Danimer Scientific, Inc. (DNMR) Q4 2022 Earnings Call Transcript

Danimer Scientific, Inc. (NYSE:DNMR) Q4 2022 Earnings Conference Call March 28, 2023 5:00 PM ET

Company Participants

James Palczynski – Investor Relations

Steve Croskrey – Chairman and Chief Executive Officer

Mike Hajost – Chief Financial Officer

Conference Call Participants

Jon Tanwanteng – CJS Securities

Kevin Estok – Jefferies

Operator

Greetings and welcome to the Danimer Scientific 2022 Fourth Quarter and Full Year Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the presentation over to Mr. James Palczynski, the company’s Investor Relations representative.

James Palczynski

Thank you, operator. Good afternoon, everyone and thank you for joining us today for Danimer Scientific’s 2022 fourth quarter and full year earnings call. Leading the call today is Steve Croskrey, Chairman and Chief Executive Officer; and Mike Hajost, Danimer’s Chief Financial Officer.

I’d like to note that there is a slide deck that accompanies today’s discussion, which is available on the Investor Relations section of our website at danimerscientific.com. I’ll call your attention to the company’s safe harbor language which is published in our SEC filings and also on Slide 2 of the presentation I just referenced.

On today’s call, we may discuss forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Forward-looking statements include, among other things, statements regarding future results of operations, including margins, profitability, capacity, production, customer programs and market demand levels. Actual results could differ materially from what is expressed or implied in our forward-looking statements. The company assumes no obligation to update any forward-looking statements to reflect events or circumstances after the date hereof, except as required by law.

Today’s presentation also includes references to non-GAAP financial measures within the meaning of SEC Regulation G. We believe these non-GAAP measures have analytical value, but note that they should be taken as an additional measure of performance to GAAP results. We have provided reconciliations for non-GAAP financial measures to the most comparable GAAP financial measures in our earnings release and our presentation.

Thank you. And it’s now my pleasure to turn the call over to Steve Croskrey, Chairman and Chief Executive Officer of Danimer Scientific.

Steve Croskrey

Thank you, James. Good afternoon to everyone and thank you for joining us. As you know, we pre-released preliminary fourth quarter and full year results for 2022 on March 20 when we announced the successful completion of our new $130 million senior term loan.

There are three things I’d like to point out about the term loan as we get started this afternoon. First, this debt achieves an important strategic financial goal to take near-term liquidity risk completely off the table. It provides us with the financial runway we need to easily navigate timing and unforeseen circumstances as we realize expected customer demand that we expect will fully utilize our recently expanded capacity. Second, I want to be clear that we have no plans to use the proceeds of this term loan for capital projects. We remain confident that we can obtain the required project financing to complete the greenfield facility and are pleased that we’ve now completed our application to the DOE’s loan guarantee program. Third, despite the high capital cost to this debt, we were absolutely unwilling to utilize equity to create a liquidity cushion. We view the dilution to shareholders that would have resulted as flatly unacceptable.

As you’ve known for the past week, our fourth quarter and full year 2022 financial results were in line with the guidance we first provided in May of last year on our first quarter call. The numbers alone don’t do proper justice to where we are today. The opportunities we have going into 2023 continue to improve and are certainly better relative to what we could have reasonably expected at this time last year. I’d like to walk you through, step-by-step, the path we’ve laid down for the year ahead.

First, as I said, we’ve taken liquidity issues off the table. Second, over the past 18 months or so, we continue to assemble a very special team of executives. Mike Hajost as Chief Financial Officer who brings significant public company experience; Keith Edwards, a leader in business development at BASF; Anthony Austin, a Chief Human Resources Officer with large company HR experience at Delta Air Lines and PepsiCo; Deborah McRonald from Nestlé, who serves as our Chief Corporate Development Officer; Brad Rogers, who came to us from PepsiCo and serves as VP, Technology and Development; and Steve Martin, our new Chief Legal Officer, an excellent attorney with significant public company and intellectual property experience who also holds 2 engineering degrees, including a Masters in Electrical Engineering.

