Earnings call transcript: Neo Performance Materials misses EPS forecast, stock drops

Neo Performance Materials Inc. (NEO) reported its earnings for Q1 2025, revealing a mixed financial performance. The company posted an earnings per share (EPS) of $0.09, falling short of the forecasted $0.105. Despite a revenue beat, with actual revenue of $121.6 million surpassing the forecast of $116.5 million, the stock reacted negatively, declining by 5.07% in pre-market trading. According to InvestingPro’s analysis, the company maintains a "FAIR" financial health rating, with particularly strong scores in growth potential and relative value metrics. InvestingPro analysis suggests the stock is currently fairly valued based on its comprehensive Fair Value model.

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Key Takeaways

• Neo Performance Materials missed its EPS forecast for Q1 2025.
• Revenue exceeded expectations, coming in at $121.6 million.
• The stock dropped 5.07% following the earnings release.
• Adjusted EBITDA saw a significant 60% year-over-year increase.
• The company continues to focus on strategic growth in key sectors.

Company Performance

Neo Performance Materials reported a flat year-over-year revenue of $121.6 million for Q1 2025. However, the company achieved a notable 60% increase in adjusted EBITDA, reaching $17 million. The adjusted net income stood at $3.6 million, underscoring a robust operational performance despite the EPS miss. The company’s strong financial position is evidenced by a healthy current ratio of 2.05 and a moderate debt-to-equity ratio of 0.68. The company continues to leverage its vertically integrated and regionally diversified business model to maintain a competitive edge in the rare earth supply chain.

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Financial Highlights

• Revenue: $121.6 million (flat YoY)
• Adjusted EBITDA: $17 million (↑60% YoY)
• Adjusted Net Income: $3.6 million
• Adjusted EPS: $0.09

Earnings vs. Forecast

Neo Performance Materials reported an EPS of $0.09, missing the forecast of $0.105. The revenue, however, exceeded expectations, coming in at $121.6 million compared to the anticipated $116.5 million. This mixed result highlights a slight underperformance in earnings but a stronger-than-expected top-line growth.

Market Reaction

Following the earnings release, Neo Performance Materials saw its stock price decline by 5.07% in pre-market trading. The stock’s performance reflects investor concerns over the EPS miss, despite the revenue beat. The share price dropped to $11.24, moving away from its 52-week high of $19.11. Notably, analysts maintain a positive outlook with a consensus recommendation of 1.93 (Buy), setting price targets ranging from $8.50 to $15.00, suggesting potential upside opportunity.

Outlook & Guidance

Neo Performance Materials reaffirmed its adjusted EBITDA guidance for 2025, projecting between $55 million and $60 million. The company is focused on expanding its presence in the automotive, energy, and electronic sectors. InvestingPro data indicates expected revenue growth of 13% for FY2025, with analysts forecasting a return to profitability this year.

[Get access to the complete NEO Research Report, part of InvestingPro’s coverage of 1,400+ US stocks, offering deep-dive analysis and actionable insights for informed investment decisions.] Plans for further phases of magnet manufacturing and the commencement of mass production for sintered magnets in 2026 are underway.

Executive Commentary

"Neo is well equipped not to just respond to the changes happening in the market, but to lead through them," stated CEO Rahim Solama. He emphasized the company’s readiness to capitalize on emerging opportunities, highlighting Neo’s institutional capability in supply as a significant industry advantage. "We are fired up and we’re just balancing the number of opportunities that are banging at the door right now," Solama added, reflecting a proactive approach to market dynamics.

Risks and Challenges

• Geopolitical tensions affecting rare earth supply chains.
• New U.S. tariffs on Chinese imports could impact costs.
• China’s export controls on heavy rare earth elements may disrupt supply.
• Currency fluctuations and macroeconomic pressures.
• Potential delays in the expansion of magnet manufacturing facilities.

Q&A

During the earnings call, analysts inquired about the growth potential of the Namco facility and opportunities in defense and other magnet applications. The company addressed concerns regarding potential export restrictions on neodymium-praseodymium (NDPR) and confirmed the timeline for production at its Estonian magnet facility.

Full transcript - Neo Performance Materials Inc (NEO) Q1 2025:

Conference Call Operator: Good morning, and welcome to the Neo Performance Materials First Quarter twenty twenty five Earnings Conference Call. For opening remarks and introductions, let me turn the call over to Irina Kuznetsova, Director of Investor Relations for Neo. Irina, please proceed.

Irina Kuznetsova, Director of Investor Relations, Neo Performance Materials: Thank you, operator, and good day, everyone. Today’s call is being recorded. A replay will be available starting tomorrow in the Investor Center on our website at neomaterials.com. Starting this quarter, our call will be accompanied by a live webcast presentation. If you are joining us online, the slides will advance automatically as was requested through the discussion.

