Q3 2024 Earnings Summary
- Strong Financial Performance with Revenue Growth and Cost Reduction: Li-Cycle reported a 79% increase in total revenue to $8.4 million in Q3 2024, consistent with record revenue from Q2 2024, demonstrating continued positive momentum this year. Additionally, SG&A expenses decreased by 50% to $12.9 million, leading to improved adjusted EBITDA and reduced net cash outflows by $27 million compared to the previous quarter.
- Significant Increase in Black Mass Production and Sales: The company increased its black mass sold to almost 2,000 tonnes in the quarter, up from 892 tonnes sold in the same period in 2023. Black mass production also increased, reflecting higher recycling service revenue and favorable metal prices.
- Favorable Market Dynamics and Government Support: Li-Cycle is well-positioned to benefit from the projected up to 3x increase in recycling materials supply by 2030, driven by widespread adoption of EVs with a CAGR of approximately 20% from 2025 to 2030 in North America. Additionally, the finalized guidance on the U.S. 45X tax credit provides direct financial incentives to the Rochester Hub, including a 10% production tax credit on lithium carbonate, supporting the development of a domestic, circular U.S. battery supply chain.
- Li-Cycle requires significant additional financing to restart construction of the Rochester Hub project, needing approximately $487 million to complete it, and faces uncertainty in securing this funding.
- The company has curtailed operations at its New York Spoke and is continuing closure activities at its Ontario Spoke, indicating possible operational challenges or inefficiencies in these areas.
- Cost of sales remain high at $20 million, exceeding the total revenue of $8.4 million, suggesting ongoing operating losses and potential financial sustainability issues.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
DOE Loan | Q3 2024 | Qualitative focus on finalizing the DOE loan with no specific dollar amount | Up to $475 million | no prior guidance |
Lithium carbonate production | Q3 2024 | No prior guidance | 8,250 tonnes annually | no prior guidance |
MHP production | Q3 2024 | No prior guidance | 72,000 tonnes annually | no prior guidance |
Black mass processing capacity | Q3 2024 | No prior guidance | 35,000 tonnes annually | no prior guidance |
Spoke Optimization | Q3 2024 | “Efforts to optimize the Spoke network, including transitioning the Ontario Spoke to closure and focusing on Generation 3” | “Building a financially accretive Spoke business focusing on their Gen 3 technology” | no change |
Rochester Hub | Q3 2024 | “Continued evaluation and refinement of cost estimates for the Rochester Hub project – estimated ~$490 million for the MHP scope” | “Restarting construction of the Rochester Hub” | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Rochester Hub | Q1: Emphasized DOE loan dependency with a conditional commitment of $375M to restart construction. Q2: DOE loan remained the top priority at $375M with ongoing financing efforts. | Q3: DOE loan agreement now closed for up to $475M with an increased principal and attractive terms, marking a key milestone for project financing. | Increased funding and stronger commitment – from conditional commitment to a finalized, higher value loan. |
Black mass production capacity | Q1: Underutilization noted with a 10,000-ton capacity but only 1,300 tons produced, reflecting operational constraints. Q2: Production improvements seen with 1,394 tons produced and focus on Gen 3 optimization initiatives. | Q3: Significant production growth reported – 1,459 tons produced and nearly 2,000 tonnes sold versus 892 tonnes in 2023, signaling a clear shift to efficient utilization. | Shift from underutilization to significant growth – operational efficiency has markedly improved. |
Commodity pricing dynamics | Q1: Concerns over lower product sales due to soft metal prices noted, partially offset by recycling service revenue. Q2: Soft nickel, cobalt, and lithium prices were highlighted but the project remained accretive. | Q3: Favorable metal pricing contributed to a 79% revenue increase, reflecting an overall improvement in the commodity pricing environment. | Transition from soft to favorable pricing – sentiments have shifted positively as pricing dynamics improved. |
Government support and regulatory incentives | Q1: Discussed DOE loan efforts alongside advantages of its PFAS compliant non-thermal process, which was highlighted as a competitive edge. Q2: Emphasis was on DOE loan progress and regulatory incentives like the Inflation Reduction Act, while PFAS advantages were not mentioned. | Q3: Focus remained on the DOE loan along with the introduction of finalized U.S. 45X tax credit guidance; PFAS/non-thermal process was no longer mentioned. | Shift towards finalized tax incentives – PFAS advantages faded while U.S. 45X guidance emerged as a key focus. |
Spoke operations efficiency | Q1: Highlighted Gen 3 Spokes with potential cost savings and a strategic shift to a centralized operating model. Q2: Continued focus on optimizing Gen 3 Spokes (e.g. Arizona and Alabama) with the closure of the Ontario Spoke. | Q3: Continued optimization of Gen 3 facilities while noting operational cutbacks and closures at the New York and Ontario Spokes, reinforcing the consolidation strategy. | Continued consolidation and efficiency drive – ongoing operational optimization with further consolidation actions. |
Strong financial performance signals | Q1: Revenue increased modestly by 17% with a reduction in cost of sales, though SG&A expenses were high. Q2: Reported record quarterly revenue growth (133%) and strong SG&A and cost of sales improvements. | Q3: Revenue grew by 79% with significant SG&A reductions (50%), yet high cost of sales risks remain a concern. | Sustained strong performance amidst cost concerns – robust revenue and cost reductions persist, but cost pressures linger. |
Debt restructuring and increased leverage | Q1: Significant debt restructuring efforts were discussed, including convertible note investments and repricing to secure financing. | Q3: This topic is not mentioned in the current period’s call. | No longer emphasized – previous focus on restructuring has receded from current discussions. |
Market dynamics driven by EV adoption and expanding recycled material supply | Q1: Emphasized robust long-term growth with EV adoption (45% CAGR) and anticipated expansion in recycling feedstock driven by manufacturing scrap and end-of-life batteries. Q2: Continued focus on EV adoption and recycling market expansion with projections of up to 6x supply increase by 2030. | Q3: Reiterated the strong market fundamentals supported by increasing EV adoption and local supply chain initiatives, bolstered further by U.S. 45X tax credits. | Consistently positive outlook – enduring strong market trends with evolving policy support. |