Loop Industries, Inc. (LOOP) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Loop Industries First Quarter Fiscal 2027 Corporate Update Call. [Operator Instructions] Please note, this conference is being recorded today, Wednesday, July 15, 2026. The earnings release accompanying today's call was issued after the market closed yesterday, Tuesday, July 14, 2026. Joining us on today's call are Daniel Solomita, Founder and Chief Executive Officer; Spencer Hart, Chief Financial Officer; and Kevin O'Dowd, Vice President, Communications and Investor Relations. I would now like to turn the call over to Kevin O'Dowd to read the disclaimer regarding forward-looking statements. Kevin, please go ahead.

Thank you, operator. Before we begin, I'd like to remind everyone that today's discussion will include forward-looking statements in the meaning of U.S. security laws. These statements reflects management's current expectations, beliefs, estimates and projections regarding future events and operating performance, including in our commercialization activities, project development, financing initiatives and other matters that are not historical facts. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those expressed or implied. For a more complete discussion of these risks and uncertainties, please refer to the Risk Factors and Forward-Looking Statements sections of our most recent annual report on Form 10-K and our quarterly report on Form 10-Q filled yesterday with the Securities and Exchange Commission and our earnings release issued yesterday. These documents are available on the SEC's website at www.sec.gov and on our Investor Relations section on our website. With that, I'll turn the call over to Founder and Chief Executive Officer, Daniel Solomita. Daniel?

Good morning, everyone. Thank you for taking the call for being on the call. We had our Q4 results not too long ago. So we'll give all updates we can on the Q1 release. We continue to make meaningful progress on our Infinite Loop India project with our joint venture partner, Ester Industries. As we've said in the past, the JV hired KPMG to arrange the project debt for the joint venture. That process is going extremely well. We have received additional term sheets from new lenders. The consortium of debt lenders are now beginning the next phase of the debt process, which includes the technical due diligence. So the debt is well underway and very confident that we'll be able to conclude the debt financing in the allotted time. We continue to advance on customer contracts. We have signed an LOI for 15,000 tonnes at a fixed price. The customer is a leading textile apparel brand company. They do not sign forward contracts. There were spot buyers and maybe 6 months contracts. They just do not sign long-term supply agreements, but they have agreed to sign an LOI with us to show support for the project and their intent to live from material from the project. Their total appetite is 90,000 KTA per year. This is an LOI for 15,000 at a fixed price. Like I said, they want to be helpful to the project, and therefore, they have even said that they're willing to talk to lenders if needed for the debt to help people understand their position and why they're signing an LOI rather than a full-blown offtake agreement. But we fully expect them to be a very meaningful customer for the project in the long term and to grow their volume larger over time. We are very confident in being able to execute additional customer contracts in the time required to complete debt financing. Our engineering is very far advanced. We recently have applied for subsidies from the state of Gujarat. The state of Gujarat just announced subsidies for clean technology projects in the area. So we have applied for the subsidy program. and our project would be eligible for approximately $28 million to be returned to the joint venture by the state of Gujarat over an 8-year period. So that just further enhances the financial viability and the financial returns for the project. So a very encouraging sign for the project, being able to secure the subsidies from the state of Gujarat. As far as our other project with the Reed Societe Generale group licensing project, as you know, as we have mentioned in the past, Societe Generale has chosen a site in [ Schneider ] Germany, which is owned by BASF, that's where they will be implementing the first Infinite Loop Europe project. We are currently in final negotiations with SocGen for the first phase of the engineering contract, which is scheduled to begin in September of this year. Loop's engineering team will deliver a precede engineering package for a 70,000-ton Infinite Loop plant built with modular construction. This is our first modular construction project, but this is definitely the road map for the future on how we bring low-cost manufacturing to the rest of the world that and to a project, how to bring down costs, we're going to be doing that in modular construction by building these plants in modules from India and then ship them on site to different regions of the world, which minimizes local labor rates. The engineering contract this engineering contract and the next phase of engineering, which would follow in the middle of 2027 will provide sufficient cash flow to fund Loop's back office expenses for the foreseeable future. We are continuing to evaluate options for the financing of Loop's equity for the Indian joint venture. As always, we prioritize capital, which is non-dilutive in nature, and we aim to have this financing completed in the next few months. in line with closing the debt financing. With that, I'll turn it over to Spencer Hart.

