Loop Industries, Inc. (LOOP) Q1 2026 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Loop Industries First Quarter Fiscal 2026 Corporate Update Call. My name is Emily, and I'll be coordinating your call today. [Operator Instructions]. This conference is being recorded today, Wednesday, July 16, 2025. The earnings release accompanying this call was issued after the market close yesterday, Tuesday, July 15, 2025. On our call today are Loop Industries Chief Executive Officer, Daniel Solomita; Interim Chief Financial Officer, Nicolas Lafond; and Kevin O'Dowd, Head of Investor Relations. I would now like to turn the conference over to Kevin O'Dowd to read the disclaimer regarding forward-looking statements.

Thank you, operator. Before we begin, please note that today's discussion will include forward-looking statements within the meaning of U.S. security laws. These statements relate to our expectations, projections, beliefs, future plans and strategies, anticipated events and other performance matters. Forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied. For a complete discussion of these risks and uncertainties, please refer to the risk factors and forward-looking statements sections and our most annual Form 10-K or our quarterly report and the 10-Q filed yesterday with the SEC in our earnings press release issued yesterday. These documents are available at www.sec.gov or directly from our Investor Relations team. With that, I'll now turn the call over to Daniel Solomita, Founder and Chief Executive Officer of Loop Industries.

Thank you very much, Kevin. Good morning, everyone. We continue to make steady progress towards groundbreaking of Infinite Loop manufacturing facilities in both India and Europe. Both regions working with excellent local JV partners with whom we are fully aligned as we advance to the next stage of strategic development. Let's start with Infinite Loop India. Off-take discussions are progressing well with leading global apparel brands and CPG brands. For the apparel company, we are offering a textile-to-textile solution, meaning we recycle waste textiles and turn that into brand-new polyester fiber, which they then incorporate into their clothing. Most of these apparel brands need a solution to be able to incorporate more sustainable materials into their clothing. Today, they're using mechanical recycling, which is basically coming from water models and turning that into fibers, but that's the way of the past. Models need to stay within the bottles and the textile companies recognize that they need a solution for textile-to-textile recycling. And that's where Loop comes in. The ability for us to recycle textile waste, removing all coloring dyes, all other types of impurities and providing them with virgin quality polyester fiber is a huge advantage for the apparel brands. There's a plentiful of waste polyester fiber available in India for us to be processing at the facility due to India's textile industry. On the CPG side, the consumer packaging goods companies today, European beverage brands are in need of high-quality recycled PET. The quality of the mechanical recycled PET that they're using today is getting worse and the quality is very low, affecting their packaging. And so they really need to find a solution for being able to incorporate more recycled material, but getting high-quality material. And this is a trend that we're going to continue to see as more mechanical recycling comes on board, the quality of the RPET that they're producing is getting worse and worse and eventually because there's only a certain amount of cycles that a bottle can go through until that bottle is no longer usable through mechanical recycling. And that's where Loop's technology steps in. Loop's technology obviously provides virgin quality, top quality PET resin, 2 of the brands coming from waste material. So no matter what the incoming feedstock quality is, we always produce the top quality output. So a lot of European beverage brands are looking to Loop to be able to provide them with that high-quality PET made from 100% recycled content. The advantage of India's low-cost structure is that it allows us to provide the highest quality PET made from 100% recycled content to our customers at very competitive prices while achieving attractive economic returns for Loop and generating strong cash flow to fund future capacity. So those are really the key elements for this is providing the customers with the highest quality PET, nature of 100% recycled content. And today, because of this low cost structure, we can provide them at a very competitive pricing. The $176 million CapEx was confirmed by TATA, the engineering firm who did the FEED study. That CapEx number includes a polymerization unit to recombine the DMT and the MEG into PET land acquisition and all financing costs through start-up. If we remove all of those costs, the total installed cost of the technology -- of Loop's technology is $95 million, which is by far the lowest cost of the industry. Site selection has been narrowed to 2 locations in Gujarat, and we'll be finalizing which land we'll be choosing very shortly. The economics for Loop on the project, in addition to the JV returns of which we own 50% will be further enhanced by licensing fees receives a 5% licensing fee for technology and customer sales and as well as engineering fees. We signed a $1.5 million engineering contract with the Indian joint venture to provide engineering support for the next stage of engineering, the detailed engineering and construction. Infinite Loop in Europe, Societe Generale is seeking to advance the timing of the project under their newly appointed CEO of the Reed circular economy and his dedication to advancing the project. Right now, we are supporting them in the site selection, which is the immediate focus. Right now, the site selection is focusing mainly on Western Europe. And so our team is supporting them as we look through the different pieces of land to find the optimal piece of land. Once that piece of land is identified, then we'll start working on the engineering for the project and the modularization. So the engineering is going to be done in a modular fashion where the modules are going to be built in India. So we're bringing India's low-cost manufacturing, low CapEx and exporting that to other parts of the world. In this case, it's going to be Europe. So we are working with a leading company in India for modularization with significant experience in the chemical industry. The modules for Loop's technology will be built in India and shipped to Europe or any -- we could ship them to any location in the world, and they're assembled like LEGO blocks on site. This will significantly decrease CapEx for these projects for Loop's technology anywhere in the world. The initial estimate is that the CapEx would be a 50% reduction versus if we would be doing it as a stick build. So that's a significant savings. So again, it perfectly positions Loop's technology to deliver highest quality PET resin or polyester fiber to the customers with extremely competitive prices. So I couldn't be more happy with the modularization progress that's going on right now. In addition to the shared project economics in Europe, we will generate additional revenues from providing the modular solutions from engineering services and to other milestone payments coming from that first European facility. With that, I'll turn it over to Nicolas Lafond for some update on the financials.