You can also download a copy of the presentation from our website to follow along or reference afterwards. On today’s call are Rahim Solama, NEO’s President and Chief Executive Officer and Jonathan Baksh, NEO’s Chief Financial Officer. Please note that some of the information you will hear during today’s presentation and discussion will consist of forward looking statements, including, without limitation, those regarding revenue, EBITDA, adjusted EBITDA, product volumes, product pricing, other income and expense measures, cash returns, operational changes and future business outlook, including potential expansion plans and contracts. Actual results or trends could differ materially from those discussed today. For more information, please refer to the risk factors discussed in NEO’s most recent financial filings, which were filed on SEDAR earlier today and also available on our website.

Neo assumes no obligation to update any forward looking statements or information, which speak as of their respective dates. Financial amounts presented today will be in U. S. Dollars. Non IFRS financial measures will be used during this conference call and information regarding reconciliation to the IFRS measures is set out in the financial statement and MD and A.

I will now turn the call over to Raheem.

Rahim Solama, President and Chief Executive Officer, Neo Performance Materials: Good morning, everyone, and thank you for joining us today. And today, we will start on Slide four. We are pleased to share Neo’s Q1 twenty twenty five results, a quarter that once again highlights the strength, resilience and strategic importance of our business within global supply chains. While the broader macroeconomic environment remains complex with new tariffs and export restrictions reshaping worldwide trade flows, Neo continues to deliver. Our performance this quarter reinforces a few key themes.

First, our financial results were ahead of expectations, showcasing Neo’s ability to navigate volatility while remaining focused on execution. Second, we’ve made meaningful progress on our most important growth projects, including continued success in ramping up our rare earth permanent magnet production capabilities in Europe. And third, among a changing geopolitical landscape Neo continues to demonstrate our thought leadership as a reliable partner in the global effort to localize rare earth supply chains. We are building a stronger, more diversified platform, one that is designed not just to respond to geopolitical shifts, but to lead through them. Before turning to our quarterly results, I would like to address our ongoing strategic review process.

And as we have previously discussed, we are conducting a comprehensive strategic asset review across our geographic footprint to consider strategic alternatives and opportunities to maximize value for our shareholders. The process remains active and is being managed under the leadership of Neo’s special committee and financial advisers. While the review continues, we have continued to take steps to optimize Neo’s business, including the divestment of non core assets, executing improvements in operational performance and progressing with major capital programs. There can be no assurance that the strategic review process will result in any transaction or any alternative nor any assurance as to its outcome or timing. Does not intend to comment further unless it determines that further disclosure is necessary or appropriate.

Okay. So moving to our first quarter results, let’s turn to slide five. Neo delivered another strong performance during the first quarter generating adjusted EBITDA of approximately $17,000,000 an increase of approximately 60% year over year and ahead of expectations. This is a direct result of solid execution throughout our business and a reflection of resilient demand for our products. Though macroeconomic uncertainties persist, I am pleased to report that at this time we remain on track to achieve our full year guidance.

Taking a closer look at our segments, our Chemicals and Oxide segment delivered its strongest EBITDA performance in recent quarters with adjusted EBITDA of CAD7 million, an increase of $7,000,000 year over year. Magnequench continued to perform delivering strong EBITDA of approximately $7,000,000 up 9% compared to Q1 twenty twenty four. And rare metals posted approximately $9,000,000 in adjusted EBITDA reflecting an anticipated step down in the exceptional results that we saw over the last two quarters. Jonathan will elaborate on the details of each BU in a few minutes. In addition to adjusted EBITDA growth, Neo amplified its financial strength by completing the Jammer and Zammer divestitures with approximately $28,000,000 in gross proceeds.

Importantly, the company remains in a net cash position with ample liquidity. Our capital structure supports further growth enabling disciplined investment in high return transformational projects that will drive Neil’s long term shareholder value. Let’s move to Slide six. Building on this foundation, we are advancing strategic capital projects that strengthen our position as a critical supplier to the automotive energy and electronic sectors. Within the automotive sector for example, we are innovating across both legacy and next generation vehicle programs and these initiatives support near term cash flow as well as long term growth.

Our Namco emissions catalyst control plant is now fully commissioned and we’ve achieved full run rate capacity for requalified products. This highly automated cost efficient manufacturing facility enhances our competitiveness in the global auto catalyst market where demand remains strong amid tightening emissions regulations. You can see some pictures of the Namco facility here, showcasing the control room and samples of automation in the facility. Namco is delivering meaningful EBITDA for our C and O segment with production volumes showing growth and multiple new customer programs secured since launch. We are efficiently scaling the facility where we target double digit annual growth while driving high cash flow conversion.

