Q3 2021
Highlights
(unless otherwise noted, all
financial amounts in this news release are expressed in U.S.
dollars)
/CNW/ - Neo Performance Materials Inc. ("Neo", the
"Company") (TSX: NEO) released its third quarter 2021
financial results. The financial statements and management's
discussion and analysis ("MD&A") of these results can be
viewed on Neo's web site at
www.neomaterials.com/investors/
TORONTO,
Nov. 8, 2021 and on SEDAR
at www.sedar.com.
- Q3 2021 revenue of $119.8
million higher by 53.9% YoY.
- Volumes in the quarter of 3,523 tonnes improved by 16.1%
YoY.
- Operating income of $12.6
million in the quarter.
- Adjusted Net Income(1) of $9.8 million, or $0.26 per share.
- Adjusted EBITDA(1) of $17.7 million.
- Cash balance of $51.7
million after distributing $3.0
million in dividends to shareholders.
- A quarterly dividend of Cdn$0.10 per common share was declared on
November 8, 2021 for shareholders of
record at December 20, 2021,
with a payment date of December 30,
2021.
HIGHLIGHTS OF Q3 2021 CONSOLIDATED
PERFORMANCE
Neo reported strong year-over-year ("YoY") gains in
revenue, volumes, operating income, Adjusted EBITDA, and
profitability in the quarter ended September
30, 2021, driven largely by increased demand for products
across all three of its operating divisions, higher selling prices
for rare earth materials, and continuing progress in several of the
Company's strategic initiatives.
Consolidated revenue in the quarter was $119.8 million, compared to $77.9 million in the third quarter of 2020; an
increase of $42.0 million or
53.9%. Neo reported a net income of $8.1 million, or $0.21 per share, which compared to $0.4 million, or $0.01 per share, in the corresponding prior-year
period. Adjusted Net Income(1) totaled
$9.8 million, or $0.26 per share, which compared to $1.3 million, or $0.03 per share, in the third quarter of
2020. Adjusted EBITDA(1) was $17.7 million, a 208% jump over Adjusted EBITDA
of $5.7 million in the comparable
prior-year period.
As of September 30, 2021,
Neo had cash and cash equivalents of $51.7
million plus restricted cash of $4.0
million, compared to $72.2
million plus $4.2 million as
at December 31, 2020, a change
largely due to an increase in working capital driven by higher rare
earth prices and higher-cost rare earth feedstock in
inventory. In the nine months ended September 30, 2021, Neo paid $9.2 million in dividends to its
shareholders. In addition, with the new credit facilities
entered into in China in the third
quarter, Neo has approximately $36.4
million available under its credit facilities with
$5.5 million drawn as at September 30, 2021, compared to $2.4 million drawn as at December 31, 2020.
_______________________
|
(1) Neo reports
non-IFRS measures such as "Adjusted Net Income", "Adjusted Earnings
per Share", "Adjusted EBITDA", "Adjusted EBITDA Margin" and
"EBITDA". Please see information on this and other non-IFRS
measures in the "Non-IFRS Measures" section of this new release and
in the MD&A, available on Neo's website at www.neomaterials.com
and on SEDAR at www.sedar.com.
|
"Neo benefitted from strong demand for our products as the
global economy continues to gain speed," said Constantine Karayannopoulos, CEO of Neo. "I
am also pleased with the incremental growth we are seeing in new
business areas, and I believe those initiatives hold promise for
enhanced and sustainable growth over the long-term. Neo was
also able to capitalize on a relatively robust rare earth pricing
environment, largely driven by an expectation of rising global
demand for such green technology applications as electrified
transportation, renewable energy, and high-efficiency motors and
other greenhouse-gas reducing technologies. I believe that Neo
is extraordinarily well-positioned to deliver the highly engineered
specialty materials needed by OEMs and their suppliers around the
world for these technologies, and we look forward to expanding and
diversifying our production capabilities as needed by these macro
growth trends."
SELECTED FINANCIAL RESULTS
TABLE 1: Selected Consolidated
Results
|
|
Quarter-over-Quarter
Comparison
|
Year-over-Year
Comparison
|
|
Q3 2021
|
Q3 2020
|
YTD Q3 2021
|
YTD Q3 2020
|
Volume
(tonnes)
|
3,523
|
3,035
|
11,792
|
8,883
|
($000s)
|
|
|
|
|
Revenue
|
119,841
|
77,864
|
385,837
|
236,295
|
Operating income
(loss)
|
12,558
|
1,137
|
47,161
|
(58,849)
|
EBITDA(1)
|
16,441
|
5,491
|
53,051
|
(44,990)
|
Adjusted
EBITDA(1)
|
17,650
|
5,730
|
62,263
|
16,566
|
Adjusted EBITDA
%(1)
|
14.7 %
|
7.4 %
|
16.1 %
|
7.0 %
|
|
|
|
|
|
|
|
|
|
_________________________
|
(1)Neo
reports non-IFRS measures such as "Adjusted Net Income", "Adjusted
Earnings per Share", "Adjusted EBITDA", "Adjusted EBITDA Margin"
and "EBITDA". Please see information on this and other non-IFRS
measures in the "Non-IFRS Measures" section of this news release
and in the MD&A.
