ORGN - NASDAQ

Thank you for standing by. This is the conference operator. Welcome to the Origin Materials, First Quarter 2022 Earnings call. As a reminder, all participants are in listen-only mode and the conference is being recorded after the presentation, there will be an opportunity to ask questions. . 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, first quarter 2022 earnings conference call. Joining the call today from Origin Materials, our 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 that 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 only as of today, should not be relied upon as representative of our views as 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, filed on March 1, 2022. 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. The 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. For today's presentation, we will 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 then discuss important industry announcements and provide a commercial update. I will then turn it over to John who will discuss construction progress on Origin 1 and origin 2. Nate will wrap up with a financial overview. We will begin on slide three. We continue to execute on our plan and make progress on our mission to enable the world's transition to sustainable materials. First, we have seen a more than seven-fold increase in our customer demand since our announcement to become a public company in February of last year, with offtake and capacity reservations increasing by approximately 1.8 billion since the fourth quarter call in February to 7.4 billion today. Second, we remain well capitalized and on track for completion of Origin 1 by the end of 2022. Due to rising inflation and a more challenging supply chain delivery environment, we have updated our capital budget for Origin 1, and now expect a $15 million to $20 million increase from our prior outlook. The total capital budget for Origin 1 is now expected to be in the range of $125 million to $130 million, up from $110 million when we first announced our go public transaction in February 2021. The additional capital budget will be fully funded from our cash on hand. For Origin 2 the previously disclosed capital budget construction timeline and financing assumptions are unchanged. As reported previously, the state of Louisiana pending finalization is expected to award a private activity bond volume cap allocation to origin in the amount of $400 million. We also expect to receive more than $100 million in pending state and local incentives. As John will discuss in more detail front end design of Origin 2 is underway with detailed engineering says to begin in 2023. And third, we remain well capitalized with approximately $427.7 million in cash and cash equivalents on hand. We maintain our expectation that the capital projects for Origin 1 and Origin 2 can be fully funded from our existing cash on hand and previous previously indicated traditional project financing sources. Now, as I have done on prior earnings calls, I'd like to give a brief overview of Origin for those who are new to the story. Origin was founded with the mission to help solve climate change by enabling the world's transition to sustainable materials. Our patented drop in core technology unit economics and carbon impact have gained the support of a growing list of major liberal brands and investors, including to known Nestle Waters, PepsiCo, Ford Motor Company, Mitsubishi Gas, chemical Kolon industries, Primaloft, Solvay, Mitsui & Co., and the Nathan Group. Building on these successes, we were pleased to announce new strategic partnerships with LVMH and Mitsubishi Chemical Holdings Group. These partnerships were further increased our exposure to consumer and industrial end markets including perfumes and cosmetics, packaging and automotive, and expand our international footprint in Asia and Europe. Our CPG partners have publicly disclosed their intent to migrate 100% of their current petroleum based DDT consumption to decarbonized and recycled materials. After extensively evaluating our technology and testing our products, these market leaders have made significant financial contributions to origin both as investors and customers, demonstrating their environmental commitment and confidence in our technology and products. They have signed multi-year update contracts worth hundreds of millions of dollars. We continue to see strong favorable tailwinds for our technology and business model with some of the world's largest public companies committing to zero carbon mandates to help tackle climate change. We were encouraged by late March rule proposal by the SEC that would enhance the climate related disclosures required by companies in their public fillings. These disclosures would include information pertaining to climate related risks that are reasonably likely to have a material impact on their business, including information related to Scope 1 and 2 Greenhouse gas GHG emissions, all of which aligns with our view that the decarbonisation momentum that we are seeing globally, is only likely to accelerate from here. The proposed rule would also require companies which have set GHG goals that include Scope 3 to disclose Scope 3 emissions. According to one report cited by SEC Chairman Gary Gensler in recent prepared remarks 70% of companies in the Russell 1000 index, and approximately 90% of the 500 largest companies by market capitalization and index, published sustainability reports in 2020, using various third-party standards, which include information about climate risks. The surge in energy prices that followed Russia's invasion of Ukraine provides another reminder of the world's need to migrate to more sustainable and less volatile solutions. With more than 99% of plastics made from fossil fuels, the industry is under both considerable environmental and economic pressure to dramatically transform the way it produces and uses plastic. With our first product origin offers an entirely circuit or plastic solution 100%

