Good day, and thank you for standing by. Welcome to the PureCycle Technologies Third Quarter 2024 Corporate Update Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Christian Bruey, Director of Communications. Please go ahead.

Thank you, Kevin. Welcome to PureCycle Technologies Third Quarter 2024 Corporate Update Conference Call. I'm Christian Bruey, Director of Communications for PureCycle, and joining me on the call today are Dustin Olson, our Chief Executive Officer; and Jaime Vasquez, our Chief Financial Officer. This morning, we will be highlighting our corporate developments for the third quarter 2024. 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 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 third quarter 2024 corporate update press release that was filed this morning 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 if joining us by phone, you can access it at any time at purecycle.com. We're excited to share updates from the previous quarter with you. I'll now turn it over to Dustin Olson, PureCycle's Chief Executive Officer.

Thank you, Christian. This has been an exciting and productive quarter for PureCycle as we made significant progress across a number of areas. Momentum is building, and I'm proud of the team and their steadfast determination on our mission to revolutionize plastic waste and enable a pure planet. There continues to be an enormous need in the market for sustainable solutions and PureCycle is leading the charge with our next-generation purification technology. Q3 was highlighted by achieving three critical production milestones at our Ironton facility. We set these specific goals to show various elements of our production progress and are pleased with their execution against them. Production out of Ironton is effectively feed rate times the hours of production equals output. These milestones were chosen to demonstrate progress against both rate and uptime with solid outcomes on both fronts. While we are pleased with the achievement this quarter, we will continue to lean into production on both rates, reliability, and quality. Our confidence in achieving our nameplate capacity targets over time continues to increase. In addition to the milestones, tangible progress was observed in feedstock production, operations, commercial, and finance areas. Within operations, there were several successful outcomes in Q3 with significant advancement on the CP2 removal, Denver PA's PreP facility launch, and the ramping of the compounding operations. Our success on CP2 has enabled us to transition to running more challenging feeds with higher CP2 levels and exclusively PCR content. We are excited about Ironton's production performance and are now focusing our attention on scaling the commercial aspects of our business. With more stable production and higher quality output, we are also gaining traction on our commercial plan. Our compounding strategy is operational and has been producing approximately $400,000 per week of sellable product over the last four weeks, providing customers with better product options. Customers are actively trialing both compounded and PureCycle stand-alone pellets with great success. We are actively developing products for film, fiber, and injection molding applications. Film and fiber continue to be underserved, and our product holds the potential to fill a badly needed supply gap. We are exploring commercial opportunities in both direct and compounded products with ongoing trials running across a growing number of large companies. The project development process takes time to develop the right product qualities and then build trust between the supplier and customer. With our current plant performance, we are seeing a growing pipeline of opportunities that will translate to financial success. The team also made substantial progress on capital raising with proceeds from the Ironton revenue bonds combined with the capital raise in September. These combined efforts raised over $105 million in net proceeds to support our ongoing operations and growth efforts. As Ironton has increased production successfully, we are now looking to pursue financing for additional capacity in Augusta and Antwerp. As expected, the third quarter was our strongest production quarter ever, with more production than we had completed cumulatively to this point. Quarter-over-quarter production grew more than 200%, and we built inventories across film, fiber, and injection molded products. This was despite significant time spent commissioning the upgrades to the CP2 removal system. Previous CP2 had been our primary constraint for both rates and quality. Once we upgraded that operation, both have improved, and we do not currently expect this to be a rate constraint moving forward. Plant upgrades during the outage have continued to pay dividends for both rate and reliability. Our current operations are running steadily with long stretches of continuous production. We've made solid progress on our production reliability as well, specifically with critical seal systems and CP2 removal. Our team is dedicated to improving plant reliability and is delivering on their objectives with good pace and momentum. We are not done ramping our Ironton production. We look to build upon the Q3 milestones, and we know what we need to do to incrementally push production to higher levels. We continue to learn and also continue to lean into advancing these improvements. Our new production capabilities at Ironton give us the confidence to increase production as necessary to meet our growing customer needs. We are currently carrying inventory of both compounded and finished products and feel comfortable with our ability to service the growing demand. The pellets are recycled CP2, and I’m very proud of them. Many people across all disciplines collaborated to find a unique solution with CP2 removal and then rebuilt it. By improving the system, we also increased our ability to remove contaminants from the final product, and by doing so, we significantly improved product quality. The team has continued to enhance our removal capacity and should no longer be limited by a CP2 removal constraint. We also see an opportunity to create additional value in the CP2 stream. We are now removing this material at rates of up to 15,000 pounds per day, palletizing the final