PureCycle Technologies - Q4 2025

Transcript

Operator (participant)

Good day. Thank you for standing by. Welcome to the PureCycle Technologies fourth quarter 2025 corporate update. At this time, all participants are on listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will 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 like to hand the conference over to your first speaker today, Eric DeNatale, Director of Investor Relations. Please go ahead.

Eric DeNatale (Director of Investor Relations)

Thank you, Marvin. Welcome to PureCycle Technologies' fourth quarter 2025 corporate update conference call. I am Eric DeNatale, Director of Investor Relations for PureCycle, and joining me on the call today are Dustin Olson, our Chief Executive Officer, our incoming Chief Financial Officer, Donald Carpenter. Our retiring CFO, Jaime Vasquez, will also be joining the call. This evening, we'll be highlighting our corporate developments for the fourth quarter of 2025. 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 of 2025 corporate update press release filed this afternoon, as well as in other reports on file with the SEC that provides further details about the risks related to our business. Additionally, please note that the company's actual results may differ materially from those anticipated, and except as required by law, we undertake no obligation to update any forward-looking statement. Our remarks today may also include preliminary non-GAAP estimates and are subject to risks and uncertainties, including, among other things, changes in connection with quarter-end and year-end adjustments. Any variation between PureCycle's actual results and the preliminary financial data set forth herein may be material.

You're welcome to follow along with our slide deck, or if joining us by phone, you can access it at any time at purecycle.com. We 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.

Dustin Olson (CEO)

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 1st, Donald Carpenter will be stepping into the CFO role. I want to first thank Jaime for his service the last couple of years, wish him well in his retirement, and now turn it over to him for a couple of words. Jaime?

Jaime Vasquez (Retiring CFO)

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. With Donald stepping into the CFO role, there'll be continuity among the finance and accounting teams. Donald's time at PureCycle, combined with his depth of knowledge, 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. Back to you, Dustin.

Dustin Olson (CEO)

Donald, would you like to say a couple words?

Donald Carpenter (Incoming CFO)

Yes. Thank you. Thank you, Dustin, and thank you, Jamie, thanks especially for all of the support and opportunities you gave me to grow into this role over the past two years. I share your thoughts on the PureCycle team, I am 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 four years ago remains the same, 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, Jamie, I wish you the best in retirement, I'll turn it back over to you, Dustin.

Dustin Olson (CEO)

All right. Thanks a lot, Donald. I wish you both the best and I'm very excited about the path forward. Additional to this announcement, we previously announced we added two 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 the Thailand's Minister of Energy and chairman of IRPC. Most recently, Valerie Mars, who retired as senior vice president and head of the corporate development at Mars, Incorporated. 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. 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 in the food-grade package on a retail shelf, they're doing something that's never been done before, at PCT scale, at PCT quality, and with PCT flexibility.

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. 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 the recycled content in 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. I'll walk you through exactly where we stand on that. In the 4th quarter, we successfully added a 3rd shift to Denver, which had previously been a constraint on production. As a result, Denver processed 44% more feed versus 3rd quarter, ramping to 14 million lbs, 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. 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 lbs. 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 both 12,500 and 14,000 lb/h. We have a lot of data from those tests, which we've analyzed and 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 outage. 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 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 multi-year supply agreements, which is a direct reflection of the confidence that they have in our operating performance.

Phase one 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, the cost to produce, and improve our final sales price. We're very excited about this addition. Phase two should be mechanically complete in March, and commissioning will continue in parallel with the planned outage. Phase two coincides with the demand planning for these grades in commercial off-take profiles. The phase two on-site compounding line will be primarily focused on producing compounds for BOPP film, which is used in flexible packaging and thermoformed applications, which is used in things like coffee lids. Two of 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, we expect to ship while Ironton is engaged in the 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 in 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 conversion expected to begin in early March. While 2025 had real commercial delays relative to our original projections, the technical progress was substantial, 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, thermoform containers, 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 continued 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-$0.03 per pound range.

