Q2 2023 PureCycle Technologies Inc Earnings Call
Yeah.
Good day, and thank you for standing by.
Welcome to the pure cycle technologies second quarter 2020, Threep corporate update call at this time, all participants are in listen only mode.
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Now like to hand, the conference over to Charlie place Director of Investor Relations. Please go ahead.
Thank you Anton welcome.
Welcome to the pure cycle technologies second quarter 2023, corporate update conference call.
I'm, Charlie place director of Investor Relations for pure cycle and joining me on the call today are dusting Olson, our Chief Executive Officer, Larry <unk>, Our Chief Financial Officer, and Dan Comas, Our executive Chairman. This morning, we will be highlighting our corporate developments for the second quarter and subsequent to quarter at the presentation, we will be going through on this.
This call will also be found under the investors tab on our website at www dot pure cycle dotcom.
Many of the statements made today will be forward looking and are based on management's beliefs and assumptions and information currently available to management at this time.
Statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control, including those set forth in our safe Harbor provisions for forward looking statements that can be found at the end of our second quarter 2023, corporate update press release, and our quarterly report on Form 10-Q filed yesterday evening as well as then.
The reports on file with the SEC.
That provides further detail about the risks related to our business.
Additionally, please note that the company's actual results may differ materially from those anticipated and except as required by law. We undertake no obligation to update any forward looking statement.
Our remarks today May also include non excuse me may include preliminary non-GAAP estimates and are subject to risks risks and uncertainties, including among other things changes in connection with quarter end at year end adjustments any variation between pure cycle as actual results and the preliminary financial data set for it here.
And may be material, you're welcome to follow along with our slide deck or if joining us by phone you can access it at any time on pure cycle Dot com, we're excited to share updates from the previous quarter with you I'll now turn it over to Dustin Olson pure cycles, Chief Executive Officer Justin.
Yeah. Thanks, a lot Charlie Thank you everybody for joining the call.
Q2 was the most exciting and rewarding quarter in pure cycles history.
Ericsson is operational.
The we've worked toward for the last decade, we shared a lot of moments together from receiving the Procter and Gamble license building the feedstock evaluation unit financing ireton going public and now proving the technology at scale.
This is a key moment for our future.
The first plant is always the most challenging and the most special but now we have a fundamental understanding for how we grow reliably into new regions and reduce our cost structure build bigger plants and get more efficient on capital projects.
With this progress we can now start realizing pure cycles potential remember.
Your cycle takes the world's most popular and least recycled plastic polypropylene and converts it into a premium ultra pure product or technology capitalized on strong feedstock flexibility a low variable costs and produces a high valued product the.
The world needs technology like this the world needs a story like this consumers all around the world are begging our industry to find solutions like this pure cycle is the answer.
As you know we accomplished the first two bondholder milestones and for the first time produce pellets at commercial scale, we are well positioned to accomplish the remaining milestones are tenants running.
And raising production rates every day.
I wish I could have been there I wish you could have been there when we first produced our pellets. It was a remarkable achievement for everyone in a tangible product of the hard work. We've all put in everyone on site will remember that moment for the rest of their lives during.
During the day, we cut a quick video to capture the moment and I was clearly excited.
I was excited for two reasons, one because I knew how much it meant for our team our partners and our shareholders to see the fruits of their labor finally come to reality, but probably more importantly for this group.
Because it represented that our technology works at scale for us when the when the polymer moved through the system, we knew the fundamental technology would work.
Moving to first pellets was a major step we pushed polymer through every key process and prove the technology works at scale.
If you take a step back and just look at our fundamentals our process is mixing polymer with solvent extracting contaminants from Palmer and then removing solvent from the polymer. These are the core principles of our technology and where the tech risk was most critical in each.
Of these steps are process worked extremely well we have good technical data to support the merits of each step.
This is a big deal for the last decade Tech risk was the biggest obstacle. This is now off the table and sets the stage for our global growth plan.
During the startup we ran into glitches. This was expected we've talked about it before there are a lot of details around a facility like this.
And you just have to work through each piece of equipment to both learn how to run them and then fix whatever issues pop up.
In some respect its about the equipment doesn't work properly wasn't installed properly will handle the process properly can it handle interruptions properly.
But it's also about the team does the team have the capacity the determination.
And the grit to stay focus to keep solving these problems, we do in a big way.
Not only has our team grown tremendously over the past four months since mechanical completion. We've also shown that we have the talent to successfully solve problems.
After completing the first pellets run in June we effectively use July to work through a series of commissioning details as you start to run you'll find the collection of issues that you just need to address.
Some of them you can work on while the equipment is running but some of them require the equipment to be cycled down during.