product, and marketing it to multiple companies as a sellable recycled material. This proves to be a great example of ingenuity. We've taken a waste stream that was originally destined for a landfill and turned it into a product that customers value. This not only helps our economics; it also makes our team more proud of the circularity that we're building. We see this as a nice addition to our product portfolio. Our feedstock operations were another area of achievement in Q3 as we started up our Denver, Pennsylvania, plastic sort facility. Plastic is an important component in our feedstock business, and we are pleased with the ongoing development. Our Denver sort facility was built with high product efficiency, high equipment reliability, and can be operated at low cost. The nameplate capacity is approximately 22,000 pounds per hour and should serve both Ironton and Augusta operations. This location will upgrade low-quality Number 5 bales to a suitable level for Ironton and also help to purify PET, HDPE, and aluminum streams for recyclers in the industry. With this facility, we should be able to buy more feed, draw more feed into the market, lower our feedstock costs, and build more stability into the Ironton operations. While still early, we have already achieved nameplate capacity at the facility. This will be a great long-term foundational asset for our business. We've also expanded our feedstock flexibility. We can now buy low-cost Number 3 to Number 7 bales and low-quality Number 5 bales, upgrade them through sorting, and then send a high percentage PP bale to Ironton for grinding and purification. At this moment, we are buying feed from MRFs, sorting at Denver, washing and grinding the bales at Ironton PreP, and purifying at our facility. We have also continued to run the off-site flake sorting operations with good reliability at 1,000 pounds per hour and are on track to install an additional flake sorting operation at Ironton. The net result of all this is incremental feedstock flexibility and efficiency. This will allow us to buy cheaper feedstock and improve plant yield by avoiding processing non-PP streams through purification. Practically speaking, our PP concentration has increased from less than 85% to 92% to 95% today and is expected to continue to improve to 97% in Q4 after the final Ironton flake sorter is installed. This higher PP concentration allows for Ironton production yields to grow while also making our plant more efficient and reliable, allowing for higher rates. Bringing together all these different feed capabilities is an important accomplishment for our team. Digging deeper into the successful production outcomes of Ironton, there are other important elements worth noting. The improvement in production across the plant has come while simultaneously moving into more challenging feedstocks and improving final product quality. Without being able to process more prevalent feedstock, Ironton production would have been limited by feed or burdened with higher cost feed inputs. The plant has shown the ability to run prevalent curbside PCR with high levels of CP2 and improved recovery. You can see how the mix of PIR, PCR with a combination of no CP2, low CP2, and high CP2 contents will impact feedstock pricing and final product pricing. Our improved product quality at Ironton helps improve commercial adoption and also opens up more applications for our product. Progress on both feedstock cost and off-take value should continue to build confidence in strong margins and the attractive economics of our business. Initial commercial feedback from the market has been very positive and gives us increasing confidence in achieving the financial margin targets we previously discussed. Our unit economics for Ironton and our products continue to show strength and should provide a solid foundation to build future plants and capacity. Our compounding efforts are layering in additional benefits to our business. The compounding strategy was added to position PureCycle to better match the product to the customer-specific application. It was an enhanced service option for our customers to open the door and qualify more quickly, and we're seeing early successes. Customers are excited about the products that we're making. Compounding also allows us an opportunity to incrementally expand our volume with PIR, PCR, and virgin complements and improve overall company profitability. We can offer these compounds to the market at lower price premiums versus virgin alternatives, but they should also carry better overall economics to us as the volumes are materially higher for a largely fixed-cost business. This works in both PureCycle's and our customers' favor and should lead to better overall profits for us. It's unclear how much of our volumes will ultimately be compounded, but in any scenario, the mix of compounding should be accretive to the overall profit dollars. Following the success of Ironton operations in Q3 and consistent production of RPP, we shifted our focus towards commercial efforts. The product you see on the left is a 50-50 blend of PureCycle and PCR material. This has been adjusted from 12 MFI to 35 MFI to serve the fiber market. It is a very unique, high-quality product in the market. The color is good, the contaminant level is very low, and it runs similar to virgin in customer facility trials. Our compounding strategy has enabled us to build a portfolio of products for the broader market. Not only are we creating a variable blend of recycled content, but we are also adjusting the product characteristics. Every application is a little different. We can now formulate blends for general categories while also creating specific recipes for customers when necessary. This simplifies their operations and makes adoption easier for customers. We have built 2.5 million pounds of compounded product inventory with various blends in preparation for upcoming commercial opportunities. This alleviates one of the early commercial challenges for new suppliers about their concerns regarding reliable supply and consistent quality. The PureCycle stage is set. Our technology is creating high-quality products in large quantities. Our commercial strategy is taking shape. We are well positioned to take advantage of this attractive landscape. No matter how you look at the overall