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Li-Cycle(LICY) - 2024 Q3 - Quarterly Report
LICYLi-Cycle(LICY)2024-08-08 10:46
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Facility Operations - Li-Cycle's Germany Spoke commenced operations on August 1, 2023[13] - The company's Arizona Spoke began operations on May 17, 2022[10] - Li-Cycle's Alabama Spoke started operations on October 13, 2022[9] - The company's New York Spoke has been operational since late 2020[18] - Li-Cycle's Ontario Spoke was paused on November 1, 2023, and has since been closed[18] - The company's planned Spoke in Moss, Norway, is currently paused[18] - The company paused construction on its Rochester Hub project pending a comprehensive review of its future strategy[36] - The company anticipates the closure of its Ontario Spoke and warehouse facility in Kingston in the coming months[38] Financial Performance - Total revenue for Q2 2024 increased to 8.4million,upfrom8.4 million, up from 3.6 million in Q2 2023[24] - Net loss for Q2 2024 improved to 8.2million,comparedto8.2 million, compared to 31.9 million in Q2 2023[24] - Net loss for the six months ended June 30, 2024, was 144.9million[28]−LossfromoperationsforthesixmonthsendedJune30,2024,was144.9 million[28] - Loss from operations for the six months ended June 30, 2024, was 71.1 million[33] - Product revenue for the three months ended June 30, 2024, was 5.2million,comparedto5.2 million, compared to 3.1 million for the same period in 2023[44] - Recycling service revenue for the three months ended June 30, 2024, was 3.2million,comparedto3.2 million, compared to 0.5 million for the same period in 2023[44] - Total revenue for the six months ended June 30, 2024, was 12.6million,comparedto12.6 million, compared to 7.2 million for the same period in 2023[44] - The company reported a net loss of 8.2millionforthethreemonthsendedJune30,2024,comparedtoanetlossof8.2 million for the three months ended June 30, 2024, compared to a net loss of 32.0 million for the same period in 2023[96] - Basic and diluted loss per share was 0.36forthethreemonthsendedJune30,2024,comparedto0.36 for the three months ended June 30, 2024, compared to 1.45 for the same period in 2023[96] - Revenue for the three months ended June 30, 2024, was 8.4million,with8.4 million, with 7.2 million from the United States, 1.1millionfromGermany,and1.1 million from Germany, and 0.1 million from Canada[101] Financial Position - Cash and cash equivalents decreased to 57.0millionasofJune30,2024,from57.0 million as of June 30, 2024, from 70.6 million at the end of 2023[26] - Total assets slightly increased to 899.9millionasofJune30,2024,from899.9 million as of June 30, 2024, from 886.0 million at the end of 2023[26] - Convertible debt rose to 426.4millionasofJune30,2024,upfrom426.4 million as of June 30, 2024, up from 288.1 million at the end of 2023[26] - Total liabilities increased to 664.2millionasofJune30,2024,from664.2 million as of June 30, 2024, from 509.6 million at the end of 2023[26] - Accumulated deficit grew to 416.5millionasofJune30,2024,from416.5 million as of June 30, 2024, from 271.6 million at the end of 2023[26] - Property, plant, and equipment increased to 697.8millionasofJune30,2024,from697.8 million as of June 30, 2024, from 668.8 million at the end of 2023[26] - Operating lease right-of-use assets rose to 89.9millionasofJune30,2024,from89.9 million as of June 30, 2024, from 56.4 million at the end of 2023[26] - Total equity decreased to 235.7millionasofJune30,2024,from235.7 million as of June 30, 2024, from 376.4 million at the end of 2023[26] - Total equity attributable to shareholders as of June 30, 2024, was 235.7million[27]−AccumulateddeficitasofJune30,2024,was235.7 million[27] - Accumulated deficit as of June 30, 2024, was 416.5 million[27] - Restricted cash as of June 30, 2024, was 9.6million[34]−Totalinventories,net,asofJune30,2024,were9.6 