Commenced production of separated rare earth
products
Initial NdPr oxide shipments expected in Q3
Stage I REO sales and production volumes of
10,271 and 10,863 metric tons, respectively
Revenue of $64.0M and net income of $7.4M
Adjusted EBITDA of $27.0M
Diluted EPS of $0.04 and Adjusted Diluted EPS
of $0.09
MP Materials Corp. (NYSE: MP) (“MP Materials” or the “Company”)
today announced financial results for the three months ended June
30, 2023.
“In recent weeks, MP Materials has begun producing refined rare
earth products at Mountain Pass, an important milestone for the
Company and in returning the full rare earth supply chain to the
United States. We expect to report NdPr oxide shipments in the
current quarter,“ said James Litinsky, Founder, Chairman and CEO of
MP Materials. “While our financials were impacted by weaker
commodity pricing, we continue our solid execution in our upstream
concentrate business and in our downstream magnetics business in
Texas.”
Litinsky added, “Achieving refined rare earth production is a
milestone worth celebrating as we work relentlessly towards
solidifying MP as the American champion in our industry.”
Second Quarter 2023 Financial and
Operational Highlights
For the three months ended
June 30,
2023 vs. 2022
(unaudited)
2023
2022
Amount Change
% Change
Financial Measures:
(in thousands, except per share
data)
Revenue(1)
$
64,024
$
143,562
$
(79,538
)
(55
)%
Net income
$
7,395
$
73,269
$
(65,874
)
(90
)%
Adjusted EBITDA(2)
$
26,951
$
109,952
$
(83,001
)
(75
)%
Adjusted Net Income(2)(3)
$
17,023
$
79,609
$
(62,586
)
(79
)%
Diluted EPS
$
0.04
$
0.38
$
(0.34
)
(89
)%
Adjusted Diluted EPS(2)
$
0.09
$
0.41
$
(0.32
)
(78
)%
Key Performance Indicators:
(in whole units or dollars)
REO production volume (MTs)
10,863
10,300
563
5
%
REO sales volume (MTs)
10,271
10,000
271
3
%
Realized price per REO MT(2)
$
6,231
$
13,918
$
(7,687
)
(55
)%
Production cost per REO MT(2)
$
1,938
$
1,750
$
188
11
%
(1)
The vast majority of our revenue
pertains to product sales of our rare earth concentrate.
(2)
See “Use of Non-GAAP Financial
Measures” below for the definitions of Adjusted EBITDA, Adjusted
Net Income, Adjusted Diluted EPS and Production Costs, which is
used in the calculation of production cost per REO MT. See tables
below for reconciliations of non-GAAP financial measures to their
most directly comparable GAAP financial measures. The definition of
realized price per REO MT is also included in “Use of Non-GAAP
Financial Measures” below.
(3)
Effective September 30, 2022, the
Company no longer excludes depletion expense for purposes of
calculating and presenting Adjusted Net Income, and has
retroactively revised the prior year period for comparability
purposes.
Revenue decreased 55% year-over-year, driven by a 55% decrease
in the realized price of rare earth oxide (“REO”) in concentrate
partially offset by a 3% increase in sales volumes. The change in
realized price reflects a significantly softer pricing environment
for rare earth products as compared to the prior year period when
recent pricing peaked. Metric tons (“MT”) of REO sold in the
quarter increased year-over-year mainly due to the higher
production volumes partially offset by further processing a portion
of the volume of REO produced from Stage I operations for Stage II
commissioning activities. The higher production volumes were driven
in part by higher uptime.
Adjusted EBITDA decreased 75% year-over-year, driven by lower
per-unit profitability, and higher personnel and other general and
administrative costs, as well as advanced projects and development
costs. The per-unit profitability decrease was driven primarily by
the decline in realized prices discussed above, as well as higher
production costs, partially offset by lower shipping costs.
Production cost of $1,938 per MT of REO increased 11%
year-over-year, mainly due to higher payroll costs, primarily as a
result of increased headcount as we expand our workforce and ready
our facilities to support separated rare earth (Stage II)
production and slightly higher costs of materials and supplies.
Adjusted Net Income decreased by 79% year-over-year to $17.0
million, mainly due to the lower Adjusted EBITDA as well as higher
depreciation expense resulting from an increase in capital assets
placed into service over the last year. These declines were
partially offset by increased interest and investment income earned
on an increase in short-term investments as well as lower income
tax expense primarily associated with the lower pre-tax income.
