Good morning, everyone. Gerry Sweeney with Roth Capital. Thanks for joining us today for a fireside chat with PureCycle. This morning we have Dustin Olson, CEO, and Eric DeNatale, IR and Finance. I want to thank you guys for making the trip out here for our conference. Just wanted to jump right into it. Right out of the gate, you know, PureCycle technology that is just state-of-the-art, recycling polypropylene. You've been building out the Ironton facility over the last several years. You're, I think, running around 60% utilization is the current status of the facility. I think just to start off with a little bit of backdrop with the company and the development of the technology, you've been building Ironton out over the last several years.
There's been some challenges, but I think, one thing that is sometimes missed is, you know, the facility was originally. When it was designed, it was designed under some unique circumstances. There were some muni bonds out there. There was a tight timeline. This was technology that was very new, or at least process technology, so that was very new, and it was also during COVID. I just wanted to maybe set the stage here with just an understanding of what you've gone through to get Ironton to its state today and maybe where you think it can go over the next several months or several quarters.
Yeah, thanks. Thanks, Gerry. Yeah, I mean, I came to PureCycle about five years ago. I got into the CEO position about three and a half years ago, and it's been an exciting journey, to say the least. Ironton is a great location. It's a great facility. The technology is unparalleled, but there's no doubt that when you try to bring a technology to scale to the market, and it's as transformative as our technology is, it's challenging. We had a lot of challenges as we went through this whole process, but a lot of that stuff is behind us.
If you think about where we are today versus where we were, let's say, five years ago when we came out as a public company, you know, we built a plant during COVID, and we did it faster than what most plants came on during COVID. We commercialized the facility. We proved that the technology works. We've made products out of the product that we've run at the facility. We've backward integrated into sortation to improve the feed quality that we receive and also our feed positioning, and we've also forward integrated into compounding, which gives us really a very unique capability to make lots of different products for lots of different customers.
It's interesting, like, we could tell war stories all day long about the little things along the way that made the difference to get us to where we are, but I think there are a lot of fun stories. I think that it really just shows the determination, the grittiness, the perseverance of the team. You know, five years ago, our team had never run a facility like this. We'd done it at the small scale, but we hadn't done it at the industrial scale. Now we have a professional team in Ironton about 80 strong that does this every day in and day out. You know, five years ago, we didn't have reliability experts on different pieces of equipment.
Today, we know how to run our plant, we know what makes it tick, and we continue to improve everything about the plant every day. When I think about the progression that our team has made across the five years, it's really a differentiator. I mean, we really have grown a lot through a lot of hard times, but we've also learned a lot that's gonna help paint the picture for the future.
Yeah, on that front, obviously a lot of time, I almost feel as though you're getting a feel for the plant, the pulse of the plant. You know, running at 60% utilization, I think you've talked even there's in the turnaround that's coming up, I think later this year, there's some other optionalities or updates you can make to even get the plant running faster, more effectively. Can you maybe touch upon that?
Yeah, I mean, you know, when you're a startup company and you're trying to make it, you know, there's a lot of work that you have to do to, you know, assumptions that you make about the original design and, estimates that you make about how things will work, you know, estimates about the feed quality that you'll receive when you get it. It's a very dynamic and changing market. I mean, recycling is a thing now, but the landscape of recycling has changed every year, okay? The terminologies are changing, the feed systems are changing, and so it's very dynamic. What I can tell you is that we've learned a lot about how this plant runs. We added a research and development center in Durham, North Carolina. That's been instrumental in understanding the fundamentals of our technology.
When you take what we're doing at the core level on the R&D side and combine it directly and immediately to what we're doing at the commercial scale, I mean, you just really know how the plant runs. The way you said it's really pretty good. Like, we understand the pulse of the facility. You know, we understand the way feed moves through the facility. We understand the personality of the facility. We know where the reliability impacts are.
When we get into this outage in April, yeah, I mean, we're running pretty steady right now at the, you know, 8,000-10,000 lbs. So, you know, when you think about all the things that we've learned across the kind of growth the last five years, I mean, we've positioned ourselves to be in a really good place. Ironton's been running pretty successfully at the 8,000-10,000 lb/h level, with pretty good quality. We have a couple of projects that we're gonna put in place in April that will incrementally improve the quality as well as push us to higher levels of production in the facility.
I think that what's really exciting to me about what we're gonna be able to do is now we really understand how the technology works at scale, and our ability to make bigger facilities, more efficient facilities in the future is right in front of us. Everything that we've learned at Ironton, as hard as it's been the last three years, we've integrated all of those learnings into our future builds, and that's on its way. The future is incredibly bright for PureCycle.
