Origin Materials - Earnings Call - Q2 2025

Executive Summary

• Origin’s Q2 2025 printed low revenue as expected from the wind-down of its legacy supply chain program, but delivered tangible commercialization milestones: first PET bottlecaps on store shelves (Power Hydration), and the first publicly named customer (Berlin Packaging).
• Management launched a strategic review with RBC to accelerate manufacturing access, distribution, and strategic capital; however, guidance was materially reduced: 2026 revenue cut to $20–$30M (from $50–$70M) and 2027 to $100–$200M (from $150–$210M), and run-rate Adjusted EBITDA breakeven moved from 2026 to 2027, citing OEM delays and tariff headwinds—an adverse surprise likely to drive estimate resets and near-term stock pressure.
• Manufacturing ramp remains the gating factor: CapFormers 3–6 FAT expected on a rolling basis through Q4’25; CapFormers 7–8 slipped to 2H’26 (from Q1’26) amid capital constraints and tariff exposure—prolonging the supply-demand gap and deferring revenue capture.
• Liquidity stands at $69.4M in cash and marketable securities with additional expected cash from $17.9M in receivables (legacy program) and $9M land sale; financing strategy prioritizes non-dilutive options but tariffs could raise cash outlays and complicate equipment debt.
• Near-term catalysts: strategic review outcomes, additional customer announcements, CSD qualification progress, and FAT completions for lines 3–6; risk factors include tariff trajectory, qualification timing, financing terms, and NASDAQ listing compliance pathway (grace periods and potential reverse split if needed).

What Went Well and What Went Wrong

• What Went Well

  • First Origin PET bottlecaps reached retail shelves (Power Hydration), validating product function through qualification and commercial bottling; management emphasized performance advantages and recyclability benefits.
  • Berlin Packaging named as strategic customer, expanding distribution reach across global brands and enhancing go-to-market leverage for 1881 closures.
  • Manufacturing and supply chain adaptability: secured EU partner Royal Hordijk to diversify production, mitigate U.S. tariff exposure, and drive CapFormer cost efficiency via PET extrusion capability.

• What Went Wrong

  • Guidance cut: 2026 revenue lowered to $20–$30M (from $50–$70M) and 2027 to $100–$200M (from $150–$210M), with run-rate Adjusted EBITDA breakeven pushed to 2027 due to OEM manufacturing delays and tariff impacts on FAT timing—a material setback versus prior trajectory.
  • Ramp delays: CapFormers 7–8 FAT slipped to 2H’26 (from Q1’26), extending the supply-demand imbalance and delaying revenue scale-up.
  • Tariffs increased (EU 15%, Switzerland 39%), raising cash requirements for equipment and potentially impairing financeability, pressuring the non-dilutive financing path and capital plan.

Transcript

Speaker 1

Thank you for standing by. This is the conference operator. Welcome to the Origin Materials second quarter 2025 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. To join the question queue, you may press star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then zero. At this time, for opening remarks and introductions, I will turn the call over to Ryan Smith, Co-Founder and Chief Product Officer. Please go ahead.

Speaker 3

Thank you. Good afternoon and thank you for joining us, everyone. Speaking first today is Origin CEO and co-founder John Bissell, followed by CFO and COO Matt Plavan. 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 second quarter 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 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 on the material risk 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 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'll 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 will turn the call over to John.

Speaker 2

Thank you, Ryan. Good afternoon. In a separate press release issued today, we announced the first Origin PET bottle caps are now on store shelves, a world's first and a significant inflection point for the company and the packaging industry. We are now officially in market with our 1881 cap for non-carbonated water, a $7 billion segment of the caps market. Coupled with our recent customer announcements, including our first publicly named customer, Berlin Packaging, and recent progress reports on our manufacturing capacity buildout, we are closer than ever to bringing our transformative PET bottle cap technology to the entire $65 billion closures packaging market. Our technology platform produces what we believe to be the world's first and only commercially viable PET caps.

The platform excels in seven areas: recyclability, oxygen barrier, which enables longer shelf life, closure diameter, enabling more economic large formats, thickness, which enables lighter weight, rigidity, which gives a premium feel, use of recycled content, and optical clarity. Successful commercialization will be a step change for recycling and improved packaging performance while creating significant value for our shareholders in the process. During the quarter, we maintained laser focus on the priority buildout of our first eight CapFormer lines, making solid progress advancing through the various stages of order placement, manufacture, testing, and shipping of lines two through eight. Despite our progress, we experienced a number of OEM manufacturing delays, including slower subcomponent deliveries and procurement delays, often due to tariff considerations. As a result, we expect FAT completion for each of our lines to be 30 to 90 days beyond our prior expectations.

