Thank you for standing by, this is the conference operator. Welcome to the Origin Materials Fourth Quarter 2022 Earnings Call. [Operator Instructions]. I would now like to turn the conference over to Ashish Gupta, Investor Relations. Please go ahead.

Thank you and welcome everyone to Origin Materials' fourth quarter 2022 earnings conference call. Joining the call today from Origin Materials are Co-CEO, Rich Riley; Co-CEO and Co-founder, John Bissell; and CFO, Nate Whaley. Ahead of this call, Origin issued its fourth quarter press release and presentation which we will refer to today. These can be found on the Investor Relations section of our website at originmaterials.com. Please note on this call, we will be making forward-looking statements based on current expectations and assumptions, which are subject to risks and uncertainties. These statements reflect our views as of today, should not be relied upon as representative 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 of 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 dated November 3, 2022. In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful as supplemental measures of Origin Materials' performance. These non-GAAP measures should be considered in addition to, and not as a substitute for, or in isolation from GAAP results. You will find additional disclosures regarding the non-GAAP financial measures discussed on today's call in our press release issued this afternoon and our filings with the SEC, each of which is posted on our website. The webcast of this call will also be available on the Investor Relations section of our company website. With that, I will turn the call over to Rich.

Thank you, Ashish, and thanks to everyone for joining us. For today's presentation, we will be referring to the slides that were posted to the Investor Relations section of our website earlier this afternoon. I will start by reviewing Q4 highlights, then provide a commercial and regulatory update. I will then turn it over to John who will discuss construction progress on Origin 1 and Origin 2, our Origin 1 platform development and application strategy, and our new strategic partnership with Avantium to accelerate the mass production of FDCA and PEF. Nate will wrap up with a financial overview. We will begin on Slide 3. We continue to execute on our plan and make progress on our mission to enable the world's transition to sustainable materials. First, we have seen a more than nine-fold increase in our customer demand since our announcement to become a public company in February 2021, with offtake and capacity reservations increasing to $9.3 billion as of today. Customer demand remains strong and broad-based and we continue to expand the breadth of industries and end-markets that we serve. As previously disclosed, due to strong customer demand, we are substantially committed for our Origin 2 paraxylene and PET capacity. As such, beginning in the fourth quarter, our sales and marketing team has shifted its focus from active marketing of PET towards higher-margin products such as carbon black and advanced CMF-derived products including FDCA and PEF for Origin 2 and beyond. Second, as announced in January, Origin 1 is mechanically complete and commissioning is underway, with the completion of plant commissioning and startup expected in Q2 2023. Since mechanical completion, work onsite has continued, including electrical work and further technology refinement. Third, continuing on the next slide, regarding Origin 2, in early January, we announced the final approval…

Thanks, Rich. I am going to begin on Slide 8, with a construction update for Origin 1. For those interested in the Origin 1 story, and the continued progress made by our team, I'd like to point you to a new construction update video that we posted today to the investor relations section of our website. As announced in January, Origin 1, our first commercial manufacturing plant, located in Sarnia, Ontario, is now mechanically complete, in line with our previously disclosed timeline. As part of mechanical completion, the plant's critical mechanical systems have been successfully installed and commissioning has begun. Work onsite will continue, including electrical work and further technology refinement. We expect the completion of commissioning and start-up in Q2 2023. The mechanical completion of Origin 1 is our most important construction milestone to date. This is a large commercial-scale manufacturing plant with a lot of moving parts, and what we've been able to accomplish to date, despite the pandemic and related supply-chain headwinds, demonstrates the capability, efficiency, and efficacy of our projects team. Leading up to the mechanical completion of the plant, we received and installed additional equipment, including wood handling equipment, piping, tanks, and control systems. Additionally, during the fourth quarter, we further strengthened our Origin 1 operations leadership team and support staff. In our construction video, you can see the progress we've made since our last update in November. To give you a sense for the overall project, the construction of Origin 1 required over 17,000 meters of pipe, 730 metric tons of steel, over 75,000 meters of cable, and about 10,000 metric tons of concrete. Looking ahead, we are excited to start up the plant, begin commercial production, deliver product to our customers, and take the next step in our journey to decarbonize the world's…

