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spk00: Greetings and welcome to the Lifecycle Holdings Corp third quarter 2021 financial results call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to your host, Ashish Gupta, Investor Relations for Lifecycle Holdings. Thank you. You may begin.
spk07: Thank you, operator. And thank you, everyone, for joining us today. Hosting the call are Lifecycle's co-founder, president, and chief executive officer, Ajay Kochhar, co-founder and executive chairman, Tim Johnson, chief financial officer, Bruce McInnis, and chief commercial officer, Kunal Palfrer. Out of this call, Lifecycle issued its third quarter 2021 earnings press release and presentation, which we will reference today. These can be found on the investor relations section of our website at investors.lifecycle.com. On this call, management will be making statements based on current expectations and assumptions, which are subject to risks and uncertainties. Actual results could differ materially from our forward-looking statements if any of our key assumptions are incorrect because of factors discussed in today's earnings news release during this conference call or in our latest reports and filings with the Securities and Exchange Commission. These documents can be found on our website at investors.lifecycle.com. We do not undertake any duty to update any forward-looking statements. Today's presentation also includes references to non-IFRS financial measures. You should refer to the information contained in the company's third quarter 2021 earnings press release for definitional information and reconciliations of historical non-IFRS measures to the comparable financial measures. With that, let me turn it over to Ajay.
spk10: Thank you very much, Ashish, and good morning, everyone. For today's presentation, we'll be referring to the slides that were posted to the investor relations section of our website early this morning. Now, as this is our first earnings call since the closing of the business combination with Peridot last month, I would like to start by thanking our employees for their contributions to lifecycle success. I would also like to thank our shareholders for their support and patience towards the completion of the transactions. Becoming a public company was an important milestone for Lifecycle, and the transaction provides Lifecycle with $527 million of cash netted expenses and funds our base case business plan. This is a real differentiating aspect that goes to de-risking the overall business. To give you a brief overview of today's agenda, first, I will start off by giving a short overview of the company, its current opportunities, and where we aim to be in the future. Second, I will then highlight what differentiates us from other industry players and how we are well positioned to capitalize on accelerating secular trends with our fit-for-purpose technologies for battery recycling. Third, I will also provide an overview of the drivers of accelerating near and medium-term quantities of lithium-ion batteries available for recycling and how this bodes extremely well for Lifecycle's continued rollout. Fourth, our CFO, Bruce McInnis, We'll provide financial and operational highlights from the third quarter. And wrapping it up, my fellow co-founder, Tim Johnston, will review our spoke and hub execution progress. Let's start on slide four. So who is Lifecycle? Well, we are the sustainable pure play leader in advanced resource recovery and recycling. Lifecycle is a commercial business. scaling and lockstep with our battery supply customers, and to meet the accelerating demand for critical battery-grade materials. Moving to slide five. The next question is, why is lithium ion battery recycling important today? And some may have an initial knee-jerk reaction, thinking that battery recycling is a need for many years away. However, the reality is that the need for recycling lithium-ion batteries is here today due to manufacturing scrap and only accelerating further. The pace of announced new battery manufacturing facilities worldwide is far exceeding our expectations of only a few months ago. On an industry-wide and average basis, at least 5% to 10% of manufacturing volumes are typically rejected and hence are available for recycling. As lithium-ion batteries are made, the manufacturing process is not perfect, thereby resulting in manufacturing rejects or yield loss. This manufacturing reject approach is important as battery manufacturers look to uphold unwavering quality standards. For example, we forecast that almost 70% of our 2025 volumes will come from manufacturing scrap. In a nutshell, if you believe in the rapid growth in EV adoption, you believe in lifecycle. We expect our recycling volumes to grow in line with manufacturing volumes over the next several years. Looking at slide six, Prior to starting Lifecycle, my co-founder, Tim Johnson, and I worked in the battery metals and chemicals industry, focused on hydrometallurgical and chemical plants to produce battery materials. Our time working in the industry led us to the recognition of a glaring hole in the future of our increasingly electrified economy, which was the lack of an environmentally and economically sustainable solution for the recycling of lithium-ion batteries that had become globally ubiquitous. We started Lifecycle in 2016 with the mission of solving this global battery manufacturing scrap and end-of-life lithium battery problem and simultaneously creating a secondary supply of critical battery materials while also ensuring a sustainable future for our planet. Lifecycle derives deep competitive