Loop Industries, Inc.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Loop Industries fourth quarter 2024 corporate update call. My name is Carla, and I will be coordinating your call today. During the presentation, you can register to ask a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two. This conference call is being recorded today, May 30, 2024, and the press release accompanying this conference call has was issued last evening, May 29, 2024. On our call today is Loop Industry Chief Executive Officer Daniel Salomita and Fadi Mansour, Chief Financial Officer and Kevin O'Dowd, Head of Investor Relations. I would now like to turn the conference call over to Kevin to read a disclaimer about the forward-looking statements.

Thank you, operator. Before we get started, let me remind you that today's meeting will include forward-looking statements within the meaning of security 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 positions. Such statements involve risks and uncertainties in 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 latest annual report, Form 10-K, of our quarterly report in 10Q5 with the SEC yesterday and yesterday's press release. Copies of these documents are available at SEC.gov or from our Investor Relations Department. At this time, I'd like to turn the call over to Daniel Salamita, Chief Executive Officer of Loop Industries. Please go ahead, Daniel. Thank you, Kevin.

Good morning, everyone. Thank you for joining our call. It's been a very eventful quarter and year end. We have made great strides towards the commercialization of our technology. This morning, I'll be outlining our partnership with Ester Industries, which combines Loop's monomer and specialty polymer business with low-cost manufacturing, I'll be updating you on our progress at Olsan with our partnership with SKGC, an update on our status of the reed financing, and finally our On Shoes partnership, which showcases Loop's ability to recycle polyester textile waste. So let's get started with the Infinite Loop India, which combines the monomer business opportunity with low-cost manufacturing. The Monomer business model is filling a market need for sustainably produced DMT and MEG and high-margin specialty polymers. This is complementary to our PET business. The Monomer business is addressing a huge underserved market for sustainably produced DMT and MEG. Today, the market opportunity is greater than $20 billion annually. DMT and MEG are used worldwide as intermediate chemicals to supply the automotive, cosmetics, packaging, and other industries. Today, there's a global shortage in DMT, and this is how we developed the business model. We've been receiving a lot of calls from chemical companies asking if Loop can supply them with DMT. As for Wood Mackenzie, virgin petroleum-based DMT is selling for $1,950 per metric ton, and MEG is selling at $835 per metric ton for a combined price of $2,785. This is with no sustainability-linked premiums. This is for virgin petroleum-based products. In talking to potential customers who are the large petrochemical companies, we feel comfortable that a 15% premium can be applied for sustainability and loops product. The DMT and MEG that are produced through loops depolymerization technology are drop-in replacements to the petroleum-based DMT and MEG, which is extremely important. This means that our customers do not have to modify anything in their production facilities to replace their current supply. The Infinite Loop India facility will produce 70,000 metric tons of DMT and 23,000 tons of MEG made through Loop's depolymerization technology. The Indian market offers an abundance of low-cost waste polyester fiber that can be depolymerized using Loop's technology and turned into the DMT and MEG. Many of our customers in the textile manufacturing industry have production facilities in India and neighboring countries such as Bangladesh, so it's very close to our customer supply chain. NAPEC's estimate for India is $165 million. Therefore, the equity commitment for Loop is in the $25 to $30 million range, which our partners at Reed and a government agency are fully on board to fund. The partnership with Esther is a 50-50 joint venture. Loop receives a 5% royalty fee on all revenue generated from the facility, which is estimated, the licensing fee is estimated to be at $8 million per year. Loop is solely responsible for all sales and marketing of the final product, which is to be sold through the joint venture. It's all sold under Loop's brand name. The expected EBITDA for the Indian facility is $70 million per year, which of Loop owns 50%, and a 35% unlevered IRR. Therefore, the economics of low-cost manufacturing coupled with the monomer business model really provide very, very attractive shareholder returns. Our partners in India, Esther Industries, have been working with Loop for the past five years. Today in Tarbun, we depolymerize waste polyester and PET into DMT and MEG. We then ship those chemicals, the DMT and MEG, to Ester in India for polymerization. Examples of some of the products we've launched using this partnership with Esther is most recently our shoes with the Swiss shoe brand On Shoes, Evian water bottles, which are for sale in South Korea, and the L'Oreal skincare products, which are on sale at alt stores in the United States. So we have a long-standing relationship with Esther, and we are fully aligned on our partnership and views for the future. This is a 50-50 joint venture, and the partners are fully aligned on the execution and the strategy. As I said before, Loop is exclusively responsible for all sales of the DMT, MEG, and specialty polymers, such as PBT, PTT, PETG. Specialty polymers offer a high-margin business, which today is really in need of sustainability. And Loop's DMT allows for sustainability to now reach these specialty polymers, which today cannot have any type of sustainability because