Thanks, John. I'll begin with commentary on our fourth quarter results, then provide our financing expectations for Origin 2, and finish with our outlook for 2023 revenue and adjusted EBITDA. Speaking to Slide 16, fourth quarter operating expenses were $13.0 million compared to $7.8 million during the same period in the prior year. Full year 2022 operating expenses were $38.9 million compared to $26.9 million in the prior-year period. Net income was $16.0 million in the fourth quarter compared to net income of $5.2 million in the same period in the prior year. Full year 2022 net income was $78.6 million compared to $42.1 million in the prior-year period. Adjusted EBITDA loss was $9.2 million for the fourth quarter compared to a loss of $6.6 million in the same period in the prior year. Full year 2022 adjusted EBITDA loss was $31.0 million compared to $20.0 million in the prior-year period. Turning to our balance sheet. Origin ended the fourth quarter with $323.8 million in cash and cash equivalents and marketable securities. Regarding the financing of Origin 2, in early January, we announced that the Louisiana State Bond Commission unanimously passed a resolution granting its final approval of the issuance of up to $1.5 billion of tax-exempt bonds to support the construction and commissioning of Origin 2. This amount is inclusive of and builds on the strong foundation of the previously announced expected $400 million in Private Activity Bond volume cap allocation. Origin's use of solid waste feedstock to produce carbon-negative materials enables the company to use these tax-exempt bonds towards the financing of the Origin 2 project. Bank of America, a global investment bank and financial services company, has been engaged by Origin to underwrite the bonds and market them to investors, which could enable the debt financing of…

Thank you, Nate. In closing, I am incredibly proud of our team's continued execution as we draw closer to commercial production at Origin 1, and encouraged by the strong momentum that we continue to see for our industry-leading technology as the world moves aggressively to a zero-carbon future. I would like to thank all of our customers for their commitments to Origin, our team and construction and engineering partners for their contributions to our company's success, and our shareholders for their continuous support. And with that, I would like to ask the operator to open the line for questions.

Our first question is from Frank Mitsch with Fermium Research.

Congrats on the Origin 1 progress and, of course, the progress in the other areas. I was struck by the discussion of the third intermediate line on the biofuel side that had not been previously discussed. Was it -- did this come about in terms of research? Or why is this now a possibility for your production process? And any more color on it would be terrific.

Yes, sure. Frank. So I think the way to think about our technology platform is really sort of a refining platform. So the mental model I use is one that looks kind of like a refinery where you're putting in a feedstock and you're converting it into a variety of different streams. And the way we've looked at this has always been CMF and HTC are the 2 primary streams, but we've always had a collection of other sort of minority materials that end up getting produced. And generally speaking, we had expected to either decompose those into HTC, which can be done with our process or frankly, just feed it back into the centralized boiler for our facilities and use them for BTU value to drive the process. Of course, if you're using it for energy to drive the process, that sets sort of a cap on the maximum value that you can get from those materials. And I think we all know that liquid fuels command a much higher premium than boiler fuels and so really, we had always expected that eventually we would be able to take these materials that we were feeding back into our boiler and turn them into some sort of liquid fuel or even a chemical product. We just didn't really expect it to happen so soon, frankly, speaking. And so this is, I'd say, in a broader sense, this is just part of the sort of wave of acceleration of market interest and newer materials coming off of our platform. Does that make sense?

I hear you. I hear you. And as you look at the process economics for generating these renewable fuels, where is the price point? Or where do you think the price points are relative to what's out there in the market today? And obviously, it's very volatile, but given where it is today, can you talk a little bit about the process economics?

Yes, sure. So the first thing to understand is that since we were anticipating originally to use them for boiler fuel, that means that, that basically sets our alternative disposition value, which is pretty low value when it comes to biofuels, right? So incrementally, we view the ability to put these into a transportation fuel market as a significant benefit to our overall unit economics. That said, it's not, let's call it, straight run gasoline coming out of our process, right? So the materials that we take out of our process, natively, you don't just put it in a gas tank. You've got to do a little bit of work to those to get them into the various kinds of transportation fuels. And what we're -- part of what we're doing right now is we've sort of checked the box on, yes, this is really interesting and is over the hurdle that this should go into a fuel of some sort. And now we're in the work with customers and partners to understand what's the right spot to put them and in what quarter and in what time sequence. Does that make sense? So I think that the overall unit economics -- maybe a broader way to say it is, the overall economics we aren't sure yet, but we are sure that it's going to be significantly more valuable in a liquid transportation fuel than it is as a boiler fuel, which was the original sort of estimation of where this stuff was going to go.

The next question is from Steve Byrne with Bank of America.

Is it fair to say that existing PET users are those that you're in discussions with about PEF? Are they the most likely off-takers of this product? And can you characterize their level of interest? Is this something they would move towards replacing PET with PEF? Or is this a few percentage inclusion in the PET as a blend? Where are you seeing the most interest?