market opportunity in front of us, it's absolutely massive. Global PP demand is over 187 billion pounds and continues to grow at 3% to 4% per year. The demand for recycled products continues to be high and growing due to brand commitments. The supply gap remains high due to a lack of quality product available, and PureCycle is testing products across three key underserved segments. We believe our product can satisfy customer requirements in approximately 85% of the current market. Not only does the market look attractive today, based on industry projections, we believe future years will look even better. The demand for recycled material is expected to grow to approximately 60 billion pounds by 2030. We believe it is clear that PureCycle is best positioned to be the primary supplier of high-quality material through this enormous market. With Ironton now better positioned, we have been focusing on our commercial efforts. Trials have been kicked off across several companies, industries, and applications. This process has been very encouraging as market feedback on our products has been consistently positive. Our product is delivering high-quality outcomes that will help enable our customers to achieve their sustainability goals. The trials are showing our product runs with virgin-like outcomes and will be able to address large parts of the overall PP market. We are excited to open up new trials as well as progress our existing pipeline of potential customers. As customer orders arrive, we intend to ramp to meet that demand. As we embark on our commercialization, we want to give investors some context around our commercial time frames. Given the unique nature of our product, most investors are likely not familiar with the process for project commercialization. We have focused on four key initial categories for sales: fiber, film, injection molding, and automotive. Each category will represent a key proof point for future sales in both Ironton as well as future facilities. For fiber, we are well on our way. The application is operationally tricky. There are numerous adjustments that need to be made to fine-tune the process, both in terms of compounding recipe and customer fiber operational variables. We believe we have found the right recipe, and we are currently trialing our material with five different fiber producers, some very big and some more niche, testing a wide range of yarn types for different applications. We are very, very excited here. I remind you that fiber is an extremely difficult operation, even for virgin material. So to find success with a recycled stream is just a significant accomplishment. Initial progress has been strong, and we are confident this will be a large category for us in the future. Injection Molding: We're very excited to partner with Procter & Gamble to develop several compounding solutions across a few different brand categories. This commercialization process at P&G is expected to take time, but initial feedback has been encouraging. Procter & Gamble has been a steady supporter of us, and we are excited to deliver the first tangible product to their brand teams. Automotive presents a potentially enormous category for PureCycle. There are typically over 300 pounds of plastic installed in each vehicle, and that number has grown as OEMs replace steel to lighten the weight for better fuel efficiency. Polypropylene is typically the plastic of choice because it is the lightest of the traditional plastic options. Automotive has been historically challenging with traditional recycled materials as it is highly sensitive to quality and the applications are highly technical. A small imperfection on an automotive plastic part can create paint adhesion problems, odor issues, or yield losses. To date, introducing other recycled supply to the automotive market at scale has been difficult due to the contamination levels. We have been working with a global automotive company to gain approval for our products in several key applications. The customer approval process is well underway, and we hope to gain final approval in Q4. If this proceeds as planned, we expect orders to start in Q1 of '25. For film, we are just getting started. While the trial process will follow a similar timeline as fiber, the early results are promising. We have not trialed our product commercially yet, but we have converted our product into film at lab scale. This is a big deal. We have worked with a large food and beverage brand to take their wrappers, things like metallized film and multilayered film, to our Durham R&D facility where we purified it and converted it into film, all on site and in front of them. It's a great proof point for our brands looking to close the elusive recycled gap in film. Across all these applications, there's also an emerging synergy story. We worked with one customer interested in using our product in a mop head application. This application had an injection-molded plastic base connected to a collection of fibers for the mop. One customer, two application types; PureCycle can serve both. We had another automotive customer discussion around replacing the carpet in the car with RPP fiber. During that discussion, we also mentioned our ability to produce bumpers, dashboards, and other products. One customer, multiple applications; PureCycle can supply all. Our strategy is to prove that our product can successfully run across multiple lanes. We found early success in fiber and injection molding and are in the early stages with film. As we gain approvals, we expect to broaden our customer base, grow our offering potential, serve customers more comprehensively, and build a strong commercial foundation for future projects. We anticipate that revenue will begin to materialize in Q4 and ramp into 2025. This confidence is being built by a growing pipeline of customers, strong success from trials, and feedback from the market. While there is some uncertainty with exact timing, the direction and inflection of our financial prospects are clear. The future is bright, and we are energized and excited. Some of the largest companies in the world are recognizing a new supply that has emerged to solve their sustainability needs, and they are leaning in enthusiastically to PureCycle. At this time, I would like to hand it over to Jaime for the financial presentation.

