PureCycle Technologies, Inc. Q4 FY2025 Earnings Call

Thank you, Marvin. Welcome to PureCycle Technologies Fourth Quarter 2025 Corporate Update Conference Call. I am Eric DeNatale, Director of Investor Relations for PureCycle. Joining me on the call today are Dustin Olson, our Chief Executive Officer, and our incoming Chief Financial Officer, Donald Carpenter. Our retiring CFO, Jaime Vasquez, will also be joining the call. This evening, we will highlight our corporate developments for the fourth quarter of 2025. The presentation we will go 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, as well as information currently available to management. These statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control, including those outlined in our safe harbor provisions and forward-looking statements available at the end of our fourth quarter 2025 corporate update press release filed this afternoon, as well as in other reports on file with the SEC that provide further details about the risks related to our business. Please note that the company's actual results may differ materially from those anticipated, and except as required by law, we do not undertake any 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 changes related to quarter-end and year-end adjustments. Any variation between PureCycle's actual results and the preliminary financial data discussed may be significant. You're welcome to follow along with our slide deck or, if joining us by phone, you can access it anytime at purecycle.com. We are excited to share updates from the previous quarter with you. With that, I will turn it over to Dustin Olson, PureCycle's Chief Executive Officer.

Thank you, Eric. Fourth quarter was another period of progress for PureCycle. We ramped our operations in Denver and Ironton, advanced our customer pipeline and made meaningful progress on our growth plan in Thailand. As we announced in the press release, effective March 1, Donald Carpenter will be stepping into the CFO role. I want to first thank Jaime for his service in the last couple of years and wish him well in his retirement. And now I'll turn it over to him for a couple of words. Jaime?

Thank you, Dustin. I appreciate the opportunity and the time that PureCycle has provided me. This is a company with a great mission and talented people that should allow the company to accomplish that mission. And with Donald stepping into the CFO role, there will be continuity among the finance and accounting teams. Donald's time at PureCycle, combined with his depth of finance knowledge, should allow him along with the senior management team to help continue moving the company forward. To you, Dustin, Donald, and the rest of the PureCycle team, I wish you the best as you continue to commercialize and grow PureCycle.

Don, would you like to say a couple of words?

Yes. Thank you, Dustin, and thank you, Jaime, and thanks especially for all of the support and opportunities you gave me to grow into this role over the past 2 years. I share your thoughts on the PureCycle team, and I'm incredibly fortunate to have such an exceptional group supporting me through the transition. I am so excited for the future of this technology and our company. While the role is new, the mission I committed to 4 years ago remains the same, and I truly believe our company has an amazing solution to help end the threat of plastic waste to our environment, both safely and responsibly. With that, Jaime, I wish you the best in retirement, and I'll turn it back over to you, Dustin.

