PureCycle Technologies, Inc.

Good evening. My name is Carrie, and I will be your conference operator today. At this time, I would like to welcome everyone to the PureCycle Technology second quarter 2025 corporate update conference 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 then the number one on your telephone keypad. If you would like to withdraw your question, press start one again. Thank you. I would now like to turn the call over to Eric Dinatale, Director of Investor Relations. Please go ahead, sir.

Thank you, Carrie. Welcome to PureCycle Technologies' second quarter 2025 corporate update conference call. I am Eric Dinatale, 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 second 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 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. 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 state public 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, 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 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 join 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.

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. 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 and the announcement of our global growth plans in Asia, Europe, and the U.S. 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. This is a transformative moment, and we're thrilled to bring our product to the world. I want to 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. 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. 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 and post-trial negotiations, and the backlog of trials continues to build. We currently have 17 customer applications that are post-trial discussions with continued plans for second half revenue ramp as these discussions convert into sales. 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. Many of these applications are with brands and products that I expect all of you are familiar with. Coffee lids, yogurt cups, spouts, container lids, pens, snack bags, tapes, storage totes are only a few of the applications that we're excited to bring to the markets. We also signed our first major commercial agreement with Emerald in this quarter for approximately 5 million pounds of Pure 5 resin, which starts to convert into revenue in Q3. Fiverr 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. 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. 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 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. We believe that this is a very large underserved market 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. Operationally, the story continues to be one of steady progress at Ironton. 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. We also produced pellets for 65 consecutive days. In early June, we took a small planned outage to prepare for the second half of 2025 commercial ramp to implement a couple of small reliability improvement projects. 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. 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. 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 the year. More importantly, the indications of demand that we are hearing from our customers are strong, gives us increased belief that sales will continue to ramp up leading to and through 2026. The unit economics on our branded contracts and what we are seeing with our current discussions continues to support the unit economics we previously laid out to the market. 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 think it's important to take a step back and reiterate why the time for growth is now. First, the operational reliability at Ironton has meaningfully improved over the past year, which was exemplified by on-stream time approaching 90% in both April and May and 65 days of consecutive pellet production. Secondly, the momentum in our commercial trials has continued, and this gives us increased confidence that demand for recycled polypropylene far exceeds our ability to supply the market. 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. 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 Rayong, 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. 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. This is inclusive of roughly $87 million in long lead equipment that we've already purchased, which further reduces the incremental cash outflow. We continue to expect that we should have this facility operational in the second half of 27. A portion of the capital raise will also be allocated to completing the permitting process in Antwerp, and also finalizing the Gen 2 design for a 300 million plus pound production unit for future facilities. 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. Design work for the larger lines should be completed in the first half of 26, which will then kick off construction of our Gen 2 line, which is expected to complete in 2029. Since the most recent update, we continue to progress 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 Ironton Learnings into the process. 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. 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. 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. While it's difficult to precisely time the trial of the sales pipeline, we are on track with prior disclosures and are very happy with our trial win percentage. The brands are excited about our product, and we are moving into the final gating items for many applications. This is good for the 2025 ramp, but it's also very good timing as they plan for 2026 volume commitments. Many of these are with large, well-known consumer brands with meaningful volume requests north of 5 million pounds per year with the intent to grow thereafter. And other major brands are inquiring about reservations starting at volumes greater than that. When we look at our sales funnel, I think it's important to look at a couple of different metrics. First, does the funnel continue to progress and build? And secondly, how do the attrition rates look? On both of these metrics, we see incredible success. 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. 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. Additionally, 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. We're introducing 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. 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. Last quarter, we talked a lot about the excitement we have regarding our ability to make film, which is an underserved market for recycled material. Since the last update, we had our first industrial trial success in film, which positions us well for commercial success going forward. I was actually at a facility a while ago and got to see the equipment running. 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. We're moving as fast as we can to qualify film across numerous customers by working our product into their highly congested production schedules for industrial trials. We have two large-scale BOPP trials scheduled for August. one with our partner Brucker, which we mentioned last quarter, and another with a large global converter, and a third scheduled for September in the U.S. The conversations with brand owners have increased in film even in front of these trials, and some have even begun to communicate interest in securing volume reservations for 2026 and beyond. 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 Ironton. 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 systems. 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. 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. The large-scale commercial supply agreement that we have with them is for approximately 5 million pounds per year of Pure 5 choice resin beginning this quarter. 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. 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. 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. The success of 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. PureCycle is a solution for California and other states that decide to follow suit. During the second quarter, PureCycle earned Green Circle's Recycled Content Certification for nearly 30 grades of PureCycle resin and co-products 1 and 2. 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, 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 the time and we know this is a differential value proposition for pure cycle the reality is that pure cycle is processing pcr feedstock day in and day out at ironton and we're happy to get this certification to add to our docket of successful certifications 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 customers for 2026 and beyond. We recently received board approval to initiate a project to bring compounding operations to Ironton by the end of the year. This is a great project. This is expected to increase our onsite compounding capacity to approximately 100 million pounds and will be primarily focused on film, thermoforming, and injection molding applications. 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. 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 Ironton. This expansion will not only help to improve our logistics and our ability to serve our customer needs, but we believe it will realize cost savings in excess of $4 million per year and improve the overall quality management activities. 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. As previously disclosed, we achieved on-stream times approaching 90% in both April and May before taking a brief outage in June. The Ironton facility has been back up and is ramping into higher production levels for Q3. We initiated a number of rate tests and successfully ran at levels at 14,000 pounds per hour, nearing main plate rates on the 1st of August. Like with all rate tests, we move 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 improve along the way until it becomes the new norm for operations. We've been doing this successfully for two years now. I can't say enough with how proud I am of our operational successes. 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. These accomplishments position us well for when we ramp our production in conjunction with a commercial ramp. Overall, the second quarter marked an important inflection point for PureCycle. We successfully raised $300 million in capital, which should allow us to begin our growth beyond Ireton and bring our Pure 5 resin to the global marketplace. 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 to roughly a billion pounds of installed capacity by the end of 2029. and should provide roughly $600 million of run rate EBITDA. We have successfully advanced our commercial trials and are ramping revenue at Ireton. We are excited for this next stage of the journey. And increasingly, I'm incredibly excited about the recent developments and more confident than ever what the future holds for PureCycle. With that, I'll turn over to Jamie for the financial presentation.