Let’s move to slide seven. Neo’s permanent magnet facility in Europe remains firmly on track both on time and on budget as we progress from commissioning into early production milestones. You can see some pictures of the equipment and the facility here. As we’ve talked about previously, the building is essentially complete and over 90% of the equipment is now installed and commissioned. Let’s move to Slide eight.

Just a few weeks ago, we successfully produced and shipped 18,000 assembled sintered magnet pieces as preproduction samples for a Tier one traction motor customer, marking a critical step toward commercial scale production. This is a remarkable achievement as we only started commissioning equipment earlier this year. The extended and global team at Neo Magnequench seamlessly executed a highly complex multi stage production process from raw materials to final assembly delivering a high performance magnet tailored to a specific traction motor platform. This marks a breakthrough achievement and exemplifies Neo’s advanced technical and operational capabilities. These are the fruits of a highly dedicated team in Estonia and globally leveraging Magnequench’s thirty years of rare earth magnetics experience and some of the world’s most advanced magnetics lab capabilities.

Our team is driven and committed to delivering on this projects, one of the most important critical materials projects for rare earth magnets in Europe and indeed the world. There is still much to be done in getting the PPAP, bringing it to mass production, servicing more customers and programs, but the accomplishment achieved a few weeks ago really can’t be understated. The progress in our permanent magnet facility in Europe is merely one phase of a multi phase growth strategy that will see us expand our magnet manufacturing in Europe with Phase two and then add Phase three and eventually Phase four elsewhere. This plan ultimately ties to one of the core investment drivers of Neo to provide global and parallel supply chains for rare earth magnetics and other critical materials for these rapidly growing and exciting end markets. Let’s move to slide nine.

The need for these parallel supply and local supply chains has never been more evident than now with recent geopolitical developments. As you are most likely aware, two major events are affecting our industry. One, the introduction of higher tariffs in The U. S, particularly with respect to China and two, the recent announcement placing selected heavy rare earth elements under China’s export control regime aimed at regulating dual use applications. These additions to the export control list include the heavy rare earths needed for sintered magnet manufacturing as well as the permanent magnets themselves.

Amid this evolving landscape, Neo is strategically positioned to win. Our vertically integrated regionally diversified model allows us to remain flexible and resilient in the face of geopolitical uncertainty. And today, we are seeing the results of this strategy. While the full economic impact from geopolitical uncertainty and the new regulatory regime is still to be determined, Neo believes we will be a long term beneficiary of these changing global dynamics. First, we’ll talk about the impact of tariffs and second, the impact of these heavy rare earth export restrictions.

Jonathan Baksh, Chief Financial Officer, Neo Performance Materials: We evaluate tariffs through two lenses.

Rahim Solama, President and Chief Executive Officer, Neo Performance Materials: First, our comparative advantage under relative tariff regimes between The U. S, China and Europe and second, the extent of domestic capacity in The U. S. I will comment specifically on some of the larger impacts of tariffs on Neo’s business. Our largest U.

S. Bound product is hafium, which we recycled and refined in Europe. Hafnium represented about two thirds of our total imports into The U. S. Last year.

Tariffs on hafnium for Europe are significantly less than the tariffs on hafnium from China, which is where our largest competition would be. For hafnium, there is a little U. S. Domestic capacity in the area of the supply chain where Neo fits. Our second largest important to The U.

S. Is for our emissions catalysts business. For these, we manufacture products both in Europe and in China. There has been a tariff on mixed oxides for catalyst from China for a number of years now, although current tariffs are clearly of a different scale. Our largest competitors have plants in China, but also have production capabilities in Europe, Japan and some U.

S. Production. Neo is working closely with our customers to rebalance some of our U. S. Destiny products to come from Europe, although this will take some time as products have to be requalified and tested.

These are all part of global programs for global customers and the same programs will continue in China, in Europe and in other parts of the world. The U. S. Bound sales of catalysts from China represent less than 5% of Neo’s consolidated sales. In gallium, Neo is the only recycler and upgrader of semiconductor grade gallium material in North America.

Following China’s Twenty Twenty Four dual control export regulation, our Canadian refinery has become even more critical to the Western semiconductor ecosystem. Neo’s exposure to U. S. Tariffs on magnetic products remains minimal as we currently ship almost no magnet volumes from China to The United States. Most non China motor manufacturing today is concentrated in Europe, Japan, Korea and Southeast Asia.