million[34] - Total inventories, net, as of June 30, 2024, were 9.1 million, compared to 9.6millionasofDecember31,2023[52]−Property,plantandequipment,netincreasedto9.6 million as of December 31, 2023[52] - Property, plant and equipment, net increased to 697.8 million as of June 30, 2024, up from 668.8millionasofDecember31,2023[53]−ConstructioninprogressfortheRochesterHubreached668.8 million as of December 31, 2023[53] - Construction in progress for the Rochester Hub reached 579.5 million as of June 30, 2024, up from 547.2millionasofDecember31,2023[53]−Accountspayableandaccruedliabilitiesdecreasedto547.2 million as of December 31, 2023[53] - Accounts payable and accrued liabilities decreased to 136.0 million as of June 30, 2024, down from 152.1millionasofDecember31,2023[65]−Non−currentassetsasofJune30,2024,totaled152.1 million as of December 31, 2023[65] - Non-current assets as of June 30, 2024, totaled 795.6 million, with 682.7millionintheUnitedStates,682.7 million in the United States, 57.8 million in Canada, 29.6millioninGermany,and29.6 million in Germany, and 25.5 million in other regions[101] Cash Flow and Financing - Net cash used in operating activities for the six months ended June 30, 2024, was 72.0million[28]−NetcashusedininvestingactivitiesforthesixmonthsendedJune30,2024,was72.0 million[28] - Net cash used in investing activities for the six months ended June 30, 2024, was 15.4 million[28] - Proceeds from convertible debt for the six months ended June 30, 2024, were 75.0million[28]−Thecompanyhasfinancedoperationsthrougha75.0 million[28] - The company has financed operations through a 315.5 million private placement of common shares and a 75.0millionseniorsecuredconvertiblenoteissuedtoGlencoreplc[35]−Li−Cycleissuedaseniorsecuredconvertiblenotewithaprincipalamountof75.0 million senior secured convertible note issued to Glencore plc[35] - Li-Cycle issued a senior secured convertible note with a principal amount of 75.0 million to Glencore on March 25, 2024[13] - The company recorded an expense of 6.0millionforworkforcereductioninthesixmonthsendedJune30,2024[68]−Thecompanyissued6.0 million for workforce reduction in the six months ended June 30, 2024[68] - The company issued 75.0 million in convertible notes during the period[73] - The company accrued 9.2millionininterestexpensefromMarch26,2024,toJune30,2024[73]−TheCompanyissuedGlencoreConvertibleNotestotaling9.2 million in interest expense from March 26, 2024, to June 30, 2024[73] - The Company issued Glencore Convertible Notes totaling 306.2 million as of June 30, 2024, including 116.6 million for the First A&R Glencore Note, 114.6 million for the Second A&R Glencore Note, and 75.0millionfortheGlencoreSeniorSecuredConvertibleNote[77]−Thecompanyhas75.0 million for the Glencore Senior Secured Convertible Note[77] - The company has 375.0 million in convertible debt principal and 240.9millioninconvertibledebtinterestobligationsasofJune30,2024[95]DebtandConvertibleNotes−Convertibledebtroseto240.9 million in convertible debt interest obligations as of June 30, 2024[95] Debt and Convertible Notes - Convertible debt rose to 426.4 million as of June 30, 2024, up from 288.1millionattheendof2023[26]−KSPConvertibleNotesprincipalattheendofJune30,2024is288.1 million at the end of 2023[26] - KSP Convertible Notes principal at the end of June 30, 2024 is 126.5 million, up from 119.3millionatthebeginningoftheperiod[69]−TheeffectiveinterestrateoftheKSPConvertibleNoteafteramendmentonMarch25,2024is18.7119.3 million at the beginning of the period[69] - The effective interest rate of the KSP Convertible Note after amendment on March 25, 2024 is 18.7%[69] - Total KSP Convertible Notes issued as of June 30, 2024 amount to 126.5 million, including 100millioninitialnoteand100 million initial note and 26.5 million in PIK notes[70] - The fair value of the compound embedded derivative upon issuance of the KSP Convertible Notes was 