All right. Thanks a lot, Don. I wish you both the best, and I'm very excited about the path forward. In addition to this announcement, we previously announced we added 2 distinguished board members to our team, Dr. Siri, who serves as the Independent Director and Chairman of the Audit Committee at the Bangkok Bank and previously served as Thailand's Minister of Energy and Chairman of IRPC. And most recently, Valerie Mars, who retired as Senior Vice President and Head of Corporate Development at Mars Inc. We're very fortunate to have both of them. Now to the business highlights in the quarter. Before I get into the details, I want to frame where we are. We are producing high-quality food-grade recycled polypropylene at scale, something no one else in the world can do. We've qualified our materials in flexible packaging, wrappers, stand-up pouches, closures, thermoform containers, bumpers, and numerous fiber applications. Branded pricing is on track with prior guidance and our pipeline has grown to over 170 active projects. The market continues to struggle integrating large amounts of post-consumer recycled polypropylene content into consumer products. Recycled content is new, especially in the FDA space. And companies are challenging decades-old processes to make them work for this emerging space. PCT is helping them. As our brand continues to rise and other brands get more familiar with our product, we dramatically reduce the adoption challenges. When a brand puts our material into food-grade packaging on a retail shelf, they're doing something that's never been done before at PCT scale, at PCT quality, and with PCT flexibility. And while customers are extremely excited about our product and how it simplifies their lives, the adoption process, which includes things like lab, pilot, and industrial scale qualifications, lots of trials, regulatory reviews, packaging design, line validation, supply chain insurance, and internal approvals, it still takes time. But here's what I want you to take away from this call. The underlying demand is very strong and growing. It's clear to me that recycled content and consumer products is coming, the regulatory environment is naturally moving in PureCycle's direction and probably the most important thing of all, consumers continue to value sustainability, and it is driving their buying behaviors. The question is not whether brands will buy recycled PP at scale, but when. And we are positioned to be the premier global supplier. 2026 is about converting our technical success into accelerated commercial revenue growth quarter-over-quarter, and I'll walk you through exactly where we stand on that. In the fourth quarter, we successfully added a third shift to Denver, which had previously been a constraint on production. As a result, Denver processed 44% more feed versus the third quarter, ramping to 14 million pounds, a 35% increase over its prior quarterly high. We are actively buying from more than 15 different feed suppliers, including most of the largest players in the market, and have reduced procurement costs by $0.06 per pound over the last 12 months. Denver has fundamentally improved our feedstock flexibility and cost structure, and I have never felt better about our ability to reliably and economically supply Ironton as we ramp to full rates. Ironton also successfully ramped production in the fourth quarter with a production of 7.5 million pounds. We not only hit a quarterly record for production but also new daily records as well. This doesn't tell the whole story as we continue to manage production levels ahead of the commercial ramp. We are routinely running Ironton with higher reliability and at higher watermarks. In the last few quarters, I've spoken about how we ran successful rate tests at about 12,500 and 14,000 pounds per hour. We have a lot of data from those tests, which we've analyzed to see some very specific improvements that should allow us to push towards nameplate capacity in 2026. The original design for Ironton contemplated an annual maintenance average. We didn't take one last year but plan on taking one between mid-April and mid-May this year. There are lots of standard maintenance activities that are expected to occur, spanning inspections, cleaning, repairs, and improvements. I expect this outage to have really positive outcomes for PureCycle. If you look back at every planned outage we've had at Ironton, the reliability, top-end rate, and quality has always improved on the other side. It is our expectation that the same will be true for this one. We always incorporate the lessons learned into our procedures and activities, but outages give you the unique opportunity to make changes that are not possible when the plant is running. Reliability matters to our customers. As we've demonstrated consistent product quality and uptime, we've seen those conversations evolve. Several of our largest pipeline opportunities are now moving toward multiyear supply agreements, which is a direct reflection of the confidence that they have in our operating performance. Phase I of our on-site compounding started up last quarter. This enables CP2 to be compounded on-site and sold to the market. This project allowed us to reduce carbon footprint and cost to produce and improve our final sales price. We're very excited about this addition. And Phase II should be mechanically complete in March, and commissioning will continue in parallel to the planned outage. Phase II coincides with the demand planning for these grades and commercial offtake profiles. The Phase II on-site compounding line will be primarily focused on producing compounds for BOPP film, which is used in flexible packaging and thermoform applications, which is used in things like coffee lids to the highest value, fastest-growing segments in our pipeline. Having this capability on-site complements existing third-party compounding assets, improves turnaround times for customer trials, and gives us direct control over the formulations. We have built and will continue to build inventory ahead of the outage and across the planned application launches, and we expect to ship while our intent is engaged in turnaround. On the other side of this outage, Ironton should be well positioned to service the expected ramp to much higher levels of production and sales later in 2026. Turning to the commercial update, we booked $2.7 million of revenue in Q4, our fourth consecutive quarter of sequential revenue growth. We are actively shipping to 11 customers, roughly half of the branded and half are unbranded with additional conversions expected to begin in early March. While 2025 had real commercial delays relative to our original projections, the technical progress was substantial and the setup for 2026 is strong. On the positive side, 2025 was a year of real technical success. We qualified our material across food-grade applications that no mechanical recycler can touch. Flexible film packaging, wrappers, stand-up pouches, closures, thermo containers, and fiber qualification delays are frustrating and noisy, but they only impact the short term; the real long-term value is created through the application technical successes. The other big positive was that branded margins continue to be in line with our previous guidance. While branded sales have a longer sales cycle than non-branded sales, branded sales are the core focus for this company and where we see the most value in the market. Co-product sales have been positive for us, and we've begun to monetize both co-product 1 and co-product 2 and are seeing prices in the $0.25 to $0.30 per pound range. Fiber technical successes provided a lot of confidence to the market early on, but adoption was slow due to fragmented demands and extremely long sales cycles. We de-prioritized it in the near term. And while it does remain a real market for us, we're not going to concentrate our resources there today. The regulatory landscape has been broadly positive. Our material is accepted in Oregon, Colorado, California, Washington, and Europe. New Jersey has been slower. We partnered with the DEP on how our dissolution technology fits within the recycling framework, which has delayed some approvals. The good news is New Jersey has excluded chemical recycling and ISCC Plus mass balance credits, which positions us as the only supplier at scale for food-grade recycled content under the mandates. Large CPGs are lobbying the DEP on our behalf, and our relationship with them is strong. I personally respect the position in the New Jersey Department of Environmental Protection has taken, and we'll continue to partner with them as they integrate the legislation into action. 2025 was a challenging year for many of our customers. Tariff uncertainty, inflation, commodity spikes, and converter consolidations forced them to focus on cost savings and restructuring their supply chains domestically, leading to longer approval timelines. However, we believe those challenges are mostly behind them. The central message from senior brand leadership is clear: 2026 will focus on revitalizing organic growth and investing in innovative packaging, which is directly relevant to us. It has been publicly reported that several Fortune 100 consumer packaged goods companies have announced substantial increases in research and development spending aimed at product superiority, premium positioning, and sustainable packaging formats. After a year of playing defensively, these brands are shifting to an offensive strategy. This is directly pertinent to us because brands that adopt an offensive approach invest in distinctive packaging, and food-grade recycled content stands out as a differentiator. Despite the commercial progress, the anticipated revenue ramp has been delayed compared to our earlier projections for 2025. Last quarter, we communicated that we have a run rate demand of 40 million to 50 million that we are currently shipping or expect to ship soon. That figure remains unchanged. New Jersey has postponed some of our ramp-up. We estimate that applications for 15 million to 30 million pounds of near-term demand will need that approval. Overall, New Jersey applications account for about 300 million pounds of demand each year. Although this situation has been frustrating, demand still exists, and the fact that key brands and converters have reached out to New Jersey on our behalf highlights their desire to proceed once the issue is settled. Fortunately, we have been able to pivot to other applications that do not require New Jersey