|
For the three and nine months ended September 30, 2021, consolidated revenues of
$119.8 million and $385.8 million were 53.9% and 63.3% higher,
respectively, than the corresponding periods of 2020. All
three business segments experienced an increase in revenue as
volumes rose due to the economic recovery since the initial impact
of COVID-19 in 2020, despite being negatively impacted by the
semiconductor chip shortage in the automotive sector and by
continuing global supply chain logistics challenges.
Consolidated volumes in the nine-month period ended September 30, 2021, were supported by progress in
key strategic initiatives in all three segments, as well as by
customer refilling of supply chains. Selling prices for rare
earth products, including Magnequench powders, rose significantly
starting from the fourth quarter of 2020, through the third quarter
of 2021, and early into the fourth quarter. Some volatility
in the second quarter of 2021 was seen before prices began rising
again in the third quarter. Rare earth prices in the third
quarter of 2021 remain relatively high compared to more recent
historical periods driven primarily by the magnetic elements which
are critical in leading technologies such as the electrification of
automobiles and other environmentally sustaining
technologies. Neo has benefited from these generally higher
prices from both a lead-lag perspective (lower cost inventory on
hand) and more dollar value margin available generally with higher
prices.
MAGNEQUENCH SEGMENT RESULTS
TABLE 2: Selected Magnequench
Results
|
|
Quarter-over-Quarter
Comparison
|
Year-over-Year Comparison
|
|
Q3 2021
|
Q3 2020
|
YTD Q3 2021
|
YTD Q3 2020
|
Volume
(tonnes)
|
1,374
|
1,095
|
4,608
|
3,390
|
($000s)
|
|
|
|
|
Revenue
|
60,063
|
31,620
|
192,856
|
100,413
|
Operating
income
|
8,130
|
2,965
|
31,805
|
11,925
|
EBITDA(1)
|
9,773
|
5,559
|
39,240
|
19,323
|
Adjusted
EBITDA(1)
|
10,503
|
5,244
|
38,872
|
18,524
|
|
|
|
|
|
_________________________
|
(1)Neo
reports non-IFRS measures such as "Adjusted Net Income", "Adjusted
Earnings per Share", "Adjusted EBITDA", "Adjusted EBITDA Margin"
and "EBITDA". Please see information on this and other non-IFRS
measures in the "Non-IFRS Measures" section of this news release
and in the MD&A.
|
In the three and nine months ended September 30, 2021, Magnequench saw broad volume
increases across the majority of its applications, including key
end markets such as solutions for electrified vehicles (including
traction motors) and in other applications such as factory
automation and home appliances. 2021 volumes also benefitted
from customer inventory rebuilding. Q3 volumes were adversely
impacted by the slowdown in automotive production due to the global
semiconductor chip shortage.
Over the last few years, Magnequench has focused on key
macro growth trends that are yielding positive sales volume growth
in areas such as compression magnets and electrified-automotive
applications, including traction motors and pumps. Despite
the slowdown in automotive, Magnequench is continuing to produce
near-record volumes in the compression magnet sector.
Magnequench margins benefited from increased volumes and better
absorption of fixed costs as well as the lead-lag impact of prices
rising in rare earth components of its powder composition.
Although Magnequench has strategically structured most of its sales
contracts to contain pass-through pricing provisions for rare earth
raw materials, in the three and nine months ended September 30, 2021, Magnequench benefited
significantly from the timing of implementation of these price
increases with having some lower cost inventory on hand.