27.7million,with27.7 million, with 72.3 million allocated to the principal portion[72] - The conversion price for KSP Convertible Notes is 107.44pershare,withaforcedconversiontriggerat107.44 per share, with a forced conversion trigger at 139.68 per share for 20 consecutive days[70] - The KSP Convertible Notes can be redeemed at any time for 130% of the principal plus unpaid interest until maturity[71] - The embedded derivatives were valued using the Binomial Option Pricing Model with an expected stock price volatility of 71% as of June 30, 2024[72] - Glencore convertible debt increased to 318.5millionattheendofJune2024,upfrom318.5 million at the end of June 2024, up from 189.0 million at the end of December 2023[73] - The company recorded a debt extinguishment loss of 58.9millionduetotheamendmentoftheGlencoreUnsecuredConvertibleNote[73]−TheGlencoreSeniorSecuredConvertibleNotewasissuedfor58.9 million due to the amendment of the Glencore Unsecured Convertible Note[73] - The Glencore Senior Secured Convertible Note was issued for 75 million with a maturity date of March 25, 2029[75] - The effective interest rate for the A&R Glencore Convertible Notes and Glencore Senior Secured Convertible Note is 20.6%[74] - The conversion feature at the end of the period increased to 145.5millionfrom145.5 million from 0.4 million at the beginning of the period[73] - The debt component at the end of the period decreased to 173.0millionfrom173.0 million from 188.6 million at the beginning of the period[73] - The fair value gain on conversion features from March 26, 2024, to June 30, 2024, was (12.7)million[73]−ThefairvalueoftheembeddedderivativeliabilityfortheGlencoreConvertibleNoteswas(12.7) million[73] - The fair value of the embedded derivative liability for the Glencore Convertible Notes was 46.2 million upon issuance, with 153.8millionallocatedtothehostdebtinstrument,netof153.8 million allocated to the host debt instrument, net of 1.3 million in transaction costs[79] - The Company recognized a fair value gain of 34.7millionand34.7 million and 10.9 million on embedded derivatives for the three and six months ended June 30, 2024, respectively[79] - The conversion price for the A&R Glencore Convertible Notes is adjusted to the lesser of a 30-Day VWAP plus a 25% premium or 79.60pershare[77]−TheGlencoreSeniorSecuredConvertibleNotehasaconversionpriceof79.60 per share[77] - The Glencore Senior Secured Convertible Note has a conversion price of 4.24 per share[77] - The Company is required to redeem a portion of the Glencore Senior Secured Convertible Note starting December 31, 2026, based on excess cash flow[77] - The embedded derivatives were valued using a risk-free interest rate ranging from 4.3% to 5.3% and expected stock price volatility of 71% as of June 30, 2024[79] Legal and Contractual Obligations - The company has contractual obligations totaling 991.5millionasofJune30,2024,with991.5 million as of June 30, 2024, with 143.6 million due within less than 1 year, 197.7millionduein1−3years,197.7 million due in 1-3 years, 487.9 million due in 3-5 years, and 162.4milliondueafter5years[95]−ThecompanyisinvolvedinarbitrationproceedingswithMasTecseekingrecoveryof162.4 million due after 5 years[95] - The company is involved in arbitration proceedings with MasTec seeking recovery of 48.7 million related to the Rochester Hub project construction contract[94] - The company filed a lawsuit seeking damages of 39.0millionto39.0 million to 53.0 million against Pike Conductor DEV 1, LLC related to a leasing dispute[93] - The Company faced three shareholder lawsuits related to the pause in construction of the Rochester Hub project, with one federal securities class action dismissed on June 10, 2024[87][88] Workforce and Cost Management - The company paused production at its Ontario Spoke and reduced staffing as part of a cash preservation plan initiated on November 1, 2023[11] - The company