Livent (LTHM) stock is up a whopping 24.1% in Wednesday's premarket trading session as of 9:17 a.m. ET following the lithium producer's release on Tuesday afternoon of a first-quarter 2022 earnings report that delighted investors.
The Philadelphia-based company beat the Wall Street consensus estimates for revenue and earnings. But the primary reason for the stock's surge is likely management's significant increase of full-year 2022 guidance for revenue and a key profitability metric.
Lithium is a key component in the lithium-ion batteries that power electric vehicles (EVs). Image source: Getty Images.
Livent's key numbers
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $143.5 million | $91.7 million | 56% |
| GAAP net income | $53.2 million | ($0.8 million) | Flipped to positive from negative |
| Adjusted net income | $40.0 million | $3.6 million | 1,011% |
| GAAP earnings per share (EPS) | $0.28 | ($0.01) | Flipped to positive from negative |
| Adjusted EPS | $0.21 | $0.02 | 950% |
Data source: Livent. GAAP = generally accepted accounting principles.
Revenue was up 17% from the fourth quarter of 2021, as strong customer demand for its lithium products drove the company's realized prices higher than management had anticipated.
Wall Street was looking for adjusted EPS of $0.14 on revenue of $140.2 million, so the company surpassed both expectations.
In the first quarter, Livent generated cash of $10.8 million, down from $12.7 million in the year-ago period. The company ended the period with cash and cash equivalents of $68.5 million, up from $21.5 million in the year-ago period, but down from $113 million last quarter. It also ended the period with long-term debt of $240.8 million, flat with the year-ago period.
For context, in the fourth quarter of 2021, revenue jumped 50% year over year to $122.9 million. Adjusted for one-time items, net income was $15.6 million, or $0.08 per share, compared with a loss of $1.9 million, or $0.01 per share, in the year-ago period.
Capacity expansion update
The company said it remains on track with its previously announced capacity expansions. In addition, it has also announced additional capacity expansions for both lithium carbonate and lithium hydroxide.
Lithium carbonate (all in Argentina):
- The first expansion is on schedule to add 10,000 metric tons of capacity by the first quarter of 2023.
- The second phase of the first expansion is expected to add 10,000 metric tons of capacity by the end of 2023, "which will nearly double Livent's total available LCEs [lithium carbonate equivalents] from 2021 levels," the company said in the earnings release.
- The company began engineering work on a second capacity expansion and has begun evaluating a third expansion. Following the third expansion, it projects it can reach total capacity in Argentina of 100,000 metric tons of lithium carbonate by the end of 2030.
Lithium hydroxide:
- The 5,000-metric-ton capacity expansion in Bessemer City, North Carolina, is projected to start commercial production in the second half of this year.
- Another 15,000 metric tons of capacity is slated to be online in China by the end of 2023.
- The company is evaluating building a facility in either North America or Europe that would process lithium material recovered from recycled batteries into lithium hydroxide.
- Following these expansions, Livent expects to have total lithium hydroxide capacity (excluding Nemaska, discussed below) of at least 55,000 metric tons by the end of 2025, compared with its current capacity of 25,000 metric tons.
Agreement to double ownership stake in Nemaska to 50%
On Monday, Livent announced that it will double its ownership stake in Nemaska Lithium to 50%. Nemaska is a "fully integrated lithium hydroxide development project with 34,000 metric tons of nameplate capacity," Livent said in the press release. The company expects production on this spodumene hard-rock project to begin in 2025.
Livent will issue 17.5 million shares of its common stock to its joint venture partner, The Pallinghurst Group, to acquire its half of Quebec Lithium Partners. Government-owned corporation Investissement Quebec will retain its 50% interest in Nemaska.
2022 guidance increased significantly
Management hiked its full-year outlook for revenue and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) as follows. The increases are due entirely to higher expected realized prices across all its lithium products. There are no changes in its projected volumes.
| Metric | Updated Guidance | Prior Guidance | Updated Projected Change at Midpoint (YOY) |
|---|---|---|---|
| 2022 revenue | $755 million to $835 million | $540 million to $600 million | 89% |
| 2022 adjusted EBITDA | $290 million to $350 million | $160 million to $200 million | 360% |
Data source: Livent. YOY = year over year.
In short, Livent turned in a great quarter, though the biggest treat for investors was the huge increases in full-year 2022 guidance.