Net income decreased 90% year-over-year, primarily due to the
factors driving the lower Adjusted Net Income discussed above, as
well as costs incurred to support growth initiatives, start-up
costs, and costs associated with the removal of legacy facilities
at Mountain Pass. These impacts were partially offset by lower
stock-based compensation expense compared to the prior year period,
mainly due to the timing of grants and the accelerated method of
recognizing expense for virtually all of our stock awards.
Diluted earnings per share (“EPS”) decreased 89% year-over-year
to $0.04, in line with the lower net income discussed above.
Adjusted Diluted EPS decreased 78% to $0.09 in line with the
decrease in Adjusted Net Income discussed above.
MP MATERIALS CORP. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
For the three months ended
June 30,
For the six months ended June
30,
(in thousands, except share and per
share data, unaudited)
2023
2022
2023
2022
Revenue:
Product sales
$
64,001
$
139,183
$
159,667
$
300,938
Other sales
23
4,379
57
8,882
Total revenue
64,024
143,562
159,724
309,820
Operating costs and expenses:
Cost of sales (excluding depreciation,
depletion and amortization)
22,704
22,092
46,920
45,265
Selling, general and administrative
18,865
18,120
38,268
38,428
Advanced projects, start-up, development
and other
7,222
1,769
15,502
3,587
Depreciation, depletion and
amortization
12,203
5,407
20,325
10,667
Accretion of asset retirement and
environmental obligations
227
419
454
837
Loss on sale or disposal of long-lived
assets, net
2,320
1
4,810
258
Total operating costs and expenses
63,541
47,808
126,279
99,042
Operating income
483
95,754
33,445
210,778
Interest expense, net
(1,392
)
(1,326
)
(2,751
)
(3,231
)
Other income, net
13,821
2,212
27,514
2,406
Income before income taxes
12,912
96,640
58,208
209,953
Income tax expense
(5,517
)
(23,371
)
(13,366
)
(51,133
)
Net income
$
7,395
$
73,269
$
44,842
$
158,820
Earnings per share:
Basic
$
0.04
$
0.42
$
0.25
$
0.90
Diluted
$
0.04
$
0.38
$
0.24
$
0.83
Weighted-average shares
outstanding:
Basic
176,984,917
176,527,570
176,933,605
176,442,043
Diluted
177,859,118
193,414,563
193,528,819
193,452,921
Reconciliation of GAAP Net
Income to
Non-GAAP Adjusted
EBITDA
For the three months ended
June 30,
For the six months ended June
30,
(in thousands, unaudited)
2023
2022
2023
2022
Net income
$
7,395
$
73,269
$
44,842
$
158,820
Adjusted for:
Depreciation, depletion and
amortization
12,203
5,407
20,325
10,667
Interest expense, net
1,392
1,326
2,751
3,231
Income tax expense
5,517
23,371
13,366
51,133
Stock-based compensation expense(1)
5,730
7,440
12,743
17,213
Start-up costs(2)
3,828
812
8,392
2,320
Transaction-related and other
non-recurring costs(3)
2,160
119
5,482
136
Accretion of asset retirement and
environmental obligations
227
419
454
837
Loss on sale or disposal of long
lived-assets, net(4)
2,320
1
4,810
258
Other income, net(5)
(13,821
)
(2,212
)
(27,514
)
(2,406
)
Adjusted EBITDA
$
26,951
$
109,952
$
85,651
$
242,209
(1)
Principally included in “Selling,
general and administrative” within our unaudited Condensed
Consolidated Statements of Operations.
(2)
Relates to certain costs included
in “Advanced projects, start-up, development and other” within our
unaudited Condensed Consolidated Statements of Operations that do
not qualify for capitalization incurred in connection with the
initial commissioning and starting up of our separations capability
at Mountain Pass and our metal alloy and magnet-making capabilities
at Fort Worth prior to the achievement of commercial production.
These costs include payroll of employees directly involved in such
commissioning activities, training costs, costs of testing and
commissioning the new circuits and processes, and other related
costs. Given the nature and scale of the related costs and
activities, management does not view these as normal, recurring
operating expenses, but rather as non-recurring investments to
develop such capabilities. Therefore, we believe it is useful and
necessary for investors to understand our core operating
performance in current and future periods by excluding the impact
of these start-up costs.
(3)
The majority of the amounts for
the three and six months ended June 30, 2023, are included in
“Advanced projects, start-up, development and other” within our
unaudited Condensed Consolidated Statements of Operations, and
pertains to legal, professional services, and other costs
associated with non-recurring transactions.