These delays accentuate the gap between the indicated demand for Origin's PET caps and our production capacity, leaving money on the table. Separately, we have fielded a number of strategic collaboration inquiries reflecting the natural synergy between the robust manufacturing and distribution capabilities of legacy packaging companies and the high-value products and innovative technology development capabilities at Origin. The packaging industry is well-defined, highly commoditized, and very competitive. Its core competencies are operational efficiency, consistently high productivity, and reliable delivery. What we hear regularly from customers, however, is that innovation in the packaging industry is lacking. To pursue these emerging opportunities and help address the gap between the indicated demand and production capacity for Origin's PET caps, we've launched a strategic review with our financial advisor, RBC Capital Markets, to identify accretive strategies that can enhance the company's access to manufacturing capacity, marketing and distribution capabilities, and strategic capital.

We believe this will enable value capture beyond what we can achieve organically, potentially enabling Origin to more effectively fulfill pent-up demand and accelerate our efforts to unlock shareholder value in the near term. One early result of our strategic review is an important refinement of our go-to-market strategy to more effectively prioritize and capture high-value opportunities within the over $65 billion caps and closures market, which is comprised of a number of different differentiated segments. Our current strategic prioritization targets five large functional segments, including water at $7 billion, carbonated soft drinks or CFD at $6 billion, other beverage applications such as hot fill, ready-to-drink, beer, wine, milk, and sports drinks at $18 billion, food and pharmaceutical at $20 billion, and other non-beverage at $17 billion. Each segment utilizes different cap formats to achieve unique performance characteristics required by the product.

Previously, our approach had been to design a single 1881 cap to serve all of these markets. However, following the recent successful qualification of our 1881 cap for flat water, we can now begin immediately selling into the 1881 flat water market rather than waiting until completion of the final designs for the 1881 cap that will serve the broader CFD market later in 2026. Our PET cap works, passed qualification for a customer's water requirements, succeeded on a commercial bottling system, and went on store shelves. We continue to work side by side with CFD customers and anticipate success with CFD qualification with a focus on impact resistance and multi-day heated horizontal stress testing. Given the design freedom and material properties afforded by our proprietary method for producing PET caps, we believe CFD qualification is a matter of when, not if.

Next, I will highlight a few of our recently announced strategic partnerships and customer relationships, and then share the status of our manufacturing capacity buildout. Earlier this month, we announced a new customer, Berlin Packaging. Berlin Packaging is a respected market leader and has agreed to purchase PET 1881 caps from Origin Materials for sale and distribution. Berlin's broad and deep distribution footprint not only immediately extends our market reach for 1881, but also opens the door for all our forthcoming formats across all closure applications globally. As a strategic customer, Berlin was exceptionally attractive because of their expertise in connecting closure products with brands to unlock the highest value opportunities. We look forward to working with Berlin and to revealing more about our other customers as well.

On the supply side, we continue to grow our manufacturing capacity and execute our adaptive supply chain strategy, actively responding to macroeconomic uncertainty and changing conditions. The status of our CapFormer buildout is as follows. Our first CapFormer system is producing PET caps in Reed City, Michigan. Two additional CapFormers, including thermoformers, and for one of the CapFormers, all of its subsystems, arrived in the United States from Europe in July and August of 2025. The equipment arrived at Reed City prior to or received an exemption from the EU and Switzerland tariff increases to 15% and 39% respectively, saving over $1 million. We continue to expect CapFormers three through six to complete factory acceptance testing on a rolling basis through Q4 of 2025.

Primarily due to capital constraints accentuated by tariff exposure, we now plan to complete factory acceptance testing for CapFormers seven and eight in the second half of 2026, updated from Q1 2026. In July, we announced a new European mass production partner, Royal Hordijk, further diversifying Origin's manufacturing footprint in response to continued pressure from U.S. tariffs on European imports. European manufacturing capacity expands Origin's global footprint, enabling the production and sale of PET caps without equipment or caps crossing U.S. borders. Hordijk is a leading Dutch producer of sustainable plastic packaging solutions in operation for over 100 years. Hordijk will use its PET extruders to produce extruded sheet for use in CapFormer production lines owned by Origin and operated by Hordijk in Hordijk facilities in the EU. We expect Hordijk PET extruders and extrusion expertise can drive capital cost efficiency for CapFormer lines.

We anticipate installing the first CapFormer in a Hordijk facility before the end of Q1 2026. Finally, our sales pipeline remains strong, and interest remains high for larger cap formats with attractive unit economics. We believe our proprietary thermoforming PET technology advantages us disproportionately as format size increases, which we believe will translate to higher margins than HDPE caps the larger the format. A key objective of our strategic review process is to identify opportunities to accelerate our development and deployment of these new formats. I'll hand it over to Matt for a review of our expected near-term financial performance.

