Good day, and thank you for standing by, and welcome to Zymergen Fourth Quarter 2021 Financial Results Call. [Operator Instructions]. I would now like to hand the conference over to your host today, Mike Dulin, Director of Communications. You may begin..

Good afternoon. Earlier today, Zymergen released preliminary financial results for the quarter and full year ending December 31, 2021. If you haven't received this news release or if you'd like to be added to the company's distribution list, please send an e-mail to investors@zymergen.com.

Joining me today from Zymergen are Jay Flatley, acting Chief Executive Officer; and Ena Singh, Chief Financial Officer. Before we begin, I would like to remind you that management will make statements during this call that are forward-looking statements within the meaning of the federal securities laws.

These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. Additional information regarding these risks and uncertainties appears in the section entitled Forward-Looking Statements in the press release Zymergen issued today.

For a more complete list and description, please see the Risk Factors section of the company's latest 10-Q and other filings with the Securities and Exchange Commission, including when filed, the Form 10-K for 2021.

Except as required by law, Zymergen disclaims any intention or obligation to update or revise any financial or product pipeline projections or other forward-looking statements, whether because of new information, future events or otherwise.

This conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 22, 2022.

In addition, please note that the fourth quarter and full year financial results discussed today are preliminary and estimated and are subject to the completion and finalization of Zymergen's financial and accounting closing procedures. With that, I'll turn the call over to Jay..

agriculture, water repellency, advanced polymers and enzymes for health care. In agriculture, our initial program in nitrogen fixation is delivering evolved microbes to a partner to replace nitrogen fertilizer. It's believed that microbes can meet all of corn's nitrogen needs and ultimately be expanded to include other cereal crops and nutrients.

Our partner is preparing the Gen 2 strain consortium to plant in this year's field trials and we're already hard at work on the Gen 3 consortium for 2023 trials. Our water repellency work is focused on a family of molecules that adhere to cellulose in repel water.

We are currently making a prototype paper that is being tested by potential partners for various applications, including drinking straws, and early tests have indicated excellent water repellency and wet tensile strength which has the potential to reduce the number of plies required.

We think this technology is extensible to other substrates, which may broaden the application to markets where paper is replacing plastics or new market segments such as clothing. In advanced polymers, we believe we found an important adjacent market opportunity to use our Z2 polymer in high-performance 3D printing applications.

As you will recall, Z2 was the base material for Hyaline. This polymer has critical advantages for printing parts that require high tensile strength and improved yield, showing approximately twice the strength compared to incumbents.

We have ongoing tests with 3D printing OEMs who supply the devices and consumables and with end users in defense and aerospace. We also have interest in development grade material being used for validation and qualification, the results of which will inform any future commercialization decisions.

The other active program in our advanced polymer portfolio is our partnership with Sumitomo, which is currently focused on applications for electronics. As a reminder, Sumitomo is exploring the use of Z1 as a cover film on phones. They will be the single point of commercialization and are sharing equally in development costs.

This program team recently ran a successful 3,000-liter fermentation to provide evaluation material and the resulting product had a purity of greater than 99%. Finally, some updates on our enzyme program, which is initially focused on 2 components that are critical to produce mRNA vaccines, namely VCE and 2 OMT.

The global market for enzymatic capping that supports this production is approximately $800 million in 2022. And although supply is largely caught up with demand, the supply chains are not yet resilient. Our excitement about this market is based on the potential of post-COVID mRNA therapeutics and vaccines.

We have decided to retain responsibility for manufacturing these enzymes using outside contractors, which we believe will help improve margins in a competitive market. Discussions are underway with multiple commercial partners, and we expect to start sampling material soon. Moving on to drug discovery.

Our program leverages our metagenomic database, which provides access to natural product diversity at an unprecedented scale.

Our powerful machine learning tools allow us to uncover molecular matter that inhibits targets of interest focused initially in oncology where we think our platform has unique advantages and the market has a consistent record of valuing innovation.

We're active with leading biopharma companies, exploring our database against their targets of interest and are in discussions with multiple potential partners to take programs forward.

In October of 2021, we received a grant from the Bill & Melinda Gates Foundation to use our technology to explore 11 high-potential therapeutic targets across malaria, tuberculosis and COVID-19.

Earlier this month, we announced progress to the first 3 targets having identified over 200 hits for APP that performed better than the benchmark molecule at statin. We are now moving APP for malaria into validation testing and PL Pro for COVID-19 is likely to follow.

