Origin Materials, Inc. (ORGN) Q4 2025 Earnings Report, Transcript and Summary

Good afternoon, and welcome to the Origin Materials' Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Matt Plavan, CFO and COO. Please go ahead.

Good afternoon, and thank you, everyone, for joining us. Speaking first today is Origin's CEO and Co-Founder, John Bissell; followed by myself, 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 2025 fourth quarter and full year press release. It 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 upon 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 revisions 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. 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'll turn the call over to John.

Thank you, Matt. Good afternoon. Last year was a challenging one for Origin but also brought meaningful progress. Our commercialization journey has taken longer than we initially anticipated, which has had a negative impact on our stock price. However, today, we are sharing that this month, we are delivering the latest iteration of Origin PET caps to multiple world-class beverage brands with approximately 30 key prospects in our pipeline receiving and evaluating our latest design. The new cap design incorporates feedback from household name beverage brands. Origin's internal testing of these caps demonstrates market improvement in seal performance and impact resistance in a single design, meeting industry benchmarks for pressurized water applications on key test metrics such as ball impact and heated stress testing. Customer qualification processes for these new caps are now underway, and we anticipate related customer announcements pending the completion of successful qualifications with time lines varying depending on customer requirements. For those new to Origin, our technology platform produces what we believe are the only commercially scalable PET bottle caps as opposed to the HDPE and polypropylene caps, which today dominate the over $65 billion closures market. Our platform excels in 7 areas: recyclability, oxygen and CO2 barrier, enabling shelf life extension, closure diameter, which enables more economic large-format production, thickness, which enables lightweighting, rigidity for a premium feel, use of recycled content and optical clarity. Our innovation stands to be transformative for the packaging industry. Turning now to financing. To strengthen our financial position in November 2025, we announced a convertible debt facility with an initial tranche of $15 million in cash with the option to raise additional capital for up to $90 million in total. We also announced the execution of a nonbinding term sheet for $20 million of equipment financing. To date, however, due to the significant decline in our stock price since securing the convertible debt facility, we have been able to make only limited use of the equity payment feature of this facility to service the outstanding debt at reasonable conversion values, which we had originally intended to do in order to preserve our cash for operations. Servicing the outstanding debt with cash has had and will continue to have an adverse impact on our liquidity. Also, at recent stock prices, we do not meet the minimum equity requirements for additional capital draws from this facility. Further, the aforementioned nonbinding term sheet did not progress to a definitive agreement because the lender made material reductions to the valuation assumptions underlying the debt financing. As a result, absent near-term financing and reductions in operating expenses, including reductions in force to extend our planned operations, we currently estimate that our existing cash and cash equivalents will allow us to continue our planned operations into the third quarter of 2026. Therefore, we are intensifying our focus on potential strategic arrangements that we believe could help accelerate value creation from our technology for the benefit of our shareholders, including a potential business combination, equity and debt financing, divestiture of assets, technology licensing and other arrangements. Despite challenging business conditions and customer adoption time lines longer than we initially anticipated, our prospective customers remain interested and engaged. These companies consume billions of caps per year and the latest cap designs reflecting modifications which our customers requested are now in their hands undergoing testing. On the commercialization front, we are executing our water-first go-to-market strategy within the $65 billion global closures market. In August 2025, the first products with Origin PET caps went on to store shelves in California, a milestone for PET cap market acceptance. We've also made significant progress developing our distribution network for PET caps. In March 2026, Origin announced HP Embalagens as strategic distributor for sustainable PET bottle caps. HP Embalagens is a major Brazilian packaging company serving world-renowned brands such as Nestlé, Ferrero Rocher, Natura, and Johnson & Johnson. The relationship complements Origin's strategic partnerships with Berlin Packaging and Matrix Bottling Group announced in August 2025 and February 2026, respectively, and supports Origin's ability to access markets and distribute PET caps globally. Acquisition of premium water customers is expected to continue throughout 2026. Finally, for PET cap production capacity, Origin's CapFormer line build-out in 2026 entails 6 lines already fully procured and projected to be installed by end of the year. With that, I'll hand it over to Matt, who will discuss the company's financial performance metrics.

