Q3 2025: Contradictions Emerge in Feedstock, Production, and Pricing Strategies

Guidance:

• Run facility at 60%–70% for the next 3–6 months, ramping to near nameplate in H2 2026.
• Denver to add a third shift (Q4) targeting ~100M lb/yr; Ironton 100M-lb compounding expansion on track for mechanical completion in December.
• Branded shipments begin Q4 2025 (P&G, QSRs); target of ~$8M/month revenue by end of Q1 into Q2 2026.
• EIF grant up to EUR 40M expected by end of Q1 2026; Gen‑2 purification design complete in H1 2026 (anticipated 300–500M lb capacity).
• Thailand feedstock LOIs secured; debt financing efforts underway; growth capex to increase early 2026.

Business Commentary:

• Operational Progress and Production Ramp-up:
• PureCycle's production ramped up, with September's production at 3.3 million pounds, the highest recorded.
• The company added a second shift in Denver, increasing capacity to 100 million pounds annually, with plans to add a third shift in Q4.
• 

• This growth is attributed to the successful startup of the Ironton facility and ramping operations at both Denver and Ironton.

• Commercial Partnerships and Market Expansion:

• PureCycle is set to ship material to P&G's converter in Q4, with applications to hit shelves in early 2026.
• The company is working to finalize shipping to other P&G applications in Q1 of 2026.

• Successful technical progress and demand for high-value applications, such as white thermoform coffee lids, are driving these partnerships.

• Feedstock Management and Cost Reduction:

• PureCycle successfully managed feedstock providers, processing 9.4 million pounds of feedstock in Q3 with plans to add more shifts in Denver and Ironton.
• The company is monetizing non-PP co-products, achieving a 20% to 30% reduction in feedstock costs.

• This is due to the company's strategic use of prep and purification co-products, enhancing operational efficiency and revenue.

• Regulatory and Market Positioning:

• PureCycle announced receiving REACH certification, enhancing its access to the European market.
• The company's presentation with Volkswagen on automotive components showcased its product's quality, signaling potential for future automotive applications.
• These developments are credit to PureCycle's continuous certification efforts and technical advancements in post-consumer recycled content.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • CEO: "another quarter of meaningful progress... ramping operations, we're starting to ship to key customers in Q4." Operational milestones: Ironton 7.2M lbs Q3 and Denver 3.3M lbs in September (records). CFO: "ended the quarter with just over $234 million of unrestricted cash." Management reiterated 40–50M lb near‑term demand and $8M/month revenue target by end Q1.

Q&A:

• Question from Andres Sheppard-Slinger (Cantor Fitzgerald & Co., Research Division): Can you give us some details as to where the interest from QSRs is coming from? Any feedback you've received — why have they been so interested as of late?
  Response: QSR interest is driven by circularity: Denver shows large volumes of QSR material in the bales and PureCycle can convert that post‑consumer material back into products, which resonates with brands and accelerates adoption.

• Question from Jeffrey Campbell (Seaport Research Partners): Regarding the Co-Product 2, is the plan to sell what you separate from the feedstock to the market although you utilize any of it in your compounding operations?
  Response: They will both compound Co‑Product 2 into pellets for sale (Ironton compounding) and use/bring material from Denver into those streams, increasing co‑product revenue and lowering net feedstock costs.

• Question from Jeffrey Campbell (Seaport Research Partners): You mentioned some potential customers buy credits. Could you expand on that and give us a sense of the value PCT provides by obviating the need for those credits?
  Response: ISCC credits trade at roughly $0.75–$0.80/lb over virgin; PureCycle provides a true plastic‑to‑plastic solution with lower regulatory/litigation risk and should at least match, and likely exceed, that premium.

• Question from Jeffrey Campbell (Seaport Research Partners): Are you actively selling much PureFive now, or are you building inventory for compounding when equipment is installed next quarter?
  Response: Both: they've sold some PureFive and compounded products while also building inventory to support upcoming trial conversions and customer ramps.

• Question from Hassan Ahmed (Alembic Global Advisors): About the EIF grant — can you describe the process, what it entails, and what it means for your European growth projects?
  Response: After improving prior submissions, they were awarded the EIF; the grant (up to EUR40M) validates scale intent and reduces project CapEx, improving European project economics.

• Question from Hassan Ahmed (Alembic Global Advisors): On Thailand feedstock LOIs — what does that entail? Can you discuss cost and availability relative to planned capacity?
  Response: LOIs indicate abundant feedstock availability in Thailand; unit economics appear very attractive, though final economics are still being finalized.

• Question from Jeffrey Grampp (Northland Capital Markets, Research Division): Several applications await brand approval — do you have a sense of timing? Are you just waiting on a few signatures and then a ramp? What might that ramp look like?
  Response: Management believes approvals are near‑term and shipments are already occurring; they reaffirm the prior target of ~$8M/month by end of Q1 into Q2 2026.

• Question from Jeffrey Grampp (Northland Capital Markets, Research Division): Is co‑product monetization feasible across continents for future projects, i.e., does the depth of market exist globally?
  Response: Purification co‑products are globally applicable; prep co‑product opportunities vary by region, but co‑product streams will be produced at every future plant and offer significant optionality.

