PureCycle Technologies, Inc.

Good day, and thank you for standing by. Welcome to the PureCycle Technologies second quarter 2022 corporate update call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you need to press star 1-1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Charlie Place, Director of Investor Relations. Please go ahead.

Thank you, Victor. Welcome to PureCycle Technology's second quarter earnings update conference call. I'm Charlie Place, Director of Investor Relations for PureCycle, and joining me on the call today are Dustin Olson, our Chief Executive Officer, and Larry Soma, our Chief Financial Officer. This morning, we'll be highlighting our corporate developments for the second quarter. Presentation we will be going through can also be found on the Investor Relations page of our website at www.purecycle.com. 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. These 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 2022 corporate update press release and in our filed quarterly report on form 10Q filed yesterday, as well as our 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. Our remarks today may also include preliminary non-GAAP estimates and are subject to risks and uncertainties, including, among others, changes in connection with quarter-end and year-end adjustments. Any variation between the company's actual results and the preliminary financial data set forth herein may be material. You are welcome to follow along with our slide deck, or if joining us by phone, you can access it at any time on PureCycle.com. We are excited to share updates from the previous quarter with you. I will now turn the call over to Dustin Olson, PureCycle's Chief Executive Officer. Dustin?

Yeah, thanks, Charlie. Good morning, everyone. Thank you for joining us. I'm thrilled to be with you today for my first corporate update as CEO. First off, I want to thank Mike Autworth, our previous CEO, for his dedication over the past seven years, taking PureCycle from an early concept to a publicly traded company. I'm excited and honored for the opportunity to lead PureCycle during this important time as we transition our operating and global expansion growth strategy. Our flagship Ironton facility remains on track and continue to expect pellets by year end. The first phase of our Augusta purification facility is planned to ramp to full capacity in 2024, and our global expansion efforts continue to advance in South Korea, Japan, and Europe. Our Ironton feed prep operations are in commissioning and are expected to start coming online in Q3 2022. And our plans for PrEP expansion beyond Ironton are progressing very well. We are developing three regional feedstock PrEP facilities along the east coast to supply Augusta Purification Facility, one in central Florida, one in eastern Pennsylvania, and one co-located on the Augusta site. We will discuss this in more detail later. We continue to successfully execute our feedstock acquisition strategy. In the second quarter, we secured additional feedstock LOIs that are expected to yield approximately 111 million pounds of recovered polypropylene to supply the Augusta Purification Facility, which combined with our previous feedstock LOIs brings our total feedstock commitments for Augusta to 329 million pounds, representing an excess feedstock supply compared to our full capacity purification processing requirements. We continue to diversify our feedstock sources in the second quarter through our Pure Zero program. This program is expected to provide organizations, companies, communities, and events an opportunity to eliminate plastic waste from their venues and create a truly circular environment. We received a pre-notification letter from the FDA for an agency opinion and LNO on two different feed streams. Ironton offtake is sold out, Augusta lines 1 and 2 are 70% allocated, and we have 205 million pounds of offtake in final contract negotiations to fill the remaining 80 million pounds of capacity for Augusta lines 1 and 2. As we approach commercial operations, our sales team is actively coordinating with numerous brand owners on specific projects for their product applications. Our finance team has taken the next steps for our financing efforts to fund Augusta Lines 1 and 2 and the three East Coast PrEP facilities. We've allocated $173 million for the Augusta project to support the project execution with expectations for full commissioning in 2024. We ended the second quarter with $516 million in total cash and investments. Moving to slide four. Scaling our operations remains the principal strategy for the company. We remain focused on the mechanical completion of our Ironton facility this year with ramp up in 2023 and completing phase one of our multi-line Augusta facility with ramp up in 2024. Additionally, we continue to deepen our relationship with SK Geocentric in South Korea and Mitsui in Japan to develop pure cycle purification facilities in Asia. During Q2, we had the pleasure to visit the SK team in South Korea and the opportunity to visit both their global R&D facility as well as the future location for this joint venture. Phase two construction in Augusta representing lines three and four, our South Korean facility and our European facility are expected to start and ramp to full operations in 2025. Our Ironson project remains on track. We expect mechanical completion in the fourth quarter 2022, followed by initial pellet production by year end. This is consistent with our previous messaging and also consistent with the timing established over two years ago. Our entire team is very proud of this achievement, given the market headwinds experienced during COVID, lockdowns, and supply chain disruptions and inflationary pressures. We're in the final phases of construction with 14 of 26 modules delivered and lifted into place. This continues to validate our modular construction strategy and confirms our assumptions for installation. PureCycle is nearing completion of feed prep build out and full commissioning is underway. There's a lot of work to do at Ironton, but we are on track and gearing up for a successful startup. PureCycle has been nimble and adapted to challenges during this process, and we will continue to adjust and recalibrate as needed. We have the right team, we have the right attitude, and we're ready to go. Moving to slide six, during the second quarter, our engineering procurement and construction activities at our first multi-line purification facility in Augusta continued to make progress with current projections anticipating mechanical completion, startup, and full commissioning to 