Fiber technical successes provided a lot of confidence to the market early on, the adoption was slow due to fragmented demands and extremely long sales cycles. We've deprioritized 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 that New Jersey Department of Environmental Protection has taken, and will 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 hangovers, commodity spikes, and converter consolidations forced them to redirect their focus on cost savings and reorienting their supply chains domestically, which lengthened approval timelines across the board. We think those headwinds are largely behind them. The key public message from senior brand leadership is clear: 2026 is about reinvigorating organic growth and investing in innovative packaging. That's directly relevant to us. It's been publicly reported that multiple Fortune 100 CPGs announced significant increases in R&D spending, with a focus on product superiority, premium positioning, and sustainable packaging formats.

After a year of playing defense, these brands are now playing offense. That's directly relevant to us because offensive brands invest in differentiated packaging, and food grade recycled content is a differentiator. Despite the commercial progress, the revenue ramp has been delayed relative to what we projected earlier in 2025. Last quarter, we mentioned 40 million-50 million lbs of run rate demand that we are actively shipping or expected to ship in the near future. That number still stands. New Jersey has delayed some of our ramp. We estimate that applications representing 15 million-30 million lbs of near-term demand will require that approval. New Jersey applications overall represent about 300 million lbs per year of demand.

While this has been frustrating, the demand is still there, and the fact that key brands and converters have sent letters to New Jersey on our behalf speaks to their desire to move forward once this is resolved. The good news is, we've been able to shift to other applications that don't require New Jersey approval, and we have line of sight on applications that can contribute to 2026 revenue. In addition to the $40 million-$50 million that we mentioned last quarter, we've added another 20-25 lbs at full ramp. The earliest of these could convert as soon as next month, and one of the most near-term opportunities represents roughly 10 million lbs of annual demand.

The pipeline continues to be strong, growing from roughly 100 projects a year ago to greater than 170 today. A lot of this recent build is a result of our success in film, where we continue to see large, high-value opportunities. I'd like to also highlight that we've been successfully qualifying pouch applications. Stand-up pouches are one of the most exciting trends in innovative packaging right now. They're lighter, more efficient, and actively taking share from rigid containers and cardboard boxes. Brands are investing heavily in flexible packaging formats, and our ability to produce food grade recycled polypropylene film for pouches puts us right at the center of this trend.

BOPP film and thermoform applications remain the core targets for our compounding operations. 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. 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 four additional brands following our recent quarterly announcement about coffee lid innovation. 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 bans.

This will give us additional tailwind to our product in the beverage containers. The net result of the 300 is north of 300 million lbs of additional TAM in North America, and is growing in the high single digits each year. Beyond cold beverages, premium pet food is a 130 million lbs 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 lbs of BOPP film demand, growing 6%-7% with protein snacking trends. Dermo-cosmetics, think CeraVe and SkinCeuticals, is a 55 million lbs market, growing at 79% as clinical skincare brands shift to PP packaging for recyclability. In household goods, things like storage bins, kitchen utensils, laundry baskets, is a 700 lbs polypropylene market, where Walmart.

Target sustainability mandates are creating demand for recycled content from a base of only 3%-5% penetration today. That segment alone has 150 million pounds of addressable pounds for recycled polypropylene, growing at 8%-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're law. New Jersey requires 10% recycled content today, 20% in 2027, and 30% in 2030.

California SB 54 requires 25% source reduction by 2032, with a stairstep approach requiring 10% by 2027, 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 reference 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 five to seven years, for food-grade polypropylene applications, we're the only global solution emerging at scale. The regulatory framework laying the groundwork for the future.

There's a lot of really strong progress in Rayong, Thailand project. I was in Thailand for a week in January and had many meetings with government officials, commercial offtake partners, feedstock suppliers, local banks, as well as IRPC and our very strong local team. A few key developments are worth calling out. First, we see a supply of feedstock well in excess of our needs. We have already signed nine LOIs with regional feedstock suppliers, six domestic and three across Southeast Asia. That, even at a minimum annual level, exceed our needs for the first purification line. We are working to expand our feedstock network in Thailand. We are also finding feed in abundance across Southeast Asia.