Infectious disease is not a targeted area of interest for our internal programs, but this work proves the power of our drug discovery platform and can enable third parties to move these and other hits forward for continued development. And finally, turning to automation.

We're now offering our technology to customers outside the company that are interested in improving the throughput, efficiency and reliability of their lab operations. We have over 20 potential customers in our commercial pipeline and have signed 2 contracts for system design.

While these initial contracts are small, creating a detailed design for a customer can greatly increase the probability of a future sale.

To support our business, we've implemented a rigorous product development program, which evaluates programs through stringent phase gates designed to verify all aspects of the market, the product and the team resources to fully develop that product to launch. This is fully implemented, and there are 6 product programs currently in the pipeline.

If all of these programs proceed without delay or cancellation, we expect to have at least 3 of these programs in the pilot phase and one in the launch phase by the end of 2022. Ahead of the process, we have a robust research engine to create a pipeline of new opportunities.

I recently visited members of our research team in Cambridge, Massachusetts where we were shown over 20 new material innovations that range from oxygen and moisture barriers for food containers to water repellent fabrics to seed coatings.

These exciting projects are early proofs of concept and will require considerable market review and technology betting before they're qualified to NRR pipeline. However, they demonstrate our research team's ability to quickly move from idea to working material. In fact, this research cycle happened in less than 4 months.

This approach allows us to gather feedback from stakeholders or even potential customers to make faster, smarter decisions about which programs to advance.

As I shared during my recent presentation at the Cowen Healthcare Conference, our goal for the research team is to move 5 programs into what we call the waiting room by the end of 2022, ready for entry into our pipeline when resources allow. We expect to put 2 to 4 of those into product development by year-end.

I'll wrap up this portion of my remarks with a brief summary of next steps for each business. In automation, we believe there's a potential to sign commercial contracts during 2022.

However, these are unlikely to generate revenue this year because we will need to configure these systems, order material, build and test our modular components, install them and qualify them before we book revenue. In drug discovery, we're looking for one potential partnership before year-end and obviously hopeful for more in 2023.

And lastly, in advanced materials, our 2022 goal is to complete distribution partnerships in both enzymes and 3D printing, which would provide both a channel to market and also validation of the technology. As we've stated in earlier presentations, we do not expect meaningful revenue in the advanced materials programs this year.

With that, I'll turn it over to Ena to update you on our financials..

Thanks, Jay. I will now take you through our preliminary results for the fourth quarter and full year of 2021. Starting with the fourth quarter. Total revenue was $3 million, primarily from R&D service agreements and collaboration revenue. This compares to $5.9 million in the same quarter of 2020.

The decrease in revenue was primarily driven by 6 fee contracts completed in 2021, in line with our overall product-focused strategy. Q4 2020 revenue included milestones earned on the successful completion of a legacy contract. R&D service revenue was $2 million in the fourth quarter of 2021 compared to $5 million in the same period of 2020.

Collaboration revenue was $933,000, in line with the same period of 2020. Total operating expenses for the fourth quarter of 2021 were $74.3 million, an increase of 5% compared to $70.5 million in the fourth quarter of 2020. Fourth quarter operating expenses decreased 25% compared to $99.3 million in the third quarter of 2021.

Excluding $7.6 million of restructuring charges, total operating expenses were $66.7 million for the fourth quarter. R&D expenses for the fourth quarter of 2021 were $30.1 million, roughly in line with the same period of the prior year.

R&D expenses for the fourth quarter decreased 23% compared to Q3 driven primarily by the slowdown in spending on canceled programs and lower headcount as a result of our reductions in force.

Sales and marketing expenses for the fourth quarter of 2021 were $4.9 million, an increase of 18% compared to $4.2 million in the same period of the prior year and an increase of 23% compared to the third quarter.

This increase compared to the third quarter was primarily driven by the effect of the onetime reversal of accrued performance bonuses in the third quarter and partially offset by headcount reductions and lower spend on third-party advertising, public relations and marketing.

The accrual reversal in Q3 had an outsized percentage impact due to the low expense base in sales and marketing. General and administrative expenses for the fourth quarter of 2021 were $22.1 million, up 44% compared to $15.4 million in the fourth quarter of 2020 and up 23% from $17.9 million in the third quarter of this year.

The increase versus the third quarter of 2021 was primarily driven by an increase in stock compensation costs and partially offset by headcount reductions. Net loss in the fourth quarter of 2021 was $78.1 million compared to $75.6 million in the fourth quarter of 2020 and $98.2 million in the third quarter of 2021.

