Li-Cycle Holdings Corp. (LICY) Q4 2023 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights increased production and sales, but financial health is strained with rising costs and significant adjusted EBITDA losses. The Q&A reveals uncertainty in strategic execution and timelines, along with unclear management responses. While revenue increased, the financial guidance is weak, and concerns about liquidity persist. These factors suggest a negative sentiment, likely leading to a stock price decline.
Key Financial Performance
Sales of Black Mass 4,324 tonnes, a 3% increase from 4,192 tonnes in 2022.
Product Sales and Recycling Services Revenues $23.6 million, a 34% increase compared to $17.6 million in 2022, driven by a higher value product sales mix and higher recycling services revenues from new service contracts.
Total Revenue $18.3 million, compared to $16.5 million in the prior year, reflecting an unfavorable non-cash fair value pricing adjustment of $5.3 million versus $1.1 million in 2022 due to lower market prices for cobalt and nickel.
Cost of Sales $81.8 million, compared to $55.2 million in 2022, due to increased raw material acquisition costs and other production costs.
Variable and Fixed Costs Related to Black Mass and Shredded Metal Products $29.1 million, compared to $23.2 million in 2022, reflecting increased raw material acquisition costs.
Fixed and Other Costs for the Spoke Network $34.9 million, compared to $16.9 million in 2022, primarily due to higher personnel costs, leases, and depreciation from existing and new Spoke assets.
Cost Related to the Rochester Hub $7.4 million, compared to $2.6 million in 2022.
SG&A Expenses $93.4 million, compared to $81.3 million in 2022, primarily driven by higher personnel costs before implementing workforce reduction.
Research and Development Costs $5.7 million, compared to $2.7 million in 2022, primarily related to personnel costs and professional fees for the Portovesme Hub.
Other Income $24.7 million, a decrease of $27.2 million compared to the prior year, primarily due to a decrease in fair value gains on convertible debt.
Adjusted EBITDA Loss $166.4 million, compared to a loss of $118.5 million in 2022, driven by higher cost of sales and increased SG&A.
Cash and Cash Equivalents Approximately $71 million as of December 31, 2023, down from $35 million as of March 15, 2024.
Pro Forma Cash Estimate Approximately $110 million, including expected gross proceeds from Glencore financing of $75 million.
Total Cost Incurred on Rochester Hub Project Approximately $567 million, including total cash spend of $452 million and costs incurred but not yet paid of approximately $115 million.
Revised Estimated Project Cost for Rochester Hub Approximately $960 million for the MHP scope, up from the prior range of approximately $850 million to $1 billion.
Estimated Cost to Complete Rochester Hub Project Approximately $508 million, including costs incurred but not yet paid of approximately $115 million.
You have reached the limit. Sign up to access full content
Get started
Operating Highlights
Black Mass Production: In 2023, Li-Cycle produced 6,825 tonnes of black mass, exceeding the revised guidance of 5,500 to 6,500 tonnes.
Partnership with Glencore: Li-Cycle expanded its partnership with Glencore, increasing their strategic investment by $75 million.
DOE Loan Process: Li-Cycle is engaged with the DOE for a conditional commitment for a loan of up to $375 million.
Cash Preservation Plan: Implemented a cash preservation plan to reduce non-core spending and slow cash outflows.
Rochester Hub Project: Conducted a comprehensive review of the Rochester Hub project, confirming the technical viability of producing lithium carbonate and MHP.
Project Development Strategy: Review confirmed a possible change in the project development strategy for the Rochester Hub, focusing on producing lithium carbonate and MHP.
You have reached the limit. Sign up to access full content
Get started
Risk or Challenges
Financing Risks: Li-Cycle is engaged in a strategic review of its financing options, including a conditional commitment for a loan of up to $375 million from the DOE. The need for significant additional funding before restarting construction at the Rochester Hub poses a risk to liquidity and operational continuity.
Project Development Risks: The Rochester Hub project has incurred costs of approximately $567 million, with an estimated total project cost of around $960 million. The increase in estimated costs and the pause in construction raise concerns about project viability and future funding requirements.
Operational Challenges: Li-Cycle has slowed operations at its spokes network and paused construction at the Rochester Hub, which may impact production capacity and revenue generation. The company is also reviewing further pauses or slowdowns in operations.
Market Risks: The company faces competitive pressures and fluctuating market prices for cobalt and nickel, which have negatively impacted revenues and pricing adjustments. The reliance on market prices for metals in contracts adds to revenue uncertainty.
Supply Chain Risks: The availability of feedstock for black mass production is tied to local market conditions and strategic customers, which may affect production levels and operational efficiency.
Regulatory Risks: Li-Cycle's operations and financing strategies are subject to regulatory scrutiny, particularly in relation to the DOE loan process and compliance with environmental regulations.
You have reached the limit. Sign up to access full content
Get started
Guidance & Outlook
Partnership with Glencore: Expanded partnership with Glencore to increase their strategic investment in Li-Cycle by $75 million.
