Loop Industries, Inc. Q4 FY2026 Earnings Call

good morning ladies and gentlemen thank you for standing by welcome to loop industries fourth quarter and full year fiscal 2026 corporate update call this conference is being recorded today thursday may 28th 2026. the earnings release accompanying this call was issued after the market closed yesterday evening wednesday may 27th 2026. on our call today are loop Industries Chief Executive Officer Daniel Sobomita, Chief Financial Officer Spencer Hart, and Kevin O'Dowd, Vice President, Communications and Investor Relations. I would now like to turn the conference over to Kevin O'Dowd to read a 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, future plans and strategies, anticipated events, business developments, project timelines, financing activities, commercial partnership, and future 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 during this call. For a more complete discussion of these risks and uncertainties, please refer to the risk factors in the forward-looking statement sections included in our most recent annual report on Form 10-K filled with the SEC, as well as last evening's earnings release. These documents are available through the SEC's website at SEC and on the Investor Relations section of Loop Industries. With that, I'll now turn the call over to Daniel Salamita, Chief Executive Officer of Loop Industries.

Thank you very much, Kevin, and good morning, everyone. Thank you for joining us for today's update call. We are making excellent progress in our global growth strategy by advancing our key partnerships in both India and Europe. Over the last few quarters, our team has focused heavily on commercial execution, capital discipline, and driving our proprietary technology towards large-scale global deployment. Today, we operate leaner, we are executing efficiently, and we have a highly visible path forward. I want to walk you through the major milestones we've recently achieved across our international partnerships and our internal operational efficiency initiatives. Let's start with Infinite Loop India, where we have seen significant positive momentum on three fronts, government alignment, project economics, and financing. Our India joint venture has officially signed a memorandum of understanding with the government of Gujarat. This provides us with vital formal alignment to support the development of our first large scale commercial manufacturing facility in the region. The agreement is a major accomplishment. It is expected to streamline permitting, infrastructure coordination, and administrative processes. Crucially, this site can support multiple manufacturing facilities, enabling a seamless phased expansion strategy. Improved project economics. Through rigorous optimization, ongoing procurement refinements, land cost optimizations, and favorable foreign exchange movements, we have successfully reduced the estimated capital costs for the initial Indian facility. We now expect the CapEx to be approximately $165 million to $170 million, representing significant savings from our prior estimate of approximately $190 million. This CapEx reduction is meaningful as it increases the overall project economics and lowers Loop's equity commitment. The project timeline has not changed. We expect the Infinite Loop India facility to be operational in calendar year 2028. project debt financing the debt financing for the construction of the Indian facility is progressing well the debt syndication process is well underway and we have received several term sheets from international banks these institutions are now moving into the technical due diligence stage of the process signaling strong institutional confidence in our business model the technical due diligence will be done at our plant in Tarban which has successfully completed this type of due diligence several times in the past, most recently by Société Générale group prior to licensing our technology. Customer engagement is strong, our value proposition to customers is clear and well received. We offer the highest quality PET and polyester fiber made from 100% recycled content and we are offering our material at similar pricing to what brands are paying for mechanical recycling PET today. Mechanical recycling PET is significantly lower quality and unable to achieve 100% recycled content without major color and quality issues. Overall, PET prices are up 30% to 50% year-to-date, mainly driven by higher oil prices. Shocks to the supply chain, as we have seen due to the conflict in Iran, serves as a reminder to purchasing departments that having long-term fixed-price contracts from a reliable partner such as Loop is a valuable hedge to have. Moving on to Europe, our partnership continues to hit key milestones. As we previously announced, Infinite Loop Europe, our European joint venture with Reed Societe Generale Group, purchased a license to build a European facility using Loop's technology. They have officially selected BASF Industrial Park in Schweizer, Germany, as the site for their first facility. This location offers world-class industrial infrastructure and benefits from a highly supportive regulatory environment aimed at strengthening the European Union's Plastic Recycling Centre. Following the successful site selection, the project is officially moving into the engineering and permitting phase. This phase kicks off with Loop's engineering team providing the feasibility study, followed by a feasibility study, and supply chain testing, which is all done at our Terbun facility. The feasibility study is expected to begin shortly and will be generating meaningful, high profitable revenue for Loop and last approximately six months. Alongside our global commercial deployment, we have systematically evaluated our corporate overhead to ensure we are maximizing every dollar. We have initiated three key targeted expense reduction initiatives to ensure Loop operates Non-dilutive government funding, we are pleased to share that Loop is receiving advisory services and up to 2.9 million Canadian dollars in non-repayable funding from the National Research Council of Canada Industrial Research Assistant Program through its Cleantech initiative. This funding extends through October 2027 and directly supports our operational readiness and industrial innovation without diluting our shareholders. We are continuing to strategically shift resources away from technology development and directly into commercial execution. This transition has resulted in a streamlined headcount and a meaningful reduction in corporate overhead we have initiated an aggressive review of vendor contracts and conducted strict service audits across our key fixed overhead expenses this has already yield material savings in fixed areas such as insurance in summary our foundational pieces are firmly in place our commercial momentum in india and europe combined with our disciplined corporate expense reductions gives us a clear capital efficient runway we are uniquely positioned to commercialize our technology globally and and create long-term value for our shareholders. Thank you to our partners, our talented team, and our investors for your continued support. With that, I'll turn the call over to the operator and open up the line for any questions.

