Earnings call transcript: NeoGenomics Q4 2024 results disappoint despite EPS beat

NeoGenomics (NEO) reported its fourth-quarter 2024 earnings, revealing a mixed financial performance. The company reported earnings per share (EPS) of $0.04, surpassing the forecast of $0.03. However, revenue fell short of expectations, coming in at $172 million compared to the forecast of $173.05 million. This led to a pre-market stock decline of 11.79%, with shares trading at $12.72, down from $14.42. According to InvestingPro data, the stock currently trades near its 52-week low of $8.98, with an overall Financial Health Score of 2.43, indicating FAIR condition.

Key Takeaways

• NeoGenomics’ EPS exceeded expectations by $0.01.
• Revenue missed forecasts by $1.05 million.
• Stock price dropped 11.79% in pre-market trading.
• The company is expanding its permanent magnet facilities in Europe.
• Revenue for the full year 2024 declined by 17% year-over-year.

Company Performance

NeoGenomics experienced a challenging year with a 17% decline in full-year revenue, totaling $476 million. Despite this, the company achieved a significant 70% growth in adjusted EBITDA, reaching $64 million. The fourth-quarter adjusted EBITDA was $21 million, highlighting some resilience in its operations. NeoGenomics continues to focus on expanding its permanent magnet facilities, particularly in Europe, as part of its growth strategy. InvestingPro analysis reveals that while the company isn’t currently profitable, analysts expect positive earnings this year, with an EPS forecast of $0.16 for FY2025. Get access to 8 additional exclusive ProTips and comprehensive financial metrics with InvestingPro.

Financial Highlights

• Full-year revenue: $476 million, down 17% YoY.
• Full-year adjusted EBITDA: $64 million, up 70% YoY.
• Q4 adjusted EBITDA: $21 million.
• Full-year adjusted net income: $2 million.
• Diluted adjusted EPS: $0.05 per share.
• Cash flow from operations: $52 million.

Earnings vs. Forecast

NeoGenomics reported an EPS of $0.04, beating the forecast of $0.03 by approximately 33.3%. However, the revenue of $172 million fell short of the expected $173.05 million, resulting in a negative surprise of about 0.6%. This discrepancy between EPS and revenue performance may have contributed to the negative market reaction.

Market Reaction

Following the earnings announcement, NeoGenomics’ stock fell by 11.79% in pre-market trading, reflecting investor concerns over the revenue miss. The stock’s recent performance has been volatile, with a 52-week high of $19.11 and a low of $8.98. The current price indicates a significant drop from recent highs, with a year-to-date decline of 40.29% and a six-month return of -39.11%, according to InvestingPro data. The stock’s beta of 1.28 suggests higher volatility compared to the broader market. Discover detailed valuation metrics and comprehensive analysis in the Pro Research Report, available exclusively to InvestingPro subscribers.

Outlook & Guidance

Looking ahead, NeoGenomics projects adjusted EBITDA for 2025 in the range of $55-$60 million, signaling a potential decline from 2024. The company anticipates a marginal revenue decrease but remains focused on expanding its permanent magnet business, including the development of a 2,000-ton facility in Estonia. NeoGenomics is targeting double-digit growth in its emissions catalyst segment. According to InvestingPro, analyst consensus remains cautiously optimistic with a target range of $16-$26, suggesting potential upside from current levels. The company maintains a healthy current ratio of 1.98, indicating strong short-term liquidity.

Executive Commentary

CEO Raheem Solan emphasized the company’s strategic initiatives, stating, "We are building a business that is not only profitable today, but will continue to deliver long term value for our shareholders." He also highlighted the competitive landscape, noting, "90% of magnets are made in China," underscoring NeoGenomics’ efforts to diversify its supply chain.

Risks and Challenges

• Dependence on the Chinese market for rare earth elements.
• Potential delays in facility expansions in Europe.
• Fluctuations in global demand for permanent magnets.
• Regulatory changes affecting emissions control catalysts.
• Economic uncertainties impacting customer spending.