During our commissioning we iterate it through these improvements.
This work improved our overall operational consistency and efficiency and paved the way for continued strong operations in the future we.
We will continue to address the plant operations every day with a systemic methodical and purposeful approach. This is the definition of operational excellence everyday you grind to improve the facility utilization by improving the robustness of our processes and operations.
With respect to commercial activities. We're on track we've established a good feedstock purchasing pattern with numerous third parties and have adequate feedstock available. We currently have over 10 million pounds of feedstock and inventory with over with about 50% prepped and ready for purification.
We have built a substantial amount of optionality into our system.
Our sales group has also been working closely with our core partners on specific applications for first products.
And we have been delivering several technical training seminars to our distribution partners. Our product is in high demand and we are ready to get the volume moving as our production increases we will continue to expand our sales to new customers in new regions.
And while we already have our core ironton volume committed and ready to go we can now be opportunistic with some of our production and plan to seed the market and prepare St sales channels for all future plants Augusta Europe and in Asia.
As you look across the four key areas of operation Preprocessing, which we call prep utilities.
Utilities purification and born digital and consider the commissioning that we've completed we are very pleased with the progress. We've made we've accomplished a lot and we moved as we moved through commissioning.
There are a few specifics that I would like to mention.
<unk> for prep operations that convert bailed plastic into feedstock ready to be purified all of the technology has been tested and commissioned it took quite some time to grind through the startup and get things positioned across each piece of equipment, but prep reliability is improving every day and efficiency improvement activities.
Our ongoing across the last quarter, we've been running a lot of different types of bells and generally have had good success here. We are in close communication with a third party suppliers to improve the Bel quality, where it's needed. We have also identified several small projects that could improve overall cost efficiency of the operation.
<unk> at this time.
For utilities, while Theres been a lot of work to get there. The area is fully commissioned and operations and its achieve benchmark rates across the system.
This is the heart of our plant and achieving strong reliability is essential to our operations heat control is an important aspect of scale up and.
And in an area, where we historically had problems at the <unk>. This is working well now and we feel good about the temperature control.
For purification, we discussed this quite a bit already but we're there we've tested the core unit operations. They work well the core Tech is sound and tested we've worked through a number of teething issues and we fixed and fine tune a lot of equipment.
There were a number of minor issues that needed to be worked through program updates external sensor replacements minor adjustments to equipment.
But they all have to be right not only have we learned a lot about ironton, but all of this will be applied to future plants as well it will help us build faster build cheaper and startup more predictably.
What are the areas, where I'm, particularly proud as with our Ironton staff.
As you might recall when when asked about what are you most worried about with respect to startup I almost always answered with the learning curve of our team.
While the last two months have been a lot of work time and effort the commitment by our team has built an incredible strength for our company.
We now know how to operate this plant.
We are now more confident in the ability to predict operational performance and we're starting to see around the corner.
Lastly, with respect to digital this has been a big lift I knew that when we decided to incorporate the born digital package. It was going to be more work at the beginning.
To get right, but I also knew that this would set the stage for everything else in the future. It's been true on both fronts I remember.
Early in the project it was really difficult to get the basic controls to operate.
The first time, we tried to put solvent into the system. It took approximately three weeks to get lined out.
But then we learned and we fixed we improved and we applied our born digital capability.
When we restarted the operations recently it took less than one day to get the plant optimized on temperature and pressure. This is a good indication of both the power of born digital as well as the growth of our team.
With respect to technology.
We are excited.
We recognize that it is an easy to see the technology progress without actually being in ironton and watching the day to day project progress and watching the data.
So we pulled the original Investor day presentation to show the progress across each section.
Look the big picture, it's clear.
For our technology to be successful, we have to be able to mix solvent extract contaminants and remove solvent. Each of these steps are really working well here are a few of the details across each section and a few problems that we've worked through.
The first and last steps are all about extrusion and our extrusion arc Streeters are working really well the heating cooling and pumping capabilities are very good and the capacity appears to attract to design.
We're happy with the relationship with Krauss Maffei the level of support they've provided and the quality of their machines.
We've always viewed our mixing and extraction steps as one of the most critical it's traditionally difficult to scale mixing and mixing of solvent with a viscous Palmer was expected to be challenging.
But our plant has achieved this success. This is a key step because the better we mixed Palmer with solvent the better the solvent will be removing contaminants good contaminant removal means superior product quality.
Filtering in purifying steps are working well now there is still minor mechanical items to work through but they will not impact plant operations. The commissioning has been challenging because we had one faulty piece of equipment and a critical step that needed to be repaired, but it was repaired by the drawings, but after startup.
We learned that we learned the design needed a small improvement we.