Thank you, Dustin. I'll touch on our liquidity on Slide. As Dustin mentioned, we raised $90 million on September 13, by entering into subscription agreements with certain investors where we saw a combination of preferred stock, common stock, and warrants. This was in addition to the $18 million in proceeds from the revenue bond sales earlier in the quarter. These transactions boosted our quarter end unrestricted and restricted cash balance to almost $94 million. Also, as a reminder, we hold about $118 million of our revenue bonds that we plan to sell over the next several months to further support our liquidity needs in 2025. In early October, we did make a $36 million payment into an escrow account related to the Augusta purification project. Over the next several quarters, we have about $11 million of commitments for the Augusta project, mostly for long lead equipment and pre-construction work. We plan to further the activity in Augusta in 2025 and also plan to secure financing for that project. Lastly, operating cash expenses totaled $23.5 million for the third quarter, a decline from nearly $35 million in the previous quarter and down about $4 million from the first quarter of the fiscal year. I will now turn the call back to Kevin to open the call for questions.

Thank you. Our first question comes from Hassan Ahmed with Alembic Global Advisors. Your line is open.

Good morning, Dustin. Good progress being made. Happy to see that you guys hit all three of the main production milestones towards the end of Q3. Just on the near-term side of it, how are those milestones looking in the early part of Q4? Are you continuing to hit those milestones or even exceed them? Where do we stand there?

Thanks for the question, Hassan. Every time we reach a new milestone, we map out the boundary conditions for that operation, and we learn how to operate at that level. So we have very high confidence in our ability to get back to those levels and operate at those levels on demand. As we progress into Q4, we've been running higher feedstock with higher levels of CP2. We continue to commission the CP2 to get all the kinks worked out so we can run at high levels, and we continue to ramp up production from there. The important thing here is that we have high confidence in our ability to reproduce those results and run the plant as we want. Our focus now is on establishing a commercial lane to have Ironton operations meet that commercial demand. Over the next few months, we'll run the rates that are required to meet the commercial demand and look for new boundary conditions so that when the demand is there in the latter half of Q4 and into 2025, the Ironton plant will increase capacity to meet that.

Very helpful, Dustin. As a follow-up, I appreciate the Slides 12 and 13 in particular. It appears that you guys are getting very good customer feedback, and commercial sales seem imminent. If I read the slide correctly, it seems that as early as just this fourth quarter, you should start seeing some commercial sales, ramping into 2025. How should we think about meaningful revenue levels, is 2025 the year? And dare I ask about EBITDA as well?

