PureCycle Technologies(PCT) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Unrestricted cash declined by just under $90 million during Q4 2023, primarily due to a $50 million increase in the general liquidity reserve as part of the second amendment to the Ironton revenue bond [24] - Operating corporate-related expenses were $27.5 million for Q4, adjusted for severance related to a previously announced reduction in force, aligning with expectations [52] - The company increased its line of credit from $150 million to $200 million to rebuild liquidity post-bond repurchase [54] Business Line Data and Key Metrics Changes - Pellet production increased five times from 200,000 pounds to 1.3 million pounds, with a single-day feed record of 102,000 pounds and a single-day palletization record of 144,000 pounds [11] - CP2 production increased from 16,000 pounds to 48,000 pounds from January to February 2024 [40] - The company achieved end-to-end production rates of approximately 8,000 pounds per hour, successfully producing significant quantities of co-products [55] Market Data and Key Metrics Changes - There is stronger demand for the company's product than originally expected, with a shorter supply of good quality competition [17] - The company is seeing positive market feedback for its product, which offers a true plastic-to-plastic solution with benefits that other technologies do not provide [47] Company Strategy and Development Direction - The company plans to focus on core operations to achieve higher continuous plant rates and drive more consistent product quality [10] - A Q2 outage is planned to implement reliability improvements, which is expected to significantly impact operational performance [41] - The company is transitioning into traditional manufacturing processes, improving reliability, and optimizing operations [38] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future fundamentals of the business, particularly post-Q2 outage [106] - The company is confident in its ability to source feedstocks and does not foresee long-term constraints in availability [69] - Management highlighted the importance of building a strong foundation for the plant to ensure long-term productivity [91] Other Important Information - The company successfully purchased around 99% of the $249 million Southern Ohio Court Authority revenue bonds, removing restrictive covenants and allowing for better operational focus [25] - The company is working on a project to flake sort material produced from the prep wet line to process more post-consumer curbside material [44] Q&A Session Summary Question: How challenging is it to engineer around CP2? - Management acknowledged that CP2 presents a challenging technical problem but believes a good design solution is in place for development in Q2 [29] Question: Is there a challenge in sourcing feedstock with lower CP2 content? - Management confirmed that they have a good feedstock network and do not expect sourcing to be a long-term constraint [59] Question: What is the expected run rate for SG&A? - Management indicated that SG&A is higher than previous estimates due to global volatility and inflation, but they are consistently looking for optimization opportunities [61] Question: Are there any embedded dates in offtake agreements that could affect customer patience? - Management reassured that there is strong demand for the product and core customers are still engaged in testing commercial scale products [64] Question: What is the latest on the Augusta project? - Management confirmed that the Augusta project is moving forward and integrating learnings from Ironton into the design [71]