Q2 2025 PureCycle Technologies Inc Earnings Call

Speaker #3: Good evening. My name is Carrie, and I be your conference operator today. At this time, I would like to welcome everyone to the PureCycle Technologies second quarter 2025 corporate update conference call.

Speaker #3: All lines have been placed on mute to prevent any background noise. After the speakers remark, there will be a question and answer session. And if you would like to ask a question during this time, simply press star, then the number one on your telephone keypad.

Speaker #3: If you would like withdraw your question, press star one again. Thank you. I would now like to turn the call over to Eric, DeNatale, Director of Investor Relations.

Speaker #3: Please go head, sir.

Speaker #4: Thank you, Carrie. Welcome to PureCycle Technologies second quarter 2025 corporate update conference call. I am Eric DeNatale, Director of Investor Relations for PureCycle, and joining me on the call today are Dustin Olson, our Chief Executive Officer, and Jaime Vasquez, our Chief Financial Officer.

Speaker #4: This evening, we will be highlighting our corporate developments for the second quarter 2025. The presentation will be going through on this call can also be found on the Investor tab at our website at PureCycle.com.

Speaker #4: Many of the statements made today will be forward-looking and based on management's beliefs and assumptions, and information currently available to management at this time.

Speaker #4: The 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 and forward-looking statements that can be found at the end of our second quarter of 2025 corporate update press release filed this afternoon.

Speaker #4: As well as in other reports on file with the SEC that provide 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.

Speaker #4: Our remarks today may also include preliminary non-GAAP estimates and are subject to risks and uncertainties, including, among other things, changes in connection with quarter-end and year-end adjustments.

Speaker #4: Any variation between PureCycle's actual results and the preliminary financial data set forth herein may be material. You're welcome to follow along with our slide deck or join us by phone.

Speaker #4: You can access it at any time at PureCycle.com. We are excited to share updates from the previous quarter with you. With that, I will now turn it to Dustin Olson, PureCycle's Chief Executive Officer.

Speaker #5: All right. Thank you, Eric. Thanks for joining the call today. You may notice that my voice is a bit shot. As I'm still recovering from a little summer cold, so forgive me ahead of time if I've got to go on mute for a moment or two for a cough.

Speaker #5: The second quarter was a meaningful period for PureCycle as it marked the shift towards growth. We updated the market approximately six weeks ago with a successful capital raise in late June, and the announcement of our global growth plans in Asia, Europe, and the US.

Speaker #5: This expansion is planned to bring roughly $1 billion pounds of installed capacity to the market by 2030. The reaction from our customers has been very positive, especially from the larger global brands looking for an opportunity to truly move the needle for their brand's global sustainability goals.

Speaker #5: This is a transformative moment, and we're thrilled to bring our product to world. I want thank our team for their hard work on this and, in particular, thank our new and existing capital partners that participated in the $300 million capital raise.

Speaker #5: We also continue to see progress on the commercial front as our pipeline advanced. The acceptance of our material continues to strengthen across numerous applications.

Speaker #5: Our ability to deliver high volumes of FDA and PCR resin with a wide range of material properties through compounding is differential. We now have numerous applications in post-trial negotiations and the backlog of trials continues to build.

Speaker #5: We're currently have 17 customer applications that are in post-trial discussions with continued plans for second half revenue ramp as these discussions convert into sales.

Speaker #5: Also notable is that the commercial discussions focus not only on deliveries in 2025, but also capacity reservation for '26. This is a fundamentally different dialogue when compared to before our successful capital raise.

Speaker #5: Many of applications are with brands and products that I expect all of you are familiar with. Coffee lids, yogurt cups, spouts, container lids, pins, snack bags, tapes, storage totes.

Speaker #5: Are only a few of the applications that we're cited to bring to the market. We also signed our first major commercial agreement with Emerald in this quarter for approximately $5 million pounds of Pure5 resin, which starts to convert into revenue in Q3.

Speaker #5: Fiber was one of those first major technical compounding achievements and we're excited to see those early wins accelerating into increased customer interest. The film market is an enormous opportunity for PureCycle and one that we have been talking about in recent quarters.

Speaker #5: Remember, there isn't a reliable, high-quality, post-consumer recycled FDA resin that can be used at scale in chip bags, candy bars, and other film applications.

Speaker #5: We originally expected trial success in the second half of 2025, but I'm very proud to announce that we achieved our first successful trial in film earlier than expected.

Speaker #5: And have planned to test two additional larger scale trials in August, one with Bruckner and another with a large global converter. And a third in September.

Speaker #5: We believe that this is a very large underserved market in both for both FDA and non-FDA applications and are hearing indications of demand from film players for '26 even before the product has been fully tested.

Speaker #5: Operationally, the story continues to be one steady progress at IronTech. As we noted on the capital raise update six weeks ago, Q2 was a strong quarter for our team where we achieved on-stream times approaching 90% in both April and May.

Speaker #5: We also produced pellets for $65 consecutive days. In early June, we took a small planned outage prepare for the second half of 2025 commercial ramp to implement a couple of small reliability improvement projects.

Speaker #5: We also successfully completed an initial test run at upper limits of the facility with a rate test at 14,000 pounds per hour on August 1st.

Speaker #5: We plan to continue testing the plant at these high levels throughout August and September to map out the requirements at these rates and also raise rates to higher and higher levels in Q3, Q4 to meet the commercial funnel requirements.

Speaker #5: Overall, the progress that we're seeing with the trial pipeline as well as what we're hearing in our post-trial brand discussions is positive and will lead to increased branded sales in the second half of year.

Speaker #5: More importantly, the indications of demand that we are hearing from our ustomers are strong. It ives us increased belief that sales will continue ramp up, leading to and through 2026.

Speaker #5: The unit economics on ur branded contracts and what we are seeing with our current discussions continues to support the unit economics we previously laid out to the market.

