Q2 2021 Livent Corp Earnings Call

August 5, 2021

Good afternoon, and welcome to the second quarter 2021 earnings release conference call for Life and Corporation for.

All lines will be placed on listen only mode throughout the conference. After the Speakers' presentation, there will be a question and answer period.

I'll now turn the conference over to Mr. Daniel Wilson, Investor Relations and strategy for live and Corporation. Mr. Rosen you may begin.

Thank you Gino.

Good evening, everyone and welcome to live and second quarter 2021 earnings call.

Joining me today are Paul Graves, President and Chief Executive Officer, and Gilberto and Tony Aussie Chief Financial Officer.

The slide presentation that accompanies our results along with our earnings release can be found and the Investor Relations section of our website and prepared remarks from today's discussion will be made available after the call.

Following our prepared remarks, Paul and Gilberto will be available to address your questions. We would ask that any questions be limited to 2 per caller, we'd be happy to address any additional questions. After the call.

Before we begin let me remind you that today's discussion will include forward looking statements that are subject to various risks and uncertainties concerning specific factors, including but not limited to those factors identified in our release and in our filings with the Securities and Exchange Commission <unk>.

As a reminder, like and it was already resumed its capacity expansion projects and the United States and Argentina earlier this year.

By the execution of a number of long term supply agreements and improve and market outlook and continued local support.

Also during the quarter Lybeck released its 2020 sustainability report.

The details our meaningful ESG progress and and the last year and highlights on new sustainability goals and it reaffirms our commitment to environmental protection, social responsibility and transparency.

Before I provide further commentary on the state of our industry as well as from alive and specific updates I'll turn on the call over to feel better to walk us through and license financial performance.

Thanks, Paul and good evening, everyone all.

And I'll begin with our second quarter results on slides for.

We reported revenue or for $102 million, adjusted EBITDA of $16 million and adjusted earnings off for cents per diluted share.

Revenue increased 11% sequentially and 57% year on year with higher volumes driven by increased customer demand across multiple for products, particularly hydroxide.

We also saw higher sequential pricing across large parts of our business, although we expect.

Great a price and momentum and the second half of the year and into 2022.

Adjusted EBITDA was 44% and.

And 150% higher than prior quarter and year, respectively.

This improve profitability was supported by higher sequential pricing and any proof product mix for somewhat offset by higher costs.

In addition to the higher energy storage and then supporting this positive outlook.

We have seen notable improvement and some non energy storage markets, many of which were significantly impacted by COVID-19 related operational and market challenges.

The key variable as to where and the guidance range. We fall is the potential for shipping delays caused by extremely challenging global supply chain conditions.

The combination of COVID-19 related shutdowns, followed by a rapid pick up and demand and continued strength regional protocols has added increasing complexity risk and cost to supply logistics.

Based upon what we've seen today there is a risk with some sales may be delayed by a few weeks due to logistic issues.

And even where we are able to deliver on time, we might be forced and clearer higher shipping cost to achieve this.

It is worth acknowledging that why we're seeing favorable market conditions support higher leach and pricing current average prices realized.

You remain well below historical highs and have not reached reinvestment cost levels for higher cost producers.

We expect the positive momentum to continue and for live and just see further benefit from this as we finalize more contracts with customers for 2022 and beyond.

Nearly all of our anticipated volume to be sold in 2022, we'll be at fixed prices that will be set in 2021 with the remainder being more closely tied to the market pricing.

To conclude <unk> 2021 guidance for total capital spending is unchanged at $125 million as our capacity expansion projects continued to progress.

We have spent $34 million through the first half for the year and expect this to accelerate with additional work.

For the next 2 quarters.

I will now turn the call back to Paul.

Thank you for the bedroom.

Moving on to slide 6 on some commentary on current market conditions.

I'll pick up on lithium demand that we saw at the end of last year was accelerated through the first half of this year and shows no signs of slowing down.

<unk> driver at this higher demand has been higher electric vehicle sales and 1 of the highest growing end markets from industry.

June EV sales in China were roughly 240000 vehicles up 18% month over month, and bringing first half total sales per $1 million.

