Q3 2024 Summary
Published Feb 18, 2025, 5:24 PM UTC- PureCycle has demonstrated the ability to rapidly penetrate large markets such as automotive by providing recycled polypropylene (RPP) that performs like virgin material, enabling faster adoption and opening potential access to over 300 pounds of plastic per vehicle.
- The company has high confidence in scaling production to meet increasing commercial demand, supported by improved product quality and resolved production constraints, with expectations of significant commercial sales beginning in Q4 and ramping into 2025.
- Operational improvements, such as the new Denver sorting facility, enhance feedstock flexibility and efficiency, potentially reducing costs and improving margins, while operating cash burn is decreasing due to increased operational reliability.
- Potential delays in ramping up production to full capacity at the Ironton plant. While management is confident in eventually reaching the 107 million pounds per year capacity, they acknowledge ongoing challenges and constraints. Dustin Olson stated, "We still got work to do to get there. Remember, every time that we push into a new boundary of the plant operations, we will find new constraints that we have to work through to get there. So we'll do that through the course of 2025, and we'll see where the production lands."
- High cash burn rate and potential liquidity concerns. The company reported operating cash expenses of $23.5 million for the third quarter, a decline from nearly $35 million in the previous quarter. Jaime Vasquez mentioned, "We hold about $118 million of our revenue bonds that we plan to sell over the next several months that should further support our liquidity needs in 2025." However, ongoing commitments include a $36 million payment into an escrow account related to the Augusta project and about $11 million of commitments over the next several quarters.
- Termination of the joint venture with SK may impact international expansion plans. The company ended its joint venture with SK in South Korea due to challenges in aligning timelines for multiple technologies. Dustin Olson noted, "It was very difficult to get aligned across the time line for 3 independent technologies to 1 space and some of the synergies across the facility just couldn't be materialized because of those timing gaps." This could delay the company's international growth and expansion efforts.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Production feed rate | Q2 2024 | no prior guidance | 10,000 lb/h | no prior guidance |
Daily production | Q2 2024 | no prior guidance |
| no prior guidance |
Weekly production | Q2 2024 | no prior guidance | 1 million lb in one week | no prior guidance |
Operating Cash Burn | Q4 2024 | no prior guidance | ~$8 million | no prior guidance |
Ironton Facility Utilization | Q4 2024 | no prior guidance | 40–50% for breakeven, 80–90% for breakeven excluding CapEx | no prior guidance |
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Production Ramp-Up
Q: Can you reach full production levels to meet demand?
A: Yes, we can ramp up production at Ironton to meet commercial demand. We've resolved constraints around CP2, unbridling capacity, and can run at 80%-85% capacity (around 10,000 pounds per hour). Our focus is now on optimizing to push above that towards nameplate capacity as needed. -
Commercial Sales Timing
Q: Will meaningful revenue start in 2025?
A: Yes, we're seeing solid signs for meaningful commercial progress in Q4 and ramping into 2025. While we aren't providing revenue projections, successful customer trials and growing trust suggest a significant ramp-up next year. -
Economics and Breakeven
Q: What are expectations on non-compounded economics?
A: To break even at Ironton, we need 40%-50% utilization; for company breakeven (excluding CapEx), we need 80%-90% utilization. Despite market fluctuations, we believe these numbers are solid. Compounding offers additional profitability by providing customers exactly what they need and adding incremental margin. -
Augusta Facility Timeline
Q: How long to build Augusta facility?
A: Building Augusta will take approximately 6 to 10 quarters, which is about 2 years plus a couple of quarters. We've purchased much of the long lead equipment already, offering opportunities to improve the schedule. -
Capital Requirements for Augusta
Q: What's the expected CapEx for Augusta?
A: We're not providing an updated CapEx number for Augusta due to variables like inflation and cost savings from Ironton learnings. We refer back to previous guidance. -
Joint Venture Pipeline
Q: Are you getting more interest in JVs after SK termination?
A: Yes, interest from global partners is growing as we demonstrate success at Ironton. Regarding SK, they remain a strong partner; the story is delayed, not over. -
Operating Cash Burn
Q: What is expected cash burn next quarter?
A: Cash burn has decreased; we expect to be around $8 million in Q4, possibly better. Prior quarters had non-recurring maintenance activities; with stable operations, costs become more steady. -
Sortation Facility Economics
Q: Does new sortation improve costs?
A: Yes, our Denver facility improves yields and controls feedstock quality, enhancing economics and reliability. Producing coproducts offsets some costs, and the facility operates efficiently with lower electricity and manpower costs. -
Automotive Adoption Speed
Q: How are you quickly moving into automotive?
A: While some automotive applications require long qualifications, others adopt faster if we demonstrate our product is a like-kind replacement. Early trials started months ago are now yielding progress, speeding up adoption. -
Production to Meet Sales Ramp-Up
Q: What production level is needed for sales ramp-up by Q3 2025?
A: It's difficult to specify, as the commercial ramp-up is in flux with customer timelines. By mid-2025, we expect to push up to and beyond 50% utilization at Ironton. -
Augusta Initial Capacity
Q: How many lines will Augusta start with?
A: We will start with two lines at Augusta, producing 260 million pounds per year. This has been our consistent message.