PureCycle Technologies, Inc. Common stock 2026 Q2 Earnings Call

Please go ahead. Thank you, Kelly.

I am Eric DeNatale, Director of Investor Relations for PureCycle, joining me on the call today are Dustin Olson, our Chief Executive Officer, and Donald Carpenter, our Chief Financial Officer. This evening, we'll be highlighting our corporate developments for the second quarter of 2026. The presentation we'll be going through on this call can also be found at the Investor tab on 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 second quarter 2026 corporate update press release filed this evening, as well as in other reports on file with the SEC that provides further detail about the risks related to our business. Additionally, please note that the company's actual results may differ materially from those anticipated. 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. If joining us by phone, you can access it at any time at purecycle.com. With that, I will now turn it over to Dustin Olson, PureCycle's Chief Executive Officer.

Thank you, Eric, and good evening, everyone. This is a quarter of real progress on all fronts and sets up the second half for further progress. Operationally, we completed the turnaround ahead of schedule and below budget, executed more than 170 site projects, and came out of it with a plant that set a new daily throughput record in June. We brought compounding in-house, and it is running today producing what customers specify. Commercially, revenue grew for the sixth consecutive quarter, and our first Procter & Gamble application entered commercial production. On the regulatory front, New Jersey approved PureFive as recycled content, the last approval our customers were waiting on, and it's already accelerating qualification at some of the largest food service companies in the country. We also spent the quarter preparing for future developments.

In May, we ran Ironton under process conditions that closely match the plant designs we will build in Thailand and Antwerp, and those tests were successful. Thailand received Board of Investment approval in the quarter, and we expect to break ground in the second half of this year. Every one of those threads points in the same direction, a second half ramp and Ironton breakeven, which remains our second half target. We are further along the path than we were 90 days ago. Let me walk you through the details. Here's the frame that we are using internally. All year we have said that commercial ramp will be second half weighted, and it was for two specific reasons. The first was the regulatory clock. Requirements that begin in January 2027 set the pace for when brands must move. The second was supply chain readiness.

It is one thing to technically qualify the product. It is another thing to make it consistently and reliably at specification every time. Brands buy at the SKU level one application at a time, and they do not start until they're confident the material in the 10th truck will be identical to the material in the first. Both factors are now proving out. Since the New Jersey approval, brands are accelerating their qualification process for the first time. You see it in QSR cold cups and in large snack and confectionery programs. That tells you that the regulations really matter for driving demand and that the demand is coming. With our compounding assets integrated and running, we now have the reliable supply chain that those brands require. You can see it working.

A customer with standards as exacting as Procter & Gamble is accelerating their own commercial ramp with us. The other thing to understand is fragmentation. Outside of a handful of categories, this market converts SKU by SKU. Thousands of separate qualifications rather than a few large contracts. That is not an issue unique to PureCycle. It is the structure of the market, and it is the same for everyone in it. Quick service restaurants follow the same pattern, but with higher volume SKUs. A large chain carries fewer packaging SKUs, and each one is enormous. A single qualification there can be worth what dozens are worth elsewhere, and they are working against a deadline that's not set by us. New Jersey's food contact exemption expires in January of 2027. The expected future pace from here is largely set by a date in statute.

Customers are driving to have product on the shelves to meet requirements that start in January of 2027. This all drives toward an Ironton breakeven, which remains our second half target. We have referred to breakeven as roughly 40%-50% utilization, and that number has not changed. It is built on branded sales at those utilization rates, and branded sales are ramping. Branded pricing remains robust, and applications carrying the highest confidence for the second half maintain strong pricing. The net of this is our confidence in the second half ramp and the path through Ironton breakeven has increased because the things that made the second half weighted are being proved out. Ironton produced approximately 4.5 million pounds of PureFive in the second quarter, down from the prior quarter and consistent with the message we communicated in advance of the planned turnaround.

We processed approximately 5 million pounds of feedstock. This was not a quarter for rate. It was a quarter for making improvements to the plant, testing equipment, and the tests worked. The turnaround was completed ahead of schedule and below budget, and we executed more than 170 projects during the outage targeting reliability, rate, and quality. Two reliability items are worth naming because together they were our two largest sources of unplanned downtime last year. The first was the CP2 system, which has been a persistent problem and is now substantially improved. The second was improving the reliability of numerous mechanical systems, and this outage substantially expanded the capacity of the plant bottleneck and improved the worst-performing seal in the plant. Both are structural fixes. When we opened the equipment during the outage, the large equipment where we had prior problems was very clean, including the settler where co-product separates from the product stream.

That bodes well for future reliability, so waste plastic is not fouling the system and is a good long-term indicator for the technology, not just for this facility. May was, by design, a low volume month. We commissioned the newly installed equipment, and we changed process conditions at Ironton to mimic the designs we intend to build in Antwerp and Thailand. Those tests were successful. Being able to run those conditions on an operating commercial asset before we build is an advantage most companies in our position do not have. In June, we set a new daily throughput record, and we demonstrated production at 12,000 pounds per hour. Our feedstock supply is very steady. Purchases are routine. Denver is running well, and inventory is balanced.

Delivered costs are declining, and we now source from more than 15 different domestic suppliers. On-site compounding is running. We announced mechanical completion on our May call. The asset today is running 24 hours a day for five days a week, and we intend to move to 24/7 in the fourth quarter. That is consistent with the cadence we described in February and again in May, and is a large part of why our ramp has been second half weighted all year. We previously relied on third-party compounders and third-party operations carry their own reliability risks. Bringing it in-house saves us money and lets us ship by rail car. Most importantly, it de-risks our supply chain, strengthens our quality control, and gives us the flexibility to deliver on what each customer specifies. Now that it's running, here is what it changes.

We control the formulation. We can hit a customer's specification, the precise recycled content percentage, the precise properties, and hold it consistently. The mandates do not currently require 100% recycled material. They require a percentage. Compounding is how we deliver that percentage in a form that the application needs. It also opens thermoform cups at scale in clear and in white. Both sit directly in the scope of regulations, and with compounding, we can make both. Importantly, we can now deliver compounded product in rail cars directly from Ironton. This was a capability that we don't have with a third-party compound partner. We have generated and shipped numerous samples since startup. The product looks excellent and you see the examples of it in the deck.