Females, What's Bugging me company, all hydroxide have limited usable excess inventory and this is even more pronounced and applications with the most stringent product quality standards.

The increase and lithium demand has been seen and both hydroxide and covenant.

On much of the commentary today has been on carbonate given some of the positive data points soon and the first half of this year hydroxide demand has been particularly strong and recent months. This as a result of increasing hi, Nicole capital production and China, as well as Korea, and Japan as a number of new models come to market.

Lithium pricing has continued to increase supported by this market backdrop following.

Following the price increase his first scene and competent and China, we've seen and upward price Benjamin hydroxide, and sparkling prices as well as international prices outside of China.

Hydroxide prices once again established a premium over carbonate during the most recent quarter and when asking some spots spodumene concentrate transaction that over a thousand dollars per ton.

This is nearly tripled historical loans that were previously seen and meaningfully ahead of disclosed contracted spot to me and prices.

The clear disconnect with seeing between recent spot spot and and transactions and contracted price levels is telling of a few important trends first it indicates that any excess bugging me and inventory is likely already been work too and given a large portion of this feedstock until it goes on the production of lithium hydroxide by convinced and China. This will continue to.

The challenge hydroxide supply and keep up the pressure on pricing.

Second the volatility and sputtering prices continues to shed light on the differences between the non integrated convert and modeling, China and a fully integrated lithium chemical producer.

The challenges and securing material on the lack predictability and on costs make it very difficult to rely on and that's part of the market Ultra.

Automotive Oems a battery customers and looking for security of supply of predictability price will increasingly have to look towards integrated suppliers as a core part of their volume needs.

Separately that continues to be a lot of strain on global supply chains, including at him largely driven by the disruption and remaining restrictions and protocols as a result of the pandemic.

The difficulty and secure and product containers and transportation either by boat or truck and.

Challenge and to accelerate any customer demand the timing of certainty and the additional costs and managing this complex environment and expect it to remain as highlighted by recent announcements from leading also Oems around semiconductor shortages for example.

And the face of these near term challenges on long term trend. We continue to believe that live and remains well positioned as a leading supplier of choice as a fully integrated lift and producer from resource to final lithium chemical production, we have more cost predictability and securities supplied to commit to and deliver on long term.

Apply agreements with greater price stability and visit and visibility.

We expect positive and lithium market dynamics to continue to 2022.

For continued to be announcements from both Oems and governments that at confidence for the longer term demand growth trajectory.

This accelerates and demand will continue to increase the pressure on meaningful battery quality supply growth.

And the last few weeks alone we've seen EV day events from multiple leading or to Oems outline and that plans for increasingly large investments into the electrification of that fleets and confirm or close the targets for ending the sale of legacy Ice's vehicles.

And a transformational announcement the European Union proposed to fit for 55 package, which would require on emissions from new vehicles to drop 55% by 2030.

And 100% by 2035 of 2021 baseline.

So differently new vehicles sold up to 2035 would need to be exclusively zero emission on non ice's.

According to Bloomberg New energy finance. This means at least 60% of new vehicle sales would have to be factory electric and Europe and 2030.

And competitive expectations for 14% and 2021.

And the U S. The push for electrification continues to gain traction as $15 billion of spending will be allocated towards E transportation as part of the most recent bipartisan on the infrastructure plan and just today, we saw the U S administration, releasing new target for electric vehicles to comprise hospitable and new vehicle sales and 23rd day.

This and answers made standing alongside leading USL to Oems, adding further service and support for their own commitments.

More than just invest incentivising the shift to electric vehicles governments around the world and getting serious about pushing the transition to cleaner forms of power generation with a renewed focus on climate change combined with the louder demands from global consumers lithium on that to be play a key role and brought up and it just.

Solutions for the future.

And response to highlight and prices and increasing confidence in the long term demand picture.

Supply side response from lifting produces this has been in the form of raising capital O announcing capacity expansions and feel project development. However, these projects are unlikely to do on us to alleviate the short and medium term challenges to provide sufficient material and in particular, the most needed material that is battery qualified.

Even on the optimal timelines they will take several years to bring on line and ultimately ramp up and begin the length qualification processes.

