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Li-Cycle Reports Second Quarter 2022 Financial Results; Closed Two Significant Long-Term Commercial Partnerships with Combined Investment of $250 Million

  • Completed long-term commercial agreements with leading global participants in the battery materials supply chain, designating Li-Cycle as a preferred recycling partner;
  • $509.3 million in cash on hand as of April 30, 2022; pro-forma cash of approximately $760 million including a total investment of $250 million in Li-Cycle;
  • Sufficient liquidity for capital and operating needs for the current project pipeline;
  • Operationalized the Arizona Spoke; on track for start-up of the Alabama Spoke; reiterating black mass production target of 6,500 to 7,500 tonnes for fiscal year 2022; and
  • Progressed the Rochester Hub and continue to be on track for commissioning in 2023.

Li-Cycle Holdings Corp. (NYSE: LICY) ("Li-Cycle" or the “Company"), an industry leader in lithium-ion battery resource recovery and the leading lithium-ion battery recycler in North America, today announced financial results for its second quarter ended April 30, 2022. Revenues increased to $8.7 million from $0.3 million in the second quarter of fiscal year 2021.

“We continued to successfully implement our Spoke & Hub network strategy, with significant operational, commercial, and financial achievements this quarter. The Arizona Spoke is now on-line, doubling our current Spoke capacity and a testament to our modular construction approach. We believe this approach is replicable and scalable for our future Spokes. Additionally, we made continued contracting and execution strides at the Rochester Hub, which remains on target for commissioning in 2023," said Ajay Kochhar, Li-Cycle President and Chief Executive Officer.

"Strategically, we are positioning Li-Cycle as a leading and preferred recycler and supplier of critical battery materials, capitalizing on the significant secular growth trends. We executed long-term in-take and off-take commercial agreements with Glencore plc, a leading battery metals provider, and LG Chem, Inc. (“LG Chem”) and LG Energy Solution, Inc. (“LGES” and, together with LG Chem, “LG”), leading global electric battery manufacturers. This collaborative approach provides customers with a global and vertically integrated solution, which we believe places Li-Cycle at the center of the battery supply chain loop in North America and Europe,” added Kochhar. “Finally, these strategic commercial partnership arrangements were combined with total investment of $250 million in Li-Cycle, further enhancing our balance sheet and enabling additional financial flexibility."

Second Quarter Financial Results

Revenues for the quarter ended April 30, 2022 increased to $8.7 million, compared to $0.3 million in the same quarter last year, driven by increases in product sales volume and metal-based prices.

Operating expenses for the quarter increased to $30.0 million, compared to $5.6 million during the same period last year, reflecting the ongoing expansion of operations in North America and the early build out in Europe. This increase was primarily related to personnel costs for operational, corporate, commercial, and engineering resources as well as professional fees and administrative costs in support of becoming a public company. In addition, higher costs from raw materials and supplies are attributable to increased black mass production.

Net loss for the quarter was approximately $20.7 million, compared to a net loss of approximately $7.8 million in the prior-year period. This loss included $2.9 million of fair value gains on financial instruments.

Adjusted EBITDA1 loss for the quarter was $19.5 million, compared to $5.1 million for the prior-year period. This was largely driven by the increase in the operating expenses as discussed above, directly related to the growth and expansion of the business. In addition, non-cash stock-based compensation increased to $4.5 million as compared to $0.3 million in 2021.

New Battery Supply Commercial Partnerships

Li-Cycle recently achieved significant commercial milestones, entering into long-term agreements with two leading global strategic partners in the battery material supply chain, thereby closing the loop for key lithium-ion battery materials. Both LG and Glencore designated Li-Cycle as a preferred lithium-ion battery recycling partner. These new partnerships complement Li-Cycle’s existing commercial agreements with Traxys North America Inc. and others.

The Glencore agreements are global in a nature, with a focus primarily on North America and Europe. Glencore will supply battery feedstock for Li-Cycle’s Spokes, as well as both black mass and sulfuric acid for Li-Cycle’s Hubs. Glencore also will provide off-take and marketing of Li-Cycle’s battery-grade end products and certain by-products produced at the Company’s Spokes & Hubs.

The LG agreements are focused on North America. LGES will provide Li-Cycle’s Spokes with nickel-bearing lithium-ion battery scrap and other lithium-ion battery recycling material. Additionally, Li-Cycle will supply LG with nickel sulphate to be produced at Li-Cycle’s Rochester Hub, once operational.

