Origin Materials, Inc. (NASDAQ:ORGN) Q4 2024 Earnings Call Transcript

Origin Materials, Inc. (NASDAQ:ORGN) Q4 2024 Earnings Call Transcript March 13, 2025

Operator: Thank you for standing by. This is the conference operator. Welcome to the Origin Materials Fourth Quarter and Full Year 2024 Earnings Call. As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions by pressing star and zero. At this time, for opening remarks and introduction, I would like to turn the call over to Ryan Smith, co-founder and chief product officer. Please go ahead.

Ryan Smith: 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 COO, Matt Plavan. Then we will 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 2024 fourth quarter and full year 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 of our 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 annual report on Form 10-K 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 as substitutes 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 on the Investor Relations section of our company website. With that, I turn the call over to John.

John Bissell: Thank you, Ryan. Good afternoon. This quarter was both a success and an inflection point for Origin. We stood up our first caps manufacturing line, turned on commercial production in February, and are now shipping product to a growing list of customers for qualification as we continue our transformation into a technology-driven manufacturing organization on the path to substantial revenue and healthy margins. We are solving a really big problem. A bottle cap made from PET that fits in the palm of your hand may seem like a small thing, but it’s the key to a $65 billion market that has been seeking the solution we offer for decades. For our customers, this solution means better-performing products with extended shelf life.

It means sustainability, it means product circularity and recycling that really works. For everyday people, it means starting to fix a broken recycling system by simplifying it, realigning it, and making recycled products more valuable. The solution has been out of reach. Nobody could solve the technology problem. Nobody could even see the problem in a way that would lead to a solution that works. Until now. In February 2025, we are pleased to announce we’ve begun commercial production from the world’s first commercial PET cap manufacturing line. Catformer line one is up and running. To date, this is arguably our most important milestone, as it is tangible proof of the Catformer system’s commercial scale production capability. Proof that is critical to our stakeholders, strategic partners, financiers, customers, and investors.

We want to acknowledge the perseverance, dedication, and sacrifice made by the Origin team to achieve this historic first. This week, we released a video showing the Catformer system operating in our Reed City, Michigan manufacturing center. I encourage everyone to watch that video as it showcases the Catformer in action and illustrates why we believe in this technology and the business it enables. We also announced that three new Catformer lines are nearing completion, and we expect them to finish factory acceptance testing during Q2 of this year. And we confirmed prior guidance that we expect to have eight Catformer lines online by the end of 2025. We are now engaged in delivering caps for qualification, and we expect to have the first beverage products with the Origin caps on shelves in Q3 or perhaps as early as late Q2.

From this point forward, continuous improvement is the rule. We have design modifications that we expect to implement both in future Catformers and that we can use to retrofit existing Catformers. We expect those modifications to substantially increase cap throughput per line and to enable new cap design features and add new formats to our product catalog. Naturally, increased throughput should equate to even better unit economics per line. To help quantify the extent of these improvements, we anticipate the output for Catformer line eight will be roughly double that of Catformer line one, with additional upgrades planned for lines thereafter. And although we expect Catformer line one will produce tens of millions of 1881 caps every month, it’s important to keep in mind that our PET cap technology is a platform, which means it’s a base for growing many different product formats and SKUs, many different applications.

We started with the 1881 format because it’s a massive market. Last year, we announced a tether version of it, designed to keep the cap connected to the bottle and comply with cap tethering mandates in the EU. In time, we’re looking forward to announcing a variety of cap types, including not only beverage caps but food container closures and more. We expect to introduce our first larger format cap in 2026, and we expect that larger cap formats will drive better margins because our manufacturing technology is particularly advantaged over the incumbent technology for making large caps. Today, caps are made by injection molding. With injection molding, the bigger the cap, the longer it takes to inject plastic resin into the circular mold. We make caps differently.

Part of our technology advantage is that we use thermal forming. Instead of injecting molten plastic, we form it out of a hot sheet, similar to stamping the caps out. So no matter how wide the cap, it doesn’t take extra time to fill the diameter of the mold. In this industry, production economics is about speed. And our technology is capable of going faster. But cap economics is also about weight. PET is a more dense material than current cap materials, but it’s also stronger. We take advantage of that strength in a way that injection molding cannot. Because our cap forming technology excels at making thinner caps. Stronger materials enable thinner caps, and thinner caps use less material. That’s a fundamental advantage for Origin, capturing more and more value through the format.

