PureCycle Technologies, Inc. Q2 FY2022 Earnings Call

Thank you, Victor. Welcome to PureCycle Technologies 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 Somma, our Chief Financial Officer. This morning, we will be highlighting our corporate developments for the second quarter. The 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 10-Q filed yesterday as well as our 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 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.

Yes. 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 Otworth, 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 we 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 the 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 PureZero program. This program is expected to provide organizations, companies, communities, and events with 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 one and two 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 one and two. 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 one and two, along with the three East Coast PreP facilities. We've allocated $173 million for the Augusta project to support 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 relationships with SK Geocentric in South Korea and Mitsui in Japan to develop PureCycle purification facilities in Asia. During Q2, we had the pleasure to visit the SK team in South Korea and had the opportunity to visit both their global R&D facility and 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 operation in 2025. Our Ironton project remains on track. We expect mechanical completion in the fourth quarter of 2022 followed by initial pellet production by year-end. This is consistent with our previous messaging and also 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, supply chain disruptions, and inflationary pressures. We are 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 multiline purification facility in Augusta continued to progress, with current projections anticipating mechanical completion, startup, and full commissioning in 2024. This is a slight change from the previous estimates due to current economic and supply chain conditions but it's essentially on track. Longtime 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 worked with for several years in our Ironton facility. Working with Coke Modular Process Systems, Denham-Blythe, Gulfspan, Emerson, and Krauss Maffei gives us increased confidence in maintaining the project schedule. During this period, the 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% complete. We anticipate an 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 on site 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. The Denver, Pennsylvania PreP facility is designed to have a number one to seven bale sort capacity of 175 million pounds annually. And the Augusta PreP facility will be designed for 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 1 to 7s or 3 to 7s, 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 FEU 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 EPR grades across different purification lines. The commercial team continues to build our offtake pipeline. At this time, our Augusta purification facility is 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 and are 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 objection (LNO) for all food types under the condition of use E through G for food-grade post-consumer stadium trash recycling materials. This was a collaborative effort with the FDA. Our teams worked closely 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. 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 of the FEU 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 Somma for our financial update.

Great. Thank you, Dustin. Please turn to our second quarter liquidity and balance sheet on slide 12. We ended the quarter with just over $516 million in total available liquidity. During the quarter, we continued to make significant investments in our Ironton, Augusta, and PreP facilities, the majority of which came from unrestricted assets. Cash and debt securities available for sale decreased from March by $68.2 million. To advance our Augusta multi-line and PreP strategy, we made deposits on long lead equipment and furthered the design and construction for both the purification lines and the PreP facilities that we provided updates on earlier in the presentation. That accounted for almost $37 million of the second quarter investments. We also continued to run our corporate and pre-operational businesses, which means we incur payroll and benefit costs, which were $6.3 million during the second quarter. We had $8 million of cash used for normal corporate operations such as insurance, professional fees, and various other expenses. Now, let me comment on the cash invested in the Ironton plant, as we are nearing mechanical completion later this year. Previously, we had disclosed that we expect the project to be $55 million to $65 million over our initial budget. At this stage, we are maintaining this position. These additional project expenses are funded from our unrestricted cash and we spent about $5.6 million this quarter. Additionally, we are required to replenish certain amounts of our Ironton bond funds from unrestricted cash. We transferred $11.5 million from unrestricted cash to restricted cash. We also made payments of $27.5 million directly from our project fund. Let's now turn to Slide 13. PureCycle continues to build on its operational momentum and execute against a strategic growth plan. The operational startup of our flagship facility in Ironton remains on track and marks a significant milestone in PureCycle's commercial path to addressing the global plastic waste crisis. PureCycle continues to build operational momentum in a number of key areas. Ironton is on track for Q4 2022 pellet production, Augusta construction underway, FDA pre-notification letter, we will receive an agency opinion letter for the use of food grade post-industrial recycled materials, and an LNO for post-consumer stadium trash. Our Ironton offtake is fully allocated, and Augusta's first two lines are 70% allocated, with 100% of Augusta's feedstocks for the first two lines under LOIs. The feed PreP execution strategy is on track with Ironton startup planned for Q3, Central Florida later in 2022 or early 2023, and both Pennsylvania and Augusta in 2023. We continue to broaden the end applications of PureCycle resin through converters and specialty compounds. We ended the second quarter with $516 million in total cash and investments. Most importantly, we broadened the experience of our board and we continue to recruit top talent to the organization. We look forward to updating the market with additional relevant information respecting how we are executing our strategic plan, which will include a further update on the Augusta debt raise process as soon as we are able. Thank you for joining us on the call today. And we'll now open for questions.

Thank you. The first question comes from Hassan Ahmed from Alembic Global Advisors.