Q&A

During the earnings call, analysts inquired about potential expansions beyond the current Estonia facility and the impact of tariffs on various product lines. The management addressed these concerns, highlighting strong customer interest in their permanent magnet production capabilities and reaffirming their competitive advantages in the critical materials market.

Full transcript - NeoGenomics Inc (NEO) Q4 2024:

Conference Operator: morning, ladies and gentlemen, and welcome to the Neo Performance Materials Inc. Q4 twenty twenty four Earnings Conference Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Tuesday, 03/18/2025.

I would now like to turn the conference over to Irina Krasnasova, Director of Investor Relations for NIO. Please go ahead.

Irina Krasnasova, 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. On today’s call are Raheem Solan, NIO’s President and Chief Executive Officer and Jonathan Bach, NIO’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 SADA’s limitations, 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 on NIA’s most recent financial filings, which were filed on SEDAR earlier today and also available on our website. NIO 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. I will now turn the call over to Rajiv.

Raheem Solan, President and Chief Executive Officer, Neo Performance Materials: Good morning, everyone, and thanks for joining the call. Today, I’ll focus on four key topics. First, our financial results highlighting our strong EBITDA performance, working capital improvements and balance sheet strength. Second, our execution and accountability in 2024, demonstrating how we delivered on our commitments to streamline our business and execute major projects on time and on budget. Third, our platform for long term growth, which has been reinforced our industry leading capabilities in permanent magnets, commission catalysts and value added metals.

Then I’ll turn the call over to Jonathan for a deeper dive into the numbers before closing with our 2025 outlook and then opening up the call for Q and A.

Jonathan Bach, Chief Financial Officer, Neo Performance Materials: Before we get started,

Raheem Solan, President and Chief Executive Officer, Neo Performance Materials: a quick comment on the strategic review process. As we announced previously, we began a comprehensive strategic asset review across our geographic and operating footprint to consider strategic alternatives and opportunities to maximize value for our shareholders. This strategic review process is continuing under the leadership of NIO’s Special Committee and Financial Advisors. In the context of the strategic review, we have continued to take steps to optimize NIO’s business, including the divestment of non core assets, executing improvements in operational performance and progressing with major 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.

Muse does not intend to comment further unless it determines that further disclosure is necessary or appropriate. Okay. So to begin, 2024 was an incredible year for you. We are pleased to report exceptional financial performance, adjusted EBITDA exceeding our guidance range. Full year EBITDA grew more than 70% year over year to 64,000,000 including $21,000,000 in Q4.

This growth was broad based across our portfolio with Magnaquench delivering a full year adjusted EBITDA increase of 21% and rare metals more than doubled its EBITDA over the prior year. Nearly all facilities contributed to this strong performance and our outstanding performance in 2024 has reinforced our momentum and positions us to continued success. In addition to EBITDA growth, we also achieved significant working capital improvements, generating $52,000,000 in cash flow from operations. Working capital efficiencies along with higher cost controls strengthened our cash flow and helped fund key strategic projects, including our permanent magnet facility in Europe and our emissions control padels facility. To maintain strong financial flexibility, we secured debt financing to optimize our capital structure, while generating sufficient cash flow from operations, including working capital improvements.

Looking ahead, we see further opportunities to enhance cash flow and capital efficiency, supporting our ability to self fund this space of growth. Future funding decisions will be guided by our capital allocation priorities and the most advantageous options available to the company and our shareholders. Our strong balance sheet remains a key pillar of our financial stability. We ended the year with $85,000,000 in cash and ample liquidity, successfully executing our strategy to right size leverage while securing additional debt capacity to deliver our two major building projects. This solid financial foundation positions Nivo for accelerated growth as we execute our transformational projects that will define our next phase of future growth.

Secondly, we are proud to note that over the past year we have delivered on every commitment we made at the end of twenty twenty three and more. Our focus on execution, efficiency and strategic transformation has strengthened our business, improved our profitability and positioned Nio for long term growth. To give a quick overview of some of our accomplishments, we have launched our emissions catalyst control facility, requalified with our customers and achieved target run rate production for the facility. We advanced our European permanent magnet plant, which is nearing completion and on track for launch this year. We streamlined our portfolio by divesting and closing non core assets to sharpen focus on midstream and downstream magnetics and critical materials.