Bear in mind, the major construction projects and up typically designed for speed and stages of permitting meant to ensure key deliverables can be met responsibly.

Many of these expansions on needed and will have to be successful in order to keep up with compounding lithium demand growth.

With that said Greenfield lifted and development, particularly those with and unproven resources are using novel technologies.

And to face timing delays and additional capital requirements, pushing abacost curve and the necessary returns on investment.

22 on the third quarter for 2023, respectively.

Additionally, our crude phase III carbonate expansion in Argentina for an additional 10000 metric tons is expected to be in production by the end of 2023.

We have all of the necessary permitting granted to us by the local and federal governments and expect the ramp up period to run rate capacity on each of these units to be short given our plans to dedicate the new hydroxide plant to no more than 1 or 2 contracted customers.

You should expect 2023 to reflect the large portion of the new capacity from phase, 1 and Argentina investment on <unk> and 'twenty 'twenty 4 to include the additional phase II capacity from Argentina.

Domestic continues to make meaningful progress and its optimization study. This year you may have seen from the recent domestic press release of the new site has been secured and.

Hawk and portal Beck and call and Quebec, Canada for the construction of the downstream and chemical conversion for delivery. Additionally, the mascot and made the decision to produce battery grade lithium hydroxide, and we will be well positioned to serve the growing market in North America, and Europe, we expect and I'm asking to conclude its optimization efforts by the end of 2021.

Brian and continues to believe we gave on attractive investment and Nebraska, the lost cost competitive fully integrated lithium chemical asset powered by renewable hydrogen energy.

Finally, <unk> released its 2020 sustainability report in June.

We reported details on sustainability goals, which were announced earlier this year and are highlighted by a commitment to carbon neutrality by 2041.

100% renewable energy use on an ongoing focus on sustainable water use.

These goals reflect the highest priorities of licensed customers communities investors employees and other stakeholders on our team is acutely focused on mobilizing our resources as needed to execute on them.

The report also highlights the meaningful progress we've made on a number of wide ranging and ESG efforts. Despite the difficulties presented by the global pandemic key.

Key metrics and report would reviewed and assured by a leading third party.

And certification and verification services on the consent on the content satisfy it's more of the requirements of the leading disclosure frameworks, which we will continue to build upon.

Ongoing efforts are underpinned by the belief that the responsibility to operating a safe ethical socially conscious and sustainable manner is a fundamental obligation of our right to operate and essential for the viability of our business.

I will now turn the call back to Dan for questions.

Thank you Paul.

You may now begin the Q&A session.

Alright, if you'd like to ask a question at this time. Please press Star then the number 1 on your telephone keypad. Please limit yourself to 1 question and 1 follow up question. If you have additional questions you can jump back and the Q2 with all your question grasp on key.

For a moment to compile the Q&A roster.

First question comes from the lineup Bob <unk> from Goldman Sachs. Your line is now open.

Hi, This is Emily on for Bob I was wondering if you guys could describe the bridge to get from prior guidance for correct guidance and then maybe give US an idea of how much of that is driven by higher pricing versus the other moving parts. Thank you.

Sure the better would you like to answer that 1.

Yes.

And so.

We are increasing the midpoint of our guidance by approximately $30 million.

I would say that 80% of that is pricing driven and about.

<unk> 20 per cent of that is volume driven.

And as you and fall down to EBITDA.

We in addition to the price improvement that we're seeing throughout this year.

And some some.

Increased costs, particularly related to logistics.

As we mentioned and disruptions of supply chain has been and mass so far this year.

And in order to mitigate any issues and be able to deliver to customers on time, we have to me to be making some earlier and higher.

Purchases of third party.

Lithium products.

And finally, we'll be seeing and also some high higher raw material costs, particularly solvents and the beauty of lithium business as a result of that.

Our midpoint of the guidance for EBITDA is increasing by about $13 million.

Great. Thank you.

Next question comes from the line of Joel Jackson from BMO Capital markets. Your line is now open.

I actually want to follow up on that exact same question. So your incremental guidance is coming at 40% margins that $30 million of additional sales is coming at a 40% margin. Your prior guidance. The companywide was about 14% margins you talked about this being 80% and incremental from price can you maybe give a little more color. Although it is all hydroxide sales.

