Earnings Call Transcript - LOOP Q2 2026

Operator, Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Loop Industries Second Quarter Fiscal 2026 Corporate Update Call. This conference is being recorded today, Thursday, October 16, 2025. The earnings release accompanying this call was issued after the market closed yesterday, Wednesday, October 15, 2025. On our call today are Loop Industries' Chief Executive Officer, Daniel Solomita; 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.

Kevin O'Dowd, Head of Investor Relations

Thank you, operator. Before we begin, please note that this morning's discussion will include forward-looking statements within the meaning of the U.S. securities laws. These statements relate to our expectations, beliefs, projections, future plans and strategies, anticipated events and other future performance matters. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially. For a more complete discussion of these risks and uncertainties, please refer to the Risk Factors and Forward-Looking Statements sections in our most recent quarterly report on Form 10-Q filed yesterday with the SEC. Our annual report on Form 10-K filed with the SEC on May 29, 2025, as amended in the Form 10-K/A filed May 30, 2025 in our accompanying press release issued yesterday. These documents are available at www.sec.gov/loopindustries.com or from our Investor Relations team. With that, I will turn the call over to Daniel Solomita, Chief Executive Officer and Founder of Loop Industries. Go ahead, Dan.

Daniel Solomita, CEO

Thank you very much, Kevin. Thank you, everyone, for joining the call this morning. Q2 was an extremely busy quarter for Loop as we move towards the construction phase of the Infinite Loop India manufacturing facility. I'm pleased to report several positive developments. We have executed a supply contract with a leading sports apparel company in the world to be our anchor customer for the Infinite Loop India manufacturing facility. The contract stipulates that we need to supply our customer with a fixed amount of Twist, our textile-to-textile polyester resin, on an annual basis at a fixed price for multiple years. There is a guaranteed take-or-pay element to the contract as well. This means if their customer doesn't pay or take delivery of the material, they still pay us a percentage of the sales price. So it's a very strong contract, very bankable contract. We also executed a supply contract with Taro Plast, an Italian specialty polymer manufacturer, to buy DMT produced from the Infinite Loop India. DMT is a very interesting market for Loop, as we are one of the only companies that can supply virgin quality DMT made from 100% recycled content, and it allows us to have a diversified portfolio. Today, we offer textile-to-textile polyester resin for the apparel and home goods companies, FDA-approved bottle grade resin for the packaging industry, and DMT monomer or MEG monomer. We are currently in discussions with several CPG and apparel brand companies to secure additional offtake agreements for the Infinite Loop India project. ELITe, our joint venture in India with Ester Industries, executed an agreement for the acquisition of approximately 93 acres of land in Gujarat, India, for a total consideration of $10.5 million. This represents a $5 million reduction in the amount included in our project cost estimates. The site has excellent strategic access to textile waste for feedstock, renewable energy, and industrial infrastructure. As a reminder, the total cost estimates produced by consulting engineers was $176 million. We are currently trending to complete construction below this number as we are $6 million under budget at this stage. KPMG has done a great job so far in building a syndicate of lenders for the project debt financing. We have begun to receive term sheets from multilateral development banks, sovereign wealth funds, as well as international and local commercial banks. The proposed terms we have seen so far are in line with our expectations. In Q2, we executed two textile industry partnerships, one with Shinkong from Taiwan and one with Hyosung from South Korea. Both companies are industry leaders in textile spinning and have long-standing relationships with all of the apparel companies and fabric mills. Most apparel companies are not used to buying polyester resin; they buy spun fiber or rolls of fabric or even completed garments. Integrating into the supply chains can be difficult, which is why we executed these partnerships. These partnerships allow Twist, our branded textile-to-textile polyester resin, to have an expanded reach beyond our customer base and will be offered by Hyosung and Shinkong to their customers, who buy spun fiber from them today. In our partnership with Reed Societe Generale Group, we are close to completing the site selection process in Europe for the initial Infinite Loop Facility. The final remaining sites all have most or, in some cases, all of the utilities needed for our technology. This will significantly reduce the project's overall CapEx. All of the sites have direct access to a port, which allows for Loop's technology to be modularized, again driving down CapEx. The standardized modules will be built in a low-cost manufacturing country and then shipped and assembled on-site. Once the site is acquired, we anticipate beginning to generate meaningful revenues and profits from engineering and milestone payments, which will cover all of our back office expenses for the next several years. Cash operating expenses for the quarter were $2.43 million, reflecting a year-over-year decrease of $1.74 million. At the end of the second quarter, we had total available liquidity of $9.86 million. We will bring that $2.43 million down further every quarter for the foreseeable future. In conclusion, I am very pleased with the progress being made on both projects. We are hitting all of our milestones needed to ensure successful projects. With that, I'll open it up to any questions.