We use this time to upgrade the equipment and its working well now.
Removing and recovering solvent is a critical piece of our process I am very excited about this section.
This allows us to be both cost effective and also a good environmental steward.
Our final two steps are dedicated to this effort both work very well in fact, while it takes some time to generate a statistically significant dataset are early indications show that our solvent remove is 15% to 40% more effective than the original design. This means that pure cycle is.
It to generate pellets with even better odor performance than originally planned.
One of the most critical adjustments that we made to the process was with respect to piping in this system.
During the first startup we noticed that the flow right through the system was hindered and would've would've been rate limited below Max capacity of original design. However.
However, our team brainstormed the situation developed a novel solution and then implemented it in late July the results were really good and the rate limit appears to be removed.
This has been a really interesting process for all of us and for the most part pretty traditional many of US have been part of big product projects startups, New plant operations and scale up efforts, it's basically going the way we expected projects like this are always more challenging in the early days as you Ts and work out the Kinks.
And then they start working.
We're very methodical with our commissioning process and while this did take some time, what we've experienced isn't unusual and there is no doubt that these efforts have paved the way for strong future operations.
At this time I would like to invite Dan comes to the call as you know Dan as the chairman of our board.
Dan is a 45 year vet of the industry and has gone through a lot of projects startups and has worked in plants for years. He has been very helpful. For me through this process.
Quite frankly, he has also spent a lot of time at ironton with all of us.
Through our discussions I thought that his perspective could be very helpful. Today Dan.
Thank you Justin I'll try to give you some perspective on project completion commissioning and startup from my 45 years of industry experience.
I will discuss how and why such observations are relevant for this project from that industry perspective.
Typical commissioning periods for complex technical facilities similar to this one take between three and six months New technology generally takes more time and effort to commission and start up compared to proven technology.
This project reached mechanical completion April 24.
We are three and a half months past mechanical completion.
Given the novel nature of our process getting to this point inside the early portion of industry commissioning norms is a strong result, and a successful outcome there.
The commissioning in early operations phase of our facility are really about understanding and addressing any key issues that might keep the plant from consistently producing at full capacity.
Safety is always the top focus during this stage, we believe that safety leads and results follow <unk>.
Commissioning success is driven by safety and finding and fixing issues.
Plant that contains miles of pipe and thousands of complex instruments controls at pieces of equipment. We'll have some issues that require quick solutions. Our plant was no different the majority of our issues were normal equipment and control issues common to any startup.
There are many reasons that we've made such good progress since mechanical completion first is our talented team of people at ironton and within the company.
Our dedicated and committed partners third are born digital philosophy.
For our capability of finding solutions.
I've been part of many projects in results and the results of this team are as good as any I've seen projects start ups follow an S curve, it's not linear so it's always slow at the start it leaving the gate and then it goes faster. However, there is nothing normal.
About the team and I are 10, it is rare to see a team so singularly focused and aligned on a mission.
Peer cycle hired a mixture of operators Craftsman engineers scientists.
Nance and business people to form his company.
Most of them are people I've had excellent experience with industry leaders.
This gave us a jump on setting up robust processes for safety environment training quality reliability and operations in general.
All PCT people are committed and focused on our mission to solve plastics waste there.
We are proud to talk about what they do with their families and the community there.
This sense of Pride and mission are key to our teamwork and drive this team to win not only did we find excellent people, but these people also work remarkably well together in my many years within the industry I've worked with a lot of top teams on big projects and managed a lot of plants. This.
<unk> is as good as any I have worked with in my career.
They look for ways to help each other.
They look for ways to solve problems rather than make excuses, they check ego at the door and they listen and cooperate with each other they make personal sacrifices to support the mission, they're committed to safe operation and making PCT successful.
Our key.
Our team is a key reason why we were making the progress that we're making I could not be prouder of this team or the opportunity to participate alongside them with them to bring this technology to the market.
And thank you for letting me share my thoughts about this project.
Thank you Dan.
We're lucky to have you and we appreciate all of your support.
While most of the company was focused on getting Ironton operational we did move the needle forward with respect to our growth strategy with respect to Augusta, we closed the key documents to secure the land, which now clears way for us to begin site work activities. We expect this work to start in Q4 and continue through Q2 of 'twenty five.
As you recall there are several concerns with respect to securing the Augusta land in the last two quarters that has now resolved now.
Now that Ironton is operational we have clear access to land our project can accelerate we're incredibly excited about the future plant in <unk> and.
In Augusta and the recycling capacity that we can bring online Europe is also on track we closed the tender process for Antwerp have commenced both engineering and permitting activities, we expect to close the permitting process in 2020 for R.