Another advantage of our platform is flexibility. Our Catformers can be retrofitted with new molds reasonably quickly. That means we can make different products from the same line and that we can retrofit existing lines with higher throughput technology, enabling us to be nimble both in responding to customer demand moving forward and in deploying new technology across lines that are already operating. Lastly, eight lines are just the beginning. Our intention is to stand up additional Origin Catformer lines in 2026 at a roughly similar pace to our deployment in 2025, accelerating as capital allows. Now let me turn to demand. Demand is incredibly strong, and we anticipate it will only grow stronger. Multiple customers have signed MOUs to purchase our caps, with our first production line up and running, we are now in the process of delivering caps to a growing list of customers for qualification, with many additional customers in our pipeline.

Despite not having publicly named our customers, we continue to accumulate substantial and accelerating demand for our caps. And there are beneficial reasons for our discretion, as we’ll discuss later. The reality is that we are increasingly in the enviable position of having indicative demand that significantly exceeds our fulfillment capability for several years to come. Our bigger challenge is to bring supply online as fast as practical to better meet demand and gain market share. We are assembling a balanced portfolio of customers and partners that we believe balances volume, margin, deployment flexibility, technical expertise, credibility, and ability to grow Origin. And all of these different customer types are currently represented in our pipeline.

We found the caps market to be quite dynamic with a variety of customer types. This market dynamism means cap pricing is, pleasantly, more variable than we had expected when we began commercializing this technology. As the only commercial producer of PET caps currently in the market, we are naturally aiming to price to the differentiated and unique value of our product. Volumes and expected delivery rates are different for each customer. Some customers are flexible on delivery times, others are not. Some customers require large inventory builds, multiple months of production from a single line, before they will switch to a new cap type, while others need smaller shipments and consequently require less inventory. We are slotting customer deliveries in a way that satisfies customers’ needs while allowing us to continue to onboard new customers and set realistic expectations around delivery times as well.

We, of course, aim for our near-term tactical decisions to enable our long-term strategy. Beyond the production lines, we plan to own and either operate or contract for operation. We continue to lay the groundwork for partnerships such as licensing in which we can supply technology to further enable the scale-up of overall PET cap supply. Standing up our first production line supports that effort. We now have a proven intellectual property-protected technology platform. We have demand from large companies for the technology, and we have the ability to ramp deployment of our Catformer lines to meet the massive supply needs of large customers. We’re also pleased to share today that we successfully expanded our Catformer manufacturing relationships to ensure redundancy and additional capacity.

All of these efforts are strategic for expanding supply generally, including in support of potential partnerships. We look forward to revealing the names of the customers who have already signed MOUs and of those in our pipeline, but our customers generally want to keep the time between an announcement and their product with our caps on shelves as short as possible. With that in mind, we do anticipate announcing some initial customer names in the coming weeks or months. In summary, market interest is strong and increasing, our sales pipeline is growing, and more customers are progressing through the pipeline as time goes on. We continue to believe we can sell every cap we make, and we are just getting started in pursuing the massive opportunity presented by the $65 billion caps and closures market.

And now, I’ll hand it over to Matt for a review of the impact of these commercial dynamics on our expected near-term financial performance.

Matt Plavan: Thanks, John, and good afternoon, everyone. I’d like to speak to the financials of the cap business specifically before I turn to cover financials at the full company level. First, a little commentary on cap margins and Catformer line economics. For competitive reasons, we’ll continue to refrain from sharing granular pricing information, but we do want to reiterate and expand on our previous guidance around the caps business at a macro level to help investors connect the dots on the value creation potential of this business. Margins per Catformer line will vary due to a number of factors, including cap format, special features on the cap, and customer volume commitments, just to name a few. That said, we expect the aggregate gross margins for the cap business to fall in the mid-double digits range.

Additionally, our average capital cost per line is in the mid-single-digit millions, separate from the cost of any extruders we may purchase along the way. We expect the payback period for the average line, including extrusion, to be less than eighteen months. Second, a few words about our financing strategy. As we’ve indicated previously, we believe our stock is significantly undervalued today, and therefore, we believe debt is the optimal way to finance our near-term growth. Thus, we are in the process of securing debt financing to fund our capital equipment build-out and our working capital needs to maintain a healthy minimum cash flow at all times. The expected short payback period per line makes for an attractive financing opportunity for lenders, and we are curating a number of financing proposals for all lines we have on order.