Finally, with regard to our executive team, I’m particularly pleased to call out that Danimer Catalytic Technologies under Jeff Uhrig’s leadership has successfully retained every key teammate from Novomer and that business is fully integrated onto the Danimer operating platform. I know every company makes a statement that they have a “world-class executive team,” but when you put Danimer’s new talent together with the seasoned Danimer leadership cadre of folks like Scott Tuten, Chief Marketing and Sustainability Officer; Phil Van Trump, our Chief Science and Technology Officer; and Michael Smith, our Chief Operating Officer, the statement could not be more true.

In addition to having derisked our liquidity position and cemented our team as we go forward into 2023, the third critical advantage we have is that our Winchester, Kentucky facility is now fully capable of serving as the growth engine for production that we need. The team on site at the plant is also extraordinary. They are showing us, in no uncertain terms, just what they can do.

On Slide 4 of our presentation, you’ll find a simplified visualization of the manufacturing process in Kentucky. Each of our 5 fermentation units is fully commissioned and running at much higher-than-expected yield levels. When we design future production capabilities relative to earlier designs, we expect to see significantly lower capital expenditures for future fermentation capacity due to the progress we’ve made in yield. Those 5 units feed into 3 downstream processing lines or trains. Each train can produce about 900,000 pounds of neat PHA per month from any combination of fermentation tanks. We have now commissioned all 3 downstream processing trains. The final stage of the process is the two extrusion lines that blend neat PHA with other biodegradable materials into finished resin. I’ll remind you that PHA is roughly half of the final material weight in our engineered materials.

At design capacity, this enables us to produce, depending on customer mix, roughly 2.7 million pounds per extruder per month of formulated PHA-based resin, our finished product. The almost 20 years of formulation and application development experience that informs the blending and extrusion process is far more valuable and far more difficult than I think is generally appreciated. The ability to engineer or formulate high-performance materials is an important barrier to entry into this market. It is as significant as the ability to make neat PHA itself.

The specific resin formulas we provide all have a challenging and intensive research and development effort behind them. As a result, our materials are able to run on customers’ existing process equipment, whether they are using blow molding, injection molding machines or other equipment. Our products also performed well in their end-use applications as straws, cutlery or films, for instance.

As of today, with a little increase in plant staffing, we could push the plant to support the shipment of 3.6 million pounds of formulated resin per month. An additional incremental staffing would be necessary to get to 5.4 million pounds of formulated resin per month. That’s our full design or nameplate capacity, roughly 65 million pounds of finished product out the door each year. We believe we could reach this level of capacity by year-end if needed.

So here is how you should understand the critical math for Kentucky. Neat PHA capacity of 32.5 million pounds enables us to produce about 65 million pounds of formulated resin. At an average price of just under $3 a pound, the Winchester plant can deliver roughly $190 million of revenue per year. While we won’t know the peak margin capability, for sure, until we actually reach and sustain full capacity utilization, we believe the contribution margin of Kentucky tops out at north of 30%. This would drive positive cash flow at the facility level of roughly $60 million, a number that would generate positive EBITDA for the company. We’re incredibly proud of what our entire team has accomplished in Kentucky and pleased to have such a powerful manufacturing engine to propel us forward.

So to quickly recap, we have the financial resources and liquidity, the expertise and talent and a world-class production facility to execute well for our customers around the world. We are enabling our customers to grow their business with branded high-value, high-margin, environmentally-responsible products. Our formulated resins combine unique biodegradation and performance qualities that only a PHA-based material can provide. We can design our products to meet any level of the different biodegradability certifications issued by independent agencies around the world, certifications that governments are increasingly requiring and that consumers are increasingly seeking out. Category by category, we are poised to disrupt large commodity markets dominated by petroleum-based plastic.

The demand for ecologically-responsible materials is clearly coming from today’s consumer, particularly younger adults with quickly growing purchasing power. They are passionate about the big global issues that PHA can help solve, and they are educated about the products and companies they spend with. This is why the end consumers for our products tend to be large global brands. Without adoption, they risk losing share over what often boils down to what could be fractions of a $0.01 for a straw or a bag or a cup. Starbucks, Dunkin Donuts and Mars-Wrigley are great examples as our Pepsi and Nestlé, both key early partners of Danimer. These are the types of companies that have embraced the leadership position on sustainability. Others will follow their example.