A quick question around feedstock sort of pricing as well as availability. Obviously, you guys did a very good job in explaining to us that, Augusta lines one and two feedstock for that is oversubscribed. Just wanted to sort of hear what you guys are seeing in terms of sort of discussions, be there with regards to availability, be there with regards to pricing for the other lines, particularly keeping in mind all the logistical issues that we're seeing, keeping in mind the inflationary environment and the like?

Yes, thanks a lot, Hassan. It's Dustin. I think that's a good question. The differentiator for us is that our technology really opened up our ability to use a wider swath of feedstock in the market. And so while we agree that there's pretty active action in the market for some of the spot pricing for number five bales, that doesn't really illustrate the availability of product that's outside of that stream. And so we feel like we're in really good shape. On the one side, we have a feedstock plus pricing program that effectively insulates us from the variability in the number five bale. On the other hand, we've got a technology that allows us to dig into feedstocks that others can't touch. And so we're in good shape for Augusta lines one and two, and we're not prepared to speak about the details yet for lines three and four, but we've got quite a few very active discussions with feedstock for three and four that we're going to be excited to share in the future.

Very helpful. And as a follow up, maybe for Larry, obviously, recessionary fears abound rising rates and the like so, I mean, what do you guys are seeing on the capital raising side of it, obviously, the world's changed a fair bit over the last couple of quarters. So but any sort of color around, that would be appreciated?

Yes, we monitor rates daily, and we've indicated in our press release that we have an ongoing process in place. Since we began examining this a few months ago, the 10-year treasury has increased by at least 100 basis points. That is significant. However, the projects we plan to fund feature robust cash flow models, allowing us to maintain a relatively tight spread over treasuries. While there are pressures from rising rates, they are not substantial. We believe we are in a solid position, and this does not affect our future plans. That's our current status.

Our next question comes from the line of Noah Kaye from Oppenheimer.

We'd like to start by zooming in on the FDA approval process. Particularly, it was really helpful for you to give investors a picture of how important getting this letter is for Ironton specifically, and I got those as well, how important getting that approval for post-industrial feedstock and stadium trash is how much of a feedstock your plan the source kind of already qualifies or falls into that category. And then maybe talk us through how you see the process playing out from here.

Yes. Thanks a lot, Noah. We're very excited about the progress we've made with the FDA. I think it's important to step into the process a little bit. This initial discussion with the FDA was really to level set so that they understood our process and technology. We understand what they needed to see in order for us to move forward. There was a lot of collaboration and good discussion. In some ways, the FDA hasn't seen a technology like this for polypropylene and in many scenarios, we were able to advise one another on how to do this process better, tighter, and more efficiently in the future. So on the first point, what we'll see going forward is a shorter cycle time with the FDA. We think now that we understand what they're looking for, and we'll be able to slide the information to them in a more efficient way. With respect to your specific question, when you think about the offtake partners that we have, they have a pretty big appetite for polypropylene in general. They sell across lots of different market channels. What we're able to do in the interim is work with them to source applications that fit into the FDA approvals we have. As we gain more approvals, we'll be able to widen that out to get to their full portfolio. So I don't see any risk to our current offtake position with Ironton because we've got flexibility in our contracts to move the product into the lanes they see fit. More importantly, getting the approval that we've got now really gives us a lane to go get additional approvals across more feedstocks and a wider application of use more quickly. You'll see that over the coming months and quarters, just more of these LNOs adopted for different product lines.

Noah, it's Larry. I just wanted to add one further thing. Almost all of the Ironton for supply are post-industrial. I think Dustin said that, but I just wanted to clarify as well.

Right. So you're effectively going to be covered on the feedstock, I do have the Ironton, and I just want to make sure that point was understood by everyone. So congratulations on that. The operational update, maybe you could talk a little bit about kind of some of the last pieces that need to fall into place here for Ironton to turn online. I'm sure we'll revisit this in the November call, but just how you are currently thinking about the cadence of the ramp as we get into the first half of next year.

