PCT - NASDAQ

And Ladies and gentlemen, thank you for standing by. Welcome to PureCycle Technologies fourth quarter 2024 corporate update call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you would need to press star one one on your telephone. You would then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker today, Eric D'Natalie, Director of Investor Relations. Please go ahead.

Thank you, Michelle. Welcome to PureCycle Technologies fourth quarter 2024 corporate update conference call. I'm Eric D'Natalie, director of investor relations for PureCycle Technologies. 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 fourth quarter of 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 fourth 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, undertake no obligation to update any forward-looking statement. Our remarks today may also include preliminary non-GAAP estimates and are subject to 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 you're joining us by phone, you can access it at any time at purecycle.com.

We are excited to share updates from the previous quarter with you.

I will now turn it over to Dustin Olson, PureCycle's Chief Executive Officer. Thank you, Eric. And by the way, welcome to PureCycle. The fourth quarter was an exciting time for PureCycle, with continued momentum across our business. This is a testament to the hard work and dedication of our team. As I look around the company, I can see we are all increasingly energized as we enter this new chapter. Before we get to the specific quarterly details, I think it's worth taking a step back to frame the progress we have made and to share why we believe so strongly in the future of PureCycle. It's never easy to bring a first-of-its-kind technology to the market. But the last year and a half of ramping Ironton has shown the strength of our team through tremendous grit, determination, and innovative spirit. All of this is foundational and will serve us well into the future. With our first meaningful purchase order from Drake, we are now entering into a new period of commercialization of Ironton. I'm incredibly pleased with the progress made so far and excited with what is to come. As we have previously discussed, the potential market for recycled polypropylene is enormous, with the virgin market soon to exceed 200 billion pounds globally. Plastic waste disposal and sustainability continue to be an unsolved problem despite pushes from policymakers. Polypropylene is still less than 1% recycled on a global basis. Of the polypropylene which is recycled, it is generally done so through mechanical processes and is of lesser quality than virgin. The solution technology is a unique technology segment that fits between mechanical and chemical recycling technologies and more efficiently checks the boxes of yield, quality, and carbon footprint. Simply stated, we believe this technology stands alone. Inside this space, PureCycle's technology is leading the market as the only dissolution process which can produce at industrial scale and meet customers' often stringent quality needs. We are thrilled to be in commercialization, finding so much success and adoption within commercialization, and believe our success in the next chapter will allow for decades of profitable expansion. The feedback from our customers has been incredibly positive, with many saying that our product meets the qualities of virgin material and some even saying that our compounds exceeded the qualities of virgin material. Our list of potential customers continues to grow. We are engaged in more than 20 trials with more than 10 in later-stage industrial trials with significant volume potential. And I'm incredibly impressed by our technical team's ability to meet spec requirements across numerous industries and applications. And let me just say this personally. This has been so much fun. There's nothing more gratifying than seeing a decade of work turn into a product customers are excited about. This initial phase of development has been time-consuming, but our successful qualifications of new applications are opening large channels of demand for our product that will serve us well for Ironton and beyond. Since we became a public company, we've learned a lot about the plastic ecosystem and made many strategic decisions to best position ourselves to capitalize and monetize the incredible opportunity in front of us. What has emerged is a vertically integrated strategy that connects our business from the purchase of bales to the sale of compounded material and then to our customer's product that you see in the store. This approach has several key benefits. First, it is designed to give us control over our own destiny as we enter a nascent and ever-evolving feedstock market.

Second,

it gives us broader access to customer applications through a compounding strategy.

Third,

We believe that there are incremental economic returns at each stage of the vertical. This is most clear in our compounding operations, where we see increasing portions of volumes going, but we also see additional opportunities in feedstock pre-processing operations as well. And fourth, given our technology's feedstock flexibility, we see a strong ability to expand the technology globally. This will allow us to create one of the world's first vertically integrated global companies capable of supplying product to global brands around the world. We are also very excited about the substantial progress that has been made in Ironton. As I explained at the Ironton showcase day back in March last year, we expect operational progress to follow an S-curve, with slow initial improvements followed by a stage of rapid acceleration. With meaningful improvement in max rates as well as on-stream time, we believe we are in the latter phase. And we have line of sight to moving toward nameplate capacity.