Thailand generates approximately 2.5 million tons of plastic waste annually, of which an estimated 400,000-450,000 tons is mismanaged, with about 70% of that leaking into the ocean each year, making Thailand the sixth largest source for ocean plastic globally. We're finding a lot of willingness from the government and the commercial sector to partner with us to solve this challenge. The commercial conversations have also been very favorable.

Our original assumption was that all product would be exported to North America and Europe. While we still expect to directly export significant quantities, a strong dialogue is evolving with domestic packaging companies, including a major film producer that sees our material as a way to grow their export business, as well as Fortune 100 CPGs with manufacturing operations in Thailand. We see key markets in automotive, flexible and rigid packaging, appliances, and fast-growing hygiene market, and expect to sign multiple LOIs with domestic customers during 2026. We had multiple meetings with the Board of Investment, or BOI, and submitted our application to them. If successful, we would reap many benefits, including an eight-year, 100% tax holiday, followed by five years of tax holiday at 50%. This equates to roughly $100 million of avoided cash taxes.

We also had many good meetings with local banks and our other banking partners in Thailand, which Donald Carpenter will touch on later. The relationship with IRPC is solid, and they have helped us build a remarkably strong domestic team in Thailand. We hosted a community forum with over 250 residents to explain the project, which was very well received. We have been purchasing equipment, and expect to break ground in the second half of 2026, with project completion still expected in 2027. Our Antwerp, Belgium, project also continues to move forward per plan. We expect permits in the second half of 2026, with construction still scheduled to begin by 1Q 2027 and mechanical completion by the end of 2028. Global brand discussions are accelerating as the Thailand and Antwerp projects advance.

Many of the Fortune 100 CPGs we're working with have operations across all three of these regions. We mentioned last quarter that we expected to complete our initial engineering work for Gen 2 purification design 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 lbs 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 lbs 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 costs 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 lbs 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 said we'd solve a 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. 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. 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.

Donald Carpenter (Incoming CFO)

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've 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 three 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-$9 million per month. This was prior to significant feedstock and tree 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 non-recurring 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-$20 million, with $7 million-$8 million for Ironton-related projects, primarily related to the on-site compounding project. The remaining $11 million-$13 million is spread across our growth projects. For full-year 2026, total project-related spend is expected to be $39 million-$45 million, with $14 million-$16 million for Ironton, which includes costs 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 semi-annual 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 EPCM 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 grant. 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, and together with the revenue bonds and project financing I've described, give us multiple paths to fund the business through the ramp. With that, I'll turn it to the operators for Q&A.

Operator (participant)

Thank you. At this time, we'll conduct a question-and-answer session. As a reminder, to ask a question, you'll need to press star one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes on the line of Hassan Ahmed of Alembic Global Advisors. Your line is now open.

Hassan Ahmed (Senior Equity Analyst)

Afternoon, Dustin. you know, I know you guys gave a lot of details in there. Clearly, are a lot of moving parts around the commercial progress and ramp. you know, just wanted to dig a bit deeper into that. you know, maybe we can start off with a basic sort of question, that the $40 million-$50 million ramp that you're talking about for Q2/Q3, and then, you know, thereon after, sort of, you know, an incremental $20 million-$25 million ramp. How much of that is, you know, for lack of a better way of putting it, forecasted versus contracted? you know, I just, you know, any further details around your conviction level and the shape of that ramp would be appreciated.

Dustin Olson (CEO)

Yeah, Hassan, well, it's nice to talk to you again. Thanks for the question. Look, at the end of the day, we have very strong conviction on our commercial ramp. These things that we're doing right now are very hard. It's eluded recyclers for decades. We have a new technology with a new product, and quite frankly, it just takes time to educate the market on our capabilities. Every time we have a technical success, it opens up the aperture for us to do more and more. Now, we've talked about the difficulty with predicting the specific timing. We know it's coming, and we know it'll be asymptotic, but it's not fully in our control. We see things like the number of customers shipping to it increases. We see the revenue continuing to increase.

