ORGN - NASDAQ

Thank you for standing by. This is the conference operator. Welcome to the Origin Materials Third Quarter 2025 Earnings Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions] At this time, for opening remarks and introductions, I will turn the call over to Ryan Smith, Co-Founder and Chief Product Officer. Please go ahead.

Thank you. Good afternoon, and thank you for joining us, everyone. Speaking first today is Origin's CEO and Co-Founder, John Bissell; followed by CFO and CEO, Matt Plavan. Then we'll open the call to questions from analysts and discuss questions submitted as part of this quarter's "Ask Origin" campaign. Ahead of this call, Origin has issued its 2025 third quarter press release and presentation. These can be found on the Investor Relations section of our website at originmaterials.com. Please note that during our discussion today, 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 about views of any subsequent date and we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For further discussion on the material risks and other important factors that could affect our financial results, please refer to our filings with the SEC, including our quarterly report on Form 10-Q filed today. 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 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, which will be posted to our website. The webcast of this call will also be available in the Investor Relations section of our company website. And with that, I will turn the call over to John.

Thank you, Ryan. Good afternoon. Today, we are announcing financing that strengthens our balance sheet and provides access to additional capital that can be staged according to our manufacturing capacity build-out. This financing fuels the scale-up of PET cap production. Our financing is composed of debt financing, both equipment backed and corporate level debt with the flexibility to optimize cash management and cost of capital by optionally servicing the debt with equity. Following our evaluation of multiple corporate financing structures over the past couple of quarters, we have executed a secured convertible debt facility with an initial close of $15 million in cash by the end of the month, with the capacity for additional tranches up to a total of $90 million as needed to maintain a healthy cash flow and to fund growth. During the third quarter, we evaluated a number of term sheets for CapFormer equipment financing and from those in the fourth quarter added USD 20 million in equipment backed financing capacity, bringing our total equipment financing capacity to approximately $30 million. We believe the funding from these 2 sources will enable us to continue to keep pace with our manufacturing build-out and to serve the forthcoming volume orders pursuant to qualification. For those new to Origin, we are making a big difference with a small cap and the technology behind it. Our technology platform produces what we believe are the only commercial-ready PET caps as opposed to the HDPE and polypropylene caps, which today dominate the over $65 billion closures market. Our platform excels in 7 areas: recyclability; oxygen and CO2 barrier, enabling shelf life extension; closure diameter, which enables more economic large-format production; thickness, which enables lightweighting; rigidity for a premium fuel; use of recycled content; and optical clarity. Our innovation stands to be transformative for the packaging industry. In addition to achieving key financing milestones this year, we continue to execute our operating plan. Our CapFormer deployment schedule is on track, and we are maintaining our related guidance. As such, we continue to expand PET cap production capacity in accordance with our revenue growth strategy. We remain on track for completing factory acceptance testing through CapFormer Line 6 by the end of 2025. To optimize capital deployment Line 7 and Line 8 start up could extend into Q1 2027, updated from Q4 2026. On the commercialization front, we are executing our water first go-to-market strategy with line of sight to our revenue targets in 2026. Last quarter, in California, we put our closures on what we believe are the only beverage products on the market with PET caps. Since then, we've built sales momentum globally, marketing our products in North America, Europe, South America and Asia and bolstering our customer pipeline in accordance with our water first growth strategy. In recent months, our sales team displayed PET caps at key international conferences for the plastic parts and beverage industries and it is clear that Origin holds a strong lead in PET cap commercialization. Water customer demand is strong, growing and provides a path on the way to CSD sales. More than half of the water brands in Origin's customer qualification funnel are also potential CSD customers. This quarter, our customer Berlin Packaging placed its first order, which we are now in the process of fulfilling. Berlin Packaging is a respected market leader and represents a sales and distribution partner for Origin. Berlin's broad and deep distribution footprint not only extends our market reach for 1881, but opens the door for all our forthcoming formats across closure applications globally. You can find more about our Berlin packaging relationship in our August 2025 release. We extended our technology lead this quarter by making significant progress with 2 priority challenges: Impact resistance and multi-day heated horizontal stress testing. Amongst separate cap designs, we successfully exceeded performance requirements for both of these tests. In upcoming production trials, we expect to consolidate these features into a single cap design. With that, I'll hand it over to Matt, who will discuss the quarter's financing and strategic highlights and provide a review of our expected near-term financial performance.