Looking forward, with significantly higher tariffs on Chinese rare earth magnets than those produced in Europe, Neo’s European permanent magnet facility offers a clear competitive advantage for customers seeking tariff optimized solutions and probably more importantly a diversified supply base. This is not an exhaustive list, but it does represent the vast majority of our imports to The U. S. And as you can see tariffs do not have a direct material negative impact on Neo and in fact may yield some benefits to Neo due to our globally distributed manufacturing footprint. What this doesn’t speak directly to is what happens to our customers’ customer as our products are ultimately consumed throughout the world.

This dynamic is harder to quantify, but remains top of mind for all as we watch the impacts of the economies of the world in general. Moving to Slide 10, in response to U. S. Tariffs, China has instituted new export controls from China on heavy rare earth elements, which have drawn renewed attention to the potential supply chain disruption. As noted earlier, these export controls not only apply to the heavy rares themselves, but to the permanent magnets that use them.

This has become a key concern of all governments, OEMs and motor manufacturers as China is essentially the only meaningful source of heavy rares today. These concerns are real and it is yet to be determined exactly how these export control restrictions will be applied. 99% of Neo’s bonded magnet portfolio is heavy rare earth free, a key differentiator from sintered magnets generally. Neo is continuing to ship its bonded magnets globally, albeit additional testing reviews from customs in China as might be expected. And notably, Neo is the only company globally with a heavy rare earth free magnet for automotive traction motors already in production.

Now on the road, two programs with Honda and Diode. This forward thinking product is a direct result of Honda, Diodes and Neo’s long term planning and technical depth. Neo owned and operated a heavy rare separator in China, JMR that we sold earlier this year. This entity does ship heavy rarer specialty products to numerous international customers that are now subject to review by these export control groups. Neo’s ownership is now 9% of this facility, but this also affects the international distribution agreement that we have in place with our partners.

Our products do not go into restricted end products and we hope to receive approval to ship these products in due course. Neo’s team has a long history of operating in China and is highly experienced in navigating complex export license processes, a capability we’ve proven during recent gallium restrictions. That experience combined with our healthy inventory and long standing customer relationships gives us a practical edge in maintaining operational continuity. Looking ahead, Neo is uniquely positioned to address one of the most critical structural gaps in the global rare earth supply chain, the absence of heavy rare earth separation capacity outside of China. So let’s move to Slide 11.

Prior to these announcements, Neil had already begun the engineering and design work for a pilot scale heavy rarer separation line in Estonia as a first strategic step building on our operational light rare earth separation base already in the same facility. Neo has thirty years of operational engineering experience with specialty heavy rare earth products in Singapore from our time operating JMR. The transfer of heavy rare earth separation technology outside of China is illegal and Neo respects and obeys the laws of the regions in which we operate. Accordingly, Neo has not and cannot use rare earth separation technology from JMR. However, Neo has been supporting our customers globally with advanced and specialty heavy rare earth products, which gives us unique exposure to the products and their characteristics.

To support future scale up, Neo is actively working with a growing pipeline of emerging rare earth mining projects across North America, Australia, Brazil and Southeast Asia, many with a focus on heavy rare earths. Several of these projects already rely on Neo’s in house laboratory and engineering teams to help optimize their flow sheets, reinforcing our role as the preferred downstream partner and offtake counterparty as new supply comes online. We are also happy to see partners like Linus make tremendous steps in their journey towards separating heavy rares, building on their vast experience and expertise in mining and separating light rares. It is critical that the industry works together to address the needs for more localized and parallel supply chains. We have been customers and partners with Linus for many years and are impressed with the progress that they are making in this area.

These efforts are increasingly important as recent trade policies and export controls reshape the industry reinforcing the urgency of localized rare earth supply chains. Moving to Slide 12. Once again, these trends validate the three pillars of Neo’s investment thesis. End markets with tremendous growth opportunities, the need for localized and parallel supply chains and Neo’s unique and long history and expertise in rare earth magnetics and critical materials. We tie this together with a company that drives positive EBITDA, has an excellent record of executing on projects and remains financially strong with a healthy balance sheet and cash flow profile.

With that, I’d now like to turn the call over to Jonathan for a summary of our financial results for the quarter.

Jonathan Baksh, Chief Financial Officer, Neo Performance Materials: Thanks, Raheem, and good morning, everyone. As Rahim noted earlier, our first quarter results reflect our strong start to the year, driven by solid performance across all segments and sustained demand in high value automotive, industrial and aerospace applications. Moving to Slide 14. We reported revenue of $121,600,000 for the quarter, which was relatively flat year over year as lower pricing in rare metals and Magnequench segment was largely offset by improved realized prices in the C and O segment. Despite mixed market dynamics, Neo delivered a solid adjusted EBITDA margin supported by a more favorable product mix and improved operational execution, including meaningful improvements in conversion costs and SG and A discipline across the organization.