We want important new customer programs in a competitive marketplace. We diversified our rare earth supply by securing additional contracts with sources outside of China. And again, we executed all of these things while focusing on cost controls, growing EBITDA, generating cash flows and preparing the company for further growth opportunities. A major highlight of the year was the successful execution of two critical growth of capital projects. Our new emissions control catalyst plan was completed on time and under budget and is now fully operational.

This highly automated world class manufacturing facility operating with a best in class cost structure not only enhances our competitive positioning, but also provides significant opportunities for future growth. Meanwhile, our European permanent magnet facility remains on track with the core building completed, 90% of the equipment installed and commissioning well underway. We also secured a major Q1 automotive supplier award for our permanent magnets. This is an important milestone in our growth strategy and a clear validation of a strong market demand. We secured a customer commitment even before the building was completed.

Beyond executing our growth initiatives, we have taken decisive steps to optimize our manufacturing footprint, simplifying our portfolio and sharpening our focus on higher margin value added businesses. We closed non core operations including the hydrometallurgical processing of niobium and tantalum, which immediately turned that portion of our rare metals business into profitability. Additionally, we completed the sale of our gallium trichloride facility in Oklahoma in December of twenty twenty four. The sale of our two Chinese separations facilities, Jammer and Zammer continues to advance and are expected to close here in the first half of twenty twenty five, generating approximately $30,000,000 in cash. This transaction will strengthen our balance sheet, reduce earnings volatility, improve the return on capital employed and enhance our geographic footprint.

In addition, we strengthened our supply chain through new MOUs for rare earth separation and secured multiple new customer agreements across key business segments, reinforcing our strategic positioning in Critical Materials. With the heavy lifting of our transformation now largely complete, we are looking ahead to the next phase, one that is centered on higher profitability, stronger cash flows and unlocking new growth opportunities in the future. And as we look at future growth opportunities, we are proud to say that NIO has the most vertically integrated permanent magnet supply chain outside of Asia, including separation, metal making and magnet manufacturing. This is a game changing development for Western supply chains and the global critical materials independence. While China produces approximately 60% of the world’s rarer elements, it dominates over 90% of rare earth processing and magnet manufacturing.

This extreme concentration leaves industries vulnerable to geopolitical headwinds and adverse developments in regional trade policy. Our European permanent magnet facility is positioned to become one of the world’s most impactful rare earth projects. We are not just talking about it, we’re getting it done and we’re getting it done quickly. With our long history and strong relationships and securing materials from numerous rare earth upstream providers, we now have a facility that is fully built and backed by decades of operational expertise ensuring a complete, reliable and independent supply chain for high performance permanent magnets that are used in electric vehicles and other advanced technologies. Our new emissions control catalyst facility is also set to become a major driver of future growth.

As one of the most automated and cost efficient plants in the industry, it minimizes sustaining CapEx while maximizing cash flow. With tightening emission regulations globally, NIO is well positioned to grow its market share in auto catalysts for internal combustion, hybrid and alternative fuel vehicles. In addition, NIO will expand its offerings of additional forms of specialty oxides for key target markets. NIO’s recycling business remains a valuable cash flow general with strong demand in margins in Hapnia and Gauguin. As sustainability and supply chain security gained importance, our expertise in recycling and refining these critical metals provides a competitive advantage.

We operate the only gallium recycling and upgrading facility in North America. We operate the only half the end recycling facility in Europe with decades of experience, relationships and technology to be able to reprocess numerous forms of recyclable fee stock. With that, I’d like to turn the call over to Jonathan for a review on the quarter.

