Q1 2024 Li-Cycle Holdings Corp Earnings Call
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
I'd like to ask a question at that time. Please press star one on your telephone keypad.
If you should need operator assistance. Please press star zero. Thank you I will now turn the call over to Louis D. S. VP Corporate Affairs. Please go ahead.
Thank you good morning, and thank you everyone for joining us for lifecycle business update and review of financial results for the interim period ended March 31 2024.
RJ Coach: We will start today with formal remarks from RJ coach our cofounder, President and Chief Executive Officer, and Craig Cunningham Interim Chief Financial Officer will then follow with a Q&A session.
Well sites on hold we do appreciate your patience in holding and ask that you. Please continue to standby.
[music].
RJ Coach: Ahead of this call lifecycle issued a press release and a presentation, which can be found on the Investor Relations section of our website at investors <unk> lifecycle Dot com.
RJ Coach: On this call management will be making statements based on current expectations plans estimates and assumptions, which are subject to significant risks and uncertainties most of which are difficult to predict and many of which are beyond the control of lifecycle.
RJ Coach: Actual results could differ materially from our forward looking statements if any of our key assumptions are incorrect, including because of factors discussed in today's press release. During this conference call and in our past reports and filings with the U S Securities and Exchange Commission, and Ontario Securities commissions in Canada.
RJ Coach: These documents can be found on our website at investors about lifecycle dotcom we.
RJ Coach: We do not undertake any duty to update any forward looking statements, whether written or oral made during this call or from time to time to reflect new information future events or otherwise except as required.
RJ Coach: These forward looking statements should not be relied upon as representing a lifecycle assessment.
Madison: Good day my name is Madison and I'll be your conference operator today at this time I would like to welcome everyone to the first quarter 'twenty 'twenty four lifecycle holdings earnings call and webcast.
As of any date subsequent to the date of this call.
RJ Coach: With that I am pleased to turn the call to RJ. Thank.
Thank you Louis and good morning, everyone.
Madison: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
RJ Coach: He has been with lifecycle for nearly two years in addition to having a marketing communications.
RJ Coach: <unk> also taken on leading regulatory affairs and Investor Relations.
Madison: I would like to ask a question at that time. Please press star one on your telephone keypad.
RJ Coach: I'll ask me is moving on to pursue other opportunities you want to pick dollar for her contributions to lifecycle and wish her well in her future endeavors.
Madison: You should eat operator assistance. Please press star zero. Thank you I will now turn the call over to Louis D. S. VP Corporate Affairs. Please go ahead.
RJ Coach: Now I'd like to introduce Craig Cunningham.
Craig Cunningham: As lifecycle as interim CFO.
Speaker Change: Thank you.
Speaker Change: Good morning, and thank you everyone for joining us for lifecycle business update and review our financial results for the interim period ended March 31st 2024.
We're excited to add him to the team and are confident that it is a strong addition to the company.
Craig Cunningham: Greg has extensive background in executive level leadership and brings more than 17 years of accounting finance operational and capital markets experience the lifecycle.
Speaker Change: We will start today with formal remarks from <unk> <unk> co founder President and Chief Executive Officer, and Craig Cunningham interim Chief Financial Officer.
Craig Cunningham: In his previous roles as CFO and executive.
Craig Cunningham: He has been a key contributor to the formulation of corporate strategy and providing key financial oversight and controls on major projects.
Speaker Change: We will then follow with a Q&A session.
Speaker Change: Ahead of this call lifecycle issued a press release and a presentation, which can be found on the Investor Relations section of our website at investors thought lifecycle dotcom.
Craig Cunningham: He also has broad experience overseeing it.
Craig Cunningham: Supply chain logistics and.
Craig Cunningham: Administrative functions welcomed.
Speaker Change: On this call management will be making statements based on current expectations plans estimates and assumptions, which are subject to significant risks and uncertainties most of which are difficult to predict and many of which are beyond the control of lifecycle.
Craig Cunningham: Welcome Craig we look forward to your contributions.
Craig Cunningham: On our most recent call in March we provided an update on the progress made since pausing construction at the Rochester hub in October 23, and initiated a comprehensive review.
Speaker Change: Actual results could differ materially from our forward looking statements if any of our key assumptions are incorrect, including because of factors discussed in today's press release. During this conference call and in our past reports and filings with the U S Securities and Exchange Commission and then show you a securities commissions in Canada.
Craig Cunningham: Today, we are pleased to share additional updates on the steps we've taken towards achieving the key objectives from this review.
Craig Cunningham: Providing an overview of our commercial highlights and also discuss our first quarter financial and operating results.
Craig Cunningham: Starting on slide three we continue to make progress on our key strategic priorities that we outlined on our last call.
These documents can be found in our website at investors <unk> lifecycle dotcom.
Craig Cunningham: First as part of our comprehensive review of the Rochester hub.
Speaker Change: We do not undertake any duty to update any forward looking statements, whether written or oral made during this call or from time to time to reflect new information future events or otherwise except as required.
We have events work with the local market to refine cost estimates for the project.
Craig Cunningham: Since we confirmed the technical viability of the mixed hydroxide precipitate for MH <unk> process.
Craig Cunningham: Second with respect to financing.
Speaker Change: These forward looking statements should not be relied upon as representing lifecycle assessment.
Craig Cunningham: We closed on the strategic investment of $75 million by Glencore on March 25.
Speaker Change: As of any date subsequent to the date of this call.
Craig Cunningham: Strengthening our long term partnership and enhancing our liquidity.
Speaker Change: With that I'm pleased to turn the call to RJ. Thank.
Craig Cunningham: Additionally, in parallel with our comprehensive review, we had working closely with the <unk> loan programs office on key financial technical and legal horse rates towards the close of the conditional commitment for a loan for gross proceeds of up to $375 million.
RJ: Thank you Louis and good morning, everyone.
RJ: Well he has been with lifecycle for nearly two years. In addition to heading up marketing communications. He has also taken on leading regulatory affairs and Investor Relations.