2024. This is a slight change from the previous estimates due to current economic and supply chain conditions, but it's essentially on track. Long lead equipment has been ordered, key construction contracts are in place, and preliminary site work has commenced. The PureCycle team is integrating lessons learned and improvements from Ironton into the Augusta project which we fully expect to improve efficiencies across every activity. We have leveraged the same key strategic partners for Augusta that we've been working with for several years in our Ironton facility. Working with Koch Modular Process Systems, Denim-Blythe, Gulfspan, Emerson, and Krauss-Maffei gives us increased confidence in maintaining project schedule. During this period with substantial supply chain challenges, Our partnerships are yielding benefits. We have been able to improve safety, navigate schedule changes, and increase cost efficiency. Moving to slide seven, we are developing three regional prep facilities along the East Coast. This is a key component to our overall Augusta project because, first, the locations are expected to provide transportation efficiencies. Second, the overall project creates the necessary recycling infrastructure for sorting, grinding, and washing. And third, the assets create a platform for reliable and valuable offtake partnerships with feedstock suppliers. PureCycle's first regional prep facility in Central Florida is approximately 90%. We anticipate the annual sorting capacity of 115 million pounds of mixed plastic. We are working through a few final construction and equipment delivery details but still expect operations to commence in Q4 of this year or early next year. Additionally, we have made progress on plans for additional prep facilities to supply Augusta. We have selected two locations, Denver, Pennsylvania, and we will co-locate a prep facility onsite at our Augusta, Georgia purification facility. We anticipate the prep facilities in Denver, Pennsylvania and Augusta, Georgia to be operational in the second half of 2023. Denver, Pennsylvania prep facility is designed to have number one to seven bale sort capacity of 175 million pounds annually, and the Augusta prep facility will be designed to have a number five bale sort capacity of approximately 263 million pounds, and also wash capacity of up to 331 million pounds annually. The overall prep asset design will allow us to purchase mixed bales also known as one to sevens or three to sevens, and also low quality and high quality number five polypropylene bales. This asset base will become an easy landing spot for all waste handlers in North America. Moving to slide eight, we're making real progress on executing our prep strategy. Decisions made one to two years ago are coming into view as assets go in the ground. Ironton's prep operations are in full commissioning now and on track for startup in Q3 of this year. You can see in one of the pictures that commissioning bales are being run through the equipment. We expect our first regional prep facility in Central Florida to be complete by the end of this year or in early Q1 with ramp up to full operations in 2023. And as noted, our Pennsylvania and Georgia prep facilities are anticipated to start up in the second half of 23. On slide nine, PureCycle continues to strengthen its relationships in the marketplace. As a result, the two lines for the Augusta Purification Facility are fully supplied with 329 million pounds of recovered polypropylene under LOI. We are oversubscribed for our first two lines in Augusta. Our teams are now focusing on securing feedstock for Augusta lines three and four. As reported last quarter, we are diversifying our feedstock strategy, focusing on FDU R&D efforts on targeted untapped waste streams and developing strategies to create new resin solutions across different market channels. Our BORN digital strategy is also being designed to optimize our feed management. This includes helping us track feedstock from source to final product, This level of transparency is important to our customers and their stakeholders. We are also developing asset optimization strategies to create unique UPR grades across different purification lines. The commercial team continues to build our offtake pipeline. At this time, our Augusta purification facility are allocated to 70% through various multi-year commitments. Our team is actively working with brand owners to develop specific plans for consumer product applications. We are seeing strong contracting momentum to fully allocate Augusta lines one and two. We currently have 205 million pounds of offtake in final negotiations for the remaining Augusta allocation. The market's continuing interest in PureCycle's UPR resin is demonstrated through the full offtake allocation at Ironton and the acceptance of its feedstock plus pricing model being implemented at Augusta. Moving to slide 11. We've completed the first step in a multi-step process with the FDA. As such, we received a pre-notification letter from the FDA on two different feed streams. The pre-notification confirmed that PureCycle will receive an agency opinion letter for the use of food grade post-industrial recycled materials for all food types under conditions A through H. The FDA also confirmed that we will receive a letter of no objection, LNO, for all food types under the condition of use E through G for food grade post-consumer stadium trash recycled materials. This was a collaborative effort with the FDA. our teams closely worked together to define the process required for current and future polypropylene approvals. We also spent significant time informing the FDA about the benefits and unique potential of the PureCycle technology to achieve superior product quality. We now have a clear understanding developed to achieve future feedstock approvals. This is great news for PureCycle. It's the first time that we have worked directly with the FDA and we see this as an opportunity to familiarize the FDA with our purification process and technology, helping to establish a baseline testing methodology for recovered polypropylene. This will be an iterative process to achieve the approvals on additional feed streams. PureCycle plans to conduct additional testing at the FDU to expand the feedstock application qualifications and make further LNO submissions for additional post-consumer recycled sources, and expanded conditions of use. Our targeted streams will include curbside and other underutilized feedstock so we can leverage our technology to reduce landfill and incineration. I will now turn it over to our CFO, Larry Soma, for our financial update.