As we have brought Ironton into commercial operations,

we made the strategic decision to hold back some of the sales to achieve higher value for the product as we sell into the marketplace. We know our resin is PCR compliant, and we know PCR compliance generates values for our customers. We also know that many customers require third-party validation and thus have made the decision to hold the inventory until we receive the certification to maximize value for the company. We're in the process of acquiring third-party certification and expect it will retroactively apply to the 7.2 million pounds of finished product in inventory and currently expect to receive it toward the end of Q1. I think it's useful to go into more detail surrounding the customer application process and how we proceed from interest to a firm purchase order. The first step is an iterative phase of pilot trials, where our technology and compounding teams work diligently with the customer to find the formulation that meets the requisite product specifications. This part's the most time-consuming. It requires a very focused discussion to fully understand exactly what the customer requires, and it's the most complex part of our process that can take up to six months. The good news is that after we qualify a product application with one customer, the time frame should be substantially reduced and shortened with future customers. We are already seeing this play out with fiber, where we accelerated the qualification process with numerous other customers subsequent to our Drake successes. We then enter industrial trials where we run a full-scale production to ensure product viability at the customer's commercial level volumes. This stage generally takes less time than the initial phase and is usually completed in one to three months, though this also should shorten after initial application success. Upon the successful completion of this stage, the commercial ramp begins, and we can build, fulfill, to full customer volume targets. Our relationship with Procter and Gamble continues to be extremely strong. As filed in an 8-K earlier this week, we have recently amended our license agreement, which concludes the North American requirements to secure exclusivity and provides additional exclusivity as we pursue expansion into other regions. This agreement is a testament to our strong working relationship and our shared excitement about the success going forward. We're entering into industrial trials for five different applications with P&G, all of which are well-known consumer brands. This shows we're not only gaining momentum with P&G, we're also gaining momentum with specific brands within P&G.

The current goal is for full

approval early in Q2, and we will then ramp sales into year-end. Note, this is only the first phase of work with P&G. And there are more than twice the number of applications not listed here that are currently in earlier stages. We believe this puts us on track to get the full P&G allocation by year-end. We are extremely grateful for the collaboration and hard work from our largest partner and excited for what is about to come. We are very happy to succeed in qualifying fiber application and announcing a commercial order with Drake Extrusion. The fiber market is an extremely challenging application to enter with recycled material. As discussed before, recycled resins typically carry excessive ash and contaminants that make this a very difficult process. Our purification process was able to remove these contaminants and produce a resin that is greater than 99% pure, and our team worked with Drake to compound a resin that performed like a virgin material. Or in their words, better than the virgin resin. We ran industrial scale trials to successfully produce staple fiber and continuous filament yarns, which ultimately led to their first purchase order, which we announced in late January. Drake Extrusion is part of a larger global conglomerate, but the Virginia facility alone that qualifies the PureCycle Material currently purchases 60 to 70 million pounds of polypropylene per year. We're excited to continue to partner and look to scale our business with Drake into the future. And we continue to work on other product applications in their portfolio. For those of you who haven't seen it, we've provided a link at the bottom of this slide to our recent interview with the CEO of Drake, where we discussed our relationship and the use of our purified resin in their facility. Over the course of the quarter, we compounded 4 million pounds of material for fiber applications. The Drake purchase came out of that material, and since the announcement, other customers are also starting to pull on the inventory. We also recently announced our first commercial product line, Run It Back, with Churchill Container. Churchill is the leading manufacturer of all of your favorite local and national souvenir cups and containers. This new product line is made of purified resin and was