<unk> also continued to move forward, both Mitsui and S. K geocentric sent teams to Ironton for site tours that supported the development of both projects, we intend to establish inventory locations in Antwerp and in Singapore in order to seed future sales for Europe , and Asia, We will use the flexibility in the irons in contract.
To make volume available for export we will add inventory in Antwerp, and then one to two quarters later planned to move to Singapore. We're currently developing the internal work processes and third party contracts to establish this operation.
I'll now turn it over to our CFO , Larry Soma for a financial update.
Thank you Dustin.
I'm really pleased with the financial progress that we made during the quarter.
At the end of May the Augusta Economic development Authority formally approved our plan of financing for one line in Augusta, which officially closed the forbearance that had previously been in place.
Subsequent to that on June 30, we.
We executed an economic development agreement.
Related to our plans to construct the Augusta facility.
Pursuant to the EPA PCT expects to receive certain property tax abatement benefits as well as certain other incentives, including site infrastructure development assistance.
We are excited about our plans for our guests that and with the technology risk removed with pellet production in turn we expect to accelerate our project financing efforts as we believe that removing that Ted <unk> will improve our cost of funding.
We have also continued our efforts to raise funds as we have interested parties for the remainder of our prep sortation equipment.
We are hopeful hopeful to provide detail soon but in the interim we were able to extend the maturity of our undrawn revolving line of credit with celebrity capital.
On June 32024 to March 31, 2025.
Our objective has always been to ensure sufficient capital to advance our strategic initiatives.
While allowing ourselves the time needed to execute a capital efficient project financing plans breakout step.
We ended the quarter with just over $366 million in cash and available liquidity, which includes $115 million of unused borrowing capacity on our line of credit.
As a reminder, during the quarter, we closed two non dilutive financing transactions for a net amount of $47 6 million.
Our corporate and pre operational employee cash used was $9 9 million during the second quarter, which was an increase from the prior quarter, primarily due to the delayed payment of a portion of our 2022 bonuses.
<unk> to the previous quarter.
We used $12 $5 million of cash during the quarter for normal corporate operations such as insurance.
<unk> can start up working capital.
<unk> and various other expenses.
Additionally, we continue to make investments in our IL 10, Augusta and prep facilities, which were funded primarily from the non dilutive financing transactions.
Now, let me comment on our budget for completing the Ironton project.
As noted in our 10-Q filing last night per cycle anticipated as of June 30 that the remaining investments in 2023 two.
To complete the Arlington facility could range from 10 million to 22, and a half million dollars.
This range is dependent upon various contract contingencies and their ultimate resolution.
We believe that we can recapture funds from some of the contractors on the project.
But the most important point is that we've already spent or forecasted the need for a total of $22 million, which means that any positive resolution to contract contingencies should be favorable to our future cash forecast.
Now I'm going to return the call to destined for his final comments.
Yeah. Thank you Larry look we continue to execute on both near and long term goals. We completed the first two milestones with the bondholders the questions with regarding pure cycles core technology have been addressed and answered.
We closed the AED eight land transaction on 30 of June , which paves the way for our North American growth strategy.
We extended the $150 million revolving line of credit through March 31, 2025, and closed two non dilutive financing transactions for a net amount of $47 9 million. We continue to set the stage and advance our international projects in <unk>, Belgium, all saw in South Korea, and Japan, we will.
Forward to updating the market with respect to the upcoming milestones achieved and completing the start up process of our flagship iron facility and the Augusta financing process as soon as possible. Thank you everyone for joining the call today at this time, we'd like to open the call to questions.
Thank you.
We will now conduct a question and answer session.
To ask a question. Please press star one one on your telephone and wait for your name to be announced to.
To withdraw your question. Please press star one again, please standby, while we compile the Q&A roster.
Our first question comes from Hassan Ahmed from Alabama.
Mobile advisors. Please go ahead.
Good morning, Dustin and Larry.
First of all and then followed by your question.
Look I mean, historically there were a bunch of cynics out there with regards to the <unk> story.
And.
The cynical stuff that they would talk about was whether or not the technology works.
Whether it's scalable or not so so clearly you guys have proven them wrong.
With commercial production, starting and the like so that's obviously the comment that I had to make but in terms of my question.
As far as your core technology.
Is the core technology working at scale.
As I sort of sift through your presentation. It seems that there wasn't really a whole lot of redesigning that you guys had to do right.
And maybe some slight redesign with regards to the mixing and extraction side of things maybe some on the purification step in the separation step.
The question is what these sort of minor redesigns.
And B.
The lessons learned and time saving and potentially budget saving.
Future projects because of the.
This potential sort of findings.
Yeah, Hey, Thanks, a lot Hassan I think the way Youre thinking about it is right.