Speaker Change: No. One asked me is moving on to pursue other opportunities.
RJ: I want to acknowledge her contributions to lifecycle and wish her well in her future endeavors.
Craig Cunningham: Third regarding liquidity.
Craig Cunningham: Part of our cash preservation plan.
Now I'd like to introduce Craig Cunningham.
Craig Cunningham: And in conjunction with our plan to right size and right shape organization.
Hi cycles interim CFO.
We transitioned from a regional management model to a centralized model to better position lifecycle for future success.
Craig Cunningham: We're excited add him to the team and are confident that it would be a strong addition to the company.
Craig Cunningham: Craig has extensive background in executive level leadership.
This strategic decision is expected to generate approximately $10 million.
Craig Cunningham: Brings more than 17 years of accounting finance operational and capital.
Craig Cunningham: In annualized savings from lower payroll costs.
Craig Cunningham: Finally, we continued to optimize our spoke network to reduce cost and improve efficiency.
Craig Cunningham: We remain focused on prioritizing our generations we spoke.
Craig Cunningham: As we align with EV and battery OEM customers, who continue to execute on growth plans in North America and Europe.
Craig Cunningham: Turning to slide four.
Craig Cunningham: For an update on the comprehensive review for the restart of the Rochester hub project.
Craig Cunningham: On our last call. We are part of that we've completed an internal technical review confirmed the viability of the MSP process as part of the potential change in our product development strategy for the Rochester hub.
We provided an update on the progress made since pausing construction at the Rochester hub in October 23, and initiating a comprehensive review.
Craig Cunningham: Since then another work stream that has significantly progressed is work with the local market regarding major construction contracts to refine our capital estimates for the project.
Today, we are pleased to share additional updates on the steps we've taken towards achieving the key objectives from this review.
Craig Cunningham: Our current estimated cost to complete the Rochester hub project is approximately $504 million for the MSP scope, which includes the total cash spend as of March 31 2024.
Providing an overview of our commercial highlights and also discuss our first quarter financial and operating results.
Craig Cunningham: We note. This estimate is subject to a number of assumptions and is likely to change as we continue to complete our comprehensive review work.
Starting on slide three we continue to make progress on our key strategic priorities that we outlined on our last call.
Our near term priorities for the restart of the project include completing the technical and economic review, which dovetails with the daily load of closing thoughts.
First as part of our comprehensive review of the Rochester hub.
We have advanced work with the local market to refine cost estimates for the project.
Craig Cunningham: Turning to slide five.
Since we confirmed the technical viability of the mixed hydroxide precipitate for MH <unk> process.
Craig Cunningham: Key initiatives, we've completed two enhanced liquidity.
Craig Cunningham: First regarding financing in late March we were pleased to announce that we closed on the previously announced $75 million investment for Glencore.
Second with respect to financing.
We closed on the strategic investment of $75 million by Glencore on March 25.
Craig Cunningham: <unk> are long term partnerships and enhancing our liquidity position.
Strengthening our long term partnership and enhancing our liquidity.
Craig Cunningham: In late April.
Additionally, in parallel with our comprehensive review, we had working closely with the <unk> loan programs office on key financial technical and legal horse rates towards close of the conditional commitment for a loan for gross proceeds of up to $375 million.
Craig Cunningham: We received approximately $5 $8 million as the first tranche of the total grant for up to $6 9 million from the German state effect in the AMOLED for Jeremy spoke.
Craig Cunningham: This is another example of the positive support we continue to receive from our local stakeholders.
Third regarding liquidity.
Craig Cunningham: We remain committed to diligently exploring strategic alternatives and financing options to enhance our liquidity.
Part of our cash preservation plan.
And in conjunction with our plan to right size and right shape organization, we transitioned from a regional management model to a centralized model to better position lifecycle for future success.
Craig Cunningham: Second we are strategically managing our cash to support our liquidity needs as part of the cash preservation plan.
In March we made a strategic decision to pivot from our regional business model to centralize one.
This strategic decision is expected to generate approximately $10 million in annualized savings from lower payroll costs.
Craig Cunningham: We're organizing lifecycle to drive increased efficiencies.
Finally, we continue to optimize our spoke network to reduce cost and improve efficiency.
Craig Cunningham: This decision is expected to generate approximately $10 million in annualized cost savings through workforce reductions.
Main focus on prioritizing our generation fleet.
Craig Cunningham: In addition, we've been actively engaged with certain contractors and suppliers to the Rochester hub.
As we align with EV and battery OEM customers, who continue to execute on growth plans in North America and Europe.
Craig Cunningham: And now have agreements in place providing for extended payment cycles.
Craig Cunningham: Looking forward, we are exploring further opportunities to increase efficiencies across organization, including realizing cost savings from our spoke operations and implementing additional adjustments to noncore SG&A expenditures.
Turning to slide four for.
For an update on the comprehensive review for the restart of the Rochester hub project.
On our last call. We are part of that we've completed an internal technical review confirmed the viability of the MSP process as part of the potential change in our product development strategy for the Rochester hub.
Craig Cunningham: Finally, we continue to evaluate further positive slowdown or spoke operations.
And those previously announced in lock step with commercial demand.
Since then another work stream that has significantly progressed is work with the local market regarding major construction contracts to refine our capital estimates for the project.
Craig Cunningham: Turning to slide six for.
Craig Cunningham: For an overview of lifecycle as commercial agreements.
Craig Cunningham: Our capability to process all types of what's my batteries independent of form factor and chemistry.
Our current estimated cost to complete the Rochester hub project is approximately $504 million for the MSP scope, which includes the total cash spend as of March 31 2024.
Craig Cunningham: Coupled with our operational capacity has led to the establishment of a broadly diversified global base of battery supply customers spanning the entire battery supply chain.
We note. This estimate is subject to a number of assumptions and is likely to change as we continue to complete our comprehensive review work.