Funding Update and Balance Sheet Position

Li-Cycle ended its second quarter with $509.3 million cash on hand. The Company further enhanced its balance sheet with additional investment proceeds of $250 million, received upon completion of the commercial agreements in May and June 2022 from LG and Glencore, respectively. Including the investment proceeds, the Company’s pro-forma cash balance is approximately $760 million.

As a result, the Company has sufficient liquidity for capital and operating needs to fund its current pipeline of projects in development.

Webcast and Conference Call Information

Company management will host a webcast and conference call on Tuesday, June 14, 2022, at 8:30 a.m. Eastern Time. The related presentation materials for the webcast and conference call will be made available on the investor section of the Li-Cycle website: https://investors.li-cycle.com/overview/default.aspx

Investors may listen to the conference call live via audio-only webcast or through the following dial-in numbers:

Domestic: (800) 909-5202

International: (785) 830-1914

Participant Code: LICYQ222

Webcast: https://investors.li-cycle.com

A replay of the conference call/webcast will also be made available on the Investor Relations section of the Company’s website at https://investors.li-cycle.com.

About Li-Cycle Holdings Corp.

Li-Cycle (NYSE: LICY) is on a mission to leverage its innovative Spoke & Hub Technologies™ to provide a customer-centric, end-of-life solution for lithium-ion batteries, while creating a secondary supply of critical battery materials. Lithium-ion rechargeable batteries are increasingly powering our world in automotive, energy storage, consumer electronics, and other industrial and household applications. The world needs improved technology and supply chain innovations to better manage battery manufacturing waste and end-of-life batteries and to meet the rapidly growing demand for critical and scarce battery-grade raw materials through a closed-loop solution. For more information, visit https://li-cycle.com/.

Non-IFRS Financial Measures

Adjusted EBITDA (loss)

The table below reconciles Adjusted EBITDA (loss) to net profit (loss):

 

Three months ended

Six months ended

April 30,

April 30,

 

2022

2021

2022

2021

 

(Unaudited - dollar amounts in thousands)

 

 

Net profit (loss)

(20,650)

(7,848)

7,896

(14,693)

Income Tax

5

5

Depreciation

1,987

606

3,821

1,133

Interest expense (income)

2,042

244

5,646

494

EBITDA (loss)

(16,616)

(6,998)

17,368

(13,066)

Foreign exchange (gain) loss

 

 

 

 

Fair value gain on financial instruments (1)

(2,862)

1,924

(53,733)

1,924

Forfeited SPAC transaction cost

2,000

Adjusted EBITDA Loss

(19,478)

(5,074)

(36,365)

(9,142)

(1) Fair value gain on financial instruments relates to warrants and convertible debt

Li-Cycle reports its financial results in accordance with the International Financial Reporting Standards (“IFRS”). The Company makes references to certain non-IFRS measures, including Adjusted EBITDA. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing a further understanding of the Company’s results of operations from management’s perspective. Accordingly, they should not be considered in isolation nor as a substitute for the analysis of the Company’s financial information reported under IFRS. Li-Cycle defines Adjusted EBITDA as earnings before depreciation and amortization, interest expense (income), income tax expense (recovery), foreign exchange (gain) loss, fair value (gain) loss on financial instruments, and non-recurring expenses such as forfeited SPAC transaction cost, and listing fee related to the business combination that resulted in Li-Cycle becoming a public company.

Forward-Looking Statements

Certain statements contained in this communication may be considered “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the U.S. Securities Act of 1933, as amended, Section 21 of the U.S. Securities Exchange Act of 1934, as amended, and applicable Canadian securities laws. Forward-looking statements may generally be identified by the use of words such as “will”, “continue”, “anticipate”, “expect”, “would”, “could”, “plan”, “future” or other similar expressions that predict or indicate future events or trends or that are not statements of historical matters, although not all forward-looking statements contain such identifying words. Forward-looking statements in this press release include but are not limited to Li-Cycle’s ability to capitalize on growth opportunities; the annual input capacity and production output of the Rochester Hub, its expected start-up date and total capital cost; statements about the anticipated benefits from the proposed collaboration with Glencore and LG, including pursuant to the commercial agreements entered into between Li-Cycle and each of Glencore and LG; the ability of Li-Cycle and Glencore to build localized supply chains for both primary and recycled sources of key battery materials to drive sustainable global electrification and better serve their customers; the annual processing capacity of the Arizona, Alabama, Ohio, Norway and Germany Spokes and the timing of commencement of their operations; our target to meet or exceed black mass production of 6,500 to 7,500 tonnes during fiscal year 2022. These statements are based on various assumptions, whether or not identified in this communication, which Li-Cycle believe are reasonable in the circumstances. There can be no assurance that such estimates or assumptions will prove to be correct and, as a result, actual results or events may differ materially from expectations expressed in or implied by the forward-looking statements.