Speaker #5: When we announced our capital raise about six weeks ago, we gave a lot of detail to the market regarding our global growth plans. I ink it's important to take a step back and reiterate why the time for growth is now.

Speaker #5: First, the operational reliability at IronTech has meaningfully improved over the past year. Which was exemplified by on-stream time approaching 90% in both April and May.

Speaker #5: And 65 days of consecutive pellet production. Secondly, the momentum in our commercial trials has continued and that and this gives us increased confidence that demand for recycled polypropylene far exceeds our ability to supply the market.

Speaker #5: Look, when it comes to growth, I couldn't be more excited about Thailand. We shifted to Thailand because it allows the fastest speed to market while also minimizing the incremental capital outflow.

Speaker #5: This project has a high ROIC, gives direct access to Southeast Asia, and ensures Procter & Gamble exclusivity for Asia. The brownfield site that we have access to in Raong has an existing infrastructure including power, steam, roads, warehousing, fire, compounding assets, a deep water port, and equally if not more important, a deep bench of very talented project professionals.

Speaker #5: This combined with the low-cost nature of Thailand should allow us to bring the project to completion for somewhere between $1.50 and $1.75 CapEx per pound.

Speaker #5: This is inclusive of roughly $87 million in long lead equipment that we've ready purchased which further reduces the incremental cash outflow. We continue expect that we should have this facility operational in the second half of '27.

Speaker #5: A portion of the capital raise will also be allocated to completing the permitting process in Antwerp and also finalizing the Gen2 design for a $300 million plus pound production unit for future facilities.

Speaker #5: We continue to expect that permitting for Antwerp will be completed in the second half of '26 and the overall project should be completed in '28.

Speaker #5: Design work for the larger lines should be completed in the first half of '26 which will then kick off construction of our Gen2 line which is expected to complete in 2029.

Speaker #5: Since the most recent update we continue to progress plan, our growth plan, and have already selected our EPCM partners for Thailand and Antwerp. We are measuring the staffing needs for both projects, carefully, as we scale the future designs and integrate IronTech learnings into the process.

Speaker #5: This should lead to lower operating costs for each new line and the combination of lower CapEx per pound and lower OpEx per pound should result in very attractive capital returns and positive results for project financing.

Speaker #5: We continue to make progress with our commercial trials and are now in post-trial discussions for 17 customer applications with numerous brands and converters. These consist of applications for many large global brands.

Speaker #5: This is consistent with prior guidance where the first half of the year would be about application trials and the second half would be about working to convert those trials into sales and that's what we're starting to see.

Speaker #5: While it's difficult to precisely time the trial-to-sales pipeline, we are on track with prior disclosures and are very happy with our trial win percentage.

Speaker #5: The brands are excited about our product and we are moving into the final gating items for many the 2025 ramp, but it's also very good timing as they plan for 2026 volume commitments.

Speaker #5: The brands are excited about our product and we are moving into the final gating items for many the 2025 ramp, but it's also very good timing as they plan for applications.

Speaker #5: large well-known consumer brands with meaningful volume requests north of $5 million pounds per year, with This is good for the intent to grow thereafter.

Speaker #5: In other major brands are inquiring about reservations starting at volumes greater than that. When we look at our ales funnel, I think it's important to look at a couple of different metrics.

Speaker #5: First, does the funnel continue to progress and build? And secondly, how did the attrition rates look? On both of these metrics, we see incredible success.

Speaker #5: Last quarter, we had a meaningful number of active trials convert to post-trial discussions. Many pending trials convert to active trials, and the backlog of future trials continued to grow as well.

Speaker #5: Last quarter, we reported 88 active and pending trials with three that were post-trial, now we have 96 active and pending trial, and 17 are post-trial.

Speaker #5: Additionally, we have we have only had one trial drop out of the funnel. So the attrition rates have been incredibly low. This speaks to our ability to meet the customer requirements as well as how much our customers want a quality recycled product.

Speaker #5: We're ing a couple of new terms, but one of them is serviceable, addressable market. The serviceable, addressable market of our sales funnel is currently 4.8 billion pounds.

Speaker #5: And while that's an enormous number, that continues to build quarter over quarter, it's still only a fraction of the $200 billion pound global market.

Speaker #5: Last quarter, we talked a lot about the excitement we have regarding our ability make film. Which is an underserved market for recycled material. Since the last update, we had since the last update, we had our first industrial trial success in film.

Speaker #5: Which positions us well sorry, positions us well for commercial success going forward. I was actually at a facility a while ago and got to see the equipment running.

Speaker #5: And I have to say, it was just awesome. These moments fuel our team and give everyone confidence in our products that we're building. I remain very bullish on our potential for non-FDA and FDA BOPP film.

Speaker #5: We're ing as fast as we can to qualify film across numerous customers. By working our product into their highly congested production schedules for industrial trials.

Speaker #5: We have two large-scale BOPP trials scheduled for August, one with our partner Bruckner, which we mentioned last quarter, and another with a large converter, a large global converter.

Speaker #5: And a third scheduled for September in the US. The conversations with brand owners have increased in film, even in front of these trials. And some have even begun communicate interest in securing volume reservations for 2026 and beyond.

Speaker #5: The overall backlog of potential trials also has continued to increase since last quarter, and after our successful capital raise, many brand owners are inquiring about capacity commitments from our facilities beyond IronTech.

Speaker #5: I would like to pause for a moment and highlight this point. Global brands have they manage massive systems. In extremely competitive markets, to do so successfully, they require high levels of efficiency and consistency from everyone that touches their system.

Speaker #5: And like all of us, they are judicious with where they spend their time. The fact that we can deliver a no-compromise, drop-in replacement product with FDA and PCR certifications and that we have significant volume pipeline planned that solves major regulatory consumer and investor-related demands is awesome.

Speaker #5: We provide the value proposition that they need. In July, we announced a partnership with Emerald Carpets. Who is one of the largest installers of trade show carpets in the country?

