Danimer Scientific(DNMR) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported sales of $12.7 million for Q2 2022, down from $14.5 million in the prior year, primarily due to lower PLA sales and R&D revenue, partially offset by an increase in PHA sales [34] - PHA-based resin sales increased by 84.5% to $7.7 million, now representing 61% of total revenues compared to 29% in the prior year quarter [35] - The gross loss for Q2 2022 was approximately $2.2 million, compared to a gross profit of $2 million in the prior year [36] - Adjusted EBITDA was a loss of $12.9 million for Q2 2022, compared to a loss of $2.7 million in the prior year [39] Business Line Data and Key Metrics Changes - PHA revenue grew by approximately 85% year-over-year, now constituting a significant portion of total revenue [12] - The company experienced a shift in product mix towards PHA, with PLA sales negatively impacted by customer operations in Ukraine [35] Market Data and Key Metrics Changes - The company noted increased interest in biodegradable solutions due to new legislation banning traditional plastics in regions like Canada, India, and California, which serves as a positive tailwind for the industry [22] - Supply chain bottlenecks and inflation are impacting customer timelines for product launches, but several significant launches are expected starting in Q4 2022 and into 2023 [24][25] Company Strategy and Development Direction - The company aims to expand capacity through organic production and third-party manufacturing, with a successful commissioning of Kentucky Phase II operations [9][13] - Strategic priorities include leading with innovation, growing customer partnerships, securing cost-effective inputs, and enhancing team capabilities to support growth [10][12] - The company is focused on transforming the plastics market and believes it is well ahead of the competition with a clear path to profitability [47] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year outlook and highlighted productive customer conversations and business development efforts [7] - The company expects adjusted EBITDA for 2022 to be in the range of negative $45 million to negative $35 million, with a focus on getting the PHA business to profitability [41][45] - Management acknowledged challenges with PLA sales and the impact of rising costs and supply chain uncertainties on capital expenditures [43][44] Other Important Information - The company is evaluating alternatives for financing its capital needs and has been invited to submit a part two application for a loan guarantee under the DOE program [14] - The Kentucky facility now has an annual nameplate capacity of up to 65 million pounds, with higher-than-expected fermentation yields [28] Q&A Session Summary Question: Trends in PHA volumes and pricing - Management indicated that PHA volumes and revenue remained stable from Q1 to Q2, with stable pricing observed [50] Question: Progress on customer conversion equipment supply issues - Management noted that customers have made progress, although not fully online yet [51] Question: Current utilization rate of the Kentucky facility - Management stated that the facility is running at levels consistent with original capacity, with a focus on bringing additional capacity online to achieve profitability [53][54] Question: Update on funding for the greenfield facility - Management confirmed flexibility in funding the project, with no specific line in the sand but a focus on ensuring financing is in place before committing additional funds [56] Question: Update on biodegradable product development - Management reported progress in developing biodegradable lids and forks, with ongoing discussions about store trials [59] Question: Canola prices and alternative feedstocks - Management shared that canola prices have increased, with locked-in prices for the second half of the year and first half of 2023, while also discussing ongoing work with soybean and pennycress as alternative feedstocks [62][66]