advantages from its proprietary spoken-up technologies, which enabled it to outpace existing and emerging lithium ion battery resource recovery approaches. LifeCycle's technologies are proven and we are in execution mode, copy and pasting our operations and lost step with our accelerating customer needs. So what is LifeCycle's strategy? Well, today we have 10,000 tons of annual lithium ion battery equivalent spoke processing capacity with an additional 15 to 20,000 tons of annual processing capacity expected from our two in-progress folks. And on the hub side, we have 60,000 tons of annual lithium-ion battery equivalent processing capacity that is on track to be operational in early 2023. The Rochester hub is located in the former Eastern Business Park. This facility is ideal for chemical infrastructure and has a large labor pool and strong support from the state of New York. On the right side of the slide, you can see where we aim to be. We are already the leader in North America. We strive to be the go-to global recycler of lithium batteries and producer of key battery grade materials. By 2025, we are targeting a global network of at least 100,000 tons of annual lithium battery cobalt spoke processing capacity. in a centralized network of 220,000 to 240,000 tons of annual lithium-ion battery coolant hub processing capacity. Moving to slide seven, we see key macro tailwinds accelerating per the left of the page. North America is expected to have over 225 gigawatt hours of annual battery production capacity by 2025, which is an increase of over 400% from today. Year to date, over 480 gigawatt hours of incremental battery cell production capacity has been announced globally that is planned to be online for 2025. Continued electrification and mobility will drive earnings power for us. Moreover, over 17 automotive companies have committed to electrifying their product lineups ensuring dominant EV sales over the next few decades. Since we started Lifecycle five years ago, there has been significant and increasing government regulation on battery recycling as well. Recently, regulations started heavily focusing on something called recycling efficiency rate, or RER. Recycling efficiency rate is a measure of the mass of the battery entering a process versus the mass extracted as products that go back to the economy. Traditional methods that use heat when burning plastics, electrolytes, and other elements in a battery can result in 30, 40, or even 50% loss in recoverable battery material. The point is, our world and our customers are moving away from this historical approach that is not fit for purpose for lithium-ion batteries. As you can see from the right of the slide, it's starting to be regulated. For example, in the EU, proposed levels are around 65% to 70%, if not more. In California, there's legislation being discussed right now that would require a recycling efficiency rate of as close to 100% as possible. While in China, the rate is over 80%. Our hydro-metallurgical or hub process enables recovery of up to 95% of all with my battery materials. This is far greater than our competitors who primarily target only cathode or typically cobalt and nickel. Our wet chemistry method extracts valuable battery grade materials from black mass as a battery grade product that is thereby reusable in the manufacturing of new battery technologies. On slide 8, you can see why we are a critical node in the lithium-ion battery supply chain. We have a two-part patented spoke and hub process that follows both the technical aspects of how we process the materials and also follows our business model. In our spoke facilities, we process any format of lithium-ion battery, from the smallest type of lithium-ion battery all the way up to a full electric vehicle battery pack. We take in Likmai battery materials at our spoke facilities, and we process them through to intermediate materials. The low-cost modular design of our spokes enables us to construct them quickly and locate them close to sources of battery supply. In fact, they can even be directly located on a major customer site. At the back end of the patented spoke process, we produce three key products, including mixed copper and aluminum, mixed plastics, and the key product is what the industry calls black mass or black mass concentrate. In simple terms, black mass is the anode and cathode materials from within the battery. When people talk about critical battery materials, things like cobalt, nickel, lithium, and graphite, they all exist within the black mass material. The second step, our hub technology, utilizes a patented hydrometallurgical process to treat the black mass. That's just a way of saying we treat it using a wet chemistry-based system in order to recover the key battery materials and place them back into the lithium-ion battery supply chain. The products produced by our hub process are battery-grade in nature, as good if not better than virgin battery-grade materials, and produced in an inherently economic fashion. Our hub design is non-tyro and allows for recycling efficiency rates of up to 95% versus a historical industry average of 50%. Moving to slide nine, it is important to note that the competitive landscape is segmented between pre-processing, involving lithium ion batteries and lithium ion battery materials being converted to intermediate products, and post-processing, involving intermediate products being converted to finished end products. In order to best understand lithium-ion battery recycling, solutions can be segmented into preprocessing, with lifecycle spokes falling into this category, and post-processing, with