8-K: Li-Cycle Reports Full Year 2023 Results, Exceeds Production Guidance

Li-Cycle announced its full year 2023 financial results, exceeding production guidance and reporting a revenue increase, while also detailing a strategic investment and ongoing loan discussions.

Summary

• Li-Cycle reported its full year 2023 financial results, transitioning to U.S. GAAP from IFRS.
• The company produced 6,825 tonnes of black mass and equivalents, exceeding the top end of its guidance of 5,500 to 6,500 tonnes.
• Total revenue for 2023 was $18.3 million, an 11% increase over 2022, while product and recycling revenue, excluding non-cash adjustments, was $23.6 million, a 34% increase.
• Li-Cycle announced a $75 million strategic investment from Glencore, expected to close around March 25, 2024.
• The company is continuing to work with the U.S. Department of Energy on a conditional loan commitment of up to $375 million.
• A conference call and webcast to discuss the results is scheduled for March 19, 2024.
• The company's fiscal year end was changed from October 31 to December 31 to align with peer companies.
• Recycling service revenue increased by 338% year-over-year to $5.7 million.
• The net loss for the year was approximately $138 million, compared to $70.8 million in 2022.
• Adjusted EBITDA loss was approximately $156.4 million, compared to $118.5 million in 2022.
• As of December 31, 2023, Li-Cycle had $70.6 million in cash and cash equivalents.
• Capital expenditures for the year were $334.9 million, primarily for the Rochester Hub project and the Germany Spoke.
• The company has been granted an extension to file restated interim financial reports until April 29, 2024.

Sentiment

Score: 4

Explanation: The document presents mixed signals. While production exceeded guidance and revenue increased, the significant net loss, increased costs, and cash burn are concerning. The strategic investment and potential loan are positive, but the overall financial picture is weak.

Positives

• Li-Cycle exceeded its production guidance for black mass and equivalents.
• The company saw a significant increase in product and recycling revenue, particularly in recycling services.
• The strategic investment from Glencore provides a substantial capital injection.
• The potential loan from the U.S. Department of Energy could provide significant financial support.
• The company is transitioning to U.S. GAAP, which may improve comparability with U.S. peers.

Negatives

• The company experienced a significant net loss of $138 million for the year.
• Adjusted EBITDA loss increased to $156.4 million.
• Cost of sales increased significantly to $81.8 million.
• Selling, general, and administrative expenses rose to $93.4 million.
• The company's cash position decreased to $70.6 million.

Risks

• The company is experiencing significant losses and may require additional funding.
• The Rochester Hub project is under comprehensive review, creating uncertainty.
• The company's ability to continue as a going concern is subject to risk.
• There are risks associated with the company's ability to source, recover, and recycle lithium-ion batteries efficiently.
• The company faces risks related to its global growth strategy and the development of its facilities.
• The company is subject to risks related to the volatility of metal prices and the adoption rate of EVs.
• The company is subject to risks related to cybersecurity attacks and intellectual property claims.

Future Outlook

The company is focused on completing its comprehensive review of the Rochester Hub project and securing additional funding. They are also working on the strategic investment from Glencore and the potential loan from the U.S. Department of Energy. The company plans to process black mass at future Hub facilities.

Management Comments

• Company management will host a webcast and conference call on March 19, 2024, to provide a business update including a review of these results.

Industry Context

The announcement comes as the lithium-ion battery recycling industry is gaining importance due to the increasing demand for electric vehicles and the need for sustainable battery material sourcing. Li-Cycle is positioning itself as a key player in this space, but faces challenges in scaling operations and achieving profitability.

Comparison to Industry Standards

• Li-Cycle's revenue growth of 11% (or 34% excluding non-cash adjustments) is a positive sign, but the significant net loss and adjusted EBITDA loss are concerning when compared to more established recycling companies.
• Companies like Redwood Materials, which is privately held, are also focused on battery recycling but have not disclosed similar financial details, making direct comparisons difficult.
• Other publicly traded companies in the broader materials space, such as Albemarle and Livent, have reported profits, highlighting the challenges Li-Cycle faces in achieving profitability.
• The capital expenditures of $334.9 million are substantial, reflecting the capital-intensive nature of the battery recycling business, and are similar to other large scale projects in the sector.

Stakeholder Impact

• Shareholders will be concerned about the significant net loss and the company's cash burn.
• Employees may be affected by the ongoing strategic review and potential workforce reductions.
• Customers will be interested in the company's ability to scale production and meet demand.
• Suppliers will be monitoring the company's financial health and ability to pay for feedstock.
• Creditors will be concerned about the company's debt levels and ability to service its obligations.

Next Steps

• Li-Cycle will host a conference call and webcast on March 19, 2024, to discuss the financial results.
• The company will complete its comprehensive review of the Rochester Hub project.
• The company will work towards closing the strategic investment from Glencore.
• Li-Cycle will continue discussions with the U.S. Department of Energy regarding the potential loan.
• The company will file restated interim financial reports by April 29, 2024.

Key Dates

Keywords

lithium-ion battery recycling, black mass, battery materials, recycling services, financial results, strategic investment, U.S. GAAP, EBITDA, Glencore, Department of Energy