Prepared remarks
Good morning, ladies and gentlemen. Thank you for standing by, and welcome to Loop Industries Third Quarter Fiscal 2026 Corporate Update Call. This conference call is being recorded today, Thursday, January 15, 2026. The earnings release accompanying this call was issued after the market close yesterday, Wednesday, January 15, 2026. On the call today are Daniel Solomita, Founder and Chief Executive Officer; Spencer Hart, Chief Financial Officer; and Kevin O'Dowd, Head of Investor Relations. I would now like to turn the call over to Kevin O'Dowd to read the company's forward-looking statement disclaimer.
Thank you, operator. Before we begin, please note that today's discussion will include forward-looking statements within the meaning of U.S. securities laws. These statements relate to our expectations, projections, beliefs, future plans and strategies, anticipated events and other matters regarding future performance. 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 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, our quarterly report on Form 10-Q filed with the SEC, and the earnings release issued earlier today. These filings are available on the SEC's website at sec.gov or through our Investor Relations teams. 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. Q3 was a busy quarter for Loop as we move towards the construction phase of our Infinite Loop India manufacturing facility and progress with our partnership with Reed Societe Generale Group for our project in Europe. I'm pleased to report on several positive developments. The Infinite Loop India project is on budget and on schedule. Before getting into the details, I want to officially welcome Spencer Hart, joining Loop as CFO. I've gotten to know Spencer well over the past year since he joined our Board of Directors. His leadership and knowledge of the capital markets and financing structures will be a great asset for Loop moving forward. In Q3, we announced that we have executed a supply contract with Nike, the large American sports apparel company, to be an anchor customer for the Infinite Loop India manufacturing facility. The contract is for Loop to supply Nike with a fixed amount of twist, our textile-to-textile polyester resin, on an annual basis at a fixed price for multiple years. There's a guaranteed take-or-pay element to the contract as well, which means if Nike does not take the delivery of the material, they still have to pay us a percentage of the sales price. We are currently in discussions with several CPG and apparel brand companies to secure additional offtake agreements. Textile-to-textile is becoming a very important growth driver as European regulations are being put in place to mandate more recycled content in clothing and recycled content from textile to textile, which means starting from polyester textile waste and producing a new polyester textile with it. We're forcing the apparel companies to find a solution to recycling old clothing at the end of its life. Loop's technology is uniquely suited to recycle post-consumer textile waste. Post-consumer textile waste is difficult to recycle because of the different components that go into making the clothing. You often have polyester mixed with cotton, polyester mixed with nylon, buttons, zippers, etc. All of these components have different monomers or starting components. For this reason, it poses a tremendous challenge to recycle. Typical recycling is done at very high pressure and high temperature, where you're either forcing the depolymerization to be done under very extreme conditions or you're simply melting the plastic down into a new form. And both of those do not work well for the textile industry because of the different components. Where Loop's technology overcomes that is because of our low-temperature depolymerization. At very low temperatures, we break down the polyester into DMT and MEG. Because of the low temperature, all of the other components like cotton, nylon, buttons, and zippers stay whole, and we filter them out after the depolymerization, which gives us a huge advantage. That's why Loop's technology is uniquely suited to process this type of clothing waste. Our project in India is also located next to a free trade zone. So we'd be able to import the waste clothing from Europe or from other parts of the world into that free trade zone and then transport that to our facilities to help the brands in Europe recycle the material that once they've collected it. It's a really huge benefit to Loop. This government regulation starts in 2026 and is going to start being enforced in 2028, which is exactly the right timing for us. Our plant is scheduled to be completed construction at the end of '27. So 2028 is a perfect timing for us to be able to do this. Because of all these regulations, we're really seeing an uptick in the demand for the textile-to-textile side. We were on the phone the other day with a very large textile manufacturing clothing company, and they said textile-to-textile is no longer a nice to have; it's a must-have because of the European regulation. That's going to be a big driving force in the future. 