approval, and we see opportunities for applications that can boost our revenue in 2026. In addition to the previously mentioned 40 million to 50 million pounds, we've added another 20 million to 25 million pounds at full ramp. The earliest these could be converted is as soon as next month, with one of the most immediate opportunities representing roughly 10 million pounds of annual demand. The pipeline remains strong, increasing from around 100 projects a year ago to more than 170 today, largely due to our success in film where we continue to see significant high-value opportunities. I want to emphasize that we have been successfully qualifying pouch applications. Stand-up pouches are currently one of the most exciting trends in innovative packaging. They are lighter, more efficient, and are replacing rigid containers and cardboard boxes. Brands are making substantial investments in flexible packaging formats, and our capability to produce food-grade recycled polypropylene film for pouches places us right in the midst of this trend. BOPP film and thermoform applications remain the core targets for our compounding operations. And we focused our commercial teams on brands with the highest growth potential. Here are some examples of the end markets that we're actively engaged. We spoke about QSR coffee lids last quarter, and the interest continues to be strong and is growing. We continue to make progress with our first QSR coffee lid project: good product fit, excellent trials, and good relationship building between the end brand and converter. We're also in discussions with 4 additional brands following our recent quarterly announcement about coffee lid innovation. But these same customers also manage a growing cold beverage category that is taking market share. Brands are launching more products in this high incremental margin category. Additionally, brands are also transitioning to PP in 12 states that have already passed single-use polystyrene bands. This will give us additional tailwind for our product in the beverage containers. The net result of this is north of 300 million pounds of additional TAM in North America, and it's growing in the high single digits each year. Beyond cold beverages, premium pet food is a 130 million-pound polypropylene market for BOPP film packaging, growing 4.6% annually as pet owners trade up to higher quality brands. Jerky and Meat Sticks represent 40 million pounds of BOPP film demand, growing 6% to 7% with protein snacking trends. Dermocosmetics, think CeraVe and SkinCeuticals, is a 55 million-pound market growing at 7% to 9% as clinical skincare brands shift the PP packaging for recyclability. In household goods, things like storage bins, kitchen utensils, and laundry baskets represent a 700 million-pound polypropylene market where Walmart and Target sustainability mandates are creating demand for recycled content. From a base of only 3.3% to 5% penetration today, that segment alone has 150 million pounds of addressable pounds for recycled polypropylene growing at 8% to 12% as the mandates ramp. These aren't hypothetical markets. These are specific applications where we are engaged with brands in our pipeline and where growth trajectory works in our favor. Let me take a moment on the regulatory landscape, because I think it's important to frame this in concrete terms. Every EPR and PCR mandate that's been passed in New Jersey, California, Washington, Oregon, Colorado, and Europe translates directly into pounds of required recycled content. These aren't voluntary targets; they are law. New Jersey requires 10% recycled content today, 20% in '27, and 30% in 2030. California SB 54 requires 25% source reduction by 2032 with a stairstep approach requiring 10% by '27, 20% by 2030. We have received post-consumer resin certification from the Association of Plastic Recyclers, or APR, which is the standard that most state regulators referenced for recycled content compliance. That certification allows our material to be categorized as recycled content across numerous states, effectively clearing the regulatory path for brands to count on PureCycle material toward their targeted mandated targets. The EU's packaging and packaging waste regulation requires 10% recycled content by 2032. When you add it all up, there are literally hundreds of millions of mandated volume coming online over the next 5 to 7 years. And for food-grade polypropylene applications, we're the only global solution emerging at scale. The regulatory framework is laying the groundwork for the future. There has been significant progress in the Rayong, Thailand project. I spent a week in Thailand in January, holding numerous meetings with government officials, commercial partners, feedstock suppliers, local banks, as well as IRPC and our strong local team. Several key developments are noteworthy. Firstly, we have a plentiful supply of feedstock that exceeds our requirements. We have signed nine letters of intent with regional feedstock suppliers, six from the domestic market and three from Southeast Asia, which even at minimum annual levels surpass our needs for the first purification line. While we are working to broaden our feedstock network in Thailand, we are also discovering a rich supply throughout Southeast Asia. Thailand produces approximately 2.5 million tons of plastic waste each year, with an estimated 400,000 to 450,000 tons mismanaged. Roughly 70% of this waste finds its way into the ocean annually, making Thailand the sixth largest contributor to ocean plastic on a global scale. We are noticing a strong willingness from both the government and the commercial sector to collaborate with us on this issue. The commercial discussions have been very positive. Initially, we anticipated that all products would be exported to North America and Europe. Although we still expect to export significant quantities, we are engaged in fruitful dialogue with domestic packaging companies, including a major film producer, who view our material as an opportunity to enhance their export business, as well as with Fortune 100 consumer packaged goods manufacturers operating in Thailand. We identify key markets in automotive, flexible and rigid packaging, appliances, and a rapidly expanding hygiene sector, and expect to finalize several letters of intent with domestic customers by 2026. We held multiple meetings with the Board of Investment and submitted our application. If approved, we could benefit from an 8-year tax holiday followed by an additional 5 years at a 50% rate, translating to an estimated $100 million in avoided cash taxes. We also had constructive meetings with local banks and our banking partners in Thailand. Our relationship with IRPC is robust, and they have aided us in building a strong domestic team in Thailand. We organized a community forum attended by over 250 residents to explain the project, which was very positively received. We have begun purchasing equipment and anticipate breaking ground in the second half of 2026, with project completion still targeted for 2027. Our project in Antwerp, Belgium is also progressing as anticipated. We expect to obtain permits in the second half of 2026, with construction scheduled to commence by the first quarter of 2027 and mechanical completion by the end of 2028. Discussions with global brands are picking up as the Thailand and Antwerp projects advance. Many of the Fortune 100 consumer packaged goods companies we are collaborating with have operations across all three regions. We last mentioned last quarter that we expected to complete our initial engineering work for Gen 2 purification design in the first part of 2026. While there is still work to be done here, the initial findings are very encouraging. First, we see no technological constraints on building the higher end of this capacity scale than what we discussed previously or closer to the 500 million pounds of capacity that we mentioned in the range. This is important because costs do not scale linearly. In fact, the initial design analysis suggests that the incremental cost difference between the 500 million and 300 million pounds is relatively minimal. As a result, the initial look indicates greenfield costs on the Gen 2 lines approaching $1.50 per pound of capacity, and for brownfield sites should approach $1 per pound for expansions. This is a really big deal. This cuts down the capital intensity of our business, meaningfully improves future IRRs and puts us back in the ballpark for what it costs to build virgin polypropylene lines. It is also a lower CapEx intensity than what we estimated in the business plan last summer associated with our capital raise. Scale also benefits us on the production cost side. While it's too early to give definitive numbers, we see a clear line of sight to Gen 2 cash cost to be below virgin on-purpose PP production lines. While the majority of our focus today is on selling out and ramping Ironton and executing our Thailand expansion, this news on Gen 2 is incredibly important to the long-term value of PureCycle. We've known for years that our process consumes significantly less energy than virgin production. Now we are seeing the cost efficiency translate into a permanent cost and return advantage in the market. A market that I remind you represents 200 billion pounds per year of annual demand and a market that is expected to continue to outgrow GDP for the foreseeable future. Look, I know the commercial ramp has been slower than we projected. But I'd ask you to look at our history. Every time that we've said we've solved the technical problem we have. Every time that we've taken a planned outage, the plant came back better. The challenges that we face today are principally out of commercial adoption timing, not commercial demand, not technology, not operations, not feedstock, and now we have the product, the production, and the pipeline. The conversion is happening; it's a matter of when, not if. When I take a step back, every year during my tenure has had its own theme. 2023 was about completing Ironton. 2024 was about making the plant work. 2025 was about technically qualifying our product, especially in the high-value parts of the market. In 2026 will be about the commercial ramp and selling out the plant. Our future is bright. We have a strong foundation supported by tech and teams that know how to build. The market opportunity continues to grow in front of us, and the company is ready to lead. With that, I'll turn it over now to our new CFO, Donald Carpenter, for the financial presentation.