lifecycle hubs falling into this category. Through lifecycle's patented spoken hub technology, the traditional lithium-ion battery recycling supply chain is collapsed and simplified. The result is much more economic and environmentally sustainable recycling of all types of lithium-ion batteries. Moreover, through Lifecycle's non-pyro technology, we do not burn any portion of the lithium-ion batteries, since our emissions are significantly reduced and are permanently completed on an accelerated basis. As evidenced from the bottom of slide 9, with respect to the incumbent lithium-ion battery recycling supply chain, preprocessing has been highly manual, high cost in nature, combustion-based, and hence unoptimized from both an environmental and economic perspective. Moreover, post-processing approaches have involved processing intermediate product through legacy nickel-smelting infrastructure. In the process, components like lithium and graphite are lost. The end products in this infrastructure are also nickel and cobalt metal, which are not the inputs to batteries. In summary, the incumbent battery recycling supply chain has been a bit like a square peg in a round hole. non-purpose built as well as being unoptimized from an economic and environmental perspective. Slide 10 summarizes Lifecycle's key competitive advantages. Lifecycle's moat is comprised of two key aspects, our patented and fit for purpose spoken hub technology and sticky long-term battery supply contracts and secured end product offtake. Lifecycle's core advantages are as follows. Firstly, high recovery rates and inherently low-cost operations. Our technology involves no discharging of batteries, minimal to no dismantling, and automated processing, compared to labor-intensive and potentially unsafe traditional preprocessing approaches. Second, non-pyro technology protected by a robust IP mode. Thermal processing generates harmful fluorine-bearing emissions, also known as forever chemicals, that are being increasingly regulated. LifeCycle's patented portfolio of non-pyro technologies leave us well-positioned for future growth in a sustainable, focused world. As a result of our patented non-pyro technologies, emissions are significantly reduced and our permitting can be completed on an accelerated basis relative to the incumbent technologies. Third, our ability to scale efficiently with customers through capital light and replicable spoke facilities, for example, co-located on-site with battery manufacturers. Lifecycle spoke technology is capital light, has a low footprint in size, and is replicable, as Lifecycle is built using a modular LEGO build fashion, thereby enabling Lifecycle to scale efficiently as the battery supply chain has grown congruently. Fourth. we are agnostic to lithium ion battery type, including lithium iron phosphate batteries or LFP batteries, future solid state batteries, and much more. Fifth, our recovery of battery grade products from the hub, including lithium. Lithium has historically been difficult or ignored for recovery by incumbent recyclers. For example, lithium is lost as part of the lead And by comparison, Lifecycle's hub technology recovers lithium economically and in battery-grade form. And last but not least, Lifecycle's spoken hub technology has a minimal environmental footprint with negligible wastewater and air emissions with aggressive zero-landfill diversion-focused operations. Slides 11 through 13 frame the tremendous opportunity we have in front of us in how it has accelerated rapidly in the past several months alone, given the amount of battery manufacturing capacity set to come online over the next few years and beyond. On slide 11, you can see that the total addressable market projections in 2025 for the amount of Lifline batteries available for recycling has accelerated significantly in just the past five months. Growth forecasts in North America, Europe, and China have all increased by at least 50%. What stands out is also the pronounced 65% growth in the total lithium ion batteries available for recycling in North America relative to the total addressable market estimates from just five months ago. The key driver of this growth is new battery manufacturing announcements far exceeding original expectations. This drives additional battery manufacturing scrap available for recycling in lockstep with battery manufacturing and not years from now. On slides 12 and 13, you can see the amount of growth coming over the next few years with projects that have already been announced. By 2025, we expect North American annual battery capacity to reach between 229 and 294 gigawatt hours from approximately 45 gigawatt hours today. Over the same period, we expect the amount of battery scrap decreased by approximately four to six times. Lifecycle is strategically positioning our footprint across key regions where we expect a significant amount of battery manufacturing capacity and projected battery scrap material to be produced, alongside ramping end-of-lifecycle quantities. As is evident, there is a lot of opportunity ahead, well exceeding Lifecycle's original base case plan. For example, our announced 2025 North America's flow capacity would represent only 20% to 30% of the projected battery manufacturing scrap volume alone, which is only one segment of Lifecycle's total addressable market. This should help to contextualize the accelerating battery supply customer growth that is driving Lifecycle to continue to accelerate its rollout within the company's five-year strategic plan. Now I'll pass it over to Bruce McInnis to provide an operational and financial update, as well as to