PureCycle Technologies, Inc.

Good day and thank you for standing by. Welcome to the Pure End Cycle Technologies first quarter 2026 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 will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like to hand the conference over to our first speaker, Eric Di Natale, Director for Investor Relations. Please go ahead.

Thank you, Myla. Welcome to PureCycle Technologies' first quarter 2026 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 Donald Carpenter, our Chief Financial Officer. This evening, we will be highlighting our corporate developments for the first quarter of 2026. 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 are based on management's beliefs, 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 harbor provisions and forward-looking statements that can be found at the end of our first quarter 2026 corporate update press release filed this afternoon, as well as in other reports on file with the SEC that provides 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 joining us by phone. You can access it at any time at PureCycle.com. We are excited to share updates from our previous quarter with you. With that, I will turn it over to Dustin Olson, PureCycle's Chief Executive Officer.

Thank you, Eric, and good afternoon, everyone. Business momentum entering 2026 is the strongest it has been. Revenues came in above budget, branded customer conversions are accelerating, and our confidence in the commercial ramp over the remainder of 2026 has never been higher. The commitments we made are becoming results. The P&G ramp is underway. Coffee lids are commercial with multiple customers. Branded sales are converting across the portfolio. The branded momentum is real. We continue to make progress toward our mission of transforming the global plastics industry, and the results this quarter reinforce that we're on the right path. Let me walk you through the details. Ironton produced 8.4 million pounds of Pure 5 in Q1, which is up from 12% from Q4. We processed approximately 10 million pounds of feedstock input. Both of these numbers demonstrate the continued scaling of our technology. The planned turnaround at Ironton was completed ahead of schedule and tracking approximately 15% below budget. This is significant. It is the first time we've completed a turnaround ahead of schedule. It speaks to a better understanding of our operations and our core technology it's a great example of how the internal improvements we've been driving that we've made are driving external outcomes this is something that we are increasingly seeing across the business it's been two years since we've taken a full shutdown across the facility during this outage we executed over 170 projects which targeted capacity reliability and quality this will pave the way to achieve full capacity within the facility we also found the plant to be in much better condition than it was two years ago. The vessels that created the most challenge last time required far less intervention this time, which is another testament to our progress. The long-term resiliency of our core technology is also very strong. One of the most impactful projects in the replacement of the critical seal system, procurement required some navigation through global supply chain conditions, but we resolved it ahead of the outage. The installation is complete and expected to materially improve reliability going forward. On-site compounding reached mechanical completion in April as well, and we're currently commissioning the asset. This is a strategically important addition to our platform. As customers scale in film and thermoform applications, we will be able to deliver a finished, application-ready product reliably and consistently without relying on third parties. The unit economics for compounded product are more attractive than the base resin, and as volumes build, this asset will be a significant contributor to our overall margin profile. Our third-party compounding volumes also ramp to approximately 1.7 million pounds in Q1, with significant month-over-month growth throughout the quarter. Let's discuss the macro environment, because the shifts we're seeing are very dynamic, but also clearly positive for PureCycle. The disruption to global petrochemical supply chains helped us in several specific ways. First, it has improved the co-product pricing. Second, it has reinforced the value of a domestic stable supply source that is independent of global petrochemical disruption. And third, it has created urgency. Brands and converters all around the world are actively looking for a domestic compliant alternative to global supply. We're seeing this manifest in two ways. Companies that are ready in our pipeline are moving faster with us, and we've received numerous inbound inquiries from the rest of the world customers looking to start the process of qualifying our product. Virgin polypropylene prices have risen roughly 25 to 35 cents per pound in the US and 35 to 55 cents per pound in Asia and Europe. Our feedstock, domestic waste polypropylene for more than 15 US suppliers is independent of these disruptions. Unlike virgin polypropylene, our product is sourced from domestic waste streams and priced independently of those dynamics. In the current environment, our customers increasingly value the consistency and reliability of our supply as much as the sustainability credentials. HDPE prices have roughly doubled, which will improve our co-product pricing dynamics as well. As you recall from the last call, in 2025, we faced numerous macro challenges. This has reversed. The current macro environment