And for those of you following along, I’ll turn your attention to Slide 5 of our earnings presentation. We had a number of specific wins that I’ll talk about. One is Zespri, a HAVI partner and the largest global marketer of Kiwi fruit who will use PHA-based cutlery in its snack assortment. We are excited to be working closely with HAVI, a global leader in sourcing for quick service restaurants. We are working to build on strong initial interest from some of HAVI’s major global partners and have delivered validating trial results for a range of products, including straws, cups, cutlery and other applications. Additionally, we’re pleased that our customer, Columbia Packaging Group, has partnered with US Foods to launch Nodax-based straws under their Evolve brand.

We are excited to see our partnerships and our degree of penetration into the market, grow in strength and in scope. The demand for our solutions is not only coming from customers. It is also coming from governments across the world. Consumers are increasingly serious about pushing change on these issues, particularly with respect to the unnecessary pollution of our marine environments. That is a powerful electoral issue, particularly for single-use plastics.

Recent proposed legislation in Europe will, if enacted at the end of next year, create a 24-month window after which petroleum plastics will be banned for the manufacture of single-use coffee pods among other categories. We’ve launched development efforts with 3 of the 5 largest producers in Europe and have anticipated our first test market launches in the second half of this year. To put this opportunity into perspective, a 10% share of coffee pods just in Europe would require the entirety of Kentucky’s nameplate capacity.

That emerging opportunity is just another data point that illustrates why we increasingly see significant demand growth as inevitable. The trends and activity in the market confirm for us that we will need the greenfield plant capacity. We’re pleased to announce that we have now submitted our Part 2 application to the Department of Energy loan guarantee program for our greenfield manufacturing facility in Bainbridge, Georgia, and we look forward to working with the DOE as it evaluates our application.

I’d now like to turn to the additional production technology under development in Rochester, New York with Danimer Catalytic Technologies, or DCT, where we continue to make progress scaling up Rinnovo, a type of PHA that isn’t just evolutionary, it’s truly revolutionary. The production of our Rinnovo PHA, known chemically as p3HP, through catalyst rather than fermentation should be a game changer that drives tremendous efficiency into the process and drives tremendous capital and operating costs out of the process. These features are driving advanced discussions with global blue-chip chemical companies for large-scale commercial offtake agreements.

As we complete our Rinnovo demonstration plant, we have simultaneously begun its commissioning. This plant serves two important purposes. First, it provides product at sufficient scale to support our customer tests and trials. Second, because we have specified reactor and distillation column designs that are scaled down versions of full-size commercial equipment, the demonstration plant will provide us with useful data that allows for optimization of our commercial plant.

This demonstration plant will help to make clear to extremely important partners, all household names in the chemicals industry that there are compelling economics and tremendous utility associated with the catalytic production of PHA. They should see clear opportunities for advantaged capital investment, lower-per-pound production cost for PHA and a development of novel applications that incorporate the Rinnovo polymer. A strategic partnership approach to scale our Catalytic Technology platform is intended to enable the rapid deployment of low-cost, alternative supply chains for a range of materials.

DCT’s potential continues to be validated. Everything points to the direction we have seen since we acquired this technology, and we are increasingly confident that the capital we invested in that deal back in August of 2021 could ultimately generate perhaps, by far, the highest ROIC of any of our capital investments. I’ll reserve a few comments for closing, but this is a good time to turn the call over to Mike for a closer view of the numbers and some comments on our outlook.

Mike Hajost

Thank you, Steve, and good afternoon, everyone. I have several items to cover, and I’ll start with our financial results on Slide 6, and should mention that all of our numbers are consistent with our March 20 pre-announcement. Fourth quarter revenues were $15.3 million as compared to $17.7 million in the same quarter of 2021. We experienced a modest decline in both products and services revenue. The lower product revenue was a result of an unfavorable shift in the timing of PHA-based shipments to a large customer relative to the prior year quarter and lower PLA-based product sales due to the war in Ukraine, which did not impact sales in Q4 of 2021.