Are these all using your own your own carbonate on third party carbonate like any more color just talk about why the incremental sales are all RC and criticize.

They are extremely higher margin.

Yes.

Yeah.

Did you give a little.

And just some specifics on that 1 I think the key takeaway on this Joe is clearly the debt.

We were primarily a hydroxide producers and most of the additional sales are and hydroxide, but pricing is really across the board we're seeing.

On pricing across the board incremental volume and <unk>.

And then we have incremental volume is largely lithium hydroxide.

And as I said, the incremental costs, including increased use of third party carbonate and 1 of the challenges we have with the supply chain as they are as we will have to carry more inventory to make sure because we cannot rely upon supply change being as reliable as they happen in the past and so that means that we have to hold more of our lithium carbonate for example, and Bessemer city.

We'll use public slightly more third party carbonate and our China operations.

And of course as Roberto touched upon we see logistics cost switching solvent costs, we're seeing.

A bunch of costs broadly speaking client for across the business as well, which does offset.

And the otherwise pricing driven gain on why you don't get so much volume drop through to the bottom line as you pointed out it is much higher margin.

Yeah.

Hi, Thank you for for taking my question.

So I guess the first 1 just wanted to check on.

The vaccination status of your workforce and Argentina and.

And to see if you've had any COVID-19 related issues from the Delta area I know in the past there were some kind of targeted outbreaks and certain areas.

Sure Good question, Doug and so.

Calls for moving people in and out of this a logged out and their own incredibly strict we put people and hotels now for 5 days for quarantine before they go we test them before they go into quarantine and hotels and the test and if they come out and then we.

And again when they get on the amount and we test them halfway through the 14 or 21 day shifts and we test them and again before they come back down again.

So there's a lot of testing going on and so to the extent that we picked up on and we've had any COVID-19 cases and suddenly.

We pick them up before they get to the sell off we don't have a huge not had a large amount of of COVID-19 issues down there in terms of individuals being infected amongst our workforce.

And the vaccination rates for our in place up there today, we believe it's not entirely clear because as you know every country has.

The rules about what people have to disclose but it's about 60% of our workforce to day is.

Either partially or fully vaccinated and timing quickly, there's certainly more vaccines available down there and celta and catamarca available drought and employees.

Got it got it good to hear.

And then.

For my follow up just.

And of off the comments you made around the higher shipping and logistics costs.

Wanted to see it.

I guess, if you had any visibility on.

Windows might dissipate or when they might peak just your outlook there.

Yes, we talk about that a lot on it.

Sure I'll answer this and we have no idea and if you do have.

From 6 months ago.

And what would've happened and we were running into extra costs and logistic challenges back then and we would've said publicly and 6 months. The challenges. We're facing will publicly have abated, a little and they started to but really the last month and so it's just been really ratcheting back up and and it's hard sometimes to.

I understand what's driving that we've had ships canceled where we've had and chips just not enough to pull and particularly in China with some 5 from China with some crackdowns they've had them storage for goods in China, and you've taken on ideal satellite picture proportion I right now it is nothing like historical levels in terms of the number of ships just sat around and waiting.

And as.

As a result of that we've seen almost across the board.

Not just costs show up and we talked about 5 ex or even more and some times for comfort.

Transportation, but in some cases, the there's just nothing available and Theres no amount of cost we will get you. The trucks. So I'll get you the ships and so it's not entirely clear to us what's driving it and a lot of our industry struggles to look at moving.

Cause and figure out what it is and therefore, it's hard to figure out what's going to change it as well.

Got it understood alright. Thanks, Thank you very much.

Next question comes from the line of Chris <unk> from Loop capital markets. Your line is now open.

Yeah, Hi, good evening I appreciate the color and perspective I just wanted to call attention to a couple of trends that have emerged and here you're thinking.

With respect to these trends 1 is.

Pretty obvious and other 1 less obvious and so 1 is just the increased relevance of carbonate.

Longer term feeding into L P applications and.

And I'm just curious if that.

And trend is influencing your thinking with respect your and <unk>.

