PureCycle Technologies, Inc. (PCT) Q4 2025 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to the PureCycle Technologies Fourth Quarter 2025 Corporate Update. [Operator Instructions] Please be advised that today's presentation is being recorded. I would now like to turn the conference over to your first speaker today, Eric DeNatale, Director of Investor Relations. Please go ahead.

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 will be highlighting our corporate developments for the fourth quarter 2025. The presentation we will 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 made -- 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 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 statements. Our remarks today may also include preliminary non-GAAP estimates and are subject to risks and uncertainties, including, among other things, changes in connection with quarter end and year-end adjustments. Any variation between PureCycle's actual results and the preliminary financial data set forth herein may be material. You're welcome to follow along with our slide deck or if joining us by phone, you can access it at any time at purecycle.com. We are excited to share updates from the previous quarter with you. With that, I will turn it over to Dustin Olson, PureCycle's Chief Executive Officer.

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

Thank you, Dustin. I appreciate the opportunity and the time that PureCycle has provided me. This is a company with a great mission and talented people that should allow the company to accomplish that mission. And with Donald stepping into the CFO role, there will be continuity among the finance and accounting teams. Donald's time at PureCycle, combined with his depth of 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.

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

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

All right. Thanks a lot, Don. I wish you both the best and I'm very excited about the path forward. Additional to this announcement, we previously announced we added 2 distinguished board members to our team, Dr. Siri, who serves as the Independent Director and Chairman of the Audit Committee at the Bangkok Bank and previously served as a Thailand's Minister of Energy and Chairman of IRPC. And most recently, Valerie Mars, who retired as Senior Vice President and Head of the Corporate Development at Mars Inc. We're very fortunate to have both of them. Now to the business highlights in the quarter. Before I get into the details, I want to frame where we are. We are producing high-quality food-grade recycled polypropylene at scale, something no one else in the world can do. We've qualified our materials in flexible packaging, wrappers, stand-up pouches, closures, thermoform containers, bumpers and numerous fiber applications. Branded pricing is on track with prior guidance and our pipeline has grown to over 170 active projects. The market continues to struggle integrating large amounts of post-consumer recycled polypropylene content into consumer products. Recycled content is new, especially in the FDA space. And companies are challenging decades old processes to make them work for this emerging space. PCT is helping them. As our brand continues to rise and other brands get more familiar with our product, we dramatically reduced the adoption challenges. When a brand puts our material into 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. And while customers are extremely excited about our product and how it simplifies their lives, the adoption process, which includes things like lab, pilot and industrial scale qualifications, lots of trials, regulatory reviews, packaging design, line validation, supply chain insurance and internal approvals, it still takes time. But here's what I want you to take away from this call. The underlying demand is very strong and growing. It's clear to me that the recycled content and consumer products is coming, the regulatory environment is naturally moving in PureCycle's direction and probably the most important thing of all, consumers continue to value sustainability, and it is driving their buying behaviors. The question is not whether brands will buy recycled PP at scale, but when. And we are positioned to be the premier global supplier. 2026 is about converting our technical success into accelerated commercial revenue growth quarter-over-quarter, and I'll walk you through exactly where we stand on that. In the fourth quarter, we successfully added a third shift to Denver, which had previously been a constraint on production. As a result, Denver processed 44% more feed versus third quarter ramping to 14 million pounds, a 35% increase over its prior quarterly high. We are actively buying from more than 15 different feed suppliers, including most of the largest players in the market and have reduced procurement costs by $0.06 per pound over the last 12 months. Denver has fundamentally improved our feedstock flexibility and cost structure, and I have never felt better about our ability to reliably and economically supply Ironton as we ramp to full rates. Ironton also successfully ramped production in the fourth quarter with a production of 7.5 million pounds. We not only hit a quarterly record for production but also new daily records as well. This doesn't tell the whole story as we continue to manage production levels ahead of the commercial ramp. We are routinely running Ironton with higher reliability and at higher watermarks. In the last few quarters, I've spoken about how we ran successful rate tests at about 12,500 and 14,000 pounds per hour. We have a lot of data from those tests, which we've analyzed and see some very specific improvements that should allow us to push towards nameplate capacity in '26. The original design for Ironton contemplated an annual maintenance average. We didn't take 1 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 multiyear supply agreements, which is a direct reflection of the confidence that they have in our operating performance. Phase I of our on-site compounding started