Danimer Scientific, Inc. (DNMR)·Q1 2024 Earnings Summary

Executive Summary

• Q1 revenue was $10.22M (-14.3% YoY) as 64% YoY PHA growth (+$3.2M) was more than offset by a 71% YoY decline in PLA (-$4.3M); adjusted EBITDA loss improved slightly to $(8.66)M, and gross loss was $(6.31)M .
• Near-term headwinds: Starbucks reallocated Nodax-based straw business across converters, creating inventory drawdowns and a revenue impact of ~$0.5M in Q1 and an expected ~$2.0M impact in Q2; Danimer retains 100% of the business .
• Guidance maintained but biased lower: FY24 adjusted EBITDA remains $(22)M to $(32)M with an expectation to land toward the lower end; CapEx $8M–$10M; year-end liquidity guided to $25M–$30M (now defined as cash plus revolver availability), up from prior ending cash $20M–$25M .
• Liquidity actions and capital structure: ~$13.6M equity proceeds in March and a new $20M ABL revolver; proposed pro‑rata warrant dividend could enable deleveraging using notes in lieu of cash exercise .
• Commercial progress: first commercial order for the 20M‑lb cutlery award; Kentucky facility broke even in March; pipeline grew to 89 customers in material selection from 85 a few weeks prior .

What Went Well and What Went Wrong

What Went Well

• PHA momentum: “PHA revenues…increased by 64% YoY,” reaching 82% of product revenue; management expects PHA mix to continue rising in 2024 .
• Commercial milestones: “first commercial order has been received” for the 20M‑lb cutlery award; initial orders for Delta Cafés coffee pods and new straw resin customer in Asia .
• Operations and cost control: Kentucky facility broke even in March; SG&A+R&D down YoY; feedstock (canola) costs trending towards mid‑$0.60/lb by year‑end and ~$0.60–$0.61 in Q1’25 .

What Went Wrong

• PLA weakness: PLA revenue down $4.3M YoY, primarily due to Ukraine-related customer disruptions; services revenue lower YoY .
• Inventory-driven headwinds: Starbucks straw converter inventory dynamics reduced Q1 revenue by ~$0.5M and are expected to reduce Q2 by ~$2.0M, pushing full-year adjusted EBITDA toward the lower end of guidance .
• Profitability still negative: Adjusted gross margin at -11.4% and adjusted EBITDA at $(8.66)M; interest expense was $8.84M amid total debt of $385.0M .

Financial Results

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “PHA revenues…increased by 64% on a year-over-year basis. PHA revenues during the first quarter made up 82% of product revenue…We expect PHA as a portion of total revenue to increase throughout 2024.” — Stephen Croskrey
• “We have received our first commercial order for our previously announced 20‑million‑pound cutlery award…planned deliveries…during the third quarter of 2024.” — Stephen Croskrey
• “Customer orders tend to spike in the last month of each quarter…our Kentucky facility broke even in March, which further validates our production model for profitability at higher production levels.” — Stephen Croskrey
• “We…entered into a $20 million revolving asset-based credit agreement…[and] generated approximately $13.5 million of additional cash after…fees.” — Stephen Croskrey
• “We expect this [Starbucks converter] inventory adjustment will impact our second quarter sales by approximately $2 million…we have retained 100% of the Nodax-based straw resin business with Starbucks.” — Stephen Croskrey

Q&A Highlights

• Starbucks straw inventory dynamics: Management estimated ~$0.5M negative impact in Q1 and ~$2.0M in Q2; decision awareness timing at incumbent converter was late Q1, but DNMR retains all straw business with Starbucks .
• DOE Loan timing: Team aims to close before potential administration change; conditional commitment “near the finish line,” but specifics not disclosed until formalized .
• Input costs and OpEx: Canola trending down to mid‑$0.60/lb by YE’24 and ~$0.60–$0.61 in Q1’25; operating costs expected down ~$4M YoY in 2024 through reductions in headcount, services, and insurance .
• Kentucky capacity ramp: Management reiterated reaching 70%–80% utilization early next year, driving company-level adjusted EBITDA positivity .
• Warrant dividend: Goal is a non‑dilutive deleveraging via bond-based exercise; contingent on shareholder approval for increased authorized shares .

Estimates Context

• Wall Street consensus estimates from S&P Global were unavailable for DNMR due to a missing CIQ mapping in our data connector. As a result, we cannot provide comparisons to consensus for Q1 2024, Q4 2023, or Q3 2023 at this time (will update when mapping is available). Management stated Q1 results were “in line with our expectations,” but no third-party consensus was cited .

Key Takeaways for Investors

• Near-term caution: Expect Q2 revenue pressure from Starbucks straw inventory adjustments (~$2M), pushing FY24 adjusted EBITDA toward the lower end of the $(22)M–$(32)M range .
• Liquidity improved: Equity raise (~$13.6M) and $20M ABL revolver extend runway, with year-end liquidity guided to $25M–$30M, a more comprehensive measure than prior ending cash guidance .
• Commercial inflection forming: First cutlery order and Q3 deliveries to DCs, plus coffee pods, Asia straws, and growing pipeline suggest increasing PHA volumes through 2024–2025 .
• Cost tailwinds: Canola feedstock trending down to mid‑$0.60/lb by YE’24 improves unit economics; Kentucky break-even in March validates scalability of the operating model .
• Structural deleveraging optionality: Proposed warrant dividend could retire convertible debt with equity-linked exercises, potentially strengthening the balance sheet without cash outlay if approved .
• Execution focus: PLA demand remains weak due to Ukraine impacts; the mix shift toward PHA is critical for margin trajectory and adjusted gross margin improvement .
• Medium-term catalyst: A DOE loan conditional commitment and greenfield financing could unlock capacity for cups and broader QSR packaging opportunities; timelines remain process-dependent .