Thanks, John. First, with respect to the changes in our expected financing sources outlined previously by John, it is the case because of the uncertainty in the duration of customer validation cycles, coupled with the impact of these changes to our expected financing sources, we are at higher risk of operational disruption if we are unsuccessful in replacing the prior funding arrangements in relatively short order. Therefore, we continue to actively source equipment financing and are currently engaged with multiple prospects. In addition, in connection with our strategic review process, we are in discussions with multiple parties and capital infusions are within the scope of those discussions. Overall, we believe our path to maximizing shareholder value will be a combination of successful new capital sourcing, monetization of current assets and continued cost containment measures and we look forward to sharing updates as we progress these initiatives. Turning now to guidance. We are updating our projected timing for adjusted EBITDA run rate breakeven. Because of the additional time we have spent and will spend on design iteration and customer qualification, reflective of customer feedback received in this past quarter and because of our increased understanding of the bespoke design requirements of key market players, we no longer project achieving adjusted EBITDA run rate breakeven prior to 2028 as compared to our previous projection of adjusted EBITDA run rate breakeven in 2027. Further, this update reflects what we expect will be a more gradual commercialization process, likely characterized by multiple smaller product launches in series rather than a single launch consuming all or most of Origin's PET cap production. Turning now to our balance sheet. Cash, cash equivalents and marketable securities were $53.5 million as of December 31, 2025. The net accounts receivable balance at year-end was $13 million and is comprised of receivables associated with the company's legacy supply chain activation program associated with the Origin 1 biomass conversion plant. Concurrent with the wind down of the supply chain activation program, we expect to collect all related net receivables in due course, resulting in a significant source of cash. Additionally, at year-end, the company had $9.1 million in land held for use in Geismar, Louisiana. We are actively seeking the sale of this land, which would also result in significant cash coming to the company. Also, at year-end, the company had $15 million in convertible debt outstanding. In a press release issued February 12, 2026, the company announced an organizational realignment and provided a business update, including the decision to cease all further investments into the furanics platform on which the OM1 and OM2 technologies are based. A significant reduction in headcount, including OM1 and OM2 focused headcount was also announced as the company continues to focus now solely on its caps and closures business. The decision to cease all further investment in the furanics technology platform resulted in a reevaluation of the OM1 and OM2 asset fair values. Therefore, the company engaged a third-party consultant, a sustainable energy and chemicals adviser to help assess the value of these assets based upon potential alternative applications for the plant and related assets and to estimate the liquidation value of each. As part of their analysis, our consultants estimate the rebuild cost of OM1 today to be almost twice that of the original build cost. Despite that increased replacement cost without continued investment into the furanics platform, the most probable valuation of these assets is more closely aligned to a repurposing of OM1 and OM2 design engineering and related assets. This valuation includes the impact of fit-for-purpose reconfiguration costs and results in an adjusted fair value of $18 million. This resulted in the recognition of a $165.9 million impairment expense recorded in the fourth quarter. With that, I will pass the call back to John for concluding remarks.

Thanks, Matt. I'll conclude with the following. Despite challenging business conditions and customer adoption time lines longer than we initially anticipated, Origin is the clear technology leader for PET caps. We have made significant progress with respect to our product development. Our customers remain engaged with approximately 30 customers receiving and evaluating our latest cap iteration. This is the first time in decades a truly new pressurized cap has been introduced into the beverage space. And while Origin has already overcome substantial technical obstacles, we expect to continue customer-driven product qualification and optimization on the way to adoption. We look forward to sharing our milestones with you as we progress in our mission, centered on the future of packaging, sustainable materials and true bottle-to-bottle recycling. With that, I'll open up the call for questions. Operator, may we have the first question, please?

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

I appreciate the candor, perhaps not the way that we were looking to end our week, but it is what it is. Before we talk about biocaps and so forth, so on the furanics side of things, it -- obviously, you're not investing in it and you're looking to repurpose the assets and so forth. As part of the strategic review process, is there no one -- are there -- are you not getting any inbounds whatsoever in terms of another company looking to take up the flag on converting wood into chemicals. I mean, quite frankly, the events of the past month in terms of oil, et cetera, would have made that a much more interesting business. So yes, any updates that you can give us there in terms of interest level, et cetera?

Yes. Frank, thanks for the question. Obviously, you're right that the current oil price environment shifts the picture for furanics pretty meaningfully. But I think -- or at least the conceptual picture. We do have some inbound interest. We think that -- we're optimistic that, that will result in the, as you say, the torque being picked up and carried on biomass chemicals. And we do think that, that could result in long-term value for Origin and shareholders as a result of the sort of furanics development. We don't think that it's going to have a significant impact on the amount of operating cash that we have available as a consequence of that. So consequently, it's sort of something that's a little bit further down the road. But we do see interest there. It's possible that the OM1 and even perhaps the engineering designs for OM2 could be used for that. But again, because we see that as something that wouldn't be seized upon immediately, the value for those are going to be likely discounted just due to time. But no, we do see some interest there.