As a reminder, if you'd like to ask a question in today's call, simply press star followed by the number one on your telephone's keypad. We'll take a brief moment to compile the Q&A roster. The first question comes from the line of Brandon Rogers from Roth Capital. Your line is now live.

Hello, this is Brandon Rogers on for JR Sweeney. Thanks for taking my questions.

Hi, Brandon.

So first, so where exactly are you in the debt syndication process and what milestones remain before officially closing that?

And then as it relates to the expected capital structure, what's the anticipated debt equity So the anticipated debt-to-equity split is 70% debt, 30% equity, of which Loop would be responsible for 15%. And our partner at Esther Industries is responsible for 15%, so we split the equity 50-50. The process, as I mentioned, we've reserved several term sheets from international banks, and now they're moving into the technical due diligence phase, where they do a technical due diligence on Loop's technology, which will be done here at our Terban facility. Terrebonne facility has done several of these technical due diligences in the past. Most recently, SOC Gen hired a third-party engineering firm to do a full technical due diligence on the technology prior to them licensing the technology and investing 10 million euro into Loop. So it's pretty standard for us. We've selected, the banks have selected the engineering firm that will be doing the technical due diligence. We're just finalizing the scope of work, and we expect that to be completed sometime towards the end of June, mid-July. Thank you.

And then, taking into consideration cash burn and with the cash enterprise, think about liquidity over the next 12 months.

Yeah, we have enough liquidity through to the end of this year, and with the engineering contract that we'll be working on, REED with the Precinct Feasibility Study and then the Feasibility Study, that capital should, those engineering contracts are expected to fund our back-office spend for the next few years.

And then just one more from me. Can you log us through how we begin generating recurring cash flow from these projects and when should we expect engineering services revenue to begin becoming more meaningful?

So today we already get engineering services revenue from the Indian Joint Venture. So every project where Loop's engineering team is working, we're getting paid for that work. Now with the feasibility study in Europe, that's when we'll start seeing much more meaningful engineering revenue and profitability from that engineering revenue. So that's going to be coming up, I would say, within the next few weeks, potentially months. But, you know, that's a very short term. Now that the site has been selected, we're finalizing the engineering contracts, and that's when you'll see much more meaningful revenue from those engineering contracts. From the projects, you know, in India, Loop has a 5% royalty fee on top of owning 50% of the facility. And so we would expect to start receiving that royalty fee in 2028 once the plant is operational. And as far as the European facility, besides the engineering services, there's also other milestones for the licensing agreement. So prior to construction, Loop would be receiving additional milestone payments from the Societe Generale group.

Awesome. Thanks, Daniel. I appreciate it, Tyler. That's it for me. Thank you very much.

Your next question comes from the line of J.P. Gagan from Global Value Investment Corporation. Your line is now live.

Hey, good morning, Daniel, and thanks for your time. A couple questions for me. You've obviously already announced an off-take agreement with Nike, but talk a little bit about where you are in discussions with other customers and then how much of the expected volume for the India plant. Do you need to have off-take agreements for before the debt financing can be finalized?

Yeah, we're aiming to have 50% of the facility signed in long-term contracts, and then the rest would be completed with LOIs. We're in negotiations with several of the large CPG companies for the additional off-takes, and we are in negotiations with several other textile companies or CPG companies for the LOIs as well. You know, one of the challenges with customers is being able to sign these long-term contracts because for them it's, you know, two years before they can start receiving, let's say approximately two years before they can start receiving material plus three-year contract after that. So it's like a five-year commitment where these brands are used to buying, you know, six-month contracts, maybe a one-year contract. But these are, you know, these long-term contracts are a little bit more complicated for some of these brands to be able to sign. But we do have good visibility on being able to complete the goal of having 50% contract signed and then the rest done in LOIs with some of the, you know, customers, existing customers that we have from our Terban facility. There's no doubt in my mind whatsoever that if the plant was often operational, we'd be able to sell 100% of the capacity of the facility because we offer the best quality material on the market for 100% recycled content. And that's been proven over and over again by all of the different CPG companies. And our price point because of the Indian economics, you know, having a capex of $165 to $170 million allows us to be super competitive on pricing. So, you know, pricing has never come up as an issue with customers where our work is too expensive. So we really have a really good formula where we have the best quality material at prices that the brands are buying a lesser quality material today. So it's just the difficulty there is just being able to get these companies. That takes a longer time for them to be able to, you know, execute contracts that are five years out.