discuss our outlook. Over to you, Bruce. Thank you, Ajay. I will now provide some commentary on our third quarter results, followed by a business outlook for the remainder of fiscal 2021. Starting on slide 15, let me take you through some of the key highlights during the quarter. We are pleased with our fiscal Q3 performance and we remain on track with our original expectations as we continue to ramp production significantly during the second half of 2021. With the pace of deployment of new battery mega factories far exceeding our initial expectations, we also recently announced the addition of a fourth North America-based boat in Tuscaloosa, Alabama. The fourth spoke is tied to strategic anchor battery supply customers that are located near the facility, as per yesterday's press release. Additionally, we expect construction of the Rochester hub to begin in late 2021, with operations commencing in early 2023. We are excited to announce that we onboarded 14 new battery supply customers during the third quarter, which demonstrates continued technical and commercial validation for Lifecycle alongside robust market acceleration. Finally, following fiscal Q3 2021, we closed our business combination with Peridot with minimal redemptions and our common shares began trading on the New York Stock Exchange under the ticker LICY on August 11th, 2021. Over to slide 16. It is important to start with our commitment towards health, safety, environment, and quality. We have successfully certified our Kingston and Rochester spoke operations as well as our headquarters in accordance with ISO 9001, ISO 14001, ISO 45001, and R2. These certifications are the culmination of leading standards that Lifecycle upholds alongside being critical for Lifecycle's customers. This further bolsters Lifecycle's competitive advantage. Turning to slide 17, as mentioned, we successfully added 14 new battery supply customers during the third quarter for a total of over 70. As part of this, we announced the foundational manufacturing scrap agreement with Altium Cells LLC. Altium Cells is a joint venture of General Motors and LG Energy Solutions. Bicycle's agreement with Altium is focused on recycling up to 100% of the manufacturing scrap generated at Altium's Ohio-based battery cell plant. When fully operational in 2022, The LTM plant in Ohio will have annual production capacity of approximately 35 gigawatt hours. Lifecycle will recover the raw materials contained in the scrap, transforming them into valuable products that contribute to the circular economy. During the third quarter, we produced 524 tons of black mass material, which included 85 tons of lithium carbonate equivalent, 75 tons of nickel, and 23 tons of cobalt, which were all in line with expectations. On slide 18, we will review quarterly financials and key highlights. For the third quarter, revenue reached $1.7 million, which increased 840% from the year-ago period, driven by increases in product sales and recycling services, largely reflecting increased quantities of batteries and battery scrap processed at the Kingston and Rochester spokes, also enabled by the continued onboarding of new battery supply customers. Revenues from product sales were approximately $1.6 million, while revenues from recycling services were approximately $0.1 million. It is important to note that the third quarter 2021 results are in line with the expected continued ramp-up during the second half of 2021. Due to continued demand for specialty chemicals for the battery industry, we continue to see strong pricing for our key products. The right of the slide provides a reconciliation between net revenue reportable under IFRS and gross revenue, which is a non-IFRS measure. As shown, the net revenue reportable under IFRS includes the treatment, refining, and possibly marketing charges that are incurred when black mass is sold to third parties. For clarity, the gross revenue, again a non-IFRS measure, excludes the treatment, refining, and marketing charges. LIESECO will continue to report net revenue in accordance with IFRS within its financial statements. During the third fiscal quarter, operating expenses were $7.9 million compared to $1.9 million during the prior period, driven by increased personnel costs, a ramp-up of operations at the Kingston and Rochester spokes, increases in raw materials, supplies and finished goods, increased R&D spending, and non-recurring expenses related to the business combination. Net loss was approximately $6.9 million compared to approximately $1.8 million in the prior year period. Adjusted EBITDA loss was $5.2 million compared to $1.3 million for the prior year period. Turning to the balance sheet, recall upon closing of the business combination in August, Lifecycle received approximately $527 million in net proceeds. As of August 31st, 2021, we had cash and cash equivalents of approximately $511 million. Shares outstanding as of August 31st were $163,179,553 common shares. Moving to slide 19, let's discuss our fiscal year 2021 business outlook. Lifecycle is reiterating the continued ramp up at the Kingston and Rochester spokes during the second half of 2021 in line with expectations. The Rochester hub procurement will begin during fiscal year 2021, enabling Lifecycle to continue on track with project execution. The Arizona spoke procurement and construction will continue. The Alabama spoke procurement and execution will be kicked off. And lastly, fiscal year 2022 guidance will be provided in conjunction with reporting of fiscal year 2021 results. Now I'd like to turn it over to Tim to provide an update on our SPOKE expansion and the Rochester hub.
