Loop Industries, Inc. (LOOP) Q2 2027 Earnings Report, Transcript and Summary

Hello, everyone. Thank you for joining us. And welcome to Loop Industries Q2 earnings call. After today's prepared remarks, we will host A question and answer session. If you would like to ask A question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Kevin O'Dowd, head of investor relations. Kevin, please go ahead.

Thank you, operator. Before we begin, please note that today's discussion will include forward looking statements within the meaning of US securities 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 risk factors and forward looking statements sections in our most recent Form 10 and Form 10 Q and other filings within the Securities and Exchange Commission. These documents, along with yesterday's earnings release, are available on the SEC's website and through Investor Relations section of the Loop Industries website. The company undertakes no obligation to update or revise any forward looking except as required by law. With that, I would like to now turn the call over to Loop Industries' founder and chief executive officer, Daniel Solomita. Daniel, please go ahead.

My name is Daniel Solomita. I am the founder-- I am Daniel Solomita, founder and CEO of Loop Industries. I will cover the continuing progress of our major commercialization project in India and our CFO, Spencer Hart, will provide an update to the company's liquidity, financing situation, and the activities of the recently formed special committee. Our engineering joint venture with Ester Industries has made the decision to reduce the size of the first facility in India from 70 thousand kilotons to 45 thousand kilotons per annum. This change will significantly lower the capital cost of the facility and the resulting debt and equity financing needs. Toyo is currently completing its detailed work to finalize the new cost estimate. The change will also allow for a faster construction timeline If we are successful in raising our capital, we would expect to begin construction in Q1 calendar of 2027 and complete construction by the end of 2028. The smaller facility is expected to provide attractive economic returns due to the advantages of Loop's low temperature and no pressure added technology. Which produces virgin quality PET resin and polyester fiber at very low operating costs. Together, with being located in a low cost environment in India, which also offers access to plentiful textile waste. The Indian facility is still contemplated to be the first of 2 facilities on the same site. This is-- The second facility is planned to be substantially larger than the first 1 and would follow after a successful startup of the first facility. We are engaged in positive discussions with a major bank in India which is a long term relationship of our Indian joint venture partner regarding the project debt facility. These discussions are progressing well, The team from the bank in India started the TEV study. Which is the technical due diligence portion. There was a team from India that came to visit our facility in Montreal a few weeks ago. We successfully completed the technology assessment of the TED study. And that will be used by the debt lender as documentation for their loan for the debt piece in India. We are fortunate that our strategic partners in India and Europe are committed to their relationship with Loop. And to the success of our commercialization projects in their respective geographical areas. I will now hand over to Spencer and then revert with a closing comment.

Thanks, Daniel. We have maintained a strong focus on cost control. And that is allowed us to reduce our overhead. Our cash operating expenses for the quarter were $1.6 million a year over year reduction of $800 thousand. And our run rate has continued to decline into the third quarter. These savings reflect targeted reductions in personnel, insurance and other operating expenses. As well as the waiver of cash compensation by our outside directors. As of August 31, we reported total available liquidity of $1.9 million. To address our capital needs and secure funding for Loop's equity contribution to our India joint venture, our board formed a special committee in September 2026. The committee is actively working with advisers to evaluate a full range of financing alternatives including equity, debt, and nondilutive options. Importantly, rescaling our first commercial facility in India will reduce the project's overall capital requirements. Director. Directly lowering our required equity contribution. All key elements of the project in India are in place. Including an experienced joint venture partner secured land, advanced engineering designs, reliable feedstock sourcing, and strong customer demand. The final step before reaching the construction stage is securing the financing. Together with the equity contribution, from Ester, our 50/50 joint venture partner, and the project debt currently being syndicated, we are actively working towards fully funding the facility. With that, I will turn the call back to Daniel for closing remarks.

Thank you, Spencer. I would like to close by saying, notwithstanding the current low stock price and our efforts on raising the capital required for the facility. Both our management team, board of directors, and partners continue to strongly believe in Loop's potential for significant long term value creation based on our technology, our commercialization projects in India and Europe. And the needs of the apparel and global consumer packaging good brands, consumers, for high quality recycled product at a competitive price. With that, we will open the call to questions.

We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of John Hickman with Landenberg. John, your line is now open. Please go ahead.

Hi. Thanks for taking my questions. Could you give us an estimate for the revised total cost of the project? At the new level and what the new equity contribution is I think before you were looking at about $20 million of equity to do update us on that?