And tension to your manufacturing footprint and commitment to.

Being a preeminent supplier.

Of hydroxide needs that'd be carbonate.

And then the other 1 less obvious is that there is you know there's evidence of some cathode folks that are looking to maybe do some of that conversion and house because they don't feel like there's just a reliable enough base of suppliers of those battery grade hydroxide sales are you seeing that at all and is that important thing that strategic thinking and of your investments.

Yes.

And with 2 really important.

Factors that we look at very carefully I think the first starting point and I'll say it that way.

Use of LSP and.

And more vehicles and that's what leads from our company and across food and.

And frankly and no difference too.

Our philosophy on strategy and philosophy has always been that we would like to have more commodity exposed to that it's not necessarily like P. Exposure, we're looking for companies and blow to market and more diverse market and I do I do agree with much of what some commentators Hussein and amendment, which is and will remain for us and the largest form of lithium being used in the industry broadly and probably.

And energy storage it and it gets far more suited for stationary storage applications. It's almost since it for many automotive, particularly lower Costello performance automotive applications and distribute them most mobile device battery technologies, it's a market and we want to be in Rfps and piece of that mine plan and.

And while it's clearly been surprised us on people today and on driving some of those short term spikes and publicly and company pricing and China.

It's not fundamental change and what our view of the attractiveness of the company and market will be in the future.

And so it's really just part of what we'd already SaaS strategy and man, which is to take at least a meaningful position and I think meaningful in terms of and can supply enough carbonate to a customer to be meaningful to them and not trying to be the biggest company producer or sell off for sure.

And I think.

So, let's say somebody on it it's a more growth carbonate market items, there's going to continue to be and really really very attractive and the long run and I'm sorry, just remind me of your second question.

Any day.

Evidence that you've seen a cathode producers wanting to do there on conversion and has to hydroxide.

Yes, and a little bit of evidence I don't think I wouldnt say for widespread he's the challenge I think if you didn't make the catalyst path and you probably need to be.

On a full scale battery producers and so that keeps you to a relatively small number for companies that are doing that and what we've also seen and generally speaking it just because you are making batches doesn't make you a cathode expert and so some of those cathode producers are making cathodes and house of struggle, sometimes did you actually meet the quality that they need for their own back Theres never mind.

I think the idea that people will start to make hydroxide and house had a mole.

And maybe in the last 6 months people talked about it there's been a few well known announcements about that and then a few what looks like well known pullbacks from that position. The challenge is always the same languages and you can make the hydroxide yourself and you need it and you need a feedstock you needed a company or union spodumene concentrate depending on which way you are going to go on.

And it's not entirely clear if there's anybody out there have solved that problem and have to back integrate all the way into the base resource. We continued to see very few consumers of lithium and chemicals expressing appetite to be in Miami on lithium extraction offerings from Argentina and Chile.

And also.

I'm not convinced the idea that people will bring either somebody hydroxide production or even company production and has will be a particularly good a widely held strategy those adopted and on industry.

Got it and my follow up Paul is and then this is longer term and nature granted but there's a lot of enthusiasm and focus on the emergence of solid state battery technology and this is an area where you've been at I think publicly skeptical about the timeline of adoption and solid state, but I'm just wondering based on.

Your engagement with commercial downstream customers if you.

Are seeing any more reasons to be optimistic on the transition ultimately to solid state and the benefits that come with that.

And I know I don't see any change and frankly in terms of acceleration on those timelines to a solid state that everybody talks about.

People will start to relax a little bit like the transition from low nickel to high nickel wasn't a step change, but it is a gradation of increasing nickel and use and chemical point on which the switchover major use hydro upside for us.

On a lot of a lot of activity and that gray area, where you could kind of accompany Oh hydroxide.

The same happened with solid state and solid state clearly everybody focuses on the safety benefits and I'll be on it.

The solid.

Solid element of the battery book, but I think the first phase is going to be increased previous the ACP and our increased use of metal and D&O to increase energy density and so I do believe might have seen more conversations about ways pre lithium anodes, which is a step if you will on that evolution can be a path to a solid metal and out and so I do it.

Bye for lithium.