Speaker #5: The large-scale commercial supply agreement that we have with them is for approximately $5 million pounds per year of Pure5 choice resin beginning this quarter.

Speaker #5: Emerald consumes roughly $50 million pounds of polypropylene per year, so there's a lot of room for us to grow the partnership, and I can tell you both parties are interested in doing so.

Speaker #5: There is also a unique opportunity with Emerald to create true circularity over time. And I give them a lot of credit for really chasing this activity in the market.

Speaker #5: With true circularity, we can take their unused carpets and use them as feedstock to produce recycled resin for their future demand. This is an exciting development and one that we hope to iterate with other commercial partners over time.

Speaker #5: The success with Emerald is also a good reminder of the regulatory pressures that are beginning to come into play for consumers of polypropylene. California recently mandated 5% recycled content for all their carpets sold in the state, with the stated goal of increasing that over time.

Speaker #5: PureCycle is a solution for California, and other states that that decide to follow suit. During the second quarter, PureCycle earned green circles recycled content certification for nearly 30 grades of PureCycle resin and co-products one and two.

Speaker #5: This is an independent certification verifying that greater than 90% of our feed comes from qualified PCR feedstocks. Customers just want to know that their product is truly coming from post-consumer curbside.

Speaker #5: And they know it's extremely difficult to procure high-quality final product made at scale from PCR feed. We hear this in the market all of the time, and we know this is a differential value proposition for PureCycle.

Speaker #5: The reality is that PureCycle is processing PCR feedstock day in and day out at IronTech, and we're happy to get this certification to add to our docket of successful certifications.

Speaker #5: Overall, we've made tremendous progress with our commercial pipeline, and we continue to expect a commercial ramp in both Q3 and Q4. With increasing visibility on potential demand from our ustomers for 2026 and beyond.

Speaker #5: We recently received board approval to initiate a project to bring compounding operations to IronTech by the end of the year. This is a great project.

Speaker #5: This is expected to increase our on-site compounding capacity to approximately 100 million pounds and will be primarily focused on film, thermoforming, and injection molding applications.

Speaker #5: This decision came in large part due to our commercial conversations. First, it's becoming clearer every day that our customers want compounded material across multiple application types, and grades, and therefore our third-party our existing third-party capacity would be insufficient to meet their needs.

Speaker #5: Secondly, as we progress with larger blue-chip companies, their volume indications require higher volumes and therefore require rail. Which can be more cost-effectively and more reliably managed through compounding at IronTech.

Speaker #5: This expansion will not only help to improve our logistics and our ility to serve our customer needs, but we believe it will realize cost savings and excessive $4 million per year and improve the overall quality management activities.

Speaker #5: The expected payback on this project is less than two years. The announcement today on our compounding expansion is a reflection of the commercial progress on specific trials and speaks to the confidence that we see in the demand ramp to come.

Speaker #5: As previously disclosed, we achieved on-stream times approaching 90% in both April and May before taking a brief outage in June. The IronTech facility has been back up and is ramping into higher production levels for Q3.

Speaker #5: We initiated a number of rate tests and successfully ran at levels at $14,000 pounds per hour, nearing nameplate rates on the 1st of August.

Speaker #5: Like with all rate tests, we moved to a new level and then we evaluate product quality reliability and operability at these levels. And then we do it over again; we optimize, we learn, and we approve along the way.

Speaker #5: Until it becomes the new norm for operations. We've been doing this successfully for two years now. I can't say enough of how proud I am of our operational successes.

Speaker #5: This is not a game that's won with a single home run. It takes practice, diligence, some occasional strikeouts, and a series of endless singles.

Speaker #5: These accomplishments position us well for when we ramp our production in conjunction with the commercial ramp. Overall, the second quarter marked an important inflection point for PureCycle.

Speaker #5: We successfully raised $300 million in capital which should allow us to begin our growth beyond IronTech and bring our Pure5 resin to the global marketplace.

Speaker #5: We have structured our growth plans in a manner that we believe creates the best balance between speed to market, cost, and overall returns. As we laid out in late June, we continue to see a path of roughly a billion pounds of installed capacity by the end of 2029.

Speaker #5: And should provide roughly $600 million of run rate EBITDA. We have successfully advanced our commercial trials and are ramping revenue at IronTech. We are excited for this next stage of the journey, and I'm increasingly I'm incredibly excited about the recent developments and more confident than ever in what the future holds for PureCycle.

Speaker #5: With that, I'll turn over the I'll turn over to Jaime for the financial presentation.

Speaker #6: Thank you, Dustin. And as we mentioned, we had a successful capital raise in June, which significantly bolstered our liquidity position. As you see on slide 12, we ended the quarter with $298 million of cash on the balance sheet, including $284 million of unrestricted cash.

Speaker #6: Earlier in the quarter, we also sold $11.9 million face value of our venue bonds at a price $88 for net proceeds of $10.5 million.

Speaker #6: And we still hold about $87 million of revenue bonds that we plan to sell in the future to further support our growth initiatives. Our operations and corporate spend was around $39 million, which was slightly higher than the $37 million spent in the previous quarter.

Speaker #6: We anticipate that our operational spend will remain at similar levels adjusted for increased spend associated with the ramp-up of commercial sales. Additionally, we expect growth capital spend to slowly increase over the next several quarters, and we are working on detailed project plans and will provide more insight once the spend curves associated with those plans are finalized.

Speaker #6: We would now like to turn the call back to Carrie. Who will open the call for questions?

Speaker #7: At this time, I would like to remind everyone if you would ike to ask a question, please press star, then the number one on your telephone keypad.

Speaker #7: Again, for any estions or comments, please press star one now. Your first question will come from Andres Shepard with Cancer Fitzgerald.

Speaker #8: Okay.

Speaker #9: Hey, everyone. Hey, Dustin. Hey, Jaime. Congratulations on the quarter and all the great progress. Dustin, you touched on this a little bit on the , but I'm wondering, can you give us maybe a bit more detail on the growth plans?