Third, let me speak to the timing for realizing revenue this year. Our first Catformer has produced millions of caps, many of which are in the hands of some of the largest and most famous brands in the world to continue their qualification procedures. And although these qualification shipments will not count as sales, they do demonstrate significant and important commercial pull-through. As for when we can expect revenue generation to begin in earnest this year, it’ll be concurrent with our next three lines commencing production and customer order fulfillment during Q3, with meaningful revenue generation by Q4 of this year and a strong 2025 revenue exit run rate. Fourth, I’ll speak to our view on 2026 revenue. With an expected strong revenue run rate entering the year, we anticipate adding a number of new Catformer lines on a regular cadence during 2026, which we believe will result in a range of revenue for the full year between $110 million and $140 million, separate from any potential licensing revenue.

We are updating guidance on expected profitability timing, due primarily to the delayed start to Line one’s commercial production and subsequent impact on timing for lines two through eight. We now expect to achieve EBITDA positive results on a run rate basis by the end of 2026, updated from our first half of 2026 prior guidance. And now for a few highlights on our quarterly and full-year results. We ended the year with $103 million in cash, cash equivalents, and securities, and when compared to the balance at the end of 2023 of $158 million, the difference is $55 million, which is at the low end of our cash burn guidance range for 2024 of $55 million to $65 million. Origin’s fourth-quarter revenue was $9.2 million compared to $13.1 million in the prior year quarter.

Annual 2024 revenue of $31.3 million was well within our guidance for the year of $25 million to $35 million. Also, as expected, these revenues are comprised of what we refer to as supply chain activation revenue. Turning now to our operating expenses for the fourth quarter, they were $16.2 million compared to $19.8 million in the prior year period, a decrease of $3.6 million. This decrease consisted primarily of $2.7 million in lower research and development expenses and $1.3 million lower general and administrative expenses. For the full year 2024, operating expenses were $85.3 million compared to $60.1 million in the prior year period, an increase of $25.2 million. A significant component of this increase is the $15.2 million non-cash impairment charge of asset expense recognized in the third quarter of 2024, along with $7.4 million higher depreciation expense primarily associated with OriginOne.

With that, I’ll pass this back to John for concluding remarks.

John Bissell: Thanks, Matt. I want to take a moment to emphasize that Origin’s launch of property portfolio is substantial, growing, and increasingly valuable in our view, deepening Origin’s technology advantage. Our portfolio now comprises over seventy issued patents, as well as dozens of pending applications. In January 2025, five applications published covering single and double wall closures, knurled and threaded closures, and methods of making our closures via thermal forming. Origin’s IP lets us make a new, lighter, better-performing cap that our competitors can’t make, using a proprietary cap forming method our competitors can’t duplicate. In short, we believe we have created a defensible moat for this business. In the near future, millions of our caps will be in consumers’ hands.

Although we do not sell directly to consumers, we recognize the importance of the consumer experience to our success. From the tactile experience of twisting the cap and breaking the seal to the sound of the seal breaking to the hand feel of the cap itself to the visual and physical design possibilities available to us with our technology, it all leads to that critical first-use experience and the visceral response that determines if someone likes the experience or not. We’re happy to report that we’ve seen a lot of smiles so far. It really is a very satisfying experience. We’ve been encouraged by the consumer feedback we’ve received thus far and are looking forward to all of you and millions of others getting to have your first experience with Origin PET caps in the near future.

Finally, I want to reiterate that we are building a product, but more importantly, we are building a platform. I’m proud of the work we’re doing, and at the same time, I think it’s important to have our team, including our investors, look up from where we are now and stay oriented on where we’re going. Success for Origin is not making a billion caps, is not launching one Catformer line, or even eight Catformer lines. Success for us is building a platform that can grow smoothly, scalably, to accommodate hundreds of Catformer lines over time. One that is capable of converting a significant share of the $65 billion cap and closures market to PET caps in the coming years. We’re just getting started. With that, I’ll open up the call for questions.

Operator? May we have the first question, please?

Q&A Session

Operator: The first question comes from Frank Mitsch with Premium Research. Please go ahead.

Frank Mitsch: Thank you, and appreciate the color, John and Matt. I wanted to get into the timeline a little bit more in the qualification process, etcetera. So you’ve gotten commercial volumes out of line one three weeks ago. And right now, that’s, you know, you’re producing that and it’s going out to testing to multiple customers. I’m assuming that, or you educate me, that they are qualifying the product and in future would have no issues in sourcing from lines two, three, and four. So can you confirm that? And, also, how long does the qualification process take? And any more specificity on the three lines that are currently in production right now that you haven’t taken, that you haven’t been able to, you know, to get up and running? So any additional color there would be very helpful.