These forward-looking statements are provided for the purpose of assisting readers in understanding certain key elements of Li-Cycle’s current objectives, goals, targets, strategic priorities, expectations and plans, and in obtaining a better understanding of Li-Cycle’s business and anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes and is not intended to serve as, and must not be relied on, by any investor as a guarantee, an assurance, a prediction or a definitive statement of fact or probability.

Forward-looking statements involve inherent risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of Li-Cycle, and are not guarantees of future performance. Li-Cycle believes that these risks and uncertainties include, but are not limited to, the following: Li-Cycle’s inability to economically and efficiently source, recover and recycle lithium-ion batteries and lithium-ion battery manufacturing scrap, as well as third party black mass, and to meet the market demand for an environmentally sound, closed-loop solution for manufacturing waste and end-of-life lithium-ion batteries; Li-Cycle’s inability to successfully implement its global growth strategy, on a timely basis or at all; Li-Cycle’s inability to manage future global growth effectively; Li-Cycle’s inability to develop the Rochester Hub, Arizona Spoke, Alabama Spoke and other future projects including its Ohio, Norway and Germany Spoke projects in a timely manner or on budget or that those projects will not meet expectations with respect to their productivity or the specifications of their end products; Li-Cycle’s failure to materially increase recycling capacity and efficiency; Li-Cycle may engage in strategic transactions, including acquisitions, that could disrupt its business, cause dilution to its shareholders, reduce its financial resources, result in incurrence of debt, or prove not to be successful; one or more of Li-Cycle’s current or future facilities becoming inoperative, capacity constrained or if its operations are disrupted; additional funds required to meet Li-Cycle’s capital requirements in the future not being available to Li-Cycle on commercially reasonable terms or at all when it needs them; Li-Cycle expects to incur significant expenses and may not achieve or sustain profitability; problems with the handling of lithium-ion battery cells that result in less usage of lithium-ion batteries or affect Li-Cycle’s operations; Li-Cycle’s inability to maintain and increase feedstock supply commitments as well as securing new customers and off-take agreements; a decline in the adoption rate of EVs, or a decline in the support by governments for “green” energy technologies; decreases in benchmark prices for the metals contained in Li-Cycle’s products; changes in the volume or composition of feedstock materials processed at Li-Cycle’s facilities; the development of an alternative chemical make-up of lithium-ion batteries or battery alternatives; Li-Cycle’s revenues for the Rochester Hub are derived significantly from a single customer; Li-Cycle’s insurance may not cover all liabilities and damages; Li-Cycle’s heavy reliance on the experience and expertise of its management; Li-Cycle’s reliance on third-party consultants for its regulatory compliance; Li-Cycle’s inability to complete its recycling processes as quickly as customers may require; Li-Cycle’s inability to compete successfully; increases in income tax rates, changes in income tax laws or disagreements with tax authorities; significant variance in Li-Cycle’s operating and financial results from period to period due to fluctuations in its operating costs and other factors; fluctuations in foreign currency exchange rates which could result in declines in reported sales and net earnings; unfavourable economic conditions, such as consequences of the global COVID-19 pandemic; natural disasters, unusually adverse weather, epidemic or pandemic outbreaks, cyber incidents, boycotts and geo-political events; failure to protect or enforce Li-Cycle’s intellectual property; Li-Cycle may be subject to intellectual property rights claims by third parties; Li-Cycle’s failure to effectively remediate the material weaknesses in its internal control over financial reporting that it has identified or if it fails to develop and maintain a proper and effective internal control over financial reporting. These and other risks and uncertainties related to Li-Cycle’s business are described in greater detail in the section entitled "Risk Factors" in its Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission and the Ontario Securities Commission in Canada on January 31, 2022. Because of these risks, uncertainties and assumptions, readers should not place undue reliance on these forward-looking statements. Actual results could differ materially from those contained in any forward-looking statement.

Li-Cycle Holdings Corp.