Well, the Toyo group that has been hired to complete the final cost estimate, will be completing that in the coming weeks. So we do not have the final number yet, but as soon as that. As soon as we do have the final number, we will be able to share that. But it will be significantly lower than the 70 thousand-ton plant that we had initially.

So you think you can get the funding put together start construction, and have construction complete by the end of 29. Does that-- Did I hear that accurately?

So it is. The time for construction startup, and commissioning is a total of 20 months. And, therefore, if we start the. If the funding is secured and we start the project in beginning of 27 calendar year, we would have the plant up and running commercially producing material by the end of 2028. Yeah. Calendar years. Okay. Yeah. Calendar years. Okay.

And so could you give us some estimate of your confidence in being able to come up with a new kind of lower equity component. So you can get this started?

Asking about are you say. Are you asking the confidence that the cap. The number will be lower that the cost will be lower?

No. Just your ability to come up with the lower number. The ability to raise the financing? Yeah. Do you. Have you talked to industry. Or interested parties already Could you give us any sense of like, where you are in that process? I know you have just did the commit. Special committee, but could you elaborate at all on that?

Sure. it is Spencer. Maybe I will address that. So let me clarify 1 thing. We feel like in the area of $20 million is the amount is the total amount that we would be requiring for the contribution for our portion of the equity contribution to the JV. As you guys kind of mentioned. I will tell you that the special committee is very focused on this. We are engaged with advisers and active working in discussions. But as you can probably imagine, we cannot-- it-- We cannot promise anything until it is done. You never know until it is done, but that is, you know, a very primary focus. And the project is very attractive. I mean, the economics of the unit are attractive. The returns are good. And the opportunity to invest in loop to fund that promises really attractive returns to investors. So we have had a lot of interest from investors that we have been engaged with.

Okay. Thank you. I appreciate your comments.

Your next question comes from the line of Jerry Sweeney with Roth Capital. Jerry, your line is now open. Please go ahead.

Hi. Good morning, guys. I apologize. I had some technical difficulties getting on earlier. I got dropped, so I missed a lot of the commentary. But just wanted to dig in a little further with everything that is going on. Obviously, a little bit of friction here, I think, securing some financing for the facility. But as you downscale this initial facility, does this impact anything around the debt financing that you are looking for in India Is there any carryover? Is there anything we should be looking at on that front?

I would say to that, Jerry, that it is only viewed as a positive by the debt lenders. So obviously, the amount of debt needed for the project is lower. The you know, we are very confident with the LOIs and the contracts that we have from Mike, Taro Plast, which are, you know, signed contracts, and then we have LOIs that will meet the requirement that the debt lenders will be satisfied with our commitments. And so overall, in speaking with the debt lenders, it was a very positive discussion, the lower size the resizing of the facility was extremely well received.

Got it. And as you go through this process, obviously, I mean, equities a component, but are there any other areas that you are pursuing alternatively that you can drive some of the financing to support the project.

Can take that. I. Hey, Jerry. I guess I mean, we are very flexible in terms of the form of the of the capital that we are raising. I think it is highly likely that there will be an equity component. You know, whether it is straight equity or some kind of convertible instrument, we are flexible and, you know, open to working with investors to find something that works for both sides. But, you know, our goal is to get the capital on that first facility And, you know, as you can probably imagine, you know, this will be the hardest financing that we will ever have to do. And subsequent financings, people will be, I think, you know, very excited to provide capital to the extent that we will need it.

Yep. No. I absolutely agree. Listen. I think you know my stance. I think the technology works. I think it is just getting financing across the goal line here and you know, getting some of the shovels in the ground and getting this started. So. Alright. Do you have any timelines when you think obviously, it sounds like this is forefront. And I know it is hard to give some definitive answers on this front, but you know, I would expect is this something that is imminent within the next couple weeks? Would we be thinking about on that front? If you can discuss this in this environment.

Timelines for the financing. Is that what you are asking?

Yeah. Yes. Yes.

I am sorry.

Yeah.

Yeah. Look. I mean, 1 thing that we cannot that we are just not gonna do is, like, is predict exactly how much or when or what it is gonna look because you just do not know until it is done. We are working really hard on that. And our goal is, you know, as Daniel said, in order to in order to break ground in the first quarter of next year, know, we would have to have the financing in place in advance of that. And so you know, that. that is probably the best way to think about what our goal for timing with, of course, the understanding that sooner is better. And so we are certainly not gonna delay anything, and our goal is to you know, bring it in and secure it as quickly as we can.

Okay. And that is fair, and I understand. Alright. Spencer, Daniel, thanks for taking my questions.

Thank you.

Thank you.