able to meet strict product requirements around odor, color, and processability. We are incredibly excited to get this product onto the market, particularly in front of the upcoming baseball season. We estimate that most professional sports teams in the big four sports in North America use about 50 to 100 thousand pounds of resin in their souvenir containers each season. When you add to that, Churchill's presence in college sports, live events, movie theaters, conventions, and convenience stores, we believe that the commercial opportunity here is quite large, and they could be a significant customer for Ironton. Since the announcement, Churchill has already received the first commitment from a professional sports team, and more than ten other professional sports teams have already submitted inquiries to Churchill. They are a great partner, and we are thrilled to see this relationship grow. And while the customers are sensitive to managing the balance between overall cost and value creation, Churchill has seen no pushback from their customers on premium resin pricing. We currently are underway with 29 trials with potential customers, of which 16 are on an industrial scale, and this is just the tip of the iceberg. The total volume potential from these trials is based on one, the applications we are testing, and two, the customers' stated market intentions, and it is approximately 250 to 500 million pounds per year at steady state. We also have customer interest in 42 trials that should begin soon, and these applications could unlock north of 1 billion pounds of demand. The progress that has been made on this front gives us a tremendous amount of confidence that we can sell out Ironton in the near future. Success in these trials should accelerate the need for global expansion as our ability to supply our customers' stated needs will be constrained. Let's go through a few of these segments. Rigid packaging is the largest market for polypropylene in North America at roughly 3.8 billion pounds per year. By unlocking access to this large premium part of the market, we can go a long way to successfully ramping our commercial operation at attractive unit margins. We are currently engaged in seven pilot application trials and five industrial trials. This includes large CPGs and one of the largest converters in the country. And successful conversion here can unlock over 200 million pounds of demand. The flexible packaging market or film represents a significant opportunity for us. Many CPG companies have a strong appetite for recycled content but face limited access to high-quality recycled solutions. Last quarter, we discussed the path development here, and we have remained on track with those estimates. We've developed a 30% PCT content compound that we feel good about for various flexible applications and are currently engaged in two pilot trials, with additional trials set to begin soon. This is a massive, largely undersupplied market with very high demand, and pending the results of these early trials, we are well-positioned to capitalize on it. The nonwoven and other fiber markets represent approximately 1.9 billion pounds in North America and roughly 6.8 billion pounds globally. And of that, only 0.3% is made up of recycled content in 2024. We are incredibly excited about our recent success at Drake, and this announcement has accelerated commercial interest across other interested parties, both in parallel to Drake and downstream. This has shortened the approval process for others, and we are engaged in seven industrial trials, which should be completed in the coming months. This has also created the opportunity to direct sell to end-market brands that you can find in your local big box stores. The automotive market is another important market for PureCycle to target future sales. The industry's trend in light-weighting to improve fuel economy has created the need for increasing plastic content in cars. Currently, there is approximately 100 pounds of polypropylene per car, and we believe it will continue to grow. Additionally, as proposed regulation in Europe and Japan aims to have 25% recycled content per vehicle in 2030, while the final form of the legislation is still to be determined, we see increased urgency to find reliable, high-quality recycled solutions from automotive manufacturers, particularly those in Europe and Japan, and those with global platforms. Europe is expected to produce over 16 million vehicles in 2025, growing to over 18 million in 2030. It's with that context that we are incredibly excited by our successful production of a compound with Washington Penn to create a bumper fascia for one of the largest global automotive manufacturers. This is a major step forward for our use of recycled content in the automotive industry. As you know, automotive quality standards are among the highest in the world. Using post-consumer recycled or PCR as a feedstock for parts is incredibly challenging for traditionally like programs.