in 2026 is a tailwind, not a headwind. Regulatory momentum continues to build. In California, regulations for SB 54 were finalized earlier this month. Source reduction deadlines are only seven months away, and we're seeing increased urgency from brands and converters to get qualified to meet this upcoming mandate. New Jersey is stepping up to higher minimum recycled content rates in 2027 also and moving from 10% currently to 20%. Additionally, while New Jersey mandated PCR content for most plastic packaging starting in 2024, it included a temporary exemption for food contact containers. This goes away in January of 27. Let's take a step back and look at this environment holistically. Three forces are converging. One, commodity pricing is extremely dynamic, creating global market uncertainty. Two, regulations across numerous segments are coming from all directions, including Europe, California, and New Jersey, as well as others. And three, consumers still want sustainable solutions. How will the brands react? Brands will lean into solutions that work. and PureCycle's demonstrated technical successes are a clear solution. PureCycle offers three positive contributions to the discussion. Very high-quality FDA-grade material with demonstrated performance across a wide variety of segments, a product positively positioned as a regulatory solution, and a localized supply that is insulated from global macro disruptions. Europe to Europe, and Asia for Asia are emerging themes, and we are the solution for plastic. Quality matters, and we provide uncompromised material. With regulations coming from every direction, APR certifications are increasingly accepted by regulatory agencies. This macro environment highlights the need for PureCycle. It is helping in the short term, but it is also providing significant tailwinds to our long-term growth plan. Q1 marked the quarter where branded sales moved from isolated wins to a real and growing base. We booked $4.1 million of revenue, our fifth consecutive quarter of sequential growth ahead of internal expectations, with branded mix increasing meaningfully within that number. We will be shipping this quarter to Procter & Gamble. We are converting new customers like Plastic Ingenuity, and there is more to come. We converted eight new customers across multiple product categories during Q1. Branded pricing is robust and above internal targets. As we move through Q2 and beyond, we have clear line of sight to a growing mix of branded sales and Q2 ramps. These are building a stable base of sales as the ramp becomes more meaningful in the second half. We are reiterating that branded applications with 40 to 50 million pounds of annual demand our ramp are starting to ramp in Q2 and Q3, and another 20 to 25 million pounds of application capacity will start to ramp in Q3 and Q4. The New Jersey regulation resolution also represents a meaningful pipeline catalyst, one we will cover in more detail when we get to the regulatory update. Our pipeline now stands at approximately 180 active opportunities, up from over 170 at year end and roughly 100 a year ago. We continue to be bullish about the commercial opportunities in film as we progress through 2026. During the quarter, we ran two industrial trials successfully at different film producers. Both were on Bruckner six-meter lines. We also ran two pilot lines successfully at different film producers. In all of these trials, the PCT product properties were excellent and comparable to their Virgin counterparts. We continue to progress with two of the top five global food manufacturing brand owners on programs related to snack and confectionery packaging, and we'll update the market as we get closer to commercialization. Our relationship with Procter & Gamble is strong and activity is accelerating. They have among the highest standards for quality and reliability in the consumer products industry. They have done extensive testing of our product and we have passed. The metrics and processes by which Procter & Gamble evaluates suppliers are the gold standard in the industry. And the fact that we have achieved commercial qualifications with them is a powerful validation that our technology and our operations. The qualification process with Procter & Gamble took longer than anticipated. Their standards are exacting and there are no shortcuts. But clearing those standards matters. The rigor of their approval process means that the specifications we validated now apply broadly across the brand portfolio. And we expect future application approvals to move considerably faster as a result. This quarter, we achieved final approval for commercialization of two Procter & Gamble applications. Tide caps for select bottles will begin shipping in Q2, and VIX ZQL caps will follow in the second half of 2026. We are also in the process of qualification with three additional applications, which are going well, and we look for many more beyond that. Additionally, We'll be posting on our website and through social media channels. We've recently achieved the highest purity grade through Cospitox testing. Cospitox is a consortium focused on the intersection of cosmetics, packaging, and toxicology that has formulated a standardized voluntary safety evaluation guidance for the use of PCR and cosmetic products and detergents packaging. This milestone was the result of a collaborative effort between Procter & Gamble and PureCycle, with both teams jointly preparing and submitting samples for evaluation from the Ironton facility. Through the testing, our dissolution process produced the highest grade material. We are the first recycler to