CHEMICALS & OXIDES ("C&O") SEGMENT
RESULTS
TABLE 3: Selected C&O
Results
|
|
Quarter-over-Quarter
Comparison
|
Year-over-Year Comparison
|
|
Q3 2021
|
Q3 2020
|
YTD Q3 2021
|
YTD Q3 2020
|
Volume
(tonnes)
|
2,106
|
1,929
|
6,972
|
5,330
|
($000s)
|
|
|
|
|
Revenue
|
45,677
|
36,031
|
152,322
|
94,889
|
Operating
income
|
7,142
|
3,145
|
27,184
|
(31,629)
|
EBITDA(1)
|
8,099
|
4,150
|
22,091
|
(28,197)
|
Adjusted
EBITDA(1)
|
8,059
|
3,896
|
29,712
|
6,847
|
_________________________
|
(1)Neo
reports non-IFRS measures such as "Adjusted Net Income", "Adjusted
Earnings per Share", "Adjusted EBITDA", "Adjusted EBITDA Margin"
and "EBITDA". Please see information on this and other non-IFRS
measures in the "Non-IFRS Measures" section of this news release
and in the MD&A.
|
The C&O segment continues to see strong demand for
various rare earth products, particularly its magnetic-based
products, as the global economy continues to recover from the
economic impacts of COVID-19. Demand and pricing for rare
earth magnetic elements continues to increase given their use in
the electrification of automobiles and other environmentally
sustainable technologies. Higher REE prices, and higher demand for
magnetic rare earth products in particular, benefitted the rare
earth separation business through higher-dollar value margins and
the lead-lag impact of lower cost inventory on hand relative to
selling prices. In environmental catalysts, customer
re-stocking of inventory levels positively affected volumes in the
first three months of 2021, while the unit saw reduced volumes in
Q3, both year-over-year and sequentially, primarily related to the
slowdown in automotive production. C&O's environmentally
protective water treatment solutions business continues to perform
well with higher volume and new customer adoption, although sales
volumes were partially impacted by the challenges in global
shipping and logistics availability.
RARE METALS SEGMENT RESULTS
TABLE 4: Selected Rare Metals
Results
|
|
Quarter-over-Quarter
Comparison
|
Year-over-Year Comparison
|
|
Q3 2021
|
Q3 2020
|
YTD Q3 2021
|
YTD Q3 2020
|
Volume
(tonnes)
|
110
|
91
|
389
|
323
|
($000s)
|
|
|
|
|
Revenue
|
19,509
|
13,613
|
56,308
|
47,592
|
Operating income
(loss)
|
2,074
|
(892)
|
4,168
|
(25,797)
|
EBITDA(1)
|
1,733
|
(535)
|
6,014
|
(23,362)
|
Adjusted
EBITDA(1)
|
2,715
|
(179)
|
6,080
|
1,108
|
|
|
|
|
|
_________________________
|
(1)Neo
reports non-IFRS measures such as "Adjusted Net Income", "Adjusted
Earnings per Share", "Adjusted EBITDA", "Adjusted EBITDA Margin"
and "EBITDA". Please see information on this and other non-IFRS
measures in the "Non-IFRS Measures" section of this news release
and in the MD&A.
|
Similar to Neo's Magnequench and C&O segments, the
prior-year comparable period for the Rare Metals segment was also
impacted by COVID-19, although more so after the first quarter of
2020 and continuing later into 2020. For the three- and
nine-month periods ended September 30,
2021, the end markets of Rare Metals exhibited some slower
recovery levels. The improvement in the Rare Metals business
in the three- and nine-month periods ended September 30, 2021 was also attributed to
progress made in several key strategic initiatives in the
segment. The Rare Metals segment has made key progress into
selling more products outside of the aerospace industry and adding
new customers, thereby participating in new growth initiatives
while diversifying its total end market exposure. Key
progress continues to be made in expanding the capacity of key
products (with minimal capital investment) and refocusing the sales
pipeline and manufacturing capacity toward more profitable end
products. Sales prices in several end markets have recovered
and gallium-based products are exhibiting more market
demand.
EARNINGS CONFERENCE CALL
In order to comply with regulatory best practices, the
Company anticipates holding its earnings conference call (the
"Call") following the completion of the distribution of common
shares of the Company in connection with the bought deal treasury
and secondary offering (the "Offering") of its common shares. Neo
expects the Offering to close on or around November 16, 2021, and will provide further
notice on the timing of the Call.
NON-IFRS MEASURES
This news release refers to certain non-IFRS financial
measures such as "Adjusted Net Income", "EBITDA", "Adjusted
EBITDA", and "Adjusted EBITDA Margin". These measures are not
recognized measures under IFRS, do not have a standardized meaning
prescribed by IFRS, and may not be comparable to similar measures
presented by other companies. Rather, these measures are provided
as additional information to complement IFRS financial measures by
providing further understanding of Neo's results of operations from
management's perspective. Neo's definitions of non-IFRS measures
used in this news release may not be the same as the definitions
for such measures used by other companies in their reporting.