66% of all of the PET and polyester manufactured in the world, which I believe is about 85 million tons per year, is coming from the polyester textile side. This is a huge shift in the marketplace, which we are uniquely suited to capitalize on. The Indian facility is perfectly located for that. Besides the low-cost manufacturing, as I said, it's near the textile hub in India, the Gujarat province, where there's a lot of textiles. The main feedstock we'll be using for the process is textile-to-textile. It's really perfect timing for us and perfect timing for this Indian project. On the engineering front, we hired Toyo, the large Japanese engineering and construction company, to complete the detailed engineering, which started November 1 and runs through the construction of the plant. Toyo has a very large presence in India and has done tremendous work to date. Our engineering team is now fully deployed on working on this project and generating revenue for Loop from this project from the joint venture. We feel that we're in good hands with Toyo. They're doing an excellent job, and we're excited to work with them through the construction of the facility. Debt syndication is moving well. We are building a syndicate of lenders for the project debt financing. We've received several term sheets from multilateral development banks, sovereign wealth funds, as well as international and local commercial banks. Returns so far are in line with our expectations, and we anticipate closing the debt financing in the coming months, in line with our project schedule. That's really the update on India. As far as the progress with our partnership with Reed Societe Generale Group, as you know, we've licensed our technology to Reed SocGen to build one plant in Europe. SocGen has spent time working on site selection. I believe they started by looking at 20 sites across Europe. They've narrowed it down to 3. There's one lead site in Germany that is being negotiated right now, and we think that should be finalized very shortly, probably by the end of January or beginning of February, at which time we anticipate to begin generating meaningful revenue and profits from providing the engineering for that project. The engineering and milestone payments will be over the next 3 years for the project, and we believe that would cover all of Loop's back-office expenses for the next several years. Cash operating expenses for the quarter were $2.2 million, reflecting a year-over-year decrease of $1.1 million. At the end of the third quarter, we had total liquidity of $7.7 million. In the coming quarters, this number will continue to decrease. The operating cash expenses will continue to decrease as more expenses are transferred to the joint venture in India and the project in Europe. We've seen some meaningful reductions in other areas of our annual spending. Our focus is on raising the remaining financing required for our equity contribution to ELITe and for the operating expenses until the startup of the Indian facility. We are engaged with multiple parties regarding financing to fund our investments in ELITe. This capital, along with anticipated engineering revenues derived from the India and European projects, is expected to fund Loop's ongoing operations until its first facility becomes operational. I'd like to turn it over to Spencer Hart now, our new CFO, and let Spencer say a few words.
Thanks, Daniel. It's nice to be on the call with you on my one of my first days as CFO. As a brief introduction, I’ve spent over 30 years in my career in investment banking. I've followed Loop for many years. About a year ago, I joined the Board of Directors, and I'm a big believer in the company, Daniel, and the whole management team. I think there’s an opportunity here to build a great company and create significant value in the process. During my investment banking career, one of my areas of focus was raising equity and debt capital for my clients. I'm going to be very focused on supporting Daniel in raising the capital for Loop to bring us to the next stage of our strategic development. For this quarter, Daniel gave you a good update on the business. The detailed quarterly results are available, which were filed last night. I would just point out that the company has managed expenses very well in the third quarter, bringing cash operating expenses down over $1 million from last year's third quarter. We have opportunities to reduce that further, and some of those opportunities have already been locked in. With that, I'll pass it back to Daniel for closing remarks.
Sorry about that. Thank you very much, Spencer. In conclusion, I'm really pleased with the progress we're making both in India and in Europe, starting to really see meaningful revenue and profitability from the engineering fees in Europe and in India, which will allow us to sustain our back office spend for many years to come. That's all very positive development for us, and we're really confident in the financing as well. So looking forward to getting all this done in this quarter. With that, I'll open it up for questions.
Questions and answers
Our first question today comes from the line of Gerard Sweeney with ROTH Capital Partners.
So I had a question on Nike. Sorry, you guys can hear me, correct?
Yes, can hear you fine. Thank you.
Got it. So question on Nike or actually the facility in India, 70,000 metric tons. Nike, obviously, is a huge global brand, a great opportunity for Loop. Just curious, how much of the facility in India is under contract? And you have Nike, and I believe you have a few other people. Maybe you could just delve into where it sits on the output and who’s going to be the offtake for the output?
Yes, we expect to have, thanks for the question, Gerry, following 5 to 6 customers total for the facility. Today, we have Taro Plast and we have Nike. We're in negotiations with several other CPG brands on the packaging side for Europe. Some of our customers that we've dealt with, we have long-standing relationships and produce products for them before, with products on the shelves with them in different geographical regions today. We’re finalizing negotiations with them for packaging for the European market and on the textile side as well for a few other textile companies. I would suspect we’ll probably have another 3 to 4 customers to have the entire capacity of the facility under contract.
Got it. So it's going to be a mix of packaging and textile. And on that front, or pricing, I know you don't necessarily want to give pricing, but maybe in broad strokes or broad terms, is textile and packaging similar pricing and margins? Or is there one area better than another? And if you don't want to go into that right now that's fine.