Thank you, Daniel. There are 2 key items I'd like to highlight from our Q1 fiscal 2026 financial results filed last evening. First, we continued our disciplined approach to managing expenses and preserving cash. Cash operating expenses for the quarter were $2.6 million, representing a reduction of $2.2 million or 46% compared to the same quarter last year. Cash used in operating activities for the quarter was $3.1 million, including working capital outflows of $0.8 million. These outflows reflect the timing of certain payments early in the fiscal year from which we will benefit later on. Second, we ended the quarter with available liquidity of $12.3 million. Our objective is to secure sufficient financing to fund Loop's equity contribution for India at our operating cash burn through to the start-up of the Indian facility. Anticipated sources include government funding and engineering revenues in addition to new capital. I'll now return the call to Daniel for his closing remarks before we open the line for questions.

Thank you, Nick. So in conclusion, we're in excellent position to move to the next stage of strategic development of the Infinite Loop manufacturing facilities. The first facility in India has, by far, the most attractive economics of any project that we've considered, and we have a great JV partner. The modularization, it brings a really a differentiating factor where because of the lower cost CapEx, how we can see an acceleration of the amount of projects that can be built because we can offer really competitive prices and maintain high returns, which is key to all of these projects. We have a great partner and a great relationship with our European partners, so advancing together in lockstep. The long-term vision is to drive significant shareholder value creation so continuing rolling out these manufacturing facilities. As we said, we have licensing revenue, engineering revenue, modularization revenue and then obviously a share in the project economics. We have very strong relationships with all of the different customers that are looking for high-quality PET resin and polyester fiber coming from Loop's technology. So I couldn't be more excited about the future of Loop. With that, I'll open up the line to questions.

[Operator Instructions]. Our first question today comes from the line of Gerry Sweeney with ROTH Capital.

I wanted to see if you could touch upon the off-take agreements, maybe go into a little bit more detail. Do you have an idea of maybe potential timing and what we should think about that? And then secondarily, does signing any of the CPG agreements need to coincide with any stages of the India project moving forward?