Thanks, Rich. I'm going get on slide eight and provide an update on Origin 1 and Origin 2. For those interested in the Origin 1 construction process, I'd like to point you to a new construction update video that we added today at the at the Investor Relations section of our website. For Origin 1, our first plant which is under construction Sarnia Ontario, we remain on track for mechanical completion by the end of 2022, and plant commissioning shortly thereafter. During 2021, our team achieved multiple construction milestones ahead of initial expectations, including the installation of key production modules containing equipment used for the conversion of biomass feedstock into high value chemicals, and the placing and bolting of the internal operator module system which were six and three months ahead of schedule, respectively. We've maintained this momentum in 2022 and continue to execute on our construction timeline. As Rich mentioned, we're updating our capital budget for Origin 1 and now expect a $15 million to $20 million increase from our prior outlook resulting from rising inflation and a more challenging supply chain delivery environment. While we were able to absorb inflation this past year by using our Origin 1 budget contingency and finding alternative supply sources, we believe it is more important to maintain our overall consumption schedule by taking the price increases we're seeing in the market today to avoid a delay to our production schedule, this increased to Origin 1 capital budget also includes an appropriate contingency reserve. During the first quarter, we hired additional members of the Origin 1 operations leadership team and began building the rest of the Origin 1 operations team. Additional equipment has been delivered on site and set including the brands thanks associate the end kind of operator module system. We've made substantial progress on the biomass building, which is where we will store feedstock entering the plant prior to further processing and conveying to the reactor system. Piping and steel fabrication, which were started nearly six months ahead of schedule are well underway and on track, and we've started installing fabricated steel pipe racks in the field and interconnecting the plants key production modules. Today the team has fabricated about 12,000 feet of pipe and about 100 tons of steel not counting the components installed and the key production modules. Normally this kind of work is done in the field. However, as we discussed on our fourth quarter call, we are utilizing a modular construction approach whereby our equipment can be fabricated off site generally in the shop. This allows us to maximize our productivity during the cold winter months of starting up while maintaining better control over the quality of our work. As the pipe fabrication work is completed piping leaves the shop for installation the piping modules were that which are then fully assembled to be loaded onto trucks and taken to the Origin 1 site for installation in the field. The team has also begun installing the field support elements of the ground, this steel will support the tank farm modules where various chemicals will be stored once the plant is operational. With regard to Origin 2 our previously disclosed capital budget and construction timeline are unchanged. To be clear, we do see the inflationary environment and continue to closely monitor costs, but we're proactively managing our cost base and have built in substantial contingencies into our initial projections. In addition, we are not currently placing any equipment and construction orders for Origin 2 and current place and supply chain conditions are likely to change in the next 12 to 24 months. I would also note that materials companies generally benefit from higher product prices and margins in an inflationary environment, which can mitigate the impact of inflation on our capital budget. Origin II our first world scale manufacturing facility will produce carbon negative materials used to a PET plastic resin and fiber which is used in packaging, textiles, apparel and other applications. And hydrothermal carbon or HTC, which can be used in fuel pellets of activated carbon and as a replacement for carbon black. Front end design at the plant is under way with detailed engineering set to begin in 2023. On our last earnings call in February, we announced that we had selected the site for Origin 2 in Geismar, Louisiana, subject to finalization of economic incentives. We expect that 150 acre facility will convert an estimated 1 million dry metric tons of sustainable wood residues each year to products for a wide range of end markets. Some of the reasons that we believe the Geismar site is an ideal location for working too include the extremely skilled labor pool in Louisiana, access to relevant infrastructure and access to sustainable feedstock. Before I conclude, I'd like to give you some additional detail about what we're working on for Origin 2 right now. The team has completed a preliminary layout for a barge dock, pipe rack and conveyor structure and completed the plot plan layout and plant 3d model based on size equipment and utility list. We continue to work closely with landowners and fiber suppliers in Louisiana and Mississippi to finalize our feedstock strategy. To summarize, the team has continued to make significant progress and we continue to expect Origin 1 to be completed by the end of 2022, and a previously disclosed capital budget construction timeline and financing for Origin 2 are unchanged. And with that, I'll turn it over to Nate to discuss some of the financial details.