Speaker #9: You know, how you have progressed them since you last updated the market? Thanks.

Speaker #8: Yeah. I mean, thanks, Andres. Appreciate the compliment. Look, I mean, we're just we're just really excited to to get moving with growth. I mean, we've we've we've talked effectively three growth projects: Thailand, Antwerp, and then our Gen2 facilities.

Speaker #8: And you know we're just really well positioned. We've done a lot of work over the last several years to secure good sites that are ready go.

Speaker #8: And now we've got IronTech in a place where it's going to support that activity and give us the confidence to move forward with with these projects.

Speaker #8: So if you look Thailand, in particular, I mean, look, I mean, this is a this is a great facility. It's an integrated polypropylene producer.

Speaker #8: They've got compounding. It's a it's a it's a relatively low-cost install for this project because they've got much of the infrastructure already available to us.

Speaker #8: So we can drop our purification facility right in and get ready to go. So that leads to a high ROIC. A good cash generation straight out of the gate.

Speaker #8: And and then and then everything else is right. I mean, we've got you ow we've got good infrastructure. We've got good roads. We've got good steam.

Speaker #8: We've got a deep port access. And look, the deep the deep port access is really important Andres. If ou if you think about if you just take step back and you think about where is plastic pollution the biggest problem?

Speaker #8: Typically, lean toward Asia because the waste handling facilities just aren't as developed as the rest of the world. And so if you look at some of these great groups around the world like the Alliance in Plastic Waste and and other notable organizations, they're utting a lot of effort and a lot of money into fixing that problem.

Speaker #8: And so what that means for us is that over the next 10, 20, 30 years, we expect there to be just an enormous amount of new capacity added to collect, sort, and process waste which means that our facilities in Thailand are going to be perfectly positioned to purify and endless growth of supply of feed from that region.

Speaker #8: And so I'm super excited about Thailand. I just think it's going to be a it's going to be a flagship big mega facility for us into the future.

Speaker #8: And and and we're just starting off now, but but we're starting off the right way. The other notable point with with Thailand is, look, and I mentioned it in my in my you know starting comments, but we have an incredible team and partner with IRPC.

Speaker #8: Not only do they have the right facility, they have the right people. And so when it comes to building the project, they've got loads of experience.

Speaker #8: I mean, I mean decades of experience at each critical position in order to do this successfully. And then on the operations side, they run a really good facility.

Speaker #8: I think that the coordination between the two companies on staffing levels and supporting these projects is going to be really strong. And we've already started to do that.

Speaker #8: I mean, this team is already getting started, learning our project, and and and helping us to find ways to deliver it on time and on cost.

Speaker #8: When it comes the other two costs or the other two projects, Andres, Antwerp is in the heart of the the the recycling universe. I mean, it's right in the middle of it.

Speaker #8: Europe is a leader when it comes to demand for recycling capacity, and we are going to be a strong supplier of good quality product there.

Speaker #8: We've got to through the permitting process. That's it's it's different in every region, but with with with Europe, you've really got to nail down the engineering, submit for permit, wait, and then start building.

Speaker #8: So that's why it's a bit delayed. But but we're very optimistic about the returns and acceptance in that region. And then lastly, it's Gen2.

Speaker #8: And look, this is this is where like we really start to nod to the future, Andres. I an, Gen2 and and we don't know the size of the plant yet.

Speaker #8: We're ing the engineering there to decide. If we want go 300 or bigger, annualized capacity, but but this facility is going to have an incredible cost structure.

Speaker #8: And so those those customers that that that partner with us early and and get started early, we're we're going to have a lot of volume for them at competitive pricing.

Speaker #8: And and I believe that this is going to lead to not only competitive operating costs but also extremely competitive CapEx facilities. And and so look, our our goal is to get PureCycle projects to be competitive with Virgin, Polypropylene facilities, so that in the future when when Polypropylene starts to grow, they will look at a PureCycle facility as opposed to a new Virgin facility.

Speaker #8: Great question. Thank you for that.

Speaker #9: No, thank you, Dustin, for that very elaborate answer. Really, really appreciate all the color. Maybe one more for me. I think the you know, the big question that I think most of us probably have on the call, and so I'm wondering if you can maybe give us a bit more granularity on the 17 applications that you disclosed are post-trial.

Speaker #9: You know, how should we think the the gating items here before commercialization? And maybe how would you characterize the likelihood of success? Thank you.

Speaker #8: Yeah. So look, I mean, first of all, we've continued to invest in ur commercial team. I think that we're building a first-class team. We are starting to formalize the process for valuating the funnel.

Speaker #8: You know, getting very strategic for how we look at different customer segments. And really starting to distill into which applications are going to ake the most sense.

Speaker #8: And so I'm really proud of the team for the work that they've done there. I mean, look, the way to look the 17 trials is it's working.

Speaker #8: I mean, look, if you if you e a step back 12 months ago, people were were wondering if if the product would even work.

Speaker #8: And now we're talking post-trial success conversations. Like that's a that's a that's a substantially different place than we were a year ago. And so right out of the gate, the first the first take should be, "Oh, okay.

Speaker #8: The tech Customers are using it. Customers are approving it from a trial perspective. And now they're in you ow further conversations." And that's very positive, okay?

Speaker #8: The other thing that you should take from that from that table is look at the different lanes. I mean, we can literally play in just about every major lane in the market.

Speaker #8: And so then getting trial success in each of these lanes will just give us flexibility to go where it makes the most sense. And and and and we'll be doing that, and you'll be seeing that over the coming months.

Speaker #8: When it es to conversion to sales, I mean, it's happening, okay? Look, a lot of the a lot of the 17 successful trials are in late stage discussions.

Speaker #8: A lot of brands are excited to get moving, and they're working through the supply chain, and the inventory management procedures. The logistics. Do I do I receive it by box?

Speaker #8: Do I works. it by rail? All of these things happen. How do I bring PureCycle in and then also work out the incumbent? These things take time.