Climates decline and I do expect that to be more battery technologies that are using lithium metal is a primary input into that and notes, but thats a long way from Apio salad stay on and so I don't see solid state batteries.

They're hitting any kind of commercial scale this decade.

Appreciate it thanks.

Next question comes from the line of Kevin Mccarthy from vertical research. Your line is now open.

Good evening, Paul Im interested to hear your thoughts about pricing philosophy, obviously, we've seen strong momentum over the last 9 months.

And so if we think about 2022, how are you thinking.

And thinking about balancing surety of price and visibility on the 1 hand versus.

Leverage to what could be a tighter market and upside pricing opportunity on on the other hand, maybe you could talk through.

Our strategy in terms of.

The contracts you have in place and more importantly, the negotiations to come.

Sure.

It's important to sort of step back and take a look at what our portfolio looks like today and what it will look like and the future and first and foremost I think we believe.

The right path for us to go down as client partner for and are willing to effectively guarantee economics for us we have largely a fixed cost structure and so it's important to have more clarity. We believe on price and then and just chasing the highest possible spot hydroxide pricing and.

On the right strategy for us So we will continue to pursue.

Managements with customers that gives us certainty that tends to lead towards fixed price and over multiple years.

We believe that today's a good environment to be having those conversations and balanced it's balanced environment between.

The economics for the automotive producers on the economics for ourselves looking forward I think there'll be a couple of things to bear in mind, 1 with doubling that capacity openings is and so they will be more conversations to have with customers and I suspect, we'll be striking more contracts and <unk>, whose timing and different price environment, probably a higher price environment and.

And we've been and for the last 6 months and maybe even will be for the next 6 and.

I think in terms of.

And second opportunity to take advantage of a sustained increase in prices on carbonate is more likely to remain a shorter term contracting market and the hydroxide market because the qualification requirements of debt on them and therefore, it's easy and switch and so I think people will take more of a market based approach and covenant and we will have more covenant and so I think that will.

And more volatility on a piece of our business, but it's probably 2020 for before we were in that place of selling a meaningful amount of lithium carbonate and I'd also say by the way I think I think as more and more automotive companies are looking at their own products and processes on economics. It was easy and the last 1 year or 2 as the first half of a couple of lithium and say why by contract long term.

It's a lot more difficult to day to sit there and say I'm going to just take market pricing and I don't think any automotive company is lumpy and what they've seen with regard to public prices become a debate whether they are accurate and realized prices and launch it now, but they do impact sentiment and the impact of attitude and we've certainly seen some customers.

<unk> have suppliers renege on them walk away from them and renegotiate prices on them and so I think they will start to look for different what net portfolio of suppliers will look like and I suspect. They will also take a similar approach which is varying percentages.

Have a fixed price part of their supply chain and they will take some market exposure with some more variable priced contracts in place as well.

Very helpful. And then the second question I wanted to ask you about butyl lithium.

Sounds like increased costs for solvents are becoming more onerous there and so my question would be is there an opportunity to extract incremental pricing and butyl lithium to recover over and recover the solvent cost pressure and if not.

Is there an opportunity to reallocate mix away from futile to other lithium derivatives.

Yeah. Good question. The truth is this is not.

The us it's nothing new.

Situation to find ourselves with.

Moving solvent prices up or down and generally speaking that will get resolved on a lag just as when solvent prices come down again, what's the pass those savings on with a lag and so yes, we would.

Expect that they'll sell the prices and the and will be passed on for most of our customers and some of our customers actually pay for the self and any way. So it doesn't impact it doesn't impact us directly, but others don't and so there will be definitely opportunities to do that with divergent and into other products as possible.

Advocates and other key.

And I have LTE is going into the beauty business and its chloride based and not carbonate based for us on whats for some of those and make macro for for beauty. They start with carbonate, but we don't we go directly from flow right. So it's not actually it's not.

Easy diversion of LC Easter is a company on hydroxide for it so I don't really expect that to happen so much in the short term.

Okay. Thank you Paul.

Next question comes from the line of Steve Byrne from Bank of America. Your line is now open.

Yes. Thank you.

I was hoping you would share with us Paul.

The portion of your volumes in the third and fourth quarters.