Yes, Steve. Good question. So we see interest across the board. So certainly, from our existing large PET users, they are almost all familiar with FDCA and PEF in concept and interested in it, and I think excited to see it coming to commercial scale with our partnership. But it also opens up a new set of potential customers, and John alluded to some of these, but for example, companies that today are required to put a lot of things in glass because of the barrier qualities, now have an alternative to glass, they didn't have with PET. And so there's examples like that, that open up some really new interesting conversations with people who need very large quantities of materials, some of which have very challenging carbon footprints and are heavy or hard to recycle, et cetera. And so this really opens up the door to those kinds of conversations.

And is there a reasonable way we could estimate the value of PEF versus PET? Given the additional functionalities that you described, the PET bottle would have to have other additives or unit ops to provide those functions. So is there a way to value this PEF that would lead to this higher margin? We're also of the view that you might be able to produce it for less than PET. Is that also a component of your assessment of higher margins?

Yes. So I think both parts -- both things that you just mentioned are salient. So the value of PEF and, let's say, more broadly FDCA-based polymers because you were alluding to polyesters that may not have just 100% FDCA as a bioacid but may include some FDCA and some other bioacids into the polyester. But I think in those applications, on an application-by-application basis, you can understand exactly what the improved value proposition is to the customer. So in the case that Rich was just mentioning, and I'll just give sort of a hypothetical logic around it, right? So there's -- glass has breakage rates, which are meaningful. It has a high carbon emission. Even when it's recycled, it has relatively high carbon emissions. It's heavy. And so you can look at PEF and say, okay, well, if we reduce the breakage rates and we reduce the carbon emissions significantly by using PEF instead of glass, and we can lightweight significantly the package, then that's a really attractive value proposition in practice for PEF. And you can do sort of similar type of value estimations in different applications. But broadly speaking, we see a significant value uplift for a lot of these applications in using PEF versus using PET. So I think that's -- in your allocation of where the margin is coming from, I would say, especially in the earlier days, most of it is coming from the value of the applications, right? PEF in those applications is much more valuable than PET. Over the medium to longer term, I think -- the other thing you said, which is that we expect to be able to produce FDCA less expensively than PTA or paraxylene, correspondingly, that's also true. But I think that's something that probably we'll obtain over a longer period of time, not so much necessarily right off the bat.

The next question is from Eric Stine with Craig-Hallum.

So, great to see the demand, obviously, at $9.3 billion now. That has slowed a little bit versus the growth rate in the last few quarters. I mean is that simply this change in focus to these higher-margin products? I mean, and is that something that we should think about here at least in the near term?

Yes. It's -- our customer demand continues to be exceptionally strong. And as we said on our last earnings call, you're alluding to, we have evolved our go-to-market strategy to focus more energy on higher-margin products, developing the platform and really accelerating some of the products that we previously thought were many, many years out and doing joint development agreements and those kind of things. So I mean as we focus there, that could impact the overall growth in the order book. But since we've really proven out the demand for paraxylene and PET, we think it makes a lot of sense to focus on these other markets.

Yes, absolutely. I mean maybe the better question is, obviously, you've got a pipeline beyond what you quote for total demand. Curious if you're able to -- maybe from a [size], but at least from a high level, kind of characterize this new focus into some of these other areas that have developed faster, what has that meant for your pipeline beyond the total demand that you quote.

Yes. Well, it certainly opens up a lot of markets that we had previously characterized as sort of longer-term addressable markets into [what field] now not as far out as we once thought. And those include some of the markets like surfactants and epoxies and adhesives and large classes of products where we think we can bring our carbon advantage as well as functional advantages and some truly unique properties. And so our pipeline reflects adding those kinds of conversations into the mix.

Got it. Maybe last one for me, and I'm just curious, obviously, we're getting really close to start up of Origin 1. I mean is that an event that you think of as something that can really accelerate the total demand, that $9.3 billion there? Or do you think it's more that, that potentially spurs conversion of the capacity reservations to full off-takes?

Yes. We think of it as a significant milestone. We think, one, our ability to get large-scale samples to lots of potential partners is very exciting. So getting CMF, for example, into the hands of lots of partners to go develop on top of the platform and accelerate in that manner is exciting. We also think the proof of technology scale-up is meaningful to many that we have a large operating commercial scale plant. And so yes, we view it as a significant milestone and think it will really help across the board.

[Operator Instructions] The next question is from Pavel Molchanov with Raymond James.

You're obviously giving guidance on a full year basis rather than quarterly. But can you -- maybe just looking kind of further ahead, what timetable do you anticipate for Origin 1 to reach steady-state operations, which I think is [35 million pounds] a year, as I recall, per quarter?