(4)
Amounts for the three and six
months ended June 30, 2023, principally relate to demolition costs
incurred in connection with demolishing and removing certain
out-of-use older facilities and infrastructure from the Mountain
Pass site to accommodate future expansion in rare earth
processing.
(5)
Principally comprised of interest
and investment income.
Reconciliation of GAAP Net
Income to
Non-GAAP Adjusted Net
Income
For the three months ended
June 30,
For the six months ended June
30,
(in thousands, unaudited)
2023
2022
2023
2022
Net income
$
7,395
$
73,269
$
44,842
$
158,820
Adjusted for:
Stock-based compensation expense(1)
5,730
7,440
12,743
17,213
Start-up costs(2)
3,828
812
8,392
2,320
Transaction-related and other
non-recurring costs(3)
2,160
119
5,482
136
Loss on sale or disposal of long-lived
assets, net(4)
2,320
1
4,810
258
Other
(21
)
(30
)
(41
)
(224
)
Tax impact of adjustments above(5)
(4,389
)
(2,002
)
(7,878
)
(4,871
)
Adjusted Net Income(6)
$
17,023
$
79,609
$
68,350
$
173,652
(1)
Principally included in “Selling,
general and administrative” within our unaudited Condensed
Consolidated Statements of Operations.
(2)
Relates to certain costs included
in “Advanced projects, start-up, development and other” within our
unaudited Condensed Consolidated Statements of Operation that do
not qualify for capitalization incurred in connection with the
initial commissioning and starting up of our separations capability
at Mountain Pass and our metal alloy and magnet-making capabilities
at Fort Worth prior to the achievement of commercial production.
These costs include payroll of employees directly involved in such
commissioning activities, training costs, costs of testing and
commissioning the new circuits and processes, and other related
costs. Given the nature and scale of the related costs and
activities, management does not view these as normal, recurring
operating expenses, but rather as non-recurring investments to
develop such capabilities. Therefore, we believe it is useful and
necessary for investors to understand our core operating
performance in current and future periods by excluding the impact
of these start-up costs.
(3)
The majority of the amounts for
the three and six months ended June 30, 2023, are included in
“Advanced projects, start-up, development and other” within our
unaudited Condensed Consolidated Statements of Operations, and
pertains to legal, professional services, and other costs
associated with non-recurring transactions.
(4)
Amounts for the three and six
months ended June 30, 2023, principally relate to demolition costs
incurred in connection with demolishing and removing certain
out-of-use older facilities and infrastructure from the Mountain
Pass site to accommodate future expansion in rare earth
processing.
(5)
Tax impact of adjustments is
calculated using an adjusted effective tax rate, which excludes the
impact of discrete tax costs and benefits, to each adjustment. The
adjusted effective tax rates were 31.3%, 25.1%, 24.0% and 24.7% for
the three and six months ended June 30, 2023 and 2022,
respectively.
(6)
Effective September 30, 2022, the
Company no longer excludes depletion expense for purposes of
calculating and presenting Adjusted Net Income, and has
retroactively revised the prior year period for comparability
purposes.
Reconciliation of GAAP Diluted
EPS to
Non-GAAP Adjusted Diluted
EPS
For the three months ended
June 30,
For the six months ended June
30,
(unaudited)
2023
2022
2023
2022
Diluted EPS
$
0.04
$
0.38
$
0.24
$
0.83
Adjusted for:
Stock-based compensation expense
0.03
0.04
0.07
0.09
Start-up costs
0.02
—
0.04
0.01
Transaction-related and other
non-recurring costs
0.01
—
0.03
—
Loss on sale or disposal of long-lived
assets, net
0.01
—
0.02
—
Tax impact of adjustments above(1)
(0.02
)
(0.01
)
(0.04
)
(0.02
)
Adjusted Diluted EPS
$
0.09
$
0.41
$
0.36
$
0.91
Diluted weighted-average shares
outstanding
177,859,118
193,414,563
193,528,819
193,452,921
Assumed conversion of Convertible
Notes(2)
15,584,409
—
—
—
Adjusted diluted weighted-average
shares outstanding
193,443,527
193,414,563
193,528,819
193,452,921
(1)
Tax impact of adjustments is
calculated using an adjusted effective tax rate, which excludes the
impact of discrete tax costs and benefits, to each adjustment. The
adjusted effective tax rates were 31.3%, 25.1%, 24.0%, and 24.7%
for the three and six months ended June 30, 2023 and 2022,
respectively.