Craig Cunningham: Sherman left of the slide we are pleased to report that during the first quarter, we continue to attract new customers, while extending and amending existing agreements.
Our near term priorities for the restart of the project include completing the technical and economic review, which dovetails with the DAA mode of closing thoughts.
Craig Cunningham: We signed new recycling agreements with some of the largest Oems in the world as well as leading battery cell manufacturers in both Europe, and North America for battery materials Fintech.
Turning to slide five which.
Which highlights key initiatives, we've completed two enhanced liquidity.
Craig Cunningham: In Europe. This included signing new agreements or expanding in amending current agreements with three of the largest EV Oems with the concept.
First regarding financing in late March we were pleased to announce that we closed on the previously announced $75 million investment for Glencore strengthening our long term partnership and enhancing our liquidity position.
Craig Cunningham: We now have agreements in place with four of the largest Oems in Europe to recycle modules and full battery pack.
In late April we received approximately $5 8 million as the first tranche of a total grant for up to $6 9 million from the German state of Saxony Anhalt.
Craig Cunningham: We continue to see broad based support for our differentiated technologies across both continents reflected in our position as a preferred recycling partner for leading global battery EV and energy storage Oems.
Jeremy spoke.
This is another example of the positive support we continue to receive from our local stakeholders.
Craig Cunningham: Turning to slide seven for some highlights of our spokes technology and operations.
We remain committed to diligently exploring strategic alternatives and financing options to enhance our liquidity.
Craig Cunningham: As a reminder, lifecycle developed a patented method for processing all forms of lift by batteries, regardless of chemistry form factor or state of charge.
Second we are strategically managing our cash to support our liquidity needs as part of the cash preservation plan.
Craig Cunningham: This environmentally friendly process does not rely on any thermal treatment and is highly scalable for the growing EV battery market.
In March we made a strategic decision to pivot from our regional business model to centralize one.
Reorganizing lifecycle to drive increased efficiencies.
Craig Cunningham: We are prioritizing our generation three spokes, which can process full battery packs without the need to dismantle and aligning with EV and battery OEM partners, who comprise a large share of our global battery feet intake.
This decision is expected to generate approximately $10 million in annualized cost savings through workforce reductions.
In addition, we've been actively engaged with certain contractors and suppliers to the Rochester hub.
Craig Cunningham: It is worth highlighting that four of our top five partners repeat intake during Q1, our EV Oems.
And now have agreements in place providing for extended payment cycles.
Looking forward, we are exploring further opportunities to increase efficiencies across organization, including realizing cost savings from our spoke operations and implementing additional adjustments to non core SG&A expenditures.
Craig Cunningham: With respect to our spoke operations, we continue to see a higher composition of EV battery packs and our input feed.
Craig Cunningham: With approximately 41% by mass.
Of the total battery materials processed at our spokes being EV battery pack.
Finally, we continue to evaluate further positive slowdown or spoke operations beyond those previously announced in lock step with commercial demand.
Craig Cunningham: We believe we are in a strategic position to receive the feedstock materials due to the enhanced capabilities of our gen. Three spokes.
Turning to slide six for.
Craig Cunningham: Which can efficiently profits full battery pack.
For an overview of lifecycle as commercial agreements.
Craig Cunningham: Turning to slide eight providing an overview of our sustainability performance as we expect to issue our 2023 sustainability report in the coming weeks.
Our capability to process all types of what's my batteries independent of form factor and chemistry.
Coupled with our operational capacity has led to the establishment of a broadly diversified global base of battery supply customers spanning the entire battery supply chain.
Craig Cunningham: Our report has been aligned with SaaS based standards and builds on the interim Barkley issued last year.
Craig Cunningham: In 2023, we strengthened our data tracking and reporting capabilities for greater transparency.
Sherman left of the slide we are pleased to report that during the first quarter, we continued to attract new customers, while extending and amending existing agreements.
Craig Cunningham: Ultimately better data will help us to enhance our performance in this important area of our business.
Craig Cunningham: Two key takeaways from our 2023 performance include.
We signed new recycling agreements with some of the largest Oems in the world as well as leading battery cell manufacturers in both Europe, and North America for battery materials Fintech.
Craig Cunningham: Zero percent of our scope one air emissions are from a recycling process, which is reflective of our environmentally friendly non thermal recycling technologies.
In Europe. This included signing new agreements or expanding in amending current agreements with three of the largest <unk> of the concert.
Craig Cunningham: Our Jimmy spoke procured all of its electricity from renewable sources.
Craig Cunningham: And we continue to prioritize safety and have had zero critical safety environmental and community healthcare.
We now have agreements in place with four of the largest Oems in Europe to recycle modules and full battery pack.
Craig Cunningham: Since our company's inception.
Craig Cunningham: Sustainability is core to our business and believe it is a value differentiator for our company.
We continue to see broad based support for a differentiated technologies across both continents reflected in our position as a preferred recycling partner for leading global battery EV and energy storage Oems.
Craig Cunningham: Not only sound ESG performance good for the World and our community, but it also supports our position as a preferred global recycling player.
With that I'll now turn over to Craig provide a review of the financials.
Turning to slide seven for some highlights of our spokes technology and operations.
Craig Cunningham: Thank you Jorge.
Craig Cunningham: Before getting into the financial results I'd like to start by saying, how pleased I am to be joining lifecycle.
As a reminder, lifecycle developed a patented method for processing all forms of lift by batteries, regardless of chemistry form factor or state of charge.
Craig Cunningham: Jane team built a truly differentiated business model with the capacity to make meaningful contributions to the future of clean energy.
Craig Cunningham: Look forward to the opportunity to help execute on this mission is to create value for our shareholders.
This environmentally friendly process does not rely on any thermal treatment and is highly scalable for the growing EV battery market.
Craig Cunningham: Turning to slide nine for a review of our 2024, our first quarter financial results highlights include improved revenue cost of sales adjusted EBITDA and cash position for the first quarter of 2024 versus 2023.