We're not going to provide incremental revenue projections for 2025. However, we are extremely excited about where we are with customers. We've had a lot of very successful trials. Each trial is unique to the customer, with specific requirements for applications. Trust in PureCycle is built as they go through the trial process. Indications suggest we are meeting needs in three main areas: will PureCycle maintain high operational levels at Ironton? We received positive feedback there; will the quality be sufficient? We're meeting that criteria too; and do we have the inventory and capabilities to meet demand? We've been able to build inventory across the quarter. While it's difficult to say when specific customers will give the full green light for POs and commercial transitions, the signs indicate solid and meaningful commercial progress both in Q4 and ramping into 2025.

Perfect. If I could quickly squeeze in one more. Production is ramping. Fair to say that the technology has been more than proven, right? In light of the termination of the joint venture with SK, production ramping up, and technology proven, I'm sure you are getting increased interest in other joint ventures as well. Can you provide any insight into what that pipeline looks like?

You're absolutely right. We have had a lot of interest from various partners wanting to bring our technology to different regions of the world. Since we demonstrated success in Ironton, interest in growth has indeed increased. SK has been a good partner for PureCycle, helping us on numerous fronts to work through technical challenges. However, the project with SK was complex, involving multiple technologies, and synchronization between timelines was challenging. We continue to seek opportunities beyond South Korea and believe that story is simply on pause, not over.

One moment for our next question. Our next question comes from Eric Stine with Craig-Hallum Capital Group. Your line is open.

Hi, everyone. Thanks for taking the questions.

Hey Eric, how are you doing?

Good morning. I just want to make sure I understand. It sounds like you've demonstrated that you can ramp to the milestones discussed that you reached in Q3. Should I take your commentary to mean that you're not necessarily producing at those levels now? While the focus is on the commercial side, I'm curious about your confidence level that you need to be above those levels you’ve previously demonstrated, especially since the market opportunity is much larger than your current production capabilities?

We are pacing production at Ironton with the commercial aspects of the business. Our operations team is confident in their ability to ramp up as needed to meet market demand. There has been a step change in product quality in the past 6 to 8 months, directly related to CP2 control. Customers recognize the benefits of our product over alternatives and are turning to PureCycle as a primary solution.

Got it. You talked about commercial activity in various end products. I assume these are near-term, yet far enough out that it gives you the time to ramp from where you are to meet the higher levels of demand. Is that a fair assessment?

That's a good way to put it. Once you demonstrate success in a single customer application, the adoption process tends to be fast. Proving capabilities in one plant allows for scaling across other plants. There are also opportunities through distribution channels that we are engaging with, so we can move products into the market both in Q4 and ramp significantly in 2025.

One moment for our next question. Our next question comes from Thomas Boyes with TD Cowen. Your line is open.

Appreciate you taking the questions. First, I’d like insight into the automotive opportunity. I know it can take time to get designed into a vehicle, particularly with materials. I was impressed with how quickly you’re getting to commercial sales; is that due to the compounded resin, or is there something else at play that we should be aware of?

Not all our customer trials started recently. Progresses you see now are a result of seeds that were planted a long time ago. Some automotive applications have long qualification periods while others do not. If you can demonstrate your product as an equivalent replacement for existing materials, adoption can happen fast. Our product's performance increasingly resembles virgin polypropylene, which accelerates adoption.

That's helpful. Nice to see the new sortation facility. Can you provide insight on the cost per pound? Is the cost offset by improved yields from the facilities? Is it a net neutral situation or a positive outlook?

We are extremely excited about the Denver facility. The operational density and population around the location are very promising. We've demonstrated the ability to run at nameplate capacity. While we're still mapping out the overall economics of the plant, we expect to see good outcomes. The Denver facility allows us to control feedstock quality better than in the past, which should improve reliability and economics. We believe having this asset gives us greater insight into incoming feed, enhancing overall economics.

That was very helpful. Quick one and then I'll jump back in the queue. What's the timeline to stand up Augusta, assuming financing occurs next year? Is that a six-quarter, two-year timeframe?