Operator, Operator

Our first question today comes from Brandon Rogers with ROTH Capital Partners.

Brandon B. Rogers, Analyst

Kevin and Dan. I'm filling in for Gerry Sweeney. I have a couple of questions for you. Could you elaborate on the anchor offtake agreement with the global sports brand? I understand that pricing is fixed with the take-or-pay component of the contract. What percentage of the 70 metric ton capacity is currently covered by the contracted offtake agreements? And then also, sorry.

Daniel Solomita, CEO

Go ahead with the second part.

Brandon B. Rogers, Analyst

And then the second part: do you expect any additional CPG offtake agreements before year-end?

Daniel Solomita, CEO

Okay. So the first part of your question is we don't get into specific volumes of the contract for negotiation reasons with other customers, but it's a significant contract for Loop having our anchor customer in place. And the second part of your question: yes, we do anticipate having other supply agreements finalized by the end of the year.

Brandon B. Rogers, Analyst

Where does the India project stand in terms of the construction timeline and clinical path, specifically regarding the timeline for groundbreaking and commissioning on that site?

Daniel Solomita, CEO

The work stream done by KPMG on that syndication has been really fantastic. They've done a great job. We're starting to receive several term sheets from different multilateral development banks, sovereign wealth funds as well as international and local commercial banks. So we're going through the terms right now, and there's a negotiation going on and there's some good competitive tension for the debt syndication. This work stream is doing really well. On the construction side, we are finalizing a detailed engineering contract with an engineering firm to begin the detailed engineering. So the project is trending on time. Our goal is to have the project up and running by the end of 2027, and that's the goal that we're maintaining. Customer contracts will be one of the gating items to get the debt financing completed. So we're on schedule with the project to have it built by the end of 2027.

Brandon B. Rogers, Analyst

Awesome. And then one more for me. The Taro Plast offtake is a key milestone. Can you talk about the commercial pipeline for DMT and polymers beyond automotive? And then on the sportswear brand, should we expect their Twist products in the market in 2026 or beyond that?

Daniel Solomita, CEO

For the sports brand, the contract is for the Indian facility, which will be operational by the end of 2027, allowing for production to start in 2028. The customer is currently utilizing our facility in Montreal, Canada, so there may be minimal material usage in 2026 and 2027 before the larger facility in India becomes operational. DMT is a noteworthy monomer currently derived from fossil fuels, primarily crude oil. Only a few companies globally, such as Eastman and SK Chemical, produce and distribute DMT. It has various applications in specialty polymers for computer chips, specific specialty chemicals, the automotive sector, and the textile industry. We're among the few, possibly the only ones, producing virgin quality DMT from 100% recycled content. We are collaborating with certain chemical companies to qualify our material and engage that market. Our portfolio diversifies with FDA-approved bottle-grade resin, textile-to-textile resin for apparel brands, DMT for specialty polymers, and MEG, which has widespread use among various companies. This flexibility allows us to operate in different segments, and attracting DMT customers is exciting for us. We have excess DMT available, and selling it to chemical companies is something we anticipate doing more of. The chemical market tends to function on a spot market basis, although some companies are interested in securing a supply. This was a key factor for the Taro Plast contract.

Operator, Operator

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

Varyk Kutnick, Analyst

So the ShinKong and Hyosung contract, could you maybe unpack what the commercial roles actually look like? Are we talking co-branded yarn, integrated fabric production? Just trying to get a sense of how the economics will work with them?