So the customer contracts, we've been advanced in discussions with customers steadily over the past few months, especially since the CapEx number was confirmed. So we have a confirmed profitability range that we want to maintain with it. So things are going really well on the customer side. Signing off on contracts is taking sometimes a little bit longer as there's a lot of steps internally in today's world. With higher inflation, people are a little bit more -- not cautious, but I'd say there's more internal steps that have to be done to get contracts fully executed and fully signed, especially for contracts that we are negotiating, which is longer-term contracts. So it's not usually these CPG brands by either spot price or 1-year contracts. We're asking for longer length contracts between 3 to 5 years in length. So those are certain things that internally they have to have acceptance from senior management for these type of things. The pricing because we are really competitive in pricing because of the low cost structure in India, pricing really is not an issue where the pricing is well aligned with the needs of the customer. So that's a big advantage that we have. And then there's a take-or-pay element to our contracts. So if the customer would not take the volume for any reason, they would be penalized to a certain amount. Could be 40% of the value of the contract, could be 100% value of the contract. So that's another thing. We want to make sure that these contracts are very bankable. So we are looking to sell out a certain portion of the facility prior to starting up the facility. Securing the debt financing for the facility, it's easier to have -- the terms would be better on the debt financing when you have a certain percentage of the contracts secured. And so that's our immediate goal. Yes, and we have line of sight on that. So we're very confident in being able to execute on that.

Got you. A couple more, maybe a little bit more detailed questions on the contract. Previously, you looked at -- I don't know if cost plus was the right term to use, but with the previous contracts, I think you discussed you would have your input cost plus, we'll say, the conversion cost plus a markup. So you had some stability on the margins. Will the contracts have a similar structure as that?

So actually, the one advantage that we're giving to customers, customers like predictability. Customers like to know that for 3 years, this is how much they're going to pay and not have the ups and downs of the cycles. Potential wars or oil disruption or whatever it can be, that's going to affect the prices. So because of the Indian low-cost structure and the security on our supply, so those variations are important when your raw materials can fluctuate tremendously. And so that's where you would put in a cost-plus structure or an index plus structure. Because in India, there's plentiful waste available at and we're locking because no one else can recycle the type of material that we're recycling, we can lock in fixed prices on our feedstock then we can lock in fixed prices for the customers. So today, we're actually offering customers fixed price contracts, which is a huge benefit. So to offset some of the longer term or offset the liabilities they have to pay, we offer them fixed price for, let's say, 3 years or 5 years. So it's a big advantage to them that evens out their predictability of their costs. So that's the way we're selling the material in India. In Europe, you may go back to that cost plus because there could be more variations. But in India, fixed-price contracts and the customers appreciate that.

Got it. One more question. Just maybe next key steps, obviously, CPG contracts or apparel. And that helps drive the financing aspect. So maybe next key steps to -- would be contract financing and then what would be some other areas that we should keep an eye on going forward?

Well, the JV has hired KPMG to syndicate out the debt financing. So they've already prepared what they call is a detailed project report, and they're already presenting this to Indian banks and other banks, EDC in Canada is Export Development Bank of Canada is interested in supporting because of Loop's technology and bringing that worldwide. So we've already begun that debt financing work stream. And now as the customer contracts come in, it just brings more credibility to the story, and it proves out the economics that we've shown the banks. So that's well underway. The land selection, we have 2 pieces of land that we've zeroed in on in Gujarat, in the Dahej region, which is where a plentiful amount of waste textile feedstock and waste bottle feedstock. And so now we're just looking at negotiating the final terms for either those 2 pieces, and we should have a conclusion of that very shortly. So that's another milestone. But yes, the biggest milestones are going to be the customer contracts in place for the facility. So those are going to be the big ones for us. Just maybe one more thing on the customer contract so that everybody is clear. The customer contract is between Loop and the CPG or the apparel company. So we make the sale, and then there's a back-to-back contract that goes to the joint venture. So the actual sale is between Loop and that company and then Loop and the joint venture will have a back-to-back contract.