Thank you, Dustin. Our revenue goal is unchanged: reach Ironton breakeven, then Corporate breakeven. Revenue ramp has been delayed by customer adoption timing, but we built and staged inventory for product launches later in the year. Core operations costs across Ironton, Denver, and Corporate remain largely in line with prior guidance. I'll put more specifics around that on the next slide. On warrants, we have two series of warrants that were extended. The Series A, which represents 15.7 million of potential shares and the public and private warrants that represent 5.7 million potential shares. We have obtained agreement with the Series A warrant holders to extend through March 17, 2027, at a reduced redemption price of $14.38 per share, representing approximately $205 million of potential proceeds. The public and private warrants have been extended for 3 months with further details in the 8-K filed today. These represent approximately $68 million of potential proceeds. On capital structure, during Q4, we repaid $20.3 million of high-cost equipment finance debt and retired $9.8 million of principal on the Ironton bonds. We continue to spend on projects across Ironton, Thailand, Antwerp, and our Gen 2 development. On operations, we previously said ongoing operational and corporate cash burn were in the range of $8 million to $9 million per month, and this was prior to significant feedstock and free processing costs. Now that we're incurring more of these costs as Ironton ramps, we're still trending within that range with $24.5 million of operational and corporate costs for the quarter. The incremental production-related costs have been offset by managing discretionary spend and capitalizing on efficiencies elsewhere in the organization. Revenue timing reflects the customer adoption delays I mentioned. We currently expect improvement as Q2 product launches begin converting our staged inventory. The debt service line includes the nonrecurring equipment lease payoff and bond retirement I referenced on the prior slide. Looking ahead, for Q1 2026, we expect total project-related spend of $19 million to $20 million with $7 million to $8 million for Ironton-related projects, primarily related to the on-site compounding project. The remaining $11 million to $13 million is spread across our growth projects. For the full year 2026, total project-related spend is expected to be $39 million to $45 million, with $14 million to $16 million for R&D, which includes the cost of our planned shutdown in Q2 and completion of our on-site compounding project. The balance is spread across our growth projects, a majority of which remains discretionary. Q1 2026 debt service is expected to be approximately $11.1 million, which includes our semiannual convertible bond interest payment and some equipment leasing payments. Regarding financing, we are excited about our prospects for Project Finance given the progress we're making with both Ironton production and our future commercial ramp. Our first area of focus is on securing local financing for our Thailand project. The project data room is open with a large Thai bank. Critical site agreements with IRPC are in place, the EPC contractor is advancing through final design and cost estimates. In parallel, we are advancing discussions for our Antwerp project and finding a lot of synergies between the two efforts. Antwerp continues to be a strong project as evidenced by our recent success securing the EUR 40 million EIF grants. Additionally, we have approximately $75 million of revenue bonds that we will look for opportunities to monetize. The warrant extensions preserve approximately $273 million of potential proceeds. Together with the revenue bonds and project financing I described, we have multiple paths to fund the business through the ramp.