Anytime you're scaling a new technology. There is that there's always that chance that you start raising rates and you run into something thats going to require a lot of time or a lot of capex to repair.
And as we started up the facility, we just didn't see that okay.
We did have some minor issues I'll speak to that in a second but but like you say I mean, the core technology is really about mixing removing contaminants and then removing solvent and as we performed those three core let's say chemical engineering type technologies.
They worked and they worked really well so we're very very excited about that.
With respect to the minor items that we had.
It's a myriad of things Hassan so I can give you lots of lots of examples of things that happened I would say the majority of them are very common to any startup whether it's a new technology or not okay. I mean anytime you start up youre going to have control valves that don't work quite right or.
Regulators that are not set properly for the system.
We had one situation, where we needed to shut down the entire utilities plants to basically boot up a new program.
Similar to restarting your computer but for a plant like this it takes it takes a bit of time, where we did have some issues that were that we had to work our way through where in some of the.
Some of the piping around pieces of equipment, we had a little bit higher pressure drop in that system than what we expected and we redesigned the piping and implemented in the course of July .
That was actually a really nice, let's say technical achievement by the team to adapt into adjust the other item was quite frankly a.
<unk> design problem with one of our Johnson screens and the.
And one of our core operations and that allowed some of the process to leak through where it wasn't supposed to and that required us to cycle down to get into that piece of equipment and fix it but but all of these things are behind us and so what we did is through the course of the commissioning process instead.
Instead of pushing to get.
Some minor rates, we've made the decision to really prep this plant for full rates and so we shut down.
Fixed a lot of things that were kind of on the list that we've been dealing with and came back up and have been running really well.
With respect to lessons learned.
Absolutely.
Okay. So on the competency side anytime you scale a technology like this.
You don't really know exactly what youre going to see you've got good fundamental understanding of the tech, but until you see it at scale.
You don't know how to handle it so on one hand, the competency development that we've had across our system has been exceptional our team out here really Dan spoke to that quite a lot, but our team really out here has has been the right team done a good job, but also learned a lot.
And as it comes to applying the learnings to future plants, it's certainly going to help us in the startup phase because we're going to know what to expect before we start so the startup will go much much faster in future plants, but we're also learning a lot about our plant where a tweak here and a tweak there is going to give us.
Basically two opportunities one is we see several areas on our plant, where we can cut significant capex and.
And also we see several areas in our plant, where we can increase capacity with very minimal impacts to the plant. So I'm optimistic about our capex per pound.
Tough environment with respect to inflation in cost in general, but I think we're going to have an opportunity to reduce cost and probably also increase capacity on future facilities.
A lot for the question Hassan.
Helpful and a quick follow up can you talk a bit about.
How do you feel the commercial scale sort of.
Facility has performed relative to the SEC.
Oh it is.
Performing better than the <unk>, Okay, I mean, we have.
We knew that on the front end, we've added a lot of design components to the commercial plant that we didn't have in the <unk>.
And quite frankly, the equipment that we have installed in the facility has a much higher quality than the <unk>. One area in particular just to give you. One example, which is there are several but one example would be around the D. Volatilization of our final product pellet I mean, this is a really big deal.
Helps to remove contaminants in the overall product.
But it also reduces the odor of our final product and we've talked about this quite a bit.
When people would smell.
S. EU pellets. They would think Wow. This is good and when we tested it looked good but what we're seeing is that the.
The performance of our final pellet here is even better than the <unk> and quite frankly, I'm I'm extremely excited about that I've got a lot of experience dealing with different industries and odor is very often a core component and I think that's going to be a big opportunity for us to value sell in the future.
Very helpful. Thank you so much thanks Hassan.
Thank you one moment for our next question.
Our next question comes from Noah Kaye.
From Oppenheimer <unk> co. Please go ahead.
Thanks for taking the questions and for the update clearly the team has been.
Living on this 24 seven.
And is it really helpful for us to see.
Where you are at currently and so my first question is kind of a two parter.
Actually feeds from the last question, which is first around product quality and second around product run rates right. So you mentioned the odor.
Just so we all understand.
Are the pellets that are coming out of the facility now.
Of the quality that would get commercial acceptance from your customers.
And if those attributes are actually better than contemplated in the agreements what does that mean for customer.
Customer demand.
Yes.
Yeah, we feel really good about the product quality Noah anytime you start up a facility like this youre going to have.
Some periods at the beginning where you have construction debris and different items that you have to clean out through the pipe rustics developed from the inside of the pipe and when we look at the products, we had some of that at the beginning.
But the core.
Core component that we've been watching is the odor performance and that's been performing very well with respect to the marketability of the product, yes, we feel very good about that.