A good framework for Augusta is six to ten quarters. That said, we have purchased a lot of long lead equipment already that's ready to go. So while that's the range, we may be able to improve the schedule over time.

Hey, good morning Dustin, good morning Jaime. Congratulations on the quarter and thanks for taking our questions.

Good morning.

Just a quick update on the current status of the production line in Ohio. Are you able to provide a timeline on when you might expect to get the plant closer to full peak capacity?

Ironton is in great shape. We've faced constraints over the last six to nine months, primarily with CP2. Solutions in place have unlocked capacity at Ironton. Critically, the recent improvements have enhanced our ability to run high-quality feed into the plant and raise rates. We're excited about our growth potential. We have identified areas to push rates above 10,000 pounds per hour, which is roughly 80% to 85% capacity. The focus is on ramping commercial production.

Do you foresee a scenario where you could, closer to 107 million pounds of UPR resin capacity through next year?

I don’t have a timeline for achieving ratable capacity at 107 million pounds per year. We still have missions to accomplish to get there and learn as we push into higher levels of production. Our team's competency in grid resiliency and problem-solving is something we hold strong to as we work through these challenges.

Thank you. One more thing, you mentioned the Augusta facility time line is roughly six to ten quarters. What would you expect the future capital requirements to be for building out that first and second line?

We're currently not in a position to offer an updated number for Augusta's CapEx requirements as various factors, including inflation, can change the situation. Previous guidance remains applicable, but we cannot quantify at this moment. Building lines three, four, and five will take less time than the first two because we will have the necessary infrastructure already built.

Hi. Good morning. Thanks for taking the questions.

Hi, thanks Brian. Thanks for calling in.

When you look at Slide 13, when the commercial sales ramp into the third quarter of 2025, what level of production does Ironton need to meet that run rate?

The commercial ramp-up is still a number that’s in flux, making it hard to give a firm production amount. Between project sales and other channels, I expect that by mid-2025 we will have the capacity to exceed 50% production at Ironton.

On the economics, could you remind us of those expectations? Can you frame what the expectations on the non-compounded economics are?

At the Ironton showcase, we stated breakeven requires 40% to 50% utilization; breakeven for the company is achieved at 80% to 90% at Ironton. These figures remain relevant as market conditions fluctuate.

What’s the expected future capital requirement when you think of building out that first and second line?

The total CapEx for Augusta remains in discussions and is subject to volatility. We're unable to provide an updated figure for CapEx but affirm previous guidance. The timeline for building additional lines at Augusta will also be shorter than for the first two lines due to the already-existing infrastructure.

The operating cash burn was about $23 million in the third quarter. Moving into the fourth quarter, we expect to retain a level around that, hopefully seeing some improvements.

As operations become more steady, overall costs should stabilize too, and any previous reliability issues will reduce costs. We believe we can manage cash more effectively going forward.

Hey, good morning Jaime. Thanks for taking the call. Just curious if you can run Ironton at a specific rate for an extended period of time? That seems more important than an exact pound amount, which can grow from that level.

Yes, we can control Ironton operations, adjusting rates seamlessly. The key component, CP2, is now under control, and we can dial production to meet market demands effectively.

On compounding, how much of an opportunity is there financially? Will you get a premium for blending in virgin material?

Compounding allows us to cater to customer specifications, enhancing service levels. Additionally, there is a chance to earn higher profit margins, as the efficiency of the blending process creates value. Ultimately, success hinges on how well we solve customers' problems through effective production.

Thank you for that question from Stanley. Dustin, if you have any final comments?

I want to thank everybody for joining the call and for being steadfast partners for PureCycle over the years. We appreciate the opportunity to update you on our progress. It's been a productive quarter for us. Ironton is under control, CP2 is resolved, product quality is better than ever, and our compounding operations are live. We're building inventory in preparation for commercialization in Q4 and beyond into 2025. We're excited about the future, working hard to make this a reality, and look forward to our next quarterly meeting. Thank you, everyone.

Ladies and gentlemen, this concludes today's presentation. You may now disconnect. Have a wonderful day.