And our first question comes from Hassan Ahmed of Alembic Global Advisors.

I understand you provided a lot of details. There are clearly many factors influencing the commercial progress and ramp. I would like to explore this further. Let's start with a fundamental question: regarding the 40 million to 50 million pounds ramp that you're mentioning for Q2/Q3 and beyond, along with the additional 20 million to 25 million pounds ramp, how much of that is forecasted versus contracted? Any additional insights into your level of confidence and the structure of that ramp would be appreciated.

Yes, Hassan, it's great to speak with you again. I appreciate the question. Ultimately, we are very confident in our commercial ramp. What we're doing right now is quite challenging and has been difficult for recyclers for decades. We have a new technology and product, and it takes time to educate the market about what we can achieve. Each time we reach a technical success, it enables us to expand our capabilities further. While we have discussed the challenges in predicting specific timing, we are aware that it’s on its way and will follow an asymptotic curve, although it is not entirely within our control. We see an increase in the number of customers shipping and a continuous rise in revenue and trial volumes. The essence of our work is building relationships with customers, and we needed to secure certifications, present the Life Cycle Assessment, conduct trials, and prove that Ironton can provide the supply security they require. We have visibility on these applications, and the volumes you mentioned are promising. We are actively negotiating both single-year and multiyear contracts for the 40 million to 50 million pounds and the 20 million to 30 million pounds. We are witnessing numerous technical successes with materials like film, pouches, and wrappers. Our collaboration with Toppan is significant, particularly as there is a strong consumer trend towards transitioning from boxes to pouches. I believe we will be the only recycled company able to cater to that market. Last year posed challenges, and looking back at 2025, I think we can all agree there were substantial distractions affecting every company, such as inflation, tariffs, and shifts in focus for consumer packaged goods firms. These issues diverted the focus of CPGs towards priorities like reshoring production from China instead of innovative packaging designs. The year 2025 functioned as a wake-up call and a reset. Currently, CPGs are focusing on growth in 2026 and exploring ways to differentiate themselves. There are only a few approaches to achieve differentiation; either they reformulate their products, which is complex and labor-intensive, or they adjust their packaging and improve marketing strategies, which is what we are observing. Practically, during the last quarter, we presented a packaging innovation that has been a significant technical success. Following that, we received multiple inquiries from other tape producers interested in the product. We also showcased a new coffee lid innovation, and now have four new coffee lid companies in the pipeline. Our discussions about Toppan have been fruitful, and I anticipate receiving many inquiries regarding stand-up pouches because there is high demand for them. The film wrapper problem is persistent, as it involves single-use plastics that have not been recyclable until our technology. We currently have products available and are expanding our pipeline, improving applications, and our team is excelling at engaging customers with our offerings. So, to answer your core question about our level of conviction regarding our commercial ramp, it is very high. We are genuinely excited about the upcoming quarters and the direction PureCycle is headed because the work we are doing now lays the groundwork for all future commercial activities, both in Thailand, Antwerp, and at our Gen 2 facilities down the line. Thank you for the great question, Hassan.

Understood. Very helpful. And just to wrap up on the commercialization side, and then I have a follow-up. I mean the New Jersey opportunity looks quite large, right? I mean, I was just wondering if you could give more details around the timelines associated with that. I mean, this could be a pretty large opportunity for you guys, and it seems fairly imminent.

Yes. I think you have to take a step back. First of all, I think New Jersey is doing a really good job. They're being extremely thoughtful. They're digging into the details of the space. If you think about it, and you reset 5 years ago, the terminology used 5 years ago is completely different than the terminology used today. And for a regulator, gathering information, it’s a lot of work to tease out all of the nuances associated with how to regulate a certain thing. What we know for a fact is that chemical recycling in the majority of these regions is out. They don't like the idea of plastic to fuel. They don't like the idea of ISCC Plus credits, and they love the idea of plastic to plastic solutions. When you're interpreting the law written by regulators and trying to put it into practice, it takes a lot of education by us to the New Jersey Department of Environmental Protection as an example, and we've been doing it. The process is painstakingly slow, and we understand that. But we're making really good progress. I think we have a very good relationship with New Jersey. We have active dialogues with them. We meet face-to-face, and I think it's really about progressing the education for this topic broadly. In many ways, PureCycle in New Jersey is kind of at the point of the spear. We are leading the industry in terms of where we're going on recycled content and our ability to do things. New Jersey came out early and led in many ways the recycled content legislation. And so I think that as these things get clarified and move forward, I think that it's going to provide a lot of clarity for our customers, but quite frankly, a lot of clarity for other regulators as well. Since then, the other regulators have come in, and like I mentioned, the APR certification is a really big deal. That means that we are considered to recycled content in many other regions. And at the end of the day, we think that New Jersey will get to the same place. And when that happens, you're right. There's a lot of demand that's out there ready to go. And we'll get to New Jersey, and then we'll start working with those customers to get our products qualified in and ramping up into 2026.

