Li-Cycle(LICY)2024-08-08 10:46Facility 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 $8.4 million, up from $3.6 million in Q2 2023[24] - Net loss for Q2 2024 improved to $8.2 million, compared to $31.9 million in Q2 2023[24] - Net loss for the six months ended June 30, 2024, was $144.9 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 $5.2 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 $3.2 million, compared to $0.5 million for the same period in 2023[44] - Total revenue for the six months ended June 30, 2024, was $12.6 million, compared to $7.2 million for the same period in 2023[44] - The company reported a net loss of $8.2 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 $0.36 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 $8.4 million, with $7.2 million from the United States, $1.1 million from Germany, and $0.1 million from Canada[101] Financial Position - Cash and cash equivalents decreased to $57.0 million as of June 30, 2024, from $70.6 million at the end of 2023[26] - Total assets slightly increased to $899.9 million as of June 30, 2024, from $886.0 million at the end of 2023[26] - Convertible debt rose to $426.4 million as of June 30, 2024, up from $288.1 million at the end of 2023[26] - Total liabilities increased to $664.2 million as of June 30, 2024, from $509.6 million at the end of 2023[26] - Accumulated deficit grew to $416.5 million as of June 30, 2024, from $271.6 million at the end of 2023[26] - Property, plant, and equipment increased to $697.8 million as of June 30, 2024, from $668.8 million at the end of 2023[26] - Operating lease right-of-use assets rose to $89.9 million as of June 30, 2024, from $56.4 million at the end of 2023[26] - Total equity decreased to $235.7 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 $235.7 million[27] - Accumulated deficit as of June 30, 2024, was $416.5 million[27] - Restricted cash as of June 30, 2024, was $9.6 million[34] - Total inventories, net, as of June 30, 2024, were $9.1 million, compared to $9.6 million as of December 31, 2023[52] - Property, plant and equipment, net increased to $697.8 million as of June 30, 2024, up from $668.8 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 $547.2 million as of December 31, 2023[53] - Accounts payable and accrued liabilities decreased to $136.0 million as of June 30, 2024, down from $152.1 million as of December 31, 2023[65] - Non-current assets as of June 30, 2024, totaled $795.6 million, with $682.7 million in the United States, $57.8 million in Canada, $29.6 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 $72.0 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 $75.0 million[28] - The company has financed operations through a $315.5 million private placement of common shares and a $75.0 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 $6.0 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 $9.2 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 $75.0 million for the Glencore Senior Secured Convertible Note[77] - The company has $375.0 million in convertible debt principal and $240.9 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 $288.1 million at the end of 2023[26] - KSP Convertible Notes principal at the end of June 30, 2024 is $126.5 million, up from $119.3 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 $100 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 $27.7 million, with $72.3 million allocated to the principal portion[72] - The conversion price for KSP Convertible Notes is $107.44 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 $318.5 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 $58.9 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 $145.5 million from $0.4 million at the beginning of the period[73] - The debt component at the end of the period decreased to $173.0 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] - The fair value of the embedded derivative liability for the Glencore Convertible Notes was $46.2 million upon issuance, with $153.8 million allocated to the host debt instrument, net of $1.3 million in transaction costs[79] - The Company recognized a fair value gain of $34.7 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 $79.60 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 $991.5 million as of June 30, 2024, with $143.6 million due within less than 1 year, $197.7 million due in 1-3 years, $487.9 million due in 3-5 years, and $162.4 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 $39.0 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 $6.0 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 $2.7 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 $225.2 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 $8.3 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 $652.5 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] - 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]