These factors contributed to a year over year margin expansion of approximately 500 basis points, reflecting our continued focus on driving improved profitability. Moving to slide 15. Adjusted EBITDA for Q1 twenty twenty five increased meaningfully to $17,000,000 up from $11,000,000 in Q1 twenty twenty four. The most significant year over year uplift came from the Chemicals and Oxide segment, where we delivered a multiyear high in quarterly earnings, primarily driven by strong recovery in our auto catalyst business. This translated into net contribution increase of over $7,000,000 accounting for 31% of total consolidated adjusted EBITDA in the quarter.

Magnequench delivered another quarter of stable profitability with adjusted EBITDA up $05,000,000 year over year supported by continued growth in bonded magnets and bonded powders and traction motor applications. Rare metals performance remained consistent with expectations as normalized hafnium pricing was balanced by sustained demand in aerospace and high-tech end markets. As a result, we saw a more balanced distribution of segment level adjusted EBITDA contribution with MagnaQuench, Chemicals and Oxide and Rare Metals representing 30%, thirty one % and thirty nine % of the total respectively. Importantly, we delivered $3,600,000 of adjusted net income for the quarter translating to adjusted earnings per share of $09 Moving to slide 16. Our MEGNA Quench business continued to deliver strong volume growth in the first quarter with shipments up 7.3% year over year.

Bonded magnet volumes reached a new quarterly record, increasing 53% compared to Q1 twenty twenty four and up 17% sequentially. This growth reflects our strategic shift to products further up the value chain as the team successfully expands from bonded powders into bonded magnet production, leveraging decades of process and application expertise. Commercial momentum remains strong, supported by continued customer wins and growing adoption across both automotive platforms and high performance cooling applications for AI servers and data centers. As Rohin noted, our heavy rare earth free magnet for traction motors presents an increasingly compelling value proposition, particularly as OEMs reassess sourcing strategies in light of recent Chinese export restrictions. This dynamic creates a clear opportunity for Magnaquench to further differentiate and grow.

Adjusted EBITDA for the quarter increased 9% year over year, with EBITDA margins expanding by 160 basis points reflecting the high value add content of our product mix and the business’ ability to sustain strong profitability even amid soft rare earth pricing. Moving to Slide 17. Chemical Dioxide’s results came in ahead of expectations, signaling a clear turnaround after a challenging 2024 shaped by market headwinds and transformative actions that are now positioning the business for more resilient growth. With the successful ramp up of our new emission control catalyst facility and the completion of the Chinese separation asset divestitures, the segment is now firmly focused on execution and margin accretive growth. The state of the art Namco plant is already delivering operational and financial benefits with sequential volume growth of 21 and a year over year increase of 4%, supported by improved automation process layout and environmental controls.

Our wastewater treatment business also delivered strong results with volumes up 25% from prior year, reflecting both continued demand from existing accounts and new customer wins. With over 90 customer retention and U. S. Market penetration still under 5%, this business offers a significant runway in high margin recurring revenue market. Adjusted EBITDA increased by $7,000,000 compared to Q1 twenty twenty four, our strongest quarterly results for C and O since Q3 twenty twenty three.

This result was achieved through increased volumes and significant reductions in conversion costs. This quarter reflects an exceptionally strong result. And while we anticipate moderation in the coming quarters, performance is expected to remain robust and supportive of our full year outlook. Moving to slide 18 and turning to our REVL segment. Q1 marked another solid quarter with consistent operational and financial execution across all facilities, supported by ongoing strength in end market demand and emerging geopolitical tailwinds.

Hapnium pricing has now normalized as anticipated, resulting in lower year over year margins relative to the elevated level seen in the second half of twenty twenty four. That said, fundamentals remain supportive, particularly with the implementation of new U. S. Tariffs on Chinese hafnium. As the largest hafnium recycler in Europe, Neo continues to secure both long term contracts and opportunistic spot sales at attractive margins.

In gallium, we saw continued strength with robust demand and favorable pricing dynamics, driven in part by regulatory constraints on Chinese exports contributing to meaningful margin expansion. Adjusted EBITDA for the quarter was $9,000,000 slightly lower than the prior year period due to the expected normalization of hafnium pricing. However, our gross margin expanded by 190 basis points underscoring Rare Metal’s ability to navigate price cycles, maintain commercial discipline and deliver strong performance. Looking ahead, we remain focused on reinforcing this position through the long term supply chain security. As part of that effort, Neo recently signed a memorandum of understanding with Globe Metals and Mining Limited for potential offtake of up to 150 metric tons per year of niobium pentoxide from the Kanika project in Malawi.