We see the size of trial volumes continuing to increase. At the end of the day, you know, this thing that we're building is really a relationship between us and the customer, and, you know, we had to get the certifications, we have to show the LCA, we've got to do the trials, we've got to prove that Ironton can be reliable enough to give them the security and supply that they need. We've got line of sight in these applications. The volumes that you talked about are very good. We are in active discussions for both single year as well as multiyear contracts for those 40-50, as well as 20-30. We continue to see the technical successes mount with the film, pouches, wrappers, et cetera.

This thing that we did with Toppan, Hassan, is really important. I mean, if you do any research on CPGs, you'll find that there's a major consumer trend to move out of boxes and move into pouches, and we're going to be... I believe we're going to be the only recycled company that can serve that market. The market was challenging last year, okay? I mean, like, the 2025, I think it's always easy to look in hindsight, because we would all agree to that. I think when you look back at 2025 objectively, you see massive distractions for everybody, for every company. The hangover on inflation, the tariffs, you know, Make America Healthy Again, focus on protein.

I mean, all these things were real, and it just diverted the focus of the CPGs to something different. Instead of coming up with a cool new design for packaging, they were worried about reshoring, let's say, production in the U.S. versus China. You know, I think that 2025 was a bit of a wake-up and a reset, but now what you hear is the CPGs are like dialing into growth in 2026. They're talking about how can they differentiate. There's only a few things you can do. I mean, you can change the formulation of what they're selling. That takes a lot of effort, a lot of work, but you can also change the packaging, and you can market better, and you can put more effort there, and that's what we're seeing.

I think from a practical perspective, Hassan, like, last quarter, we showed this packing tape, okay? It's a huge technical success. After the call, we got multiple inbounds from other tape producers that are interested in that product. We showed the coffee lid innovation, and now we have four new coffee lid companies in the pipeline. We talked about Toppan this time, and I suspect we're going to get a lot of inbounds for the stand-up pouches because everybody wants them. No one's been able to solve the film wrapper issue. It's a single-use plastic with no recycled supply and no recyclability until PureCycle. We have products on the shelves right now. We're continuing to grow the pipeline. The applications are getting better, and our team is doing a really good job of getting customers excited about our products.

You ask-- I think the core question was, how much conviction do we have about our commercial ramp? It's, it's very high. Okay? We are very, very excited about the next few quarters and where PureCycle is gonna go because this work that we're doing right now, quite frankly, sets the foundation for every new commercial activity that we do going forward, both in Thailand and Antwerp and our Gen 2 facilities down the road. That's a great question, Hassan. Thank you.

Hassan Ahmed (Senior Equity Analyst)

Understood. Very helpful. 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, you know, this could be a pretty large opportunity for you guys, and it seems fairly imminent.

Dustin Olson (CEO)

Yeah, I think, look, 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 five years ago, the terminology used five years ago was completely different than the terminology used today. 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.

You know, 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. I, and I think it's really about progressing the education for this topic broadly. You know, in many ways, PureCycle and New Jersey are kind of at the point of the spear. We are leading the industry in terms of, where we're going on recycled content, on our ability to do things.

New Jersey, you know, came out early and led in many ways, the recycled content, you know, legislation. 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, though, other regulators have come in, and like I mentioned, the APR certification is a really big deal. That means that we are considered recycled content in many other regions. At the end of the day, we think that New Jersey will get to the same place. When that happens, you're right. There's a lot of demand that's out there ready to go. We'll get to New Jersey, and then we'll start working with those customers to get our product qualified in and ramping up into 2026.

Hassan Ahmed (Senior Equity Analyst)

Very helpful, Dustin. Just as a follow-up, you know, 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, you know, maybe in terms of assumptions around energy, scale, yields, et cetera.

Dustin Olson (CEO)

Yeah. No, that's good. First of all, you know, we have the pleasure of operating a new technology at commercial scale in Ironton successfully. I've mentioned this on a couple of calls that the technology in many ways is doing more with certain steps than what we expected. We've been able to take those learnings and leverage it into our Durham research facility and really get down to the fundamentals of the technology and understand how we can scale it. In some ways, Hassan, there are pieces of equipment in the Gen 2 design that you only need to make a little bit bigger. Then in other parts of the process, you need to add parallel trains. The long result of this study indicates that, you know, our technology is very scalable.