Typically,

automotive manufacturers face challenges with paint adhesion, scrap rate, and consistency, or are limited by highly restricted feedstocks when using other recycling techniques. However, with the compound and PCT's product, we see very good success across all these quality components. This application was comprised primarily of purified resin and was compounded with other non-polypropylene components to make the final bumper. We expect further safety testing to be completed in the coming months with approval scheduled later in 2025. While there's no change in interest from the customer, there is still an open discussion on whether it will be introduced into this model in mid-2025 or in the next model, which is slated to start production in late 2025. It's important to note the scale of this opportunity. Global demand for just one bumper fascia on one vehicle model is roughly 30 million pounds per year, with 15 million for North America alone. With this case, both the addressable volume and the margin opportunity driven by regulation have the potential to be a very strong component for the PureCycle strategy in the coming years. The bottom line for all of our commercial activity is this. While initial qualification can be time-intensive, it is a necessary undertaking for us to unlock and enhance the value of our resin.

To date, we've had good success.

And frankly, we've succeeded at every application we've tested, even if it's taken a few iterations to get there. Based on customer interest and success we've achieved across numerous applications, we see even higher demand for our product today. Given the supply and demand imbalance in the market, the high percentage of applications that are FDA continues to provide the confidence in our unit margins and growth to come. On the operational front, we're really excited about the progress we've made since our last update. We continue to pace Ironton production to match the commercial ramp, producing 3.6 million pounds in Q4, and there is tremendous improvement under the surface. There are three areas that highlight our increased confidence in the path to nameplate capacity and meeting our customers' needs. First, we have continued to improve our maximum achieved feed rate. This is really exciting. As nameplate capacity is now in sight, each time we reach new heights, we learn more about our facility's potential. Second, our reliability is improving significantly. This is appropriately measured by on-stream time, which is almost 70% in December, a new monthly high. We expect to continue to see quarter-over-quarter reliability improvements and will update the market on our performance as each quarter concludes. Finally, our quality metrics continue to improve as well. This is practically seen in our ability to qualify customer applications but is also seen in the pellets with improvements in opacity and odor. This is a direct result of the investment that we made in Denver and our flake earning operations coming online and improved operating performance at Ironton. Running PCR feeds is much harder than running post-industrial recycle or PIR. And yet, the PP we are producing is over 99% pure compared to mechanically recycled product, which is typically in the 90 to 95% range. Given we are now running almost exclusively very challenging PCR feeds, this operational progress is even more exciting to our team and really increases confidence for Ironton and beyond. We also ramped our compounding activities in Q4 to 4 million pounds, which is helping our customer qualification efforts. As I've mentioned before, the domestic market for compounding capacity is in excess, and we secured 5 million pounds per month of local compounding capacity at very attractive unit economics. This is an exciting development and is making the theoretical economic benefit very real. We are also finding additional sales channels for our co-products from the purification process as well as the excess PET and PE and other saleable materials from our purchased sales. Approximately 5% of our feed to purification goes to co-product one and co-product two, and we see emerging sales channels at the $0.22 to $0.55 per pound range. This process is still being optimized, but it is a clear and exciting opportunity to further lower our net feedstock cost going forward. We have continued to spend capital on long-lead equipment for Augusta given the progress we see in Ironton. The data that has come out of Ironton has been valuable in developing our plans for future growth. There is a lot of work going on behind the scenes. We are seeing real opportunities to improve our project and technology execution, and I can't wait to update the market on our expansion plan soon. This, coupled with our successes in operations and commercial efforts, are the principal reasons why we continue to invest. Let me end by saying that I'm incredibly proud of how far the company has come and even more excited about the opportunity in front of us. What we have seen in the last three months has only further validated the scale. A company is only as good as its people. We continue to grow our talent, particularly in commercial sales and projects. And the people across the entire company are as energetic and optimistic as ever. This new chapter is an exciting one and a bridge to becoming a unique growth concept. One that can create substantial good for society and the world at large while generating strong returns for our stakeholders. With that, I will turn it over to Jaime for the financial presentation. Jaime?

Thank you, Dustin. On slide ten, you can see our year-end liquidity position, which included just under $16 million of unrestricted cash.

As we highlighted, we raised $33 million in February,

by entering into subscription agreements with certain investors. This included a significant investment by Plead Investment Advisors, a Hong Kong-based fundamental equity investor that has done due diligence on PureCycle for a period of time.

We believe that attracting a firm like Plead helps further validate the progress

that PureCycle is making towards commercialization. The capital raise was also supported by Saliber Capital and Samlin Capital,

who further increased their investments in PureCycle.

In addition to the capital raise, we still hold about $118 million of revenue, which will further enhance our liquidity position. Our cash expenses for the fourth quarter totaled $68 million. This amount included about $36 million payment mostly for equipment related to our growth projects. Adjusted for the $36 million payment,

as well as the revenue bond interest payment,

our cash expense for the quarter was around $27 million, which was in line with recent previous quarters. Now, I would like to turn the call back to Michelle to open the call for questions.

Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. And to withdraw your question, please press star one one again. And the first question will come from Andres Shepherd with Cantor Fitzgerald. Your line is now open. Hey, everyone. Good morning, and congratulations on the quarter and all the great progress. Dustin, you touched on this a little bit in your prepared remarks. You know, there's a lot of exciting information in the deck surrounding the commercial ramp. I'm wondering if you can maybe elaborate, you know, what gives you confidence about this flowing through? Thank you.

Yeah. Hey. Thanks a lot, Andres. Oh, look. We are just so excited about the application successes we're seeing in the customer trials. I mean, I can tell you when I went to Drake the other day and shot the video that we released a couple of weeks ago, it was so exciting to see our product dropped into their plant and watch the staple fiber production. It was exciting. And when you see that kind of success across extremely difficult customer applications, it gives us extreme confidence in our ability to do this. And that's just one example. I mean, we see this across the board in all of the segments that I mentioned, and that's what gives us our confidence.

Wonderful. That's super helpful. And again, very exciting indeed. Maybe as a quick follow-up, Jaime, I'm wondering if you can maybe comment a bit further on your current cash positions and plans around financing going forward?

Absolutely. I don't want to comment beyond the fourth quarter. But, you know, as you saw, we ended the quarter with $15 million of unrestricted cash, and we raised another $33 million in February. We still have the revenue bonds to sell. And I'm very confident that as Ironton continues to perform the way it's been performing, and we continue to have the commercialization success, we'll be able to sell those revenue bonds near term.

Got it. Wonderful. Thanks again, and congrats on the quarter. I'll pass it on.

Yeah. Thanks a lot, Andres.

The next question will come from Hassan Ahmed with Alembic. Your line is now open.