Our next question comes from Varyk Kutnick with Divyde Capital Partners.

I wanted to get some direction on Loop's capital intensity. A public dissolution recycler recently said the facility in Thailand will have a gross CapEx per pound of approximately $1.40 to $1.70. That's based off, I think, 130,000 tons per year. Where does Loop fall from a gross, which means excluding financing and land and net CapEx per pound on the facility you guys are building?

So for Loop's technology -- so if we exclude land acquisition, if we exclude financing cost and we exclude the polymerization, which is putting the monomers back together, our cost per pound at 100 -- so our facilities are GBP 154 million per year capacity, we would be at $0.61 per pound.

Wow. Okay, that's pretty helpful.

So that's CapEx for the pound would be $0.61 per pound produced.

And is that on a net basis? Is that on a net basis, just to be clear?

Yes, that's on a net basis, exactly. That's excluding financing costs, excluding land costs and excluding the polymerization cost. If you would add in the polymerization unit, then we would be at $0.75 per pound. But Loop's sole technology is $0.61 per pound. So if you're plugging into an existing facility that has polymerization, we're at $0.61 per pound. And that's a -- that's at the current capacity. The beauty of Loop's Technology is because there's really no proprietary equipment in the technology. It's basically reactors, filters and distillation columns. The technology lends itself very well to scale. So future facilities like our India 2 facility, we're looking at the 50% increase in capacity. So that $0.61 would even come down further from there as we scale to bigger facilities. But yes, $0.61 per pound is today's number.

Our next question comes from [ Jonathan Norwood ] with [ friends and family of BMO ].

Sorry, I was just muted there. Just a couple of follow-ups here on the question that Gerry asked about the offtake agreement. So I mean these are obviously long-lead agreements because you're probably say, 3 years away from being able to -- I mean, maybe you can correct me on that. But by the time you get this -- the facility up and running and producing product, we're probably looking at about 3 years out. So how do you like what sort of out, I guess, do you have or does the CPG company have or the apparel company have in terms of Loop not meeting milestones from a construction perspective? Or what sort of out do you have in the event that the environment changes such that selling to this particular company would not be economic?

So a couple of different points there to discuss. So the facility would be up at the end of '27. It's 18 months construction time plus, let's say, 6 months of start-up. So we're 24 months away from, let's say, this fall. So the plan is to have the facility up by the end of 2027. Customer contracts, there's a take-or-pay element. So if we're producing the material, shipping it to them. If they do not want to accept the material, they have to pay us a penalty on the material, like I said, ranging between 40% of the contract up to 100% of the contract. It's a negotiation different with every customer. If Loop is unable to deliver the material to the customer, there is no financial penalty to lose.

Okay. So if you guys -- let's just say for whatever reason you were able to like have this thing up and running in 18 months. So let's just say it's the end of '28 instead of the end '27. Could these guys -- could they back out of the agreement? Like is there anything that's tied to your ability to get the plant up and running by the end of 2027?

No, there's nothing tied to it.

Okay. All right. Just making sure on that. Because I mean, we've seen in the past, and I know that we were essentially -- I think initially, it was sort of like bottle to bottle. And we've seen like Coke and Pepsi sign up and then subsequently drop off. And I'm just wondering, like I just want to be mindful of that and how a delay in the construction of the project could potentially -- because it's been a long time to get this thing up and running. And just want to make sure that these guys -- they don't have the ability to pull the plug sort of halfway through construction or anything of that nature. But that's fine.

So -- just let me clarify that point, I think, Jonathan, you invest when you had a contract with Coke and Pepsi. It was for Coke -- Coke and Pepsi didn't pull the contract. It is that Loop that it was unable to deliver the facility, which we're talking about was 2018, which was a facility in 2018 that we were looking at doing in Spartanburg, South Carolina. So no contract was ever pulled. It was that Loop cannot ...