Condensed consolidated interim statements of financial position

As at April 30, 2022 and October 31, 2021

(Unaudited - expressed in U.S. dollars)

 

 

 

 

April 30, 2022

October 31, 2021

 

$

$

 

 

 

Assets

 

 

Current assets

 

 

Cash and cash equivalents

509,315,733

 

596,858,298

 

Accounts receivable

11,501,265

 

4,072,701

 

Other receivables

1,564,430

 

973,145

 

Prepayments and deposits

38,205,456

 

8,646,998

 

Inventory

3,370,209

 

1,197,807

 

 

563,957,093

 

611,748,949

 

 

 

 

Non-current assets

 

 

Plant and equipment

70,402,519

 

26,389,463

 

Right-of-use assets

32,396,195

 

27,009,760

 

 

102,798,714

 

53,399,223

 

 

 

 

 

666,755,807

 

665,148,172

 

 

 

 

Liabilities

 

 

Current liabilities

 

 

Accounts payable and accrued liabilities

45,158,491

 

18,701,116

 

Lease liabilities

4,858,940

 

2,868,795

 

Loans payable

7,475

 

7,752

 

 

50,024,906

 

21,577,663

 

 

 

 

Non-current liabilities

 

 

Lease liabilities

30,118,752

 

26,496,074

 

Loans payable

27,812

 

31,996

 

Convertible debt

88,526,371

 

100,877,838

 

Warrants

 

82,109,334

 

Restoration provisions

433,280

 

334,233

 

 

119,106,215

 

209,849,475

 

 

 

 

 

169,131,121

 

231,427,138

 

 

 

 

Shareholders' equity

 

 

Share capital

718,258,295

 

672,079,154

 

Contributed surplus

12,524,967

 

3,026,721

 

Accumulated deficit

(233,168,290

)

(241,088,229

)

Accumulated other comprehensive loss

(296,612

)

(296,612

)

Equity attributable to the Shareholders of Li-Cycle Holdings Corp.

497,318,360

 

433,721,034

 

Non-controlling interest

306,326

 

 

Total equity

497,624,686

 

433,721,034

 

 

666,755,807

 

665,148,172

 

 

Li-Cycle Holdings Corp.

Condensed consolidated interim statements of comprehensive income and (loss)

Three and six months ended April 30, 2022 and 2021

(Unaudited - expressed in U.S. dollars)

 

Three months ended April 30,

Six months ended April 30,

 

2022

 

2021

 

2022

 

2021

 

 

$

$

$

$

 

 

 

 

 

Revenue

 

 

 

 

Product sales

8,291,122

 

176,102

 

11,913,569

 

1,088,968

 

Recycling services

362,101

 

81,282

 

577,624

 

185,656

 

 

8,653,223

 

257,384

 

12,491,193

 

1,274,624

 

 

 

 

 

 

Expenses

 

 

 

 

Employee salaries and benefits

11,328,894

 

2,547,281

 

19,107,554

 

4,245,480

 

Professional fees

3,559,716

 

567,918

 

6,433,755

 

3,002,052

 

Share-based compensation

4,477,355

 

263,214

 

9,676,164

 

1,009,385

 

Raw materials and supplies

1,816,599

 

480,255

 

3,230,441

 

894,357

 

Office, administrative and travel

3,148,739

 

317,644

 

5,993,279

 

621,885

 

Depreciation

1,986,776

 

605,621

 

3,820,851

 

1,132,999

 

Research and development

528,080

 

824,836

 

869,866

 

1,352,031

 

Freight and shipping

587,484

 

141,447

 

797,845

 

432,497

 

Plant facilities

983,968

 

234,202

 

1,421,038

 

448,336

 

Marketing

747,630

 

163,135

 

1,196,575

 

304,790

 

Change in Finished Goods Inventory

812,421

 

(567,261

)

987

 

(644,893

)

 

29,977,662

 

5,578,292

 

52,548,355

 

12,798,919

 

 

 

 

 

 

Loss from operations

(21,324,439

)

(5,320,908

)

(40,057,162

)

(11,524,295

)

 

 

 

 

 

Other (income) expense

 

 

 

 

Fair value (gain) loss on financial instruments

(2,861,556

)

1,924,346

 

(53,733,121

)

1,924,346

 

Interest expense

2,451,285

 

244,645

 

6,192,527

 

495,334

 

Foreign exchange (gain) loss

140,296

 

358,748

 

128,843

 

750,712

 

Interest income

(409,089

)

(505

)

(546,676

)

(1,222

)

 

(679,064

)

2,527,234

 

(47,958,427

)

3,169,170

 

 

 

 

 

 

Net loss

(20,645,375

)

(7,848,142

)

7,901,265

 

(14,693,465

)

 

 

 

 

 

Income tax

5,000

 

 

5,000

 

 

 

 

 

 

 

Net profit (loss) and comprehensive income (loss)

(20,650,375

)

(7,848,142

)

7,896,265

 

(14,693,465

)

 

 

 

 

 

Net profit (loss) attributable to Shareholders of Li-Cycle Holdings Corp.