The net loss of $78.1 million in the fourth quarter of 2021 included $7.6 million of restructuring charges related to our portfolio review and cost reduction work. Turning to full year 2021 results. Total revenue for 2021 was $16.7 million primarily from R&D service agreements and collaboration revenue.

This represents a 26% increase from $13.3 million in 2020. R&D service revenue was $12.4 million, an increase of 27% compared to $9.8 million in 2020. Collaboration revenue was $4.2 million, an increase of 20% compared to $3.5 million in the prior year.

Total operating expenses for 2021 were $364 million, an increase of 43% compared to $254 million in 2020.

The increase in operating expenses was primarily driven by increased resources allocated to product development, expenses incurred post acquisition of Lodo Therapeutics, restructuring charges as well as the costs associated with being a public company. Excluding $28.8 million of restructuring charges, operating expenses were $325 million for 2021.

R&D expenses for 2021 were $159 million, a 75% increase compared to $90.9 million in 2020. Sales and marketing expenses for 2021 were $23.6 million, up 27% compared to $18.6 million in 2020. General and administrative expenses for 2021 were $83 million, an increase of 38% compared to $60.1 million in 2020.

Net loss for full year 2021 was $362 million compared to $262 million in 2020. Net loss for full year 2021 included $28.8 million of restructuring charges related to our portfolio review and cost reduction work. We ended the year with $386 million in cash and cash equivalents and $12 million in restricted cash.

Looking ahead to 2022, we continue to expect product revenue to be immaterial this year and continue to prioritize closely managing expenses. We expect our first product revenues from commercial sales in 2023, but have potential for a cash upfront fee if we are successful signing a drug discovery partnership.

In 2021, we incurred $28.8 million of restructuring expenses related to reductions in force, contract termination costs, long-lived asset impairments and restructuring-related consulting fees. These activities began in the third quarter and was substantially completed by the end of the year.

However, certain activities such as lease restructuring will extend into the first half of 2022. We expect to realize the full effect of our restructuring efforts in 2022.

As such, we expect our first quarter 2022 total operating expenses to be in the range of $70 million to $75 million, which includes $15 million to $19 million of stock-based compensation, depreciation and amortization expenses.

We expect this to be in line with our go-forward total operating expense run rate, excluding any lease termination restructuring charges. As a result of cost savings related to our restructuring efforts, we believe that we have sufficient cash to fund operations to mid-2023.

However, the quarterly cash flow will be uneven due to capital expenditures on leasehold improvements in the first 3 quarters of 2022 and the repayment of our perceptive debt by June 30. With that, I would like to turn the call back over to Jay for closing comments..

Thank you, Ena. To close, I'll leave you with an update on our strategic plan and our CEO search. As I mentioned earlier, in February, our Board of Directors approved our 3-year strategic plan, which we had committed to completing in early 2022.

With our focus on a smaller number of programs and reduced cost structure, our new strategic plan charts our course through 2024 with clear milestones and goals. Under the new strategic plan, our investments prioritize near-term revenue and the development of a solid pipeline of new opportunities by continuing investment in research.

We believe this will fuel the creation of distinctive high-performing products. Lastly, we officially launched our search for a permanent CEO in February. We believe our business is now set up for long-term success, which opens the door to a broader cross-section of potential leadership talent.

I hope it's clear how we are managing the business to create multiple successful products and that we have an engine behind that to create a pipeline of new opportunities with even higher potential. With that, we'll now open it up for questions.

Operator?.

[Operator Instructions]. Our first question comes from Steven Mah from Cowen..

So on your strategic plan, you said you're prioritizing near-term revenues.

Could you give us some more color on your potential pharma partnership you said that you would likely announce this year? Does that mean to say that you're going to be prioritizing more upfront payments versus milestones and royalties? Maybe give us a little bit of color on the potential deal structure there..

Yes. We expect the deals to be traditional and structured meaning that there'd be upfront fees, milestones and a back-end royalty. We would, to some extent, prioritize upfront fees over extremely long-term factor like a royalty. So if we had that trade-off, we would probably optimize an agreement to increase the upfront portion.

We -- in general, during our product prioritization process, it was important that we deprioritize programs that were very long term. In other words, things that might get to market 4 or 5 years out in favor of ones that we could put into the market over the next few years.

And so that was part of the adjudication process we use as we went through the prioritization of the portfolio back in the last half of last year..

Okay. Got it.

And then the go-forward on your pharma drug discovery partners, it will be similarly prioritized balance between near and long-term revenues?.