up last quarter. This enables CP2 to be compounded on site and sold to the market. This project allowed us to reduce carbon footprint and cost to produce and improve our final sales price. We're very excited about this addition. And Phase II should be mechanically complete in March and commissioning will continue in parallel to planned outage. Phase II coincides with the demand planning for these grades and commercial offtake profiles. The Phase II on-site compounding line will be primarily focused on producing compounds for BOPP film, which is used in flexible packaging and thermoform applications, which is used in things like coffee lids to the highest value, fastest-growing segments in our pipeline. Having this capability on site complements existing third-party compounding assets improves turnaround times for customer trials and gives us direct control over the formulations. We have built and will continue to build inventory ahead of the outage and across the planned application launches, and we expect to ship while our intent is engaged in turnaround. On the other side of this outage, Ironton should be well positioned to service the expected ramp to much higher levels of production and sales later in '26. Turning to the commercial update. We booked $2.7 million of revenue in Q4, our fourth consecutive quarter of sequential revenue growth. We are actively shipping to 11 customers, roughly half of the branded and half are unbranded with additional conversions expected to begin in early March. While 2025 had real commercial delays relative to our original projections, the technical progress was substantial and the setup for '26 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, wrapper, stand-up pouches, closures, thermo 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 continue to be in line with our previous guidance. While branded sales have a longer sales cycle than non-branded sales, branded sales are the core focus for this company and where we see the most value in the market. Co-product sales have been positive for us, and we've begun to monetize both co-product 1 and co-product 2, and are seeing prices in the $0.25 to $0.30 per pound range. Fiber technical successes provided a lot of confidence to the market early on, but the adoption was slow due to fragmented demands and extremely long sales cycles. We de-prioritized it in the near term. And while it does remain a real market for us, we're not going to concentrate our resources there today. The regulatory landscape has been broadly positive. Our material is accepted in Oregon, Colorado, California, Washington and Europe. New Jersey has been slower. We partnered with the DEP on how our dissolution technology fits within the recycling framework, which has delayed some approvals. The good news is New Jersey has excluded chemical recycling and ISCC Plus mass balance credits, which positions us as the only supplier at scale for food-grade recycled content under the mandates. Large CPGs are lobbying the DEP on our behalf and our relationship with them is strong. I personally respect the position in New Jersey Department of Environmental Protection has taken, and we'll continue to partner with them as they integrate the legislation into action. 2025 was a challenging year for many of our customers. Tariff uncertainty, inflation hangovers, commodity spikes and converter consolidations forced them to redirect their focus on cost savings and reorienting their supply chains domestically, which lengthened approval time lines across the board. We think those high 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 recycle 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 to 50 million 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 to 30 million pounds of near-term demand will be required -- will require that approval. New Jersey applications overall represent about 300 million pounds 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 to 50 million pounds that we mentioned last quarter, we've added another 20 million to 25 million pounds at full ramp. The earliest that these could be converted -- the earliest of these could convert as soon as next month and one of the most near-term opportunities represents roughly 10 million pounds of annual demand. The pipeline continues to be strong, growing from roughly 100 projects a year ago to greater than 170 today, and a lot of this recent bill 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 shape from rigid containers, 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 in the right at the center of this trend. BOPP film and thermoform applications remain the core targets for our compounding operations. And we focused our commercial teams on brands with the highest growth potential. Here are some examples of the end markets that we're actively engaged. We spoke about QSR coffee lids last quarter, and the interest continues to be strong and is growing. We continue to make progress with our first QSR coffee lid project, good product fit, excellent trials and good relationship building between the end brand and converter. We're also in discussions with 4 additional brands following our recent quarterly announcement about coffee lid innovation. But these same customers also manage a growing cold beverage category that is taking market share. Brands are launching more products in this high incremental margin category. Additionally, brands are also transitioning to PP in 12 states that have already passed single-use polystyrene bands. This will give us additional tailwind to our product in the beverage containers. The net result of the -- is north of 300 million pounds of additional TAM in North America, and it's growing in the high single digits each year. Beyond cold beverages, premium pet food is a 130 million-pound polypropylene market for BOPP film packaging, growing 4.6% annually as pet owners trade up to higher quality brands. Jerky and Meat Sticks represent 40 million pounds of BOPP film demand, growing 6% to 7% with protein snacking trends. Dermocosmetics, think CeraVe and SkinCeuticals is a 55 million-pound