Daniel Solomita, CEO

So the economics is... it's a great question. The big thing with the textile and apparel industry is that the brands are not used to buying resin because that resin has to get spun into a fiber, then the fiber needs to get put into a fabric, and the fabric gets dyed and treated. Some companies just buy ready-made garments, while some prefer to buy spun fiber or fabric rolls. Certain customers are more used or would prefer to buy spun fiber rather than buying the resin and having to figure out the supply chain of who to send the resin to. And so what we've done is we've partnered with the two biggest and most respected spinning companies in the world, Hyosung and ShinKong, which work with all of the different players in the marketplace. There are two ways this relationship works: we can bring our customers and say, if you prefer to have spun fiber, we can work with Hyosung or Shinkong, and they can spin the fiber for you, and we can sell you the fiber directly. On the other side, there are many different smaller players out there that don't buy huge volumes, and those are usually the ones that have trouble buying resin. Hyosung and Shinkong can now offer Loop's material to their customers and say, we can offer you this material spun into a fiber or made into a fabric, and this is the underlying technology. For larger customers, Loop will always maintain the relationship with them, so we'll sell the material directly. For smaller players, that's where ShinKong can come in and aggregate maybe 10 different small suppliers together to create enough volume to purchase directly from us. It's really on a customer-specific kind of scenario. But we're working really well. We just did a trade show in Paris for the apparel company with Hyosung. It was very well received by many of these different smaller fashion brands that are looking for sustainability, and they already have established relationships with Hyosung or Shinkong, which brings our material into those mixes.

Varyk Kutnick, Analyst

Awesome. For the color on that. And then I'm reading between the lines here and what you said and others, demand outweighs supply by multiple orders of magnitude. You've got the luxury of being selective with customers here. How are you thinking about diversification? One? And then India's 70,000 metric tons at nameplate capacity. Is there room for expansion there? Or would you rather allocate incremental demand to other sites?

Daniel Solomita, CEO

Great question again. So for us, it's about having a more diversified portfolio. So that's why we have the textile-to-textile for the apparel industry. We have the packaging side mainly on the bottles. So we're working with some of the beverage companies, especially for the European market, where there is significant regulation in Europe that requires brands to use a percentage of recycled content in their packaging. These brands are looking for really high-quality PET resin. All of our packaging customers so far that we’re discussing with would be taking the material from India, shipping it into Europe, and using it within their European packaging. This diversifies the portfolio there. The DMT and the MEG are also interesting markets, depending on pricing and market demand. Sometimes you get squeezes in the market when people really need DMT or MEG; we'll be able to supply them with that material. Having a diversified portfolio is important for us. We want to do some packaging, some textile, and some chemical, which I think covers us regardless of market conditions in two years. We will always allocate a certain amount of material to the spot markets. Regarding your second question: yes, 70,000 tons is the first facility. The land we bought, the 93 acres, is enough for two facilities. We are planning an expansion quite rapidly after the first facility is up and constructed. The second facility being planned is 100,000 tons. Thus, we would have approximately a 50% increase in capacity for the second facility on the same existing site, again bringing down CapEx because we'll reuse part of the utilities that are on-site. We are planning to have a second expansion in India. From everything I've seen, I don't think there's a better place in the world right now to be putting up these facilities as it's the lowest cost structure we can find. This will allow us to offer our customers a very high-quality product without the need for significant green premiums. That is key to having a long-term successful project here. We're also working with Societe Generale, the French bank in Europe. Certain regulations in Europe are driving brands to buy European-sourced material. There are significant incentives right now in France for brands to source material from within the European Union, which is accelerating the timeline for the project in Europe. The sooner we tap into engineering revenue and the milestone payments, the better, as that will cover all of our back office expenses for several years. This is a fantastic achievement.

Varyk Kutnick, Analyst

Okay. I noticed that the cash covenant on your line of credit was removed in October. That's a strong vote of confidence. What motivated that decision?

Daniel Solomita, CEO

Well, we asked for the covenant to be removed.

Varyk Kutnick, Analyst

It's a vote of confidence.

Daniel Solomita, CEO

It's a vote of confidence in the sense that we can now have more predictable revenue streams and profitability coming from the engineering services, which gives banks the confidence to provide us with more leeway and flexibility on those types of instruments.