(2)
The Convertible Notes were
antidilutive for GAAP purposes for the three months ended June 30,
2023. For purposes of calculating Adjusted Diluted EPS, we have
added back the assumed conversion of the Convertible Notes since
they would not be antidilutive when using Adjusted Net Income as
the numerator in the calculation of Adjusted Diluted EPS.
Reconciliation of GAAP Cost of
Sales to
Non-GAAP Production
Costs
For the three months ended
June 30,
For the six months ended June
30,
(in thousands, unless otherwise stated,
unaudited)
2023
2022
2023
2022
Cost of sales (excluding depreciation,
depletion and amortization)
$
22,704
$
22,092
$
46,920
$
45,265
Adjusted for:
Stock-based compensation expense(1)
(795
)
(506
)
(1,917
)
(1,221
)
Shipping and freight
(1,995
)
(3,508
)
(4,283
)
(6,752
)
Other
(11
)
(580
)
(614
)
(1,136
)
Production Costs(2)
19,903
17,498
40,106
36,156
Divided by:
REO sales volume (in MTs)
10,271
10,000
20,486
21,706
Production cost per REO MT (in
dollars)(2)
$
1,938
$
1,750
$
1,958
$
1,666
(1)
Pertains only to the amount of stock-based compensation expense
included in cost of sales.
(2)
See “Use of Non-GAAP Financial Measures” below for definition
and further information.
Conference Call Details
MP Materials will host a conference call to discuss these
results at 2:00 p.m. Pacific Time, Thursday, August 3, 2023. To
access the conference call, participants should dial 1-833-470-1428
and international participants should dial 1-929-526-1599 and enter
the conference access number 297364. The live audio webcast along
with the press release and accompanying slide presentation, will be
accessible at investors.mpmaterials.com. A recording of the webcast
will also be available following the conference call.
About MP Materials
MP Materials (NYSE: MP) produces specialty materials that are
vital inputs for electrification and other advanced technologies.
MP’s Mountain Pass facility is America’s only scaled rare earth
production source. The Company is currently expanding its
manufacturing operations downstream to provide a full supply chain
solution from materials to magnetics. More information is available
at https://mpmaterials.com/.
Join the MP Materials community on X, YouTube, Instagram and
LinkedIn.
We routinely post important information on our website,
including corporate and investor presentations and financial
information. We intend to use our website as a means of disclosing
material, non-public information and for complying with our
disclosure obligations under Regulation FD. Such disclosures will
be included in the Investors section of our website. Accordingly,
investors should monitor such portion of our website, in addition
to following our press releases, Securities and Exchange Commission
filings and public conference calls and webcasts.
Forward-Looking Statements
This press release contains certain statements that are not
historical facts and are forward-looking statements for purposes of
the safe harbor provisions under the United States Private
Securities Litigation Reform Act of 1995. Forward-looking
statements may be identified by the use of words such as
“estimate,” “plan,” “project,” “forecast,” “intend,” “expect,”
“anticipate,” “believe,” “seek,” “will,” “target,” or similar
expressions that predict or indicate future events or trends or
that are not statements of historical matters. These
forward-looking statements include, but are not limited to,
statements regarding the continued demand for rare earth markets
and the market for rare earth materials generally, future demand
for electric vehicles and magnets, estimates and forecasts of our
results of operations and other financial and performance metrics,
the Company’s ability to control costs, and the Company’s Stage II
and Stage III projects, including the Company’s ability to achieve
run rate production of separated rare earth materials and
production of magnetic alloy and magnets. Such statements are all
subject to risks, uncertainties and changes in circumstances that
could significantly affect the Company’s future financial results
and business.
Accordingly, the Company cautions that the forward-looking
statements contained herein are qualified by important factors that
could cause actual results to differ materially from those
reflected by such statements. These forward-looking statements are
subject to a number of risks and uncertainties, including
fluctuations and uncertainties related to demand for and pricing of
rare earth products; changes in domestic and foreign business,
market, financial, political and legal conditions; changes in
demand for NdFeB magnets; the effects of competition on the
Company’s future business; risks related to the rollout of the
Company’s business strategy, including Stage II and Stage III, and
the timing of achieving expected business milestones; risks related
to the Company’s long-term agreement with General Motors, including
the Company’s ability to produce and supply NdFeB magnets; the
impact of the global COVID-19 pandemic, on any of the foregoing
risks; risks related to current and future governmental and
environmental laws, regulations, licenses or legal requirements;
and those risk factors discussed in the Company’s filings with the
Securities and Exchange Commission, including Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form
8-K and other documents filed by the Company with the Securities
and Exchange Commission.