I think, first, I'd like to emphasize that we've talked about this before, but just to be really clear, we view Origin 1 as an asset that really can strategically produce materials for application development of higher-value products such as some of the ones that we just mentioned, FDCA, epoxies, resin, surfactants, carbon black, asphalt, that kind of stuff. And so since we're using it for those kinds of strategic applications, we really expect that we're going to be doing some combination of campaigning and then also tuning it to produce those kinds of materials. So I think you could say we're going to take a little bit of time to bring it and run it at nameplate capacity. Now that said, for the purposes of [OM 2] technology demonstration, right, we will run -- campaigns with this plant at the OM 2 relevant parameters for some extended periods of time to generate data and learning from those kind of things, and we'll report back with that. But I think it will be probably some time in '24 that we're actually trying to run this for extended periods of time at nameplate capacity. It's going to be -- because the demands of application development and market development really supersedes, frankly, that just produce as much product as possible that we possibly could off the plant, if that makes sense.

Yes. No, I appreciate that. And then as far as the entry into the fuels market, historically, I mean, you and plenty of other biomaterials companies have looked at specialty biomaterials as a higher value, right, source of revenue compared to fuels. Are there certain fuel categories, maybe jet fuel, for example, that can match chemicals in terms of a dollar per pound, dollar per gallon basis?

Yes. So certainly, there are fewer categories that can pretty easily match even high-value chemicals as -- on a dollar per pound basis. So no question about that, especially in today's environment. I think from our perspective, as I mentioned, the alternative disposition or alternative use for the material that we're looking to use for biofuels was really a pretty low value boiler fuel kind of application. So for us, we don't really see it as a trade-off between the value of the chemicals that we're going to produce and the value of the biofuel that we put into the market, we see it as sort of -- I mean, frankly, it's just a straight up net add to the value of all the materials that we're producing off of our plant. But to your point, we think there are some pretty high watermark kind of interesting molecules that you can produce even just for fuels. And so I think this is -- frankly, for us, it's pretty exciting. This is a meaningful opportunity. And I think, over the medium to long term, we have the opportunity to really generate meaningful value off of biofuels in addition to off of this material stream in addition to the CMF-derived chemicals and the HTC-derived products that we can make.

Okay. And then lastly, kind of an ESG question. As you guys are well aware, there is, let's say, a faction of the environmental community that does not appreciate the use of forestry in bioenergy. Particularly if you're getting into fuels, how are you going to be addressing this pushback that trees are being chopped down, so to speak, for putting it into vehicle engines?

Yes. So I think there are 2 layers to that. The first is, of course, we're actually using residuals in the first place to fuel our plant. So I think these are materials and residuals that were going to be produced as a result of other product production anyway, for example, dimensional lumber, et cetera. So I think the first layer is we really see that as the predominant feedstock for our process, which is very different than purpose-growing timber specifically to harvest and put into our process. And I think the second layer to that is that even this fuel is actually a -- you could think of it as a byproduct of the production of our materials and chemicals. And so I think, in both cases, this is finding the highest and best use and value for a material that was going to be produced anyway rather than on-purpose production exclusively of fuels or something along those lines.

That concludes today's live Q&A session. I'd now like to turn the call over to Ashish Gupta, Investor Relations to conduct the next segment of our investor Q&A.

Thank you, Gaily. And before we get into investor Q&A, I want to apologize to everyone on the line who had problems connecting to the webcast due to technical issues. Obviously, something we strive to avoid but in this case, it couldn't be. As we've done on previous earnings calls, for today's call, we invited all investors to submit questions as part of our Ask Origin campaign. Once again, we are pleased to have such a high level of participation and I want to thank everyone who participated. In the interest of time, we'll be taking the most commonly asked questions. Our first question is for Rich. Rich, does the IRA provide any benefit to Origin? Is Origin seeking money from the IRA or other federal opportunities?

Yes, that's a great question. We remain optimistic that the funding offered by the IRA is very relevant to us, and we're exploring several paths of eligibility for programs, including the Section 48C Advanced Manufacturing Tax Credit and the Advanced Industrial Facilities Deployment program. And these programs are expected to start receiving initial applications in the next month or 2 and decisions anticipated by the end of the year. And in addition to the IRA, we're exploring opportunities for funding and financing under the 2021 Infrastructure Investment and Jobs Act. And in that act, we've identified more than a dozen initiatives that we think could potentially assist us in financing a variety of Origin investments and most notably, Origin 2 and infrastructure improvements in and around the Geismar, Louisiana site.

Great. Just turning to geographic expansion. Can you help us understand if Origin will expand to EU and Asia?