Speaker #8: And and and the technical success we're having is leading the way to a good discussions in all those regions. And and I and I feel very good about the ramp-up that we've discussed in the past.

Speaker #8: Look, we we we've talked extensively about what we expect to get in terms of the ramp in the second half. And we still feel good about it, okay?

Speaker #8: Are there going be movements here and there and some customers in and replacing others? Maybe. Are we going to have some trials that we emphasize more than others?

Speaker #8: Maybe. But at the end of the day, we are starting to ramp right now, and we still feel good about the ramp that 've discussed in the past.

Speaker #9: Excellent. Thank you so much, Dustin. Really appreciate . And congrats again on all the progress. I'll pass it on. Thank you.

Speaker #8: Thanks, Andres.

Speaker #7: Your next question will come from Hassan Ahmed with Enblatt Global.

Speaker #10: Oh, no, Dustin. You know, things seem to be progressing along extremely well. You know, my first question is around commercialization, right? A couple of things that ou said on the call intrigued me a lot.

Speaker #10: You know, you talked about the serviceable, addressable market being around $12.8 billion. And you know, like you rightly said, for an industry that's, you know, call it a $185, $190 billion pounds, that's just scratching the surface.

Speaker #10: So I guess my question is that, you ow, as you inked this sort of commercial agreement with Emerald, $5 million pounds, you know, their needs are 50.

Speaker #10: I mean, how are you guys thinking about parceling the sort of production out? Meaning, you know, the pace with which things are going and what you're alluding to, I mean, you'd be able to sign these commercial agreements with a variety of guys, it seems.

Speaker #10: I mean, you know, the demand is there. They're going to sort of scoop this up, right? So how is your commercial team thinking about picking and choosing the right sort of, you know, customers?

Speaker #10: How are you thinking about, you know, what it entails to actually get the best deals, right? And how to sort of maybe even grow in pricing, right?

Speaker #10: Because I mean, it's a very unique sort of place to be in commodity chemical land where you know the demand so exceeds what you're producing that in theory, I mean, pricing power is with you.

Speaker #8: Yeah. I mean, that's a at question. So I mean, in a ay, it's a it's a little bit about the the commoditization of polypropylene.

Speaker #8: I mean, we are not commodity polypropylene. We are a specialty we are a product. It's in short supply. And there's a lot of demand for it in the market.

Speaker #8: I think that when you when you ink about the overall, you know, segment choices for us, I think it's a bit it goes in a couple of different ways.

Speaker #8: First of all, with IronTech, I mean, our goal is to show that we can we can make it in all of these applications, okay?

Speaker #8: want to be able to show the automotive sector that we can make a bumper and that our odor is good enough to go on the inside of a car.

Speaker #8: We want to the textile market that we can make fiber reliably both in single-strand, non-woven, staple, and it could go in a car's and a carpet.

Speaker #8: It could go into these high-reg areas like California for the 5%. We just want to show them it can work. And then the same thing with food-grade applications like dairy and yogurt and all these different things.

Speaker #8: These are these are highly technical applications. You don't want the yogurt to break when it drops on the floor, so you got to add some impact modifier to make sure it's got the right quality so that it won't break.

Speaker #8: And all of these things are questions that our customers ask, and they want to know that it works, okay? So first off, we want to show that technically we can do it.

Speaker #8: And I ink that and and and so many different ways we are we are we are doing really well there. Now, when it comes to how much do you deliver to each segment, look, I mean, I would tell you that I think that there is a high-valued customer willing to pay high prices in every single segment.

Speaker #8: Now, depending on the segment, it may not be as deep as another. For sure, consumer-facing FDA grades it's a deeper pool than in some of the other segments.

Speaker #8: But still, there are deep segments there are deep value customers in some of these segments that we can target. So I think that we can really work to manage the overall margin across each segment.

Speaker #8: And then we will choose which segment to dive into to to to maximize the the the the margin at volume, okay? When when it comes to when it comes to IronTech, I want to highlight a really important point that we're that we're basically announcing for the first time.

Speaker #8: And that is the in-house compounding of material. Look, when you recycle material, it's a fundamentally different feedstock, and it needs fundamental work to get it ready for the customer.

Speaker #8: Sometimes you need to add whitening. Sometimes you ed to add impact so it doesn't break. Sometimes you need to add tensile strength so that the fiber doesn't break.

Speaker #8: Sometimes ou need to change the MFI. Sometimes you ed to add a different kind of virgin material. We have all of these flexibilities. And and at we're learning from the customers is, dang, they like us.

Speaker #8: They like the brand. They like the circularity. They like what we're ing. And if we can make a product that really meets what they need and it can drop in, then we win.

Speaker #8: And with this compounding solution, look, this is not replacing the third-party compounding that we've ked about in the past. This is just as, you know, as as an increment.

Speaker #8: And to be able to do this at scale with rail, with big brands that have big demand, it's it's awesome. And so I I just think that we're in a great place on.

Speaker #8: We'll figure out how to maximize margins so we can maximize value to shareholder. And we're ing that by creating an incredible slate of optionality through our funnel.

Speaker #8: And we're going to get better and better quarter over quarter at defining the funnel, adding to the funnel, and then choosing which areas we focus on.

Speaker #8: Great question.

Speaker #10: No, that's that's that's you know phenomenal and unique situation to be in. And you know sort of question around where you just left off.

Speaker #10: I mean, that the compounding opportunity seems very interesting as well. I mean, it's almost like on the pricing side, you could get batch economics for a bulk chemical, right?

Speaker #10: So so my question is, you know, you've initiated that $100 million pound sort of project as you called it for a compounding. You know, could you give us a sense of A, how long this is going to take?

Speaker #10: And B, the capital outlay? And and part and parcel with that C, I guess, would this be something that you would consider at the other sort of growth projects that you're considering, you know, be it out in Asia or Europe or the like?