Thanks, John. I'll begin with some commentary on our first quarter results than our financing expectations for Origin 1 and Origin 2 and finished with an update on our 2022 outlook. Speaking to slide 16, first quarter operating expenses were $7.6 million compared to $5.4 million during the same period of the prior year. Adjusted EBITDA loss was $6.5 million for the first quarter compared to a loss of $4.6 million in the same period of the prior year. And finally, net income was $7.3 million for the first quarter compared to a net loss of $53.6 million in the same period in the prior year. Turning to our balance sheet Origin ended the first quarter with $427.7 million in cash and cash equivalents and marketable securities. We maintain our expectation of fully funding the construction of both plants using our existing balance sheet cash, cash equivalents, and previously indicated traditional financing sources. With regard to the financing of Origin 2, as we reported previously, the State of Louisiana pending finalization is expected to award private activity bond, tax exempt bonds authorized by the state and local governments for financing qualified projects by private capital, volume cap allocation to the company in the amount of $400 million. We also expect to receive more than $100 million in pending state and local incentives. We maintain that our financing assumptions for Origin 2 remain reasonable and achievable with Origin 2 fully funded from its existing cash on hand and previously indicated traditional project financing sources. The 400 million private activity bond allocation from the State of Louisiana provides a strong foundation for the financing of Origin 2, and in combination with certain 2021 infrastructure investment JOBS Act provisions, and other non-volume cap tax exempt financing could enable debt financing of Origin 2 using entirely tax exempt bonds. Origin also continues to work with leading financial institutions on other forms of traditional private financing and Federal Loan programs, including through the US Department of Agriculture and Department of Energy. As we've highlighted our previous earnings calls inflationary pressures remain a focal point. As John mentioned at this point, we are not adjusting our overall capital budget for Origin 2. We acknowledged the situation remains fluid, we will look to update our cost estimates such that we can communicate any changes to the market at appropriate times as we progress through the project. I will now wrap up with an update on our 2022 outlook. We are maintaining our guidance for an Adjusted EBITDA loss of up to $36 million. Capital expenditures are now expected to be up to $175 million versus $155 million previously reported due to the increase in capital budget of Origin 1. With that, I will turn it back to Rich for closing remarks.

Thank you Nate. To close, I'm incredibly proud of the team's execution and encouraged by the strong momentum that we continue to see for our industry leading technology as the world moves aggressively to a zero carbon future. I would like to thank all of our customers for their commitments to Origin, our team and construction and engineering partners for their contributions to our company's success and our shareholders for their continuous support. And with that, I would like to ask the operator to open the line for questions.

Thank you. We will now begin the question-and-answer session. Our first question comes from Frank Mitsch of Pharmion Research. Please go ahead.

Hey, good afternoon, folks, and congrats on piercing the $7 billion barrier. I was wondering if you might be able to put that into some perspective. Obviously, a lot of those contracts are multi-year contracts. And so in the sense that you have -- to avoid double counting, and so on, on an annual basis, how does this $7 billion plus show up in terms of the number of Origin 2s that you need to build? So that is how many plants does this backlog really indicate?

Yeah, hi, Frank, this is Rich. I'll answer that. So the $7.4 billion is the cumulative value of our contracts, most of which are 5 to 10 years in duration. And we've been taking orders across Origin 1, 2, and 3, and we will continue to keep taking orders, as we see, obviously, very strong demand for our products. And in that $7.4 billion, we were especially excited to extend into the toy sector, as well as the beauty and cosmetics and high end luxury sector. Then also to announce a partnership with Mitsubishi Chemical Holdings to advance our efforts to produce carbon black.

