PureCycle Technologies, Inc.

Hello and thank you for standing by. At this time, I would like to welcome you to the PureCycle Technologies first quarter 2025 corporate update call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. I would now like to turn the conference over to Eric Di Natale, PureCycle Director of Investor Relations. Please go ahead.

Thank you, Jericho. Welcome to PureCycle Technologies' first quarter 2025 corporate update conference call. I am Eric Di Natale, Director of Investor Relations for PureCycle, and joining me on the call today are Dustin Olson, our Chief Executive Officer, and Jamie Vasquez, our Chief Financial Officer. This evening, we will be highlighting our corporate developments for the first quarter of 2025. The presentation we'll be going through on this call can also be found on the investor tab at our website at peercycle.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 management at this time. 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 first quarter 2025 corporate update press release filed this afternoon, as well as in other reports on file with the SEC to 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 quarter-end and year-end adjustments. 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 if joining us by phone, 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 over to Dustin Olson, PureCycle's Chief Executive Officer.

Thank you, Eric. The first quarter was another period of significant progress across multiple aspects of the business and marked the first reported revenues in the company's history. This is a moment we've been waiting for and excited to finally get there. The success we see with customers across numerous end markets and product types gives us confidence in our belief that we can successfully convert trials, ramp revenues, and sell out iron's end production around year end. We have made continual operational improvements most notably with on stream time. On stream time has been the biggest challenge for production and we successfully targeted this metric for improvement over the last couple of months. While we're not producing pellets at full rates during the month of April, the fact that we made pellets every single day and we're online for almost 90% of the month is a major achievement and consistent with our goals. To think that only a year ago, we were focused on working to get the plant online for more than 25 to 30% of the time shows the substantial improvements we have made. Our operations and manufacturing team has shown incredible drive and determination to get us where we are today and should give confidence that we will continue to improve going forward and march toward main plate capacity. The commercial efforts continue to show meaningful progress as well. We're currently engaged in over 30 trials of which 24 have progressed to industrial. and which represent over 300 million pounds of potential product sales. This represents an increase from our Q4 update just over two months ago. We continue to see progress through the sales funnel and saw three prior trials convert to purchase orders. Many of these discussions are for large potential orders, and while they can seem lumpy in the early stages, we're excited about where things stand. The announcement of our technical success with Drake in Q1 led to the development of an additional fiber demand that's beginning to ramp now. There are an increasing number of conversations going on, and we're really excited about the pipeline and opportunity in front of us in fiber. The combination of improved operational reliability at Ironton and the progress we are seeing on the commercial front gives us increased confidence in our path to generating meaningful EBITDA and cash flow. In prior calls, we have spoken about our compounding strategy. and how it is both allowing us to better serve customers' needs while also providing us with more operational flexibility. As we ramp into the fiber market and have shown trial success in film, I think it's helpful to update the market on where we stand with compounding and why we are so excited by what it can offer PureCycle going forward. As the conversations with our customers have evolved over the past year, we have now segmented our production into two different brands under the PureCycle umbrella. First is Pure 5 Ultra, which is intended to be our flagship product that is nearly indistinguishable from Virgin. It has very favorable dynamics in the market and can be used in color-sensitive applications. Being able to use Ultra is a game-changing breakthrough for the plastic recycling industry, and we believe that this product stands alone. Many customers, however, need more flexibility than just Pure 5 Ultra. Some customers need specific mechanical properties. Some customers don't care about color sensitivity. Some customers target only 30 to 50% recycled content. However, almost all customers need strong molecular performance absent of what we call co-product one and co-product two contaminants. This is where PureCycle differentiates itself for the market. And this is why PureCycle is introducing Pure 5 Choice product line, which includes compounds that service multiple applications like film, fiber, and automotive. Pure 5 Choice will give customers the opportunity to select the product that they need for their specific application. Because polypropylene is one of the most versatile types of plastics, it ends up being used in the widest set of applications, from carpet and furniture to snack bags and beverage labeling, and even into automotive bumpers and FDA caps and closures. As a result, the feed that we process is often a mix of different types of consumer products. Therefore, many applications, particularly more challenging ones like film and fiber and automotive, require mechanical properties outside of what the recycling industry traditionally produces. This is where our Pure5 choice comes into play. We blend our resin with varying quantities of other input streams and additives to produce a product that mimics the customer's current fossil-based supply. We believe our Pure 5 Choice blends will pave the way for our fiber segment, our film segment, and impact modified options like automotive for our customers. Unlike other recycling technologies in the industry, our ability to remove contaminants at the molecular level allow us to build a platform for Pure 5 Choice. This is why our product reaches customers that other technologies cannot, and our early successes in fiber, film, and automotive show that. Our fiber application is approximately a 50-50 blend that achieves an MFR or melt flow rate of 18 to 40, depending on what the customer needs, whereas our film production is approximately 30 to 50 percent PCT blend and will achieve an MFR as low as 2 to 3. Both of these application successes are huge breakthroughs in the industry, which we believe will open up significant demand for us. Pure 5 Choice is also available in bright white products. The best way to envision this product is just imagine walking through a big box retailer or an appliance retailer and thinking about all the bright white durable goods that you see. The next time you walk through a store, you'll be amazed by the quantity of plastic products that are bright white. Pure 5 Choice should give brand owners the opportunity to build their products out of recycled polypropylene. Overall, compounding has allowed us to give customers the product that they need for quicker adoption and can expand sales volumes beyond 107 million pounds per year of nameplate capacity of Ironton. It's also nice that the unit economics per pound of