Service revenue is down, which indicates our customers are moving from R&D contracts into commercialization. We reported a fourth quarter gross loss of $2.7 million compared to a gross loss of $2.4 million in the prior year period. After adjusting for depreciation, stock-based compensation, rent and certain non-recurring items, adjusted gross profit was $2.6 million or 17% of sales compared to $400,000 or 2% of sales in the fourth quarter of 2021. The $2.2 million improvement in adjusted gross profit was the result of the favorable shift in the mix of revenues caused by a major customer that while unlikely to be repeated, came at a very high rate of profitability. This more than offset the impact of lower sales.

R&D and SG&A expenses, excluding depreciation and amortization, stock-based compensation, rent and one-time items, totaled $10.3 million in the fourth quarter compared to $9.7 million in the prior year quarter, mainly attributable to an increase in headcount and salaries to support our future expansion plans. Adjusted EBITDA loss for the fourth quarter of $8.6 million compared favorably to a loss of $10.2 million in the fourth quarter of last year. The year-over-year improvement was driven at the gross margin line. Adjusted EBITDA excludes stock comp, other income and other add-backs as reconciled in the appendix.

I’ll now turn to our full-year results. We booked revenues of $53.2 million for the full year of 2022 as compared to $58.7 million in 2021. Product revenue for the year was $48.4 million compared to $50.8 million reported for 2021. PHA-related sales increased by $7.3 million or 34%, but this increase was more than offset by a decline in PLA-based resins of $9.9 million. As we’ve discussed previously, our PLA business has been impacted by disrupted customer operations in Ukraine and Russia. PHA-related revenues increased to 53% of total revenue in 2022 from 36% in 2021.

We completed several funded research and development projects over the course of 2021 and 2022, leading to a decrease in service revenue in 2022 to $4.8 million as compared to $8 million last year. We reported a full-year gross loss of $10.4 million for 2022 compared to a gross profit of $900,000 in 2021. After adjusting for depreciation, rent, stock-based compensation and certain non-recurring items, adjusted gross profit was $4.4 million in 2022 compared to $11 million in 2021.

The decrease in adjusted gross profit was primarily driven by a change in product mix away from relatively higher margin PLA-based resins. PHA-based resin margins reflected increased costs related to the ramp-up of capacity at our Kentucky facility. We expect gross margin will improve dramatically overtime, as the facilities capacity utilization numbers increase.

R&D and SG&A expenses, excluding depreciation and amortization, stock-based compensation, rent and one-time items, totaled $46 million in 2022 compared to $31 million in the prior year, mainly attributable to an increase in headcount and salaries to support our future expansion plans as well as increases in costs associated with having a larger asset base, such as property and liability insurance. I’ll also note that the closing of the Novomer acquisition was in August of 2021. So we picked up a full year of expenses for their operation against a partial prior year.

Adjusted EBITDA for the full year, which provides a view of results that excludes the impact of several non-cash and/or non-recurring items, was a loss of $45 million. This is consistent with the range of EBITDA guidance that we established on our first quarter call in early May of last year. Our cash balance at the end of 2022 were $62.8 million, which was within the guidance range we provided of $60 million to $65 million. Capital expenditures totaled $165 million in 2022, which was at the low favorable end of our guidance range of $165 million to $175 million.

We also ended the year with total debt balance of $288 million, up slightly from the prior year-end balance of $261 million, mainly due to additional, forgivable new market tax credit borrowings during our third quarter. Our year-end financial statements, of course, do not reflect the cash proceeds or additional debt from our recently completed $130 million term loan. It is our intent to generally preserve this new cash on the balance sheet to maintain strong liquidity position. That enables better management of the business in general. And in the event of unforeseen challenges, can have additional importance.

A strong liquidity position means that when we need to move quickly, we will not hesitate. When we need to slow down, consider our options and come to a deliberate and thoughtful decision, we will have the time and resources to do that as well. We will continue to treat our cash very dearly and maintain a disciplined approach in its use.

Before I turn the call back to Steve, I’d like to provide our outlook for 2023 that corresponds to Slide 7 of the presentation. The key to our performance in 2023 will be the magnitude and timing of the customer demand to ramp up for PHA-based resins and the degree to which we utilize the increased production capacity of our Kentucky operation.

