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LH

Li-Cycle Holdings Corp. (LICY)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 revenue was $4.2M (+17% YoY), but net loss widened to $136.7M due to a $58.9M debt extinguishment loss and $23.8M unrealized fair value loss tied to Glencore note amendments; adjusted EBITDA loss improved to $27.4M from $37.9M YoY .
  • Liquidity strengthened: cash and cash equivalents rose to $109.1M (from $70.6M at 12/31/2023), aided by closing the $75M senior secured convertible note with Glencore on March 25 .
  • Operational posture: workforce reduction (~17%, $8.3M charges) and centralized structure expected to deliver ~$10M annual payroll/benefit savings; Spoke network prioritizing Gen-3 sites and EV OEM feedstock .
  • Rochester Hub: progressing MHP scope; current estimated cost to complete ~$504M (subject to refinement); DOE loan process (up to $375M) advancing toward definitive documentation .
  • Stock reaction catalysts: DOE loan closure, clarity on Hub cost/timeline, and ongoing European EV OEM wins; risks include metal price headwinds and financing execution .

What Went Well and What Went Wrong

  • What Went Well

    • Adjusted EBITDA loss improved by $10.5M YoY to $(27.4)M, driven by higher revenue and lower cost of sales; CFO: “Highlights include improved revenue, cost of sales, adjusted EBITDA and cash position for the first quarter” .
    • Liquidity actions: closed $75M Glencore financing and received €5.3M (~$5.8M) Germany Spoke grant tranche; Ajay: “We closed on the strategic investment of $75 million by Glencore… enhancing our liquidity” .
    • Commercial momentum: new/expanded agreements with major EV OEMs in Europe and North America; Ajay: “We now have agreements in place with 4 of the largest EV OEMs in Europe” .

  • What Went Wrong

    • Significant non-operating charges: $58.9M debt extinguishment loss and $23.8M unrealized fair value loss drove other expense to $(92.5)M and net loss to $(136.7)M .
    • SG&A elevated to $31.7M (+$9.0M YoY), reflecting non-recurring professional/legal costs from the Hub pause and $5.1M severance linked to workforce reductions .
    • Pricing/mix headwinds: product and recycling revenue excluding FMV fell to $4.6M (from $7.7M) on lower nickel/cobalt prices and constituent mix, partially offset by more service revenue and black mass sold .

Financial Results

MetricQ1 2023Q1 2024
Total Revenue ($USD Millions)$3.6 $4.2
Product Revenue ($USD Millions)$3.1 $1.9
Recycling Service Revenue ($USD Millions)$0.5 $2.3
Cost of Sales ($USD Millions)$19.1 $16.8
SG&A ($USD Millions)$22.7 $31.7
Other Income (Expense) ($USD Millions)$2.7 $(92.5)
Net Loss ($USD Millions)$(36.5) $(136.7)
Adjusted EBITDA ($USD Millions)$(37.9) $(27.4)
Loss per Share (Basic & Diluted, $USD)$(0.21) $(0.76)

Revenue Breakdown

Revenue Type ($USD Millions)Q1 2023Q1 2024
Product Revenue$3.1 $1.9
Recycling Service Revenue$0.5 $2.3
Total Revenue$3.6 $4.2

Balance Sheet Snapshot

MetricDec 31, 2023Mar 31, 2024
Cash & Cash Equivalents ($USD Millions)$70.6 $109.1
Convertible Debt ($USD Millions)$288.1 $447.7
Total Equity ($USD Millions)$376.4 $243.0

KPIs

KPIQ1 2023Q1 2024
Black Mass Sold (tons)881 946
EV Battery Packs as % of Input Feedn/a~41%

Notes to “Why” behind results:

  • Revenue mix: lower nickel/cobalt prices and constituent mix drove lower product/service revenue excluding FMV; total revenue rose on smaller unfavorable FMV adjustment ($0.4M vs $4.1M prior year) .
  • Cost of sales fell on lower production volumes, partially offset by repairs/maintenance; service revenue cost rose with new contracts .
  • SG&A increased due to Hub-pause professional/legal fees ($7.9M) and severance ($5.1M), partly offset by lower recurring personnel/admin .
  • Non-GAAP adjustments: adjusted EBITDA excludes debt extinguishment loss ($58.9M), fair value loss ($23.8M), and restructuring/professional fees ($11.5M) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
DOE Loan (gross proceeds)Project FinancingUp to $375M conditional commitmentAdvancing toward definitive financing documentationMaintained
Rochester Hub – Cost to Complete (MHP scope)Project Restartn/a~$504M (subject to refinement)New clarity
Organizational Savings2024 onwardn/a~$10M annual payroll/benefit savingsNew
Workforce Reduction ChargesNext 12 monthsn/a~$8.3M non-recurring chargesNew
CapEx Run-rate2024n/a$6.2M in Q1; no significant incremental expected near termMaintained low