John Bissell: Yep. Hey, Frank. Thanks for the question. So a couple of things. First, yes, you’re right. We’ve been producing, you know, millions of caps from our first Catformer line, and those are going to a couple of different areas. You know, qualification can be broken down into a couple of different categories. One is sending caps to customers for them to qualify the product in its entirety, let’s call it. So, you know, using our caps at the appropriate rates on their capping and filling systems. You know, one of the tricky things about this is that there’s a performance of the cap on a given bottle. But there’s also the performance of the cap in the capping line or the capping and filling line. And there’s, you know, a big part of the performance of these caps is not just how do they perform on average, or at best.

It’s how do they perform in their frequency of misfire or failure or something along those lines. And so you really need large sample sizes to do that kind of evaluation at the quality level that our customers care about. And so that’s why there’s a, even though they’ve tested it on individual bottles, they’ve tested it on relatively, you know, tens of thousands and at least hundreds of thousands of caps. Online, it’s a really large quantity of caps that’s required really to do a true qualification for the capping lines themselves. So that’s the kind of thing that’s happening right now and that we’re preparing samples for them to run. There’s a second kind of qualification, which is the qualification essentially internally for our own next set of lines, you know, because as you mentioned, we have lines two, three, and four in process.

We take caps from our first line, and we actually use them to qualify the next sets of equipment also. And our view is that that’s important because building capacity is sort of high leverage relative to everything else. And so our cap and again, we’re talking, you know, tens, hundreds of thousands, and ultimately millions of caps to do those kinds of things. And so the first set of those caps coming off of Catformer line one is going to those kinds of activities, both customer qualifications and for our own internal equipment qualification. In terms of how long these qualifications take, the answer, and we spoke to this a little bit in terms of just the extent of variability in the caps market that we found, is, and we see this, of course, with price, but we also see it with the really, frankly, the level of diligence that these customers will use during their qualification process.

And what we find is generally, the larger the volume of product that the customer’s expecting to roll these caps out onto, as you’d expect, the more qualification work they do. And so, consequently, we see that with smaller customers, they can usually move quicker. Their qualification is less intensive and just takes less time. With larger customers, it tends to be a longer process. And, you know, we also mentioned there’s a qualification, and then there’s actually the inventory build that goes into supplying these larger customers as well. Right? They don’t want to be operating in a just-in-time kind of fashion with our first line. They want us to have a significant amount of inventory that’s built to continue to supply them if we happen to have any supply chain hiccups that show up.

You know, we don’t think that we’ll have those, but I think it’s prudent for organizations to have that kind of inventory built in their supply chain no matter how you slice it.

Frank Mitsch: Alright. That is very helpful in explaining some of the complexity. You know, the one account that you have it names, although you did name the size, you know, it’s a $100 million plus. Memorandum of understanding that I believe it was supposed to start in the first quarter of this year and that contract was, you know, over a two-year period. The expectation was that you would be able to get to that, you know, $100 million over a two-year period. Starting now. Now, obviously, you know, it looks like that’s being delayed a little bit. Also, you know, if your sales in 2026, the projection is basically, you know, this one customer itself, and I know that that’s not going to be the case. Is there anything you can describe qualitatively or quantitatively with respect to that kind of baseline customer that you have out there that you’ve identified everything except the name of the customer?

John Bissell: Where do these stand? And then, you know, we’re…

Frank Mitsch: Anything there would be helpful.

John Bissell: Yeah. Sure. No. Understood. So as you said, you know, we were a little bit slower getting this Catformer line one up and running than we were originally expecting when we announced that MOU. As a consequence, you know, we do expect that that’s going to push the start date or the initiation date of the purchases made or described in that MOU by a sort of day-per-day or equivalent amount. So we’re a little bit slower getting that rolling, but we still expect it to be a two-year term, as we described it originally. And so, and that would be backloaded into the second year. When we put that agreement together, that was in mind of the, or in light of the ramp rate that we’re describing now, where we have, you know, eight Catformers this year, and that obviously, as a consequence, the bulk of cap production or the run rate is going to be much higher at the end of this year than it will be at the beginning.

Right? So we’re escalating quite quickly into our production rate as those platforms come online. And so we see the production rate in 2026, you know, obviously quite a bit higher than the production rate in 2025. And so that’s sort of reflected in the balance of that agreement. And then, of course, because of the two-year contract that we’re talking about, and it’s being pushed by a little bit into 2025 for the start, then we expect it to extend into 2027. So some of that revenue that we would have expected there from that particular contract is going to extend into 2027. But the guidance that we gave for 2026 is consistent with all the things that I just said. So, you know, you can sort of trace that out and say, well, that contract is probably going to be a meaningful amount of our 2026 revenue.