Yes. So we have extensive customer relationships in the EU and Asia. So we certainly have a very global set of partners and customers. We don't have any specific plans to share at this time in terms of building plants outside of North America. But there's certainly plenty of interest in our materials from those parts of the world. And so we would hope, over the long term, that we would certainly have assets around the world, but nothing to announce at this time.

Thank you, Rich. With that, we'll now turn to some questions for John. John, could you discuss some of the longer-term product opportunities where you see the highest potential?

Yes, sure. So obviously, we've been talking about FDCA, PEF and biofuels quite a bit on this call, which I think we're incredibly excited about. With a lot of these materials, you're talking about not just a 10% or 20% value uplift relative to drop-in materials, but really sometimes 100%, 200% even more increase in the value of those materials. So that's obviously really exciting because it demonstrates that we can get a great margin and profitability, but also that we're actually adding that much value to the economy by producing these materials. The FDCA, I think we talked about it in the context of PEF and polyesters all the time, but it's a material that's relevant quite a bit beyond that as well. So you can see it in -- obviously, there's been work done with nylons or polyamides using FDCA that's incredibly interesting. And then as we've mentioned before, epoxies and coatings is another area where FDCA has some pretty unique properties that we think are making a really, really interesting material or a monomer to add into those materials. So we continue to be really excited about FDCA, again, even beyond its use in polyesters and PEF more specifically. For biofuels, we've talked about some of the shape of the biofuels opportunity from our perspective. But I think to Pavel's comment earlier, I think it was, there are a lot of different fuels, not all fuels are created equal. And so as we penetrate into the biofuels market and can qualify our material in different areas, I think there's a lot of opportunity for large value uplift even beyond just getting into liquid transportation fuels in the first place over time. So I think that's going to be a really exciting and frankly, a pretty rich and…

Yes, apologies, sorry.

So surfactants, obviously, as you wash your hair, you're actually going to wash that surfactant down the drain, right? So it's going to end up going into the water treatment system and the drainage system and ultimately in the water. So being able to use less surfactant in those kinds of situations is really valuable because it means that you're putting less stuff down into the environment. And what we've seen with furan-based surfactants is they really do perform exceptionally well in almost all of these categories. So they often perform better in more rigorous surfactant environments like a hard water kind environment. And they do it at a lower what's called critical micelle concentration or CMC. And that means that you don't need as much surfactant to get the effect that you're looking for. So what we're seeing is that these furan-based surfactants really do just straight up perform better in a whole bunch of applications and sometimes by almost an order of magnitude. And then the second thing is that not only are they performing better in the application itself, but then after the application, when you wash it down the drain, furans are inherently a much more degradable material than the associated aromatic species that you would usually replace with the furan. And so when you wash your shampoo down the drain, you want to make sure it degrade as quickly as possible so it's not contaminating your river water with shampoo or a conditioner or whatever else. And it turns out that the furan-based and CMF-based surfactants do that better too. So we're really excited about applications like surfactants that really are incredibly relevant in sort of everyday life for people. And so I think that's just one example among the others like FDCA and biofuels that I mentioned, of really exciting products that we can develop over the medium and long term.

Thank you for that very thorough explanation, John, and my apologies for interrupting your thoughts there. Can you provide us with an update on the company's plans for Origin today?

Yes, sure. It's a great question because, obviously, on our schedule, we have indicated that we would begin project development for Origin 3 right around now. And in fact, we have. So we've started project development for Origin 3, and we're making good progress, but we don't have anything else beyond that to update at this time.

Great. Really appreciate it. We'll wrap up with a question for Nate. Nate, will the Louisiana Private Activity Bonds cover all of Origin 2? Or are there other financing options being considered?

Sure. So first -- and again, we're very grateful to the state of Louisiana, the State Bond Commission, the Louisiana Public Finance Authority for their continued support in the development of Origin 2. Our recently announced approvals from the State Bond Commission and LPFA for up to $1.5 billion, which is inclusive of the expected $400 million in private activity bond cap allocation. They are important milestones towards potentially using entirely tax-exempt bonds for the debt financing of Origin 2. That said, we continue to simultaneously pursue other forms of financing, grants, federal tax credits, including programs from the USDA and the DOE and others, which have come out of the IIJA and IRA, that Rich was referring to earlier, to optimize the capital structure and financing cost of Origin, too.

Great. Thanks again to Rich, John and Nate. That will conclude the investor Q&A portion of today's call. I'll now turn it back to Rich for closing remarks.

Thanks, Ashish. And thanks, everyone, for your interest in Origin and for joining us today. This concludes our call.

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