We are prioritizing our generation three spokes, which can process full battery packs without the need to dismantle and aligning with EV and battery OEM partners, who comprise a large share of our global battery feet intake.
Starting with the sales of Black mass, which were 946 tonnes, a 7% increase versus 891 tons sold in 2023.
It is worth highlighting that four of our top five partners repeat intake during Q1, our EV Oems.
Craig Cunningham: Product sales and recycling service revenues before noncash fair value pricing adjustments decreased to $4 6 million compared to $7 7 million in 2023. The decrease was largely driven by reduced market prices for cobalt nickel and partially offset by higher recycling service revenue and an increase in products sold.
With respect to our spoke operations, we continue to see higher composition of EV battery packs and our input feed.
With approximately 41% by mass.
Of the total battery materials processed at our spokes being EV battery pack.
We believe we are in a strategic position to receive the feedstock material due to the enhanced capabilities of our Gen III spokes.
Craig Cunningham: Total revenue increased 17% to $4 2 million, reflecting lower unfavorable noncash fair value pricing adjustments of <unk> $4 million versus an unfavorable adjustment of $4 1 million in 2023.
Which can efficiently profits full battery pack.
Turning to slide eight providing in a review of our sustainability performance as we expect to issue our 2023 sustainability report in the coming weeks.
Craig Cunningham: Moving to cost of sales, which decreased 12% to $16 8 million versus $19 1 million in 2023.
Our record has been aligned with SaaS based standards and builds on the interim Barkley issued last year.
Cost of sales attributable to product revenue decreased by $3 2 million or 17% compared to last year. As a result of lower production levels, partially offset by increased operational costs associated with repairs and maintenance activities.
In 2023, we strengthened our data tracking and reporting capabilities for greater transparency.
Ultimately better data will help us to enhance our performance in this important area of our business.
Craig Cunningham: Cost of sales attributable to service revenue increased by <unk> 9 million compared to last year due to new service contracts entered with an existing customer that commenced in October 2023.
Key takeaways from our 2023 performance include.
Zero percent of our scope on the air emissions are from a recycling process, which is reflective of our environmentally friendly non thermal recycling technologies.
Craig Cunningham: SG&A expenses were $31 7 million versus $22 7 million in 2023, primarily driven by higher professional fees and legal fees related to the Rochester hub construction pause as well as severance cost and <unk> from the March workforce reduction I would like to note that these expenses are onetime in nature.
Our Jeremy spoke procured all of it budgets need from renewable sources.
We continue to prioritize safety and zero critical safety environmental and community.
Since our company's inception.
Sustainability is core to our business and believe it is a value differentiator for our company.
Craig Cunningham: This increase was partially offset by lower recurring personnel and other administrative costs of $3 7 million.
Not only sound ESG performance good for the world and our community.
But it also supports our position as a preferred global prospective partners.
Craig Cunningham: Other expenses were $92 5 million compared to other income of $2 7 million in the prior year, primarily due to the debt extinguishment loss of $58 9 million and unrealized fair value loss on financial instruments of $23 8 million relating to the amendment and restatement of the terms of the convertible notes issued by life.
With that I'll now turn over to Craig provide a review of the financials.
Thank you Jorge.
Before getting into the financial results I'd like to start by saying, how pleased I am to be joining lifecycle.
<unk> team built a truly differentiated business model with the capacity to make meaningful contributions to the future of clean energy.
Craig Cunningham: Michael.
Look forward to the opportunity to help execute on this mission and to create value for our shareholders.
Craig Cunningham: Adjusted EBITDA loss was $27 4 million compared to a loss of $37 9 million in the first quarter of 2023. This was largely driven by higher revenue lower cost of sales, partially offset by the increase in SG&A.
Turning to slide nine for a review of our 2024, our first quarter financial results highlights include improved revenue cost of sales adjusted EBITDA and cash position for the first quarter of 2024 versus 2023.
Craig Cunningham: As of March 31, 2024, lifecycle has cash and cash equivalents of $109 1 million versus $72 6 million at the end of 2023, which includes the gross proceeds from Glencore financing that closed during the first quarter.
Starting with the sales of Black mass, which were 946 times and a 7% increase versus 891 tons sold in 2023.
Product sales and recycling service revenues before noncash fair value pricing adjustments decreased to $4 6 million compared to $7 7 million in 2023. The decrease was largely driven by reduced market prices for cobalt nickel and partially offset by higher recycling service revenue and an increase in products sold.
Craig Cunningham: I will now turn it back to RJ.
RJ Coach: Thank you Craig.
RJ Coach: Turning to slide 10, we continue to see favorable long term industry demand trends in both North America and Europe.
RJ Coach: The chart on the left illustrates the rising adoption of electric vehicles with sales achieving a CAGR of approximately 45%.
Total revenue increased 17% to $4 2 million, reflecting lower unfavorable noncash fair value pricing adjustments of <unk> $4 million versus an unfavorable adjustment of $4 1 million in 2023.
RJ Coach: From 2019 for 'twenty two 'twenty three.
RJ Coach: Notably third party sources are projecting a robust 25% CAGR office space the decade.
RJ Coach: If you'd underwrite these growth dynamics support the robust demand for an expanding market for recycling of all forms of lift my batteries.
Moving to cost of sales, which decreased 12% to $16 8 million versus $19 1 million in 2023.
RJ Coach: Near to midterm the.
Cost of sales attributable to product revenue decreased by $3 2 million or 17% compared to last year. As a result of lower production levels, partially offset by increased operational costs associated with repairs and maintenance activities.
RJ Coach: The increase in recycling materials is largely being driven by manufacturing scrap from Giga factory growth.
RJ Coach: Supplemented by end of life battery feedstock to the end of the decade.
RJ Coach: It is projected that by 2030 demand for recycling materials will increase by up to six times 2023 level.
Cost of sales attributable to service revenue increased by <unk> 9 million compared to last year due to new service contracts entered with an existing customer that commenced in October 2023.