achieve this, and that means our resin is pure enough for leave-on cosmetics, achieving the highest possible Cospitox grade underscores the quality and consistency of our product and reinforces its suitability for demanding cosmetic applications. We are deeply appreciative of their support, their continued partnership, and excited for the ramp ahead of us. All of these qualifications matter. They are proof points for Procter & Gamble, but also for other customers. When other brands see the product passing the highest quality standards and they see supply disruptions and They see regulations coming, they start calling. We're very excited about a recent announcement with Plastic Ingenuity. To put this in context, the market for hot lids in North America is massive. There are over 50 billion, 50 billion coffee cups consumed annually in the U.S. alone. Plastic Ingenuity services many of these brands, including some of the largest in the world. Part of their decision to move forward with us was the positive reception that they received from numerous QSRs and restaurant chains when they showcased the sustainable lids at the SPC Impact Conference in Nashville two weeks ago. The market response validated the demand. Coffee lids are available with 25% to 100% Pure 5 Ultra resin, which gives brands options to buy what they need. Beyond hot lids, we have finished trials on additional applications as well. including cold lids, which is a rapidly growing category, as well as food trays and meat trays. We're seeing significant opportunity to commercialize across their product portfolio. QSRs carry significant plastic packaging exposure in California. And with the mandate seven months away, we're seeing real urgency from a number of brands actively looking for compliance supply. We complete our first international sale in Q1, Their initial purchase was over 300,000 pounds of pure choice resin for a product line we've sold previously into. Over 3 million items are being produced. Discussions are ongoing around additional applications and a broader relationship. Not only was this a successful project, it was also a much accelerated timeline for qualification and approval. The model here is simple to what we've done successfully before. start with a qualification of a single application, demonstrate the product works, and then broaden into sustained commercial relationships. We've already seen this play out with Churchill, a very trusted partner, where we started small with shipments to events like the CFP National Championship Game and other one-off sports and entertainment venues. That success has now matured into a broader, more meaningful commercial relationship that continues to grow into materially significant pounds that continue to ramp through the rest of this year. The progression with Churchill has directly led to increased brand recognition. Companies and organizations see the product working at scale in the real world, and it accelerates their decision to move forward. New Jersey remains in review, and we continue to progress positive discussions with all levels of the New Jersey government. I've personally met with numerous government officials, including the governor, the governor's office, and the DEP, and I am very encouraged by the new administration's drive for efficiency, efficacy, and impact. I remain very optimistic about our progress here. When this resolves, it will open a phased ramp of incremental demand as customers progress through the qualification process and prepare for 2027 regulation changes. And this will make New Jersey a circular state. The broader regulatory landscape continues to advance and timelines are getting very real. California's signature recycling bill called SB 54 requires 10% source reduction by 2027. That is only seven months away with increases to 20% in 2030 and 25% in 2032. Those source reduction targets can be achieved partially through recycled content. With our APR certification, Pure 5 resin qualifies as recycled content under SB 54, and we're seeing increased urgency from brands and converters who need to make this mandate. We've had direct conversations with the governor and his office about Pure Cycle's role in meeting the state's recycling targets and recycled content mandates. In New Jersey, the post-consumer recycle requirement increases to 20% in 2027, and the food contact exemption expires in early 2027. Both states have excluded mass balance from the definitions of recycled content, which means PureCycle is one of the only compliant suppliers at scale for food grain recycled polypropylene. The volume contingent on New Jersey approval has increased and now stands at 25 to 50 million pounds. That number has grown since last quarter, and I believe it will continue to grow. Two large brands have moved as far as they can through the qualification approval process without regulatory clearance in hand, positioning themselves to move quickly once New Jersey resolves. Both are motivated by the same deadline, the food contact exemption sunsets in early 2027. This combination of powerful, and near-term demand catalyst. This combination creates a powerful and near-term demand catalyst for PureCycle. It drives real demand and real urgency for the customers. A quick update on our global growth projects. As I mentioned, the Ironton turnaround was completed ahead of schedule and is tracking below budget. The improvement projects incorporated during this outage are targeting higher reliability, production rates, and product quality. Our Thailand facility remains on track for mechanical completion by the end of 2027, operational commissioning in Q1 of 