Yes, we have a target average sales price for the facility that is quite unique. Our technology allows us to operate in both the packaging and textile sectors. We can produce FDA-approved food-grade plastic for water bottles as well as textile materials. This versatility positions us well in the market. Currently, the textile side tends to have higher premiums due to new regulations and its distinctiveness. Both sectors are capable of mechanical recycling, which provides a certain percentage of the material quality they need, but for premium quality, they turn to us for virgin materials. Overall, textiles have a higher premium at this point, but the pricing is fairly comparable and largely depends on the customer's needs and their profit margins. Typically, textile and fashion companies operate with slightly higher margins. Our output is the final product, meaning the polyester fiber we produce is the actual textile itself, while in packaging, we are simply the container for the drink. The mindset is a bit different, but we are equipped to operate in either market as needed.
Got you. And another question on that front. This is maybe on the marketing side, and probably something that hasn't been brought up in a while. But I know historically, you've always said even on some of the runs you've done for Avion, it's like made with Loop or Loop material. Are you still going to be able to market the textile and packaging with some of that marketing opportunity like Loop made with Loop recycled product or Loop inside along those fronts?
Yes, we definitely want to continue on the marketing side with that. On the packaging side, we've had that in the past. We expect to continue that in the future. On the textile side, we created a sub-brand for Loop's material called twist. That's part of the discussion when we talk about this with the textile companies. One of the big things that the textile companies need from us is to be able to recycle their waste because now they're responsible for collecting it. That puts a huge pressure on the system. They'll have to organize collection. Once the collection is there, they’ll need our technology to recycle that for them. Those are really great opportunities for co-marketing and co-branding around the entire circularity of the entire product portfolio. So them sending us the waste, reprocessing, and sending it back to them is creating that loop. That’s something we think we can really leverage on the marketing side.
Got you. And then finally, just last question, just time line for the India facility. Just if you can remind us groundbreaking and then mechanical completion then commissioning.
Yes, the term groundbreaking feels outdated because our project has already been approved and there’s no further approval needed. We are progressing, and our partner Loop is highly committed to completing this. Detailed engineering has begun, which leads into construction. The project remains on schedule and on budget, with completion expected in the fourth quarter of 2027, which has always been our goal. You will see significant updates regarding the facility's progress, and we plan to have some kind of ceremony at the site. The project is authorized, and we are methodically advancing to achieve our objectives.
Our next question comes from Marvin Wolff with Paradigm Capital.
Can you hear me okay?
Marvin, yes, I can hear you fine.
I just had a question with respect to the German site selection that's going on now. How big a plan would that be once that comes on board?
So it's the same size; it's 70,000 tons capacity, exactly the same size as the Indian facility.
Okay. And I guess it's too early to talk about customers for that plant, but I would assume you're in early discussions with people.
Yes. The European plant would mainly focus on the packaging side because the supply chain for textiles is mainly in Asia. But there could be some textiles being recycled at the facility. Due to the European regulation that's coming in, having the facility in Germany, having these textile companies able to send us the material in Germany will provide a big advantage for them. The same Loop customers that we’ve always been dealing with will support that facility. By bringing the low-cost mentality of India into Europe through modularization, we can build our technology in modules in a low-cost country, then ship them on-site. This allows us to reduce CapEx, which enables us to offer better pricing to our customers. We've seen a reduction of CapEx of probably close to 50% by doing it modular versus doing it in a stick build. That's a big part of our business moving forward. The engineering I keep mentioning, as well as building our design from India into modular fashion, allows us to reduce CapEx and offer better pricing to our customers. We're competitive on pricing in the European market, and this project in Europe will be very competitive as well.
And if you could just remind us, what is the size of the debt package you're looking at?
For India, the debt package is $130 million.
Okay. And what is the equity component that Loop is going to have to provide?
The equity component that Loop is going to have to provide is approximately $28 million.
Very good. Well, you're making great progress, and it's good to see it come along with some continued intensity.
Yes, steady progress, doing everything the right way and getting that plant built for the end of 2027. That’s the goal.
Yes. Okay. Very good. Well, at the end of '27 comes faster than you think, right? It's only less than 24 months away now.
Yes, the engineering teams and Toyo, along with the joint venture’s engineering team and our partner's engineering teams are working full out nonstop. Everyone is fully dedicated to that facility. The amount of work going on behind the scenes is tremendous. You don't always see that because there aren't many press releases. But the amount of work being done to get this facility done is substantial. It's all hands on deck getting this built. It all starts with the engineering and the technology. That's the foundation of these projects. You can build a plant and it doesn't work. We’ve spent time doing it the right way. We've operated this plant in Canada for over 5 years, gaining all of the knowledge and engineering that needs to be applied in these new plants. Nothing has come easy, but we are methodically getting to where we need to be in 2027 to deliver this product to our customers.