there's no monomers available to be used as the base building blocks. The Infinite Loop India project leverages Loop's existing engineering package and has the same major equipment suppliers as the Canadian facility we have running here in Terrebonne. The Terrebonne facility we've had operational for the past four years, and those four years have been allowing us to secure all of the major equipment that we need for the facility. So we have had four years of experience running all of these pieces of equipment and therefore very comfortable with all of our suppliers. So this project leverages our existing very mature engineering package and all of our key equipment suppliers. Luke and Esther have hired a global leading engineering firm to secure land for the project, which we're expecting to be in the Hyderabad area, and they will be providing all of the local engineering support for the project. We expect to break ground on the facility by the end of this fiscal year. This partnership is in line with Loop's strategy of deploying capital to low-cost manufacturing countries, such as India, to enhance shareholder returns. We will move to a more asset-light business model focused on licensing our technology in higher-cost manufacturing countries. As far as the Ulsan update, Loop and SKGC are negotiating with the Korean government for grants and subsidies for the project. We are currently also studying the possibility of putting up a monomer plant in Ulsan. The other big significance to the monomer business model is that it significantly reduces the capex and increases financial returns in the business. monomer business model, we do not need the polymerization section. So about 40% of the capex is not needed because we're selling the chemicals rather than repolymerizing it into PET. So this is something that we're studying in Ulsan as well. Again, this is a huge market opportunity and we're filling a market opportunity that exists today because of this tremendous underserved market. As far as India as well, another thing that's very important to stress is that India is a high-growth opportunity country. And the Indian economy is the fastest growing economy in the world. 1.5 billion people in the population is growing. A lot of our customers are leaving China or finding a China plus one solution and moving a lot of their manufacturing into India, especially on the textile manufacturing, so all of the large clothing companies. Low-cost manufacturing, labor rates are significantly cheaper than India. I was reading an EY presentation on the specialty chemical markets where labor costs for operators in a chemical plant in India are 80% less than what they are in China today. So we believe Asia is going to be the main driver for demand for the next several decades, which is why... the Indian project is so important for us, and also the monomer business potentially in Korea is also very exciting because of the location. I'll switch now to the Reed financing. Over the past several months, Loop and Reed have been working diligently on completing our joint venture partnership and on our mainly non-dilutive financing to fund Loop's global expansion of our technology. Reid has hired several independent firms to conduct a thorough due diligence of all aspects of Loop's business, including technology, so technology due diligence, financial due diligence, legal due diligence, ESG due diligence, and all of the independent firms have concluded their due diligence and all of that was completed successfully. The joint venture with Reed is consistent with our business model to invest capital in low-cost manufacturing countries and to have a more asset-light business model built on licensing and higher-cost manufacturing companies such as Europe. The partnership with Reed is for Europe specific, where Reed comes with Loop as our financial partner. So any equity commitments, any funding commitments that we would have to develop our technology in Europe, it will be split 50-50 between Loop and Reed. So on the equity side, we'll be splitting with Reed, but all licensing revenue and all engineering revenue comes directly to Loop. So again, more of an asset-light business model where we're Loop splits on the equity side, so much less equity check, but we get the licensing revenue, which is standard at 5% of sales. On the financing side, the financing read, which is largely non-dilutive, coupled with financing from our other partner, will fund 100% of the capital need for our equity commitment for India and leave leftover funds for Loop's head office. The completion of the agreement is imminent. We had hoped to have everything signed off by the time of this call, but we were very confident in the signing and announcing the final agreements by the end of this week. Lastly, this quarter, we had a launch with Onshoes, the Swiss shoe manufacturer. They launched a Cloud Easy Cyclone shoe on May 21st. The upper part of the shoe is crafted with polyester fiber made from Loop's facility here in Terrebonne, Canada. It's 100% recycled fiber using our technology. We started with waste polyester fiber broke it down into the DMT and the MEG, purified the DMT and MEG, sent that over to Esther. Our partners at Esther Industry produced the polymer, which was then sent to On Shoes, which they used to produce the upper part of the shoes. The program is a subscription program, and so as the people pay a monthly subscription fee, they have access to the shoe. When the shoe is sent back, On shoes, we'll remove the upper portion, send that over to us, and we will recycle it for them and send it back to them. So it shows the complete circularity for textiles and for running shoes. This is the first shoe launched by On using Loop's fiber-to-fiber recycling technology and sets a precedent for sustainability in the footwear and textile markets. With that, I'll hand it over to Shadi to go through the financials.