Morning, Dustin. You know, fantastic seeing all the commercial successes you guys are making. You know, love the fact that you pointed out a line of sight to 250 plus million pounds of resin sales. Right? And the fact that you are, you know, almost approaching nameplate utilization. Right? So, you know, from a commercial perspective, things seem to be well on track from an operational perspective as well. Now as, you know, you guys are sort of hitting all of these milestones, can we revisit unit economics? I mean, what are you guys seeing in terms of sales price, what are you guys seeing in terms of feedstock cost? What are you guys seeing in terms of potential EBITDA margins? And, you know, to use your words, you know, as you are sort of embarking on this next chapter, you know, it would be interesting to revisit, you know, where we stand in terms of unit economics.

Yeah. Look, thanks, Hassan, for the question. We still feel really strong about the unit economics. I mean, as we've mentioned before, there's a few key components here. You know, one is obviously sales price. We continue to stand by the sales price that we discussed in prior public disclosures being an aggregate of, like, $1.36 per pound of PGTPP. So that still feels really good to us. Our variable cost components, both the fixed and variable at the Ironton site, they're quite good. We continue to find efficiencies on the utility side. Those are very strong. Those are, I think we've noted this before, but those are substantially lower than what we originally estimated in the initial Ironton. And then there's feedstock. And on the feedstock side, what you see is a market where the number five bale is moving around quite a bit. So that's something we're paying attention to. But with the integration of the Denver facility, our flake sorting operations, our ability to compound some of the co-products that come off of prep, as well as the feedstock flexibility that our technology offers, it's still very good. I mean, we view our technology as unique and the ability to run different feeds that give us cost advantage on the feedstock side as well as gaining improved opportunities to continue to further optimize the overall site. We feel really good about all of that. And like we've mentioned before, you know, the breakeven economics for Ironton, they still look quite good at the 40 to 50% operating range. And the breakeven economics for PCT we still say are quite good at the 80 to 90% range. So Hassan, we feel really good about the unit economics. And quite frankly, the commercial successes are gonna drive a lot of the top end here. And the more commercial success that we can show across a wide variety of applications, the more opportunity we're going to have to sell to higher value creation customers that can afford to spend a bit more on the product. And that's gonna give us a lot of flexibility going forward, as well as fuel the growth plan for the company.

Very helpful. And, you know, just as a follow-up, you know, sort of, you know, towards the end of your onset, you talked about these growth projects. Obviously, with this commercial success, you know, with the operational success, you know, I'm sure there's a lot more interest now in the product, in PCT, and the likes. So can you just talk a bit more about, you know, future growth projects, maybe, you know, potentially, you know, some sort of rough timeline associated with those as well.

Yeah. I mean, look. I mean, we've always said that unlocking the potential for growth was dependent on our ability to commercialize the product and run Ironton at good rates with good reliability. And we believe that we're at that turning point now. We believe that we're able to show the market our capability both in terms of producing the product quality required for the customers as well as running the plant in a controlled fashion that's gonna give us access to the growth. The growth side of things, like, we're in a great position. Okay? We have a really good relationship with our friends in Augusta. And a site that's ready to go. We have a really good relationship with both the site at the Port of Antwerp as well as the governments in Belgium. They're very excited for that to progress, and we have a very compelling package for our European growth plan that will be quite good. And then we also have additional growth opportunities beyond Europe and the US into Asia, which we're currently working. So, you know, as you know, we've purchased a lot of the long-lead equipment for two 130 million pound lines.

Those are

ready to go and ready to execute, and we believe the timeline to execute is bridged because we've already bought most of the long-lead equipment for those projects. So once we, so we're on the cusp of moving that forward. The other thing I'd like to mention is just about the learnings we've taken from Ironton, Hassan. I mean, it's one thing to run the plant more reliably and to show that we can hit top-end rates. But the data that we're collecting off of the plant gives us critical insight into the fundamentals of the plant operation that is far beyond what we've ever had in the past. And we're gonna be able to leverage that information to not only improve the design of the 130s but also lead to enhanced designs in the future beyond the 130s that will have substantial improvements in operations, technical deployment, as well as CapEx per pound. And so we're not gonna talk too much more about the growth plan. It's coming. But I can't wait to share that with the market.

Extremely helpful, Dustin. Thank you so much.

And the next question will come from Eric Stein with Craig Hallum. Your line is open.

Good morning, everyone.

Hey, Eric. How are you doing?

Hey. Doing well. Thanks. So maybe we could just dig in a little bit on the production side. So appreciate the details in terms of max feed rate achieved. But just trying to put that in context, the 12,500 pounds per hour. You know, just curious how long was that? I mean, was that a sustained run? And I guess what I'm getting at is so you did 3.6 million pounds in Q4, which, you know, I guess, is roughly low teens in terms of your overall nameplate. You know, what are you shooting for in terms of that production number for Q1?

