管理層發言
Thank you, operator. Before we get started, let me remind you that today's meeting will include forward-looking statements within the meaning of the securities laws. These forward-looking statements relate to, among other things, current plans, expectations, events, and industry trends that may affect the company's future operating results and financial position. Such statements involve risks and uncertainties, and future activities and results may differ materially from these expectations. Additional information concerning these statements and related risks and uncertainties is contained in the Risk Factors and Forward-Looking Statements section of our annual report on Form 10-K and our quarterly report on Form 10-Q filed with the SEC yesterday and yesterday's press release. Copies of these statements are available at sec.gov or from our Investor Relations department. At this time, I'd like to turn the call over to Daniel Solomita, Chief Executive Officer of Loop Industries. Please go ahead, Daniel.
Thanks, Kevin. Good morning, everyone. Thank you for attending our call. We had a significant milestone accomplished in late December just before the quarter end, where we finalized the Reed transaction with Societe Generale. That was a big milestone that we had been working on for many months to be able to complete it. The transaction is a €20 million financing to Loop, €10 million in convertible preferred security, which converts into Loop shares at $4.75 a share five years from now, and can be repaid in cash or in stock. The other part of the transaction, which is very significant, is that we've sold the first license to our technology to Societe Generale, wherein Societe Generale will now be able to develop a project in Europe with Loop to be able to build an Infinite Loop manufacturing facility on the Continent of Europe. That's a very significant milestone. Our focus and our strategy have been to license our technology into higher-cost manufacturing countries such as Europe and parts of Asia.
We want to really deploy our capital into low-cost manufacturing countries such as our partnership with Ester in India. This is a key milestone that accomplishes our vision for the company's future. Being able to license the technology to Societe Generale is a major milestone with a €10 million upfront payment and two additional milestone payments as the project advances. A significant part of our revenue stream will come from selling engineering packages and engineering services. With every license that we sell, Loop's engineering services teams will be involved in all of the necessary process engineering work before construction even starts. So that's an important milestone. We've also entered a service agreement with our partners in India for the India joint venture. Our engineering teams are now going to start generating revenue back to Loop, providing all of the engineering services needed to build these facilities, all the way through construction and even startup commissioning.
That's going to be an exciting revenue stream for us going forward. Every project or license will generate revenue from our engineering services department. That's an area we're going to grow within the company to handle all of the incoming projects. We're responsible for building the project, shared with Societe Generale in Europe. We are now working together on planning to see where Societe Generale would like to place this facility, aiming to build it in the near term to supply European brand companies with top-quality PET plastic. Licensing of the technology is a key milestone, and we feel optimistic about prospecting other licenses worldwide. The India joint venture, our key project, is moving well. We're being finalizing the land acquisition, having identified the plots, and are currently performing legal due diligence to purchase it with our attorneys in India. The feedstock will primarily come from polyester textile waste, crucial for our India joint venture, as the fashion industry requires recycled solutions for their end-of-life products.
Loop's technology fits perfectly here, emphasizing the increasing importance of circular fashion. The situation in India is advantageous due to textile waste, low-cost manufacturing, and proximity to the fashion company supply chain. We’ve made efforts in the textile industry, including launching a pair of running shoes made from 100% recycled polyester fiber with On shoes last year. We have expanded our product offerings based on customer demand; some customers want us to produce fiber instead of selling them polyester chips. We are actively building our supply chain with spinners globally to supply fashion companies with the required materials. Everything is on track for the India project, and we're eager to break ground in the second quarter of this year for the project in India. Regarding our financials, we had a write-down on some polymerization equipment purchased for the Ulsan project, which is purely an accounting matter and does not affect the equipment's usability in other projects, including India.
Lastly, we canceled the joint venture with SK as it did not align with our strategy of investing in low-cost manufacturing countries. South Korea is a high-cost manufacturing region, and we do not wish to commit substantial capital there. If SK is interested in a project, it will only occur through a licensing agreement, and we will not be investing in South Korea. SK has faced significant changes and reorganizations, resulting in a board member leaving our board, although they continue to hold their investment in Loop at this time.
Thank you, Daniel. Good morning, everybody. Please allow me to go through the financial results for the quarter. Obviously, the most notable transaction that occurred wasn't in this quarter; it was the financing Daniel mentioned for USD 20.8 million. This won't be reflected in our Q3 financial statements but will appear in our fourth-quarter filings in 2025. The proceeds from this transaction provide us with liquidity for our upcoming equity contribution in India and the head office expenses for 2025. Looking at our income statement, there has been a continued decline in our expenses. Research and development costs totaled $1.38 million, down 25%. This reduction is a natural evolution of the production facility, which is no longer in testing—it's poised for operations. Hence, we're not incurring prior expenses. Our G&A expenses decreased to $2.15 million, a 13% reduction. Most of these savings stem from lower insurance claims.
Looking ahead, we expect these numbers to continue decreasing as we move into fiscal 2025. Our cash burn rate for the third quarter is $2.8 million, below our target of $1 million per month or $3 million per quarter. This compares to $2.9 million in the second quarter and confirms our financial health. To clarify, the cash burn figure represents our cash expenses excluding depreciation or stock-based compensation, which are non-cash items. This also excludes project-related costs. Our adjusted run rate is expected to decrease to around $900,000 per month in the fourth quarter, with fiscal 2025 projected between $800,000 and $900,000 monthly. Overall, this quarter reflects our ongoing operational strategy.