market growing at 7% to 9% as clinical skincare brands shift the PP packaging for recyclability. In household goods, things like storage bins, kitchen utensils, laundry baskets is a 700 million-pound polypropylene market where Walmart and Target sustainably -- sustainability mandates are creating demand for recycled content. From a base of only 3.3% to 5% penetration today, that segment alone has 150 million pounds of addressable pounds for recycled polypropylene growing at 8% to 12% as the mandates ramp. These aren't hypothetical markets. These are specific applications where we are engaged with brands in our pipeline and where growth trajectory works in our favor. Let me take a moment on the regulatory landscape because I think it's important to frame this in concrete terms. Every EPR and PCR mandate that's been passed in New Jersey, California, Washington, Oregon, Colorado, and Europe, translates directly into pounds of required recycled content. These aren't voluntary targets. They are law. New Jersey requires 10% recycled content today, 20% in '27 and 30% in 2030. California SB 54 requires 25% source reduction by 2032 with a stairstep approach requiring 10% by '27, 20% by 2030. We have received post-consumer resin certification from the Association of Plastic Recyclers or APR, which is the standard that most state regulators referenced for recycled content compliance. That certification allows our material to be categorized as recycled content across numerous states, effectively clearing the regulatory path for brands to count on PureCycle material toward their targeted -- mandated targets. The EU's packaging and packaging waste regulation requires 10% recycle content by 2032. When you add it all up, there are literally hundreds of millions of mandated volume coming online over the next 5 to 7 years. And for food-grade polypropylene applications, we're the only global solution emerging at scale. The regulatory framework 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 9 LOIs with regional feedstock suppliers, 6 domestic and 3 across Southeast Asia, that, even at a minimum annual levels exceed our needs for the first purification line. We are working to expand our feedstock network in Thailand, but we are also finding feed and abundance across Southeast Asia. Thailand generates approximately 2.5 million tons of plastic waste annually, of which an estimated 400,000 to 450,000 tons is mismanaged. With about 70% of that linking into the ocean each year, making Thailand the sixth largest source of ocean plastic -- 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 products would be exported to North America and Europe. And while we still expect to directly export significant quantities of strong -- 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 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 8-year 100% tax holiday followed by 5 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 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 for plan. We expect permits in the second half of '26 with construction still scheduled to begin by 1Q '27 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 last -- we mentioned last quarter that we expected to complete our initial engineering work for Gen 2 purification design in the first part of 2026. While there is still work to be done here, the initial findings are very encouraging. First, we see no technological constraints on building the higher end of this capacity scale than what we discussed previously or closer to the 500 million pounds of capacity that we mentioned in the range. This is important because costs do not scale linearly. And in fact, the initial design analysis suggests that the incremental cost difference between the 500 million and 300 million pounds is relatively minimal. As a result, the initial look indicates greenfield costs on the Gen 2 lines approaching $1.50 per pound of capacity and for brownfield sites should approach $1 per pound for expansions. This is a really big deal. This cuts down the capital intensity of our business, meaningfully improves future IRRs and puts us back in the ballpark for what it costs to build virgin polypropylene lines. It is also a lower CapEx intensity than what we estimated in the business plan last summer associated with our capital raise. Scale also benefits us on the production cost side. And while it's too early to give definitive numbers, we see a clear line of sight to Gen 2 cash cost to be below virgin on-purpose PP production lines. While the majority of our focus today is on selling out and ramping Ironton in 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. But now we are seeing the cost efficiency translate into a permanent cost and return advantage in the market. A market that I remind you represents 200 billion pounds per year of annual demand and a market that is expected to continue to outgrow GDP for the foreseeable future. Look, I know the commercial ramp has been slower than we projected. But I'd ask you to look at our history. Every time that we've said we've solved that we -- every time that we said we'd solve the technical problem we have. Every time that we've taken a planned outage, the plant came back better. The challenges that we face today are principally out of commercial adoption timing, not commercial demand, not technology, not operations, not feedstock, and now we have the product, the production and the pipeline. The conversion is happening, it's a matter of when not if. When I take a step back every year during my tenure has had its own theme. 2023, a was about completing Ironton. 2024 was about making the plant work. 2025 was about technically qualifying our product, especially in the high-value parts of the market. In 2026, will be about the commercial ramp and selling out the plant. Our future is bright. We have a strong foundation supported by tech and teams that know how to build. The market opportunity continues to grow in front of us, and the company is ready to lead. With that, I'll turn it over now to our new CFO, Donald Carpenter for the financial presentation.