But we expect there to be quite a few other customers that are meaningful in that mix as well.

Frank Mitsch: Okay. That’s very helpful. Matt, you in the presentation talked about wanting to maintain a minimum cash level and kudos on hitting the low end of the cash burn for 2024. So what is that minimum cash level and, you know, where…

Matt Plavan: I just wanted to follow up real quick on the last answer that John gave. Although I know it’s probably obvious, I’d like to be explicit. When he said it’s a two-year term, that’s just the MOU itself. Our expectation is that that would be a contract that would persist or that relationship would persist over time. So it’s not, you know, it’s two years and it somehow doesn’t persist. Just wanted to clarify that. It’s probably obvious, but when you said the unit term, it’s an initial two years. Just want to clarify that. So from a cash burn standpoint and minimum cash balance, you know, we haven’t disclosed what that would be, but, you know, we think it’s prudent to have at least a year to eighteen months of run rate on your balance sheet.

And we, although we haven’t given specific cash burn guidance, I think it’s fair to say that when you look at the operating expenses for 2024, and we think of that in terms of cash in particular. So we would strip out any non-cash charges, material non-cash charges, which would be stock comp and depreciation and amortization. It was roughly $48 million in 2024. We don’t expect that to change materially in 2025. So we think we’re going to keep that steady and, you know, the financing strategy is really to utilize our existing capital and raise debt to cover the equipment that we’re purchasing. And those two sources, we think, get us through the year with a healthy minimum cash balance and on our way into an exciting 2026.

Frank Mitsch: Okay. Very helpful. Thank you so much.

Operator: The next question comes from Salvatore Tiano with Bank of America. Please go ahead.

Salvatore Tiano: Yes. Thank you very much. So understand now you’re talking about the, I guess, free cash flow of around $50 million for this year. Still didn’t provide, unlike the past few years, any revenue or EBITDA guidance for 2025 unless I missed it. So could you elaborate both on what that outlook would be and also why the change in your framework?

Matt Plavan: Sure. You’re right. We haven’t been specific about 2025. I think we’ve kind of given as much as we’re comfortable giving, which is that it will be revenue beginning really materially beginning in Q3 and then ramping in Q4 in accordance with the builds of the Catformers. And as John mentioned in his comments, with regard to the timing of bringing on customers and the volumes in between those different customers and the timing of those is significant variability. And so we think it’s imprudent to try and give you a specific number for revenue at this point for 2025. And what we thought was more important is to give you our confidence in the exit rate being substantial and significant off of these eight lines. And that we felt more comfortable sizing 2026’s revenue than 2025.

And the fact that we also expect to reach run rate profitability in 2026, we felt that was the best guidance to give TheStreet right now based on our visibility. And, again, all the moving parts in Q3 and Q4 are such that we’re not comfortable. We can give you a number that would be meaningful.

Salvatore Tiano: Okay. Perfect. I also want to ask a little bit about the issues with line one. Can you first elaborate a little bit on what happened there? And secondly, why is it pushing, I guess, if we think that the prior breakeven EBITDA or positive EBITDA was expected in the first half of 2026 and now end of that year, it implies a minimum four to six months delay, if not more. So why would the delay in what seems to be the smallest line you’re adding cause such a big pushback in your breakeven EBITDA?

John Bissell: Yeah. So I think, Salvatore, I missed actually the first part of your question. I think you broke up a little bit. What was your question on line one?

Salvatore Tiano: Oh, what are the issues that you mentioned? If you can elaborate a little bit on that.

John Bissell: What I’m still missing the second word. Sorry.

Salvatore Tiano: Sorry. I believe there’s some issues with line one that was mentioned. Oh, issues. So essentially, what are the issues? Yes. And, ultimately, why is it pushing back your timeline for EBITDA breakeven by at least four to six months?

John Bissell: Yeah. Got it. Okay. So on line one, and I think we described this a little bit in some of our social media posts. But when we were giving sort of regular updates on the progress of line one, you know, one of the things that we saw was customers in Q4 really came back to us and said, look, we understand why you think that the user experience associated with the cap doesn’t require knurls. But it is, you know, our customers really believe that it was necessary for some of the manufacturing components that I described, you know, the filling and capping lines really needed those knurls to be able to perform well. And so we went back and added the knurling feature to line one. When, really, when we were planning all this out originally, we didn’t expect to.