spk05: Thank you, Bruce. I'll start off on site 20 to give an update on our SPOKE facilities. Our first commercial SPOKE is located in Kingston, Ontario and began operations in mid 2020. Stoke 2, located in Rochester, New York, has been operational since late 2020. In April 2021, we announced the development of a third North American Stoke in Gilbert, Arizona. We're on track for completion of the first processing line in early 2022. We are further excited to have announced this week an additional Stoke to be located in Alabama, which is on track for completion in mid-2022. Moving to slide 21, our fourth commercial spoke facility will be located in Tuscaloosa, Alabama, in the southeast of the United States. This region is highly strategic, located close to battery and auto manufacturing sites. This facility is incremental to our base case business plan due to increased forecast demand for additional battery mega factories. The Alabama spoke for facility will initially have 5000 tons per year of processing capacity with capability to be expanded to 10,000 tons per year of lithium ion battery processing capacity. To move to Arizona, we plan to leverage our full pack shredding technology, increasing life cycles, total processing capacity in North America to 25 to 30,000 tons per year of lithium ion batteries. Turning to slide 22, very importantly, I'm pleased to report that our flagship Rochester hub project is on track. In 2020, we began definitive engineering, permitting, and infrastructure work, and are pleased to report that definitive engineering work will be completed in 2021 to facilitate groundbreaking before the end of the year, allowing for the commissioning to begin in early 2023. The development of the hub has allowed Lifecycle to continue to expand our commercial base, securing critical contracts such as the Altium Agreement for the supply of battery materials and offtake for finished specialty chemicals. We look forward to providing a more in-depth update on the Rochester Hub project following the completion of definitive engineering. Moving to slide 23. I am pleased to highlight that we will be hosting the Lifecycle Battery Recycling Day on October 6, 2021. This event will include a range of panels involving external guests covering key topics pertinent to Lifecycle's business. This includes vehicle electrification, sustainable critical materials, next-generation batteries, as well as environmental and community engagement. Save the date and stay tuned for registration details, which will be further communicated in the coming several weeks. In addition, we are pleased to be participating in several upcoming investor conferences, as noted on slide 23. Finally, on slide 24, we believe Lifecycle is the right solution for the recycling of all types of lithium-ion batteries. Traditional smelting and refining techniques are less economically efficient and more harmful to the environment. We have a strong portfolio of patented technology, complemented with a strong network of commercial demand and battery supply contracts that have taken many years to develop. We are scaling with our customers as they grow and supporting increasingly stringent policy directives regarding battery materials and recycling. Before I wrap it up, I would like to summarize why we are so excited about the opportunities we have ahead of us. One, lifecycle is at the intersection of three broad and rapidly changing megatrends that are critical for the growth of a zero-carbon economy. These include the electric vehicle revolution, sustainability with an emphasis on circular economy, and the domestic supply of strategic materials. Two, we believe LifeCycle provides the leading fit-for-purpose solution for the recycling of all types of lithium ion batteries. Traditional smelting and refining techniques are more harmful to the environment, and our technology has proven to be more efficient with higher yields and more recoverable material, enabling robustly improved environmental and economic sustainability. Three, lastly, Lifecycle is already a commercial business that has patented solutions operating today. Our long-term competitive edge is comprised of two key aspects. Our patented fit-for-purpose spoken hub technologies and our sticky long-term battery material supply contracts and associated end-product off-take agreements. Following the closing of the business combination, Lifecycle is well capitalized to execute on our business plan. Lifecycle is poised for rapid growth as we continue to scale with our customers, accelerating electrification plans. Thank you for your time today. We will now open the line up for questions.
spk00: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Robin Seidler with BMO Capital Markets. Please proceed with your question.
spk08: Hey, good morning, guys. So my first question is on the spoke rollout in CapEx. So how should we think about the spoke expansion and rollout going forward considering what I believe is about a one per quarter production capability right now? And when you think about other things like the time it takes to scout ideal locations and to secure necessary permits. And it seems like the next couple spokes are expected to be about 10 million in all-in CapEx. versus I think the $5 million previously stated. So is $10 million the small capex run rate right now?
spk10: Yeah, thanks, Robin, and I appreciate the question. I actually turn it over to Tim Johnson. He's going to answer the question.
spk05: Thank you, Roger, and thank you, Robin. Excellent question. So first of all, let me start by saying Lifecycle has now established what we're calling a Spoke Fulfillment Center. This is essentially a dedicated location where we've developed the capability to build spoke modules. For those of you who've seen the videos, you'll understand what I'm referring to there, and be able to roll out spoke plants on a continuous basis. So we don't see any restrictions in our ability to fulfill the requirements of one spoke per quarter, using your estimate there, Robin. What I would say is, you know, part of the execution of the spoke programs is that because of the low environmental footprint associated with these spoke facilities, there have been and they continue to be relatively simple permits. as well as because of the replicable nature of the facility, they're able to be turned on and ramped up relatively quickly. In relation to the run rate costs, Robyn, what we've allowed for is going forward, some facilities will have the ability to process full packs. Some facilities will have the ability to process up to modules. There is a slight incremental cost to that, but most of that incremental cost is actually because our standard process is to allow for the duplication of the processing lines within the same facility. RJ outlined in the presentation that we've seen a significant increase in the demand for the cycling capacity. And so in certain locations, as in Arizona and Alabama, we're actually starting with the footprint to be able to run up to 10,000 tons per year. This is overall a lower capital intensity way to roll out spoke capacity. And that's the way. So you should still consider for 5,000 tons per year a run rate of roughly $5 million per processing line.