Got you. Okay, so there's three facilities, Origin 1, 2, and 3, could satisfy this $7.4 billion?

Yes, we are currently taking orders on those three plants.

Okay. All right. Got you. And then, just, I understand that, the inflation environment may change. But I'm just curious if we said that the inflation environment that we're currently in right now, didn't change, how that impact Origin 2’s capital budget?

Yeah, so good question, obviously. We're definitely feeling inflationary pressure, pretty good on 1, right, as I mentioned, and we closely monitor cost there. But we're also proactively managing our cost base for Origin 2. And we built in quite a bit of contingency into our initial projections. So generally, we think we're in a pretty good spot. Most of the macroeconomic pressures to date. But to your point, inflation is not something that's easily predicted right in either direction. In addition, right now. We're not placing any equipment or construction orders for Origin 2. We're still in the engineering phase. Current inflation supply chain conditions are pretty likely to change significantly in the next 12 to 24 months. And I say the final piece is, obviously, inflation isn't something that happens homogeneously across all different inputs. And so that's something that we're working pretty closely with supply chain partners, and frankly, our engineering phases to do what we can to address those sorts of things.

Understood. I mean, it seems to me that the financing assumptions that you originally made on Origin 2 it seems like you're kind of exceeding that in terms of this $400 million private activity bond and state local incentives, etc. I'm asking the question in the context of, do you believe that you would be sufficiently funded with the cash on hand and the project financing such that there would not be a need to come back to the equity markets to fund Origin 2.

Yes, that's what we think right now. That's correct. We currently think we’re -- the equity component of the plan for Origin 2 is well financed, and it's sufficient given what we see currently in the inflationary environment.

All right, terrific. Thanks so much.

Our next question comes from Steve Byrne of Bank of America. Please go ahead.

Just drilling in a little more on this, the $7 billion worth of offtake agreements, what fraction of that would you say is related to PET? And of those customers that are interested in PET, do any of them have an awareness or an interest in PEF? Is it reasonable that you could produce PEF at a lower cost than PET and any update from Kolon Industries?

Yeah, thanks, Steve. So we're not at this time not disclosing the composition of the $7.4 billion but it is safe to say that our carbon negative drop in PET is our flagship product and is incredibly popular. PEF for those that aren't familiar with it is what we describe as the next generation PET which has all the positive benefits of PET in terms of recyclability and barrier qualities. But it's also degradable and has some other functional benefits. And we do see increasingly strong interest from customers for PEF. So that is absolutely part of our active dialogue with customers and potential customers. And we think it's a very exciting material for the future.

And Kolon Industries has some CMF from your West Sacramento pilot plan to work with and see if they can produce PEF from that?

So all I can say is that, we're very excited about our Kolon industries partnership. They do have substantial expertise in PEF and FPCA related applications. And we continue to work very closely with them.

And then maybe one more on this $7 billion of offtake. The question of pricing in this inflationary environment, is how do you incorporate price into those offtake agreements?

Yeah, it's a great question. So the first thing I can say is that our pricing is at or above the assumptions in our financial projections that we put out back on our analyst day last year. And we do see prices continuing to evolve favorably, as customers get more focused on their carbon footprint, as you mentioned, with inflationary pressures, and then also with the scarcity of our materials. But our pricing strategy, continues to be charging a modest premium for the carbon negativity and the sustainable aspects of what we sell. We're very conscious not to try to price gouge customers or be that way, because we're trying to really become one of their core suppliers and build each customer into a very large lifetime value and long term relationship. But pricing does continue to evolve favorably.

Thank you.

Thanks for the question.

Our next question comes from Eric Stine of Craig Hallum. Please go ahead.

Yeah. Hi, hello, it's Aaron Spychalla on for Eric Stine. Thanks for taking the questions. First maybe on carbon black, good to see progress there with Mitsubishi. Can you just kind of talk about the overall interest level that you're seeing with customers? And if this is kind of earlier than you've maybe expected that to be? And just kind of the outline? Because as we think about Origin 2 and beyond?