We expected to always add knurls, but it wouldn’t be with the first line. And so that was really what gave us a bit of a delay there. And the broader philosophy behind that is, of course, we want to bring all of the beneficial features that we can to our caps, but we’re also trying to go quickly. And so the game is to make sure that we bring all the necessary features at every stage and then give ourselves time to introduce the more performant features as we make our way to building this business. So we took our customer feedback, went back, introduced knurls, and that gave us a little bit of a delay there for line one. And that really, we’re seeing that delay, not day for day, but, you know, propagate through a lot of the work we’re doing, not just because of knurling, but because, you know, as I described, there’s qualification work that has to happen with these lines, getting that knurling on and delaying line one delayed some of that qualification work.

And it just has a variety of sort of impacts as you look across the propagation of the business or the of our manufacturing capacity. I’d also say, you know, when we really aren’t saying there’s a six months delay. What we’re saying is it’s difficult more than a year out to forecast the exact point where we think that we’re going to cross over into an EBITDA positive run rate. And so, you know, we were saying first half, we’re now saying it’s sometime in 2026. You know, as you suspect, that’s because we think there’s a little bit of fuzziness there, and we would rather sort of be transparent about that fuzziness now. You know, we are not looking at that and saying that we expect it to be a full six months. We just there’s high uncertainty when you’re this far out.

Salvatore Tiano: Okay. And the last thing I want to understand a little bit is I hadn’t realized so these lines start with the shapes that you get from, I guess, supplier other suppliers. Rather than just buying, I guess, the pellets and extrusion the PET yourselves, right, if I understand correctly. So I guess, what drove the decision and what allows you to have this strong economics? You know, the mid, I don’t know if it’s 40 to 50% gross margin that you’re talking about even though you are not essentially you’re leaving one step of the manufacturing process, the extrusion, to an external party. Which should be technically get compensated for that. So how do you achieve this margin, and why did you make this decision?

John Bissell: Yeah. So I think there are two places where you need that sort of two-time regimes that we need to talk about here. The first is near term, which is, you know, it takes some time to get extruders. Extruders are longer lead time than thermal formers altogether. Equipment or cap forming systems. As a consequence, even if you have them on order, if you’re waiting for the extruders to operate those cap forming lines, then there’s a mismatch. And we don’t think that mismatch is worthwhile to wait for. So we want to get our cap forming lines landed. We want to start making caps and generating revenue, making money off those cap forming lines. And then we will introduce extruders to vertically integrate those lines over time.

So that’s one in terms of timing. Two, you described correctly that there is margin available, increased margin available by operating our own extruders. That’s true. But our margin is not entirely dependent upon operating those extruders. We can make margin without them. And so we think it’s worthwhile to start doing that. You quoted a particular margin profile. I think what we said was mid-double-digit percentages. Our expectation on that, I should say, is not immediate right from the very first cap formers. You know, that is the way that we expect the business to evolve over, say, the next couple of years. And we also think that’s going to be a mix of different types of cap formats. It’s not all just on any given cap format that we have the same margins.

And so I think just be cautious about applying that to any given Catformer or Catformer, but we do think that’s going to be something in the mid-double-digit percentages is the margin profile that we expect for the cap business overall.

Salvatore Tiano: Okay. Perfect. Thank you very much.

Operator: That’s all the questions we have from the phone line. Now I’ll turn it over to Ryan Smith for a Q&A section answering Ask Origin questions submitted by investors prior to today’s call.

Ryan Smith: Thank you, operator. Prior to our earnings call, we invited all investors to submit questions as part of our Ask Origin campaign. Thank you so much to everyone who participated. You asked some great questions. These questions were, of course, submitted before our call today, and we answered many of them thoroughly with our prepared remarks and our analyst Q&A. We will generally be answering the most relevant questions today during the time that we have. So let’s start with our first question for you, John. It’s about market conditions. Because of current events and conditions that were previously unforeseen, do you feel your stock price compares today with what your recent past expectations were? Do you believe you have a viable strategy to navigate these current issues to mitigate their impact?

John Bissell: Yeah. Look. We definitely see the macro environment right now as one that we did not explicitly anticipate when we embarked on this business, but it’s one that we believe that we can navigate. It requires us to do things differently. And we’re adjusting our plans as a result of this. You know, it’s obvious that we’re constructing a significant amount of our equipment in Europe. Our customers are global. We expect to manufacture in the US. There are things that we can do to adjust if the trade conditions change. But that has an effect. Like, that particular configuration is affected or appears like it will be affected by what’s going on. That said, we think that the fundamentals of the business are effectively unchanged by the macro conditions.