We are confident in our ability to produce PHA-based resins at much higher levels which will have a favorable impact on our gross profit margin. Our guidance also reflects reductions to our SG&A and R&D costs, an effort that has already begun and is reflected a sequential improvement over the past few quarters. Those factors contribute to our expectation of adjusted EBITDA to be in the range of negative $31 million to negative $23 million in 2023 and an improvement in profitability of between $14 million to $22 million over the negative $45 million we just reported for 2022.

In terms of quarterly flow, while we don’t provide quarterly guidance, we have good visibility into the first quarter. First quarter will show modest decreases in products and services revenues compared to the prior year. On the revenue line, we’ve seen a shift in the timing of shipments to one customer relative to last year, which we expect to normalize in the second quarter.

Service revenue will also continue to reflect the completion of some projects. We have some major programs launching mid-year, but it’s not yet clear how much of the initial impact will be recorded in the second quarter or the third quarter. We do expect to return to year-over-year growth beginning in the second quarter, strengthening through the third quarter, and in the fourth quarter of the year should show the benefits for a number of major launches, the highest levels of utilization at Kentucky, and we expect it to be our strongest quarter of the year. With respect to adjusted EBITDA, I’ll note the obvious connection between utilization and gross margin as we scale up production activity over the course of the year.

Looking out beyond 2023, we expect our PHA gross margin to strengthen further as we utilize Kentucky’s full capacity. We expect our PLA business will stabilize at around the level we ended it with in 2023. We also believe that our current SG&A and R&D spending levels are generally adequate to support the growth of the business.

In terms of full-year CapEx, we have a baseline expectation of $26 million to $31 million for 2023. This range captures prior commitments for the greenfield facility, maintenance expenditures, spending to complete the Novomer demonstration plant in Rochester, a few minor projects. This range excludes significant additional spending for the Bainbridge greenfield facility. Once we have received feedback on our application from the DOE, we will be in a position to provide you with guidance beyond this baseline.

I’ll now hand the call back to Steve for his closing remarks.

Steve Croskrey

Thanks, Mike. There is momentum in our operations, momentum in the biomaterials category and momentum in sustainability as a mandate for responsible brands and businesses around the globe. The pace of new customer inquiries continues to track at significant rates. This past quarter, the way we track that activity, we saw a 41% year-over-year increase. What that number doesn’t reflect, though, is the increase in urgency and seriousness of those calls. The world continues to move in our direction. We have financial flexibility and strength. We have an outstanding team. We have the production capacity we need. And most importantly, we have the ability to translate all those advantages into value for our customers who need, not only great solutions, but also great execution. We think we have a powerful formula for success. 2022 was an important year that held a great deal of success, but I think our most important accomplishment this past year was that we completed the foundation we need for a strong ‘23 and beyond. I believe and our entire team believes that 2023 will be a watershed year in Danimer’s history.

Thank you. And operator, we’re now ready to take questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question is from Jon Tanwanteng with CJS Securities. Please proceed with your question.

Jon Tanwanteng

Hi. Good afternoon everyone. Thank you for taking my questions. My first one, Steve, was just on the question of regulation or the topic of regulation. You mentioned that you had some potential out there to move away petroleum-based plastics. It sounds like if they do that, you don’t have the capacity to meet even just a small portion of that. What are the other options that are out there for these large companies to do so? And if there is not that much out there, what are they doing, if anything, to help you guys reach that kind of capacity sooner just to meet those needs?

Steve Croskrey

Well, thank you for the question, Jon. Right now, I am not aware of any other really elegant solutions to that particular problem. Because of heat tolerance quality, some – a lot of the other biopolymers that could be used won’t work. So, obviously a great thing for us, but this is pretty early in the news cycle on this. So, I don’t really have anything to report yet, Jon, about any possible cooperation with those potential customers to help increase our capacity.

Jon Tanwanteng

Okay. Fair enough. You also mentioned that your catalytic PHA opportunity was getting stronger than it could be a very high return investment? Could you just give us a little bit more detail on what you are expecting out of that just in terms of timing, profitability, whether it’s a licensing agreement or some kind of joint facility? Help us understand what’s new compared to six months ago or a year ago when you were just starting out with that?