Speaker #10: I mean, is is is this going to be the model?

Speaker #8: Yeah. I mean, let's say it's the first questions first. We expect to have the compounding project done by the end of the year with startup in Q1.

Speaker #8: We do not expect it to impact our compounding operations at the third party. And if we if we did get pinched and we needed compounding capacity, we have other alternative that we can that we can turn on to pull in additional capacity.

Speaker #8: It'll come at a fee, but we have that as an option developed right now. So it'll it uld be on by the end of the year.

Speaker #8: When when it comes to whether or not this will be part of the future discussions, look, I I think so. I you know 've got to evaluate this.

Speaker #8: We've to see how it plays into all of projects. But the reality is that the moment that we started to turn on compounding about a year ago, we really started to find great traction and and and we found great traction with our customers, and they started to see us with a different lens of reliability.

Speaker #8: Instead of them having to make adjustments to the recycle material coming in, we can make them on our site and make easier for them.

Speaker #8: And I and I think they love it. And and look, when it comes to thin wall injection, look, the the plastic industry has been thin walling plastic applications for decades.

Speaker #8: More and more every year, we are working to minimize the amount of plastic used. That requires higher performance polymers. We're going to be able to do that with our compounding operations because we have such a clean product.

Speaker #8: Coming out of purification. When it comes to thermoforming, it's very difficult to get MFIs less than 10. We can do that. And then when it comes to film, you need less than 10 MFI and also highly pure product.

Speaker #8: Look, we we are in a position that's just truly unique. And we're seeing successes. And I I I think you're right. That the successes that we're seeing in these applications in IronTech are going to translate to potentially the same customers in different regions.

Speaker #8: I mean, look, we we have a lot of customers that are saying, "We're a al brand. We make the same thing around the world.

Speaker #8: We wanted to look the same. Smell the same. Process the same. We want it to be the same. And I just don't think there are many recycle solutions that can say that they're going to be able to provide a global solution that enables their customers to have a no-compromise, kind of lower anxiety changeover to recycled sustainability products.

Speaker #8: I think we're we're truly unique there.

Speaker #10: Perfect. Thank you so much, Dustin.

Speaker #8: Thanks, Hassan.

Speaker #7: Your next question will come from Eric Stein with Craig Hallam.

Speaker #11: Hey, this is Luke on for Eric. I appreciate you taking the question. So first here, capacity obviously seems to be in high demand at IronTech right now, which could give you the luxury of being selective.

Speaker #11: So, how are you thinking about customer diversification playing out? Do you expect to be servicing maybe a select few customers at higher volumes at IronTech, or do you think it's realistic to plan on converting a greater portion of that trial pipeline into maybe lower volume commercial contracts?

Speaker #8: Yeah. So look, I I think it's a great estion. I think to a certain extent, those customers that move fastest are going to have the first bite at apple.

Speaker #8: That's first. And so we're starting to see a lot of capacity reservation cleanup in 2026. I think there's a bit of a rush to get a piece of the pie.

Speaker #8: That's good for us. I also think that there will be some segments that are naturally deeper with margin than others. I think FDA, I think FDA film, and I think some of the other consumer-facing brands will obviously be there.

Speaker #8: But but don't lose sight of some of the other big brands. I mean, look, automotive has a major regulation kind of waterfall come in their way.

Speaker #8: In '28 and '30. And in order for them to be successful there, they have to start now. And so I I just think that in every single segment, there are going to be pieces of that segment that see enough value in the sustainability in order to pull and still create good margin across the board.

Speaker #11: Right. That's helpful. So I guess just for our second question here, switching gears a little bit to the Gen2 facilities, can you maybe talk about some of the challenges you anticipate of scaling to a $300 million plus pound facility?

Speaker #11: Obviously, you've learned a lot from IronTech and are starting from scratch. But what are some of the major areas to focus just to ensure execution?

Speaker #11: Thanks.

Speaker #8: Yeah. Well, look, I mean, it is a fundamentally different place where we are today than where we were when we started building and designing IronTech.

Speaker #8: Today, we've seen a commercial-scale run. We know how it works. We know its quirks. We know what we can do to make even IronTech better on a day-to-day basis.

Speaker #8: And we're ing to implement that into the next two lines and Antwerp and Thailand. So out of the gate, the reliability of those other lines will be improved.

Speaker #8: When it comes to a fundamental understanding of our process, we are extremely deep, okay? We have learned a lot. Through the commercialization IronTech, but also through the acceleration of learning and development research and development out of Durham.

Speaker #8: I mean, Durham is an incredibly valuable facility for us. Our R&D team has grown and gotten better and better year over year. And it's because of the fundamental research.

Speaker #8: I mean, I mean, there's there's qualitative research, and there's fundamental research. We have done fundamental research on our process to understand how the molecule behaves at different regimes.

Speaker #8: And that gives us the confidence to scale it up up into much, much higher levels. And I will tell you that our team is extremely confident in our ability to scale different pieces of the unit operation to get to a much larger scale.

Speaker #8: And quite frankly, that's why we haven't decided how big of a plant we want to make. It's open as to what that number will be, and that'll ultimately come down to a cost optimization decision for us in the next say 6 to 12 months.

Speaker #11: Got it. That color is very helpful. Thank you. I'll turn it over.

Speaker #7: Your next question will come from Jim Schoen with TD Fallon.

Speaker #11: Hey, guys. Thanks for taking my questions. Can you just update us on what the 2H ramp actually looks like now? I mean, does Q3 look like Q2, and then is Q4 significantly better?

Speaker #11: And then is the I think in the in the past, I think you talked about EBITDA break-even for IronTech in the third quarter and then at the corporate level being EBITDA break-even I believe late Q4, early Q1.

Speaker #11: Is that is that target still on track?

Speaker #8: Yeah. That's a good that's a good clarification question, Jim. I I appreciate that. Now, when we talked in the last quarter, I think that we disclosed you know 12 weeks ago or so that we expected Q1 and Q2 to be consistent.