spk08: Okay, and maybe just to follow up on that. So the spoke cap packs, we should think of them more like a range, maybe between 5 to 10, 10 being the ones that can process the full pack. And maybe with respect to, I think the MD&A mentioned, The beachhead spokes in both Europe and China would be closer to 10 as well. Is that because those are going to be full pack processing or because there's going to be maybe more upfront costs associated with permitting and scouting that is actually embedded within that 10 million number of costs?
spk05: There is a minor amount of additional engineering, upfront engineering costs associated with bringing the spoke design up to the European code requirements. But in general, and we'll be talking more about this in our full year guidance, but as we look across where we'll be placing spokes in the near future, the initial spoke capacity will likely be full pack processing capacity built in a similar fashion with expansion capability.
spk08: Okay, thank you. And maybe just a second question. So at this stage, Do you foresee an LFP hub as the most likely candidate for Hub 2? Maybe you can just discuss the current expectation and sequencing and timing for the next hubs.
spk05: Yeah, no problem, Roland. So first of all, we're really excited about the continued acceleration of the LFP battery market. And we have multiple paths currently underway, which we'll be able to provide an update as part of the coming quarters.
spk08: All right, thank you. Thank you, Roland.
spk00: Thank you. Our next question comes from the line of Daniel Ives with Wedbush Securities. Please proceed with your question.
spk06: Yeah, thanks. Can you just talk about how you're thinking about the run rate for EBITDA in Q4 and just going forward? Appreciate it.
spk10: Yeah, hey, Dan, thanks so much for the question. Certainly. So, you know, I think just to reiterate, we continue to see volumes, tonnages, as well as hence revenues ramping in line with expectations. And just to be clear, I'm talking about the immediate future, you know, as it relates to fiscal Q4. So you'll see that continued commensurate rise in the tonnage and the revenue, but also an associated negative adjusted EBITDA I think the second point around that is, you know, we're pulling forward and continue to enhance the team with respect to personnel. And that's very important, of course, to enhance execution as we continue to accelerate our role. Of course, the near-term immediate effect is an adjusted, if it does, it's more negative. Roughly speaking, you could probably take the Q3 numbers and incrementally add to that 50% to 100%, just as a rough indication. for the immediate fiscal Q4 adjusted EBITDA. But the bottom line is, you know, point three and final point is that we're laser-focused on execution. We're building our spokes as we continue to accelerate and lockstep with our customers, as you've seen in this presentation. And we are, of course, gearing towards the execution of the hub, which, as everybody knows from the sell-side community and for those that are new, that is a key financial inflection point for the company. So... hopefully they can give you a little bit of color.
spk06: Great, great. And then just given all the activity that we're seeing in the market in terms of, you know, build out of battery technology, can you just talk about maybe our conversations of change with customers, with potential customers, call it like the last six months versus maybe if we went back a year, year and a half ago, just anecdotally. Thanks.
spk09: Well, if you look in the North American context, I would say that as you've seen, I think we presented in the slides as well, significant announcements of production capacity here in North America. So the opportunity is definitely increased and there's definitely a projected let's say, deficit in capacity or starting to become a deficit in capacity in North America as more of these gigafactories, megafactories come online. So I would say the opportunity is rapidly increased, and there's a strong demand for our services and also increased capacities given the megafactory rollout. Thanks.
spk00: Thank you. Our next question comes from the line of Jeff Osborne with Cowan & Company. Please proceed with your question.
spk03: Good morning, guys. This is Jeff Rossetti on for Jeff Osborne. Thanks for taking our questions. Just maybe if I could start, I know you disclosed that there was some COVID-related impact in your 2Q and also this quarter. So I just wanted to see how that impacted operations at your spoke in Kingston and Rochester. I also know that you said you were ramping up on your plan, but I just wanted to see where the utilization rates stood at your two spokes in the quarter.