And you know right now what the price will be.

Joe <unk> talked about a variety of these contracting mechanisms and.

From where you stand right now.

Do you have a pretty good view of where pricing will be for the third quarter volumes and most of it and the fourth.

The reason I ask is.

Net.

Full year guide that you have put out there is there.

A portion of that volume that you really have on price, yet and therefore, theres some theres some upside and that number.

And then the other reason being the sequential increase you saw and price from the first and the second quarter here.

A sequential game that you think you might be able to continue into third and fourth quarters.

Yes.

There's a lot of it a lot and that and Im sure.

And so to your questions. Yes, we have very good visibility on pricing and third and fourth quarter right now.

Joe Bento pointed out from a bigger challenge is frankly at the timing and which we'll realize that price and Lucas.

I'm sure we can get it to the customers is not that easy and so we see longer and extended and slower supply chain and so there's certainly an aspect of I see the price and I know, what the customer will pay but I have to get the material from trucks and get that pricing down and so the risk is really and on timing on.

On the third and fourth quarter and my view is not on.

The pricing environment embedded into our <unk>.

Guidance at that point in time and and in terms of the first couple of quarters and there's a lot of mix issues goes on as well right.

We were fulfilling some first and second quarter business that was really last year's pricing on loans to.

And well enough on did roll off as we went to we we were able to change and mix of customers and products into a place that help with average realized pricing but.

But I certainly expect the benefit on the average realized pricing and hydroxide and carbonate.

And that we saw and the first part of the year to probably accelerate and the second half EBITDA as we said at the beginning of the year, it's really the back half of the year, where those opportunities mostly reside.

And we may even see some and some of the other products that we have got some pricing traction as back end of the year as well.

And then just maybe an extension of this into 2022.

Is there any potential for.

A meaningful increase in volumes in any way until Bessemer city expansion comes on and.

Any comment on how much visibility you have on pricing for 2022 now.

Yes, we certainly don't have a lot of ability to increase volumes, given where we are right now to what our installed capacity as of hydroxide and that's on a covenant and they don't really meaningfully and a change in and even though we are confident and our ability to quickly qualify for new bets and the city is unlikely to be moving a lot of volume.

And in 'twenty 'twenty 2 so.

I don't see a huge amount of volume upside and Fortunately for us if we do by the way the public because we delayed from 2021 sales not intentionally but because of the supply chain and they will get pushed into next year. So and so it may look like this higher volume, but our fundamental capacity it doesn't really patient from the start of 2023.

Argentina Phase 1 comes on line and look in terms of price and for next year.

And we feel pretty confident that our average realized price for 2020, twos and it'd be higher than it was from 2021 and.

And if you recall, we started 2021, saying that on average realized price and that was going to be flat to slightly down.

Compared to the prior year, and it's coming and flat to slightly up now higher than it was for in terms of what we think our average will be across the portfolio.

Just the nature of when we would mean prices and so we will end this year with a very clear view as to what our pricing environments and on a like for 2022 and every indication is that it's going to be meaningfully higher and once this year.

Thank you.

Next question comes from the line of David <unk> from Cowen and company. Your line is now open.

And good afternoon or good evening, everyone. Thanks for taking my questions Tonight.

And good evening.

But just curious.

As you think about some of the expansion that's going on right now at solar on Bari.

Okay.

Theres been a lot of talk and the market about some advancements and DLA technologies and 11 was 1 of the earliest non to use daily.

As you think about ramping volumes or are you looking into any advancements on the technology side or any new applications for GLA that that might be able to.

It accelerates some of that production timeline or are there any initiatives.

Either partnerships or internally too and.

And to improve upon what's already there.

D day.

I don't know why its become such a buzzword I guess a couple of people running around on specific projects looking about.

The past day.

Media, if you will and expansion.

And we've been able to do this for ease of use and yields it's not a new technology day of new concept.

And the issue has always been that the yield from the very rapid dailies just doesn't justify yields are so low that justify the investments and advance which is why you typically ended up with a daily process like I was in Argentina, which is a bit of a hybrid where we do concentrate the buy and very quickly and.