Turning to slide 11, and concluding on lifecycle go forward strategy and key objectives.
SG&A expenses were $31 7 million versus $22 7 million in 2023, primarily driven by higher professional fees and legal fees related to the Rochester hub construction pause as well as severance costs and income remarks workforce reduction I would like to note that these expenses are onetime in nature.
RJ Coach: We continue to work closely with <unk> towards closing of a loan for gross proceeds of up to $375 million.
RJ Coach: Second we continue to evaluate a range of further.
Financing and strategic alternatives to bolster our liquidity and facilitates the restart of the Rochester project.
This increase was partially offset by lower recurring personnel and other administrative costs of $3 7 million.
RJ Coach: Third we remain focused on completing our technical and economic analysis of our go forward approach for the Rochester hub.
Other expenses were $92 5 million compared to other income of $2 7 million in the prior year, primarily due to the debt extinguishment loss of $58 9 million and unrealized fair value loss on financial instruments of $23 8 million relating to the amendment and restatement of the terms of the convertible notes issued by <unk>.
RJ Coach: And finally regarding the spoken hub network.
We are validating our spoke network to densify further opportunities to drive down costs, while focusing our production on our gen. Three spokes to support our key EV and battery OEM customers.
Speaker Change: Operator, we're now ready for questions.
Speaker Change: Thank you.
Michael adjust.
Speaker Change: At this time, if you would like to ask a question. Please press star one on your telephone keypad.
Adjusted EBITDA loss was $27 4 million compared to a loss of $37 9 million in the first quarter of 2023. This was largely driven by higher revenue lower cost of sales, partially offset by the increase in SG&A.
Speaker Change: You wish to remove yourself from the queue you may do so by pressing star Q.
Speaker Change: We remind you to please pickup your handset for optimal sound quality we.
As of March 31, 2024, lifecycle has cash and cash equivalents of $109 1 million versus $70 6 million at the end of 2023, which includes the gross proceeds from Glencore financing that closed during the first quarter.
Speaker Change: We will take our first question from Jeff <unk> with TD Cohen.
Jeff: Hi, good morning.
Jeff: I just wanted to start with the.
Jeff: Our review for the hub.
Jeff: Let's see if you could provide any more detail on the.
I'll now turn it back to RJ.
Jeff: On the kind of work you're doing to refine costs there.
Thank you Craig.
Turning to slide 10, we continue to see favorable long term industry demand trends in both North America and Europe.
Jeff: Whats what.
What kind of steps have been are left in the process and is there any kind of timeline on when you expect to complete the review.
The chart on the left illustrates the rising adoption of electric vehicles with sales achieving a CAGR of approximately 45% from.
Speaker Change: Hey, good morning, Jeff.
From 2019 for 'twenty two 'twenty three.
Speaker Change: Yes, so as I mentioned in my remarks, it's really dovetail it dovetails with the Doj process. So I'd say the key thing that we.
Notably third party sources are projecting a robust 25% CAGR office space the decade.
Speaker Change: Working on right now is working with the local market to refine the capital cost estimate obviously, what we've put out there.
If you'd underwrite these growth dynamics support the robust demand for an expanding market for recycling of all forms of lift my batteries.
Speaker Change: And was reiterated today.
Near to mid term.
The increase in recycling materials is largely being driven by manufacturing scrap from Giga factory growth.
Speaker Change: Our best and latest information.
Speaker Change: But we're doing some additional work at the local market to get their input effectively.
Supplemented by end of life battery feedstock to the end of the decade.
Speaker Change: <unk> refined.
After it effectively so that's important obviously because it drives some of the support for the work for the <unk>.
It is projected that by 2030 demand for recycling materials will increase by up to six times from 2023 level.
Speaker Change: But it is also important obviously needs to be.
Turning to slide 11, and concluding on lifecycle go forward strategy and key objectives.
Speaker Change: Working towards a restart in terms of timing I would say, it's again very intertwined it dovetails with the <unk>. So the priority in my top priority is closing the <unk> loan.
We continue to work closely with a view towards closing of a loan for gross proceeds of up to $375 million.
Speaker Change: And Thats really the enabler to a restart.
Second we continue to evaluate a range of further.
<unk> financing and strategic alternatives to bolster our liquidity and facilitate the restart of the Rochester have project.
Speaker Change: Gotcha Okay.
Speaker Change: Yes.
Speaker Change: Regarding a restart.
Is there any kind of capex needed this year.
Third we remain focused on completing our technical and economic analysis of our go forward approach for the Rochester hub.
Preserves the hub at all.
And finally regarding the spoken hub network we.
Speaker Change: <unk>.
Speaker Change: Would you plan to build in the blackness inventory at all this year.
We are validating our spoke network identify further opportunities to drive down costs.
Speaker Change: You mentioned that you may focus on just the Gen III spoke so.
Focusing our production on our Gen three spokes to support our key EV and battery OEM customers.
Speaker Change: Maybe you would have.
Speaker Change: Reduce your black mass production or.
Operator, we're now ready for questions.
At some point this year and just anything on kind of what youre seeing on the inventory side and maybe any kind of.
Thank you.
At this time, if you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Incremental capex spend that you might.
If you wish to remove yourself from the queue you may do so by pressing star Q.
Speaker Change: This year thanks.
Speaker Change: Yeah for sure. So in general I would say Q1 is relatively indicative of the run rate on that so we don't expect anything significantly incremental around capex. During Q1, we adjusted first part around the makes sense of the <unk>.
We remind you to please pickup your handset for optimal sound quality.
We'll take our first question from Jeff <unk> with TD Cohen.
Hi, good morning.
Just wanted to start with the <unk>.
Review for the hub and let's see if you could provide any more detail on the.
Speaker Change: So we're very focused on ensuring that the doctors are preserved.
On the kind of work you're doing to refining costs there.
There is some level of spend but it's not very material. So that is included in the financials that you saw in Q1.
