8-K: Li-Cycle Reports Strong Revenue Growth and Secures $475 Million DOE Loan

Li-Cycle announced strong third-quarter revenue growth of 79% and secured a $475 million loan from the U.S. Department of Energy to support its Rochester Hub project.

Summary

• Li-Cycle reported a 79% year-over-year increase in revenue, reaching $8.4 million in the third quarter of 2024.
• The company secured a $475 million loan facility from the U.S. Department of Energy to support the development of the Rochester Hub.
• The Rochester Hub is expected to produce approximately 8,250 tonnes of lithium carbonate and 72,000 tonnes of mixed hydroxide precipitate (MHP) annually.
• Li-Cycle has a 100% off-take agreement with Glencore for the MHP production from the Rochester Hub.
• Selling, general, and administrative expenses decreased by 50% year-over-year to $12.9 million due to cash preservation initiatives.
• The company is prioritizing a full financing package to restart construction at the Rochester Hub and meet the requirements for the first advance of the DOE loan.
• Li-Cycle is working to establish a self-sufficient Spoke business through optimization initiatives and a focus on Generation 3 Spokes.
• The total capital cost of the Rochester Hub project through to mechanical completion is estimated to be approximately $960 million, with $487 million remaining to complete.
• The company raised $1.1 million through an at-the-market (ATM) equity offering program in the third quarter.
• Li-Cycle had cash and cash equivalents of $32.2 million as of September 30, 2024.

Sentiment

Score: 7

Explanation: The document shows positive progress with strong revenue growth and a significant loan secured, but there are still risks and uncertainties related to financing and project completion. The sentiment is cautiously optimistic.

Positives

• The company achieved strong revenue growth of 79% year-over-year.
• Li-Cycle secured a significant $475 million loan facility from the DOE.
• The company has a 100% off-take agreement with Glencore for MHP production.
• SG&A expenses were significantly reduced by 50% year-over-year.
• Net profit was $56.5 million, a significant improvement from a loss of $30.7 million in the same period last year.
• Adjusted EBITDA loss improved to $21.7 million, compared to a loss of $41.4 million in 2023.
• Li-Cycle is prioritizing a full financing package to restart construction at the Rochester Hub.
• The company is optimizing its Spoke facilities to improve cash flows.
• Li-Cycle is gaining commercial traction with EV OEMs, with 40% of feedstock from EV battery packs.

Negatives

• The company had a cash balance of $32.2 million as of September 30, 2024, down from $57.0 million at June 30, 2024.
• The company needs to secure additional financing to complete the Rochester Hub project.
• The remaining estimated cost to complete the Rochester Hub project is approximately $487 million.
• The first advance under the DOE Loan Facility is subject to certain conditions, including completing the company's base equity contribution.
• The company has curtailed operations at its Generation 2 New York Spoke and is continuing closure activities at its Generation 1 Ontario Spoke.

Risks

• Li-Cycle needs to secure additional financing to meet the conditions for the first advance of the DOE loan and to complete the Rochester Hub project.
• The company's ability to continue as a going concern is dependent on securing additional financing.
• There is a risk that the company may not be able to develop the Rochester Hub as anticipated or at all.
• The company relies on a limited number of commercial partners to generate revenue.
• There are risks of litigation or regulatory proceedings that could materially and adversely impact Li-Cycle's financial results.
• The company has identified material weaknesses in its internal control over financial reporting.

Future Outlook

Li-Cycle expects to continue utilizing its ATM equity offering program in the fourth quarter and is actively exploring additional financing and strategic alternatives for a complete funding package to restart construction at the Rochester Hub. The company is also focused on optimizing its Spoke facilities to establish a self-sufficient business.

Management Comments

• We are pleased to report that Li-Cycle has achieved significant milestones to support the restart of construction at the Rochester Hub.
• We believe the completion of the DOE loan agreement and the continued support from partners like Glencore are strong endorsements of our technology, business model, and the key role that Li-Cycle will play to support the shift to electrification.
• We also thank the DOE for their continued support and are grateful for the bipartisan support for lithium-ion battery recycling and how it can underpin the development of a strong domestic battery supply chain.

Industry Context

This announcement comes as the demand for lithium-ion battery recycling is increasing due to the growth of the electric vehicle market. Li-Cycle's focus on securing funding and optimizing its operations aligns with the industry's need for sustainable and efficient battery material recovery solutions. The DOE loan underscores the importance of domestic battery supply chains.

Comparison to Industry Standards

• Li-Cycle's 79% revenue growth is a strong performance compared to some other companies in the recycling sector, although direct comparisons are difficult due to the varying stages of development and business models.
• The $475 million DOE loan is a significant achievement, demonstrating confidence in Li-Cycle's technology and business plan, and is larger than many other grants and loans in the sector.
• The projected production capacity of 8,250 tonnes of lithium carbonate and 72,000 tonnes of MHP at the Rochester Hub is substantial and positions Li-Cycle as a major player in the battery recycling market, comparable to other large-scale recycling projects.
• The 50% reduction in SG&A expenses is a positive sign of cost control, which is crucial for companies in the capital-intensive recycling industry, and is better than many other companies in the sector.

Stakeholder Impact

• Shareholders will be impacted by the potential for further equity dilution through the ATM program.
• Employees may be affected by the ongoing optimization initiatives and potential restructuring.
• Customers will benefit from the increased production capacity and the company's focus on EV battery recycling.
• Suppliers will be impacted by the company's focus on cost reduction and optimization.
• Creditors will be impacted by the company's ongoing financing activities and the terms of the DOE loan.

Next Steps

• Li-Cycle will continue to explore additional financing options to secure a full funding package for the Rochester Hub.
• The company will focus on optimizing its Spoke facilities to improve cash flows.
• Li-Cycle will continue to utilize its ATM equity offering program in the fourth quarter.
• The company will work to satisfy the conditions for the first advance under the DOE Loan Facility.

Key Dates

Keywords

lithium-ion battery recycling, battery materials, Rochester Hub, DOE loan, MHP, lithium carbonate, black mass, Glencore, EV battery recycling, Spoke optimization