Yeah, it's a great question. So we've always been excited and talks about our plans for our HTC intermediate to be used as carbon black, which we view as a very exciting market. We're able to offer a substantial reduction in emissions with our product versus the fossil alternative. And in our financial projections that I mentioned before, we tried to be conservative in how long it would take to get there. And assumed that very little of that would be sold from Origin 2 and that was more in the Origin 3 timeframe that we would really have meaningful orders for carbon black. And so we're excited to announce our first partnership in carbon black, which is certainly a milestone in terms of us making progress towards providing that material. And we're moving as fast as we can towards that higher value application. And we do see a lot of interest both from end customers, as well as existing carbon black producers, who are under pressure from their customers to offer, lower carbon and sustainable alternatives to their traditional fossil offerings. So we're excited about the momentum we're making in that market.

All right, thanks for that. And then just any update on the stock pricing, raw materials, chemicals, anything else, just as we think about the margin outlook with kind of everything going on big picture?

Yeah, generally speaking, when it comes to feedback and materials, et cetera, sort of input raw materials, we haven't seen a lot of impact on of inflation so far. What we're looking at is pretty consistent with what had expected in our sort of projections from last year. So I think generally speaking, we're seeing, as Rich said, pretty favorable pricing for products. And I think, sort of no news is good news, on any raw material and input cost changes or price changes to cost changes. So I think we're generally feeling pretty good about that.

Okay, good. And then maybe last for me just on labor. You kind of talked about adding to the operations leadership team and some other ops additions there. Can you just kind of talk about your overall thoughts on the labor market and things as you look to build the plants out?

Yeah, so. So that's correct. We built out to leadership team for OM 1 quite substantially, and we're feeling great about the quality of the team that we've been able to attract for that so far. And we'll be building out the rest of the OM 1 operating team over the course of the year, in preparation for turning it up. I'd say broader comments around the labor market. We've seen an incredible influx of talent in our business over the last sort of year and a half. And I'd say, frankly, speaking, I think that we've been able to gather talent quality that pretty substantially exceeds what our expectations were at the beginning of last year. And there's no signs of it slowing down, I think there's really a substantial drive for people in the in the chemicals and materials and primary energy sectors to look to move to renewable, capable to high value, technologically sophisticated companies. And it's been a major boon. So I think, we understand that, broadly, it's sort of a tough labor market for a lot of companies. But for us right now, it feels like we're living in the promised land.

Good. That's good to hear. Thanks for taking the questions.

Our next question comes from Pavel Molchanov of Raymond James. Please go ahead.

Thanks for taking the question. On your list of partners and customers, I think close to half of the businesses are based in Europe in some way. Given, you know, I guess this is the first call we've had since the war started, I wanted to ask if there is any shift that you're observing in the level of incoming customer inquiries, request for you to engage in discussion in the context of energy security and triple digit oil prices that we've seen in the last 90 days.

Yeah, thanks for all the great question. The demand we see continues to be very strong and to accelerate, and a lot of that's driven by companies net zero pledges, stated sustainability goals that are driven by their shareholders, employees, customers, etc. It's hard to say if we've seen any direct impact from oil prices or geopolitical events, but I will say demand, just continues to accelerate. And you're right to point out that Europe is a very large market for us. Japan is a very large market for us. And a lot of companies look at our products as serving their global business, and not a particular geography. And so I view all those things is just additional tailwinds on top of the strong demand we've been experiencing.

Yeah, no, I completely understood on the CapEx side is still one of the culprits for the uptick in Origin 1, CapEx.