Okay. Got you. And any sort of update that you can give us in terms of the overall strategic review, where RBC stands and how that process is coming along?

Yes. We have some parties that are interested. As we've said before, it's a pretty wide variety of different potential arrangements that could be put together. Our view on which of those arrangements are optimal for Origin has shifted over the course of the last couple of quarters. And so we continue to pursue that. We -- as we said in our prepared comments, we think that the -- there are some attractive opportunities there that we can move towards, but hard to predict exactly which one is going to be the winner.

Got you. And it sounds like a lot of the issues that you're facing pertain to the time line working with your customers in terms of them testing and the iteration process to when things can be commercialized. You did put products on the shelf back in August with power hydration. Can you give us an update as to how that product performed on the shelf? Where does it stand now? Is it continuing and so forth? Any update that you -- because that's actually a project that is on store shelves. So was possibly giving us some confidence that, that time line from testing to commercialization might be narrowing, but it doesn't appear to be the case.

Yes. So the product performs essentially equivalently to the standard HDPE caps. there can be some variance inside of even existing caps. We were easily inside of that variance. And so I would say performed well. We expect that there will be an expansion of our caps in that product line in the relatively near term. So I would say, generally, that was a success. That has not translated as you were just commenting, that has not translated into immediate market acceptance by other customers, not because they aren't interested, but just because the larger companies that we have tended to work more closely with also have extended and quite rigorous internal specification requirements that we've spent quarters previously talking about quite a bit. And it's taking quite a few iterations to get that done. I think that was not our expectation. We thought that this would be faster, as we've said numerous times. We really still believe that this cap is going to get to market and that it will perform as well or better than existing HDPE caps. But as it is obviously taking us more time than we were expecting to get it into market and at volume.

Okay. Got you. And then lastly, I believe the last quarter, you indicated that you expected '26 sales to be between $20 million and $30 million and then ramp to $100 million to $200 in '27. As you sit here today, how would you characterize your expectations on sales in '26 and in '27, assuming that the financing comes through?

Yes. Frank...

Matt, can you take that one.

I do. Thanks for the question, Frank. And last quarter, we actually said we weren't going to provide revenue guidance until we got a little further into the ramp and production of the product. What we did was we provided updated guidance with respect to when we expect it to be EBITDA positive breakeven and that was in '27. We updated that in this call to pushing that into '28, just to give some cushion for what we expect to be a ramp that is going to probably be more customers at smaller sizes in addition to the large customers. So maybe a little more protracted in bringing everybody up to significant production levels. So that's really the updated guidance from where we were before.

Okay. Great. And lastly, are we through all the factory acceptance tests on all the lines? And in terms of actual start-ups, obviously, Line 1 is up, where do Lines 2, 3 and 4 stand?

Yes. So we're pretty much through the factory acceptance tests for all of the lines. We have not gone through and completed site acceptance testing for all of these lines in large part because we've had our team focused on the iterative product development with our customers. There are a lot of customers that we've been working with. There are a variety of different designs that we've run through modifications to these designs, some small, some modest, a little bit larger than -- let's say, a little larger than modest, but nothing with a major redesign. However, each time you do that, there is really sort of a requalification of the line in order to make sure you're getting consistent product. And then, of course, you've got to retest that product and send to those customers. And so we've had a lot of our efforts focused on just a couple of lines to make sure that we can be making those changes quickly rather than spreading those efforts out across lots of different lines to increase our volume capacity when we don't have customers that are taking volume imminently, right? And so we could put our efforts into SAP those lines quite quickly if we wanted to, and we expect to do so once we see customer uptake increase. But right now, it's really all focused on iterating as quickly as we can.

Now I'll turn it over to Matt Plavan, CFO and COO, for a Q&A section answering Ask Origin questions submitted by investors prior to today's call.

Great. Thank you, operator. As you just mentioned, prior to the call, we've invited all investors to submit questions as part of our Ask Origin campaign. And I want to thank everyone who submitted questions and participated. It's a good number of questions. And so let me jump right into it, starting with a couple of questions for John on manufacturing capacity. The first question is, why haven't Lines 2 and 3 started up yet?

Yes. And I think this is -- Frank fortunately asked a similar question there. I think the reality is that we need to -- what's important to Origin right now is iterating on the product development as quickly as we can so that we can get that to customers. Ramping capacity -- production capacity isn't the important thing yet. And so we've had our resources focused on iterating on that product rather than bringing on the sort of last mile of bringing all these different lines on -- we will be able to bring those lines on relatively quickly once we get customer uptake to increase, but not yet.