28, and production in Q2 through Q4 of 28. The construction expected to break ground in the second half of 26. The total investment is currently expected to be around $250 million. The Belgian facility also remains on track. Permits are expected near year-end 2026. construction expected in Q1 of 27, and mechanical completion by the end of 2028. Total investment remains in line with prior disclosure of approximately $350 million. We are also awarded a 40 million Euro grant from the European Innovation Fund for the Belgian facility construction and finalized the documentation in April. On Gen 2, our initial design estimates continue to validate the economics, and we're working through the more advanced design work. At this time, I'll turn it over to Donald, our Chief Financial Officer, for the financial update and some commentary on our capital position. Donald? Thank you, Dustin. This quarter, we are introducing operational KPIs alongside our financial results to give you a clearer view of how the business is performing. We will continue to refine and expand these disclosures as the business scales. For additional context to the KPIs, Feedstock process measures purification-ready material delivered into the purification process. Other production captures co-products 1 and 2 and other saleable material recovered from the feedstock stream. This is an incremental revenue source that improves our overall yield and per-unit economics at Ironson. Together with purified production, these metrics give investors a more complete view of Ironson's throughput. Year-over-year production grew approximately 95% while monthly operations spending grew only 6%. That divergence is operating leverage emerging in the business. As we run more pounds through a largely fixed cost base, our cost per pound falls. At the same time, branded sales are lifting revenue per pound. Those two trends are converging, and that convergence is the foundation of the unit economics improvement we expect as the commercial ramp accelerates through 2026. Net loss for Q1 was $33.4 million compared to net income of $8.8 million in Q1 2025. The prior year period included a $56.7 million favorable change in the fair value of our warrants. Adjusted EBITDA was negative $30.9 million compared to negative $25.5 million in Q1 2025. The year-over-year change is primarily driven by approximately $3 million of higher project development costs running through the P&L. Included in adjusted EBITDA for the quarter is approximately $7 million of project development costs that were expensed through P&L. These are primarily professional services, project team labor, and facility costs related to our Thailand, Belgium, Augusta, and PrEP development activities. As these projects advance toward construction authorization, a greater portion of these costs will shift to the balance sheet as they become capitalized. We've included a reconciliation of adjusted EBITDA in the press release. We ended Q1 with total liquidity of approximately $131 million, which includes $90 million of cash and cash equivalents, approximately $31 million of excess cash invested in marketable securities, and $10 million in restricted cash. That compares to approximately $182 million of total liquidity at the end of Q4. Total operations spending came in at approximately $8.8 million per month in Q1 and within our $8 to $9 million per month expectations. Importantly, we held this monthly range for Q1 even as production volumes increased and feedstock and other variable cost growth was absorbed within our ongoing operations. This metric captures our ongoing operational run rate separately from project-related spending, much of which is largely discretionary and is shown separately. The split isolates ongoing operations from the discretionary capital deployment we're making for Thailand, Belgium, Augusta, and Gen 2 efforts. The Q1 quarterly total of $27.4 million reflects an annual incentive compensation payout of $1.3 million in addition to the ongoing monthly rate. Q2 will include the Ironton turnaround spend, which is tracking below budget and reported separately from the operation spend. Q2 will also include the scheduled SOFA bond debt service payment of approximately $9 million on June 1st. We have flexibility to monetize a portion of our SOFA bond holdings to offset some of this outflow. Project spend totaled approximately 14 million for the quarter, below the 19 to 20 million quarterly expectations, primarily due to timing. Fiscal year 2026 project spend expectations of 39 to 45 million are unchanged, and the majority of remaining project spend is discretionary. In April, we extended our public and private warrants to March 17th, 2027, and lowered the redemption trigger price to $14.38 per share, bringing them in line with the Series A warrants. These warrants now share the same expiration date with approximately $273 million in total potential proceeds available through that date. Beyond the warrants, we have meaningful financing optionality. Our $200 million revolving credit facility remains undrawn and available through September 2027, and we have approximately $75 million in revenue bonds available to monetize. Equipment financing payments will also step down in the second half of 2026 as existing leases mature, reducing our ongoing capital costs. On Thailand, conversations with a local Thai bank continue to develop well. We are actively progressing the project financing and are encouraged by the alignment we are seeing as we work on finalizing terms and conditions. We will provide updates as appropriate. With that, operator, please open the line for questions.