Shares of Livent (LTHM) fell 3.9% in Thursday's after-hours trading, following the pure-play lithium producer's release of its second-quarter report.
The stock's modest decline is probably largely attributable to the quarter's revenue missing Wall Street's consensus estimate. Broad market dynamics were also likely a factor, as all major indexes were slightly down on Thursday.
On the positive side, the quarter's earnings surpassed the analyst expectation. And in what many investors probably viewed as a neutral development, management reaffirmed its 2023 guidance.
Demand for lithium has been surging over the last couple of years, fueled by the rapid adoption of electric vehicles (EVs), which are powered by lithium-ion batteries. Livent has been capacity constrained, but expects its capacity expansions will drive approximately 20% higher sales volumes next year relative to this year.
Livent's key numbers
| Metric | Q2 2022 | Q2 2023 | Change |
|---|---|---|---|
| Revenue | $218.7 million | $235.8 million | 8% |
| GAAP operating income | $90.2 million | $104.8 million | 16% |
| GAAP net income | $60.0 million | $90.2 million | 50% |
| Adjusted net income | $73.3 million | $107.3 million | 46% |
| GAAP earnings per share (EPS) | $0.31 | $0.43 | 39% |
| Adjusted EPS | $0.37 | $0.51 | 38% |
Data source: Livent. GAAP = generally accepted accounting principles.
Wall Street was looking for adjusted EPS of $0.47 on revenue of $252.9 million, so the company beat the bottom-line expectation but missed the top-line one.
In the first half of the year, Livent generated cash from operations of $181.6 million, about 3 times what it generated in the year-ago period. It ended the quarter with $167.8 million in cash and cash equivalents and $242.7 million in long-term debt.
For context, in the prior quarter (Q1 2023), revenue surged 77% year over year to $253.5 million, and adjusted EPS rocketed 186% to $0.60.
What happened with Livent in the quarter?
- Lithium volumes sold were about flat with the first quarter of 2023, while average realized prices were slightly lower.
- In May, Livent and Australian lithium miner Allkem announced they plan to merge. The deal is expected to close around the end of this year.
- In May, the company's Nemaska Lithium joint venture in Quebec, Canada, announced its first customer agreement -- it's with Ford Motor Company. The agreement "calls for the delivery of up to 13,000 metric tons of lithium hydroxide per year over an 11-year period, with the supply of spodumene concentrate to Ford from the Whabouchi mine prior to commencing delivery of lithium hydroxide produced in Becancour," the company said in the press release. (Spodumene is a lithium-bearing mineral.) Livent owns a 50% stake in Nemaska and is the operating partner. The timeline for Nemaska remains the same: Commercial sales of spodumene concentrate are expected to begin in 2025 and initial production of battery-grade lithium hydroxide is expected in late 2026.
What the CEO had to say
Here's what CEO Paul Graves said in the earnings release:
We continued to see healthy demand from our customers which helped to support strong financial results in the second quarter. As anticipated, we experienced the lagged impact of lower market prices in certain lithium products and end markets, as well as higher operating costs during the quarter. We expect 2023 second half financial performance to be broadly similar to the first half of the year, supported by pricing visibility from our existing customer contracts and incremental volume available for sale in the second half of the year.
2023 guidance reaffirmed
Management reaffirmed its guidance issued in May.
| Metric | 2022 Result | Initial 2023 Guidance | 2023 Guidance Issued in May | 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.
Last quarter, the company said its annual outlook is based on its expectation of 20% higher total volumes sold of lithium carbonate equivalent (LCE) and higher average realized pricing, partly offset by higher costs, relative to 2022.
In short, Livent turned in a solid quarter that held no notable surprises.