DOE Loan Process: Engaged with the DOE Loan Programs Office regarding a conditional commitment for a loan of up to $375 million.
Cash Preservation Plan: Implemented a cash preservation plan to reduce non-core spending and slow cash outflows.
Rochester Hub Review: Conducted an internal review to assess a possible change in the project development strategy for the Rochester Hub.
Black Mass Production: Produced 6,825 tonnes of black mass in 2023, exceeding guidance of 5,500 to 6,500 tonnes.
Spoke Operations: Slowed operations at spokes and paused construction at the Rochester Hub.
Rochester Hub Cost Estimate: Revised estimated project cost for the Rochester Hub to approximately $960 million.
Future Revenue Expectations: Expect significant additional funding required before restarting construction of the Rochester Hub.
Cash Position: Estimated pro forma cash to be approximately $110 million post-Glencore financing.
Market Demand: Projected demand for recycling material to increase by up to six times from 2023 levels by 2030.
Production Strategy: Focus on Gen-3 spokes to support key customers and drive down costs.
You have reached the limit. Sign up to access full content
Get started
Shareholder Return Plan
Glencore Investment: Li-Cycle expanded its partnership with Glencore, securing an additional investment of $75 million in a senior secured convertible note.
Existing Convertible Note: The terms of the existing Glencore convertible unsecured note, with an outstanding principal of approximately $225 million, were amended to include extended maturities and a reset conversion price.
Total Project Cost: The revised estimated project cost for the Rochester Hub project is approximately $960 million.
Cash Position: As of March 15, 2024, Li-Cycle had cash and cash equivalents of approximately $35 million, with expected gross proceeds from Glencore financing of $75 million.
Pro Forma Cash Estimate: Pro forma cash is estimated to be approximately $110 million after accounting for the Glencore financing.
You have reached the limit. Sign up to access full content
Get started
Key Q&A
Q:Has the nature of the conversations with DOE changed since you put the facility in strategic review?
A:We are thankful to DOE for continuing to actively engage with us and be very supportive, and that hasn't changed over the last couple of months.
Q:Would you consider the awarding of those funds as necessary to continue construction?
A:The project financing loan from DOE is a key part of our full funding solution, but it needs to be informed by our refined estimates.
Q:Have you maintained relationships with your former contractors, or would you need to change contractors to proceed?
A:We've had immense support from the contracting community, particularly in the Rochester region, and we're working with them to determine the best contracting strategy.
Q:Which areas appear most appealing to you over the next two to three years?
A:Both North America and Europe are growing similarly in terms of material available for recycling, and each market has its own features.
Q:Do you have any concerns about wastewater at the Rochester facility?
A:The project has never had any reagents or materials introduced, and we have a zero liquid discharge system to reclaim water.
Q:Does the scope change of making MHP require amendments to your permits?
A:No major changes are required from an environmental permitting perspective.
Q:Once you get a financing solution in place, how long would it take to complete the facility construction?
A:We need to complete subcontractor bidding before we can provide a timeline for construction and ramp-up.
Q:Review of Unclear Management Responses
A:Management did not provide a clear timeline for construction completion and ramp-up, stating that it depends on subcontractor bidding and further reviews.
You have reached the limit. Sign up to access full content
Get started
Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Co Founder
EV battery
Generation
Li Cycle
SGA
amount
approach
arrangement
asset
battery chemistry
cash preservation
cobalt sulfate
collaboration
color
contractor
cost sale
customer base
demand
form
funding solution
hub
increase
intake
ion battery
lithium ion
modification
note
number
payment
personnel
perspective
preservation plan
price
production nickel
recycling
spoke
status
tonne
wastewater
LICY Transcript
Li-Cycle Holdings Corp (LICY) Q3 2024 Earnings Call Transcript
Positive11-9
The earnings call reflects positive sentiment due to strategic financing through a DOE loan, strong long-term strategy with secured offtake agreements, and expected significant revenue growth. Financial metrics show improved revenue and cost management, despite some operational risks and market dynamics challenges. The 10% production tax credit further supports the positive outlook. The absence of negative sentiment in the Q&A section reinforces the positive rating. The stock is likely to react positively in the short term, with potential gains between 2% to 8%.
Li-Cycle Holdings Corp. (LICY) Q2 2024 Earnings Call Transcript
Neutral8-9
Li-Cycle Holdings Corp. (LICY) Q1 2024 Earnings Call Transcript
Neutral5-12
Li-Cycle Holdings Corp. (LICY) Q4 2023 Earnings Call Transcript
Unknown3-19
The earnings call highlights increased production and sales, but financial health is strained with rising costs and significant adjusted EBITDA losses. The Q&A reveals uncertainty in strategic execution and timelines, along with unclear management responses. While revenue increased, the financial guidance is weak, and concerns about liquidity persist. These factors suggest a negative sentiment, likely leading to a stock price decline.
LICY Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