When you do that, then you're gonna end up scaling costs, reducing the CapEx per pound, and also, I'll speak to this in a second, the operational cost per pound also drops pretty dramatically. On the op costs, you know, and maybe the assumptions on yields, I'll remind you that our technology is a plastic to plastic solution, and so we have 100% or nearly 100% yield recovery on polypropylene. Our goal is to remove everything that's not polypropylene out of the streams and create co-product 1 and co-product 2. Our yield is very high, and our yield doesn't change as you scale. That's an enormous benefit that we have over other technologies. The same is true for operating costs.

The reality is that many of the steps of our process require the same amount of people, only incrementally more energy and incrementally more steam to operate. Therefore, when you look at the overall dollars per pound that it's gonna cost to run this facility, the operating costs just get divided by a much bigger number, and that number is gonna drop significantly. What we're talking about feed plus a $0.35 per pound number for Ironton and feed plus a much lower number on our Gen 2 facility. We're not releasing yet what we think that number will be, but if you're talking about feed at $0.05-$0.10 per pound, and then yield adjusted to $0.15 per pound.

You, you know, you start adding, you know, smaller numbers than 35 on top of that, you very quickly get to numbers that are below the virgin costs for these polypropylene. Think about that, Hassan. I mean, you know, down the road, people, polypropylene is a growing market. It's a great polymer, and people are going to use more and more of this as we go into the future. As that happens, and people need to build new polypropylene facilities, what are they going to build? Are they going to build a traditional virgin polypropylene facility, or are they going to lean into a technology that's been proven at Ironton and they can scale to big numbers that could potentially give them bigger margins than what they would have on the virgin side? We're very excited about where this takes PureCycle.

Hassan Ahmed (Senior Equity Analyst)

Super helpful, Dustin. Thank you so much for all the details.

Dustin Olson (CEO)

Thank you, Hassan.

Operator (participant)

Thank you. One moment for our next question. Our next question comes on the line of Andres Sheppard of Cantor Fitzgerald. Your line is now open.

Anand Balaji (VP of Industrial Technology Equity Research)

Hey, guys, this is Anand on for Andres Sheppard. Congrats on the quarter, thanks for taking our questions. Donald Carpenter, congrats on the promotion to CFO. It sounds like you're making good progress on the Thailand debt financing with data room now open. I was wondering if you could give us an update on the latest developments there, how do you see that project progressing?

Donald Carpenter (Incoming CFO)

Thanks. 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 banks' 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 our 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.

I've been involved in several project financings over my career, and I'm really proud of the first book we've put forward with the bank.

Dustin Olson (CEO)

Hey, Anand, just to follow on that, I mean, Donald brings a lot of really good project finance experience. I think that's going to really set us up nicely for both Thailand and Antwerp and everything that we do in the future. I'd like to get back to a point that he made about Thailand. I mean, think about this. PureCycle could come into Thailand. When PureCycle comes into Thailand, we will fundamentally change their performance on plastic waste. That is such a compelling story, not only for us, because it's a great market and it's a great location and we've got this great tax holiday and all these things we've talked about, but it's exciting for Thailand, too. You know, Thailand, think about Thailand's core industry, it's tourism.

Think about how negatively tourism can be impacted by plastic waste. I mean, in a way, there are a lot of existential benefits to Thailand by adopting a technology like ours, and we couldn't be more excited to get going there and get this project up and running. It's a great question, Anand.

Anand Balaji (VP of Industrial Technology Equity Research)

Gotcha. Thanks for all that color. Maybe as a follow-up, you know, on the call and on the presentation, there was lots of great macro commentary on the TAM, whether it's cold beverages or cosmetics. 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?

Dustin Olson (CEO)

Yeah, look, I think this is going to develop over time. I think short term, we'll be heavily focused on closures and injection molded 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 two of compounding at Ironton and get that compounding 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. It's just 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.