(20,626,701

)

(7,848,142

)

7,919,939

 

(14,693,465

)

Non-controlling interest

(23,674

)

 

(23,674

)

 

Net profit (loss) and comprehensive income (loss)

(20,650,375

)

(7,848,142.00

)

7,896,265

 

(14,693,465.00

)

 

 

 

 

 

Earnings (loss) per common share - basic

(0.12

)

(0.08

)

0.05

 

(0.16

)

Earnings (loss) per common share - diluted

(0.12

)

(0.08

)

0.05

 

(0.16

)

 

Li-Cycle Holdings Corp.

Condensed consolidated interim statements of cash flows

Three and six months ended April 30, 2022 and 2021

(Unaudited - expressed in U.S. dollars)

 

Three months ended April 30,

Six months ended April 30,

 

2022

 

2021

 

2022

 

2021

 

 

$

$

$

$

 

 

 

 

 

Operating activities

 

 

 

 

Net profit (loss) for the period

(20,650,375

)

(7,848,142

)

7,896,265

 

(14,693,465

)

Items not affecting cash

 

 

 

 

Share-based compensation

4,477,355

 

263,214

 

9,676,164

 

1,009,385

 

Depreciation

1,986,776

 

605,621

 

3,820,851

 

1,132,999

 

Amortization of government grants

 

(51,977

)

 

(66,039

)

Loss on disposal of assets

 

 

 

13,399

 

Foreign exchange (gain) loss on translation

(95,694

)

341,977

 

(457,908

)

661,757

 

Fair value (gain) loss on financial instruments

(2,861,556

)

1,924,346

 

(53,733,121

)

1,924,346

 

Interest and accretion on convertible debt

1,942,755

 

 

5,208,363

 

 

 

(15,200,739

)

(4,764,961

)

(27,589,386

)

(10,017,618

)

Changes in non-cash working capital items

 

 

 

 

Accounts receivable

(5,685,871

)

(5,797

)

(7,428,564

)

(842,345

)

Other receivables

(853,606

)

174,968

 

(591,285

)

(19,031

)

Prepayments and deposits

299,464

 

(4,235,085

)

2,370,660

 

(4,450,774

)

Inventory

(489,162

)

(646,079

)

(2,172,402

)

(603,696

)

Accounts payable and accrued liabilities

4,729,463

 

3,782,666

 

(3,224,360

)

3,311,236

 

 

(17,200,451

)

(5,694,288

)

(38,635,337

)

(12,622,228

)

 

 

 

 

 

Investing activity

 

 

 

 

Purchases of plant and equipment

(6,072,361

)

(2,482,161

)

(15,482,102

)

(5,098,250

)

Prepaid equipment deposits

(6,844,282

)

(369,839

)

(19,845,963

)

(369,839

)

Prepaid construction charges

(12,078,697

)

 

(12,078,697

)

 

Proceeds from disposal of plant and equipment

 

 

 

16,866

 

 

(24,995,340

)

(2,852,000

)

(47,406,762

)

(5,451,223

)

 

 

 

 

 

Financing activities

 

 

 

 

Proceeds from private share issuance, net of share issue costs

 

 

 

21,620,000

 

Proceeds from exercise of warrants

 

 

65,180

 

 

Proceeds from loans payable

 

1,588,020

 

 

3,091,220

 

Proceeds from government grants

 

51,977

 

 

66,039

 

Capital contribution from the holders of non-controlling interest

330,000

 

 

330,000

 

 

Repayment of lease liabilities

(1,059,229

)

(167,429

)

(1,892,563

)

(326,722

)

Repayment of loans payable

(1,548

)

(413,748

)

(3,083

)

(714,741

)

 

(730,777

)

1,058,820

 

(1,500,466

)

23,735,796

 

 

 

 

 

 

Net change in cash and cash equivalents

(42,926,568

)

(7,487,468

)

(87,542,565

)

5,662,345

 

Cash and cash equivalents, beginning of period

552,242,301

 

13,813,370

 

596,858,298

 

663,557

 

Cash and cash equivalents, end of period

509,315,733

 

6,325,902

 

509,315,733

 

6,325,902

 

 

 

 

 

 

Non-cash investing activities

 

 

 

 

Purchase of plant and equipment in payables and accruals

23,579,072

 

1,775,352

 

29,681,735

 

2,632,909

 

Non-cash financing activities

 

 

 

 

Equity issued for non-cash costs

 

 

 

455,055

 

 

 

 

 

 

Interest paid

508,530

 

244,645

 

984,164

 

495,334

 

____________________________

1 Adjusted EBITDA is not a recognized measure under IFRS. See Non-IFRS Financial Measures section of this press release, including for a reconciliation of Adjusted EBITDA to net profit (loss).

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