Speaker #8: And and and largely they are. I mean, 2 is a a small increase over Q1. But effectively the same level. We anticipated that and expected it.

Speaker #8: And then when it comes to Q3 and Q4, we see ramp in both quarters, okay? We're already seeing higher revenue numbers in Q3. Then what we did in as far as run rate, then what did in Q2, we expect that to continue.

Speaker #8: With respect to the exiting Q3, what we said is that we believe that we could exit Q3 at the $4 million per month revenue level.

Speaker #8: I think that that still makes sense. You know, we've done a lot of work to continue to minimize cost. I mentioned that in terms of the inline compounding.

How does it perform? And how can we emulate that through our compounding operation. And so, there's a, there's always a lot of back and forth and sometimes that can take longer than expected. I mean look, I mean, sometimes we, we get the compounding recipe, perfect, out of the gate. And it's like Drop in day. 1, awesome, go. And other times, it takes a couple of different trials to get there. We, we certainly experienced that with

Fiber.

Um,

With respect to push back. Like I mean there's there there's there's a lot of discussions and and I think that I would boil down most of it.

To bureaucracy.

Okay, each bureaucracy and comfort level.

Each company and each brand, especially well established Global brands that have been around forever. I mean, they're, they're they're calling card for success is doing it. Consistently and reliably. And so, they've just got a whole host of requirements to move into. Um,

To that. You have to move through before you get to, to get to the sales point. So that's part of it. And the bureaucracy there is is is very real. I mean, we're clicking through a lot of these. The green circle is very important to the FDA is very important. The compounding recipe is very important. The consistency is very important, like even things, like getting the compounding on site is important because when they think about sending the material to a third party and handling it multiple times, they're concerned about that. Because it may not be as reliable from a quality perspective, as it would be, if it were handled all in-house without as many turnovers. So, all of that has been part of the discussion. Um, and then at the end of the day, the brand has to make a decision. Do I want this product to meet my sustainability goals? Will it help?

With invoicing better with inventory management and and we're making progress on all those fronts. So I I I wouldn't look at it like major push back anywhere. I would look at it like a funnel that is filling up really fast. There's a lot of ways behind us in terms of new volume and New Opportunities, and new applications. And then and then the customers that are coming through the end of the funnel, you know. They're, they're, they're getting much more comfortable with our product and excited about what this can mean for their operation.

Okay, that's great. And then, any goals or targets for orders in Q3 or the back half or anything like that?

So look, I mean what what what I think that goes back to your first question on kind of what is our Revenue expectation and the uh, the orders from uh, finished products uh, should be consistent with what we're looking at from a revenue ramp perspective.

Thank you very much.

Your final question will come from Jeffrey Campbell with Seaport research partner.

Thanks for taking my call and really exciting progress. Um,

First the circular Supply that you noted with Emerald is certainly meaningful, but separately looking at recent feedback data. We've seen evidence and mechanical recyclers, have been increasing uptake of PPE feed stock, which we assume.

Is largely downsized.

Is this a competitive concern for PCT, or can you navigate this as you move to the increased volumes that you've been talking about?

Um, so let's, let's start with Emerald. Uh, Emerald is is great. I mean, 1, it's a, it's a new

Customer with real Demand with a unique value, proposition to their Market. Um, and an opportunity to create true circularity, and and circularity is the thing that everybody is looking for. And, and this is going to be, I think a shining example of that. And by the way, in the conference circuit, there are there, there's already a little bit of a buzz generating about our ability to serve that market and create circularity across the board. So I'm incredibly uh, optimistic about this and I think it's going to grow over time and and also like just just a, a shout out to the emerald team.

They're good people who are innovative and excited about moving forward, and I see them being, let's say, kindred spirits in this world of entrepreneurship and doing something new and exciting. I think that we're going to work really well together.

Yo you you you bring up a great question uh with respect to seed and mechanical Recycling and some of the uptake. I mean first of all I would tell you that

Um, there there's a lot of mechanical recyclers, if you look at it globally that are having trouble, uh, differentiating themselves in in an increasingly competitive feed stock environment. And so, you start to see some of, um, you start to see some of the players Fall Away, um, with respect to the competition in the US, look,

There's obviously going to be movements.

In the feed, stock market every day, depending on what's Happening. I think that at the end of the day, pure cycle makes a highly differential product that can go into a number of markets that mechanical recyclers can't touch. And I think that that will put us in a unique position where we ought to have a lot of feed stock power. And in order to let's say pay for the feed stock and still make great margin on the final product. The other thing, I I'd like to remind you of is um we really uh, especially for some of the longer term projects in Europe and in Thailand I mean and and also in the US we're we're leaning into what we call the feed stock Plus pricing model.

Which is effectively feed stock yield adjusted plus a marker. And so what that means is our customers recognize that feed is fundamentally different than oil

and that they need to be sensitive to the feed stock changes in order to have reliable Supply. And, and what that does for us, especially for the higher Brands is it allows us to effectively pass along the feed stock swings to our customer, uh, which I think additionally, gives us a good price and margin protection capability. Uh, and also puts us in a good competitive position with with mechanical the, the only reason that our customers are willing to do this is because of our product quality. Um, if we had a lower-end down cycle of product quality, I don't think that they'd be willing to eat that feed stock cost. But because we can get into FDA, we can get into some of these higher consumer-facing products we can get into the Bopp like nobody else can. I think it's a differential conversation that's going to be good for pure cycle.

Follow up on the circularity part. Is it reasonable to think that?

A circularity develops that this could actually be a less expensive, each stock to Source, because it would be presumably a much better qualified bead stock, rather than, you know, digging through giant piles and trying to sort everything out.