We think that we’re significantly undervalued right now. We think that we have been. We think that this technology has a lot of running room and is one that brings a lot of value to consumers and to our direct customers, the major brands. And we think that there’s nothing stopping us from executing on that. So we’re excited about it.

Ryan Smith: Great. Now the next question is similar to the question Frank asked, but slightly different. Which is about the sales pipeline. It asks, can you map out what the sales pipeline looks like from initial customer interaction to the signing of a definitive agreement?

John Bissell: Yeah. So, really, there are a couple of different phases. Just to break it up simply. The first is, you know, there’s customer interest, and often that involves handling samples that are the appropriate format or demonstrative format for what they’re interested in. They take a look at that. They look at it internally. They look at the specs of that product to see if it’s going to match what they’re looking for. At that point, they say, you know, if they say yes, then we move to the next phase, which is the qualification phase that we’ve been describing. We think that that qualification phase, as I described to Frank, can change quite a bit depending on the customer and, actually, depending on the specific application as well.

Not all bottles are created equal in terms of what they require from the cap. And not all products are created equal. And so we move our way through that qualification process with the appropriate volumes and support, and we also get feedback. As part of that qualification process as well, which is great. That’s how we get better is by getting feedback from our customers and then also obviously assessing things ourselves internally. That qualification process is the bulk of this, so the interest process is pretty quick. The qualification process tends to be longer even when it’s on the shorter end of the qualification types. It’s still longer than the other two phases. And then the third is moving into a definitive agreement of some sort. We are very explicit as we go through that process exactly what the numbers and price and volumes and ramp-up would be to deliver the product.

So that’s something that happens far before we sign a definitive agreement and, in fact, before we go into most qualification work. But that’s sort of the way it breaks down. Three phases: interest, qualification, and then signing of a definitive agreement of some sort.

Ryan Smith: Great. Alright. Next question. Given the demand that you’ve mentioned, this is a question about customers and customer selection. But the question is, how do you prioritize customers? What goes into that?

John Bissell: Yeah. So I think in our prepared remarks, we talked about a couple of different things. But there are a lot of differences between the customer types, and that leads to, you know, we sometimes, tongue in cheek, say it’s sort of an artisanal balance or slate of customers that we want at this stage. You know, we’re balancing things like the volume that the customer demands, the margin that we expect to get off of that particular cap, their deployment flexibility. Some are more flexible than others. The technical expertise of the customer or partner because that can provide us with different kinds of information about what we can do better and how we can improve our product and our process as well. The credibility, of course, of the customers and partners because the more credible they are, that allows us to continue to access even larger parts of the market.

And then finally, you know, in a more strategic sense, what are the things that they can do to help us grow Origin and grow this platform and this technology? So we’re looking at all of those things. I don’t think there’s an algorithmic ranking for, you know, if they score this, this, this, and this, and all those different categories, that means they’re going to go to the top of the list. Balancing it is really a key part of what we’re doing here.

Ryan Smith: Great. The next question, an investor asks, consumers are used to colored caps with printed labels. How are you thinking about tinting and embossing? How does that affect recycling? Can the cap be recycled to the bottle?

John Bissell: Yeah. So, first, I think the overwhelming response we’ve gotten is that customers are excited about a clear cap. So having a clear cap or a clear part of packaging is something that obviously, the market wants. And it’s something that if you look at the sort of arc of packaging history, obviously, performance matters, but all else being equal, consumers like to buy products in clear packaging. They want to look at the product. They don’t want to look at the packaging for the most part. And so we see this as sort of another step in that direction of the packaging arc of history, is towards another component, a meaningful component of the product packaging being clear and transparent so you could see the product as the showcase instead of the package as the showcase.

That said, there are some really good ways that look great because I’ve seen the mock-ups to color and emboss our caps to have some great highly differentiated looks to them. So a particular brand or product can really differentiate themselves with the way that our cap looks on that product. What’s important to us, though, even as we look at those kinds of differentiated appearances, is that the cap can still be recycled. So if we’re dying the PET with a material that or with something that can’t come out, or that stays colored, then that’s going to restrict the ability to recycle that as effectively. That’s mission-critical to us that our caps are recyclable. The existing recycling stream. And in fact, what we’re trying to do is increase the value of the recycling stream, not decrease it.

And so we have some really, really good ways to introduce color, impart color and patterns onto the caps that look great that don’t impact the recycling stream on the down on the other side of the use of the product. So we’re excited about that. We’ve got answers. We don’t think we need them yet, and we also think that the clear cap just looks great, and that’s what everybody tells us. So we’re listening to that.