Very helpful, Dustin. And just as a follow-up, the Gen 2 design work obviously seems very impressive. Just trying to get a better sense of what sort of key assumptions are behind achieving sub-virgin sort of cash costs, maybe in terms of assumptions around energy, scale, yields, etc.

Yes, that's great. First of all, we have the opportunity to operate a new technology at commercial scale in Ironton successfully. I've mentioned in previous calls that the technology is exceeding our expectations in some aspects. We've been able to take those insights and apply them in our Durham research facility, allowing us to delve into the fundamentals of the technology and understand how we can scale it effectively. There are components in the Gen 2 design that may just require slight increases in size, while other areas of the process will need additional parallel trains. Ultimately, this study shows that our technology is highly scalable. As we scale, we will also scale costs, which will lower the capital expenditure per pound. When you consider the overall cost per pound to operate this facility, the operating costs will be divided by a significantly larger figure, leading to notable reductions. We’re discussing feed plus a cost of $0.35 per pound for Ironton and a considerably lower figure for our Gen 2 facility. We aren’t disclosing that estimated number yet, but if feed is around $0.05 to $0.10 per pound and yield adjusted to $0.15 per pound, then with additional smaller numbers compared to $0.35, we'll quickly arrive at figures below the virgin cost of producing polypropylene. Looking ahead, polypropylene is a growing market, and its demand is set to increase. As the need for new polypropylene facilities arises, will they choose traditional virgin polypropylene or adopt a technology validated at Ironton that can scale to larger production levels and possibly offer greater margins? We are very enthusiastic about the potential this brings for PureCycle.

Our next question comes from the line of Andres Sheppard of Cantor Fitzgerald.

This is Anand for Andres. Congrats on the quarter. And Donald, congrats on the promotion to CFO. It sounds like you're making good progress on the Thailand debt financing with data room now open. So I was wondering if you could give us an update on the latest developments there? And then how do you see that project progressing?

Yes. Thank you for the kind words. I'm really excited about the opportunity, and I'm also really excited about this particular project. We've made a ton of progress so far. We've put together a comprehensive data room, and our team and the bank's team have been working collaboratively. We're meeting frequently, and we're working through this project together. There's a significant amount of documentation that goes into a project financing of this scale, and the critical agreements with IRPC are in place, and I'm really pleased with the progress on the site design and initial cost estimates thus far. Both teams are really excited and working hard on this. It serves a really critical need for Thailand, and it's a strategic growth location for PureCycle.

Anand, following up on that, Donald brings valuable project finance experience which will position us well for both Thailand and Antwerp, as well as future endeavors. I want to emphasize what he said about Thailand. PureCycle's entry into Thailand could fundamentally enhance their handling of plastic waste. This is an exciting narrative not only for us, given the favorable market conditions, strong location, and attractive tax incentives, but also for Thailand. Considering that tourism is a core industry for Thailand, it's evident how plastic waste can adversely affect it. Adopting our technology presents significant benefits for Thailand, and we are thrilled to initiate this project and get it underway. That's an excellent question, Anand.

Got you. And maybe as a follow-up, on the call and on the presentation, there was lots of great macro commentary on the TAM, whether it's cold beverages or cosmetics. And so I was wondering which verticals you see as the most promising with respect to your customer pipeline, whether it's automotive or snack bar wrappers and what should investors be focusing on here?

Yes. Look, I think this is going to develop over time. I think short-term, we'll be heavily focused on closures and injection molder projects. These are very much in our wheelhouse. We've got a lot of experience, and those run really well. I think that what you'll see as we commission the Phase II of compounding at Ironton and get that compounded facility up and running; you're going to see a tremendous amount of benefit arise from that project into the thermoforming and film activities. Film and thermoforming have been very elusive for recyclers. This is very difficult to do, and it's difficult to get the quality needed to make those projects. I think that while short-term we'll be focused on something a little different, I think that we're really going to grow into this concept of thermoforming and film, and I think that's going to be an extremely strong market for us because not many people can participate in it, and it's one of the largest growing segments on the macro side.

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

Listen, when we consider everything, it seems that when you're in discussions with brands about selling to them, they are looking for a couple of key factors. The first is reliability, which I noted in your prepared remarks. The second is the testing of the product by the brands. It appears that the brands are becoming increasingly confident because they can observe the improvement in reliability in Ironton and are going through the brand testing process. Is this the direction we should be heading in? Is this an accurate understanding of the current situation?