spk10: Yes, certainly. Thanks for the question, Jeff. Yeah, so I can start, and then Tim can add on here as needed. You know, short answer is, yeah, as we disclosed in the Q2 MD&A, there was a bit of a slower start to the year than we had originally anticipated. But that said, as we've reiterated on this call, you know, for the immediate future for, you know, full fiscal year 2021, we're very encouraged by the pickup and the continued ramp-up. You know, I'd say broadly in line with the expectations as we've reiterated for 2021. uh but as you can probably then piece together that there's also some catch-up that we're pleased to report within fiscal q3 and fiscal q4 so that's you know just from a rough guidance for the full year that should give you an indication i'll turn this in we can talk a little bit more about the utilization aspect
spk05: Yeah, Jeff, and so just further building upon what RJ was saying, the Kingston operation is now operating 24-7. The biggest impact that we had in Rochester was the slightly slower hiring of the staff there. It took a little bit longer to get the staff than we had initially anticipated. But we're now at two shifts, going to three shifts actually next week. uh and we'll be at four shifts which is full utilization uh by the end of the year uh so as i just said that the back half of this year uh is the is the heavy ramp here and you'll continue to see that as part of our next quarterly reporting okay great and appreciate the update on fiscal guidance i was wondering if there was any change to the calendar guidance that you provided in your f4
spk10: Yeah, I can take that perspective here again. So I think the short answer is, again, reiterating that we're in line with the expected grant that the King's Kingdom of Rochester spoke. You can extrapolate that to the full year, calendar year, if you want to take that approach as well. Again, what we just emphasized as we were talking about there was a question from Dan. tonnages in line, revenues in line, where we see, of course, some adjusted EBITDA being more negative, as you can probably tell from the results of this quarter. It's frankly because we're hiring and we're pulling costs and execution forward. So we're accelerating some of that, which means it pronounced your term, adjusted negative EBITDA. But of course, as folks know here, this is all gearing towards the ramp and the execution of the spokes and us, which we're laser focused on.
spk03: Okay, great. And if I could ask one more, just on the 14 new supply customers, that's great. Just wanted to see, are you able to disclose at all now where you stand in terms of your total lithium ion battery feed tonnage?
spk10: Thanks, Jeff. So I'll start and then all can add on here. Yeah, look, I think as part of our four-year fiscal 2022 guidance, we'll look to continue to pride as transparently as we can, you know, color around that. I think folks can also see based on the graph of the Alabama spoke. But of course, just as a broad comment here, what's very important, of course, is gearing all the black mass ultimately towards filling the up. So, you know, stay tuned for that. It's going to be a big focus as we talk about full-year 2022 guidance. But I'll turn it over to Kamal.
spk09: Yeah, I think just on the comments of 14 new customers, we've seen accelerated growth in customer acquisition. At the beginning of the year, we had indicated around 40 customers. Now we have 70-plus and 14 of those coming in the last quarter, and we will continue.
spk03: uh to increase that number and and uh add new customers which will of course drive volume into the plant okay thanks and i'm sorry if i could just get one more uh just on the rochester hub tim i think you you mentioned that you know you'll provide additional detail once you finish the engineering phase uh just wanted to see you know how do you get to the lower end or the higher end of your uh that 30% range on the $175 million cost number and whether or not you would see any change in the actual processing capability of the Rochester hub as you finish the engineering phase. Thanks, and I'll jump back in the queue.
spk10: Thanks, Jeff. I'll turn it over to Tim.
spk05: Yeah, thanks, Jeff. And so let me sort of start with answering the back end of the question first. So as discussed, we continue to benefit from market acceleration. As outlined in the presentation, we've seen an increase in 65% in demand or material available for recycling for 2025 in just the past five months. And so we continue to take that into our consideration as part of the rollout of both the SPOC and HUB facilities. We are in the final stages of definitive engineering, and I'm looking forward to coming back to the market upon the completion of the definitive engineering next quarter to provide a much deeper dive on the overall HUB project.
spk07: Thanks.
spk00: Thank you. Ladies and gentlemen, as a reminder, if you'd like to join the question queue, please press star 1 on your telephone keypad. Our next question comes from the line of PJ Julikar with Citi. Please proceed with your question.
spk01: Yes, good morning, Ajay and Tim.
spk05: Good morning, PJ.
spk01: You know, you talked about 5% to 10% battery scrap in manufacturing. Is it possible that as battery manufacturers go down the learning curve and become more efficient, that 5% to 10% scrap rate could go down in the future?
spk10: Appreciate the question, P.J., and I can start here and all can add on as needed. Yeah, this is actually a common question, so I appreciate you asking it. So I think in the near-term years of RAMP, which is pertinent for a lot of the data that we showed around the market, for North America and, generally speaking, for megafactories, it's actually quite common that you can have a much higher scrap rate than 5% to 10%. In fact, it's public. It's out there for many of the megafactories in the past years. It could even be as high as 30-plus percent. Now, people take a step back just to play devil's advocate. People will say, hmm, well, why would that be? You know, obviously, folks are trying to minimize scrap rates. I would point you as well to the commensurate side of it, which is regarding quality and trying to prevent recalls. I'm not going to point to specific names or instances, but I think that's an important aspect to point to regarding keeping an unwavering quality standard, and that needs to be the approach in cell manufacturing. So short answer, PJ, is 5% to 10% is more conservative. Now, over time, 10, 20 years into the future, certainly, I think that's, of course, the objective of you know, our customers, and we want them to succeed. We want to be collaborating with them. But, you know, again, for the near-term, medium-term, that's not a huge driver. I'll get maybe perhaps Tim to add on a little bit as well.