Thanks, John, and good afternoon, everyone. First, while the details of the convertible debt financing will be published in the 8-K to be filed in the coming days, I would like to share a qualitative perspective on our financing strategy. We expect the next several quarters to be operationally dynamic at Origin with concurrent executions of a number of critical workflows, including key design iterations, multiple customer qualification processes and significant capital equipment acquisition and capacity build-out activities. At the moment, we believe the combination of our equipment financing and convertible debt instrument is the optimal funding strategy for the agility to best respond to the rapidly evolving working capital needs and to have ready access to future equipment funding at the optimal cost of capital for a given situation. We anticipate drawing additional tranches in 2026 as needed, although we are not obligated to do so. It is at our discretion, contingent upon meeting certain minimum equity and financial conditions. Similarly, it is the company's decision whether to service any outstanding debt with either cash or shares, contingent on meeting certain minimum liquidity requirements. Second, our revenue and run rate adjusted EBITDA guidance remains unchanged. Before consideration of potential strategic review outcomes, we continue to expect 2026 revenues of $20 million to $30 million, 2027 revenues of $100 million to $200 million, and we continue to expect to reach EBITDA adjusted run rate breakeven in 2027. Third, during this quarter, Origin settled securities litigation with no finding of liability or wrongdoing. Announced in October 2025, Origin entered into binding agreements to settle the shareholder class action lawsuit and the related derivative lawsuit initially filed in August 2023 and March 2025, respectively, pending in the United States Court for the East District of California. The proposed settlement, which will be fully covered by insurance, resolves all claims asserted against Origin and the other named defendants in the lawsuit. Even when a company has strong confidence in its position, which Origin does, the way the litigation process works, it can often cost more to fight through vindication than it does to settle and make the case go away. This settlement allows us to avoid distractions associated with the lawsuits and avoid uncertainty and focus on our core business. Lastly, Origin's strategic review engagement with RBC Capital Markets announced in our Q2 2025 earnings release is progressing well with productive engagement from potential counterparties. We look forward to sharing more on this topic as appropriate. With that, I'll pass it back to John for concluding remarks.

Thanks, Matt. I'll conclude with the following: We secured financing that strengthens our balance sheet and provides access to substantial additional capital. We are the clear technology leader for PET caps poised to grow and dominate a new market category. We are making strong progress with respect to our manufacturing capacity build-out and product development and demand is strong, both for water and CSD applications. We look forward to sharing our milestones with you as we progress in our mission centered on the future of packaging, sustainable materials and recycling that actually works. With that, I'll open up the call for questions. Operator, may we have the first question please?

[Operator Instructions] Our first question today comes from Frank Mitsch with Fermium Research.

And congrats on the financing. Can I -- I wanted to ask a couple of questions on the cash position and the convertible debt financing. Okay. So you're going to get $15 million by the end of this month. And it is at your option to get up to the $90 million, the additional $75 million. I believe, Matt, you mentioned that there were some milestones or some mileposts that were necessary for you to pass in order to get the future funding. Can you -- is that true? And can you just kind of describe that those mileposts?

Yes. Frank, thanks for the question. And at this point, the 8-K with the deal terms, it's going to be out by month end, probably sooner. And frankly, I think it's best to see all the terms together at one time in order to get a proper understanding of how the instrument works. And so I think I need to wait until we file that to really get into a level of detail beyond what we did in the prepared comments. So I think that's the approach we should take at the moment.

All right. Fine. I'll be on the lookout for that. The burn rate in the third quarter was $15 million. It's a little bit higher than perhaps I've been thinking. Can you offer your outlook in terms of the burn rate for the next couple of quarters?

Yes. So the burn rate is a combination of kind of at the moment, kind of what our operating expenses are cash operating expenses. And as we talked about in Q1 and Q2 together in the first 6 months, that was approximately $20 million, and then the rest was CapEx for CapFormers. In Q3, it was roughly $10 million on OpEx and $5 million on CapEx, so relatively consistent. And I think as we look into 2026, that's probably a good guide to use. Of course, as we begin generating gross profit, we're going to reduce the net burn. But as we've said before, this is a capacity build story to gather all the -- to be able to service all the demand. So we're going to keep building the CapFormers, and that's kind of why we have the financing lined up that we do to take care of that. But it's a relatively straightforward split, 50-50, 60-40, something like that, between OpEx and CapEx for the foreseeable future.

Terrific. And John, you indicated that Lines 2 and 4 are going to be starting up in the fourth quarter and in the first quarter. And I was wondering if you could give us an idea as to when you expect that that's going to be generating acceptable product quality for the customers because it's kind of important, I guess, given the NASDAQ delisting, I guess, is you're extended until April of 2026. So if these lines are up and running and you're qualified, et cetera, then I think there could be scope to see the stock get to $1 on its own. But yes, if you can give us a little more color on the start ups of Lines 2 and 4, please?