分析師問答
Thanks. Good morning, guys. On the Reed financing, can you please remind us what the terms for the additional licensing payments are? What those milestones really are and when we should expect them to be hit?
Nick, the milestone payments are tied to customer contracts and other standard parameters for Financial Investment Decisions (FID). We have two very attainable milestone payments that will be available to Loop, potentially realized by the end of 2025 or 2026, depending on how quickly Societe Generale develops the project. We are starting discussions on the location selection. The engineering services would likely begin a bit earlier than that, as soon as the site is selected, our engineers will commence work on the process design package, which should start around the end of 2025 as well. However, it heavily relies on the pace at which Societe Generale wishes to progress with the project. We have some interesting opportunities in Europe.
And sorry, regarding the engineering services, can you remind us what that would quantify as now?
The engineering services on a project such as Societe Generale's are expected to help generate about $10 million for Loop through to construction.
Okay. So recognized over a period of about 12 months?
Through construction, it's probably over 24 months, given that it generally takes about 18 months to build the facility. The engineering services begin with the primary engineering package or process design package. Then we have the feasibility study followed by detailed engineering and construction. Across those three phases, we're discussing around $10 million— €10 million, to be exact.
Understood. Thank you. Moving on to the SKGC partnership—could you provide more color on the read-through for Societe Generale building a project in France versus SKGC in South Korea? Given that SKGC deemed South Korea unviable, does that have implications for France?
The SK scenario was quite different. SK intended to build a massive project, referred to as the Ulsan ARC, which involved three companies and had shared utilities. SK ultimately canceled that project, affecting not just ours but also those other companies. One major issue was SKGC's parent, SK Innovation, facing financial strain from their heavy investment in the electric car battery market. They underwent significant management changes and prioritized shoring up their balance sheet. This situation doesn't reflect our technology; rather, it's a strategic shift for SK. Loop retains 49% of that joint venture, but we were unwilling to allocate hundreds of millions into a project. The European market varies significantly from South Korea. European brands are increasingly mandated to incorporate recycled content due to forthcoming regulations, driving demand for Loop's top-quality recycled material.
That makes sense. Thank you, Dan.
Hi, good morning, guys. Thanks for taking my question. Could you remind us the timeline for CapEx deployment for your different projects over the next month? Particularly, any indications of CapEx deployment timing in India would be welcome.
I'm sorry, I didn't catch the second part of your question regarding the CapEx deployment?
In India with Ester.
Yes, in India, we expect to break ground in the second quarter of 2025. We've injected capital into the joint venture, hiring Tata Engineers, a significant firm for local engineering work, supported by Loop's engineering team for all process-related tasks. We've also brought on board KPMG for debt syndication and for the detailed project report required for the Indian banking syndicate. CapEx will commence significant spending alongside construction in the second quarter of 2025. With Societe Generale, it's a licensing deal, with them responsible for the equity position.
Good morning, Daniel and Fady. Thanks for taking my call. When should we anticipate seeing revenue from engineering, especially concerning the India plant with Ester, moving in that direction?
Yes. The revenue from engineering is expected to start appearing in the next quarter filings as we’re beginning to receive that revenue.
Understood. It sounds like breaking ground on the India plant with Ester is planned for Q2. What milestones should we look for between now and breaking ground, and post-breaking ground to track the project?
The completion of the engineering package by Tata and Loop's engineers is a key milestone. KPMG's role in debt syndication and the DPR is also crucial for the Indian banks. We'll be finalizing customer contracts within the upcoming months, which are vital for debt financing. Additionally, securing waste feedstock is in progress. Specific partnerships with spinning partners will be announced to sell spun fiber instead of chips, which is another important development in this timeline.
Thank you, that detail is appreciated. Regarding the Reed SG licensing, it's a significant step forward. I'm intrigued—are there additional opportunities for licensing beyond Europe, or possibly outside Europe?
Yes, there are certainly opportunities for licensing. We are in discussions with potential partners for licenses outside of Europe, particularly in higher-cost manufacturing countries across Asia. This European licensing with Societe Generale was a critical market penetration, and we're actively pursuing other opportunities, although the speed of these developments can be somewhat unpredictable.
Understood. Thanks for the insights.
Yes, good morning, guys, and congratulations on securing the Reed financing. My question pertains to your relationship with the spinners. Is it going to be a tolling relationship, or could you provide more detail?
Yes, it will be a tolling relationship where we send the chip from India to the spinner, who will then produce fibers per customer specifications. We'll then send that from the spinner to the customer. We have already qualified our material with major spinners supplying our customers, primarily targeting several large fashion brands who purchase spun fibers or fabrics. Many customers have requested Loop's assistance transitioning from purchasing resin to fibers, which has prompted us to develop our supply chain with spinners.
That appears to present a substantial opportunity with high volume potential.
Indeed, the fashion companies utilize substantial amounts of polyester fibers, and that market is expanding. Within the entire PET market, around 90 million tons per year, over 66% comes from the textile sector, which is facing challenges in recycling materials. Loop has the best technology for addressing this industry's needs. The India joint venture is well-placed to convert waste scrap into new fibers, signifying a key growth opportunity driven by the circular fashion industry.
Thank you for answering my questions.
Thank you very much.
Thank you, everyone, for joining us. If you have any questions, you can reach out to IR at Loop Industries. Have a nice day.
Thank you, everyone. Bye-bye.
Thank you, everyone, for joining us. This concludes our call, and you may now disconnect your lines.