Yes. Okay. Thanks. Secondly, in terms of manufacturing capacity, how is the 100-up mold progressing? Any expectations on when that will be installed? And does that require requalification of the CapFormer lines?

Yes. So there's a sort of similar answer in terms of why we haven't or when we would install the 100-up mold on our existing lines. So increasing throughput is not the important thing right now. The important thing is that we iterate as quickly as we can on product. However, we had a really good and encouraging test on the 100-up mold when we did an in-line test a little while ago. We had some pretty modest alterations that we wanted to make for that mold. Those alterations are in process. And when it's appropriate, we will reinstall that mold on one of the lines, and that will -- we think that, that iteration is quite likely to be the final iteration before the 100-up mold is put in service. That said, we are not taking any resources off of the product iteration at this point in order to do that 100-up mold installation even once that mold is ready. Additionally, I think when that 100-up mold does get installed in the line, it will require some level of line requalification, and then we'll need to ensure that the caps that are being produced by the line meet the specifications that our customers require, but that has not tended to be the gating item for us. We're pretty good at making the caps that we designed so far anyway.

Great. Next question regarding bottling trials. When are you doing the next bottling trial with Matrix?

That's a pretty easy answer. We're doing one right now. So in process.

Great. Okay. Now shifting to partnerships and sales. A question here is Berlin Packaging, Matrix and HP Embalagens announcements are all related to distribution and cap supply chain. Is there a logic to these announcements preceding major end customer announcements?

No, it's mostly idiosyncratic. So we announced customers and partners when we are able to announce them. And it's turned out that our distribution partners like the 3 that you mentioned, were made it to the point that we can announce those partnerships before some of the other customers did. That said, there is, I suppose, a logic to the fact that we are working with those particular parties aside from the fact that they were announced before others, which is that it is important for us to access many of the sort of smaller and midsized brands by going through these kinds of distributors and reselling organizations. We don't maintain a sales force that's large enough to go after many of the small and midsized brands, whereas these partners do. And so that's a path to a large part of the market that we really would not be staffed to access otherwise.

Okay. That's helpful. Thank you. Also under kind of sales, and I think we've addressed this indirectly in this call, but let's go ahead and ask this because I think a lot of people are asking the same question, and it probably bears hitting it head on. So why has it taken longer than you expect to get meaningful sales volumes?

Yes. It's very straightforward, which is that the customer qualification process has taken longer than we were expecting. We modeled our customer qualification processes and timing around the acceptance and qualification time for a modification to an HDPE or polypropylene cap design. Obviously, we had some buffer in that in order to iterate more. And what we found is that for a variety of reasons, a PET cap design has required a lot more time than we were expecting. And I think that has to do both with the fact that it's just a new cap. And so that makes customers a bit more wary in the way that they adopt it. But also the design specifically that we have used to make a PET cap work is a bit of a different design. It's actually visually apparent if you look at our PET caps versus the HDPE caps. Some of that's due to the material, some of it is due to the process that we use to make it. But as a consequence, there are -- even when the cap is performing well in application, it took us time to figure out which tests were testing it appropriately and which tests weren't. And what we found was that there were a number of tests that were actually not well designed to test a PET cap with our particular design. And that's just one example of the kinds of challenges that we've run into, none of which are insurmountable, none of which are actually particularly difficult, but all of which took time for us to discover and then fix and many of them had to be done essentially in series. And so instead of being able to identify every difference in the qualification and acceptance process all at once and then fix all of them in parallel, we've had to do it in series one by one, which is frustrating, has been challenging, but has not changed our view of the ultimate performance and capability -- market capabilities of our PET cap.

Thank you, John. I think that's it for the Ask Origin questions. So as we close this out, what should we be excited about with respect to the future as investors?

Yes. Look, I think looking forward, we will continue to share our milestones when we reach meaningful milestones. We are the clear technology leader for PET caps. And we believe that as we grow, we can dominate this new market category. We look forward to announcing the partnerships that we believe will help us take this cap to market appropriately. And we appreciate the support that we've had from our investors and our customers all the way through here. We believe that we will still get customer qualifications that enable us to announce those customers in the very near term. But obviously, due to the series reveal and discovery of qualification challenges, we don't really know until we get there exactly when we're going to get there, so that's all.

Great. Thanks, John. Okay. Thank you, and thanks to all of our investors on the line today. This concludes our call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.