So we're making good progress on the start up of those lines already. And we're excited to get them up running and producing consistent product that we can test with our customers. As we said before, it can be a little bit tricky to predict exactly when we're going to get line time with customers to do that qualification on the customers' lines, right? So first, you've got to get our lines up and running, and then you've got to be take that product from those lines and specifically use it in the customer lines, check that off. And then you can figure out exactly what the timing is to start generating revenue off of that and making sales into that customer line. But we do think that we can make really significant progress across all of those items in the window that you were just referring to, which is really sort of through the end of Q1. We think we can do a lot across those. We're sort of not ready to commit on any single particular customer at this point, but we really think we can make a lot of progress across all of those. There's plenty of time for us to do that, and we're -- we like the way that the Lines 2 and 4 are starting up right now anyway.

All right. Very helpful. And then I guess, lastly, speaking of customers, you're getting your first order, you received your first order from Berlin Packaging. I assume that, that's for a water application. I'm curious -- and I assume that you're through qualifications, et cetera. But any color that you can give on that first order and what your prognosis is for future orders from Berlin Packaging.

Yes. So we're excited to ship it. We haven't heard feedback from Berlin's customers on it yet. So we're excited to see that. I think that's going to be part of what we talked about I suspect next quarter is learning everything that we learned from those -- from Berlin's customers. We have been busy setting up our customer support service. So a lot of the work that we've been doing is really product development-oriented engagement with customers where we're going from qualifying in a very prescribed fashion with Berlin. What's a little bit different is we don't necessarily control exactly which customers are going to be using our caps there. So we need to have the ability to responsively provide customer service instead of just sort of planning too far in advance. So we're excited to do that. We've got that capability pretty much set up. And I think that's going to give us a heck of a lot of information about how our cap is performing, how people are using it. And as with most applications in the world, as you as you start to use something for that application, you're going to learn things that you weren't expecting. And that's, frankly, as an engineer and scientist, that's really exciting.

Now I'll turn it over to Ryan Smith, Co-Founder and Chief Product Officer for a Q&A section answering Ask Origin questions submitted by investors prior to today's call.

Thank you, operator. Prior to our earnings call, we invited all investors to submit questions as part of our Ask Origin campaign. So thank you so much to everyone who participated. These questions were, of course, submitted before our call today, and we answered many of them thoroughly with our prepared remarks. We will generally be answering the most relevant questions today during the time that we have. So let's start with the first question. The investor asks, could you please provide more explanation about the various phases of qualification and their significance? And this is specifically in reference to qualification of the Lines, terms like FAT and SAT.

Yes. So first, I think your comment just now, Ryan, is a useful one to remind everybody of, which is, for better or for worse, we do talk about qualification in 2 different contexts. One of them is qualifying our product with customers on their bottling lines. And that's been a significant focus of ours over the last year or so. And that's a process where we send them caps. They run our caps on their bottling lines. And they see both how do those caps perform from a throughput and a quality perspective in their bottling lines, examples of things that could go wrong there, not specifically for our caps, but caps in general, could be misapplication of the caps or jamming of their bottling systems. And then the other thing that they're really looking for in the aggregate is how do those caps end up performing on those -- the products that they are making on the line. So there's sort of the performance of the cap running through the process and then there's the performance of the cap as part of the final package for the product. And there, you could have under application of the caps that might make it not feel properly or could be over application of the caps, which might cause a problem for, I don't know, tamper evidence or it might make it too hard to get off or something like that. These are sort of generic comments on what could go wrong with those sort of things. And so those are the 2 elements of customer qualification. And of course, with customer qualification, you're both looking for our particular cap design that's being qualified. It's also what do we maybe need to change, adjust settings on their lines in order to make our cap run properly on their lines. These are pretty typical things that you might manage your way through during a customer qualification process, whether it's a PET cap or any other cap. And so that process is what we often are referring to. And the key part of that process is we have to get on to our customers' operating lines. And they have to give us the time to do those runs, collect the data appropriately, make sure that our cap is working properly, and then they can incorporate our caps into their product and planning cycles going forward. But obviously, that's a long-winded way of saying, that's actually not what the question was about, although I think it was really worth walking through. The question is about our qualification of our own lines. So not the lines for using caps, but the lines for making caps. So this is what -- these are our cap forming lines. And what we do during factory acceptance testing which is FATs, which is something we talk a lot about, is that's us testing the performance of the equipment at the site that the equipment was fabricated and assembled. So hence, in the factory, not our factory, but the factory of the equipment suppliers. And that's verifying that before the equipment ever leaves the factory that it's operating the way it's supposed to, to all of its specs. With successful completion of the FAT, the factory acceptance test, it all gets boxed up. It gets shifted to wherever we're going to install and operate that equipment. So frequently, that means our Reed City manufacturing location in Michigan. We unbox all of the equipment. We reintegrate all of it, assemble it, start it up and then we run it again. And we see if it performs the same way now installed at a completely different location where we're going to be operating it for the foreseeable future, to see if it runs the way that it did during the factory acceptance testing. When we have checked that off and it is running the way that it was before, that is the completion largely of the site acceptance test or the SAT. So that's the FAT and the site acceptance test. Now we also go through a line start-up and qualification process for ourselves, which is where we're really -- we're not testing whether the equipment is working. We are dialing in the equipment so that it is operating exactly to the performance specifications that we're looking for as long-term operations of that equipment. And that's less of a test if this equipment work, that's do we have it honed in properly so that we're getting the level of precision that we want to see on those lines so that when we're shipping caps to customers, we are comfortable with those caps, statistically are meeting the specifications as frequently as they need to, to make sure that when we go on to customer qualifcations on their lines, that those caps are going to work the way that they're supposed to.