Speaker 0

Thanks, John, and good afternoon, everyone. I'd like to begin with an update on our financing strategy. As we previously indicated, we endeavor to source the majority of funds for our capital equipment buildout on our way to sustained profitability from non-dilutive capital such as equipment and corporate debt. However, depending upon equipment operation target locations, tariffs may require us to deploy meaningfully more capital for our equipment going forward. The 15% tariff on EU imports, up from 10% as of late July 2025, and the 39% tariff on Switzerland imports, which went into effect on August 7, 2025, affect Origin Materials because we source CapFormer systems from Switzerland and Germany for deployment in the U.S.

Such tariff costs can significantly raise the cash outlay required for financing equipment, as we do not expect the tariff costs to be financeable, thereby making debt financing in those instances more expensive and potentially suboptimal. As John mentioned, we believe our strategic review process will help us optimize our cost of capital under these circumstances and to maintain timely capacity build for demand capture and to preserve the path to our stated goal of non-dilutive financing for the majority of our forthcoming capital expenses. Next, we're revising our revenue and run rate adjusted EBITDA guidance. We estimate an aggregate reduction in manufacturing output of approximately 50% and 15% for 2026 and 2027, respectively, compared to our prior estimates. This is due to the impact of the aforementioned delay in CapFormer FAT timing for lines two through eight on our backloaded 2026 production schedule, as we described in May 2025.

Prior revenue guidance for 2026 and 2027 was a range of $50 million to $70 million and $150 million to $210 million, respectively. We are updating revenue guidance before consideration of potential strategic review outcomes to $20 million to $30 million and $100 million to $200 million for 2026 and 2027, respectively. In addition, we expect these same factors to push our adjusted EBITDA run rate breakeven from 2026 into 2027. Lastly, we ended the quarter with a strong balance sheet, including $69 million in cash, cash equivalents, and marketable securities. In addition, the net accounts receivable balance of $17.9 million at June 30, 2025, is comprised of receivables associated with the company's legacy supply chain activation program that is being wound down in 2025.

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, as of June 30, 2025, the company had $9 million in land held for sale in Geismar, Louisiana. We expect the sale of this land to also result in an additional significant source of cash. With that, I'll pass it back to John for concluding remarks.

Speaker 2

Thanks, Matt. I will conclude by reiterating what I said at the beginning of this call. Today, Origin is closer than ever to bringing our product to the $65 billion caps and closures market. The first Origin PET bottle caps are now on store shelves. We are now officially in market with our 1881 cap for non-carbonated water. This quarter, we announced our first publicly named customer, Berlin Packaging. Despite tariffs as high as 39% directly impacting our business, we remain nimble by expanding the geographies into which we can deploy production. We are adapting and executing our plan, and we are evaluating promising paths forward through our strategic review with RBC Capital Markets, which we believe can both accelerate and de-risk our business plan, while simultaneously unlocking significant value for our shareholders. With that, I'll open up the call for questions. Operator, may we have the first question, please?

Speaker 1

Showing no questions, I will now turn it over to Ryan Smith, Co-founder and Chief Product Officer, for a Q&A section answering Ask Origin questions submitted by investors prior to today's call. Thank you.

Speaker 3

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. These questions were, of course, submitted before our call today, and we answered many of them thoroughly with our prepared remarks. We will generally be answering the most relevant questions today during the time that we have. Let's start with the first question for you, John. The investor asks, as soon as a customer becomes public, we'd like to know where to buy the product so we can support it and get the cap into our hands to show and tell the tangibility. How do we do that?

Speaker 2

As we announced earlier, we now have our product on shelves with a small brand, Power Hydration, located in California. We're excited to get those caps on bottles out there and to have them in market. Certainly, if people want to travel to California to go get one of those bottles, they're welcome to do so, but we certainly don't expect that. We don't expect Power Hydration will be the last brand that we announce with these caps out there in the near term. We're excited to have our caps qualified for water and to have our caps on store shelves already.

Speaker 3

Great. The next question from the investor asks, have you been monitoring the competition, and could you provide some insights on who your closest competitors are, and how much further ahead do you think Origin is in mastering this particular type of PET cap production?

Speaker 2

Sure. Yeah, our technology platform is pretty differentiated from the other attempts at making PET caps, both historically and currently. As a reminder, what we do with our technology is thermoform PET sheet into caps, and then with a little bit of post-processing, can convert those into caps that can be directly put on bottles. As you compare that to both existing caps technology for HDPE and polypropylene cap production, and also the attempts, both historical and current, to make PET caps, those technologies are using either injection molding, which is melting the PET down fully and then extruding it into a fully enclosed mold, or compression molding, which is taking a softened PET and essentially pressing it into a fully enclosed mold to make the shapes. There are some key elements of those technologies which are challenged relative to thermoforming.