Yeah. The 12.5 thousand pounds per hour was a stable production. We basically planned to test operate that test, move the plant up to that position, and held it. We could get the required data from the plant to know how well it was operating at that position, and we were really happy about those results. When it comes to where we're going with overall plant rates, it's gonna be driven by commercial. Okay? It doesn't make a lot of sense for us to generate product out of the plant and stack it before we have the commercial sales and the commercial applications well understood for a couple of reasons. One, it's a working capital stack that we have to watch out for, but two, you know, when you get into the development of specific customer applications, it's very specific to the application itself. And so as we're compounding this material to meet the customer's needs, we are very specific in what we want to do. And so we want to make sure that we produce exactly what the customer is looking for at the end of the day. So that's really what's driving our overall production. But from a basic production capability perspective, we feel very much in control of the plant. We understand the plant much better. If we tell the plant to go left, it goes left. If we tell the plant to go right, it goes right. And we know how to do that effectively. So we're very well poised at this point to move forward as the commercial sales develop.

Got it. And maybe, I guess, just adding on there, I mean, so is it fair to say it sounds like you feel like production levels are really not the limiting factor or much less of a limiting factor than it has been in the past. It really is getting through the qualifications, the trials, and then ramping with the customer, how fast that is.

Yeah. I think that's pretty accurate, Eric. I mean, look, we're a manufacturing facility, and we will forever be working to improve the reliability of the site and the uptime of the site, and there's plenty of work that we need to do there to continue to make progress. But the items continue to get smaller and smaller and smaller, and so we're getting much more articulate with the improvements that we're making, and that's leading to big gains on the manufacturing side. But you're right. I mean, we are ready to go. And as we get the customer sales locked down, we know exactly what we need to make, then we'll start ramping both feedstock procurement as well as operations along with the commercial.

Okay. Thank you.

Thanks, Eric.

The next question will come from Adit Shrestha with Stifel. Your line is open. Good morning. Thanks for taking my questions. Just quickly on the monthly cash

burn, what is that currently running at? I think we looked at Q4. It's around $10 million, and I want to make sure it's running at the same pace now. And you did raise $33 million in February. I guess it gets you through at least the first quarter, but how should we think about

the remarketing of the SOFA bonds when that actually occurs?

You know, based on sort of your burn rate and your expected production ramp-up?

Yeah. So, you're right. The cash burn has been historically in that $8.5 million range. And now that we've brought on Denver, it's probably moved up into that $9, $9.5 million range, but we'll get the efficiencies and the benefits of product going from Denver into the Ironton facility. And so as we move forward, we've got sufficient liquidity with the revenue bonds behind us. That'll be one avenue that we'll look to raise additional liquidity for the balance of the year. Alright. And

Just maybe a quick update in Augusta. I know Dustin kind of talked about it, but just the sort of now the expectations that Augusta construction resumes in 2025 and sort of you started looking at sort of the financing options? And if you have, are you seeing sort of more attractive rates in the market?

Yeah. I mean, Augusta is on track. We are doing work at the site, some civil work in Augusta, that will lead to preparing the site for the big project. We continue to have a good relationship with the AEDA. We continue to stand by the timeline that we discussed in the past, and we think that the Ironton success that we're seeing is gonna lead to, yeah, like you said, improved rates for financing longer term, but also the access to the cash to continue to progress that project.

As a reminder, to ask a question, please press star one one on your telephone. The next question comes from Thomas Boyes with TD Cohen. Your line is open.

Excellent. I appreciate it. I appreciate you guys taking the questions. Maybe the first one, obviously, good to see the progress with P&G. For the sales volume chart,

that you showed in the deck that references the compounded resin,

Do you have a sense of what maybe the average blend is there? Is this where we're talking about, you know, 25% recycled, 25% virgin, or was compounding referring to just finished regimens where you're adding in final components that hit the customer's application step?