Beginning in 2027, an important step towards securing future inputs to support our growth strategy. Moving to slide 19 on cash flow. Neo’s financial position remains sound with the continued ability to generate cash over both the short and long term. As of 03/31/2025, Neo held cash and cash equivalents of 77,000,000 During the quarter, Neo paid approximately $3,000,000 in dividends to shareholders. Cash from operating activities was negative $18,000,000 primarily reflecting the $13,000,000 settlement of the European patent litigation claim as well as $15,000,000 net increase in working capital.

Working capital changes were driven by higher accounts receivable due to the timing of customer sales as well as elevated inventory levels as we began to hold strategic stock in select jurisdictions amid rising geopolitical uncertainty. We will continue to actively manage inventories to ensure operational continuity and uninterrupted customer supply. In the first quarter, we invested $4,300,000 in the Namco emission control catalyst facility and $5,200,000 in the European Sinterbagnet facility, alongside additional capital upgrades at Silnet. As Rohin mentioned earlier, we also received approximately $28,000,000 in cash proceeds from the sale of Chinese separation assets, 26,000,000 in net cash, which was completed in the first quarter. Sustaining capital expenditures was low at $1,000,000 for the quarter and we remain well positioned to continue generating strong free cash flow moving forward.

Moving to slide 20. Our liquidity position remains sound with cash on hand of $77,000,000 an undrawn $25,000,000 credit facility from EDC, additional revolving and other loan capacity of $41,000,000 and access to up to $10,000,000 in government grants support from Europe. We continue to operate with a strong balance sheet ending the quarter in a net cash position of $6,000,000 providing both financial stability and flexibility. This foundation enables us to fund strategic growth initiatives without relying on external equity financing for current projects, while maintaining disciplined capital allocation and enhancing long term shareholder value. Moving to slide 21 and turning back to our financial performance.

Our strong EBITDA this quarter underscores the strength of our global diversification strategy and operational execution. Amid heightened geopolitical volatility and supply chain disruption, Neo continues to perform with resilience and consistency reinforcing our leadership in enabling secure localized rare earth supply chains outside of China. At present, we are restating our guidance of 55,000,000 to $60,000,000 in adjusted EBITDA for 2025 and we’ll continue to monitor the global economic situation while remaining focused on disciplined execution and capital allocation. With that, I’ll turn the call back to Rohit for closing remarks.

Rahim Solama, President and Chief Executive Officer, Neo Performance Materials: Thank you, Jonathan. Moving to slide 23. In summary, Q1 was another strong quarter for Neo. We delivered solid financial results, advanced critical growth initiatives and continue to navigate global complexity with confidence. These results underscore the value of our diversified program and the adaptability of our business.

As we look ahead our team remains focused on three priorities maintaining financial strength and resilience, driving our long term growth strategy with discipline and continuing to increase shareholder value through strong execution. Neo is well equipped not to just respond to the changes happening in the market, but to lead through them. Our investments today are building the foundation for tomorrow’s outperformance and we’re both excited and ready to confidently navigate the path ahead. Thank you for your time today and for your continued support. And with that, I’d like to open up the call for questions.

Conference Call Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer First question comes from David Ocampo at Cormark Securities. Please go ahead.

David Ocampo, Analyst, Cormark Securities: Thanks. Good morning, everyone.

Jonathan Baksh, Chief Financial Officer, Neo Performance Materials: Good morning, David.

David Ocampo, Analyst, Cormark Securities: This is either for Raheem or Jonathan or maybe both of you could take a stab at it. But, you guys called out that, Namco has, I think, 50% additional capacity, and it does sound like you guys are expecting double digit growth as you kind of secure new customers in in China and elsewhere. And I think if you take a look at prior commentary, you guys have been alluding to a 55,000,000 to $60,000,000 EBITDA target through the cycle, depending on where it’s are in a stable market. Does that number change now with the growth that you’re expecting from Namco?

Rahim Solama, President and Chief Executive Officer, Neo Performance Materials: Look, I think that the growth for Namco in terms of double digit growth this year was embedded in our original thought process, and it’s offsetting kind of the half name normalization margins. I just think it speaks to further long term opportunities and for the long term growth.

David Ocampo, Analyst, Cormark Securities: Okay. Gotcha. And then for sintered magnets, the Estonia opportunity, it’s mainly been focused on EV and maybe a little bit on wind turbines as the potential head markets. Everything that we read out there, I mean, it does seem like the focus at least as it relates to the trade banters related to defense oriented products, whether it’s aircraft or missiles. Have you guys had any ongoing discussions with government bodies about your facility in Estonia, just given the importance of French ordering?