Got it. All right. Thanks. And is the debt financing contingent on a certain amount of off-take being spoken for?

Yeah, the debt financing is contingent on 50% of the off-takes signed in minimum three-year contracts. Okay, okay.

Thanks for clarifying that. I'm curious on the CapEx cost reduction from, I think it was $190 to in the $165 to $170 million range. Obviously, CapEx has something to do with that, but was there any other meaningful cost savings, or how do you drive that cost reduction?

Yeah, I would say approximately 50% came from FX because the Indian rupee lost against the U.S. dollar. So when I talk about $165 million of CapEx, that's including all of the financing costs, land acquisition costs, engineering costs, and the construction costs. So the FX portion would only be on the construction costs. Land acquisition, we saved $5 million from the land acquisition. and then there was other material savings from optimizing the process where working with suppliers in India or in other parts of the world that are lower cost than what we had in the initial estimates. So it's a combination of purchasing optimization, land cost reduction, FX, and engineering.

You announced maybe a week ago that you signed an MOU with the government of Gujarat. Help us understand what that means. Is it symbolic or is there some sort of tangible benefit in terms of permitting, access, utilities, et cetera?

Yeah, it's really validation. The project is important for the Gujarat government. The Gujarat government here has this yearly review of projects and, you know, select projects that they are, you know, getting behind. And, you know, our project was something that was important for them. textile recycling, textile waste is a pretty big issue in India. India right now has some of the strictest, actually the strictest rules on recycled content and packaging in the world. And so, you know, today they have to have 40% recycled content and they're going to go to 60% recycled content in packaging, you know, which dwarfs Europe's 25% recycled content in packaging. And so, you know, India is very focused on helping pollution in the country and finding solutions. And so our technology being able to recycle the textiles and the textile hub being in Dahej and the Gujarat province, it's an important project for them to be able to recycle the textile waste. And, you know, today that textile waste is either burnt, sent to landfill, or just, you know, discarded basically on the side of the roads. And so this is where, you know, having our project is going to help alleviate some of the pollution in the Gujarat province because of this textile waste, which has no other value today except for a technology like ours.

Okay. And finally, at the risk of putting the cart in front of the horse, you've got visibility into some of the regulatory mandates coming down the pike and obviously pretty good input from your customers right now. Have you started to think about what comes after the plant that you own in India and then the technology license in Europe in terms of additional plants and whether that's a build or license model and the timeline for starting to really make meaningful progress on those?

So the plan in India is to build a second facility, much larger facility, once this one is up and operating. We've bought enough land to be able to sustain two facilities on that same site. There's enough feedstock in Gujarat to be able to support a second site as well. So the joint ventures plan is definitely, you know, once you have six months, a year of stable operations at the plant, to begin the construction on the second plant right away. So the engineering was all, you know, the engineering was conceived with the view on having that second plant at the site. And so that's going to be really important for us. I wouldn't be looking to invest our dollars, our shareholders' dollars in, you know, high-cost manufacturing countries once we've seen what India can deliver. It's very rare to see projects, you know, go through engineering and go through detailed engineering and have capex reductions. Usually you're over budget. These are the first projects I've ever seen that are actually under budget. And the cost structure in India allows us to be able to compete anywhere worldwide. Our customers, like Nike, they don't really care if the facility is in the United States, in Canada, in Germany, or in India. What they care about is getting the best quality material at the best price, and that's what India can offer us. So for us, investing our dollars, low-cost manufacturing, India has huge potential. potentially other parts, but India is definitely somewhere we think we can build a very big base. As far as licensing, Sokchen is building the first plant in Germany. Through the exercises, you know, they see an opportunity to potentially build more facilities. European regulation is coming in where, you know, trying to protect the recycling industry in Europe, so more material coming from European. There's incentives if you're buying your recycled plastic from Europe rather than bringing it in from other parts of the world luckily for us India and Europe have a free trade agreement so we're not affected by any of those you know type of tariffs or protectionisms and so licensing in other parts of the world is something that we'll definitely explore in other parts of the world but yeah for us low-cost manufacturing is our key and then licensing in higher cost manufacturing great all right that's all for me. Thank you. The last thing I'll add there is probably the way we bring low-cost manufacturing into higher-cost countries. Like in Germany, what we're doing is we're taking the experience of India and the low-cost manufacturing of India and building our technology in modules. So the modules would be built in India with low-cost labor, low-cost materials, and then shipped onsite to Germany and assembled onsite. So you're limiting the amount of high-cost labor that goes into these some of these other countries like in the European countries so that's the way we see significant savings for this project in Germany where we could see you know potentially a 50% capex reduction rather than if you would build it as a stick-built project in Germany your next question comes from the line of Varick Kotnik from divide capital partners your line is now live Hey, Daniel.