Yes, that's great. You can appreciate there's a lot of moving parts on a project of this scale and size. Given the environment that we're operating in, it's just a daily battle to hold schedule, stay on track because there are a lot of moving parts. But again, I'll reiterate, I'm very, very happy with our partners. We've made some nice strategic relationships in key areas like in the I&E, the electrical, the construction space that have allowed us to bypass much of the pain felt by the rest of the industry because we have partners that put us first. That's one reason we've been able to hold schedule in Ironton. We're very proud of that because we've got partners standing behind us and battling for the components we need. This could be one of those things where you charge forward and get almost everything done, but then you end up with a punch list of activities that you've got to close before you start. We're actively working, let's say, multiple critical path lanes to ensure that we hold the schedule, and I can tell you that we're continuing to zero in on more certainty every month for mechanical completion in Q4 with pellets by the end of Q4, okay? With respect to the ramp up for Ironton, most people assume that the ramp up we've stated, which is effectively a nine-month linear ramp up, pertains mostly to technology and scale-up, which it does, but not entirely. We're confident in the scale-up and those activities will go fine. The things others often overlook are that we need to keep working the feedstock ramp-up plan so our suppliers can go from zero to full capacity, and we need to continue to work with offtakers to start taking material and grow that as well. The nine-month ramp-up plan for Ironton is longer than that for Augusta. It hinges on three factors: a, ramping the feedstock to our contractual plans, b, getting operations up, running reliably, and c, producing pellets, pushing to the offtakers and getting them comfortable about taking our material regularly. We're working on all three, and I'll say that we've made great progress across all fronts. We're starting to take feedstock into Ironton now, and, as you saw in some pictures, we're having detailed discussions with offtakers about the logistics of taking specific products. We're happy with our progress and on track to meet the ramp-up plan we've stated.

Our next question comes from the line of Eric Stine from Craig-Hallum.

So maybe just a little bit more on the FDA, and I ask this just because I don't have full knowledge of how deep that classification set is. I know, ultimately, your goal would be if you've got all of those classifications covered, then whatever feedstock you take in can supply any customer. So, I mean, is there a way to think about this with what you just announced today? I mean, how far does that get you to your ultimate goal, so that you can fully meet the market opportunity?

Well, our goal is ultimately feedstock flexibility with all classifications A through H, and that's what we're on track for. Over the past nine months, we've charted a path to achieve that. This will be an iterative process because the FDA needs to become comfortable with our technology and how we use the product before they will approve an LNO. This technology and the level of purification we bring to the molecule is unprecedented compared to others before. Education with the FDA is essential. The most important part is that we managed to get an LNO at the initial classifications and have a path to obtain more. I feel very confident that our engagement with the FDA is going to lead us to the rest.

For the LNO, is for E to G, the ultimate goal is A to H; this gives you a lot of confidence that you've got a pathway to get the entirety of it.

Yes. There are several operational reasons for that. Some of it has been procedural where we followed some procedures from the FDA testing protocol built for other molecules, not so much for polypropylene. We'll have to adjust for future applications to improve performance. The other part is that it’s the first feed we tested. As we test more feeds and demonstrate for the FDA that the quality of products from different feedstocks is indistinguishable, we’ll secure further LNOs. This is a great first step, and we've established strong communication with the FDA. There's an open dialogue and clear pathway to move forward.

Now, that's helpful. Maybe just turn into Augusta. And I know the offtakes, I think you have 70% allocated but laid out. There's a lot more behind that; things that are being finalized. Pipeline beyond that. I mean, do any of those potential offtakers? Were they waiting on this letter of no objection? How does that play into potentially closing on some of that activity to get it in a full offtake position?

I think it's helpful. It'll instill confidence in our path to moving forward with securing the FDA LNO. Up until this point, it was theoretical. There's definitely recognition of our achievements so far, but we've also identified customers who aren't waiting for it. Some customers, like in automotive, don't require it. As we engage with Augusta, the LNO will help with different allocations or discussions, but we're broadening the dialogue beyond consumer products into sectors that don't need it. We're experiencing strong interest across various channels regardless.

Got it. Maybe last for me, just on Europe. But I noticed that in South Korea and Japan you've got named partners. I know that Europe has been one where even go back a year plus and a lot of the Ironton offtakers were exploring the ideal location in Europe. So maybe just where that stands. And then I know that, LNO, here you thought would be helpful in terms of getting into the European market?

As we got into discussions around Europe, there was discussion about different partnerships, and I'm going to keep that very confidential at this moment; it's a topic for a future announcement. Anytime you get into discussions with JVs or partners, there's a level of work needed on your own to prepare for it. We're building a case for this activity independently, with opportunities to partner if we choose. We're doing a lot of work on site selection, prioritizing efficiency, good labor force, energy access, and infrastructure. This groundwork is essential because there's plenty of feedstock in Europe that traditional recyclers cannot use, and this is a domain we're targeting. The same process is underway with specific sites in Europe. Regarding the importance of FDA concerning Europe, yes, it's crucial. Europe has a separate approval process called EFSA, akin to the FDA. Our FDA results will support our customer perceptions and inform the EFSA process, and we closely monitor EFSA discussions and implications for our approval pathway.

The only other thing I'd add, Eric, is that we are also staffing appropriately to meet the needs of what will be required in Europe. We're not doing this just from the U.S.; we are finding a few critical resources that we're putting in place in Europe to achieve our goals.

Our next question comes from the line of Gerry Sweeney from ROTH Capital.

