Shares of Livent (LTHM) gained 10.2% in Tuesday's after-hours trading, following the pure-play lithium producer's release of a powerful first-quarter report. Investors' delight is attributable to Livent speeding by Wall Street's revenue and earnings expectations, and management increasing its 2023 guidance for both the top line and a key profitability metric.
The Philadelphia-based company has been benefiting from surging demand for its lithium compounds that can be used to make lithium-ion batteries for electric vehicles (EVs).
Livent's key numbers
| Metric | Q1 2022 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $143.5 million | $253.5 million | 77% |
| GAAP net income | $53.2 million | $114.8 million | 116% |
| Adjusted net income | $40.0 million | $126.0 million | 215% |
| GAAP earnings per share (EPS) | $0.28 | $0.55 | 96% |
| Adjusted EPS | $0.21 | $0.60 | 186% |
Data source: Livent. GAAP = generally accepted accounting principles.
Wall Street was looking for adjusted EPS of $0.39 on revenue of $233.5 million, so the company crushed the bottom-line expectation and sailed by the top-line one.
In the first quarter, Livent generated cash from operations of $102.9 million, about 9.5 times what it generated in the year-ago period. It ended the quarter with $194.1 million in cash and cash equivalents (up from $68.5 million a year ago) and $242.3 million in long-term debt (roughly flat with the year-ago period).
For context, in the prior quarter (the fourth quarter of 2022), revenue soared 79% year over year to $219.4 million, and adjusted EPS rocketed 400% to $0.40.
What happened with Livent in the quarter
- The company and automaker BMW amended and extended their existing supply agreement. It now runs through 2028 and involves higher annual volumes of lithium hydroxide.
- Livent was appointed by Nemaska Lithium as its exclusive sales and marketing agent. Livent owns a 50% share in this lithium hard-rock mining project in Québec, Canada. The project is expected to enter into its first customer agreements in 2023, begin commercial sales of spodumene concentrate in 2025, and begin production of lithium hydroxide in late 2026. (Spodumene is a lithium-bearing mineral; it can be directly refined into battery-grade lithium hydroxide.)
What the CEO had to say
Here's what CEO Paul Graves said in the earnings release:
Livent achieved record revenue and profitability in the first quarter driven by higher realized lithium pricing and strong demand from our customers. We continue to expect strong financial performance in 2023 supported by pricing visibility from existing customer contracts. The Company remains on schedule to deliver its announced capacity expansions, which will result in an incremental 4,000 metric tons of volume available for sale in 2023, and an incremental 10,000 metrics tons available in 2024 year over year. We continue to work closely with our customers who remain focused on securing larger and longer-term volume commitments from us.
Livent's performance is not very closely tied to lithium prices in China
Livent's 2023 financial performance is not very dependent upon spot lithium carbonate prices in China, which have notably declined this year, though they're still elevated relative to a couple of years ago.
On the earnings call, chief financial officer Gilberto Antoniazzi outlined one main reason: "[R]oughly 70% of our 2023 volumes have fixed-price terms that were set prior to our last earnings call in February." Graves mentioned two other reasons related to product type and geography: "We saw much greater resiliency in hydroxide prices and in some non-China international pricing benchmarks" compared with lithium carbonate prices in China.
2023 guidance raised
| Metric | 2022 Result | Initial 2023 Guidance | Current 2023 Guidance | Projected Change |
|---|---|---|---|---|
| Revenue | $813.2 million | $1 billion to $1.1 billion | $1.025 billion to $1.125 billion | 26% to 38% (midpoint up 3 percentage points from prior outlook) |
| Adjusted EBITDA* | $366.7 million | $510 million to $580 million | $530 million to $600 million | 45% to 64% (midpoint up 6 percentage points from prior outlook) |
Data source: Livent. *EBITDA = earnings before interest, taxes, depreciation, and amortization.
Livent said the guidance remains based on its expectation of 20% higher total volumes sold of lithium carbonate equivalent (LCE) relative to 2022. It also said its outlook continues to assume higher average realized pricing across its portfolio, partly offset by higher costs, relative to 2022.
On the earnings call, Graves attributed the raised 2023 guidance to Livent achieving average realized pricing in the first quarter that was higher than its expectations when it set its outlook three months ago.
In short, Livent kicked off a new year with a great quarter.