Yes, I believe that is correct. Both of the points you've mentioned are indeed true. The improvements in Ironton’s operations have instilled confidence in the brands. We frequently conduct tours of the plant, and visitors are consistently impressed. On the testing side, as we gain more experience in testing and qualifying various products, we find that we can provide tangible examples. For instance, when we produce film and print on it, we can show people the actual product, making it easier for them to connect with what we offer. This lowers the barrier for exploring different applications. However, I don’t want to downplay the methodical nature of brands in this process. We cannot control their pace, but we have become adept at responding to their frequently asked questions. Brands take their reputation very seriously and must feel confident in their partners before making changes. This is why we emphasize the trust that needs to be established between the supplier and the customer. It involves relationship-building, ensuring product quality, and navigating through numerous steps to secure a commitment from a customer. This process is time-consuming, which can be frustrating from both internal and external perspectives. However, if you take a moment to recognize the progress being made, it becomes clear that we are making significant advancements with major brands that are enthusiastic about our direction. These developments are foundational and should benefit us for a long time.

In that respect, does this process really help you kind of, for lack of a better term, crack the code, speed up additional opportunities going forward?

The answer to that is 100% yes. But as it eliminates the need for every single brand to go through some qualification process on their side. I mean the reality is that when we get into a lot of the techie stuff like contaminant removals and contaminant validations and things like that, we performed very, very well, and we're stacking a database that we can show customers a trend line that says, 'Wow, you really pass all of these different things in a good way.' That kind of data is based on history and gives brands immediate confidence in what you're doing. But then they still want to test it on their machines, and they still want to make sure it looks right on their material. They’re going to do some of their own testing. But every time we do something, we prove that we can do it, and then the brand gets comfortable with it, and the next brand coming in has a bit of a shorter ramp to get started.

One more quick question. Regarding the Ironton situation, I'm not going to refer to it as an outage but rather a turnaround. It seems like you have a lot of confidence in an increase in utilization after the turnaround. Are there specific aspects that you can address or implement that give you that confidence in this increase?

Yes, this is a traditional turnaround. When we established this company, we aimed to complete one turnaround per year for 30 days annually. Last year, however, we managed without it, which I believe is a positive sign for how often we'll need to conduct these in the future. We're planning to carry out several standard procedures that are quite straightforward, alongside some exciting initiatives. After operating a facility consistently for several years, with its ups and downs, our reliability has notably improved. Overall, this plant is functioning continuously. However, certain pieces of equipment can't be accessed while the plant is operational, necessitating removal during maintenance. We'll undertake several basic tasks like replacing and upgrading instrumentation. The key takeaway from this outage is the valuable data we gathered from our two test runs at 12.5 and 14, which revealed some constraints within the facility. We are committed to addressing these issues, getting the plant back to full operation, and pushing it to achieve higher performance levels. With this process, we will gain more insights, expand our capabilities, and enhance our operations at Ironton. I'm really excited about this turnaround, as we get to explore the equipment, learn more about our technology, and improve. I have great confidence that we will emerge from this outage with a significantly improved facility.

Our next question comes from the line of Jeffrey Campbell, Seaport Research Partners.

Dustin, I don't want to gild the lily, but my understanding is that there is no other DP recycling method, including chemical recycling, that is qualified for BOPP application suites to PureCycle's level. So just to confirm, when you're talking about thermoforming and the compounding capabilities that you're going to develop this year as a long-term driver, this is related to PCT's BOPP technical capabilities, correct?

Yes, I think that's a good way to put it. I don't want to speak for other technologies, as there are many nuances when discussing chemical recycling. There are different categories like incineration, pyrolysis, and ISCC Plus credits. Most customers prefer plastic to plastic solutions rather than mass balance or plastic to fuel solutions. Regarding our BOPP capabilities, we stand out in the market. When you produce BOPP, think of it as stretching a piece of plastic very thin, which can be used for things like chip bags or meat packaging. If there are any contaminants in that pellet, stretching it can create blemishes that look like stretch marks and can lead to operational issues such as breakage. These are genuine concerns for BOPP producers. However, our purification technology works at a fundamental molecular level, allowing us to remove solids, ash, colors, and other contaminants effectively for BOPP applications. This is no longer theoretical; after our success with Bruckner on a small pilot line, we’ve transitioned to industrial-scale operations. We have had a few successful trials on industrial-sized machines that are producing film with our product, which is very exciting and points to our future.

Great. When you speak about the percentage of recycling the states are increasingly requiring, are they specifically requiring certain plastic types? Or are these sort of broad statements of the amount of recycled content they want, however it's arrived at?

Yes, that's a good clarification question, Jeff. The answer is kind of both. I mean, if you look at that slide, we mentioned the percentage, but there's a small note below it that says those percentages apply to lots of different things. In some cases, they apply to specific categories of plastic like PP or PE or PET; in other cases, it applies to specific types of applications like rigids or bottles or something like that. So you really have to dive into the details. I will tell you that we've done a lot of research on the regulatory front. I think we're getting smarter here. It's a very dynamic market that's very nuanced, but we're learning more and more about it every year. I think that the general trend is 2 things. One, broadly speaking, regulations fall into 2 buckets: One is recycled content and the other is EPR. Two, it's coming. The regulations are real and they're coming. In many ways, they're coming faster in the U.S. I mean everybody talks about Europe, and the PPWR is really coming in Europe for 2030, and our Ironton facility is going to be online just in time for that, which is going to be great for brands over there. But actually, states are leading quite a lot, and we're starting to get a lot of inbounds from customers on how to handle different regulations that are coming. The SB-54 in California is a very real thing. A lot of times, California regulates, and the country moves that direction; we saw that with fuel standards a decade, 1.5 decades ago, and we could see that happening here as well. I think that we're well suited for the future.