Rahim Solama, President and Chief Executive Officer, Neo Performance Materials: Sure. Look, think frankly, we’re very popular right now among all sorts of different entities and that’s governments, OEMs, tier ones and the like inside automotive, outside automotive. So I think that there’s a wide variety of interest in terms of what we’re doing here. I think that we talk about wind farms and we talk about traction motors because they drive traction motors are some of the highest forms of magnetic specifications. And once you get to being able to deliver that, frankly, you can deliver most other types of specifications out there.

So we’re open to all kinds of business. But I think when we were launching the plant, we wanted to launch with anchor tenants that are fairly large programs, the defense and other types of programs that we don’t participate in today tend to be really small in volume. And I think that’s fine. It’s a different business model. It’s one that we can certainly adapt to over time.

But on the launch, we wanted fewer programs with volume. But the world is changing and we will change with it.

David Ocampo, Analyst, Cormark Securities: Does that force you guys to keep some of the capacity at least for phase one open in the event that some of these newer type customers that might be higher margin come to the table?

Rahim Solama, President and Chief Executive Officer, Neo Performance Materials: Think that we’ll let that play out as it plays out. I think again, we have more than adequate demand and it is just about executing the right launch path with the right number of programs. So a lot of it depends on the specific magnet specifications in this and that. So I think we’re open to be agile to manage the right way. So I don’t think we close any doors to opportunities here.

David Ocampo, Analyst, Cormark Securities: That sounds good. Maybe a loss and something that maybe you probably can’t answer at this time, but we’ve all seen the export restrictions on heavy rare earths. Is there any speculation out there in the marketplace that this will eventually be applied to NDPR in general?

Rahim Solama, President and Chief Executive Officer, Neo Performance Materials: So this is, I can say a non neo comment, but just a general industry comment. I think that that can happen, but frankly, there’s a lot of NDPR available outside of China today. So Linus is a massive producer of NDPR. MP is going to continue with their growth plan and produce more NDPR over time. Both of them are expanding.

We are in touch with numerous other upstream providers, some of which we believe have a real path to get there. So I think that there becomes additional supply of NDPR. I think it’s the largest call it leverage point was probably heavies. But it could be a next step. I just not sure that it’s as the heavy step.

David Ocampo, Analyst, Cormark Securities: Okay, that’s perfect. I’ll hop back in the queue. Thanks, Reen.

Rahim Solama, President and Chief Executive Officer, Neo Performance Materials: Thank you, sir.

Conference Call Operator: Thank you. Next question comes from Ian Gillis at Stifel. Please go ahead.

Ian Gillis, Analyst, Stifel: Good morning, everyone.

Rahim Solama, President and Chief Executive Officer, Neo Performance Materials: Hey, Ian.

Ian Gillis, Analyst, Stifel: Could you talk a little bit about how you’re thinking about maybe timing and sanctioning for the next phases of the stone at this point? Just given some of the, I guess changes in the broader marketplace over the last number of months.

Rahim Solama, President and Chief Executive Officer, Neo Performance Materials: Yeah, look, I think it’s probably early days to be talking about timelines for when we would really start phase two and phase three in earnest at this point. There’s obviously a lot going on. Our issue, as we have talked about in the past, has never been our belief in demand. So we’ve always believed that demand was there. And it’s the supply of qualified magnet manufacturers that and which is really the limit and separation, frankly, is the limiting factor.

So current events don’t necessarily change our view on that from a demand perspective. Clearly, the amount of demand requests and nature of programs is, as I said, through the roof. But I’m not sure that these are it’s just a little bit early days to start picking dates for phase two. But certainly it’s on our time horizon. People are thinking about it.

We’re thinking about what other regions, because it is a very supportive environment from a demand perspective and frankly, a government perspective. But we need to execute. And you’ve heard that theme from me all the time. We need to execute and we need to prove that we need to get the right most cost effective process in place and running a few parts is helpful. So I think it’s top of mind for all of us, but we are still thoughtful with our overall launch strategies.

Ian Gillis, Analyst, Stifel: Understood. The other thing, I guess, like a few weeks ago, I guess you could softly call them a competitor, one of your competitors launched a rare separation plant or they announced their intention to build one in Europe. If you’ve had a chance to look through that or do any diligence on it, can you maybe talk a little bit about what your competitive advantages may be versus that plant and how you’re thinking about some of those developments in Europe as a whole?

Rahim Solama, President and Chief Executive Officer, Neo Performance Materials: Sure. So I guess, first of all, you’ll forgive me if I don’t comment specifically about other participants in the industry, but overall, I would actually say it’s a good thing. We are always happy to see more upstream operations come into place, more separation operations come into place, and in fact, a larger ecosystem even further downstream than that. So although in some industries, additional competition might be viewed as challenging to one’s ability to capture the demand base, but we don’t see that at all. We see a larger ecosystem giving confidence to the demand base that the supply base will be ready.