Whats what.
What kind of steps have been are left.
Speaker Change: And I will continue of course, that's the priority.
The process.
Speaker Change: And around the black Knight's inventory build so our party right now as we continue to focus on managing our liquidity is going to continue to be to sell the black box that we produce.
Is there any kind of timeline on when you expect to complete the review.
Hey, good morning, Jeff.
Yes, so as I mentioned in my remarks, it's really dovetail it dovetails with the Doj process. So I'd say the key thing that we're working on right now is working with the local market to refine the capital cost estimate obviously, what we've put out there.
Again, I'd say Q1 is relatively indicative of the run rate of where we are.
Speaker Change: After further changes philosophy, let the market know, but where we stand right now the key focus is on Germany, Arizona, Alabama.
And was reiterated today.
Speaker Change: Okay. Thanks very much.
Our best and latest information.
Speaker Change: Thank you.
But we're doing some additional work at the local market to get their input effectively.
Speaker Change: Thank you.
Speaker Change: We will take our next question from Brian Dobson with Chardan capital markets.
Validate refine.
The extra effectively so that's important I will say because it drives some of the support for the work for the <unk>.
Brian Dobson: Hi, good morning, Thanks, very much for taking my question.
But it is also important obviously needs to be.
Brian Dobson: I've got a quick follow up question.
Working towards a restart in terms of timing I would say, it's again very intertwined it dovetails with the <unk>.
Brian Dobson: On the Rochester hub Theres been a lot of talk recently about Piedmont chemicals in battery production.
The priority in my top priority is closing the <unk> loan.
Speaker Change: <unk> also been battered cycling against given recent regulations put in place by the EPA.
And Thats really the enabler to a restart.
Speaker Change: How does your recycling process.
Gotcha Okay.
And just.
Speaker Change: Chemicals are.
Regarding a restart.
Speaker Change: Are they I guess mitigated.
Is there any kind of capex needed this year too.
Speaker Change: Prior to.
Speaker Change: Prior to the raw materials being shipped for sale.
Preserved.
Hub at all.
And would you plan to build in the blackness inventory at all this year.
Good morning, Brian.
Speaker Change: Building up.
Speaker Change: Okay.
Yes, no worries no worries then yes very.
Brian Dobson: Very good question. So it was definitely a hot topic administered actually has been for a couple of years. So the key thing.
You mentioned that you may focus on just the Gen III spoke so.
Maybe you would.
Brian Dobson: So <unk> our foreign containing.
Reduce your black mass production or.
Brian Dobson: It's a political issue with it as it gets into People's bodies, and it can be quite harmful to the ecosystem and essentially in humans. So that's the big focus on key faster makes it such a hot topic for the gig server realms kind of grounding.
At some point this year, just anything on kind of what youre seeing on the inventory side and maybe any kind of.
Incremental capex spend that you might.
This year thanks.
Yes for sure. So in general I would say Q1 is relatively indicative of the run rate on that so we don't expect anything significantly incremental around capex. During Q1, we addressed the first part around the maintenance of the <unk>.
Brian Dobson: The big thing about.
Brian Dobson: It looks on batteries and where the <unk> contained at the end of the day, if you're not treating the batteries thermally you keep a flooring and basically non cash its non admitted form.
Brian Dobson: I can give you more depth, but there's different types of flooring or may go different places in the process, but the bottom line is we do not.
So we're very focused on ensuring that the docs are preserved.
Brian Dobson: Admit like PFS for example into the year. This is one of the challenges actually with the traditional process for recycling with one batteries, so where you heat up the batteries and really what we're trying to do in simple terms is.
There is some level of spend but it's not very material. So that is included in the financials that you saw in Q1.
And I will continue of course, that's the priority.
And around the black Knight's inventory build so our party right now as we continue to focus on managing our liquidity is going to continue to be to sell the black box that we produce.
Brian Dobson: Degrade the binder, the glue that keeps the cathode and the anode on the respective oils, that's a fluorine based binder and Thats one of the common places where you emit flooring.
Again, I'd say Q1 is relatively indicative of the run rate of where we are.
Brian Dobson: So in our case, the flooring goes into solid products and as a result doesn't get admitted to the atmosphere and Thats also been a part of the permitting that we did for the Rochester out.
Further changes philosophy, let the market know, but where we stand right now.
Key focus is on Germany, Arizona, Alabama.
Speaker Change: Yes, excellent and do you think that this gives a competitive advantage to tankers recycling, but you do versus the pyro base.
Okay. Thanks very much.
Thank you.
Thank you.
We will take our next question from Brian Dobson with Chardan capital markets.
Speaker Change: Cycling with those with those players need to stop that type of recycling under these new regulations.
Hi, good morning, Thanks, very much for taking my question.
Speaker Change: Yes, we do think it gives us a big advantage because customers have been focused on it for a while.
I've got a quick follow up question.
Speaker Change: The very traditional the non lifecycle, if you will.
On the Rochester hub Theres been a lot of talk recently about Piedmont chemicals in battery production.
Speaker Change: Approach as I mentioned, there is basically some sort of pretreatment Cherry Park batteries, and then very commonly some sort of whats called calcination.
Also within battery recycling I guess, given recent regulations put in place by the EPA.
Speaker Change: The thermal step that is the step that is of a concern for flooring emissions.
How does your recycling process chemicals.
Speaker Change: And we see that as a very common approach. It comes from Asia actually has been installed.
Are they I guess mitigated.
Prior to.
Prior to the raw materials being shipped for sale.
Speaker Change: North America, and Europe, so would the need potentially stop operations not sure.
Good morning, Brian within the hub capability.
Speaker Change: But yes, it's a very hot topic and of course going to renewed interest.
Folks.
Yes, no worries no worries then yes very.
Speaker Change: Great. Thanks very much.
Very good question. So it was definitely a hot topic administered actually has been for a couple of years. So the key thing on this.