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q1 2024)Trend
Rochester Hub scope/costInternal review indicated MHP scope; revised total project cost estimate ~$960M including costs to date; costs to date ~$567M (12/31/2023) Estimated cost to complete ~$504M for MHP scope; timeline/process dovetails with DOE loan closing Greater clarity; still subject to refinement
Financing & LiquidityAnnounced $75M Glencore senior secured convert; DOE loan conditional commitment up to $375M; pro forma cash around ~$110M (as of 3/15) Glencore $75M closed (3/25); cash $109.1M at quarter-end; DOE workstreams advancing Strengthened
Spoke operations & feedstockSlowed operations; prioritizing Gen-3; >80% US Spoke availability in Q4; EV packs ~45% of Gen-3 U.S. Q4 intake EV packs ~41% of Q1 input feed; 946 tons black mass sold; optimizing Spokes to reduce costs Stable-to-improving mix
Regulatory (PFAS/ESG)Zero liquid discharge and ESG framing; sustainability report forthcoming PFAS emissions advantage of non-thermal process reiterated; no air PFAS emissions; competitive differentiation Heightened focus
European/NA commercial winsStrategic EV OEM agreements; diversified intake/offtake New/expanded EV OEM agreements in Europe and NA; four top European EV OEMs now under contract Expanding

Management Commentary

  • Ajay Kochhar (CEO): “We… continue to work closely with the U.S. Department of Energy… toward definitive financing documentation required for a loan for gross proceeds of up to $375 million” .
  • Ajay Kochhar (CEO): “We now have agreements in place with 4 of the largest EV OEMs in Europe” .
  • Craig Cunningham (Interim CFO): “Highlights include improved revenue, cost of sales, adjusted EBITDA and cash position for the first quarter of 2024 versus 2023” .
  • Ajay Kochhar (CEO): “Our current estimated cost to complete the Rochester Hub project is approximately $504 million for the MHP scope” .

Q&A Highlights

  • Hub restart timing/costing: Management emphasized cost estimate refinement with local contractors; restart timing tied to DOE loan closing .
  • CapEx and asset preservation: Q1 CapEx reflects maintenance to preserve Hub assets; no significant incremental CapEx expected near term .
  • Inventory strategy: Focus remains on selling produced black mass (Germany, Arizona, Alabama prioritized) to manage liquidity .
  • PFAS regulations: Non-thermal process avoids PFAS air emissions; viewed as competitive advantage vs pyro approaches .
  • Spoke capacity/utilization: Network-wide throughput slowed to align with demand and working capital; optimization under review .
  • Glencore note restructuring: New $75M senior secured convert; 2022 $200M convert amended into tranches with repricing/maturity extensions upon milestones .

Estimates Context

  • S&P Global/Capital IQ consensus estimates for EPS and Revenue were unavailable for LICY at the time of analysis; therefore, vs-estimates comparisons are not provided. If you need consensus comparisons, we will re-run once SPGI mapping becomes available.

Key Takeaways for Investors

  • Liquidity runway improved via $75M Glencore financing and $109.1M quarter-end cash; however, convertible debt increased and equity declined, underscoring financing execution risk until DOE loan closes .
  • Operating performance holds up amid metal price headwinds: service revenue growth and lower cost of sales aided adjusted EBITDA improvement YoY, but non-operating charges dominated GAAP results .
  • Hub path-to-restart gaining definition (MHP scope, ~$504M cost to complete), with DOE process as the pivotal catalyst; expect shares to react to milestones (definitive DOE documentation, contractor rebids, cost/timeline updates) .
  • Strategic positioning with EV OEMs strengthened (contracts with four leading European OEMs), supporting feedstock availability and Spoke utilization as OEM scrap/end-of-life volumes rise .
  • Cost discipline tangible: centralized model and workforce reduction target ~$10M annual savings; monitor SG&A normalization as one-time fees subside .
  • Regulatory/ESG differentiation: non-thermal approach provides PFAS emissions advantage, potentially influencing OEM recycler selection amid tightening standards .
  • Near-term trading: headline risk around non-cash charges and financing structure remains; medium-term thesis hinges on DOE loan closure, Hub restart, and monetization of MHP/lithium carbonate markets .