With respect to the ability to let's say upsell that from an odor perspective, we'll have to see how that goes Noah.
We anticipate a lot of interest in our products and markets that we haven't traditionally chased from an odor perspective, but we'll have to we'll have to see how that plays out over time.
Not to show your hand, too much but can you talk a little bit more about that what what does having lower or do you mean in terms of expanding your markets.
Well I mean, one one easy example is automotive.
There would be and let's just speak to automotive.
No one wants to have.
There's a lot of areas in the world that do not like the new car smell.
A lot of times, the new car smell is really the fossil based plastic that is creating that smell inside the vehicle and if we can perform better than fossil based polypropylene on the order front, which early indications indicate that we can then that's going to give us a jump into the.
Cockpit of the vehicles.
Type applications that would be dashes pillars.
Consoles things like that I think that's a really big opportunity that could open up for us.
Really interesting so into product run rate.
You mentioned you recently initiated.
The restart and so im good.
I think that where you sit today is at fairly low run rate relative to rated capacity, but can you walk us through where you sit.
And how you see this ramping you've reiterated commitment to a full month, 50% production by end of September .
So you have conviction there, but just help us walk through what Youre seeing now and what you expect.
It's important to note that in July we were much more focused on fixing these items that were hanging us up a little bit so that we could reach full run rate and what I'll tell you now is that we're touching the 40.
45% level of capacity.
We haven't seen real top end constraints, yet so as we get into August I anticipate us pushing above the 50% level and and working to knock out those next milestones.
That's great to hear.
Last question just around.
There was a comment in the release around the.
Expected margins.
Kind of being in line with the budget.
That was provided previously.
I think there can be a lot of moving.
Parts of the cost structure and the revenue stack, but just what should give us or what gives you confidence in being able to kind of hit target margins.
You build this thing to scale.
Over the next several months.
Well, let's talk about cost and then we'll talk about revenue on the cost side I think we're seeing indications although the early that our variable cost structure is going to look good if not a little bit favorable to the original budget. Okay. I think that we're finding efficiencies as we optimize the plant to pull down the utility costs and so I think that's going to be that's going to be good.
Another core components of cost as feedstock.
And we're finding feedstocks feedstock market has been down quite a bit this year relative to the last couple of years and so we will take full advantage of that and quite frankly, given our flexibility on feed.
That will have.
A notch better than others buying in the mechanical recycling market. So I feel good about that.
The other item that.
We really haven't got it.
Yes, no that's okay and the other item that we really haven't spoken quite as much about is on the revenue side.
Well there are a lot of puts and takes on the overall deck, especially with respect to with respect to ironton.
We have a couple of things one we've got an increasing amount of feedstock plus contracts that we're applying to ironton, which is going to help quite a lot.
But more important to that as to how we believe that we can value. So we've run.
We've run several different feedstocks and the plant so far.
A couple of different grades of <unk>, we even ran a little bit of PCR, we focus more on P. IR because of it.
Consistency in it just allowed us to watch the data a bit closer but the key thing is that the feeds that we ran in the <unk>.
The plant so far that they all basically act the same which is which gives us a lot of confidence on the PCR front.
And so most of the contracts that we have in place are.
Mandating like a minimum of 50% PCR, but we know that the market is very excited about more PCR and so the higher the PCR that we can put to the market.
I think the better we'll be able to value sell our products and so I feel good about the revenue side. The polypropylene market in general is down a bit is down a bit Noah and so that's that's something that we have to watch, but I think that our product is in a league of its own and I think it is going to carry a lot of a lot of weight.
And the market.
Thanks.
Thank you.
Thank you.
One moment for our next question.
Our next question comes from added some risk.
From Stifel. Please go ahead.
Hi, Good morning, and thank you for taking my question.
Just could we get an update on the general timeline of meeting the key milestones I know you talked about the 50% utilization you will meet that by September but.
And it looks like other things may have shifted a bit when do you not expect a procurement.
<unk> completion to occur.
Yes look we feel really good about the milestones I think we will be ramping above 50% within the next period short period of time I think we'll have a shot at achieving the milestone in August and if not we'll close that milestone in September with respect to.
The final performance test look this is this is really the game that we have been going for the all of the work that we did in July it was really about achieving this because it gives us a lot more flexibility.
The overall system.
And so we.
We haven't really set a target date for that.
I think that in the September October timeframe is very reasonable for us to touch that test remember its a five day test at.
At a 100% rates and as we as we ramp up to get to that position we will.
Well no if we see any incremental constraints and look to work around them, but.
Right now with what we see across the system I see no reason, that's going to stop us from getting it done in September October .
Alright, Thank you and just a follow up.