Yeah. That's a great question, Thomas. The way to think about it is a couple of things. One, the whole purpose of compounding is to create the product that the customer needs. So in some cases, compounding does not add any additional material to it. It just augments the property. So we can change what we call the flow rate of the resin from one number to another number because it will fit better into the system. A great example of this is with our Churchill container. With Churchill, we ran our standard material off of the facility with a lower MFI, and they could only get to 50 to 60% rates because of their specific equipment. But after we augmented the compound a little bit, didn't add anything to it, but augmented the mechanical properties, we were able to get 100% performance out of the Churchill equipment, and everybody was very excited about that. When it comes to the percentage of other materials added into the product, I think that there's kind of a segment discussion here. When you think about fiber, we're currently running that at, like, a 50/50 blend. A 50% PCC material and 50% other. When you think about film, we expect that to be on the order of 30% our material and 70% other. And then when you come to automotive, it's really a mixed bag depending on the specific application that goes into the car. You know, by the way, an automobile consumes a lot of different types of applications. They consume fiber into the rugs and the carpeting in the car. They consume rigid and they also consume compounds. And so as an example with the bumper, in that particular case, that was approximately 60 to 70% PCT material, and then the balance was other non-polypropylene type materials to make the performance of the work. So I think that's a bit of a longer answer, but it really depends on the application. One thing is certain, we definitely see a lot of value in the compounding operation. More so than what we originally anticipated. The ability for us to deliver to the customer exactly with a no-compromise drop-in solution is highly valued by the customer. And it really gets us in the door, has been the gating item to really unleash some of the commercial progress.

Got it. No. That's extremely helpful. And maybe just on the automotive front, just with the kind of disclosures about the pilots that you have going, excuse me, is that with

one OEM that you have had the existing relationship, or is that now

expanded to other OEMs? And the reason I'm asking is just obviously, you know, the qualification time for with new OEMs to be designed into specific model years is a lot longer. So I'm just kind of wondering through that 45 million pound number that's on slide eight. If that's something that's near term or a portion of that is something that would come in a lot over a lot longer time frame.

Yeah. So a couple of questions there. So the first thing is with every single application success that we see across all the segments, it leads to a lot more interest by others that are trying to jump in and participate as well. So after we, you know, after we discussed the automotive in the last quarterly as well as, you know, we have some technical presentations coming up in the near future that are public. That interest level has driven a lot of additional requests for trials from other manufacturing facilities, other automotive tiers. And so that continues to go there. I would say a lot of success carries on success from the initial single pilot success. With respect to timing, this is also a bit the same across the board. It really depends customer by customer, application by application. So some customers can adopt much more quickly and drop it in, other customers need, you know, they have longer qualification processes. In the case of our resin with the bumper, quite frankly, our resin dropped in and performed extremely well. I mean, I was actually at that trial as well the first day we tried it, and I mean, the numbers just look fantastic. And they operated very well. It surprised people with how low the scrap rate was. And we were very excited coming out of that day. Now once you get past that point, that proves that your material is good enough to work in all bumper applications. It's good enough to work in lots of very challenging automotive applications. But then you move into the commercial aspects of supply chain and pricing and drop-in time, and do you put it in on this model and replace the incumbent, or do you drop it in in the new model and just be a new supplier? And that, quite frankly, is the discussion we're having right now. And I'm not sure where that will land at this time. However, I'm not worried about it. Because we've got lots of interest in our product across the board. And the interest in the customer has not slowed down at all. And quite frankly, it's accelerated. After the success that we had with the bumper, we're getting additional inquiries about, you know, potential products on the interior of the car, potential products in some of the fiber backing behind the dashboard and the different substrates, as well as the fiber and the carpets and different places inside the car. So I think the story with automotive is growing, and it'll be a great growth discussion for us in the long term, especially as we grow globally. Remember, these automotive customers, they are highly quality sensitive. And maybe even more so supply chain sensitive. They don't like to do things in singular locations. They like to do things globally. And as we begin to grow globally, we're going to be able to offer a global product to global platforms, and that's going to be highly, we believe it'll be highly valued by the customers.

Absolutely.

Appreciate it. If I could just sneak one more in just around because you'd mentioned the bonds. For the source of liquidity. For the discussions you're having, have you

seen any inclination that the discount could contract? I mean, before I think we're getting 80 cents on the dollar there. And, you know, my expectation is with a bit more performance information out of Ironton that you would slowly start to see that narrow. I'm just wondering if you're starting to see that actually play out.

Yeah. I think you're exactly right. You know, our viewpoint is that we have de-risked bond performance of Ironton and with the success that we're having on the commercial side. So, you know, as we last sold the bonds, they were at 80 cents on the dollar, and we would expect something to be much less than that.

Great. Now I'll hop back in queue. Thank you so much.

The next question will come from Gerry Sweeney with Roth Capital. Your line is open.

Good morning, Dustin and Jaime. Thanks for taking my call. Hey, Gerry. Good morning.

At one point,

I'm just

a little confused upon, and I apologize. But these are my words, not yours. So it sounds like you can run Ironton maybe at a higher production level. You're a little reticent to do that because you don't want to build excess inventory because some of your customers may need certain specificity to their end product.

Right.

Then we talk about compounding.