Your next question comes from the line of Marvin Wolff with Paradigm Capital. Marvin, your line is open. Please go ahead.

Good morning, guys. Can you hear me okay? Yes. We can. Okay. Good. On this downsized or right sized 45 thousand ton size for the output. What percent of that do you have contracted out?

So we have not given exact volumes for all of our contracts, but you know, between the LOIs that we have signed and the contracts that we have signed and the commitments we have today, we are over a threshold of 50% of the facility sold.

60% of the 45.

Over 50%, I said. It committed ROIs or contracts.

Right. That was a 45 size.

The 45 thousand size. Okay.

Yes. Now with a smaller first plant, does that imply a larger second plant? Because were not we talking about the second plant being maybe 100 thousand tons?

Yeah. So we will have the flexibility to increase the size of the second plant as well because the gating item on the size of the facilities is more about the feedstock availability. And so, you know, we are very comfortable that there is enough feedstock for a total of at least 170 thousand tons in the area, so we would be able to grow the second facility to 125 thousand tons. So the total output of the 2 facilities would remain the same.

Right. Okay. Okay. Well, that is good.

Yeah.

The it is always interesting when something's downsized because people assume, you know, maybe it is not as profitable. But I think with your technology, the downsized amount can be just as profitable. Is that correct?

Yeah. So in a chemical-- in a chemical plant, the costs that. You know, the scale cost factor. So it is 1-to-1 kind of on the chemistry. So the chemistry costs do not change because the amount of catalyst you use or the amount of energy used is kind of directly proportional to the amount of feedstock you are processing and the amount of output. So those things do not change. it is more of your fixed cost that would go up. And, thankfully, in India, the low cost environment and the low cost of labor in India allow for the economics to still be very attractive? Because, usually, it is the labor cost that bites you will need the same amount of people running the facility. But in our case, because of the low cost nature of India, it does not impact our financials. Dramatically. So it is still very profitable. Okay.

1 last question. When do you expect the detailed engineering guys to have their stuff all done and have a number that you can talk about.

I would expect that in the coming weeks. So definitely before year end. Calendar year end.

Yeah.

Yes.

Okay. Okay. Very good. Thank you very much.

Thank you.

Your next question comes from the line of Varyk Kutnick with Divide Capital Partners. Varick? Your line is now open. Please go ahead.

Hey, guys. Good morning.

Good morning. Good morning. Varyk.

I just wanna make sure I understand. So if the original equity piece that was required on your end for the factory was 70 thousand metric tons or whatever it was. Your equity contribution was $20 million. Now that is been haircut by 42%. Should not your equity contribution be somewhere near, like, $12 million now? Or is it not scale like that or proportional?

You want me to take that, Daniel?

Sure.

So here. Here's how we are thinking about the equity Here's how to think about the equity contribution. The banks that we have been working with, and, again, nothing's finalized, but, you know, we are. It seems like. It seems realistic to think that gonna be. They will finance 70% of the project. And so the remaining 30% is gonna be equity, and that is gonna be split evenly between Loop and Esther, who is our JV partner. Right. So when you think about it like that, it is. Our portion is about 15% of the total project cost. Right? When it was 70 thousand and we talked about a 165 to 170 million doll. You know, million for the for the facility. 15% of that would have been more like 25 or 25 to 30 in that range. And so I know you said that we. You know, that the old amount was 20, but it was probably a little more than that and so now Right.

So we say if we say $30 and we cut it by 42%, the equity piece should be then around 15 or $16 million that you guys need that. Correct?

Yeah. I mean, that is basically how the math works. Right. You know, when the, you know, the cost may not come down by 40% just, you know, because there are It just does not exactly work like that, but it will come down. And our equity component will come down. And I think that will be, you know, the methodology we just discussed is the right way to think about what the amount of our equity contribution will be. And keep in mind, that we have made a portion already of that contribution. You know, over time, we have How much are you made? To the JV. it is in the kind of 3 to $5 million range.

Gotcha. So if the total amount is 20 that you guys even extended because you guys lower end of that. Yeah. Gotcha. And if we were to say that you have already contributed, 2 or $3 million, you guys really only need to contribute $17, $18, or 17 to make this make this over the line. Correct?

that is the way to think about it. Yeah.

Okay. that is helpful. Appreciate the color, guys. Good luck.

Great thing.

We have reached the end of the Q&A session. I will now turn the call back to Daniel Solomita for closing remarks.

Thank you very much, everyone, for attending the call and for the questions. And we will keep you posted as to the developments of the company.

This concludes today's call. Thank you for attending. You may now disconnect.