I wanna use that to transition over to the Thailand facility, but, you know, that's foreshadowing. We definitely wanna get into the commercialization process. Using your learnings, everything from Ironton, you know, the Thai facility is the next plant on the drawing board. Maybe a quick update on that front and see where that's headed.
Yeah, I mean, we've always had a big goal of growing the technology, getting to commercial scale, getting to a global footprint. Most of our customers are very interested in having global supply. Quite frankly, there's no one in the world that has the capability to make a product globally that's of the same quality, because generally the feedstock that comes in drives the quality of the final product, but with our process, it doesn't. When you're talking to some of the big brands, and you can show them that you can make the same thing in Europe, the same thing in Thailand, the same thing in the U.S., that's very intriguing. The idea of global contracts are gonna continue to percolate, and we'll get those across the goal line in due time. Thailand is very exciting.
We worked on Thailand for a couple of years. To be honest, we were thinking about doing a JV with the IRPC group. We ended up moving away from that and having a wholly owned facility in Thailand at their facility. We get a lot of the benefits of being in their facility, integrated operations, integrated utilities, lower CapEx per pound. But we also have 100% of the equity ownership. Thailand's extremely exciting. It should be mechanically complete at the end of next year. We'll be making product as we roll into 2028 and ramping in 2028. I think that's all very positive. The team in Thailand is also quite good.
When you're building internationally, you have to be very careful with, cognizant of the team that you that you need to pull that off. We're lucky that the IRPC team has loaned an entire project team to us in Thailand, and they are, they're quite good. They just finished a $400 million diesel project with the same engineering group that we're using now, and so there's a lot of relationships that are already established, and I can just tell you that it's an extremely capable team. I'm excited about this project. I think it's gonna have slightly lower costs on the fixed side, about neutral cost on the variable side, but a very low CapEx per pound, and it's going to be a very profitable plant for us.
Switching gears, commercialization. I guess this is where the rubber hits the road. Ironton producing product, that's back. You've sold some product. The commercialization process I think is a little, maybe a little bit longer sales cycle. You know, brands are brands because they like to protect their product and their actual brand per se. Maybe give us an update as to how this moves forward. I think you're selling into the branded market as well as the non-branded market. An update as maybe as to how this develops.
Yeah. When you're bringing a new product to the market that the market has never seen before, you encounter a lot of things for the first time. A lot of the regulatory things we're working through right now, first time anybody's ever seen a product like PureCycle in the market, they don't know how to handle it. They don't know how to think about it. They don't know how to categorize it. Quite frankly, a lot of the terminologies that have been available to the market have evolved over the last several years. Even calling your technology the right thing is important and well known now, but when a lot of these regulations got started several years ago, it wasn't known. When it comes to commercializing with the customers, it's a lot the same thing.
You know, there's mechanical recycling product, which has been used for a while, but quite frankly, the quality's not good enough to get into some of the applications that we're targeting. Then there's chemical recycling, which is the other end of it, but quite frankly, chemical recycling is getting regulated out. When they start looking at our product, we call these things SOIs. It's called substance of interest. Substances of interest is like what kind of contaminants are left in the plastic after your process. When they see our product and they look at the levels of quality that we're generating, they've never seen it before.
As they start to think about how do they integrate it in, how do they use it in their system, they're developing a lot of times, for the first time, how to think about it. That just takes extra effort. You know, Eric and I were talking about this earlier, that there's lots of steps in the process to get people to yes. At the beginning, it's just like, look at the pellet looks good. Test the pellet looks good. Try the pellet at the pilot, pellet looks good. Start scaling it to commercial and the industrial scale. But there's a lot of steps in that process, and quite frankly, there's more in our process because we're new. Never been done before, never been seen before in the market.
To some extent, we've underestimated it. There's no doubt that our product works. There's no doubt that our product is superior. There's no doubt that we can do things with our product that other people can't do. We can make film, we can make fiber. No one in the world can do that with post-consumer curbside recycled material. In fact, you know, we're sitting here in California right now, one of the things that happened in California several years ago is they mandated 15% recycled content into carpet. The market screamed and said, "Hey, we can't find enough material to make 15, drop it to five." They dropped it to five.
