Overview

Loop Industries, Inc. is a visionary technology company leading the charge towards a more circular economy. With its groundbreaking Infinite Loop™ technology, Loop is revolutionizing the way plastic waste is reclaimed and repurposed, paving the way for a more sustainable future.

Established in 2015, Loop's mission is to accelerate the world's shift away from the reliance on finite fossil resources and towards a sustainable plastics economy. The company's patented and proprietary depolymerization process allows it to break down no-and-low-value waste polyethylene terephthalate (PET) plastic and polyester fiber, regardless of color, transparency or condition, into their base building blocks - dimethyl terephthalate (DMT) and monoethylene glycol (MEG). These monomers are then purified and repolymerized to create virgin-quality Loop-branded PET resin and polyester fiber.

Early Challenges and Milestones

In the early years following its founding, Loop faced significant challenges in scaling up its depolymerization technology from laboratory scale to commercial production. The company worked diligently to secure financing and build out its first small-scale production facility in Terrebonne, Quebec. After several years of intensive research and development efforts, this facility became operational in 2020, marking a crucial milestone in Loop's journey. The Terrebonne facility enabled Loop to produce monomers and begin collaborating with customers on product activations using its recycled PET and polyester.

Technological Advancements

Loop's innovative technology addresses the limitations of traditional mechanical recycling, which struggles to handle contaminated, degraded or complex plastics. By chemically breaking down these materials, Loop is able to create a closed-loop system where plastics can be recycled indefinitely without loss of quality. This represents a significant advancement in the quest for true circularity in the plastics industry.

Strategic Partnerships

The company's strategic partnerships with industry leaders such as SKGC, SUEZ and Ester Industries have been instrumental in driving the commercialization of the Infinite Loop™ technology. In 2020, Loop announced a strategic partnership with SUEZ Group to build the first Infinite Loop manufacturing facility in Europe. This partnership was expanded in 2022 to include SK Geo Centric as an equal participant. The companies worked together to select a site in France for the planned facility, although the timing and details of this project have been under review as Loop and its partners evaluated opportunities to reduce capital costs.

In May 2024, Loop announced a landmark deal with European investment firm Reed Management to provide 35 million in financing to fund the global expansion of its technology, including the formation of a 50/50 joint venture for the European market.

Additionally, Loop's collaboration with Swiss sportswear brand On showcased the versatility of its fiber-to-fiber recycling capabilities, with the launch of the Cloudeasy Cyclon shoe featuring 100% recycled and infinitely recyclable polyester yarn from Loop's Terrebonne, Quebec facility.

Financials

Financially, Loop has navigated the challenges of its pre-commercialization stage, reporting a net loss of $10.03 million for the six-month period ended August 31, 2024. The company's most recent fiscal year saw revenues of $153,000, with a net loss of $21,087,000. Operating cash flow for the year was negative $18,034,000, while free cash flow stood at negative $23,678,000.

For the most recent quarter, Loop reported revenues of $23,000, a 57.4% year-over-year decrease due to lower sales of Loop PET resin as the company continues to be in the pre-commercialization stage. The net loss for the quarter was $4,839,000, with operating cash flow at negative $2,860,000 and free cash flow at negative $3,009,000.

Liquidity

As of February 29, 2024, Loop's cash position stood at $1,400,000, with an additional $1,010,000 available through an undrawn senior loan facility. The company's debt-to-equity ratio is 0.23, with a current ratio of 0.48 and a quick ratio of 0.47. Loop has access to a credit facility with a Canadian bank that allows for borrowings of up to $2,590,000 in aggregate principal amount, with a two-year term on amounts drawn. This facility is secured by the company's Terrebonne, Québec property.

The company's focus on building strategic partnerships, securing financing, and advancing its technology roadmap positions Loop as a trailblazer in the emerging sustainable plastics landscape. As the world increasingly demands solutions to the global plastic waste crisis, Loop's Infinite Loop™ technology stands out as a promising and scalable approach to creating a more circular and environmentally responsible plastics economy.

Geographic Expansion

Geographically, Loop's expansion plans span across North America, Europe, and Asia, with the recently announced 50/50 joint venture with Ester Industries to build an Infinite Loop manufacturing facility in India. This facility is expected to produce 70,000 metric tons of recycled DMT and 23,000 metric tons of recycled MEG annually, catering to the growing demand for sustainable chemical building blocks in the region.

Loop has provided guidance on the Infinite Loop India facility, estimating a total CapEx of $165 million, with Loop's equity commitment in the $25 million to $30 million range. The company expects to receive a 5% royalty fee on all revenue generated from the facility, estimated at $8 million per year. The expected EBITDA for the Indian facility is $70 million per year, of which Loop owns 50%, representing a 35% unlevered IRR.

Revenue Breakdown

Loop Industries operates in two main product segments: Recycled PET Resin and Specialty Chemicals. The Recycled PET Resin segment focuses on the production and sale of virgin-quality recycled PET plastic and polyester fiber using Loop's patented Infinite Loop depolymerization technology. During the three and six month periods ended August 31, 2024, Loop generated revenues of $23,000 and $29,000 respectively from the sale of these recycled PET products to customers.

The Specialty Chemicals segment, announced in May 2024 through the partnership with Ester Industries, aims to produce lower carbon footprint rDMT, rMEG, and specialty polymers. This expansion into specialty chemicals complements Loop's core PET resin and polyester fiber business and addresses the growing global demand for more sustainable alternatives to traditionally produced DMT and MEG.

Environmental, Social, and Governance (ESG) Initiatives

The company's commitment to sustainability is not only reflected in its technological innovations but also in its environmental, social, and governance (ESG) initiatives. Loop has integrated ESG considerations into its core business strategy, aiming to minimize its carbon footprint, promote circular economy principles, and foster responsible supply chain practices.

Future Outlook

Despite the challenges of operating in a pre-commercialization stage, Loop's visionary leadership, strategic partnerships, and technological advancements position the company as a formidable player in the race towards a more sustainable future. As the global demand for circular solutions continues to rise, Loop's Infinite Loop™ technology stands out as a promising and scalable approach to creating a more environmentally responsible plastics economy.

Loop has provided guidance on its financial performance, indicating that R&D costs for the most recent quarter were $3 million, with normalized R&D costs at $1.7 million, representing a 23% decrease from the prior period. G&A expenses, normalized for a one-time stock-based comp adjustment, decreased by 10% compared to the prior period. The company's total cash burn rate for the quarter was $3.1 million, which is within their targeted range of $1 million to $1.2 million per month. Loop expects its cash burn rate for fiscal 2025 to remain between $1 million and $1.2 million per month.

Regulatory Matters

It is worth noting that in 2022, Loop received a subpoena from the SEC requesting information, which launched an investigation that is still ongoing. The company has stated that the investigation does not mean the SEC has concluded anyone violated the law or that it has a negative opinion of Loop. Loop continues to cooperate with the SEC as it works to resolve the matter.