Jonathan Bach, Chief Financial Officer, Neo Performance Materials: Thanks, Vadim and good morning everyone. As outlined in our press release earlier today, our fourth quarter and full year ’20 ’20 ’4 results highlight NIO’s continued momentum across key segments. Magnafunch delivered meaningful volume growth supported by increasing demand for bonded powders, traction motor applications and permanent magnets across both automotive and industrial markets. Chemicals and oxides continue to underperform due to weakness in the separation business and the short term impact of relocating the emission catalyst facility. Current metals had an outstanding year with robust demand for hafnium, niovia, and gallium contributing to significant year over year growth.

We reported revenue of $135,000,000 for the quarter and $476,000,000 for the full year with adjusted EBITDA of $21,000,000 and $64,000,000 respectively, exceeding our guidance range for the year. Adjusted net income came in at $5,000,000 for the quarter and positive $2,000,000 for the year, translating to diluted adjusted EPS of negative $0.12 and positive $0.05 per share perspective. On a full year basis, revenue declined 17% largely due to declining rare earth prices, which was partially offset by higher prices and volumes in rare metals. As we’ve discussed before, the pass through pricing model and many of our contracts help stabilize profitability and substantially mitigate gearing’s impact from low rare earth prices. We continue to see the benefit of this pricing mechanism in our 2024 financial performance, particularly in our Magniquinch business.

This combined with operational improvements and tailwinds in our rare metals business drove a 900 basis point expansion

Raheem Solan, President and Chief Executive Officer, Neo Performance Materials: in gross margins for the year.

Jonathan Bach, Chief Financial Officer, Neo Performance Materials: Magniquinch delivered strong volume growth in 2024 with sales increasing 1% in Q4 and 8% for the full year. The business grew volumes in all of its strategic growth areas including magnets, heavy rare earth free powder injection motors and bonded powder spot sales. Learning decades of experience, the Magnacunch business continues to innovate and adapt its product portfolio. Adjusted EBITDA for the fourth quarter and fiscal year twenty twenty four reached $7,000,000 and $26,000,000 up 1521% respectively. Adjusted EBITDA and expansion of four sixty basis points was driven by lower input costs, higher yield, process improvements and workforce optimization efforts.

Megaquence remains a core pillar of Neo’s growth strategy with further opportunities as we expand our footprint into permanent magnets. 2024 was also a transformational year for our CNO business as we successfully completed the relocation of our emission control catalyst facility and executed our strategy to optimize our business. Expected sale of our rare earth separation facilities, ZAMR and JAMR marks our exit from the legacy separation business in China, furthering our efforts to reduce earnings volatility, optimize working capital and focus on high value downstream operations. These divestments are expected to be accretive or neutral to adjusted EBITDA reinforcing our shift towards a more profitable and resilient business model. Volumes for the year were nationally impacted with the closure of Xamarin in Q2 twenty twenty four and relocation of our emission control catalyst facility.

However, the segment remained operationally efficient and where price stabilization helped offset some headwinds. Adjusted EBITDA for 2024 was approximately $5,000,000 reflecting these dynamics. With the emission control catalyst facility fully operational and most products we qualify, the team is now focused on enhancing operational efficiency and gaining the full benefit of this new highly automated facility. This is expected to translate into improved margins and reduced inventory. Demand for emission control catalyst in hybrid and alternative fuel vehicles continues to strengthen.

And with our industry leading cost structure, CNO is set to drive sustainable growth and expanded margins in 2025 and beyond. Transitioning to our rare metal segment, which delivered another exceptional year with strong performance across all facilities, particularly in our hafnium recycling business. Adjusted EBITDA grew by $28,000,000 year over year, driven by strong market demand, strategic inventory management and effective commercial execution. While we expect some margin normalization as half the impressive stabilized, the segment’s core fundamentals remain strong. With solid macro tailwinds driving the growing demand for critical materials and our operational execution, we are confident in the continued success of our burn metals business.

We ended 2023 with a strong cash position of $85,000,000 reflecting our disciplined approach to capital management while funding major drill projects. We generated over $50,000,000 in cash from operations and invested approximately $60,000,000 in our new emission control catalyst and permanent magnet facilities. With efficient and timely execution, these two large growth capital projects are nearly behind us. Most importantly, there is minimal project construction and execution risk remaining. Our Mission Control Catalyst facility is fully capitalized, assets are in operation, the facility has ramped to full production.

