PureCycle Technologies, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the PureCycle Technologies third quarter 2022 corporate update. 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'll need to press star 11 on your telephone. I would like to turn the call over to your host, Charlie Place. You may begin.

Thank you, Kevin, and welcome to PureCycle Technologies third quarter 2022 corporate update conference call coming to you from Orlando, Florida. As you may be aware, we had a hurricane pass through here early this morning, and while the worst of it has passed, if we lose power on this call, we will be calling back in and appreciate your patience. I am 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 will be highlighting our corporate developments for the third quarter. This presentation that we will be going through on this call can also be found on the investor relations page of our website at purecycle.com. Many of the statements made today will be forward-looking and are based on management's beliefs and assumptions and information currently available to the 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 third quarter 2022 corporate update press release and in our filed quarterly report on Form 10-Q, filed yesterday, as well as in 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 statements. 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 the quarter-end and year-end adjustments. Any variation between PCT'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 if joining us by phone, you can assess it at any time on purecycle.com. We're excited to share updates from the previous quarter with you. I will now turn it over to Dustin Olson, PureCycle's Chief Executive Officer. Dustin?

Thanks, Charlie. Good morning, everyone. Thank you for joining our call today. I'm pleased to share with you the significant progress that we've made at PureCycle since our last corporate update in August. But before we start, I want to share a bit of a reminder of our history and our mission. In 2012, Procter & Gamble invested in a new future. They looked around the sustainability ecosystem, and they recognized that existing technologies would just not meet their global ambitions. So they invented something new. In late 2015, PureCycle was founded, and we started to scale this innovative idea. We made our first pellets at the Feedstock Evaluation Unit in 2019, and now we're moments away from our commercial scale pellet production. So why are we doing this? We have to remember. Every year, approximately 850 billion pounds of plastic and 170 billion pounds of polypropylene are globally produced from fossil fuels. Every year, approximately 16 billion of polypropylene is produced in the U.S. And every year, less than 5% of polypropylene is recycled. Every year, people work really hard to meet their brand goals. And every year, our world falls short and another 150 billion pound polypropylene opportunity slips away. It's easy to forget the core mission of PureCycle or why we are chasing this new future, but we need to remember who PureCycle is and why our company is so special. The world wants circularity. The world wants a new and real plastic solution. And PureCycle is positioned to change the paradigm and deliver a technical solution that the world so desperately needs. After a decade of R&D and seven years of scaling efforts, we're almost there. PureCycle's first commercial plant will be in Ironton. We will be domestically scaling in Augusta, and we will start our global scaling in South Korea. We built the right team, the right infrastructure, and the right systems to scale our solution. Please move to slide four. Our flagship facility in Ironton, Ohio, remains essentially on schedule with mechanical completion and pellet production now expected in the first quarter of 23. The slight delay in construction is not unique to us. And we believe we'll have no impact on our nine-month ramp-up timeline for Augusta operations as we previously discussed. We continue to work on phase one of our Augusta project through lead times for delivery of certain critical equipment have increased. And while our debt financing is taking longer to close given the current market conditions, we've generated substantial options designed to minimize our overall cost of capital. As a result, we now anticipate purification lines one and two in Augusta to be mechanically complete and begin ramp up of operations in the second half of 2024. In October, we signed a joint venture agreement with SK Geocentric for the construction of the purification facility in Ulsan, South Korea, representing our first non-US facility and a key milestone in our global expansion strategy. This agreement is much more than just capacity. It represents trust in our core technology, a gateway into Asia, and a deep technical bench. Our Ironton feed prep facility is in the final commissioning phase and beginning to process feedstock. I can tell you that our team was very excited to watch the first feedstock bale work through the process and flow into our feedstock silos in Ironton. This is a big scaling step for our team. There's still more work to do, but a motivational step for our team nonetheless. As previously disclosed, an original pre-spec counterparty which was contracted for both feedstock supply and offtake, sought termination of obligations. We disagree with the reasoning provided. We are now actively working to address their actions. We are in final negotiations for replacement contracts and will adapt pricing mechanisms that better reflect the market dynamics and create greater stability to PureCycle's economics. For Augusta, we continue to engineer final prep operations and are adjusting operational timelines for the three East Coast prep facilities to match the new timeline for purification startup. We're very excited with how this operational design is coming together. It will create a foundational Eastern seaboard network for plastic waste collection and sortation. We continue to work to resolve the issues related to the Central Florida location. And while we're disappointed with some of the local government actions, We believe the overall impact to our prep strategy is minimal. The volume is not needed until 2023, and we are working numerous solutions that are not material to the overall company or project economics. We continue to successfully execute our feedstock acquisition strategy. Both Ironton and Augusta lines 1 and 2 have feedstock LOIs sufficient to run at nameplate capacity. representing more than 408 million pounds of feedstock annually in aggregate. Our team continues to hold active discussions with feedstock sources to build a pipeline of supply to support our additional purification lines in Augusta. I'm very proud to report that our commercial sales team signed contracts representing 106 million pounds of offtake since our last corporate update, and that both Ironton and Augusta lines one and two offtake are now sold out. Additionally, we announced a new 100% recycled polypropylene concentrate developed in partnership with Milton and Company. We continue to advance our feedstock in Europe, offtake, and site selections, and hope to be able to share with you more specifics during our next call. Despite very challenging market conditions since our last update, our