Do you see any other process technology issues from startup maybe that needs to be resolved or <unk>.
Any other.
Things that may pop up that we're not necessarily seeing right now.
Well I mean, that's that's kind of a crystal ball question I mean, the short answer is I have no doubt that we will have other challenges in front of us as we move forward. Okay. That's the nature of this business, it's the nature of.
Introducing a novel technology and that's what we've seen all the way through what I'm confident in our team and our ability to solve problems. So do we see other items that are out there now some.
Some nuisance things around the edges, but again.
The core technology that really represents the power of the technology is working really well and we're going to leverage that pivot on that and continue to grow so I'm really optimistic that the majority of the heavy hitting headaches are behind us and we're going to be moving forward with.
Pace now.
Thank you for taking my questions and good luck.
Yes. Thank you so much of that C next time.
Thank you one moment for our next question.
Yes.
Our next question comes from Eric Stine from Craig Hallum. Please go ahead.
Hi, everyone.
I was hoping to follow up on an earlier question about lessons learned.
You bring ironton online and at scale.
Any change to your thought on optimal plant size I believe it's 130 million pounds.
Is your expectation and then also just curious as you move forward and looked at international markets is there anything in those markets that would dictate a different plant size.
Look I think we've had a lot of theoretical discussions about what the optimal plant size would be I think that when you when you helicopter up a little bit and think about the market holistically.
I think there is look I think there are cases to be made for smaller plants and I think there are cases to be made for bigger plants. Obviously, when you get into the bigger plants you have the opportunity to.
Spread the cost out across higher capacity and that helps your overall capex per pound.
And you can also often offer quite a bit of feedstock flexibility by targeting one feed to specific line in and optimize that way with respect to small.
Smaller plants, I mean, theres a lot of smaller markets out there that would love to have a facility like this that could reduce their dependency on imports from other regions.
And so we're paying attention to both.
I think from a technology perspective, what we're seeing is that.
But since the core technology is so robust and effective.
The ability to scale the inside components of our plan are are are pretty straightforward, we're going to have to look at the details.
Prepared to make a comment on what we think future plant sizes could be today, but I think that we should be very optimistic about that.
Think that.
Once you've got a good handle on your core internal technology.
Then it's really just about.
Operating a bit on the edges to increase.
Capacity, so some natural constraints that we're going to have initially our extruder capacity okay.
We'll probably hit constraints, there before anywhere else, but but you can always add an extruder or you can always build a bigger distributor for future lines.
We're not seeing.
<unk> constraints, we're not seeing extraction constraint at this point.
We're not seeing solubility management constraints those are good and once you have clean.
Control of that core portion of the technology that allows you to think about scaling differently. So do I think that we could have a much bigger plants out there someday, absolutely and what impact will that be on our overall capex per pound. It will certainly drop it and I think that when it comes to the overall <unk>.
Position for us in the market in the long run I think that's where pure cycle becomes very powerful because once we know the technology works and we can operate it reliably like we're learning and Ironton, then it's going to be all about how can you get the capex per pound and control. So that you can grow economically more sustained.
And I think that we are in a great position today to do that.
Got it that's helpful.
Maybe last one for me.
On the feedstock side, obviously, you've done a lot of work in the U S.
Curious I know, it's still somewhat early but curious the work that you've done work that your partners have done in some of these international markets.
As those as those projects approach.
Yeah, No actually this is one of the fringe benefits of.
Of thinking and going global early as soon as you start opening that up.
It just it gives people the reason to pick the phone up and to give you a call. Okay. So in every region that we've mentioned about growing globally.
We have feedstock potential future feedstock partners that are picking the phone up and given us a call and one great example, that I'd like to use it when we were considering moving into Europe .
One of the one of the things that we heard a lot of was it's going to be very difficult to find feedstock you'll have a very difficult time, finding feedstock because there's not enough of it it's all being consumed and theres not any leftover for pure cycle.
But within a couple of weeks of announcing our location in Antwerp.
We had early indications of Oversubscription for a single line and quite frankly on our way to having enough subscription for two lines and so I think that.
Fundamentally we are a technology that is agnostic when it comes to the type of feedstock, we handle a lot of different varieties that's differential too.
Almost all other players in the market as a result of that feedstock suppliers and aggregators, they see us as an opportunity to where they can go find a home for stuff that they've been looking at.
For many years and so we find that our technology actually draws feedstock out of the market as opposed to shorten the market.
Yes, that's great to hear thank you.
Thank you.
One moment for our next question.
Our next question comes from Gerry Sweeney from Roth Capital. Please go ahead.
Good morning, Larry Thanks for taking my call.
Yes, Thanks, a lot Jerry it's good to see you again.
Good question.