The first is that making that thin film of a PET cap is quite challenging with both of those technologies due to the material properties of PET. In fact, when you make that cap, it isn't going to have the same kinds of properties that a PET that is formed using thermoforming will, due to some of the orientation that occurs within PET when you stretch it and when you mold it over a part with some draw, like you do with our technology. We think those are some of the key elements that allow us to both get better unit economics, and not just better unit economics for caps the size of 1881, but caps that are even larger than that. We think that's what allows us to get better material properties out of our PET. It allows us to get lighter weight caps.

It allows us to get the optical clarity that our customers have found really quite striking and aesthetically pleasing and differentiating. Actually, it's also what allows us to use recycled content in our caps more easily. Many of the differentiated properties that we think are key, not just to our technology, but to PET caps in general, and making PET caps successful, depends on the technology that we bring, which is this thermoforming anchored technology. We're really excited about that. We think that that's going to be a step change, as we said earlier, in recyclability and really in cap performance in the product. The PET caps just perform really well across a whole bunch of different dimensions. I think relative to our competitors, we're excited that we have, we think, the first commercially viable PET cap in market.

We think that our cap performs better than other attempts at making PET caps out there. We think that our cap has the ability to really change the way that the packaging industry innovates, frankly. We're excited to be here.

Speaker 3

Great. The next question asks, how should we view the Royal Hordijk partnership in the context of prior partnerships and operating partners?

Speaker 2

Yeah, you know, we expect in general to have multiple operating and manufacturing partners in all of the major geographies. We see Royal Hordijk as an excellent addition to that, in particular with the more protectionist trade environment that all companies are operating in these days. Having another great partner in the EU, in particular one that has a huge capacity for extrusion of PET sheet, for thermoforming PET, and the capabilities and expertise that comes with that kind of large-scale PET sheet extrusion and PET thermoforming operation, is something that we think is hugely additive to our overall capability as a company, and of course, particularly our overall capability in Europe. We're excited to have them, and we don't think they'll be the last of the manufacturing partners that we bring on board.

In the near future, we think that there are going to be plenty more of those as we look across different geographies and expand into new geographies as well.

Speaker 3

Great. Next question I want to address to Matt. The question asks, where do we stand with respect to our NAVDAC listing? We have been trading for under $1 for some time now.

Speaker 0

Yeah, thanks, Ryan. Just as a reminder, there are minimum listing requirements the NASDAQ has for companies on the exchange. One of those is that your stock price stays above $1, generally speaking. The way they monitor that is if your stock falls below $1 for 30 consecutive days, you get a notification that you're non-compliant with that particular minimum listing requirement. They give you initially 180 days to remedy that situation. They measure it as being remedied the moment that your stock crosses over a closing price of $1 for 10 consecutive days. We are 129 days into our first 180-day grace period. We continue to see many opportunities for us to perform, execute, and have our stock and the value of our company increase, and in doing so, be over $1 for 10 consecutive days in the near future.

At this point, we've got another 51 days in our first grace period. At that point, you can apply, and we would, if we weren't over $1 and hadn't met that minimum listing requirement, we would apply for a second grace period of 180 days, which the NASDAQ evaluates to make sure that you meet all the other minimum requirements. If the only requirement remaining is the minimum dollar stock price, and you have a plan that is acceptable to the NASDAQ to earn that second grace period, which is generally what is generally approved, as long as you're willing to perform a reverse stock split during that second period if your attempts through organic measures are unsuccessful in raising the stock price above $1. Generally, companies are willing to do that.

We think we, as I said, have many more opportunities during that remaining period of time between what's left of our first period, and should we have to request a second grace period, that gives us another seven months to regain compliance. We feel good about our opportunities to do that. We'll keep all folks or investors posted through our public disclosures on our progress towards meeting those minimum requirements.

Speaker 3

Great. Thanks for explaining that. John, to close this out, what do we have to get excited about as we look to the future?

Speaker 2

Yeah, I think there are a lot of things to get excited about. The first is that Origin PET bottle caps are now on shelves, and we think this is just the beginning. There's a lot of growth. That water market is huge, and we're excited to grow sales while we work on our CFD qualifications. We're working on more customer announcements and naming our customers, especially following our Berlin Packaging press release. We have CapFormer systems three through six, which will be completing their FAT on a rolling basis through the end of the year, continuing to build capacity there. We're evaluating promising paths forward through our strategic review with RBC Capital Markets, which we believe can both accelerate and de-risk our business plan while simultaneously unlocking value creation for our shareholders.

For some time now, we've been receiving inbound interest from well-established caps companies that frankly struggle with innovation. It's hard to find innovation in these established industries, and we can provide that. We're excited across all of these areas from organic to inorganic growth, and we're excited that our high-performance, highly sustainable, and recyclable cap is finally in market in one of the largest caps and closure segments. There's a lot to be excited about.

Speaker 3

Great, thank you. I'll pass that back to the operator.

Speaker 1

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