Sirwin
Sirwin

Origin Materials - Q3 '23 Earnings Analysis


Origin Materials has reported its earnings for Q3 2023 today. For the most part, I was not personally surprised to see the results. Some others must have shared my sentiment, as the stock price actually saw some upward movement in after hours trading.

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With the after hours trading volume only clocking in at 166k, it is an insignificant and low volume move. It does seem, however, that investors are taking the company's shifted timeline in stride at this point. It's probably safe to say that all of the bad news from Q2 earnings, which caused the company to lose over two-thirds of its market value, has been priced in.

The company guided its 2023 revenue target from $40-60 million to $25-30 million. It sounds disappointing, but with the delays in the Origin 1 facility coming online, I certainly expected it. Analysts asked about 2024 revenue forecasts, which the company is not currently providing. Co-CEO Rich Riley said, "we're very focused on cash right now. Generating products to support our JDA revenues, continuing to learn for O2 and potential plants." I assume that the original 2023 guidance, given in 2021 on the original SPAC presentation, assumed O1 would by operating by the end of 2022. Given that the plant did not start producing until 10 months after that original timeframe, it makes sense that 2024 guidance will come in lighter than the original $120 million target. 

As the company moves forward, it plans to ultimately use wood biomass (woodchips) as a feedstock for Origin 1. The plant is currently still running on corn starch, as planned. Of operations, co-CEO John Bissell said, "We're not running at close to rated capacity. We weren't planning to. The ramp schedule originally had lots and lots of room to bring it up to capacity."

The team at Origin 1 will need to collect more data before they can provide production capacity figures. For now, according to Riley, "O1 gives us incredible capability to deliver large-scale samples. Meaningful CMF and HTC drives our near-term JDA revenue, the principal way these materials will drive revenue. [We will] only continue to ramp going forward."

If I had to sum up the general tone of the earnings call, it would be "so far, so good." Granted, the company hasn't been hitting milestones on time but seems to have plenty of cash, for now, to get through the new few quarters. Securing funding for Origin 2 will be the biggest challenge going forward, but Bissell stated on the call that "now we see a lot of customers and partners leaning in...more options for financing, not fewer, and we haven't taken anything off the table." On the same subject, Rich Riley commented that "Our customers are very understanding that scaling new platform tech is challenging. Few alternatives. The reaction we get from customers is 'how can we help you guys scale?'...we have customers wanting to get involved in licensing conversations to help scale."

So, other than updated guidance for 2023, there really was no new material news disclosed in the report. I certainly did appreciate the video, showing the Origin 1 team actually producing product. After all, we've had to wait an extra 10+ months to see this milestone achieved. In the end, though, perhaps it will all be worthwhile. It's certainly exciting to see the team continue the world's transition to sustainable materials.

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Next, we await to see the plant successfully run on woody biomass and what productivity results the data currently being collected will yield once they get to continuous operation. More will be revealed in February.


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