Our current mega facility has received all major pieces of equipment and is currently going through the installation

Raheem Solan, President and Chief Executive Officer, Neo Performance Materials: and commissioning process.

Jonathan Bach, Chief Financial Officer, Neo Performance Materials: The remaining cash spend across both these projects is estimated at $36,000,000 most of which will be spent through the first half of twenty twenty five. Our working capital initiatives including inventory optimization and strategic inventory releases contributed around $20,000,000 in improvements enhancing our cash flow and financial flexibility. We’re focused on generating additional cash flow and we anticipate further benefit from working capital improvements of approximately $20,000,000 in 2025. In addition, we expect to receive approximately $30,000,000 of proceeds from the sale of our China separation assets, which is expected to close in the first half of twenty twenty five. As we are nearing the end of a major capital cycle, we are transitioning into a phase of lower capital requirements with a modest sustaining CapEx of approximately $4,000,000 to $8,000,000 per year.

This positions the company well to deliver strong free cash flow moving forward. In 2024, we returned $12,000,000 to new shareholders through dividends and completed our normal course issuer bid with over $2,000,000 in share buybacks. Additionally, we drew $50,000,000 from our EDC credit facility to support key strategic projects. Our liquidity remains strong with an undrawn $25,000,000 EDC credit facility, an undrawn Estonian government grant of up to $10,000,000 and total cash position of $85,000,000 Despite investing approximately $100,000,000 over the last two years in transformational projects, we maintained a low leverage ratio of 1.1 times LTM adjusted EBITDA and remain in a net cash position. With this financial flexibility and strong stewardship of our balance sheet, we seek we look forward to continuing to execute our strategic growth initiatives in support of the business, while maintaining a disciplined approach to capital allocation.

Additionally, I’d like to note that Neo CEO Europe received a court ruling on an intellectual property case resulting in liability for approximately EUR10.3 million in damages plus interest, an amount that is significantly lower than the original claim and was already accounted for in our financial statements, meaning there is no expected impact on our Q1 twenty twenty five or future earnings. The ruling is subject to appeal, but importantly, the patent in question has expired and does not affect our current products, sales or operations. Turning back to our financial performance, our ability to maintain a strong cash position while executing on strategic initiatives sets us apart in an industry where many peers face cash flow pressures. As Rohini noted, our disciplined approach has driven EBITDA growth reinforcing Nio’s resilience and positioning us to continue investing in long term value creation. As we enter 2025, Nio is well positioned to sustain its momentum and deliver solid performance.

We anticipate delivering 2025 adjusted EBITDA of $55,000,000 to $60,000,000 which is an increase to our previously communicated guidance of $53,000,000 to $58,000,000 This forecast reflects the impact of lower happening in prices in 2025 and the sale of three facilities we discussed earlier. While we expect revenue to decline marginally, our diversified business model and strategic growth initiatives reinforce our confidence in the outlook. With that, I’ll turn the call back to Rajim for closing remarks. Thank you, Jonathan.

Raheem Solan, President and Chief Executive Officer, Neo Performance Materials: Our confidence in the long term growth and value creation is driven by our strategic expansion in magnetics and critical materials, broadening our capabilities beyond bounded powders into magnets and assemblies and to capture new market opportunities and strengthen our position across the line. Magnafunch has long been at the forefront of magnetic materials innovation, pioneering theodymium magnet technology and establishing a global leadership position in bonded magnetic powders. Over the years, we have expanded our expertise beyond powders, strengthening our position as a fully integrated supplier. The acquisition of SG Tech in 2023 further enhanced our European presence and advanced our capabilities in soft magnetic composites and ultra high density magnetics. Today, we are building on this foundation with our move into sintered permanent magnets, a key next step in our growth strategy.