Yes. No, that's --

We're talking about 7 years ago, right? So this is a completely different project and completely different economics. So -- and a very different customer base. So yes, I understand your concern, but the facts of the matter was that we did not build the plant in Spartanburg and that's why the contracts fell off. If you have a certain contract for some facility and it doesn't get built, if the facility is built and operating, then the customers are locked in to buying the volumes.

Okay. No, that makes sense. And so on the equity contribution that's required by Loop for the India facility, can you remind us of how much that is and what the time line for having to inject that amount is?

So the total amount would be $25 million. Part of it will be paid for with polymerization equipment that we had bought for a previous project. So we'll be able to reuse that equipment. We also have a certain portion of that committed by a government entity here in Quebec. And the timing for that is probably sometime in the fall once we have the land selected. So yes, sometime towards the fall time frame. So like we said by the end of the year, breaking ground. So at the time of breaking ground, that's when we would be needing all of the capital in place for the project.

So what's the funding gap then between, I guess, the amount of cash that you will have on hand at that time? The amount of capital that the government entity will be putting up and then the amount that you have to effectively put in? What's that funding gap? And how do you anticipate coming up with that capital?

The funding gap is -- for that facility is about $15 million. So we have several different opportunities right now that we're evaluating for the $15 million. The one thing I'm really excited about is the acceleration of the SocGen project because that will be touching engineering and modularization revenue earlier. And that will definitely help with the cash flow going forward for the Loop's cash position. So the amount needed right now is $15 million.

Okay. And just on licensing, Dan, can you give us an update on what, I guess, the pipeline looks like for potential companies to license your IP? Like how active is that pipeline? Or are there any sort of hopefuls or more people that are interested in that?

Yes. I think with the -- once we've confirmed the CapEx number in India and the modularization work that we've done, it really allows projects where before you were looking at these very capital-intensive projects of somewhere north of $500 million for a plant. Now that we're able to cut that number in half, let's say, for the Western world or North America or other higher-cost manufacturing companies, I think that opens the door to a lot more potential projects. SocGen is very interested in building multiple of these facilities. So we want to start with one in Europe, but they have a plan to roll out several of these facilities through their private equity arm. They have a new CEO -- they have a CEO that's been hired just for this. So he's working diligently with my team on finding the optimal location and then bringing in the facility, bringing in the modules. So that modularization, I can't stress how much that modularization is going to help rapidly expand future facilities. So there's other potential opportunities in Asia. There's a potential opportunity in North America. So we're looking at a whole bunch of different opportunities right now. India is going to be still the lowest cost facility we'll ever build is going to be India and economics are tremendous for us. And the customer appetite for Indian material is strong, shipping it to Europe or using other -- the textile supply chain is all done in either China, South Korea, Vietnam or Taiwan. And so having a facility in India supplying those countries is really important for us. So we were definitely planning. We're buying enough land to have a second facility on site in India. So the plan there is after the first facility. We have a year of operation to expand to the second facility, which would be 100,000 tons, which is a 50% capacity more than the current facility. So that's going to be another really exciting opportunity, having that low-cost structure in India and continue building off of that.

Yes. Well, no question. I mean, on paper anyway, India, it seems to be the optimal place to locate one of these plants. So I guess just one last question on the debt piece that your Indian partner has to come up with. It sounds like KPMG has been engaged to put together a syndicate. That's -- I mean, is that an Indian-based thing? Because typically, in North America, like you wouldn't expect to see an accounting firm putting together a syndicate. You'd have a bank that would be doing that. So what's the -- yes, I'm not used to hearing KPMG like organizing a syndicate. Is that like a pretty standard thing in Asia? Maybe Kevin or Nick can answer that.

Our partner at Ester have built -- they have 3 operating -- 3 PET operating facilities the latest that they've built was in 2021. And this is the same -- KPMG was the person they used for that debt syndication as well. So we're following their lead as they have the experience in that. We're following their lead, especially with the Indian banks.

