Loop Industries, Inc. (LOOP)·Q2 2025 Earnings Summary

Executive Summary

• Q2 FY2025 revenue was $0.023M and diluted EPS was $(0.10); operating expenses declined quarter-over-quarter as Loop continued cost discipline, though reported expenses included non-recurring legal and project costs .
• Management expects the Reed financing to close in November 2024, with an initial €10M convertible preferred security (13% PIK, 5-year term) and further tranches thereafter; a $2M bridge loan from the CEO and an independent director is in place if timing slips .
• The Infinite Loop India facility site was selected in Gujarat, offering proximity to textile waste feedstock, seaport access, and 100% renewable biomass energy; ground-breaking is targeted for H1 CY2025, with customer offtakes anticipated in Q1 CY2025 .
• Demand signals: rising European mandates (50% recycled content from January 2025) and premium pricing for high-quality recycled PET vs declining quality from mechanical recycling; Loop’s pharma- and food-grade qualifications support premium positioning .
• Near-term stock catalysts: definitive Reed close and India land purchase announcements, plus visibility on offtake agreements and DPR completion for Indian debt syndication; cost run-rate guidance maintained at ~$1.0M/month, with identified savings for next fiscal year .

What Went Well and What Went Wrong

What Went Well

• Reed financing timeline reaffirmed for November close with terms detailed (EUR 10M CPS at $4.75 conversion, 13% PIK; additional tranches to follow), improving liquidity runway and enabling India capex initiation .
• India site selection in Gujarat and secured textile waste feedstock underpin a textile-to-textile value proposition and cost-advantaged manufacturing with renewable biomass energy; “100% biomass” cited as key to sustainability profile .
• Cost management progress: CFO highlighted $2.9M cash expenses after excluding non-recurring legal ($0.8M), stock-based comp ($0.4M), and project costs ($0.5M), achieving first quarter under $3M cash spend; incremental savings targeted to reduce annual run-rate to ~$11M next fiscal year .

Selected management quotes:

• “We’re really excited about closing the Reed deal and moving the company forward on the commercialization side.”
• “The land… checks all of those boxes… 100% of the main energy source from the facility will be biomass.”
• “It’s the first quarter that we’re under the $3 million or the $1 million a month. So we’re very proud of that at Loop.”

What Went Wrong

• Revenue remained de minimis ($0.023M) and declined year-over-year due to timing of initial deliveries; net loss widened slightly YoY, reflecting lower interest income and higher FX loss .
• Legal and project costs drove reported total expenses higher than baseline cash guidance, indicating continued lumpy near-term spend tied to financing, regulatory filings, and project preparation .
• European virgin PET oversupply from China pressured global pricing and stalled projects; management and investors are in a “wait-and-see” mode pending 2025 regulatory impacts on prices and potential tariff actions .

Financial Results

Quarter-over-quarter:

• Revenue increased by $0.017M (+283%) from Q1 to Q2, driven by initial deliveries of Loop PET resin .
• Net loss improved by $0.350M QoQ as R&D and G&A came down; reported expenses still include non-recurring legal and project costs .

Year-over-year (Q2 FY2025 vs Q2 FY2024):

• Revenue decreased from $0.054M to $0.023M (−$0.031M), reflecting timing of initial customer deliveries .
• Net loss modestly increased from $(4.750)M to $(4.839)M as interest income declined and FX losses rose despite lower G&A .

KPIs and Balance Sheet (as of Aug 31, 2024):

• Cash and equivalents: $1.395M; total current assets: $2.360M .
• Liquidity commentary: $2.4M total liquidity (cash + undrawn $1M LOC), plus $2M bridge loan commitment to extend runway through February 2025 .
• Accounts payable and accrued liabilities increased to $4.376M, with payments expected over subsequent months .

Segment breakdown: Not applicable; Loop reports consolidated metrics with no segment disclosures .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO: “The transaction is scheduled to close in November… myself and one of the other lead directors have agreed to lend the company $2 million… just an insurance policy in case it’s needed.”
• CEO: “We ended up choosing the Gujarat province… 100% of the main energy source from the facility will be biomass… enabling textile-to-textile recycling.”
• CEO: “We’re seeing strong customer demand… regulation in Europe coming in 2025 for 50% recycled content… most of our material from India will be exported.”
• CFO: “Back out… stock-based comp ($400k), nonrecurring legal ($800k), project costs ($500k)… you get to $2.9M… first quarter under the $3M or the $1M a month.”
• CFO: “We have $2.4M of total liquidity… $1.4M cash and $1M untapped LOC… plus $2M bridge gives us enough liquidity to last through February.”

Q&A Highlights

• India milestones: Final site selection expected in November; ground-breaking around March; offtake agreements anticipated in Q1 CY2025 .
• Pricing dynamics: European recycled PET index up >50% YTD; mechanical recycling quality deteriorating; Loop targets a premium for virgin-quality recycled PET .
• Reed terms: Initial EUR 10M CPS converting at $4.75 after five years with 13% PIK; subsequent tranches to follow post-close .
• Licensing/expansion: Active interest from industrial partners and governments; second India facility planned (potentially >70k tons, dedicated fiber-to-fiber) .
• Working capital: AP increased late in quarter due to timing; cash runway through February includes bridge; DPR engaged with Big Four for Indian debt syndication .

Estimates Context

• Wall Street consensus (S&P Global) for Q2 FY2025 EPS and revenue was unavailable at the time of analysis due to API limits; therefore, estimate comparisons could not be presented. If needed, we will update when S&P Global access is restored.

Key Takeaways for Investors

• Closing the Reed financing in November (with defined CPS terms) is the key near-term catalyst to de-risk liquidity and enable India capex sequencing; monitor 8-K/press announcements .
• India strategy is maturing: site picked in Gujarat with renewable biomass energy and secured textile waste feedstocks; ground-breaking in H1 CY2025 and offtakes in Q1 CY2025 should validate commercialization .
• Premium recycled PET demand and EU recycled-content mandates support pricing; Loop’s pharma- and food-grade qualifications bolster competitive positioning as mechanical recycling quality wanes .
• Cost discipline is improving (cash spend under $3M for the quarter) with further savings identified for next fiscal year; watch for sustained ~$1.0M/month cash run-rate ex-project costs .
• Revenue remains nascent; focus should be on project execution, financing close, offtake visibility, and debt package progress (DPR) to underpin the India facility economics .
• Medium-term thesis: multi-plant roadmap (India #1 then #2), licensing in higher-cost regions, and monomer economics may drive earnings power once facilities scale; track subsequent tranches from Reed and government financing .

Appendix: Prior Quarter References

• Q1 FY2025 press release summarized financials: revenue $0.006M, net loss $(5.189)M, EPS $(0.11); reiterated ~$1.0M/month cash expense run-rate ex project costs and expected Reed close by end of fiscal Q2 .
• Q4 FY2024 call discussed India capex (~$165M), monomer business economics (DMT ~$1,950/mt, MEG ~$835/mt), IRR ~35%, and asset-light licensing strategy in Europe .

Sources:

• Q2 FY2025 8-K/Ex-99.1 press release and financials
• Q2 FY2025 earnings call transcript
• Q1 FY2025 press release
• Q4 FY2024 earnings call transcript