Yes. As I said, we'll prioritize to some extent, upfront fees. It doesn't mean we'll push everything to the upfront. But if we had -- if we could gain a point in royalty that was 10 years out versus another few million in an upfront fee, we'd probably do the latter..

Okay. Got it. And if I could sneak in one more.

You said the CEO formal search launched in February?.

That's right..

What is the expected time line for a new CEO then? I know you don't have a crystal ball, but your best guess?.

They're always uncertain, but my experience in a position like this is typically to expect about 6 months. And as I've said previously, the intent isn't for this to be, I leave on Friday and the new CEO starts Monday. There'll be an overlap during a period of sort of orientation of any new person into the company.

We want that transition to be as smooth as possible, both for the internal employees and to make sure that the new CEO is sort of prioritizing the kinds of strategic initiatives that we believe are important..

And our next question comes from Derik De Bruin from Bank of America..

This is Mike Ryskin on for Derik. I want to start first with the OpEx commentary for 1Q and sort of the guidance as you go forward.

Could you talk about sort of the moving pieces there between the R&D and the SG&A line and some of the other adjustments now that you're past some of the restructuring? And what I'm also trying to get at is, as some of these programs that you've kicked off relatively recently, as they progress, should we expect R&D to ramp accordingly and sort of how is that going to flow through the model?.

Let me answer in general first, and then I'll pass it to Ena for any more specifics. We thought it was important that we give some indicator of what the Q1 run rate might look like to give everyone an opportunity to kind of model out what the business will look like for 2022 in terms of a cash burn profile.

I think what we gave you in terms of details in the script are probably as far as we're going to go. We're not going to break down by individual line items how the Q1 expenses are going to kind of roll out through the rest of the year. But we thought it was important, as I said, to kind of give you the overall backdrop.

So Ena, anything to add to that?.

No, I think that's exactly right, Jay. The only other thing I'd say is, as you think about the guidance we gave on total operating expenses, the $70 million to $75 million, that includes cost of revenue, R&D, sales and marketing and G&A expenses, in line with how we report total OpEx on our -- in our press release.

And again, that also includes $15 million to $19 million of stock-based compensation, depreciation and amortization in Q1..

So noncash, yes. And Mike, one other thing, I didn't answer the second part of your question, which is, do we expect a ramp-up of R&D as we launch products. The answer is no.

We've kind of planned out inside the existing infrastructure of the company, both on the commercial side and the R&D side, to stay roughly within the parameters that we gave you for the next 6 quarters. There'll be some fine-tuning and moving of people back and forth between groups, but -- and maybe some small increases but nothing material..

Okay. And then just a quick follow-on to that. I think you also indicated, Ena, sufficient cash until mid-'23, and yet you're not expecting sort of material product revenues until more or less that same time frame. So it just leads to the natural question of cash balance and thoughts on maintaining that.

So what are the avenues you're considering? I realize it's still maybe a little over a year away, but what are the different options you're considering for sort of maintaining sufficient cash?.

Yes. I'd say all options are on the table. We haven't precluded any approaches. And obviously, that will depend on what happens with markets and interest rates and various forms of funding, as we all know, tend to come in and out of favor in different periods.

And so we'll look at all options as we get closer, we'll probably begin that in some earnest in Q3 of this year..

Okay. And then last quick one, if I can squeeze one in. On the customer validation and the process validation process, any comments you can give in terms of how that's gone over the last 3 to 6 months after the strategic shift.

Are you having to undergo any additional steps to sort of walk people through the process and the sort of the onboarding process and how should we think about time lines there, things like that?.

Yes. I'd say, overall, we've been pleased with what's happened across the various different products that we're working on. In any customer evaluation, the reason you do it, and in fact, the reason we pulled it forward in our process is to get feedback from customers as early as we can.

And that will result in fine-tuning of the products, but that's how this should work and will work. So in the various areas, we're getting information about exactly what format of the product that people want in 3D printing. There's pellets and spools and different markets are going to require different physical formats.

And so that's the kind of feedback that we're getting. And with our focus on bringing forward commercial input all the way, in fact, into the research area of what we're doing, that will dramatically, we think, increase the probability that by the time we get a product to market is a good fit for the customers..

And our next question comes from Matt Larew with William Blair..

This is actually Max on for Matt. I just had a few quick ones on the automation side of the business. So you announced a couple of weeks ago that you have 2 contracts in place for detailed system design.

Just wondering if you can give some more context around the next steps there are generating a potential sale and how much revenue a potential sale could bring in? And then any detail you can provide around how those 2 customers -- or those 2 customers specifically and how they plan to use your automation technology?.