Anand Balaji (VP of Industrial Technology Equity Research)

Got it. Thank you, guys, for the color. I'll pass it on.

Dustin Olson (CEO)

Thanks, Anand. Have a good night.

Operator (participant)

Thank you. One moment for our next question. Our next question comes to the line of Gerry Sweeney of ROTH Capital. Your line is now open.

Gerry Sweeney (Managing Director)

Good afternoon, guys. Thanks for taking my call.

Dustin Olson (CEO)

Thanks, Gerry. Good to see you again.

Gerry Sweeney (Managing Director)

Yep. Listen, when we look at everything, it sounds like, and I caught some of this on the call, when you're engaged with brands and you sell them to brands, it sounds as though they're looking for a couple things. Obviously, one was reliability, which I picked up, I think I picked up on your prepared remarks, and two, you have brand testing of the product. You know, it feels as though the brands are getting more and more confident. One, they can see what's happening at Ironton, reliability is increasing, and two, going through the brand testing. Is this sort of path forward, is this an accurate assessment as to what's happening today?

Dustin Olson (CEO)

Yeah, I think so. I mean, I think both of the things that you just mentioned there are very true. Ironton operating better and better every day has given confidence to brands. That's, there's no doubt about that. I mean, we routinely have tours out to the plant, and people always leave very impressed. I think on the testing side, the more experience that we get testing and qualifying different products. I mean, it's very simple. It's like we have things in our hand that we can show people, okay? When we make film and we print on film, we can hand people a piece of film and say, "See what we can make?" Then people can immediately connect to it. I think that reduces the hurdle for getting started with the different applications.

I think both of those are very true, but I don't want to understate just the methodical nature of brands going through this process. I mean, we can't control it, but we've gotten very good at answering their questions because a lot of the questions are repeat over and over and over. They're very methodical. I mean, a brand has built an entire lifetime building that reputation. In order to make a change, that brand has got to feel really good about who they're partnering with. That's why we focus so much our comments around the trust built between supplier and customer. I mean, there's relationship building, there's product quality building, there's all these components.

Like there's 20 different steps or more that you have to go through to get to a yes on a customer like this. It just takes time. Look, from an outside looking in and also from the inside looking in, it's very frustrating. It takes time. But if you lift your head up and you see the progress that you've made, you realize that you're really starting to make some pretty big strides with big brands that are excited about where you are. I think these are foundation laying type things that are going to be very good for us for a long, long time.

Gerry Sweeney (Managing Director)

Pardon me. 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?

Dustin Olson (CEO)

The answer to that is 100% yes, but it doesn't eliminate the need for every single brand to go through some qualification process on their side.

Gerry Sweeney (Managing Director)

Sure.

Dustin Olson (CEO)

I mean, the reality is that when we get into a lot of the techie stuff like, contaminant removals and contaminant value, you know, validations and things like that, we perform very, very well. 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 it gives brands immediate confidence in what you're doing. 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. 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 with it.

Gerry Sweeney (Managing Director)

One more quick question. The Ironton, I'm not going to call it an outage, I'm going to call it a turnaround. You sound like you have a lot of confidence in uptick in utilization post-turnaround. I mean, are there a line of sights to a couple of things that you can fix, implement that gives you confidence on that uptick?

Dustin Olson (CEO)

I mean, look, this is a very traditional turnaround. you know, when we first built this company, we had an expectation to do one per year for 30 days a year. Actually, last year, we didn't have to do one, which I think bodes well for future in terms of how often will we need to do this. Look, I think we're going to do a whole lot of stuff that's very normal, very easy, and then we're going to do a few things that are very exciting, okay. you know, there's anytime you run a facility for a couple of years in a row, and we've been running very steady. You know, we obviously have our ups and downs. Reliability continues to improve. Like, by and large, this plant is up and running, full time.