And I say will be ready because the demand so far exceeds supply. That the more institutional capability we have in supply, the better this industry will be. The more confidence will come across all dynamics. So we are happy to see other people make progress. So there’s a limited amount of separation capabilities.

As you know, from a mining perspective, 60% of rare earth mining is in China and 40% is outside of China, but only 15% of the separation capacity exists outside of China. So we need more capacity outside of China and we need more magnet capacity outside of China, because outside of China it’s only seven percent. China’s 90 three percent and the rest of world is 7%. So the more capacity we build downstream and in all midstream assets, think the better for the industry in the long run. And I think the industry is so large, like we’re talking about $10,000,000,000 type numbers here in a decade.

We need an industry that’s strong and we’re supportive of that.

David Ocampo, Analyst, Cormark Securities: Understood, that’s helpful. I’ll turn

Ian Gillis, Analyst, Stifel: it back over. Thank you.

Rahim Solama, President and Chief Executive Officer, Neo Performance Materials: Thank you.

Conference Call Operator: Thank you. The next question comes from Marvin Wolf at Paradigm. Please go ahead.

Marvin Wolf, Analyst, Paradigm: Good morning, guys, and congratulations on a strong quarter there. Was wondering if you could give us a little more color on sort of the timelines on PPAP, when you expect it to be finished, when do you see that turning into what I would call normal everyday production and deliveries to this OEM or all the tier one and then OEM that will use it on the centered magnet side from the Estonia plant.

Rahim Solama, President and Chief Executive Officer, Neo Performance Materials: Yes, I think we’ve talked about PPAP in 2026 and mass production starting in 2026 as well. Now that’ll be mass production from our side. Technically the OEMs launching that program in 2027, but the parts obviously got go through the supply chain in order to meet the OEMs expectations and being on time. And that all remains on track. If anything, I think we’re seeing more pull to do more things faster and we’re responding to our customers and multiple inquiries to do more things faster.

But that program continues to remain on track and we anticipate that that will continue. We do anticipate there’ll be more kind of dual source programs that will come up as well. So kind of interim changeover sourcing of programs. So I think there’s a lot of moving parts in terms of new opportunities. So we just can continue to focus on executing with confidence so that we can preserve these customers and launch successfully again for beyond phase one, because this business to us is phase one, phase two, phase three, phase four.

We’re not in this for just phase one. So that’s why we’ve preached this response launch, a safe launch concept and do it responsibly because the market is just massive.

Marvin Wolf, Analyst, Paradigm: Okay, that’s great. Sort of along that line as well, will additional OEMs be able to use the same magnets that are currently being PPAP from the tier one or will there have to be modifications in the specs for those magnets, both in terms of physical specs and chemical specs?

Rahim Solama, President and Chief Executive Officer, Neo Performance Materials: So they’re generally larger programs, but the larger program tends to be consistent set of specs and then other programs have different specs. Having said that, we got to commissioning here in the early part of this year and produced samples just a couple of months later. Our ability to do this quickly is being evidenced in real life. So this isn’t stuff that we need to talk about. Like I talk a lot about safe launch and responsible launch, but if you actually just look at the facts on how fast the facility was able to execute on getting these ready to go, making modifications for other customer requirements, whether they’re dimensional or magnetic spec requirements.

We have increased confidence in our ability to do those things quickly. So you’ll hear me talk about responsible launch and safe launch, but shouldn’t be confused with our capacity to execute things fast. And that’s what we will again continue to shift our priorities, continue to shift to do things quicker as we gain more confidence in our ability to execute. But certainly executing these samples within two to three months, frankly, was beyond my expectations. I think it was just an incredible achievement.

And the team continues to make advancements in the number of alloys and the number of different programs that we will be capable of serving. And I continue to think good things will happen. And I think that things will happen quickly. But the specific programs do take different types of magnets. But I don’t think that that is a whole different process for us.

It’s largely all the same equipment, but you’re just putting different alloys and then different dimensions and other different magnetic properties. But it’s 95% the exact same equipment.

Marvin Wolf, Analyst, Paradigm: Super. Sounds like you’ve got a real tiger by the tail there.

Rahim Solama, President and Chief Executive Officer, Neo Performance Materials: We are fired up and we’re just balancing, Frankly, we’re just balancing the number of opportunities that are banging at the door right now.

Marvin Wolf, Analyst, Paradigm: That’s great. Okay. That’s all for now. Thank you very much.

Rahim Solama, President and Chief Executive Officer, Neo Performance Materials: Very good. Thanks, Marla.

Conference Call Operator: Thank you. We have no further questions. This will conclude your conference call for today. We thank you for participating. And at this time, we ask that you can please disconnect your lines.

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