Thanks, Daniel. On the expense side, we've continued to make good progress at lowering our cash overhead. So it's now running at approximately $500,000 per month. Two of the areas that the savings have come from are a reduction in employee compensation and lower insurance costs. We've also benefited from the funding that we received from the National Research Council of Canada, which is approximately CAD 2.9 million in aggregate and which began funding on a monthly basis earlier this year. As of the end of the quarter, May 31, we had approximately $3.6 million of liquidity, which includes our credit facility as Daniel discussed, we're focused on various approaches towards raising capital, and we will provide additional information as soon as there is a material update. Now I'll pass it back to Daniel to make some closing remarks followed by Q&A.

Thank you, Spencer. Yes, we continue to make meaningful progress in all projects, the project in Europe and the project in India. So we're very optimistic and looking forward to getting this project built. I'll turn it over to questions now.

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

Two questions. The first question really is around the debt financing. What are the major steps remaining? Is it just the technology due diligence and then -- so what are the major steps for remaining? And what -- can you remind us of the time line to close the debt facility as well as to still remain a sort of a 70-30, 80-20 sort of debt-to-equity opportunity with the package?

Thanks, Gerry. So the term sheets that we've received from multiple international and local Indian lenders have all harmonized the terms. The terms are going to be 70-30 in debt-to-equity split, of which Loop is responsible for 15% because our joint venture partner, Ester has 15%, and then we have 15%. So that's the major terms sulfur plus approximately 3%. That's kind of what we're looking at. So very fair interest rate. So those are the major -- those are like the major terms of the debt -- as far as next steps, there's the technical due diligence. The consortium is being formed, the technical due diligence is being done, which we've done countless amount of technical due diligence, independent technical due diligence at our facility in Montreal, Canada, most recently by Societe General. They hired a third-party specialist engineering firm to do a full due diligence of Loop technology prior to purchasing the first license for a down payment of EUR 10 million plus the investment of EUR 10 million. So that was done. Obviously, SK Global Chemical did a full technical due diligence as well on the technology. So we have no concerns whatsoever on the technical viability of the technology. We also have commercial products for sale such as our shoes with on shoes and Avion water bottles. So we're very confident in that process. Once that is done, then it's final negotiations on all of the different terms and then closing of the debt. the timing is going to be in the fall of this year, which falls in line with the project breaking ground. So those are really the next steps. Obviously, the customer contracts is a piece of the debt. So that lenders want to see visibility and comfort that the customer contracts will be there. And so far, we're making good progress. We have customer contract, obviously, with Nike and Towers. Now we have an LOI with another leading firm on the textile side and more to come.

Got it. Actually, that was a good lead-in for my second question. I just wanted to get an update on the pipeline for your customers. Obviously, you've already sold some products, as you mentioned, on shoes and you had Nike, Power Plus and then this new 15,000 ton LOI, how much material or capacity is left to sell or put under LOIs and what does that pipeline look like?

Yes. We're in negotiations with several different leading brands on the textile side and on the consumer packaging side, and so we have -- once we finalize those agreements, which are very well advanced, we will have the required amount of volumes sold in either contracts or LOIs to begin construction. So we're doing very well. It just takes a little bit longer. The real issue is that, especially on the textile side, it's a very complicated supply chain for the textile companies. Companies are used to buying either garments, like you want to buy 1,000 pairs of jeans, they go to the manufacturer and they buy the jeans in a certain color with a certain style or they buy maybe rolls of fabric, going back to buying PET polyester chips is a little bit foreign for some of these customers. They all want to buy the material once it's available and put it into their supply chain. The problem they have is trying to figure out if they sign a contract today, where are they going to send those chips? Who's going to spin the fiber for [indiscernible] going to take the fiber and make it [indiscernible] so it complicates the supply chain, which is why it takes a little bit longer to sign these offtakes. The appetite for the material is there. Our pricing is very competitive because of the low-cost nature of India. So with the customers that we are in negotiations with now, we'll have enough of the capacity sold to begin the project.

Your next question comes from the line of Marvin Wolff from Paradigm.