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

[Operator Instructions] And our first question comes from the line of Hassan Ahmed of Alembic Global Advisors.

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

Yes, Hassan, 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. And every time we have a technical success, it opens up the aperture for us to do more and more. We've talked about the difficulty with predicting the specific timing. We know it's coming and we know it will be asymptotic, but it's not fully in our control. You see things like the number of customers shipping to increases. We see the revenue continuing to increase. We see the size of trial volumes continuing to increase. At the end of the day, the thing that we're building is really a relationship between us and the customer, and 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 on 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 million to 50 million pounds as well as 20 million to 30 million pounds. We continue to see the technical successes, mount with the film, pouches, wrappers, et cetera. The thing that we did with Toppan, Hassan, is really important. I mean if you do any research on CPG, 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 -- now 2025, I think it's always easy to look in hindsight. I think that we 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, 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. And I think that 2025 was a bit of a wake up and a reset. But now what you hear is that CPGs are like dialing in to growth in '26. 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 packaging date, okay? And 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 4 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 from the standup pouches because everybody wants them. And 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 pure cycle. So we have products on the shelves right now. We're continuing to grow the pipeline. The applications are getting better. And our team is just -- is doing a really good job of getting customers excited about our products. So you asked, I think the core question was, how much conviction do we have about our commercial ramp? And it's very high, okay? We are very, very excited about the next few quarters and where PureCycle is going to 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.

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

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

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

Yes. No, that's good. So first of all, we have the pleasure of operating a new technology at commercial scale and Ironton successfully. And 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. And 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. And in some ways, Hassan, there are pieces of equipment in the Gen 2 design that you only need to make a little bit bigger. And then in other parts of the process, you need to add parallel trains. But the long result of this study indicates that our technology is very scalable. And when you do that, then you're going to end up scaling costs, reducing the CapEx per pound. And also -- and I'll speak to this in a second, the operational cost per pound also drops pretty dramatically. On the op cost 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 screens and create co-product 1 and co-product 2, and so 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. And therefore, when you look at the overall dollars per pound that it's going to cost to run this facility, the operating costs just getting divided by a much bigger number, and that number is going to drop significantly. So we're talking about fee plus a $0.35 per pound number for Ironton and fee plus a much lower number on our Gen 2 facility. Now we haven't -- we're not releasing yet what we think that number will be. But if you're talking about feed at $0.05 to $0.10 per pound and then yield adjusted to $0.15 per pound and you start adding smaller numbers than $0.35, on top of that, you very quickly get to numbers that are below the virgin cost to produce polypropylene. And think about that, Hassan. I mean, 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. And so, 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 is 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.

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

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

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

Anand, just a follow-on on that. I mean, Donald brings a lot of really good project finance experience. And I think that's going to really sets up nicely for both Thailand and Antwerp and everything that we do in the future. But 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 the great tax holiday and all these things we've talked about. But it's exciting for Thailand, too. Because 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 run. It's a great question, Anand.

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

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

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

Listen, I -- 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 of 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. It feels as though the brands are getting more and more confident. One, they can see what's happening in Ironton reliability is increasing. And two, going through the brand testing. So is this sort of path forward? Is this an accurate assessment as to what's happening today?

Yes, 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 in brands. That's -- there's no doubt about that. I mean we routinely have tours out to the plant and people always be very impressed. I think on the testing side, I think 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 hands 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 and then people can immediately connect to it. And I think that, that reduces the hurdle for getting started with different applications. So 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. But they're very methodical. I mean, a brand has built an entire lifetime building that reputation. And so 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. There's 20 different steps or more that you have to go through to get to a yes on a customer like this. And it just takes time. And look, from an outside looking in and also from the inside looking in, it's very frustrating. It takes time. And -- 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, and I think these are foundation laying type things. They're going to be very good for us for a long, long time.

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

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

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

Yes. I mean, look, this is a very traditional turnaround. When we first built this company, we had an expectation to do 1 per year for 30 days a year. Actually, last year, we didn't have to do that, which I think bodes well for the 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. There's -- any time you run a facility for a couple of years in a row, and we've been running very steady. We obviously have our ups and downs. Reliability continues to improve. But like, by and large, this plant is up and running full time. And when you do that, there's just a certain piece of equipment that you can't get to because it's running, you have to take it out as you do it. So there's a lot of simple things like instrumentation replacements and instrumentation upgrades. But I think the most important thing about this outage really is the data that we collected when we did our 2 test runs. We did a test run at 12.5. We did a test run at 14, and both of those gave us insight into constraints that we see in the facility. And I -- we're going to attack those items. We're going to get the plant back up and running, and we're going to -- we're going to push the plant to higher watermarks. And 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. It's a core team, and I'm very confident that we're going to come out of this outage with a much better facility than we've got right now.