If any of these risks materialize or our assumptions prove
incorrect, actual results could differ materially from the results
implied by these forward-looking statements. The Company does not
intend to update publicly any forward-looking statements except as
required by law. In light of these risks, uncertainties and
assumptions, the forward-looking events discussed in this earnings
release may not occur.
Use of Non-GAAP Financial Measures
This press release references certain non-GAAP financial
measures, including Adjusted EBITDA, Adjusted Net Income, Adjusted
Diluted EPS, and Production Costs. We define Adjusted EBITDA as our
GAAP net income before interest expense, net; income tax expense or
benefit; and depreciation, depletion and amortization; further
adjusted to eliminate the impact of stock-based compensation
expense; start-up costs; transaction-related and other
non-recurring costs; accretion of asset retirement and
environmental obligations; gain or loss on sale or disposal of
long-lived assets; and other income or loss. Adjusted Net Income is
defined as our GAAP net income excluding the impact of stock-based
compensation expense; start-up costs; transaction-related and other
non-recurring costs; gain or loss on sale or disposal of long-lived
assets; and other items that we do not consider representative of
our underlying operations; adjusted to give effect to the income
tax impact of such adjustments. Adjusted Diluted EPS is defined as
GAAP diluted earnings per share (“EPS”) excluding the per share
impact, using adjusted diluted weighted-average shares outstanding,
of stock-based compensation expense; start-up costs;
transaction-related and other non-recurring costs; gain or loss on
sale or disposal of long-lived assets; and other items that we do
not consider representative of our underlying operations; adjusted
to give effect to the income tax impact of such adjustments. Our
key performance indicator, realized price per REO MT, is calculated
as the quotient of: (i) our GAAP product sales for a given period
and (ii) our REO sales volume for the same period. Production
Costs, which we use to calculate our key performance indicator,
production cost per REO MT, is defined as our GAAP cost of sales
(excluding depreciation, depletion and amortization), less
stock-based compensation expense included in cost of sales,
shipping and freight costs, and costs attributable to certain other
sales, for a given period. Production cost per REO MT is calculated
as the quotient of: (i) our Production Costs for a given period and
(ii) our REO sales volume for the same period.
MP Materials’ management uses Adjusted EBITDA, Adjusted Net
Income, and Adjusted Diluted EPS to compare MP Materials’
performance to that of prior periods for trend analyses and for
budgeting and planning purposes. MP Materials believes Adjusted
EBITDA, Adjusted Net Income, and Adjusted Diluted EPS provide
useful information to management and investors regarding certain
financial and business trends relating to MP Materials’ financial
condition and results of operations. MP Materials believes that the
use of Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted
EPS provide an additional tool for investors to use in evaluating
projected operating results and trends. MP Materials believes
realized price per REO MT is an important measure of the market
price of the Company’s concentrate product. Furthermore, MP
Materials believes production cost per REO MT sold, which utilizes
the non-GAAP financial measure, Production Costs, is a key
indicator of the Company’s concentrate production efficiency. As we
evolve as a business and transition from a producer of rare earth
concentrate to a producer of separated rare earth products upon
completing the commissioning of our Stage II project, the metrics
that management anticipates using to evaluate the business may
change or be revised. For example, in completing the transition to
separated rare earth products, we may determine that production
cost per REO MT, which is a metric focused solely on Stage I
concentrate operations, and consequently, Production Costs, are no
longer meaningful in evaluating and understanding our business or
operating results. MP Materials’ method of determining these
non-GAAP measures may be different from other companies’ methods
and, therefore, may not be comparable to those used by other
companies and MP Materials does not recommend the sole use of these
non-GAAP measures to assess its financial performance. Management
does not consider non-GAAP measures in isolation or as an
alternative or to be superior to financial measures determined in
accordance with GAAP. The principal limitation of non-GAAP
financial measures is that they exclude significant expenses and
income that are required by GAAP to be recorded in MP Materials’
financial statements. In addition, they are subject to inherent
limitations as they reflect the exercise of judgments by management
about which expense and income are excluded or included in
determining these non-GAAP financial measures. In order to
compensate for these limitations, management presents
reconciliations of such non-GAAP financial measures to the most
directly comparable GAAP financial measures.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230803934080/en/
Investors: IR@mpmaterials.com Media: Matt
Sloustcher media@mpmaterials.com
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