Our excitement for the growth prospects for permanent magnets is very high with customer sample qualifications beginning in 2025. Interest from prospective customers is enormous and we expect to secure additional awards over the coming years. This of course is still Phase one of our permanent magnet strategy. Over time, we will share more about Phase two and Phase three as this market opportunity is measured in the billions of dollars and Neo is a leading candidate to win significant business here. In our emissions catalyst business, we are targeting double digit growth driven by increased production volumes, cost efficiencies and new customer wins.

Our new state of the art facility is among the most automated and cost efficient in the industry, ensuring high cash flow conversion and strong scalability. New and existing customer interest is high and we have numerous customer visits and new programs in the pipeline. Beyond these core growth areas, we are focused on operational efficiency and cost reductions. Manufacturing cost savings will come not only from the emissions control catalyst facility, but also from the ongoing optimization in all of our plans. In 2024, we achieved a 20% reduction in conversion costs at our largest magnet wedge plant.

On the SG and A side, we are targeting a disciplined reduction of approximately 10% per year in each of the next three years, further improving efficiency and profitability. And in 2025, we have placed a renewed emphasis on media engagement, investor communications and shareholder awareness to ensure that our unique positioning and our growth trajectory are fully recognized by the market. With a strong balance sheet, a clear vision and solid execution, we enter 2025 with confidence. We are building a business that is not only profitable today, but will continue to deliver long term value for our shareholders. With that, Joan, I’d like to open up the call for questions.

Jonathan Bach, Chief Financial Officer, Neo Performance Materials: Thank

Conference Operator: The first question comes from David Ocampo at Cormark Securities. Please go ahead.

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

Jonathan Bach, Chief Financial Officer, Neo Performance Materials: Rene, my first question

David Ocampo, Analyst, Cormark Securities: is just on this is probably my first time hearing about a Phase three magnet facility. Curious if that’s all production that’s going to come out of Narva or are you guys thinking another location outside of Estonia?

Raheem Solan, President and Chief Executive Officer, Neo Performance Materials: I think Phase II is likely to stay in Estonia because it just makes sense to leverage the capital and leverage the infrastructure in place. For Anthony, a 2,000 ton facility, we can do so much more and we would originally thought of it as a 5,000 ton facility and we just approached it incrementally. So yes, but I do think that there is a Phase III and there’s a Phase IV, and it’s all likely to be outside of Europe and the other jurisdictions. We won’t be specific as to what that means just yet. But I think that this market is enormously large and we remained extremely well positioned.

It’s just about finding the right timing to execute those programs.

David Ocampo, Analyst, Cormark Securities: Okay. And I think you’ve spoken in the past about a steady ramp that’s expected out of Estonia. Just curious what we should be modeling in for 2026, is it 10%, twenty %, thirty % of the capacity and then full ramp by 2028 is still the target?

Raheem Solan, President and Chief Executive Officer, Neo Performance Materials: Well, the program that we have would actually just launch at the end of twenty twenty six. We would expect to win another program or two here during the year 2025. Some of the things that we’re looking at do launch in 2026, some launch in 2027. So it’s kind of hard to give you a specific number on what 2026 might look like in terms of the timing of that launch. But I do think that this facility will start ramping quickly and I think that there’s really a lot of customer interest and we will be stacking programs on top of each other as we execute.

Jonathan Bach, Chief Financial Officer, Neo Performance Materials: Okay.

David Ocampo, Analyst, Cormark Securities: And just the incremental orders that you are expecting to receive, is that mostly just because of the ongoing tariff banter or is it just because you guys are getting closer to the finish line here now and you’re opening up more of your order book?

Raheem Solan, President and Chief Executive Officer, Neo Performance Materials: Yes. No, I don’t sorry, I think you said is it a result of tariffs and I don’t think it’s a result of tariffs. I think it’s a result of much more fundamental demand. As you know, 90% of magnets are made in China. So European Critical Raw Materials Act that came into place in 2024.

But I think even independent of kind of the European Critical Raw Materials Act or tariffs in The U. S, I think it’s customer behavior that is what we would consider to be the most indicated driver for growth. And the amount of interest we’re seeing, the amount of tours we’re managing, the amount of opportunities we’re seeing is just very large and very impressive.