Speaker Change: Thanks, Brian.
Thank you.
Speaker Change: Once again, if you would like to ask a question. Please press star and one on your telephone keypad now.
So <unk> our foreign containing.
It's a political issue with it as it gets into People's bodies, and it can be quite harmful to the ecosystem and essentially in humans. So that's the big focus on key fastener might've been such a hot topic for the gig server realms kind of grounding.
Speaker Change: And we will take our next question from Matthew O'keefe with Cantor Fitzgerald.
Matthew O'Keefe: Thanks, Thanks for taking my call good morning.
Matthew O'Keefe: First question for me is just on the hub operations.
The big thing about.
Matthew O'Keefe: You've got four operating hub and you did 1300 tonnes of black mask, but.
It looks on batteries and where the <unk> contained at the end of the day, if you're not treating the batteries thermally you keep a flooring and basically non cash its non admitted form.
The capacity of those four hubs.
Matthew O'Keefe: Nameplate capacity, it's over 10000 isn't it in that range.
I can give you more depth, but there's different types of flooring or may go different places in the process, but the bottom line is we do not.
Speaker Change: Good morning, Matt.
Yes, so that's the input capacity curve.
Net like PFS for example into the Air. This is one of the challenges actually with the traditional process for recycling with one batteries, so where you heat up the batteries and really what we're trying to do in simple terms is.
Speaker Change: Yes, yes, so that's in terms of batteries to get to those black bounce it really depends on like the form factor of the material.
Speaker Change: Let's say roughly half so that sounds like full nameplate, but also keeping mindful shifts right. So really the way that we operate is very focused on.
Degrade the binder, the glue that keeps the cathode and the anode on the respective oils, that's a fluorine based binder and Thats one of the common places where you emit flooring. So in our case the flooring goes into solid products and as a result doesn't get admitted to the atmosphere and Thats also been a part of the permitting that we did for the Rochester out.
Speaker Change: Really prioritizing the shifts around where the commercial demand is and it does move around over time right. So the more ships, we have closer estimate.
Speaker Change: So I guess, what I was getting at is like what kind of I guess what.
Yes, excellent and do you think that this gives us a competitive advantage the type of recycling, but you do versus the pyro base.
Speaker Change: What capacity, you're running at right now and because you've got point joining in on full capacity you made the $1 $9 million in revenue and $15 9 million of costs.
Cycling with those with those players need to stop that type of recycling under these new regulations.
Speaker Change: Why aren't you just running one spoke in shipping everything there were two one in Europe and North America.
Yes, we do think it gives us a big advantage because customers have been focused on it for a while.
Speaker Change: Yes, so are we talking about optimizing the spoke network.
The very traditional the non lifecycle, if you will.
Speaker Change: As part of the focus right. So there's a balance there. So part of the reason to have numerous focuses are closer to the batteries are and it has been tough to ship batteries all around the world.
Approach as I mentioned, there is basically some sort of pretreatment.
<unk> batteries, and then very commonly some sort of whats called calcination.
Speaker Change: But as we look at the Gen. III that is a big focus of ours basically driving through.
That's the thermal step that is the step that is of a concern for flooring emissions.
Speaker Change: But where it makes sense, which then drives down the unit cost, which then makes it much more efficient but.
And we see that as a very common approach it comes from Asia actually.
Speaker Change: We will just continue to be thoughtful around that there is a bit of a working capital consideration there too.
<unk> installed in North America and Europe.
Speaker Change: So it's a balance right.
Would they need to simply stop operations not sure.
Speaker Change: To what degree we want to be pushing so we're always looking at that.
But yes, it's a very hot topic and of course going to renewed interest.
And we'll continue to update us let's take vacation.
Great. Thanks very much.
Speaker Change: Okay.
Thanks, Brian.
Speaker Change: Alright.
Thank you.
But you didn't say you don't really have a number of sort of what percentage of capacity you're running at.
Once again, if you would like to ask a question. Please press star and one on your telephone keypad now.
Speaker Change: Yes, we don't really like usually gets goes I spoke to kind of look on a network wide, but it does depend personal network and network wide.
And we will take our next question from Matthew O'keefe with Cantor Fitzgerald.
Sure.
Thanks, Thanks for taking my call good morning.
Speaker Change: Net required I mean, you can you can do the math right. If you take 10000 tons of.
First question for me is just on the hub operation.
You've got four operating hub and you did 1300 tonnes of black mass, but what's the capacity of those four hubs.
Speaker Change: If our capacity through black mass for silver producing so yes, youll see that we did disclose right last quarter that we flowed through so.
Speaker Change: This is reflective of that.
Nameplate capacity, it's over 10000 isn't it isn't.
Speaker Change: Now the question really is combine that with the commercial demand in the working capital needs. What is the best choice around to your question right, where do you consolidate that demand potentially or not.
In that range.
Speaker Change: Of mainly good morning, Matt.
Matt: So that's the input capacity curve so.
Speaker Change: So.
Speaker Change: Yes.
Matt: Yes, yes, so that's in terms of batteries to get to the Black Mountain.
Speaker Change: Pretty hefty burn.
Speaker Change: Okay, and then if I may ask one other thing I didn't it didn't have a time to time to go through the 10-K, but.
Matt: Really depends on like the form factor of the material.
Matt: Let's say roughly half so that sounds like full nameplate, but also keeping mindful shifts right. So really the way that we operate is very focused on.
Speaker Change: On the debt side.
Speaker Change: One of the things, we do with Glencore here.
You've renegotiated some of that.
Speaker Change: Yes.
Speaker Change: Converts right and to do it.
Matt: Really prioritizing the shifts around where the commercial demand is and it does move around over time right. So the more ships, we have closer estimate.
Speaker Change: Took some serious structure. These unsecured converts in a portion of that is now into secured.
Speaker Change: Congrats does that correct senior secured the converts.
Matt: So I guess, what I was getting at is like what kind of.