• Question from Luke Persons (Craig-Hallum Capital Group LLC, Research Division): Can you provide color on the financial impact of 4Q shipments and how quickly you expect to ramp to full production for these contracts?
  Response: Shipments will increase revenue but timing is hard to pinpoint; company reiterates the $8M/month revenue target by end of Q1 into Q2 2026 as the ramp objective.

• Question from Luke Persons (Craig-Hallum Capital Group LLC, Research Division): What is your thought process on inventory and cash use going forward — should we expect inventory to build in 4Q/1Q as contracts close?
  Response: Inventory may build modestly as Ironton and Denver ramp to support customer sales; timing is uncertain and cash deployment will align to ramp and project spend.

• Question from Andres Sheppard-Slinger (Cantor Fitzgerald & Co., Research Division): Can you give more details on the 40–50M lb run‑rate you mentioned and connect that with REACH certification in Europe and the joint presentation with Volkswagen on the bumper — how should we interpret all that?
  Response: The 40–50M lb run‑rate comes from near‑term customers (including P&G and highlighted projects); REACH enables European commercialization and the VW bumper validates automotive qualification, though automotive volumes are expected to scale more slowly.

Contradiction Point 1

Feedstock Supply and Demand Dynamics

It involves differing insights into the supply and demand dynamics of feedstock, which could impact production planning and market positioning.

Are the feedstock LOIs in Thailand impacting capacity? - Hassan Ahmed(Alembic Global Advisors)

2025Q3: The feedstock letters represent a strong willingness to partner in Thailand, with potential partners limited by the ability to sell, not supply polypropylene. - Dustin Olson(CEO)

How are you allocating production and selecting customers amid strong demand and your unique market position? - Hassan Ijaz Ahmed(Alembic Global Advisors)

2025Q2: Our strategy to ensure feedstock availability is to build directly adjacent to waste management facilities and work with partners like IRPC and LyondellBasell, who have access to a vast amount of plastic waste. - Dustin Olson(CEO)

Contradiction Point 2

Production Ramp and Breakeven Timing

It involves differing expectations for production ramp and breakeven timing, which are critical for revenue projections and financial planning.

What is the financial impact of 4Q shipments, and how quickly will you reach full production for these contracts? - Luke Persons(Craig-Hallum Capital Group LLC)

2025Q3: Shipments are expected to begin in 4Q, with exact timing hard to pinpoint. The ramp is aligning with prior commentary, with the goal of achieving $8 million per month by Q1 and Q2. - Dustin Olson(CEO)

Can you provide an update on the 2H ramp and confirm if the breakeven target remains on track? - James Joseph Schumm(TD Cowen, Research Division)

2025Q2: Q3 revenue is on track to reach $4 million per month, with Q4 to Q1 expected to achieve corporate breakeven. - Dustin Olson(CEO)

Contradiction Point 3

Feedstock and Inventory Management

It involves the strategic approach to managing feedstock and inventory, which directly impacts production costs and revenue potential.

Are you selling PureFive or building inventory for compounding operations? - Jeffrey Campbell (Seaport Research Partners)

2025Q3: There is currently a combination of selling PureFive and building inventory in anticipation of future trials converting into sales. - Dustin Olson(CEO)

What is the strategy for the 14 million pounds of inventory? Will you sell more this year or hold it for a specific reason? - Andres Sheppard (Cantor Fitzgerald)

2025Q1: We knew we'd need to push some material through distribution initially. However, as trials progressed faster and early pricing for branded sales was higher than expected, we decided to hold back some inventory to sell at higher values in the second half of the year. - Dustin Olson(CEO)

Contradiction Point 4

Pricing Strategy and Market Trends

It highlights changes in the company's approach to pricing, which is crucial for revenue forecasting and competitive positioning.

What credits must potential customers purchase? What value does PCT offer for these credits? - Jeffrey Campbell (Seaport Research Partners)

2025Q3: Some customers still want fixed prices, but feedstock plus pricing is gaining traction. - Dustin Olson(CEO)

Are there any shifts to feedstock plus pricing in the pricing structure? - Thomas Boyes (TD Cowen)

2025Q1: The market is moving towards feedstock plus pricing, especially given supply-demand imbalances. - Dustin Olson(CEO)

Contradiction Point 5

Commercial Ramp and Production Capacity

It impacts expectations regarding the pace of commercial ramp-up and production capacity utilization, which can affect revenue projections and investor confidence.

What is the financial impact of Q4 shipments, and how quickly can production reach full capacity for these contracts? - Luke Persons (Craig-Hallum Capital Group LLC)

2025Q3: We have multiple brands and multiple brand applications in the trials. We continue to progress well on those, and we expect those to begin shipping in Q4. - Dustin Olson(CEO)

What are current production levels and constraints on growth? - Eric Stine (Craig-Hallum)

2024Q4: The 12,500 pounds per hour is a stable production rate. Production is driven by commercial sales, not solely by plant capacity. - Dustin Olson(CEO)