Sure. Let me give you what I can on that. So the idea of these design contracts is to take the use case of the customer, which involves understanding their application, their throughput, what kinds of components they would need based on what aspects of preparation they are doing. Some customers will need particular types of modules.

Others will need distinctively different ones. And what we do in this design phase is we configure the system, and we very clearly understand whether there's any additive software that's required to fully enable that customer's application. Once we complete that design, we will present that to these customers.

And of course, that will have associated with it, the cost of implementation. So the cost of the customer of all aspects of the system.

So the hardware required, any augmentation or changes to the software that might be some custom programming, the cost of ongoing service contracts, all that would be presented to a customer and that would be the opportunity to make the sale.

And so the hope is that because we have the ability to obviously design around our approach to automation that it dramatically increases the probability of those customers ultimately placing a purchase order. The range of revenue possibilities here is quite broad because the system is so modular and so configurable.

You could imagine systems probably as low as a few hundred thousand dollars that have a handful of modules in them. That would be a small implementation up theoretically to the tens of millions of dollars for very large installations. And so we're not in a position to disclose the particular configurations of these 2 initial potential customers.

But obviously, should we win [indiscernible].

Got it. Very helpful. Just a follow-up for me here on the product pipeline. I know you completed your sprint on a couple of weeks ago and you gave some detail around the products there.

But is there any detail you can provide around the 20 potential product opportunities that you're evaluating, how they split up by industry and application? And then just curious if you have any more detail on the background of your employees in your research team and what sort of industry experience they have and whether or not that could inform the way that they identify potential product opportunities?.

Well, I could say that the -- what our team presented was, in some ways, almost overwhelming. There were so many different options, opportunities, market segments in different technologies.

It was an incredible performance by the group particularly given the very short time frame we put them on to deliver not just a concept on PowerPoint, but a physical implementation of a product. It's not an end product, but it's a physical embodiment of the underlying science that would go to a product.

And so the range of these was sort of breathtaking in a way. The kinds of people we have there are both molecular biologists and chemists. And we have this unique ability to have our biologists and our chemists work together on these programs.

And so we can conceive of things in our biology group that can be made ultimately biologically, but very often, it takes a long period of time to physically get enough material to actually create an implementation because to reprogram microbes and to go through the fermentation might typically take 9 months to a year.

We can create that molecule synthetically in chemistry or a surrogate molecule that's close to it quite quickly. And so what we are able to do is to make that iteration.

So we can create something in our chemistry group in Cambridge that has the ability to provide that physical demonstration very quickly, we can evolve it using, to some extent, using our chemistry methods. And then we can go back to the biologists and say, okay, now we want to out of an organism.

And so it's that cyclical process that we think is so powerful in our research team. And they come from all sorts of background sciences and different experiences in terms of the application markets that they've worked in..

And our next question comes from Matt Sykes from Goldman Sachs..

Maybe just the first one on the VCE opportunity. Jay, you mentioned about an $800 million market. Supply/demand is kind of a little bit back in balance, but there's still some supply chain issues, but it's still competitive. Just wondering where you see the competitive advantage for your potential product.

Is it cost, efficacy? Just any other details you can provide as you enter that market or constantly entering that market?.

Yes. Well, we certainly think that our performance basis will be at least as good as the products on the market, and we're continuing to improve the process internally with a goal of being better. The VCE process is a challenging one. So the manufacturing side of this is difficult.

And so I think because of the metagenomic starting points that we have for enzymes and our ability to -- the way we can process this and reprogram these bacteria that we have the chance to continue to improve this. So this is Iteration 1 for us that we've done in maybe 10 months, maybe 12 now. So it's been quite fast for us to pull this all together.

From a cost perspective, our goal clearly is to have a great cost position on this. How we wind up pricing it is an open question. We're really not ready to announce pricing nor have we looked at the ultimate pricing that we would have through a distributor because we're going to take this to market through a distribution partner.

But the plan is to be at least competitive price-wise and technically with the products on the market..

Got it. That's very helpful. And then maybe just a follow-up on the other question regarding automation. You gave a lot of details about the design contracts.

I'm just wondering from like an economic standpoint, is there a certain ability to generate some recurring revenue from this -- the service contracts? I think you mentioned, but also maybe software licensing.

Just maybe some details around kind of what the economics would look like on one of these types of contracts or partnerships with the customer..

Yes. So the initial model will have ongoing service contracts that you would expect in any sale like this that would include just hardware support and various customers will require different levels of support. Some will be as is typical, again, in this kind of business, 2-day response time.