Yeah, steel is a component of it. Materials more generally, have been meaningful in terms of tightness in the supply chain. And but honestly, it's a little bit I wouldn't say there's one single overriding logic to it. I think, just generally, supply chains have been migrating into North America and Western Europe and out of Asia on a lot of different items. It's never binary, just it's sort of all of it or not. And so it's a little unpredictable, not just in terms of what the item is, that's going to be more expensive, but also how long that item will be more expensive, whether it's fabrication or materials or whatever else. So as I mentioned in the prior comments, we really been able to navigate a lot of that by having just a great project management, construction management team and procurement team on OM 1. And they've navigated through supply bottlenecks and cost increases and all this kind of stuff. But at a certain point, you just need to make sure that you're getting all of the material on time. From our perspective, it's more important for OM 1 to start on time than it is for us to make a little bit of headway on budget. And so we just said, look, yeah, we think we can probably navigate through some of this stuff, but it's just time to make it happen. And so I think, overall, I don't think there's a sort of single overriding logic to it. But yes, we've definitely seen cost increases on materials, but you also see it in certain areas of fabrication. And then I think that, something that it seems to be subject to is frankly electrical equipment is something that sort of power equipment is something that is sort of noticeable. It's not a large proportion of our budget, but there are all these kinds of items that have made a difference. It's not one single thing across the board.

And then lastly, the LVMH partnership, just to clarify, is it only the packaging of the cosmetics that you'll be participating in or the cosmetic material itself?

Yeah, so the initial partnership that we've announced is around using our carbon negative PET for packaging of perfumes and cosmetics. We're very excited to work with the LVMH team, because we think that's just where this starts, and that there's a lot of things we can do together across their various products and categories. But this initial partnership is for packaging.

Okay, thank you very much.

Thanks for the questions.

Our next question comes from Jordan Levy of Truist Securities. Please go ahead.

Good afternoon Rich, John, rest of the teams. You may have touched on this before, but there's been a few projects announced kind of in the general

Yes, that's a great question. So we've -- there's a lot of activity I think, broadly across the industrial sectors of North America, that includes areas like Geismar. The wood basket there is pretty deep and quite robust. So we're not at all concerned about scarcity of raw materials or something along those lines. The other thing I'd say is, depending on the project that you're talking about, lot of those projects actually generate residuals, which are attractive to us. So it's not just sawmill but it also generate residuals that we can use for our process. But there are a variety of other kinds of processing we can do there as well. So in some cases, those additional projects really are competitive, they're actually something of a boon for us. And broadly speaking, I'd say, we feel very comfortable about the feedback environment, not just for Origin 2 but for Origin 3, and 4 and plants beyond that. And so and I don't think anything's changed about that from our perspective.

That's helpful. Thank you, John. And just a follow up, maybe, I know, you outlined it on some of the slides, the schedules for Origin 1 and 2, but maybe just high level key points where we'll be looking toward on the construction site for Origin 1 over the next month or so. And in the engineering and planning phase for Origin 2.

Yeah, so for Origin 1, I think the key milestone to look forward from here on out is mechanical completion, which will happen towards the end of the year. From mechanical completion and then through to startup. That's the stuff, we're sort of -- we're almost there. So I don't think there's too much in terms of intermediary remarks. There are some but there's nothing that's major in terms of intermediary or milestones beyond what we've indicated on the slides themselves. And then for Origin 2, we're in the front end engineering process right now. We're looking to have that process complete next year. At that point, once you have that, you can sort of bid out that the engineering package from the feed package from that process to get fixed pricing for it from EPCs. And then we can pull together the massive stack of contracts that we've put together. And then of course, feedstock supply agreements, all together into the project financing. So I think that's really the big milestone coming up. Of course, there are lots of intermediary steps along the way between here and there, some of which we denoted as you mentioned on the slide.

Thanks so much, and demand number looks great.

That concludes today's live Q&A segment with analysts. I will now turn it over to Ashish Gupta Investor Relations to conduct the ask Origin segment of our Q&A.

Thank you, Arielle. This quarter as part of our Save the Date release, we invited investors to submit questions for earnings call as part of our Ask Origin campaign. We were pleased to have had such high participation and want to thank everyone who submitted a question. In the interest of time today we'll be taking the most commonly asked questions. Our first question is for Rich. Rich, how do you think about a licensing agreement? What are the trade-offs? Would you partner with other companies to further accelerate deployment of future Origin plants?