Two questions; one longer-term, and one short-term. On the longer-term question, in your prepared remarks, you talked about working on different UPR rates. I also think you talked about working with compound. Can you explain this a little bit further? Is this an opportunity to even add additional value to some of the polypropylene that you're going to convert? What exactly does this do maybe from a value standpoint?

Yes. Let's be clear; we do not intend to move into the compounding space. It's not part of our business plan to become a compounder. Our goal is to be an ultra-pure recycled resin provider. We are establishing relationships with compounders in the market who ultimately know the final brands and what’s needed to build the right recipes for creating the most value in the market. The comments about creating new value in the market channel relate to those relationships we're developing with others. With respect to new channels from feed to product, some unique opportunities will arise to highlight high-level transparency of full circularity in certain market segments. If any market segment can state that a product produced in a plastic container was recycled, came back through the chain, and returned to their product, that lightens the path for us. We've done similar work with consumer good applications, and I believe that the brand interest is set to grow dramatically with our transparency.

Got it. That makes sense. And then, the other question, this is more short-term. Obviously, you gave us some view on Ironton on track and when pellets are going to be produced and maybe the ramp-up time. But the next several months are probably very critical for Ironton. Are there some major steps in the commissioning process that once you cross them that they will give you a better view or visibility that the facility is on track to run the way that you plan?

Yes, I think that's a fair question, Gerry. I think that when we reach mechanical completion, that's going to be a big day for us. When we're able to introduce some of our process-specific solvents into circulation to get operation going—that's a big day. When we start making pellets out of the back end, there are so many steps in the commissioning process that I won't go into detail. There are literally hundreds of steps that we will go through to ensure we do it right and have a safe, reliable startup. Those are, I would say, the three big milestones. After that, the ramp timeline will be dependent on the three factors I previously mentioned: reliable feedstock ramp-up, operational ramp-up, and reliable offtake. We will take our time with the ramp activities, but we're methodical, reliable, and safe in each step, and I assure you that we are managing that effectively.

Our next question comes from the line of Thomas Boyes from Cowen.

Just two quick ones. Could you talk a bit more about the transition to the feedstock pricing? And I know, you said that there was some customer acceptance there. Is that for a portion of the 70% that's already allocated? Or is that really talking about maybe the 205 that's in the contracting phase?

I think the way to look at it is approximately 80% of the Augusta portfolio will be feedstock plus pricing. That's an estimate right now. Most of the legacy contracts with our original offtake stakeholders are based on virgin pricing models. However, the majority of customers that we're signing and negotiating with are aligning with the feedstock plus pricing category.

Got it. And then maybe how should we think about R&D spend? The goal is to kind of add additional feedstock streams for things that we are being landfilled and/or incinerated?

Yes, look, I would say that it's premature to really talk about material R&D spend concerning other materials we could incorporate into the technology. What we are learning about the materials we process—polypropylene and others—is very instrumental and insightful for us. We clearly see the potential of our technology. Still, at this moment, we aren't focused on an R&D stream away from our current activities with the FEU or testing different conditions for polypropylene and different feedstocks. Outside of that, we aren't extending into new areas. Our focus from the start has always been on Ironton: getting our schedule right, the tech right, getting started, and producing. That's our commitment. However, we are keeping an open eye on where we think it could go and over the next three to twelve months, we'll have more granularity to share about that activity.

Our next question comes from the line of Vivek Arora from Jefferies.

You mentioned that you're seeing strong demand from customers who don't require FDA LNO at all. Can you please give us some color on the pricing you're able to negotiate on the non-packaging applications when you discuss these offtake agreements? Thank you.

Yes. Hey, Vivek, we really appreciate the question. Regarding pricing in the market, we're going to keep that closely held until we get Ironton up and running and get Augusta ready to roll. I can tell you that there's no material difference between the pricing that we see with FDA-required customers and non-FDA-required customers. The significant aspect is watching our product quality being adopted by many channels. We've consistently maintained that we offer a virgin-like replacement. The more channels that get exposure to our product, test it, and start using it, the better we demonstrate that the polypropylene we manufacture is viable across market applications.

Thank you. I'm not showing any further questions in the queue. I like to turn the call back over to our CEO, Dustin Olson, for any closing remarks.

Yes. First of all, thank you, everybody, for dialing in today. We are very excited to share the news about PureCycle. And look, I think the big takeaway for PureCycle today and really in the near-term future is that we are 100% committed to executing our plan. The plan that was set forward many years ago, the plan that we've talked about quarter-over-quarter, is really staying fairly consistent. There are minor changes on the edges, but by and large, the strategy we've developed is in the execution phase. I believe that it's exciting for us to see steel going into the ground, to see our projects built, and to get them ready for service. This is going to be a watershed mark for all of us here and those that follow us. So thank you for following and for all the great questions. We look forward to continuing this path of execution, with far more updates in the future.

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day.