spk05: Yeah, one other factor just to consider in that as well, PJ, is that as cell formats get larger, there's a higher potential for scrap. And the reason is that the potential of a defect from a probability perspective increases with the size of the individual cell So some of the trends that we're seeing in the auto industry is actually leading towards higher potentials for scrap as well.
spk01: Great. Good point on the safety side. Then you mentioned that 70% of your 2025 volumes would be from manufacturing scrap, which is interesting. What do you think, is the rest 30% post-consumer battery recycling? And how much of that do you think could be from EVs versus traditional consumer batteries?
spk10: Great question. I can start again and then I can add on as needed. Yeah, short answer is, it's interesting. We do see a rising quantity of larger format, as we call it, so higher voltage driving from EV-fed batteries. So as part of that 30%, actually, we are starting to see a more pronounced amount as part of our network. And that is, for example, because they're older hybrids. It could be what we call premature mortality, damaged defective recalls. So, you know, roughly good to assume that roughly 20% of that residual in that sort of range probably trivial to high voltage. And then that latter 10% portable batteries, energy storage systems, and the like. Last comment on that, it's interesting. If you can go five years further and beyond, we'll continue to see that mix change and EV batteries really equalize and then ultimately, of course, overtake this growth.
spk01: Great. Thank you.
spk00: Thank you. Our next question comes from the line of Ben Callow with Baird. Please proceed with your questions.
spk04: Hey, good morning. Congrats on your first conference call and quarterly results. You added 14 new supply customers during the quarter. Could you talk maybe just about how the market is for adding new customers and then when you add a new customer, how those contracts work with the customers? If it's similar to how it was last quarter, similar to how you started, or if there's been any changes there in terms. And maybe you could just refresh us on how the terms of those contracts work.
spk10: Yeah, definitely. I'll take those questions.
spk09: Yeah, Canal here. You know, when we're adding customers, we're looking at a broad funnel across different customer segments. So, of course, automotive and transport, targeting those and approaching the customers or the contacts that we've had for a number of years now to acquire those customers as they ramp up their electrification strategies and production. So those tend to be longer-term customers. On the opposite end, for example, when we add groups in the post-consumer, consumer electronics, that tends to be more regional. They have to go through compliance checks. So the R2 and ISO certifications we recently achieved in Rochester are significant milestones to help us to acquire those customers. but also adding more regional business development capacity in line with the spoke capacity. So as we had Phoenix and Alabama bring in team members in those regions to chase the more regional customers as opposed to the, for example, automotive customer, a more centralized approach in national contracts. So it's a, I guess, multi-layered business development approach to acquire customers. customers and can take six to nine months to go through their processes and compliance checks to add them onto our roster. Ajay, I think we'll add something on top of that.
spk10: Yeah. And just quickly, what I wanted to say is, you know, just as a broad comment, there continues to be, we see a deficit of recycling capacity relative to the available material and hence from a terms length, you know, pricing, whatever the aspects of the contract are, they continue to be favorable and in line, and it's not, frankly, folks realizing from the customer community, from the battery supply customer community, that it is a pretty thin universe of companies that can deal with these issues soup to nuts. And so just to be clear, terms continue to be the same. It's not many times we're seeing a deficit of recycling capacity relative to available materials.
spk04: And just following along with that, when you have the Tuscaloosa announcement, how much do you, for lack of a better word, fill it or have a line of sight to fill it from? I know that there's the Mercedes plant and then there's Ford plant, but how do you have the contract structured so that you can deploy that capital and know that you'll have your returns on it? Thank you.
spk05: Yeah, thanks, Ajit. And so how we assess that is really twofold. It's the immediate available market. And typically what we're looking for is in the range of about 1,000 to 1,200 tons per year of immediately available material. But more importantly is the strategic longer-term view. A lot of how these customers will contract is not based on the future deployment of assets. It's the capability to process the material today and now. And so as we looked at Tuscaloosa and being strategically located in the southeast of the United States, close to both battery and automotive manufacturing facilities, it's both an immediate need, but most importantly, it is a long-term strategic opportunity for lifecycle. Thanks, Chris.
spk00: Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Kochar for any final comments.
spk10: Thanks very much. So to close out, I would like to thank all of our employees for their contributions to Lifecycle's success, our shareholders for their support, and our customers for their commitment. We look forward to providing future updates and future opportunities to discuss our progress as we move ahead. Thanks very much for your time today.
spk00: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
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