Operator, Operator

Our next question is a follow-up from Varyk Kutnick with DIVYDE Capital Partners.

Varyk Kutnick, Analyst

I've been back on so quickly. This was probably listening to your comments in the beginning. The update on the debt financing for India, the syndication is probably the most confident I've ever heard you guys sound. So you have no worries about the equity contribution for the India joint venture, even though it's somewhat unfunded right now. You're confident you guys will be able to reach that and liquidity will be strong moving into 2026?

Daniel Solomita, CEO

Yes. We have several different options. As we've said in the past, we have the government funding in place for a portion of the equity. We have other options for the remaining equity needed for Loop's position. So, I'm very confident on that side. The debt syndication is going really well. They started the process, I believe, in August, end of August. Within maybe 1.5 months to 2 months, we've seen a lot of interest in this project. Many sovereign wealth funds and these multilateral development banks are looking for projects in India that are sustainability-linked. So, we’re very happy with the workstream with KPMG so far. They're bringing top-quality players to the table, and the terms we've seen proposed so far are in line with our expectations. This financing workstream is working exceptionally well.

Varyk Kutnick, Analyst

Got it. And then one more. The $1.5 million engineering services agreement, remind me, is that recognized upfront? Or is that spread across a couple of quarters? Yes, some color on that.

Daniel Solomita, CEO

Yes, that's going to start. I would assume in the beginning of November, once we kick off the detailed engineering phase. There's a detailed engineering firm that will be contracted by the joint venture, an external firm, and then we work side by side with that firm. That revenue will be starting next month.

Varyk Kutnick, Analyst

Seems like things are finally working out for you guys. I'm excited. Good luck with everything. I look forward to hearing about next quarter.

Daniel Solomita, CEO

Yes, it sounds like the most progress we've ever made on a project so far. Again, this is a testament to low-cost manufacturing, and the shift to becoming a low-cost producer in the world we live in today. It was really the right decision for us to offer our product to our customers at prices they're used to paying, without the need for significant green premiums. I believe that's the key decision factor. We have a fantastic partner in India, who has really addressed all of the markets: the construction, the cost estimates, the whole India factor, and the feedstock situation. We've locked in feedstock. We have two independent studies on feedstock confirming availability and pricing. We've done an excellent job preparing this project, and the confidence that KPMG and lenders have in us by sending term sheets shows how solid of a project this is.

Kevin O'Dowd, Head of Investor Relations

I can give you some runway here because you mentioned something I've always thought about: the green premium. People have always prioritized sustainability but have always forgotten about the second piece, profitability. It seems from our conversations you've always talked about how without sustainability, you can't have products or profitability. Please discuss that equation right there, sustainability with profitability. Do you think every project you guys go into is set to keep that equation in balance?

Daniel Solomita, CEO

I mean, sustainability is still very important, and we see a shift in which brands are more or less committed to sustainability. I believe that sustainability is a cyclical type of market, where its importance can fluctuate. Right now, all companies are looking for ways to drive down costs and remain competitive while offering a good product on the market at an attractive price. For us, the ability to provide our customers with the highest quality material combined with sustainability is a fantastic advantage. They can acquire our products at a competitive price, which makes their decision to sign contracts much easier. It’s not super easy to sign contracts, but having meaningful conversations with these companies is very possible because they recognize our material's quality and sustainability, all at a price that makes sense. This is refreshing and a testament to the low-cost nature in India. There is much interest in increasing the textile-to-textile material in the marketplace. Our competitive pricing means we can provide strong returns for our investors and projects. If I compare this to other projects I've seen in the past, this is by far the most profitable project we've encountered. We can achieve competitive pricing for our customers while still maintaining strong returns.

Varyk Kutnick, Analyst

Good luck with the rest of the year here.

Operator, Operator

We have not received any further questions until I'll turn the call over to the management team for any closing remarks.

Daniel Solomita, CEO

Well, thank you all very much for attending the conference call. It's been a really exciting quarter for us as we move closer to construction. I look forward to updating you at our next call. Thank you.

Kevin O'Dowd, Head of Investor Relations

Thank you.

Operator, Operator

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