Speaker Change: Yes, sure sure sure no problem. So yes. So there's two components of that there's the new investments of $75 million investments about the senior secured convert right.
Matt: I guess what.
Matt: What capacity you're running at right now and because you've got point joining in on full capacity you may have been $1 $9 million in revenue on 15.
Speaker Change: Alright, Thats one that closed and then if you are asking about is basically the restructuring youre re striking of the old convert the $200 million convert from transferring to.
Matt: 9 million of costs.
Speaker Change: Why aren't you just running one spoke in shipping everything there were two one in Europe and North America.
Speaker Change: So there are two triggers for that.
Speaker Change: Yes, so are we talking about optimizing the network.
Speaker Change: And this is back to the March 25 docks. So basically have just had a very high level.
Speaker Change: As part of the focus right. So there's a balance there. So part of the reason to have numerous focuses are closer to the batteries are and it has been tough to ship batteries all around the world.
Speaker Change: It will re price based on the <unk> of 30 days plus 25%.
Madison: But as we look at the Gen. III spoke that is a big focus right is basically driving through throughput where it makes sense, which then drive down unit cost, which then makes it much more efficient but.
Speaker Change: After key milestones or.
Speaker Change: Saturday earlier of a day.
Speaker Change: So the two milestones are.
Louis D.: We will just continue to be thoughtful around that there is a bit of a working capital consideration there too.
Speaker Change: The closing or the <unk>.
Speaker Change: <unk> that definitive documentation around the theory loan.
Louis D.: So it's a balance right.
Speaker Change: So that's the first one or the end of this year.
Speaker Change: To what degree we want to be pushing so we're always looking at that.
Speaker Change: So thats the first milestone half of it and the second is associated with a few different trigger points, but it's focused on commercial production from the Rochester hub.
Speaker Change: And we will continue to update it.
Speaker Change: Jason.
Speaker Change: Okay.
Speaker Change: Alright.
Speaker Change: But you didn't say you don't really have a number of sort of what percentage of capacity you're running at.
Speaker Change: Or a future date, so that's effectively how it's going to be repriced and part of that yet.
Speaker Change: Yes, we don't really like usually gets goes by spoke to kind of look on a network wide, but it does depend personal networks network wide.
Speaker Change: His addition of security for that original note that was part of the totality of the transaction that we did with Bancorp.
Speaker Change: Net required I mean, you can you can do the math right. If you take 10000 tons of <unk>.
Speaker Change: The benefit there just to be clear benefit there just to be clear is we're getting an extended maturity associated with that original note. So we five years for those two tranches from the point, where they get re priced effectively and that has a good amount of time relative to the original maturity date. So.
Speaker Change: Input capacity through black mass for silver producing so yes, you will see that we did disclose right last quarter that we flowed through.
Speaker Change: So this is reflective of that.
Speaker Change: Now the question really is combine that with the commercial demand in the working capital needs. What's the best choice around to your question, where do you consolidate that demand essentially or not.
Speaker Change: Okay. That's important. Thank you. Thank you for that thanks for clearing that up that's it for me for now thanks.
Speaker Change: Thanks, Matt.
Speaker Change: So.
Speaker Change: Yes.
Speaker Change: Pretty hefty burn.
Speaker Change: Thank you.
Speaker Change: Okay, and then if I may ask one other thing I didn't have time to go through the 10-K, but.
Speaker Change: It appears that there are no further questions in the queue I will now turn the call over to Jay for his closing comments.
Speaker Change: On the debt side.
Speaker Change: One of the things, we do with Glencore here.
Jay: Thank you.
Speaker Change: We renegotiated some of that.
So thanks, everybody again for joining as we mentioned we're laser focused on the key objectives that we outlined we look forward to continuing to update the market.
Speaker Change: Yes.
Speaker Change: Converts right end too so it took some serious structured these unsecured converts in a portion of that is now into secured.
Jay: Taking into.
Speaker Change: Congrats does that correct senior secured the converts.
And again, yes sure sure. So yes. So there's two components of that there's the new investment to $75 million investments about the senior secured convert right.
Speaker Change: This does conclude today's program. Thank you for your participation you may disconnect at any time.
Speaker Change: Alright, Thats on that close and then where you are asking about is basically the restructuring youre re striking.
RJ: The old converted the $200 million convert from transferring to.
Speaker Change: So there are two triggers for that.
Speaker Change: And this is back to the March 25th Dock. So basically have just at a very high level.
Speaker Change: It will reprice based on the <unk> of 30 days plus 25%.
Craig Cunningham: After key milestones or.
Craig Cunningham: Saturday earlier.
Speaker Change: So the two milestones are.
Speaker Change: The closing or the <unk>.
Craig Cunningham: <unk> in the definitive documentation around the daily loan.
Craig Cunningham: So that's the first one or the end of this year.
Craig Cunningham: So thats the first milestone half of it and the second is associated with a few different trigger points, but it's focused on commercial production from the Rochester hub.
Craig Cunningham: For a future date, so that's effectively how it's going to be repriced and part of that yet.
Craig Cunningham: His addition of security for that original note that was part of the totality of the transaction that we did with Bancorp.
Craig Cunningham: Okay. So the benefit there just to make clear that even though just to be clear is we're getting an extended maturity associated with that original note. So we five years for those two tranches from the point, where they get re priced effectively and that is a good amount of time relative to the original maturity date.
Speaker Change: So that is correct.
Speaker Change: That's important. Thank you. Thank you Matt. Thank you for clearing that up that's it for me for now thanks.
Speaker Change: Thanks, Matt.
Speaker Change: Thank you.
Speaker Change: It appears there are no further questions in the queue I will now turn the call over to Jay for his closing comments.
Jay: Thank you.
Jay: So thanks, everybody again for joining as we mentioned we're laser focused on the key objectives that we outlined we look forward to continuing to update the market.
Jay: Again soon.
Yes.
Speaker Change: This does conclude today's program. Thank you for your participation you may disconnect at any time.