Great. The next question from an investor, asks, can you speak to the customer demand in Europe versus the U.S. given the environmental stance of the current U.S. administration and how that factors into your expected growth plans?

Yes. I think the first thing to say here is we see a real delamination between the sort of sustainability treatment and public opinion of something like a sustainable material or climate technology, low-carbon materials, those sorts of things. And end of life and recycling type sustainability. So those -- they're often sort of different working groups, if you're looking at the larger sort of meta organizations. They are frequently handled by suddenly different people, even if they might report up into the same broader sustainability group in inside of a company, and they're driven by different consumer factors. So while we have, I think, like everybody else, certainly seen somewhat of a change in tenor on the climate side of things. And notwithstanding that, that really hasn't changed our own view of the importance of climate, but I think that the broader view on climate has changed. We have not seen a reduction in intensity for end-of-life recycling type value propositions or sustainability efforts. And so we have seen a lot of push still in the U.S. just like we had before around resolving the issues for recycling and end of life, particularly for plastics. And I think -- and same in Europe, obviously, there's tethering in Europe that is leading a little bit sort of tethering activities or other kinds of end of life activities in the U.S. But I'd say, in both cases, we see really strong demand elements that are coming from this end-of-life and recycling sustainability desire. I think also, as the plastic and plastic microparticles are becoming more inherently linked to consumers. I think that's driving recycling more. And frankly, we think that, that favors PET quite significantly compared to other packaging materials. So we're really excited, frankly, about all of those demand elements. And I think it's all good right now for PET caps as far as you can tell.

Excellent. All right. And so this next question, I think, was motivated by the fact that Origin has participated in a number of trade shows recently. The investor asks, have any concrete developments come from your recent spate of trade shows in the U.S. and Europe?

Yes. So not things that we're ready to sort of communicate externally. A lot of these deals can take quite a long time. There's a lot of involvement especially if it's not just a straight up, I'm going to buy some caps from you that you're already making. And obviously, in our face of life, there are a lot of transactions or sort of commercial development activities that involve something that we could do or will do in the future or those kinds of things. And those take a little while to be able to communicate out. So lots of concrete things that happened there. not all things that we can talk about. But I will say our sales team and our business development team has been really busy with the outputs of not just those trade shows, but in general, and I think that our experience so far has been as people become aware of what we are doing, we get a lot of inbound interest as a result of that. And so that sort of qualitatively tells us that there's lots and lots of markets that we haven't touched, haven't tapped, isn't aware of us. It's going to be valuable for us to continue to push our message and show people our product and that there is a high percentage of the market that is very interested in PET caps across the board, both small companies and large covers.

Yes. That makes sense. All right. And then last question here, John, to close this out. What do we have to get excited about as we look into the future?

Look, we are excited about the capacity that we're bringing online. We think that, that's going to enable us to really drive caps to the larger customers. We're excited about new product features and continued product development, which left us -- access more parts of the market. And frequently with -- especially with large customers, while they want to start with a single product, they want to have a vision for how something like a PET cap can solve a lot of their -- solve the sort of cap and sustainability problem associated with caps of different non-PET materials, solve that for their whole portfolio. And so showing how we can do that to them is something that additional product types or product features can do, and we're really excited about that. We're excited about the financing that we just closed here. And we think we can show how that can drive the business the way that we all wanted to. And I think I think with all of that said, I think we're in a really good spot. And we've got the right products in the right market and we have the right resources to go execute on it. So there's going to be a lot to talk about. Thank you.

Excellent. And that's all for our ASK Origin questions. Thank you, John. Thank you, Matt, and thanks to all of our investors on the line today. This concludes our call.