David Ocampo, Analyst, Cormark Securities: Okay. Maybe asking it a different way. Are you guys starting to see more of a premium getting reflected just because there is an uncertainty if one of these magnets will make its way out of China in a few years or will be limited in some way or another?

Raheem Solan, President and Chief Executive Officer, Neo Performance Materials: Yes. Look, I think business is always competitive. The automotive industry is competitive. So certainly there’s dialogues around premium because competing with the overcapacity in the installed base in China is difficult. And I think customers value the integrated supply chain that would exist outside of China.

The size of the quantum of those premiums are things that we don’t generally talk about. But look, the industry is competitive, but I think we have a significant advantage because of our experience in magnets and the trust we have with our customers and our integrated position.

David Ocampo, Analyst, Cormark Securities: Okay. That’s my line of questioning. I’ll hop back in the queue. Thanks, Rene.

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

Jonathan Bach, Chief Financial Officer, Neo Performance Materials: Yes. Can you guys hear me okay? Good. Good. Thank you, Marvin.

Marvin Wolf, Analyst, Paradigm Capital: Hey, congratulations on a great quarter. Yes, and it’s interesting to hear all this stuff about the magnets in Europe. What I was wondering, there’s a lot of banter about tariffs, but not a lot of specificity, if you will, out in the marketplace and from the big main tariff component in the world. We know you don’t have much exposure to tariffs, but people keep asking the question, will there be any because now you’ve got the European stuff where if parts are coming in from Europe into U. S, it could be a tariff and all that.

Do you think most of these tariffs in your case can be passed on and will be actually worked into the price of the product or do you think it’ll make it tougher?

Raheem Solan, President and Chief Executive Officer, Neo Performance Materials: Yes, I think that there’s two factors on how we think about tariffs. And of course, sometimes our thinking has changed day to day. But nonetheless, I think fundamentally there’s two factors that we think about. One is does The U. S.

In particular in this example have an independent supply chain that would fill the gap and two, the relative impact of tariffs jurisdiction. So in terms of those things, the three products probably that we ship into The U. S. Would be recycled hafnium. And I think the fact that it is a recycled hafnium product from Europe, I think has a set of, let’s say, distinct advantages.

The processes of that hafnium are in The U. S, but I don’t think that there’s another company like ours that will recycle apnea at the volume or scale that we can process in Europe. So in that universe, there’s just not a domestic supply chain in that universe. And our largest competition we think is China. And I think that there’s more tariffs affecting China than there are Europe.

Another product would be gallium. And of course, we recycle and upgrade gallium in Canada for shipments into The U. S. But also shipments into Asia and other places in the world. And obviously, The U.

S. Doesn’t have a source of gallium and China has put ninety six group has export restriction on gallium and is the dominant gallium provider in the world. So in that circumstance, if you want to grow the chip industry in The U. S, you’re still going to need gallium. So I’m not sure that that’s the tariff as a primary impact.

And then the third is we do ship some catalysts into The U. S. And there are other catalyst players who have footprints elsewhere in the world. But we ship most of our businesses on global business. We have a platform that runs in every jurisdiction of the world.

So we would have to have those dialogues with customers on the impact. But I think generally the majority of the products that we ship into The U. S. Are actually coming from Europe, not China. Obviously, there’ll still be tariffs in Europe, but I think again relative tariffs and an independent U.

S. Supply chain would be the things that are most important to us. I think we’re well positioned on both

Jonathan Bach, Chief Financial Officer, Neo Performance Materials: accounts.

Marvin Wolf, Analyst, Paradigm Capital: Okay, great. That adds some color in what is a very cloudy picture right now.

Jonathan Bach, Chief Financial Officer, Neo Performance Materials: Yes, indeed.

Marvin Wolf, Analyst, Paradigm Capital: Thank you.

Raheem Solan, President and Chief Executive Officer, Neo Performance Materials: Super. Thanks, Mark.

Conference Operator: Thank you. We have no further questions. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect your lines.

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