And ours to usable level, but a small amount of time and upon and massively increases the concentration through evaporation of allowing those and 2 on our carbonate price plans of a higher concentration in Florida, and we would if we didn't have the ponds and the challenge with as we go forward has been people till you Wanna get away from pumps structures and other books for that patient that comes from that so most of that.

Technology investment and.

And Argentina is actually all about reducing water usage and we have some pretty interesting.

Projects under way today that could by the look of things massively reduce the footprint that we have maybe even eliminate the pump footprint for future expansions in Maine and justifiably. So.

And 2 that we have today, but that's really it's not going to take our costs down and comfortable really changed and it won't necessarily improve our yields it's really about imprudent for sustainability footprint down debt, which is really important.

Daily and other locations E chapter understand from many many different ways of doing it on and they don't know works everywhere, but.

Most of them will only work and specific situations are lining up your daily technology with with the resource that you have is really the critical point you can have a solvent based BLE technology, very rapid clearly never going to be forgiven and environmental product on that and.

And South America, you can have but may work and Petro clients. For example, you can have other lease structures that are very.

Good and high concentration low impurity, Brian's, but don't work with specific and puts it. So it's not an easy question and answer to say is really going to make a huge difference I think it will unlock some resources and I think with a higher price environment today than maybe the last time people looked at this on.

Maybe I'll start and people looked at it and they would compete with ex.

<unk> 5 dollar carbonate back and start with 2 thousands and the economics behind BLA and probably more favorable than necessarily technology changes and daily, but we certainly we continue to look on our knowledge and that process will help us develop.

Ryan based resources and that's a constant flow.

Because of Atlas and.

And obviously to the extent that we do make any progress.

For the first and now.

And I appreciate that and great responsible.

I guess speeds and so maybe the second follow up and just you mentioned and the mask and the prepared remarks and <unk>.

Recent some decision points towards the end of the year.

I guess should we expect to see live and looking into.

And the other upstream resources in terms of expansion beyond the mask and beyond as hard rock maybe into other brines or would we expect to see just more expansions on the conversion.

Side before.

Yes, I think yes is the short and so we absolutely expect and.

To diversify our resource base and while we are on.

And the mask is obviously important stockholders and we're pleased and proud to be and investing in opex for today, and obviously on our technology and operating partner on that project.

It's still not enough, we need to we need more resources and so yes, we continue to look at additional opportunities to bring on what we would describe as our unique capabilities to sit on.

Assets and resources that fit those capabilities, we are not the correct 1 for many lithium assets for multiple reasons, whether it's the fact that day, particularly big challenge and mining channel by province, or because of the geography and but there are many others that we are we believe on natural.

Invest our operating or maybe even 1 off and so we will continue to look at that and I do hope and the company is yes, we find we find additional resources to take and go off.

I appreciate the time everyone. Thank you.

Thank you.

Next question comes from line of Lucas pipes from B Riley Securities. Your line is now open.

Yes, good evening, everyone and thanks for taking my question.

Well I'd like to go back to some of the earlier questions.

This function.

Appreciated all your comments Aaron and.

I wanted to.

Take a step back.

A higher level question.

And margins in the second quarter about 20% plus margin what do you think.

And they should go to these gross margins for business that is growing quickly.

Whether it's a lot of demand growth.

And the years to come.

Sure.

Thank you.

Yes.

It's a difficult question to answer because and the and what we're really going to take a look at what you're really asking me and with pricing and go to.

And will some of the higher costs, we're seeing today prepayment income.

B B.

Regress back from all of a historic norm I mean, if you go back to 2018 as I'm sure. You know, we made about $190 million on revenue on something approaching high for <unk> $500 million of revenue. So we've demonstrated margins and that kind of range and passed on.

I think as we get bigger and we have more volume.

And costs.

With the volume corporate costs head office costs, and all bunch of different costs.

But equally as we continue to increase our quality of our product and for that customer demand and that we also get some cost headwinds to this no doubt is meaningful.

On opportunity for our margins to expand but it's largely going to be driven by what your assumption was pricing as to what gets you there.

That's helpful. Thanks, Thank you Paul and.

Q2 2021 Livent Corp Earnings Call

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