The reason I asked the question is that I was curious if there is any discussion about the concept of circularity compared to the reality of mechanical recycling, where it is recycled five or ten times before it becomes unusable. Are you hearing any conversations about this while working with the regulators?

I believe the idea of circularity is acknowledged, but it's not yet established in legislation. There is definitely interest in circularity. For instance, in New Jersey, we purchased over 10 million pounds of feed last year, and there seems to be a lot of enthusiasm in the state about this. I'm particularly excited about what we can achieve in New Jersey, where we'll take waste from the state, demonstrate its value, transform it into a usable product, and allow customers to repeatedly purchase that product. This signifies New Jersey's shift towards circularity, and both the state and our team are very enthusiastic about it. Additionally, regarding recycled content and circularity, brands clearly recognize its importance, and we receive numerous inquiries about feedstock. There is a lot of dialogue surrounding whether we can use specific feedstock and convert it back into products for consumers. However, at this moment, it hasn't been legislated yet.

Yes. Well, it's not surprising because you're the only ones that can do it. But my last question is kind of one that I get a lot from investors. And I just kind of wanted to give you a chance to put your $0.02 in. We continue to see PET recyclers pulling back on production and even shuttering facilities in the U.S. and the EU. Can you help investors understand why demand for PCT's recycled PP will continue to grow while recycling of other types of plastics appears to be languishing?

We produce a premium product, which sets us apart. Many recyclers struggle in tough economic times because their products compete with or are priced lower than virgin materials, making profitability challenging. Our differentiated product offers a strong advantage. I am optimistic about our technology for several reasons. As market dynamics shift, we expect feedstock prices to decrease, which benefits us. Additionally, as we enhance our compounding capabilities, we will leverage the co-products from our feed more effectively, improving our margins and overall system performance. We're actively qualifying new product applications, which expands our flexibility in determining where to sell. Our supply to customers is limited, and we must strategically choose where to market our product based on qualifications and demand. The technical qualifications we are undertaking are increasing our options for future sales.

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

This is Luke on for Eric. So first, is there a timeline for when you might finalize the site for your Gen 2 facility? I know Thailand has mentioned in the past as a potential suitor since it's a really appealing market. But could you just talk about some of the factors that are going into this decision?

Yes. I mean I think the first step is for us to really get a good handle on the overall technology for Gen 2 and then the cost position for Gen 2. I think that we're getting better at that, but we still have more work to do. So I don't want to get too far ahead of it because there's work that we need to do to finish that up. Look, we're very excited about Augusta. Augusta has been a good partner for us in Georgia. That's a really nice site, and we can build the facility there. We've been very public about that Gen 2 going there first. Look, I think that every site that we've announced in the past is a good location for Gen 2, okay? Where the first one goes, that's open for discussion right now. We are very excited about the Augusta facility. But you mentioned Thailand; honestly, I think that's a great location, too. We're finding lots and lots of opportunities on the feedstock side to fill that facility. I think the integrated brownfield opportunities there will help us on overall CapEx efficiency. One of the interesting things that will happen, I didn't speak to this on the call, but one of the things that will happen is, actually, the footprint required for a Gen 2 at $500 million, it's not even that different than a footprint for Ironton. It's a little bit bigger. I mean it swells a bit. But when you start talking about how much capacity can you put on each site, like the more efficient you get with building Gen 2 and upsizing that equipment, actually, the more capacity you can put on each site. And so when we talked about Augusta hosting 8 lines, I think it will be able to do 8 lines, potentially 8 Gen 2 lines. We have to work the math. But I think that with Augusta, Antwerp, Thailand and also with our partners up in Japan with Mitsumi company, I mean all of those sites are perfect for expanding into, and I think that you'll naturally see us start to do that with the Gen 2s in the future.

Got it. That's helpful. And just as a quick follow-up here. So what are your plans for prioritizing which customers will get capacity at Ironton since you really only need a small percentage of the pipeline that you're engaged with to fully scale before you booked out?

Yes, we're currently assessing that. To be straightforward, our priority is to fill the pipeline first, finalize sales, and then make a decision. We have considerable flexibility in this area. I can assure you that we're keeping our options open with contracts. We want to avoid being tied into a long-term agreement that could limit us later on. This means we'll be able to optimize our approach over time. Typically, polypropylene contracts are renewed annually, allowing for renegotiation. As we build in more flexibility, we'll be in a better position to optimize it moving forward.

This concludes the question-and-answer session. I'd like to turn it back to CEO, Dustin Olson for closing remarks.

Yes. Look, I appreciate everybody dialing in on a late day today. We've had a lot of prepared remarks. I know there's a lot that you're going to have to go through. We are always very available for your questions. So sleep on it tonight, call us back tomorrow, and we'll do more. I think you can tell from our comments how excited we are and how confident we are about 2026. So buckle up, enjoy the ride. 2026 will be a great year for PureCycle. Thanks, everybody.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.