Our next question comes from Varyk Kutnick with Divyde Capital Partners.
So in the past, you've talked about the gross CapEx per pound in India being $0.61 with maybe net around $0.75. Does that same number translate to the European facility, especially when you talk about the modularity of it?
So the European facility will be a little more expensive. You could take the module cost, the CapEx that you provided, and that would be the cost for the modules. Then you have to add the transportation and the reconnection of the module. So there's a little more cost involved. The good thing about the European site is the utilities. In a chemical plant, the utilities are the most expensive part of the entire project. The beauty of the facility that we have in Germany is that it's a big chemical plant with utilities already in place. Instead of us having to put in our boilers, steam generation, natural gas connection, and cooling towers, it's already there on site. That offsets some of the increased costs for the transportation and reconnection of the modules. We expect the plant to be a bit more expensive than the Indian project, but not significantly more due to the offset of the utilities.
Right. I mean, if I look at the rest of the field, you guys are about half the cost on a CapEx per pound basis. Where does that magic come from?
The magic comes from reinvention. During COVID, building costs went up, and so did plastic prices due to tight supply chains. There was a trade-off. After COVID, when factories reopened, plastic prices came down while CapEx leveled off and remained high. This imbalance led to project cancellations in the space. We had to reinvent ourselves. Going into India, we focused on low-cost manufacturing and lower labor rates, which translates to lower construction costs. Everything we're doing is done in a low-cost industry. We have no specialized equipment. A chemical plant consists of tanks, reactors, agitators, heat exchangers, and pumps – all sourced locally. Indian labor is significantly cheaper than other countries, allowing us to build efficiently. Labor costs in India are 80% less than in China today. This is how we achieve success at a low-cost level.
I appreciate the color on that. Is it safe to assume that your return on invested capital, which you guys hold at a JV level, will result in a significantly better payback period? When we think about more facilities, will it come out of cash flow from India, or will it be funded through other means?
It's going to be funded through the cash flows in India, 100%. We have enough space to build a 100,000 ton capacity right after the first one is done. The total capacity of the site is 170,000 tons. We’ve conducted multiple feedstock studies, identifying over 500,000 metric tons of textile waste available for us to process in India, not counting imports from Europe or Vietnam. We have 170,000 capacity on the site, which will be a mix of packaging waste for our packaging customers. All of that will be financed through cash flow. The licensing fee we receive plus covers our back office expenses and more because we’re cautious with our cash. A lot of R&D and engineering costs are now being paid by the joint venture, lightening the cash burn at the head office. The royalties and engineering fees we’ll be cash flow positive at the corporate level through those. The payback is less than 3 years in India.
I visited Europe, and Reed mentioned they have the opportunity to partner with you. They handle design, licensing, engineering, and collection with minimal financial risk. The less than three-year payback period shows that this scalable project will extend beyond India to Europe and other regions.
Absolutely! The Nike deal, I don't think people have mentioned that and what a big deal that itself.
Nike is huge. Obviously, if I could look back and choose any customer that I wanted to work with, Nike would be right up there as one of the top companies. They are an amazing organization, great company, and brand with successful brands within Nike. We're really honored to have Nike as our anchor customer, and it's just tremendous working with a company of that size. They are true innovators and they need textile-to-textile, and they are moving quickly to get that done. Yes. I mean, it's just on the Internet, so I'm going to throw it in here. But I mean, obviously, Nike produces about 2 billion pounds of plastic and shoes per year, I should say, clothing and shoes per year. I mean, in India, which will do 154 million pounds. You're about 5% of their total capacity, which shows the scale of this when you think about it and include other apparel players. It's bigger than we could ever dream of.
Absolutely. The entire polyester fiber market is 66% of 85 million tons. This represents a huge potential for growth in the textile sector, and Loop’s technology is uniquely positioned to handle it due to low-temperature methanolysis. This method is key because it prevents contamination of the stream with cotton, nylon, buttons, and zippers, which makes Loop’s technology particularly suitable for this recycling.
We have not received any further questions. I'll hand the call back over to Daniel for any closing comments.
Yes, nothing further from me. Thank you very much, everybody, and we'll be speaking again soon.
Thank you. This concludes our call. Thank you all for your participation. You may now disconnect your lines.