reduced its workforce by approximately 17% as part of its Cash Preservation Plan, primarily at the corporate level[38] - The company recorded an expense of 6.0millionforworkforcereductioninthesixmonthsendedJune30,2024[68]LeasesandCommitments−TotalleasecostforthesixmonthsendedJune30,2024was6.0 million for workforce reduction in the six months ended June 30, 2024[68] Leases and Commitments - Total lease cost for the six months ended June 30, 2024 was 7.3 million, compared to 2.7millionforthesameperiodin2023[55]−RecognitionofROUassetsandleaseliabilitiesfornewoperatingleaseswas2.7 million for the same period in 2023[55] - Recognition of ROU assets and lease liabilities for new operating leases was 36.8 million for the six months ended June 30, 2024[56] - Total future minimum lease payments for operating leases as of June 30, 2024 were 225.2million[57]−Theweightedaverageremainingleasetermforpremisesandequipmentoperatingleasesincreasedto20.50yearsasofJune30,2024[58]−Thecompanyhas225.2 million[57] - The weighted average remaining lease term for premises and equipment operating leases increased to 20.50 years as of June 30, 2024[58] - The company has 7.4 million in committed purchase orders or agreements for equipment and services as of June 30, 2024, compared to 8.3millionasofDecember31,2023[95]ShareholderandEquityInformation−TheCompanyconsolidateditscommonsharesataratioof1post−consolidationshareforevery8pre−consolidationshares,effectiveJune3,2024[83]−Commonsharesandadditionalpaid−incapitaloutstandingincreasedfrom8.3 million as of December 31, 2023[95] Shareholder and Equity Information - The Company consolidated its common shares at a ratio of 1 post-consolidation share for every 8 pre-consolidation shares, effective June 3, 2024[83] - Common shares and additional paid-in capital outstanding increased from 651.6 million as of March 31, 2024, to 652.5millionasofJune30,2024[81]RiskandMarketExposure−ThecompanyisexposedtocurrencyriskasitscashismainlydenominatedinU.S.dollars,whileoperationsrequireCanadiandollarsandothercurrencies[180]−Thecompanyhasvariableinterestratedebtwithaninterestratefloorandcap,butdoesnotexpectchangesininterestratestohaveamaterialimpactonitsbusiness[181]−ThecompanydepositsthemajorityofitscashwithlargeCanadianandU.S.financialinstitutionsaboveaminimumcreditrating,minimizingcreditriskassociatedwithcash[182]−Thecompany′srevenueandaccountsreceivableprimarilycomefromlargemultinationalOEMsanddominantmarketparticipants[182]−Thecompanyisexposedtocommoditypricemovements,particularlycobaltandnickel,withrevenuessensitivetomarketpricesofthesemetals[183]−AsofJune30,2024,themarketpricepertonneforcobaltwas652.5 million as of June 30, 2024[81] Risk and Market Exposure - The company is exposed to currency risk as its cash is mainly denominated in U.S. dollars, while operations require Canadian dollars and other currencies[180] - The company has variable interest rate debt with an interest rate floor and cap, but does not expect changes in interest rates to have a material impact on its business[181] - The company deposits the majority of its cash with large Canadian and U.S. financial institutions above a minimum credit rating, minimizing credit risk associated with cash[182] - The company's revenue and accounts receivable primarily come from large multinational OEMs and dominant market participants[182] - The company is exposed to commodity price movements, particularly cobalt and nickel, with revenues sensitive to market prices of these metals[183] - As of June 30, 2024, the market price per tonne for cobalt was 24,912 and for nickel was 16,955[184]−AsofDecember31,2023,themarketpricepertonneforcobaltwas16,955[184] - As of December 31, 2023, the market price per tonne for cobalt was 28,660 and for nickel was $16,250[184] - The company's capital structure consists of net cash and equity, with no externally imposed capital requirements as of June 30, 2024[185]