But if it's critical, it could be 24/7 response time, which comes at a higher price. And so that will be customer dependent. The software will be licensed as part of the initial purchase price. But there could be either built into the service contracts or as a stand-alone pricing for software upgrades that would come as part of this.

So that's an opportunity for annuity revenue. Downstream, probably not in the first few contracts, but downstream, there may be situations where we would install a system, and it would all become recurring revenue by charging essentially an operating cost to run the hardware and the software together.

That's kind of a second level business model that certainly is -- has potential here, but it's not something that we're going to do in the initial contracts..

And our next question comes from John Sourbeer from UBS..

I guess when you look at the opportunities across advanced materials, drug discovery, automation.

I guess, can you just maybe talk more on really where is the nearest -- near-term opportunity there to maybe start to generate revenues?.

Yes. I'd say the nearest term revenues, as we indicated a bit in the script, are in automation and drug discovery. And so even though most people think of drug discoveries having a very long revenue cycle, and it certainly does by the time you get to an ultimate product that -- where you launch a therapeutic.

The opportunity for us in drug discovery is in upfront fees in relatively near-term milestones. And so as we've again tried to indicate, those upfront fees will clearly be cash. They may or may not actually be revenue depending upon how contracts get ultimately defined.

But that's an opportunity for cash infusion to the company in those forms of upfront fees. Similarly, in automation, we mentioned that we hope to have at least one contract during 2022.

Again, we think that will be a great validation of our platform and a great springboard to other contracts, but it's unlikely we'll be able to go through the full process of installation and qualification before year-end. So that type of transaction should result in revenue in '23.

In the advanced materials side, we think any material revenue will be in '23. And as we've continued to indicate there, there won't be any material revenue from those 4 markets in 2022..

Got it. And I guess just a follow-up on the automation.

Can you confirm, are any of these processes patented in the number of patents, if you do have any around these processes there?.

We do have some patents for sure, I don't know the exact number. We could follow up with you, if that's important. And there are some patents on the software, which are useful, but sometimes hard to defend. So I wouldn't say that the software patents are things that are blocking patents necessarily to third parties.

But the architecture of the hardware is pretty unique and something I think that's benefited not just from many, many years of know-how that we've built up inside the company, but the close proximity of our automation team to our scientists.

So unlike a lot of other automation companies, we've actually used this at scale for many years and continue to evolve it to meet the needs of scientists running these real-world applications.

And so I think that gives us a unique viewport into what the real customer requirements are and how to optimize the combination of hardware and software to meet those needs..

And our next question comes from Rachel Vatnsdal from JPMorgan..

So going off of John's question, you don't expect any meaningful revenue this year in advanced materials, but you've been making progress in all 4 of those end markets.

So can you just walk us through which products in advanced materials are closest to making it to market and that you have the highest confidence in? And then should we be modeling any product revenue for advanced materials in 2023?.

The answer to the last part of the question is yes. So we will have revenue from advanced materials in '23. The leading candidates for revenue, timing-wise, would be the enzyme, so VCE and 2OMT and also the 3D printing opportunity would be the 2 leading areas. So in water repellancy that remains more exploratory in terms of the ultimate application.

And in ag, because of the annual planting cycles, any revenue from that would come at the earliest at the end of '23. There is some potential from the Sumitomo partnership that we could begin to get some revenue on Z1, but I think that's less likely.

So if I were to prioritize them, I put the enzymes and 3D printing at the top, Sumitomo kind of in the middle and ag and water repellancy in the third bucket in terms of price..

That's really helpful. And then just one more on automation. So you mentioned that you have the 2 contracts in place and then 20 customers in the pipeline.

So can you give us some more color on that pipeline and where you are at in the selling process for those 20-some customers in the pipe?.

Yes. It's pretty well distributed, as you might expect. So there's a number where we are demonstrating the technology and talking specifically about how they might use it. So those are in sort of the latter phase of what you'd call a sales pipeline and then we have some that are in the very early conversation phase and then many in between.

So it pretty much spans the kind of 4 segments of the sales pipeline that you typically expect. The 2 where we have the design contracts are obviously the furthest along and the most likely to turn into revenue..

And I'm showing no further questions. I would now like to turn the call back over to Jay Flatley for closing remarks..

So we just want to thank all of you for the time you've taken with us today, and we look forward to speaking with you next quarter. Thanks again..

This concludes today's conference call. Thank you for participating. You may now disconnect..