Our next question comes from Marvin Wolff with Paradigm Capital.

Can you hear me all right, guys?

We can hear you fine, Marvin.

Yes. Okay. Very good. Yes. I was wondering could you give us more color on things surrounding the 2 sites you're looking at. Things like lead time on permits, are these fully greenfield sites, all that kind of stuff because here in Canada, you could choose the site today and not be allowed to break ground for maybe a couple of years between, by the time you got through all the local regulations and whatnot. So a little more color on that would be helpful, if you could.

Yes. So the permitting comes with the purchase of the facility. So they're in industrial zones already zoned for this type of an activity. So we'll be with other chemical companies in the park. And so when you acquired the land through this process, we acquired the permitting as well. So once the land is acquired, we're ready to start construction.

Very good. And so that includes everything. That includes like utilities and everything.

Well, utilities depends, like utilities in our process is steam generation, electricity. So those types of things you'll have to bring in a substation for the electricity connected to the electrical outlet in the area. So some of it will have some industrial parks, have some utilities, some don't. That's a big part in deciding which location to use. A lot of that has to do with what utilities are available. In India, the utilities are mainly just roads and there's nothing that would be for our process specifically. So all of the utilities at these facilities in India, Loop would be providing all of the utilities. That CapEx number has all the utilities costed into that. In Europe, it's a little bit different. You can find industrial parks or industrial areas that have certain utilities like they'll have a common steam generation or they'll have a common wastewater treatment plant. That's not the case in India.

Okay. And how many megawatts of power do you need to operate the facility?

Less than 5.

Okay. And is that like a standard number you can easily get from the hydro or electricity provider?

Yes. Our technology is -- so the main source of energy use for our process is steam. So the steam is used to heat and cool reactors, distillation columns. Our technology is low energy, right, because we have a very low operating temperature in our reactors below 85 degrees Celsius. So we don't use a lot of power consumption and the #1 energy source is going to be for the steam generation is going to be rice husk. So in India, it's a biomass. So very good for the environment. It's not coming from a coal plant or not coming from other higher polluting sources. It's actually the peel of the rice that's used. Their pelletized and they're used to generate the steam. So it's going to be 100% biomass coming into the facility.

Okay. That sounds great. What about the long lead equipment. Have you ordered any yet? Or is there any that you got to order soon here?

Well, the longest leader -- no, actually, they're real long lead equipment in -- for our technology because all of our technology is all -- it's a chemical plant. So it's reactors, stainless steel piping, heat exchangers, pumps, distillation columns, which are all fabricated within an 8-month lead time. So there's no real long, long lead time equipment. The longest lead time equipment would be the reactors for the polymerization, but we already have those in stock that we bought for a past project. And so we already have those ready and they're already produced. So there's really no long lead time equipment that we need to be mindful of to meet our deadline on start-up of the facility at the end of '27.

On the polymerization unit you have sitting around somewhere, what's the dollar value that's being attributed to that for your contribution towards the $25 million in equity?

That's going to be approximately $5 million.

Okay. Listen, thanks very much for the color. Appreciate it. And waiting to see an announcement shortly on the site selection because I think that will really get this ball rolling.

Yes. Site selection and customers, I would say, are the big announcements coming. Customers are very, very important to have those top-quality CPG brands or apparel brands, so customers is going to be key for this.

Definitely. And they will let you use their name in a press release?

Yes, we've got in the past 2 contracts with CPG brands, and we've always announced them. So I anticipate the same.

And the same with the athletic company?

Yes.

Thank you. At this time, we have no further questions. And so I'll turn the call back to the management team for any closing comments.

There's no further questions. Thank you all very much for participating and looking forward to giving the market further updates as soon as they're available. Thank you very much.

Thank you, everyone, for joining us today. This concludes our call, and you may now disconnect your lines.