year. I haven't given guidance for the next year yet. As Origin 1 comes online this quarter and continues to ramp up, our confidence remains in using it as a strategic asset for generating large-scale samples, joint development agreements, and exploring licensing arrangements. I don't believe our outlook for these initiatives has materially changed.

I think it’s clear that we'll be making some material from Origin 1 off of the HTC, but I'm unsure that we're ready to label it as N660 since it seems to outperform that standard. However, I anticipate that we'll be producing substantial volumes off of that plant in a couple of months.

Thanks for taking my question. I saw in the press release that after this quarter, you will no longer be reporting the off-takes and capacity of reservations. What led to the decision to stop disclosing that number? It was quite useful over the years.

Yeah, thanks, Pavel. This is Rich. We felt like that number has grown, you know, 9 times in a relatively short period of time. The reason we were focused on that was to prove that we had a lot of demand beyond packaging, and that number grew very rapidly—more quickly than we expected. We believe that we've proven this demand sufficiently now, so focusing on joint development agreements, licensing relationships, and revenue generation seems more beneficial. While we will update that number as appropriate, we believe that concern from investors about substantial demand for raw materials is well understood.

Understood. Let me follow-up on that you are right on the cusp of startup. Have your thoughts changed regarding how long it will take for Origin 1 to reach steady state operation? I think 36,000 pounds of production per quarter is something like that. Are we still looking at a 12-month timeframe for that?

Thanks, Pavel. I think, generally speaking, our view hasn’t changed. A meaningful part of our timeline is influenced by the demand for specific materials from customers, which is somewhat uncertain and is the actual driving factor here more than just maximizing capacity. We acknowledge that there’s always uncertainty with ramping up these plants. We aim to manage expectations to under-promise and over-deliver.

That concludes today's live Q-and-A segment. I will now turn it over to Ashish Gupta, Investor Relations to conduct the next segment of our investor Q&A.

Thank you, operator. As we've done on our last four earnings calls, for today's call, we invited all investors to submit questions as part of our Ask Origin campaign. Once again, we are pleased with a very high level of participation and want to thank everyone who submitted a question. In the interest of time, we will be taking the most commonly asked questions. Our first questions are for Rich: what is Origin developing with SCGP? Is it retrofitting a factory? Can you talk about the terms or possible revenues from future licensing?

Yes, it's a great question. SCGP is a really interesting company, as I discussed previously. We are working with them to explore the feasibility of them making large commercial quantities of PET in Asia using eucalyptus as a feedstock. We have received eucalyptus and processed it successfully in our pilot plants, proving that the yields on eucalyptus are attractive and feasible for an Origin plant. So, we’ll continue working with them on the feasibility assessment and look forward to potential collaborations with other companies on similar projects.

Do you think licensing could be a significant source of revenue over the next few years?

I do. There is potential for some revenue, and we will likely be compensated for our exploratory work with various partners. The seriousness and timing of those partnerships are still unclear, but it's evident that many companies will need an entire Origin 2 scale plant or more for their own needs. This inevitably leads to licensing discussions. I think that could result in significant revenue in the relatively near term; it’s just tough to predict exact outcomes and timelines. However, it’s clear that we continue to make progress on the licensing front.

Great. Really appreciate that color, Rich. With that, we'll now turn to some questions for John. Question for John: are there any key learnings from the Origin 1 building commissioning process that you think you want to take into consideration for Origin 2 and beyond?

Yeah, sure. There are quite a few things that we’ve been learning. The most important lessons are probably around the way we specifically execute capital projects. It's vital to note that we're scaling both a technology and the organizational capabilities of Origin with these projects. Origin 1 is a significant endeavor that has tested our processes and abilities. We've learned a lot about what we need to improve, as well as what has worked effectively. Many of these lessons will be transferable to Origin 2. While our technology’s specifics may undergo small tweaks, the foundational learnings regarding organizational and capital project execution are very significant.

Thanks, Ashish. And thank you all for joining us today for all the great questions and for your interest in Origin. This concludes today's call.

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