Hey, Eric.

Remind me again on the current object agreement with Nike. Is it, you know, the terms, is it take or pay? Are there committed minimum volumes? And is everyone else going to follow that same framework for underwriting over in India?

Yeah, so the Nike contract is a three-year term, renewable after three years. It is a fixed price contract, fixed volume contract, and it's a 40% taker pay. So if they don't take the material, they pay us 40% of the value of the contract. Ikea has pretty ambitious goals to eliminate fossil fuel-based polyester in their supply chain, textiles and footwear. And so, you know, we see that volume growing bigger over time as our plants become up and running and, you know, Nike's commitment to sustainability, you know, just increases. Other customers, there are a lot of the fixed-price contracts, fixed-term contracts are coming from the textile industry. On the beverage side, with the pathogen companies, it's more of an index pricing. So we use a, let's say in Europe, you use the ICIS index pricing, which is published monthly on what recycled PET is sold for. And then we use a cap and a collar. So we have a floor pricing that it can never go lower than a certain price and a cap and it can never go higher. So it hedges us on the downside, hedges them on the high side, and we trade within a band. It's about 275 euro per ton band that we trade within. So that's typically the way the beverage companies like to price the contracts.

All right. And then as far as, you know, Nike here, do they have any type of right of first refusal on capacity in the future in India, in Europe, et cetera? Is that built into their contract?

First right of refusal, no. There's no first right of – we don't give, like, first right of refusals to anybody. They do have an option to purchase more material in their contract, so they can exercise an option to purchase more material. You know, we have some customers that, like I said earlier, we have some customers that they just cannot sign long-term. Their corporate governance doesn't allow them to sign these long-term material contracts, but they're willing to sign, you know, LOIs with us for – even the LOIs have a price. They have committed volumes. And so there are those cases where some brands are just not able to sign these long-term contracts. They're willing to support us with an LOI, a firm LOIs, And, you know, they're willing to help us in talking to the banks and things of that nature. So, you know, being very, very supportive.

Got it. And help me with some of these numbers here. So, obviously, construction costs have gone down, which is excellent. So, if I think of the 70 million tons, metric tons annually, at $170 million to build, you get about 44 cents of capbacks per pound. Does that include polymerization?

Yes. So that's depolymerization and polymerization and all utilities. So this site is greenfield, complete greenfield. There is no infrastructure whatsoever. So that includes depoly, repolymerization, land, engineering, and all the financing costs through, you know, startup and commissioning until the plant is operational. The construction piece. So just the construction piece is approximately $115 million out of the $165 million, let's say.

That would put what? If I'm doing rough math in my head here, if you guys are going to do, you said in the past, you know, your EBITDA margin or EBITDA would be roughly around $50 million, $60 million. Does that still sound right on this plant?

You know, price, it's interesting. It's an interesting dynamic right now. So some of the dynamic pricing that we see with the ICIS, you know, that index pricing is up about 30% to 40% right now since the beginning of the year, mainly because of the conflict in Iran. So, you know, that price floats up and down. So if you're taking the floor price, you know, that's probably where we would be somewhere at the floor price today. It's a little bit higher than that. So, you know, we're looking at about 45% of it, the margin is somewhere roughly around there.

Either way, though, your payback period on this bill all in is about a year and a half to two and a half, depending on where pricing falls. Is that number still reasonable?

I mean, the numbers just got better by reducing CapEx by, you know, $20 million to $25 million.

So, we should see some real progress within a serious timeline second half of this year.

Yeah. I mean, now the debt piece, you know, the debt piece has fallen into place. We have, you know, great international banks behind the project with their term sheets. Now completing the technical due diligence over the next four to six weeks is something that Loop is very used to doing. We've done it many, many times for either customers or other partners. Like I said, most recently for SockGen before they licensed the technology and they, you know, made the investment into Loop. So that's really what's ongoing there. And then, you know, once we have that's going to be completed and then we're going to wrap all of the different terms and get everything completed for the debt.

Good luck with everything. I look forward to following along.

Thank you very much.

There are no further questions. I'd like to turn the call back to Daniel Solomita for closing remarks.

Yep. Just again, thank you very much for everyone's support. Thank you to the team and thank you to our international partners. Have a nice day.

This concludes today's meeting. You may disconnect.