finance team is still targeting completion of financing to fund Augusta project by year end. We've allocated $168 million to the Augusta project to support the project execution with expectations for starting up operations in mid 2024. We ended the quarter with $416 million in total cash and investments. Moving to slide five. While the majority of our activities are focused on completing Ironton and Augusta, we continue to pursue opportunities to scale our technology globally. As previously mentioned, current market conditions have pushed back the development timeline by a couple of weeks in Ironton in approximately three to six months for future developments. We remain committed to financing activities to fund phase two construction in Augusta, representing lines three and four, our South Korean facility and our European facility, all of which are currently expected to start up and ramp to full operations in mid 2025. However, we will spend the time required to ensure the project is designed for process and cost efficiencies. Slide six is a fun slide for us. Every time we visit Ironton, it's different. It's changed. It keeps looking more and more like a real facility every day. And for anyone that's ever completed a major capital project, you can appreciate how it feels when you get close to startup. And you can see how far we've come since 2021. As the final pieces of our modular construction are being put in place, it's very clear that our construction teams are zeroed in on completing this project. As you see, we are fast approaching the final steps of the Ironton project construction phase. We expect mechanical completion and an initial pellet production in the first quarter of 2023. Slide 7 shows the details of the final construction activities. And despite delays in the delivery of a couple of pieces of equipment, All 26 modules have been delivered and lifted into place. Our feedstock prep operations are in commissioning and beginning to process feedstock. The central utilities are functionally mechanically complete and near final commissioning. The control room, offtake, and rail operations are expected to be mechanically complete by the end of November. And purification and coproducts are expected to be mechanically complete in Q1 of 2023. Mechanical completion will be dependent on the final extruder delivery timeline. Our entire team is very proud of this achievement, given the construction market headwinds we experienced in 2022, including the war in Ukraine, COVID-19 in Germany, supply chain issues, and more recently, low water levels in the Mississippi River, impacting some of the module deliveries. By all external markets, however, it appears that our project schedule is outperforming other industry projects. PureCycle and its contracting partners are working relentlessly to reach mechanical completion as soon as possible. We remain on track to reach full operating capacity during the nine-month ramp-up timeline that we've discussed previously. Slide eight is an explanatory slide. Every month, we post a construction monitoring report prepared by an independent engineer retained by Ironton bondholders to track the construction progress at Ironton. They independently report on all the critical aspects of the project, including cost and schedule, and in the end, publish a date for final project performance test. The September report showed a delay to March 3rd, 2023. This delay was due to the headwinds that I just mentioned, the Ukraine COVID supply chain and water levels in the Mississippi. However, We want to be very clear about when our project will begin generating first pellets. For the last several quarters, I have referenced pellets by the end of 2022. While this statement has shifted two to four weeks or into early January, it's still the same premise. The difference between first pellets in January and the final performance test in March is the operational commissioning phase for the plant. After mechanical completion, but before the performance test on March 3rd, we will be testing multiple feed sources at various conditions to validate unit operations. Once completed, we will perform our five-day 100% capacity test. During that time, we will be making pellets and selling those pellets to our offtake partners. Our initial commissioning plan outpaces our nine-month ramp, and therefore, we remain confident that PureCycle will be operating at full capacity by the fourth quarter of 2023. Moving to slide nine. During the third quarter, we continued phase one engineering and construction activities at our first multi-line facility in Augusta. However, due to tightening capital markets and expanding lead times of delivery equipment, we're now anticipating mechanical completion startup and full commissioning in the second half of 2024, based on completing financing by year end. We have also adjusted the timeline for startup operations of our three East Coast facilities to align with the new Augusta Phase 1 construction schedule. Despite the temporary delay in our Augusta Phase 1 development timeline, we continue to work with the AEDA on our construction timing and with our partners to pursue all opportunities to improve equipment delivery timelines, manage construction costs, and improve construction efficiencies to complete this project in mid-24. On slide seven, with respect to the core project fundamentals, I'm pleased to share with you that Augusta Purification Lines 1 and 2 have fully committed feedstock volumes and offtake capacity. Signed feedstock LOIs of 301 million pounds represents an excess supply of approximately 7.5% and offtake contracts for 289 million pounds per year, a 106-pound increase since our last update, represents excess demand of around 11%. This once again represents the strength of our technology, both in terms of feedstock conversion capability and superior final pellet quality. On slide 11, as mentioned earlier in the presentation, we entered into a definitive joint venture agreement with SK Geocentric for the development of the purification facility in Ulsan, South Korea. Construction is expected to commence in the third quarter of 2023, with startup operations expected to begin in the second quarter of 2025. This JV is an important first step in our global expansion strategy. As mentioned before, this project represents much more than just capacity. It represents a gateway to Asia, a strong technical partnership, and trust in one another. We couldn't be more proud of this relationship with SK Geocentric. Additionally, we continue to work on the structure for an agreement with Mitsui and evaluate potential site selections for our purification facility in Japan. Progress continues on our European expansion plans. We have narrowed down our site selection options, are developing an engineering procurement plan, and have added to our operations team. We hope to have an announcement regarding the European site selection by our next corporate update call. Ironton is an important start for our company, but it's just the beginning. The PureCycle team is energized and focused on executing its global expansion strategy and taking advantage of the market-leading technology to address the global challenge for plastic pollution. At this point, I will now turn it over to our CFO, Larry Soma, for the financial update.