We spent a lot of questions on the operational front, but by.
My one question is.
Have you sent pellets for certification yet.
We have not sent pellets for certification of the commercial plant.
Yet.
But we are in active.
Discussions with all of our key partners.
Four.
For their applications.
Got it okay.
And then switching gears.
Larry Hasnt had a chance to talk too much. So I got it I got a question or two for him obviously the project financing.
That was kicking back into gear, but just curious if maybe you could let us know where it stands and then.
In conjunction with that it sounded as though in your prepared remarks Augusta was one line I'm not sure if I heard that right I'm. Just curious if there were any changes and obviously that fits into the project financing as well yeah. Yeah. Thanks, Jerry I'll answer the last part and then I'll pass the Baton to Larry Augusta is.
It has the capacity for eight lines, we purchase long lead items for two lines.
And we are evaluating whether to attack one line first and then pull the second line in or to go after both at the same time, we've got that.
That was a kind of a central discussion with the EBITDA in terms of the overall timing and the package that we built with them, but they were very comfortable with us starting with one versus starting with two which is which is where that narrative is coming from and I'll pass it to Larry for the rest of the answer.
Yeah, Okay. Thanks, Jamie it's a good question.
If we learned one thing from our experience last year being in the market.
Besides from the fact that it was a very difficult market.
We really had a strategy with one set of investors.
And what we've done is we've pivoted.
Our thought process for <unk>.
Starting by thinking about different avenues, so that we don't have all of our eggs in one basket.
We have three different scenarios.
That we are.
Thinking about and evaluating with respect to how we would close financing.
What that does is it diversifies it diversifies us so that we have choice hopefully.
And that choice should allow us to pick.
The scenario Thats best for US long term, but also would get us to the finish line sooner. So.
The good news is with Iron 10, running tech risk removed we have <unk>.
<unk>.
Irons in the fire if you will so we're really.
Cited about that but.
If there's one thing we know we don't want to get our selves ahead of things because it's a tough market. So.
Sure.
We're going to we're going to make sure that we're positioned well, we're probably going to be.
Working to.
To build momentum with some anchors if you will so yes, we're really excited to get going now that the tech risk has been removed.
And the other comment.
<unk>.
With respect to what <unk> said.
Sure.
As Dustin.
Justin alluded, we did get the approval from the Aea for one line financing for one line.
We have been <unk>.
Progressing long lead for two lines. So as Duston said, we've got a lot of flexibility. The most important thing is that we got the agreement with the <unk> and when we go to market on a couple of different scenarios, we have flexibility whether it's one line first both together et cetera.
Got you that was my main.
Question really.
<unk> gave you that sums up youre in good shape.
No matter, if you do one or two lines correct.
That's right obviously two lines two lines at the same time as more.
Revenue and profitability for us so that will also factor into our thinking.
Got it okay I appreciate it thanks for taking my call.
Thanks Jerry.
Thank you we'll move for our next question.
Our next question comes from Thomas Boyes from PD Cowen. Please go ahead.
Thanks for taking my question, it's great to see all of the kind of progress this quarter.
First.
A quick one on just the 100% operating capacity of deadline at the end of January Thats not the performance test is it similar to the 50% operating capacity is that something where you need to operate the facility, 100% for a whole month for a four week measurement period is it simply just a pound per quarterly name plate capacity, just wondering kind of under.
Stan.
The framework there.
Yes.
Similar to the to the current milestone, which is just a pounds per month requirement by that date.
Got it.
And then just a longer term one I was wonder if you could talk about the ability to leverage the <unk>.
Alone for additional lines of Augusta beyond wanted to because that process. Obviously takes it takes a good chunk chunk of time.
Yes, I mean, so we're chasing a lot of different financing options for us and.
In the case of let's say a long term partner like the deal and financing, we're certainly looking at that as a potential vehicle beyond.
Two lines.
It's one of these potential financing options that could.
We turned on for each line.
In series and Augusta.
So you wouldn't necessarily have to go through the same process every time that you bring a new line on.
Got it I appreciate the color. Thanks.
Alright, I am showing no further questions at this time I will turn the conference back over to Dustin for closing remarks.
Look I just want to close first of all by thanking everybody for participating today and asking the great questions and more importantly by following us and supporting US along the way it seems to me like every quarter, we accomplished something newer bigger and even more exciting this quarter was no different and.
I mean, given the success that we found with our technology combined with the growth the quality and the resolve of our people today.
Today represents a true inflection point for our company and while we're extremely proud of where we are today I believe future.
Future updates will even be more rewarding. Thank you for joining the pure cycle team and helping us to create a pure planet.
This concludes today's conference call. Thank you for participating you may now disconnect.
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