And taking products and compounding it to meet customer requirements. That's where my disconnect is. Why not

run Ironton at higher levels, build some inventory, and then when those orders come in,

compound it to meet

some of those, you know, the specificity of orders or the requirement. And I know it's probably a little bit more complicated than I just said, but I think it's important just for clarity's sake.

No. It's a fair point, Gerry. I mean, there's a couple of things here. One is, you know, there's still a working capital component on the feedstock side. Yep. So bringing that in and pushing the cash out is something we're keenly aware of and managing closely. And so for us, being a good steward of working capital is an equal component to that story. But also, you know, as we run our plant and learn about the plant and test different limits of the plant, we see the opportunity to optimize it to what the customer needs even at the Ironton level. And so running ahead of the customer requirements is premature for us. So we see it as a better value position for us to pace the rate at the plant with the customer request. Now to be fair, we have the opportunity

sorry,

we plan to pace the commercial with the Ironton operation.

Got it. Okay. Sorry.

Just looking at my notes.

Taking a lot of notes here.

Procter and Gamble, do you think, you know, you have a nice chart there and, you know, ramp up. And actually, I think the table with all your programs that are sort of in different stages is actually great. I think it's super helpful. But on do you think Procter and Gamble would

potentially would they be your largest customer this year? It seems like they're further along

you obviously have a great partnership with them. Just curious from that perspective.

I don't think we're gonna take a

position on which customer is gonna be the biggest stake in the final tally at the end of this year. What I can tell you is that we're very thankful to have Procter and Gamble on our team. And I think that what you saw from the 8-K that we filed this week is that the pretty strong vote of confidence by Procter and Gamble to us.

So

we've got a lot of good trials already started with Procter and Gamble, the five that are mentioned before, and then we have quite a big backlog coming behind, and we think that that's going to put us in a great position to hopefully fill out their full capacity by the end of the year.

Got it. That's fair.

I appreciate it. Thanks for the clarity on the first question. I appreciate it very much.

Yeah. No. Thanks.

I show no further questions in the queue at this time. I would now like to turn the call back over to Eric for closing remarks.

Alright. Thank you, Michelle. We also received a few questions through email. First, can you please provide more detail around the 8-K with Procter and Gamble?

Yeah. Like I mentioned just a second ago with Gerry, I mean, this is a real vote of confidence. I mean, this effectively provides exclusivity to PureCycle with the license for North America. And it also extends the exclusivity period across all of the regions in the world. And so we feel really good about that. This is also Procter and Gamble basically saying that we believe in PureCycle's ability to run the facility at expected rates and provide a product with a quality that's gonna be good enough for their operation. That's quite good. I think this is all driven by the success that we're seeing in the trials. I think that Procter and Gamble is excited to be growing with us and getting into the commercialization phase, and look, I think it's important to just take a step back and recognize the work that Procter and Gamble did at the beginning of the story. Recognizing the unique position required on quality for a technology like this solution over a decade ago is brilliant. And then trusting in PureCycle to extend that dream into action into reality through the production at Ironton has been a very good partnership, and we continue to work very well together going forward.

Next, we also have a question that came in asking how pricing is bearing relative to virgin pricing.

Yeah. We're not gonna get into the specific pricing relative to Virgin, but what I will tell you is that we still feel very comfortable about the stated prices that we put out about a year and a half ago with a $1.36 level, and that's with Virgin moving all over the map. Okay? Virgin has moved from, you know, north of 80 cents a pound down to south of 60 cents a pound. But our pricing still stands pretty firm and secure. Ultimately, the price, the final price of our product is gonna be driven by supply and demand fundamentals, of which we believe there's an enormous undersupply of high-quality material in the market and a growing demand for our product. And it's also important to note that this is not a commodity polypropylene market that we're operating in. We are a specialty product. We operate in a different market, and it's quite disconnected from Virgin, and I think we're starting to see that disconnect happen a bit across the board. So I feel really good about our pricing, really regardless of where the virgin pricing goes.

Alright. Thank you for everyone who submitted questions today. Dustin, do you have any final comments?

Yeah. Look. Before we conclude, I just want to take a moment to sincerely thank all of our stakeholders, partners, and employees for their continued trust and support. Your commitment has been instrumental in getting us to where we are today. We're incredibly proud of our progress both operationally and commercially. Simply put, we've never been in a better position than we are right now. This strength enables us to continue with discipline and focus, always making strategic decisions that serve the best interest of our stakeholders. Today, we're operating from a place of strength, which gives us even greater flexibility and confidence in our direction. We're excited about the opportunities ahead and look forward to connecting with many of you in upcoming conferences. Thank you again for your support. We look forward to continuing this journey together.