PCT material also increases relative to the non-blended material. We introduced our compounding strategy to the market in Q3 of 2024, and it's nice to see the operation streamlining into real solutions for customers, including sales of compounded material in the first quarter. Since our last update at the end of February, our backlog of potential trials and customers continue to grow. Currently, we're engaged in 33 active trials, with 24 in the industrial stage and another nine pilot trials. The volume potential from the trials has increased since last quarter. This is a positive development. The trials continue to go well, and it gives us increased confidence in our ability to achieve our sales goals of 2025. For instance, in rigid packaging, we have increased the overall number of trials and now have 13 of those in the industrial phase versus five from the prior quarter. This shows steady progress with multiple customers across the portfolio. Some examples include the products we showed last time with Procter & Gamble, Thermoform dairy cups with a large converter, and several shampoo and beauty closures for large consumer brands. And while I can't speak to the exact details yet, we have also been engaged in detailed conversations with multiple large auto OEMs that could potentially procure a significant portion of volume, across a global portfolio of plants and markets. I believe this interest will only continue to build in front of the recycled content regulations that go into effect in 2030 in both Europe and Japan. There's a lot of interest in our product. We continue to broaden the addressable market, and we continue to push trials forward. We believe the market continues to search for high-quality products that they can drop into their operations. and each trial success provides PureCycle increased optionality for where we choose to sell the irons in production. We believe the underpinning of PureCycle's future success is tied to proving that our product can work across numerous application segments, especially those that currently do not have sustainable solutions. It's for this reason that we are excited to announce initial trial successes with Bruckner. They are the industry leading supplier of equipment to manufactured stretch films and have nearly 90% market share and 30 billion pounds per year of DOP market. The ubiquitous nature of Bruckner equipment in the industry should allow us to move into industrial trials with many of the large end product customers in the near future. Bruckner has over 1,000 machines operating in the market and their latest single line edition has the capacity of almost 2x that of iron-thin mainplate capacity. BOPP film is a huge market opportunity for PureCycle. The successful test with Bruckner resulted in film successfully stretched nine times without seeing any tearing and with ultra-clear and transparent properties. So far, the results we're seeing suggest that our film blend can act as a drop-in replacement for Virgin. The BOPP film market is arguably the most exciting end market for us over the next few years for several reasons. This market has a higher concentration of single-use plastics versus durable plastics. It's very difficult to produce with traditional recycling grades, which leads to very low levels of penetration, and brands are under significant pressure to find a sustainable solution. Quite simply, Brands have been under intense pressure to find solutions for plastic film, and until now, the industry has not been able to provide a reliable solution. Our film product can be used in applications like candy and snack wrappers, pet food bags, beverage labeling, as well as adhesive tapes. Coming into the year, we did not expect film to drive a significant amount of revenue in the near term, but the success at Bruckner has accelerated our plans and can make a significant contribution to our sales in the second half of the year. This has been extremely exciting and a welcome development. Ironson continued to make operational progress in the quarter, producing 4.3 million pounds of resin, and we are currently holding approximately 14 million pounds of inventory. More importantly, after some small tweaks to the operations, we successfully ran the plant every day in the month of April. and achieved an on-stream time of almost 90%. This is the first time that we have come close to achieving the 90% on-stream target, which was referenced in our original engineering plans. The improvement in reliability over the last year has been tremendous. I have consistently talked about how the operational issues at Ironton have become smaller in scope and less frequent, and our performance in April is a testament to that. We have also continued to see improvements in quality supported by improvements in operations in Denver, at our flake sorter, and also with purification at Ironton. Overall, the first quarter showed excellent progress for our plan to commercially ramp Ironton through 2025. We generate our first reported revenues, made progress with key customers and trials, achieved our first success in an important film market, and made meaningful operational progress at Ironton. Combined with what we're seeing with regards to our pricing on realized branded sales, this gives us increased confidence in achieving our unit economics and our commercial and operational ramp. We continue to progress our capacity additions and growth plans, and there are a lot of exciting developments that we will be announcing in more detail soon. I would like to give you a sneak peek of what is to come. We have learned a tremendous amount about our foundational technology from the commercialization of Ironton and from the fundamental research and development out of our Durham facility. These learnings should enable us to scale the technology to much higher capacity per line, which will in turn allow us to reduce the CapEx and OpEx of these facilities, as well as improve overall facility economics. The economics we are beginning to realize at Ironton are strong. but they should get even better on future lines. We also continue to see lots of opportunities to continue to optimize and improve Ironton economics. For the last several years, we have continued to invest in the overall growth of this company through the purchase of prep equipment as well as long lead equipment for two 130 million pound lines. This has served us well. It has allowed us to move through Ironton challenges more quickly, and improve the feed position of the early introduction of Denver. This should also allow us to improve speed to market with less inflated cost structure because of those early decisions. Because of the intense global interest in our product across the customer funnel, we are going to aggressively grow the capacity of future lines even more than what we have done so far. We are still in the early stages of engineering these solutions, but given what we know about the technology today, we feel confident in our ability to scale to much higher levels. This should drive capital and operational efficiencies across facilities and ultimately improve the overall profitability and return on capital to our stakeholders. This will set the foundation for the future of PureCycle. We are currently pursuing multiple paths of financing for our plan, and once finalized, we intend to update the market with as many details as possible. We believe the lessons we have learned from Ironton have been foundational, and as we see increased operational and commercial successes, it gives us more confidence in the growth plan ahead. With that, I will turn it over to Jamie for the financial presentation.