Livent (LTHM) surged 8.6% on Friday following the lithium producer's release after the market close on Thursday of a strong second-quarter 2021 earnings report.
The largest U.S.-based lithium pure play, based in Philadelphia, easily beat the Wall Street consensus estimates for revenue and earnings. But what probably most electrified investors was management's raising of full-year 2021 guidance for revenue and a key profitability metric.
Through Aug. 6, Livent stock has gained 222% over the one-year period, compared with the S&P 500's 34.5% return. Most lithium mining stocks have performed well over the past year, largely thanks to investor optimism stemming from the Biden administration's support of electric vehicles -- lithium is a key component in the lithium-ion batteries that power EVs -- and improving conditions for end markets of lithium. Many customers delayed their purchases of lithium during the early stages of the COVID-19 pandemic because of supply-chain disruptions.
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Livent's key numbers
| Metric | Q2 2021 | Q2 2020 | Change (%) |
|---|---|---|---|
| Revenue | $102.2 million | $64.9 million | 57% |
| GAAP operating income | $4.0 million | ($2.2 million) | N/A |
| GAAP net income | $6.5 million | ($0.2 million) | N/A |
| Adjusted net income | $7.8 million | ($0.1 million) | N/A |
| GAAP earnings per share (EPS) | $0.03 | $0.00 | N/A |
| Adjusted EPS | $0.04 | $0.00 | N/A |
Data source: Livent. GAAP = generally accepted accounting principles.
Revenue increased 11% from the first quarter, which the company attributed to a combination of higher volumes sold and higher prices across its key lithium products.
Wall Street was looking for adjusted EPS of $0.02 on revenue of $88.8 million, so Livent exceeded both expectations, with the revenue beat a big one.
Livent had easy comparables because its business was hurt by the early stages of the pandemic. In Q2 2020, its revenue plunged 43% year over year. Its Q2 2021 revenue is still lower than it was two years ago (Q2 2019), but just by 10%. In Q2 2020, its GAAP EPS of breakeven was down from $0.11 in Q2 2019, and adjusted EPS of breakeven was down from $0.12 in Q2 2019.
Livent's cash flow situation is in better shape than a year ago. In the first six months of 2021, the company generated cash of $30.6 million running its operations, compared with using cash of $0.3 million in the year-ago period. It ended the second quarter with cash and cash equivalents of $216.6 million, up from $17.2 million in the year-ago period. It had $239.7 million in long-term debt at the end of Q2, an improvement from $274.6 million in the year-ago period.
Capacity expansion projects resumed in the U.S. and Argentina
In early May, when Livent announced its first-quarter results, it said it had "resumed its capacity expansion plans in the United States and Argentina," which are "backed by the execution of recent long-term supply agreements." These projects were paused in March 2020, soon after the pandemic began.
In that release, Livent said it expects its Bessemer City, North Carolina, project, which adds 5,000 metric tons of lithium hydroxide capacity, to reach commercial production by Q3 2022. And it projects that phase 1 of its Argentina expansion, which adds 10,000 metric tons of lithium carbonate capacity, will reach commercial production by Q1 2023.
Data by YCharts. Albemarle and SQM included for context; neither is a lithium pure play. Shares of all three large lithium miners have been shown up by Piedmont Lithium stock, up 818% over the last year; however, Piedmont is speculative as it's not yet commercially producing lithium.
What management had to say
Here's part of what CEO Paul Graves had to say in the earnings release:
We were pleased to complete the equity issuance and are focused on executing on our capacity expansion projects, which are progressing on-schedule. Increasing production capacity and building upon our low cost and sustainable operations will strengthen our commercial footprint and enhance our position as a partner of choice to leading auto OEMs [original equipment manufacturers] and battery producers.
Graves is referring to Livent's public stock offering in June, which raised about $262 million.
2021 guidance increased
The company said the guidance increases stem largely from higher lithium pricing, as there are "limited additional volumes available."
- Full-year revenue is expected to range from $370 million to $390 million, up from the prior outlook of $335 million to $365 million. The new outlook represents annual growth of 28% to 35%.
- Full-year adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) is now expected to range from $55 million to $70 million, up from $40 million to $60 million. The new outlook represents annual growth of 147% to 214%.
Graves commented on the lithium market and the company's outlook for the market:
Lithium market conditions remain very positive in 2021 and we see the trends continuing into 2022. Pricing conditions have significantly improved during the year and we have seen a notable improvement in lithium hydroxide and carbonate demand alongside strong global electric vehicle sales growth. Increasing support for electrification from OEMs [original equipment manufacturers], governments, and consumers is solidifying expectations for substantial long-term lithium demand growth. However, this is not being met with sufficient reliable, qualified supply expansion, which we expect will be apparent as the market remains tight and occasionally short, particularly over the next few years.
In short, Livent's results are coming back strong after last year's pandemic-driven setbacks.