Well, I mean, I was actually speaking with the governor a couple weeks ago and also about different recycle mandates, and yeah, like, PureCycle is an answer that allows you to achieve things like that 15%. PureCycle's an answer that lets you achieve SB 54. PureCycle's an answer that lets you get into applications that currently are untouched, and we're getting a lot of traction with customers there. Having said that, it's delayed, okay? 2025, if I had to characterize it, was really a year where we proved that our product would work in lots of applications. We made yogurt cups, we made bumpers, we made film, we made cups for the national championship game
Once you have that in the market, it makes the barrier to adoption much easier for customers, but they still have to adopt, and they still have to go through their process to do that. 2025 was a very challenging year for a lot of customers. You know, with inflations and tariffs, a lot of Make America Healthy Again with reformulations. Like, there was a lot of distraction. What we see in 2026 is that customers are coming back around. They're putting more money into R&D. They are changing the packaging. They're leaning into sustainability. Some of it's regulatory driven, like what we see in California starting in 2027, like what we see now in New Jersey. People are very excited about starting to adopt our product in 2026.
You touched on New Jersey. Can you expand on that a little bit further? I think y ou mentioned just not only educating, I think, companies, but educating some of the government's agencies and understanding of what your product is, how it works, and how it fits into the market. New Jersey, I think, is a prime example of that.
Yeah. I mean, look, New Jersey is actually a leader in the market when it comes to mandating certain regulatory requirements for plastic. One thing they said is, you know, physical plastic-to-plastic solutions are accepted. Chemical recycling is not accepted. That's actually an enormous tailwind for us in the long arc because we are plastic to plastic. We are not chemical recycling. As New Jersey got out there and they started to develop the FAQs and the law for all of these different things, the terminology for the entire industrial space was not well known. Like, there were lots of words that were misused across different technologies and quite frankly, ours got lumped into the wrong technology. Ours got lumped into chemical recycling, not into physical recycling.
That's a dividing line for a lot of different regulations. Now, since then, New Jersey was first to the game, tip of the spear, leading the entire environment in terms of what's in and what's out for recycling, but they did it at a time where the terminology wasn't well developed. Since then, other states are coming in, California, Washington, Oregon, Massachusetts. They're all coming in, but they have the benefit of the terminology being well-defined. What's very clear, kind of indisputable, is that our technology is a physical recycling process that is plastic to plastic, and it is not chemical recycling. In fact, most states are starting to adopt APR certification as the gating item to being accepted, and we have that certification.
With New Jersey, we believe that we were misinterpreted on one small component, and we're working with them, and I believe that we'll get that changed. I am very happy with what New Jersey is doing. They've been very collaborative. They've been a good partner, but they're doing their due diligence, and I think that when they get to the finish line, they'll be in a much better place, and I think that that'll be a good tailwind for us.
Just keeping an eye on time. I may jump around a little bit, but I think one thing that really triggered something in my mind when you were talking about speaking with the governor of California and some of the regulations and mandating some recycled content. Switching gears to Gen 2, which is pretty exciting. I think sometimes people get frustrated with some of the mandates with recycled content because it may be more expensive. Gen 2, I think, is, you know, on the horizon here. We're starting to see it. Maybe explain the excitement behind Gen 2 and what could it do for the market.
Okay. If you look backward from a PureCycle perspective, we have, we became public. We built a plant during COVID. We've proved that the technology works at scale. 10 lb/h up to we've run at, like, 14,000 lb/h for a period of time. Like, we did all of these things. We proved that the technology works. We proved that we can make products. We've done all of these things. That's in the past. The level of unknown variables to us continue to shrink day after day after day. If you start looking forward, yeah, we get distracted by the commercial. Quite frankly, from our perspective, we know we're making it. We know it works.
We're talking to the brands that really care about this, and they see a lot of regulations coming their way. We see that as a big tailwind. Now, if you flip to what's exciting about the future, we have several thing. We have, let's say three major categories that are very exciting. One is the nationalization, the Europe for Europe, the Asia for Asia, the U.S. for U.S. The nationalization of activities means that a PureCycle facility that's using a nation's waste to make a nation's product is a tailwind. Okay. You hear that a lot in Europe in particular. We were in Davos a few weeks ago and on a panel with the Prime Minister of Belgium, and you know, he made it very clear, like, Europe needs to start taking care of Europe.
He mentioned that in the state of, you know, plastics recycling in Europe for Europe. Like, that's a tailwind for us because we can drop our facilities all around the world and have a nationalized, focused, facility for their nation that reduces their dependency on others. That's good. The second tailwind's regulatory. Regulatory is big, and if you look across the world, you've got ELV regulations, which are vehicle regulations that come in 2030. That is big. We've made a bumper successfully. We painted it successfully. It's with Volkswagen. It was great. It's a major accomplishment. We can also make parts for the interior of cars, and most plastic recycling companies can't because the plastic smells, and our odor is very, very low. You can put our plastic on the inside of a car. Not many, if any, can.