Yeah, look that's a great question. I mean, 1 of the things that this brings up is when you have a good partner then you have the opportunity to partner with them in smart innovative ways to help build the product. So it's more circular. And so there are things that we can do together with Emerald because we're we're, we're talking and we're communicating. And, and not only are we creating circular naturally. We're also building a product. That is more circular, that's awesome. Okay, that's awesome. And, and with respect to a value of feed stock. Yeah, I think that's an opportunity. I, I mean, I would tell you look, I don't, I don't know. Um, I don't know the entire carpet space or or specifically, I don't know what Emerald is doing with all of their uh, their their carpet right now necessarily but a lot of other carpet manufacturers.

Send this material to the landfill and so they pay to get rid of it. And so there's certainly going to be at least. I believe there will certainly be an opportunity.

To find an economic Optimum that works for both. I mean like cut their cost so it doesn't go to the landfill and cut our costs because the feed stock is lower. That's true partnership. And that's a good opportunity that you create when you go fully circular

And let me ask 1 final quick modeling question. Are you still thinking about a dollar 36 a pound is sort of an average price.

seemed to have the price of the

That feedstock. Plus, I'm wondering if that's changing any of those dynamics.

Yeah, I think I think that we still feel comfortable with the with with what we've said previously which is that dollar 366 that we announced a couple of years ago, ultimately that dollar 6 uh, led to an an Eva projection, or an EV expectation. And we're, we're keenly aware of that and managing it. I would tell you that as the feed, stock moves up and down. We see, we see those numbers move a little bit. Okay, on average, and quite frankly, um, it gets a little complicated when you start bringing compounding into the mix because the overall ASP might be a little bit low for the compound. But then when you, when you calculate it up for the per pound of PCT, it can be a bit better.

Um, but but generally speaking, I mean, we're still holding to the numbers that we've mentioned in the past. Uh, we still see great volume for the Branded products that we end up making. And, um, and I and I think that all the things that we're doing to cut costs out of the business, create good feed stock, flexibility and feed stock optionality as well as final product, optionality by getting it tested and qualified. And lots of different segments is going to put us in a really nice position to preserve the margin over the long run and and honestly, that's what we're focused on there. There's a whole lot of short-term Focus that people are interested in. So are we? We we pay a lot of attention to what's going to happen in this next quarter and the quarter after that and the quarter after that. But when you really pause for a moment helicopter up and look at the long Arc of pure cycle. I mean we feel extremely good about about our ability to serve the market and generate great value for the shareholders.

Great, I appreciate it.

Your next question will come from Jerry Sweeney with Roth Capital.

Hey Justin, thanks for sliding me in there at the end.

No problem, Jerry. How are you doing? Good, I'm doing great. Um, trying to do a little vacation, so multitasking. But you know, I wanted to take a slightly different tack. I understand all the trials with the pipeline and all that, and I think you kind of alluded to it earlier. But at some point, do you even narrow the aperture of some of, uh,

The markets you're going for and after, maybe delineate what's the best options, best areas, the best returns. You know, because a billion pounds is great in 2030, but, you know, at some point, do you actually start narrowing down where you want to sell some of those products to get the best optionality? In other words, maybe a little bit less is more and can actually speed things up. Have you discussed that at all internally from a strategic perspective?

Yeah, look, I definitely believe that we will find markets that we will focus on, and that'll ultimately be a long-term evaluation of the margin and earnings capability for PureCycle as to who we choose to partner with.

Um and for Ironton I think that it's a little bit more of a broad stroke because we're not only finding the specific Lane but we're also proving that we can walk in many different lanes and look I think that's important for a couple reasons 1. It gives us a great opportunity for Price Discovery across the different applications so we really get good insight into what that segment is willing to pay. But but quite frankly, when you're talking about building to a billion pounds, um you you've got to have a lot of lures in the, in the in the water in order to build up that pipeline demand and I think that the work that we're doing right now at Ironton, it is awesome for what it means for the future of the company. Because we'll be

Will be so many steps ahead.

When it comes to commercializing Thailand and to and to.

Yeah, that's fair. I took that I was just curious. And the second Thing 1 Thing that caught my ear, and I don't know if it's relevant or not, but the Thailand facility. Uh, I think you said it gives exclusivity to uh, practical gamble in Southeast Asia. Um, I don't know what that meant if it's important, but just curious, if you could elaborate on it,

Yeah, like we've disclosed this exactly. No, no. You got it, right? Yeah. We've disclosed this, our relationship with Proctor is very strong. We continue to work with them. By the way, we continue to progress, all these projects with Proctor and we're very excited about all of that. But um, but but 1 of the things in the license agreement, which I believe is public, is that, as you build capacity in the specific regions, it clicks off exclusivity for the life of the patents in those regions. And so as we build in Europe, and as we build in Asia, and as we've already built in North America, it gives us further and further exclusivity in the region. So that's a, that's another very important Point, uh, for uh, this expansion plan, is it really? Um, you know, prepares the path for the long term?

I got you. So what you're saying is by building a plan in Thailand,

Uh, gives you exclusivity on the technology. The original sort of base technology that you licensed for Procter & Gamble. Is that the way to read it? Yep, yeah, that's right. I was looking at something else—the opposite. They had some type of exclusivity on product or violence, but understood. Okay, perfect.

Thank you.

Yeah. Thanks Jerry.

And that concludes the Q&A portion of today's conference. I will now turn the call back over to CEO Dustin Olson for any closing remarks.

Look, thank you for, uh, bearing with me, my voice, and my summer cold for this call. It was just six weeks ago that we updated the market on the capital raise and gave updates on operations, commercial projects, and even today, just six weeks later, we've seen real, substantive progress. We're proud of that, PureCycle.

Working. Our tech is transformative, and we're distancing ourselves from the competition. Our operations and commercial plans are becoming clearer and are ramping up. Our growth plan is established and wildly exciting, and we are poised for a great decade. It's now time for us, employees, investors, and believers in PureCycle, to change the world on a grand scale and make history. Thank you all for your attention today. I look forward to talking to you again in a few weeks.

Thank you for your participation. This does include today's conference call.