Steve Croskrey

Yes. Sure, Jon. Thank you. Timing-wise, well, let me just start with a little detail on what we are actually doing. So, what we are working on is negotiating two agreements. One is a co-location agreement in the Gulf with a major supplier of ethylene oxide. And the second is an off-take agreement with a major chemical company. That off-take agreement would take enough volume to cover our cash flow needs to operate that facility. So, it will allow us, I believe – we believe to get attractive project financing. That’s about all I can really tell you right now other than both those negotiations are moving forward. The off-take agreement is at an LOI drafting stage at this point. And we expect to have some kind of agreements in place by the end of this year. Once we have financing lined up, then it will be roughly 2 years to start shipping product. And just as a reminder, the plant that we are talking about here is 168 million pounds of capacity.

Jon Tanwanteng

Great. Thanks for that details, Steve. My question for you, I think you had mentioned that you would be at very good utilization level for Kentucky exiting the year. Any sense of what that run rate might be? I understand that through the year, you will get some questions about timing and volumes for the ramps, but it sounds like you have a bit more surety as you approach the end of the year. Can you talk about that expectation?

Mike Hajost

Yes. Thanks Jon. Appreciate the question. Yes. I think as we are expecting our volumes to pick up a quarter to the next quarter to the next one obviously, being stronger at the end of the year. And we believe that we are not going to be necessarily consistent all the time because there still will be some lumpiness, albeit we think that with a higher customer base, we will take a little bit of the volatility out of our capacity utilization than what we have seen over the last couple of years. But I think for – the expectations there is that we would certainly be running well above the breakeven capacity required for the Kentucky facility itself. And I think probably making very good headway towards levels that would cover – make the overall company EBITDA positive. But again, a lot of work to go on between now and then to achieve the customer demand to come through on the pace that we are expecting it to do to achieve that.

Jon Tanwanteng

Okay. Great. And then second, just what is your current cash burn rate with the new financing in place and the adjustments you are making to SG&A and R&D?

Mike Hajost

Yes. I think overall, we are pleased with some of the changes. I mean our guidance range that we gave out provides, I think a pretty good pathway to look at what the cash flows are going to look like for the year. And when you look at the ranges of the adjusted EBITDA that we gave out, the CapEx ranges, we believe cash interest this year, will certainly be higher than it has been, and it’s probably closer to maybe like a $23 million rate considering that the new financing is, for the most part, starting up here as we exit Q1. But you could put those together and get a sense of what the cash burn would be, the savings that we are expecting kind of within SG&A and R&D, we think that year-over-year, that can be in the $8 million range. So, it’s a pretty sizable amount of reduction and we are pleased to be able to kind of pull through and get more granular to achieve that. But with the ending cash balance we had, the – as you know, we paid off a $10 million loan and then we added the term loan net proceeds. We believe that we will probably end up the year somewhere in the low-50s to mid-60s of liquidity. And I think we are very comfortable with that considering what we said before about being comfortable with the $20 million range.

Jon Tanwanteng

Okay. Got it. That’s very helpful. Just one more and I will jump back in queue. What is the nature of the reductions in expenses you are looking at, are they more efficiencies, is it something else?

Mike Hajost

I think the – I think a number of those, again, they are kind of spread out across SG&A and R&D. And there are a lot of things that we looked at just more granularly as part of our budget process this year. We did take out some headcount. We are going to have less R&D going on as we have got more projects sort of established and we have products that we can sell and just a lot of other sort of external spends that we have now have been able to manage more effectively inside. So, less consulting, things like that. But again, we watch these costs very, very carefully. As you know, our SG&A and R&D as a percentage of our sales, remains high. We are eventually going to grow into that. But while we are doing that, it’s very important for us to continue to sharpen the pencil there as well.

Operator

[Operator Instructions] Our next question is from Laurence Alexander with Jefferies. Please proceed with your question.

Kevin Estok

Hi guys. This is actually Kevin Estok on for Laurence Alexander. Thank you for taking my question. I guess my first question is, are you guys accounting for any recessionary risk, let’s say, in the back half of ‘23 and the first half of ‘24 in your outlook? And I guess what’s your view on the sort of the biggest risk to your volumes going forward or in the next few years?