That puts a big tailwind for us. You look at PPWR. That is a regulation coming in Europe in 2030. That's a big recycled content, big, fines structure developing for Europe if you don't use recycled content. Those two are big tailwinds. If you look in the U.S., the U.S. is actually a bit further ahead because it's driven state by state, and those regulations are coming now. New Jersey is in place now. California's coming next year. Washington, Oregon, Massachusetts. These are all coming, and those regulatory tailwinds are gonna be very good for PureCycle because many of these regulations are either downgrading chemical recycling or they're deselecting chemical recycling. That creates an opening for PureCycle, and then the mechanical recycling's not high enough quality. You put that out there, and PureCycle tends to stand by itself. Okay?
The third, and I would argue potentially the most. Look, it's amazing is Gen 2. We talked about Gen 2 on our earnings calls a couple of times, and Gen 2 is our higher capacity design for future facilities. We've done a lot of work with our Durham facility, also with some engineering firms to evaluate what's possible with our facility. What we've proved to ourselves is that we can build a 500 million lb per year plant without tech risk. When you start scaling up these facilities, you start building for much cheaper. We think the CapEx per pound is dropping into the $1.25-$1.50 type area for Gen 2 as compared to Ironton, which was $3.50 per lb. Future facilities, a massive reduction in cost to build.
Potentially even more important than that is the cost to operate. When you build a facility that's five times bigger, the number of pieces of equipment don't change that much, which means that the number of people that you need to run the facility don't go up by five times. Massive scale efficiency there. On the variable cost side, it also doesn't scale linearly. There's a big scale advantage on fixed and variable. When you put all of that together, it means that Gen 2, we're going to be able to build a facility that's nearing virgin levels for cost and that we ought to be able to produce a pellet that's amongst the lowest cost of PP in the world.
All of a sudden, when the world is faced with how do we expand polypropylene, they will have to ask themselves, do we go build another virgin polypropylene plant like we've done for 60 years, which costs amount of money, it has a certain output, has a certain cost structure, or do we build a PureCycle facility which is about the same cost, maybe a little bit more expensive to build, but about the same cost, but the variable cost is lower. So we could actually make more margin by running a PureCycle facility and selling it at virgin, and then on top of that, you get the sustainability benefit and probably additional margin on top of that. I'm very excited about those three tailwinds.
We for sure get distracted by the commercial today, but from my perspective, it's like that's coming. It's coming. I know it's slow. We didn't expect the New Jersey hiccup. We didn't expect the distraction from 2025, and the qualifications are taking longer than what we planned on, but it's coming. When you get beyond that and you really take a step back and you say, "What is our risk profile today versus what was it five years ago? What is our risk profile today for what it's gonna be in the future?" I mean, it's awesome. I just think PureCycle is a unicorn technology in an industry that is ripe for transformation, selling a product that every consumer in the world wants. I'm very excited.
I'm gonna open up for questions, but one quick statement I have to make. I traveled with Dustin and the PureCycle team in Europe, and we met over multiple days, tons of accounts. The one thing that I think really stuck out with me was I think there's more. Sometimes with unicorn technology companies, there's just a technology there, but the one thing I really noticed was there's a whole scaffolding going around PureCycle. It's just not just a technology. There's a company here. They have the Durham facility, the research facility. You have a commercialization team. You have a finance team in Europe and in Asia. Not only are you developing a technology, you're developing a company behind all this. When scaling comes, you're gonna be positioned for that opportunity.
I really appreciate that comment. I think that when you come out of the, you know, as a SPAC and you are a quick-to-market public company, there's a lot of work that you have to do to shore up the business. There's a lot of foundational work that we've done to get the contracts right, to get the scaffolding, as you say it, right, to understand the facility, to do more R&D, to really introduce it to the market properly, to lobby properly with different government officials. All these things are foundational and very important, and we had a lot of work to do. Well, we've done it, and we continue to do it.
I agree with you that when you look at our backward integration into sort, our forward integration into compounding, and then the core technology being in some ways more efficient than what we expect it to be, and to have this potential for Gen 2, like, it's a very exciting time. I do think we've built a pretty nice moat around the company and around the technology.
I think we have time for no questions? No. All right, we're done. Time. Okay. Dustin, Eric, I appreciate it.
We're around. We're happy to talk. We appreciate all of your support if you're an investor.