Yeah, so our current projections assume -- they don't assume licensing, they assume we build own and operate our own plants and the economics that come from those. But as you can tell, from the, incredible demand that we have, and some customers indicated that they would need plants, just to meet their own needs. We are very open to entering into license agreements. And that could allow us to scale faster, more capital efficiently and have a greater impact on the planet and serve this massive demand from our customers. So we do get asked about it by customers and other industry participants. And continue to think that that's a very exciting opportunity for us that that's not currently included in any of our financial projections.

Great, thanks so much for that Rich. We now turn to a few questions for John. John, what is Origin’s vision for helping the the glut of a crisis of plastic waste at our global ecosystems? Does the Origin team hold any concerns or solutions as to how they approach improper disposal of carbon negative PET products?

Yeah, it's a great question. I think it's particularly interesting because one, I think that it's important first to differentiate between all the different kinds of plastic that are out there. Frequently, what you see in public discourse is this idea that all plastic is universally equal. And frankly, that's just not the case. Different plastics have radically different performance. That's why they get used for different applications. As you break all that down, PET, in particular, is somewhat unique. And it's, it's unique in the progress that it's made in end of life solution. So as you look across all of the different plastics, PET is recycled at vastly higher rates than any other plastic out there. And in fact, even speaking more broadly about materials for packaging and other applications, really, it's PET and aluminum, from an impact perspective and an actual recycling and end of life perspective. And then there's sort of endpaper actually, sorry, and let me include paper. And then there's everything else. And so realistically, we chose PET as a target product, in many ways, because we saw it as the best answer for packaging. And many of the pieces that plastic has applications broadly. And not just from a performance perspective, also from an end of life perspective, and then we could come in and solve the beginning of like components, right? So you could get sort of an all in one shot. And we've seen a lot of our customers recognize that. So over the last couple of years, I would say the migration of different applications right into PET as the core material, rather than, you know, polystyrene, or polyolefins, or something along those lines, has been pretty dramatic. And we see it all the time, right customers looking to take something that used to be made out of a different material and get it into PET. And, and the reason for that is not just because it's better than all the other plastics, but as I said, it's actually from an environmental or climate perspective, it's better than just about any material. So it's better than glass, it's better than steel. It's really, really the most efficient, highest performing best economics, best for the climate answer. But of course, that doesn't mean that it doesn't have any issues whatsoever. The recycling rates are very high with PET. But they, you know, from our perspective, we want to get them higher, we want to make that better. And so that's one of the reasons why we're excited about polymers, like PEF that we were discussing earlier, PEF brings a ton of the benefits and performance and recycling behavior that you see with PET that make it such a good material, but it also enables other sort of both performance and end of life solutions that really aren't available to PET so PEF brings for example, higher barrier, which means that you can get into applications that you can't use straight the PET very effectively. And receive degradability characteristics with PEF. And so that means that even though you would preferentially recycle it, in the instance that there is sort of leakage from the end of life supply chain and you get plastic material in the environment, of course it is better for that material to biodegrade in the environment then it is for it to just persist out there. And so from that perspective, we see polyester broadly not just polyester as PET but polyester as a class of polymers that include polymers like PETF, or PEF, rather that we can really, we can solve the climate and the plastic problems and pretty good micro-plastic problems, all with a one single great material solution. So that's sort of our view on plastics more broadly.

Fantastic thank you for the very thorough explanation. Next, can you explain the benefits which you see in Origin derived HPC over a couple over -- excuse me over traditional petroleum sourced analogues such as carbon black?