When you do that, there's just certain pieces of equipment that you can't get to because it's running, you have to take it out to do it. There's a lot of simple things like instrumentation replacements and instrumentation upgrades. I think the most important thing about this outage really is the data that we collected when we did our two test runs. We did a test run at 12.5, we did a test run at 14, both of those gave us insight into constraints that we see in the facility. You know, we're going to attack those items. We're going to get the plant back up and running, and we're going to push the plant to higher watermarks.

As we do that, we'll learn more, we'll do more, we'll grow more, and we'll continue building that into our operations at Ironton. I'm really excited about the turnaround, as you call it. We call it that as well. I'm excited about it because every time you get to open the equipment, look inside, learn more about what your technology is doing, it just makes you better as a core team. I'm very confident that we're going to come out of this outage in a much better facility than we've got right now.

Gerry Sweeney (Managing Director)

Got you. I appreciate it. I'm losing you a bit.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from the line of Jeffrey Campbell, Seaport Research Partners. Your line is now open.

Jeffrey Campbell (Senior Analyst of Cleantech and Sustainability)

Good afternoon, and thanks for the wealth of details in the call today. It's much appreciated. Dustin, I don't want to gild the lily, but my understanding is that there is no other PP recycling method, including chemical recycling, that is qualified for BOPP applications to PureCycle's level. 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?

Dustin Olson (CEO)

I think that's a good way to speak to it. I don't want to over speak for other technologies. I mean, there's a lot of nuances when something like chemical recycling is mentioned. There's, you know, there's straight up incineration, there's pyrolysis, there's ISCC PLUS credits. Those things are in a different category because most customers prefer plastic to plastic, not mass balance solutions or plastic to fuel solutions. When it comes to our ability to do BOPP, I think we stand alone in the market right now, okay?

Whenever you make BOPP, the simplest way to think about it is imagine taking a piece of plastic and stretching it really, really, really thin so it can turn into one of the seven layers on a chip bag or, you know, one of the layers that covers up meat packing or something like that. It's really thin. If you have any contaminants in that pellet, whenever you start to stretch it adds blemishes. It can add like little pimples that will look like stretch marks. It'll add problems in the operations where it could break when they're running it. All these things are real concerns for BOPP producers.

As a result of that, yeah, I mean, what we're finding is that because our purification technology purifies at the molecular fundamental level, we're able to remove solids, ash, colors, and other contaminants to a level that just works on BOPP. This isn't theoretical anymore, you know. A couple of quarters ago, we talked about Brückner on a small pilot line. Since we had the Brückner success, we've been doing it on the industrial scale. We've got, I think, two or three industrial line size success trials that have worked really well. I mean, these are on big machines. I mean, these are like 6.3 m machines that are making film with our product, and that is cool. It's super exciting, and I think it's going to be the future for us.

Jeffrey Campbell (Senior Analyst of Cleantech and Sustainability)

Great. When you think about the percent of recycling that 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 to have and survive that?

Dustin Olson (CEO)

Yeah, 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 two things.

One, broadly speaking, regulations fall into two buckets. One is recycled content, the other is EPR. Two, it's coming. Okay? Like, the regulations are real, and they're coming, and 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 Antwerp facility is going to be online just in time for that, which is going to be great for brands over there. 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, you know, a decade and a half ago.

you know, we could see that happening here as well. I think that we're well suited for the future.

Jeffrey Campbell (Senior Analyst of Cleantech and Sustainability)

The reason I ask the question is because I wondered aside from different categories of plastic and so forth, is there any notion of circularity versus the reality of mechanical recycling that it gets recycled five or 10 times, then it becomes a park bench? Are you hearing any discussions of that when you're working with the regulators?

Dustin Olson (CEO)

I would say that the concept of circularity is there in principle. I would say it's not legislated to the point just yet. Definitely people are looking for circularity. A couple of things to point out on that, though. One, if you look at New Jersey in particular, we bought over 10 million lbs of feed from New Jersey last year. I think New Jersey's excited about this too, but I'm really excited about what we're going to be able to do in New Jersey. I mean, we're actually going to take waste from that state, be able to show them how much employed from that state, convert it into something, you know, beautiful, and then let them turn it into something that a customer can buy over and over.