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

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

Yes, I think that's a good way to 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 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 1 of the 7 layers on a chip bag or 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, it adds blemishes. They can add like little pimples that will look like stretch marks. It will add problems in the operations where it could break when they're running it. All these things are real concerns for BOPP producers. And as a result of that, yes, 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. And this isn't theoretical anymore. A couple of quarters ago we talked about Bruckner on a small pilot line. Well, since we have the Bruckner success, we've been doing it on the industrial scale. So we've got, I think, 3 or 4 -- 2 or 3 industrial line size success trials that have worked really well. I mean, these are all big machines. I mean, these are like 6.3-meter 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.

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

Yes, that's a good clarification question, Jeff. The answer is kind of both. I mean, if you look at that slide, we mentioned the percentage, but there's a small note below it that says those percentages apply to lots of different things. In some cases, they apply to specific categories of plastic like PP or PE or PET, in other cases, it applies to specific types of applications like rigids or bottles or something like that. And 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. And I think that the general trend is 2 things. One, broadly speaking, regulations fall into 2 buckets. One is recycled content and the other is EPR. And two, it's coming. 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 Ironton facility is going to be online just in time for that, which is going to be great for brands over there. But actually, states are leading quite a lot, and we're starting to get a lot of inbounds from customers on how to handle different regulations that are coming. The SB-54 in California is a very real thing. And a lot of times, California regulates and the country moves that direction, we saw that with fuel standards a decade, 1.5 decades ago, and we could see that happening here as well. And I think that we're well suited for the future.

The reason I asked 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 5 or 10x then it becomes a hard patch. So -- are you hearing any discussions of that when you're working with the regulators?

I would say that the concept of circularity is there in principle. I would say it's not legislated at this 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 pounds of feed from New Jersey last year. And so I'm -- I think New Jersey is 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 beautiful and then let them turn 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 brands definitely value that, and so we get a lot of inbound questions about feedstock. 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.

Yes. Well, it's not surprising because you're the only ones that can do it. But 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 $0.02 in. We continue to see PET recyclers pulling back on production and even shuttering facilities in the U.S. and the EU. Can you help investors understand why demand for PCT's recycled PP will continue to grow while recycling of other types of plastics appears to be languishing.

Yes, it's because we make a premium product. Okay. A lot of the recyclers, 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. And so I feel really good about our technology in the long run for a couple of reasons. One, I mean, as this dynamic begins to emerge, I think that you're going to 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 going to start to monetize the value of the coproducts 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. And 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 we will -- 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. And 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 going to drive that overall supply picture. And 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.

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

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

Yes. I mean I think the first step is for us to really get a good handle on the overall technology for Gen 2 and then the cost position for Gen 2. And I think that we're getting better at that, but we still have more work to do. So I don't want to get too far ahead of it because there's work that we need to do to finish that up. Look, we're very excited about Augusta. Augusta has been a good partner for us in Georgia. That's a really nice site, and we can build the facility there. We've been very public about that Gen 2 going there first. Look, I think that -- I think that every site that we've announced in the past is a good location for Gen 2, okay? Where the first 1 goes, that's open for discussion right now. We are very excited about the Augusta facility. But you mentioned Thailand, honestly, I think that's a great location, too. We're finding lots and lots of opportunities on the feedstock side to fill that facility, I think the integrated brownfield opportunities there will help us on overall CapEx efficiency. But one of the interesting things that will happen, I didn't speak to this on the call, but 1 of the things that will happen is, actually, the footprint required for a Gen 2 at $500 million, it's not even that different than a footprint for Ironton. It's a little bit bigger. I mean it swells a bit. But when you start talking about how much capacity can you put on each site, like the more efficient you get with building Gen 2 and upsizing that equipment, actually, the more capacity you can put on each site. And so when we talked about Augusta hosting 8 lines, I think it will be able to do 8 lines potentially 8 Gen 2 lines. We have to work the math. But I think that with Augusta, Antwerp, Thailand and also with our partners up in Japan with Mitsumi company, I mean, all of those sites are perfect for expanding into. And I think that you'll naturally see us start to do that with the Gen 2s in the future.

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

Yes. I mean, look, I mean, we're evaluating that. I mean, 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 want to get baked into a long-term contract that could restrict us in the future. And so we'll be able to optimize that over time. Typically, polypropylene contracts are 1 year at a time, and then you renegotiate. And I think that as we build the flexibility, we're going to have the ability to optimize that over time.

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

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

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