So the first and most immediately fall out is the lower carbon footprint, right? So when you're looking at a lot of people, again, you mentioned carbon black, I'll take Carbon Black as a specific example. That's a pretty highly emitting material, right. So Carbon Black is essentially like a condensed soot from the combustion -- a partial combustion of, of natural gas, or heavy oil or something along those lines. And so naturally, that's going to emit not only a lot of carbon dioxide, but a lot of other things as well during the process. And we make our carbon black from ACC in a completely different way, which doesn't have even remotely the kinds of emissions that you see, especially with traditional carbon black manufacturer. So that's a big driver for our customers. But there are other elements of HTC, which are characteristically different from normal carbon blacks as well. So for example, our HTC actually starts with a lot of oxygen functionality on the surface. So lots of alcohol and aldehydes made things bound up in that polymer structure. And we can remove those in order to get to something that's much closer to sort of turbostratic , carbon black, but those can actually provide some really substantial benefits over sort of a traditional native carbon black. So for example, if you have all that extra functionality you have a bunch of surface area that you can react substrates on to right, which can give different performance for the carbon black. It also disperses better in in water and aqueous media, which can be relevant in certain applications. So it's really different from that perspective. But the big sort of anchor difference is the carbon footprint.

Wonderful. Now a little bit of a follow-on prior question. Just wanted to give you a chance to if you wanted to expand at all, on the feedstock sourcing strategy for OM 2 perhaps you could also provide some context, go into the logistics of how lignocellulosic materials bought and transported does Origin intend to go into offtake agreements with bio residue aggregators, or target individual players in the industry?

Yes. So to piggyback on the answer that I had earlier, I think, yes, we do expect to have long term agreements with specific materials suppliers, feedstocks players across the industry. It depends on player by player, whether it makes sense to engage in, what the length of offtake agreement might be, and what the supply mechanisms are. But generally speaking, one of the benefits of working in the forest products industry, which is why we selected that as sort of a feedstock basis for our first large scale plant is that you have on a relative basis forestry products are much denser than what you see for a lot of other biomass types. And that makes it much more straightforward to transport, it makes it much more economic handle. And so we have a lot more flexibility with an Origin 2 type plant running on forest products. And that allows us to go after all sorts of different materials, or sorry, different feedstock locations. And when I say materials, in this particular case, what I actually mean is the residual products from either sawmills or pulp mills, or whatever else is out there. And so what we do expect it will pull together as a sort of portfolio of different feedstocks that are that are all feeding into the Origin 2 plant.

Great. Appreciate that. And for our last investor question, it's in a similar vein as the last one. Just maybe can you help us understand how flexible OM 2 is regarding exactly the feedstock it uses, for example, could use gas during one quarter and next quarter switch to cardboard in response to a shortage or a low price opportunity? Could it do a blend of one or more materials similar to how oil refineries blend different crude oils?

Yeah, so that's exactly the way that we think about it is really, as you look at feedstocks for a given Origin plant, the front end and in fact, the mass proportions of the plant are designed really for a particular feed are one. So if I have the mechanical handling equipment to deal with woodchips, I, you know, it may not be very straightforward for me to handle because that doesn't mean that the plant or the technology itself wouldn't be able to feed the plant. It's more a question of whether you have the mechanical infrastructure to move that kind of material around that particular plant. So I think it's unlikely that we would shift wholesale from one feedstock one quarter to a different feedstock the next quarter, but I think it's quite likely that we will design our front end feedstock infrastructure to handle a particular blend with sort of operating envelope limits on how much can that blend, move at any given time. So you know, where are we going to try to incorporate because, for example, into a general residual speed, you might have the ability to process between 10% and 20% of the feed in and you might hit 10%, some quarters, and then you might try to enrich the 20% other quarters, depending on what the rest of the feedstock environment looks like. Of course, that's also going to affect the downstream feedstock distribution of our products, rather sorry, distribution coming into the plant, and that needs to be accounted for as well. So I think that the analogy to refineries is good. Some refineries are really designed to run heavy sour crude, others are designed to run, sweetened light or short run gasoline or something like that. And so it's not that they couldn't run other feedstocks. It's that they're not optimized for them and our plants will be similar, I think. And that's

Great. Really appreciate the added Q&A session here, Rich and John. Also wanted to thank the investors once again, who participated in the Ask Origin campaign. We really appreciate your contributions to today's call. That'll conclude the Q&A portion of today's call. And I'll now turn it back to Rich for closing remarks.

Yes, thanks, Jason. And I agree. Thanks, everyone for the really great questions and for joining us today. We really do appreciate your interest in Origin. This concludes today's call.