That is New Jersey becoming circular, and they're super excited about it as are we. The other point on the recycled content is that with respect to the circularity is, you know, brands definitely value that. So we get a lot of inbound questions about feedstocks, you know, can we use this feedstock and then make it back into a product that they can buy again? There's a lot of discussions there. It's just not at this point, it's not legislated in.

Jeffrey Campbell (Senior Analyst of Cleantech and Sustainability)

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

Dustin Olson (CEO)

Yeah, it's because we make a premium product. Okay, a lot of the recyclers, you know, they're struggling in economic times like this because they sell a product that competes with virgin or sells at a discount to virgin, and it's difficult to make money there. I think that you have to have a differentiated product, which we do. I feel really good about our technology in the long run for a couple reasons. One, I mean, as this dynamic begins to emerge, I think that you're gonna start to see downward movement in feedstock pricing. That's good for us. I think that as we add compounding to our capability, we're gonna start to monetize the value of the co-products that come out of the feed and get better value out of that.

That's very exciting from both a margin perspective as well as overall system perspective. Then the more and more that we do to qualify different product applications, which. I mean, we're doing it in spades. I mean, we're qualifying new things all the time. I think it just gives us more optionality on the offtake side, okay. I mean, Our supply to customers will be limited, okay. We don't have an infinite amount of supply for all the customers that want our material out of Ironton. So the more that we can do to create optionality for where we choose to sell our product, which will ultimately depend on where did we get qualified and who wants it the most, is gonna drive that overall supply picture.

I think that the technical qualification that we're doing is just opening that up to give us a lot of flexibility for where we go in the future.

Jeffrey Campbell (Senior Analyst of Cleantech and Sustainability)

Okay, great. Thank you. I appreciate it.

Dustin Olson (CEO)

Thanks, Jeff.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from the line of Eric Stine of Craig-Hallum Capital Group. Your line's now open.

Luke Persons (Sell-Side Equity Research Analyst of Clean Technology and Industrials)

Hey, this is Luke on for Eric. Thanks for getting our questions in here. First, is there a timeline for when you might finalize the site for your Gen 2 facility? I know Thailand was mentioned in the past as a potential suitor since it's a really appealing market. Could you just talk about some of the factors that are going into this decision?

Dustin Olson (CEO)

Yeah. 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, we still have more work to do. I don't wanna get too far ahead of it because there's work that we need to do to finish that up. You know, 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 could 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 a Gen 2, okay? Where the first one goes, that's open for discussion right now. We are very excited about the Augusta facility. 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. 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. When we talked about Augusta hosting, you know, eight lines, I think it'll be able to do eight lines, potentially eight 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 Mitsui & Co., I mean, all of those sites are perfect for expanding into. I think that you'll naturally see us start to do that with the Gen 2s in the future.

Luke Persons (Sell-Side Equity Research Analyst of Clean Technology and Industrials)

Got it. That's helpful. Thanks. Just as a quick follow-up here. 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're booked out?

Dustin Olson (CEO)

Yeah, Look, we're evaluating that. quite frankly, we're filling the pipeline first, sell it up, and then we'll make that, sell it out, and then we'll make that decision. I think we have a lot of flexibility. What I can tell you is we're leaving ourselves open on contract flexibility. We don't wanna get baked into a long-term contract that could, you know, restrict us in the future. We'll be able to optimize that over time. Typically, polypropylene contracts are one year at a time, and then you renegotiate. I think that as we build the flexibility, we're gonna have the ability to optimize that over time.

Luke Persons (Sell-Side Equity Research Analyst of Clean Technology and Industrials)

Great. Thank you.

Dustin Olson (CEO)

Thanks, Luke.

Operator (participant)

Thank you. This concludes the question and answer session. I'll now turn it back to CEO Dustin Olson for closing remarks.

Dustin Olson (CEO)

Yeah, 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 gonna have to go through. We are always very available for your questions, 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, buckle up, enjoy the ride. 2026 is gonna be a great year for PureCycle. Thanks, everybody.

Operator (participant)

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