Steve Croskrey

Thanks Kevin. Thanks for the question. In terms of recessionary risk, I would say that we haven’t built anything necessarily into the financial model. But it was one of the important considerations in doing this term loan. As – I know most of you have heard me say many times, whenever I have been asked about risk to our business, I talk about the timing of these customer launches because we really don’t have control over when those happen. We can do our thing on our end and then we have to wait for the customer. The one thing we can control that takes that risk off the table is improving our liquidity. And so that – with an uncertain economy out in front of us, we felt like it was important to do that now rather than wait for a moment in time, maybe when perhaps if things got really bad in the economy that we wouldn’t even be able to do that. So, that’s really why we have taken on this additional debt.

Kevin Estok

Got it. Thank you. And you actually made a reference of this already, but I just wanted to confirm, the approximate utilization rate that would make you guys breakeven at your Kentucky facility, just wanted to confirm that.

Mike Hajost

Yes. We stated this a couple of times, Kevin. And what we have said is that about a 20% capacity utilization rate would make the facility itself breakeven from an EBITDA perspective. I think gross profit, for the most part, equals EBITDA. It’s not a lot of SG&A and R&D there and then obviously, at higher levels. So, we can cover the corporate costs as well.

Kevin Estok

Great. Perfect. Thank you very much. Appreciate it.

Operator

Thank you. And our next question is from Jon Tanwanteng with CJS Securities. Please proceed with your question.

Jon Tanwanteng

Thanks for the follow-up. Can you guys just give us an update on the DOE loan program and kind of what you are expecting on the timing basis?

Steve Croskrey

Yes, sure. So, as you heard in the script, and it was in our press release as well, we just completed the Part 2 application. That was about an 8,000 page document. So, just to give you an idea of the comprehensive nature of that application. The next step on our end is to wait for a response from the DOE. But if our application is approved, then we will move on to negotiation of terms and a due diligence period. We are hopeful of seeing funding in the second half of the year. But obviously, that’s something we have to wait and see what the DOE does.

Jon Tanwanteng

Okay. Great. Well, can you use part of that, assuming you get it to pay down the high-cost debt that you have, or would that truly go to CapEx?

Steve Croskrey

No, that would just go to the CapEx for the project. There would be some management fees and licenses and things like that back to the company. But all of those details would be part of the negotiation with the Department of Energy.

Jon Tanwanteng

Okay. Is – are off-take agreements for the greenfield that’s mostly on hold until you get that financing? Is that safe to assume?

Steve Croskrey

Well, good question, Jon. We, of course are kind of always working on off-take agreements just in the natural course of time with customers as our relationships develop. But what we kind of determined, while we were going through this, the application process, is that we may have enough contracts and support now to get through the approval process. But as we get more detail, that would allow us to go back to customers if we needed to round out those contracts with a kind of a clear understanding of what we need out of the contract to get it across the finish line. So, prior to them coming back to DOE, coming back and proposing terms and those kind of things, we are flying a little bit blind in terms of what they might need in that respect.

Jon Tanwanteng

Got it. Okay. And then just any update on – the cost compete at the greenfield that’s at this stage, is that something you are still working on?

Steve Croskrey

Yes. That will – that number is going to probably change, depending on the timing of the project approval and all those sort of things. But we did recently bump up our estimate in our ranges. I think we brought the low end up by $15 million and the top end up by around $50 million in terms of our expected cost of that facility. So, I think we are at $515 million to $665 million now.

Jon Tanwanteng

Is that the remaining or is that the total?

Steve Croskrey

That’s the total.

Jon Tanwanteng

Okay. What have you spent so far?

Steve Croskrey

Mike, you can catch me if I am wrong here. I want to say $171 million through the end of the year, but if you have a better number, you should give him that.

Mike Hajost

No, that’s exactly the number.

Jon Tanwanteng

Okay. Great. Thank you so much guys.

Steve Croskrey

Okay. Thanks Jon.

Operator

[Operator Instructions] Thank you. There are no further questions. I would like to turn the floor back over to Stephen Croskrey for any closing comments.

Steve Croskrey

Thank you, operator and thank you again to everyone for joining us today. I would like to thank you for your continued interest in Danimer Scientific and we look forward to updating you on our progress when we report the first quarter.

Operator

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.

Mike Hajost

Thanks Paul.