Look, that sounds like a very good progress on the LOI side. So could you give us an idea of what percent of the 70,000 capacity of the plant is either covered under the Nike and LOI contracts? Or if you want to make it wider, even how much of the 70,000 tons would be covered by all the contracts you're talking with at this time?

So with -- if we execute on the contracts that we have and the other contracts that we're in, let's say, final negotiations for, we would have most of the facility locked in either full contracts and LOIs. So that's our aim. A lot of our contracts always have an option for the customer to buy additional volumes. So if you have a 15,000 ton contract, usually, there's a vision in the contract, they have an option for an additional 15%. So that's the way we structure most of our contracts. So far, they're all fixed pricing on the consumer goods side, the packaging side, we use more of a index-based pricing model where we use -- we have like an ICIS index pricing. So it's a little bit of volatility. There's always a floor pricing a cap and a collar in there. So we're protected on the downside and the customer is protected on the upside. So that's the way those pricing contracts work. But we will have the -- enough of the volume secured with the contracts that we are -- have and the contracts that are being negotiated to be able to begin the construction.

And if I understood correctly, the LOI is kind of like a contract in this case. You're not going to continue negotiation to a final contract. Is that right?

Yes, the final -- once the plant is up and running, then the LOI can be converted into spot market buying. They don't -- most of these companies and customers don't side forward-looking contracts. They don't sign a contract for today that the plant is going to be built in construction for 18 months and then startup and commissioning plus another 3-year term on the contract, you're looking out, let's say, 4.5, 5 years which for most customers is too far the plastic and chemical industry is basically spot market or 6 months by. So a lot of customers have just said to us, listen, when you guys have the material up and running, the price is good, quality is excellent. We want to buy the material and so that's why. So the LOI is not going to be renegotiated into a final contract. We have the volume. We have the price, and now it's going to be bought in the spot market for the plant once the plant is open. They've already qualified our material. They've tested their material. They like the price, they like the quality. So everything is in line. Now they can start buying the material. They just need to have the plant up and running before they can actually start purchasing.

Okay. That's good. I heard you correctly, this particular customer on the LOI could take up to 90,000 tonnes a year in sort of the best case scenario. Is that correct?

Yes. That's the total appetite over time. That's the opportunity with this one customer is 90,000 tonnes. So that would be the total opportunity. We do have a plan to build a second facility on the same site for 100,000 tons, maybe more, and therefore, having customers that have that type of appetite is fantastic.

No, that is. That's super. Very good. Okay. Well, congratulations on the progress made so far, and it sounds like things are moving along nicely.

Your next question comes from the line of Connor Norwood from Viking Capital.

And I know you touched on this earlier, but just to clarify, how long is the new LOI expected to take to convert into a firm order? And does the banking syndicate for the India JV, you acquire that firm order to be in place to complete financing?

So no, the banking syndicate does not require that to be -- it's not going to be converted into a contract. It's going to be converted into a contract for spot buying once the plant is operational. The LOI gives comfort to the debt lenders that the appetite is there and the customer has offered to speak to the debt lenders to give them comfort as well that they value the material. They value our proposition, which is best quality material at great pricing. And so that's why there's an actual fixed price in the LOI. So it's not going to be converted into a contract and it's not going to be -- it's going to be just a spot buying once the plant is open.

Got it. And then my second question here is, can you walk us through how you plan to fund operating expenses and any remaining CapEx over the next 12 months? Specifically the current cash runway and to what extent the plan relies on additional equity or debt issuance?

So as far as our operating expenses at the back office with the liquidity we have, on hand plus our engineering contracts that I mentioned during the call, we will have sufficient cash for ongoing operations for the foreseeable future from those 2 sources, our existing liquidity plus the engineering contracts. There's also an additional EUR 10 million licensing payment that would be due to loop sometime at the end of 2027 from the Societe Generale Group when the next milestone is reached. So those are all things that are going to be coming into place that is going to fund all the back office. We do have a remaining equity requirement for the Indian joint venture which today we're evaluating different opportunities to fund that. As I mentioned, our priority is to do that in a dilutive equity, not a dilutive equity issuance, but some type of a structured debt facility. And so that's what our priority is, and that's what we're working towards.