Ryan Smith: Great. Next question. If your manufacturing process enables cost advantages as cap size increases, why did you start with the bottle caps as opposed to working down from larger formats?

John Bissell: The short version is that our customers asked for it. So we saw from the beginning a really strong demand for the 1881 format. There are a whole bunch of reasons for it. But 1881, it’s a huge market. Our customers wanted it. And we think that our solution is a really good solution for 1881 as well. So we think that’s a great spot to be. There are other benefits that come with the large format caps. We want to access those as well. And because of the flexibility of the technology that we’ve developed, the platform we’ve developed, we think we can go after both without there being much sacrifice between the two.

Ryan Smith: Right. Next question. What is the main bottleneck or constraint bringing Catformer lines online?

John Bissell: Yeah. So for 2025, you know, that’s mostly set. Everything’s in process. It’s moving. Our suppliers are spun up. They’re targeting a certain number of machines, and our team is geared to deliver those machines on the ground and then start operating them. So, really, you know, when we look at bottlenecks, we’re talking more about 2026. As we look at 2026, the key really is balancing our cost of capital with the rate at which we deploy cap forming lines. Our suppliers for these cap forming lines have the ability to deliver more machines. Our customers want more caps, and our view is that we’re going to continue to de-risk the technology, make it clear that this works the way that we say it works, that customers want the product, that the margins are acceptable for financing, and then that will enable us to access cheaper capital.

We can use that capital to grow faster. So we’re excited to do that. But given, you know, macro market conditions and the nature of this kind of business development, we don’t know exactly when that inflection point’s going to get reached, and so we’re going to have to see. We believe it’s in 2025. We think it’s soon. We don’t know exactly when it’s going to be. And so we view 2026 platform or deployment as mostly capital limited. As we can remove that constraint or reduce that constraint, we expect that we’re going to be able to deploy more cap formers.

Ryan Smith: Right. You speak a little bit about Catformer one’s performance and then also talk about improving performance in future Catformers?

John Bissell: Yeah. Catformer one has been doing a great job. We frankly, were really impressed with how well the system performed right out of the box. There were minimal adjustments that needed to be made to sort of tune it back or bring it back into stack with what we did during the fat. We think that our suppliers just did a fantastic job, not only from packing a complex piece of equipment like this but also sending their teams to work with us to bring them back online. Just really, really impressive overall. And we’re excited with the way that we’re able to iterate on that machine at Reed City. So some of the technology improvements that we’ve described, those are coming from very specific modifications that we want to keep making and introducing over time on our existing lines and then also on future lines.

And so at Reed City, what’s wonderful is that we have the ability to machine things and make modifications almost in real-time as we do this. And so we have really focused on the ability to make those changes quickly. We’re seeing great performance off of the line so far, and we’re excited to really drive continuous improvement across Catformer line one, but then all of our future lines as well.

Ryan Smith: Great. Alright. Now this next question is going to be one from Matt. Matt, you talked a little bit about cash burn in the Q&A, but the question is, what is your financing plan for 2025 and 2026, given the need to ramp manufacturing lines in that time frame?

Matt Plavan: Yeah. Thanks, Ryan. And this might be a little bit repetitive as I think about this response in terms of what Frank asked, but I think it’s good and I appreciate the simplicity of this question because it allows me to dial the lens back and answer with kind of a macro view of our financing strategy, which really is pretty simple and straightforward. So in addition to utilizing the existing capital on our balance sheet, we’re securing equipment-based debt financing. As outlined on the call, a portion of which we’ve already secured and the rest we continue to curate amongst a number of other lenders. And so with those two sources of cash, we have what we need to both fund our operations and build out the Catformer lines. We expect to propel us into 2026 with, as we said, significant revenue, margin, and cash from operations on a run rate basis before the end of the year.

Ryan Smith: Great. Alright. For this last question, I’m going to throw it back to John and just ask, what do we have to get excited about as we look to the future?

John Bissell: Yeah. Look. I think the exciting things are the underlying business fundamentals. We’ve got incredibly strong demand looking forward to building capacity over the course of 2025, at which point we’re going to have really quite meaningful production capacity by the end of the year, and then rolling into 2026 and continuing to expand that. We’ve got three Catformers in process that are going to land in Q2 or out or factory test in Q2. We’re shipping caps to customers. We’re expecting caps on shelves. Well, on products on shelves soon. And we’re excited to share some customer names in the weeks and months ahead. So we’re stoked.

Operator: That’s great. Thank you, John.

Ryan Smith: Thank you to everyone who joined and everyone who sent in questions. We look forward to our next update. And this concludes our call for the day.