Non-IFRS measures have limitations as analytical tools and should
not be considered in isolation nor as a substitute for analysis of
Neo's financial information reported under IFRS. Neo uses
non-IFRS financial measures to provide investors with supplemental
measures of its base-line operating performance and to eliminate
items that have less bearing on operating performance or operating
conditions and thus highlight trends in its core business that may
not otherwise be apparent when relying solely on IFRS financial
measures. Neo believes that securities analysts, investors
and other interested parties frequently use non-IFRS financial
measures in the evaluation of issuers. Neo's management also
uses non-IFRS financial measures in order to facilitate operating
performance comparisons from period to period. For definitions of
how Neo defines such financial measures, please see the "Non-IFRS
Financial Measures" section of Neo's management's discussion and
analysis filing for the three and nine months ended September 30, 2021, available on Neo's web site
at www.neomaterials.com and on SEDAR at www.sedar.com.
TABLE 5: CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION
($000s)
|
September 30, 2021
|
|
December 31, 2020
|
ASSETS
|
|
|
|
Current
|
|
|
|
Cash and cash
equivalents
|
$
|
51,734
|
|
$
|
72,224
|
Restricted
cash
|
3,964
|
|
4,219
|
Accounts
receivable
|
68,838
|
|
51,851
|
Inventories
|
156,587
|
|
130,867
|
Income taxes
receivable
|
1,491
|
|
2,186
|
Assets held for
sale
|
—
|
|
415
|
Other current
assets
|
24,760
|
|
13,889
|
Total current assets
|
307,374
|
|
275,651
|
Property, plant and
equipment
|
73,599
|
|
74,322
|
Intangible
assets
|
50,676
|
|
53,653
|
Goodwill
|
69,379
|
|
68,967
|
Investments
|
11,609
|
|
10,045
|
Deferred tax
assets
|
3,481
|
|
3,040
|
Other non-current
assets
|
3,275
|
|
864
|
Total non-current assets
|
212,019
|
|
210,891
|
Total assets
|
$
|
519,393
|
|
$
|
486,542
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
Current
|
|
|
|
Bank advances and other
short-term debt
|
$
|
5,485
|
|
$
|
2,428
|
Accounts payable and
other accrued charges
|
68,216
|
|
79,106
|
Income taxes
payable
|
5,857
|
|
2,945
|
Provisions
|
3,878
|
|
2,628
|
Lease
obligations
|
1,439
|
|
1,297
|
Derivative
liability
|
11,843
|
|
9,428
|
Other current
liabilities
|
2,964
|
|
940
|
Total current liabilities
|
99,682
|
|
98,772
|
Employee
benefits
|
2,259
|
|
2,358
|
Provisions
|
16,010
|
|
4,201
|
Deferred tax
liabilities
|
13,926
|
|
13,970
|
Lease
obligations
|
1,974
|
|
2,243
|
Other non-current
liabilities
|
1,555
|
|
1,513
|
Total non-current liabilities
|
35,724
|
|
24,285
|
Total liabilities
|
135,406
|
|
123,057
|
Non-controlling
interest
|
2,340
|
|
1,490
|
Equity attributable to
equity holders of Neo Performance Materials Inc.
|
381,647
|
|
361,995
|
Total equity
|
383,987
|
|
363,485
|
Total liabilities and equity
|
$
|
519,393
|
|
$
|
486,542
|
____________________________
|
See accompanying notes to this table in Neo's
Consolidated Financial Statements for the Three and Nine Months
Ended September 30, 2021, available on Neo's website at
www.neomaterials.com
and on SEDAR at
www.sedar.com.
|
TABLE 6: CONSOLIDATED RESULTS OF
OPERATIONS
Comparison of the three and nine months ended
September 30, 2021 to the three and
nine months ended September 30,
2020:
($000s)
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Revenue
|
$
|
119,841
|
|
$
|
77,864
|
|
$
|
385,837
|
|
$
|
236,295
|
Costs of sales
|
|
|
|
|
|
|
|
Costs excluding
depreciation and amortization
|
83,330
|
|
57,395
|
|
268,830
|
|
174,824
|
Depreciation and
amortization
|
1,980
|
|
1,996
|
|
5,771
|
|
7,431
|
Gross profit
|
34,531
|
|
18,473
|
|
111,236
|
|
54,040
|
Expenses
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
13,347
|
|
10,938
|
|
41,024
|
|
37,589
|
Share-based
compensation
|
1,198
|
|
973
|
|
2,761
|
|
916
|
Depreciation and
amortization
|
1,908
|
|
1,797
|
|
5,798
|
|
5,851
|
Research and
development
|
5,520
|
|
3,628
|
|
14,492
|
|
9,449
|
Impairment of
assets
|
—
|
|
—
|
|
—
|
|
59,084
|
|
21,973
|
|
17,336
|
|
64,075
|
|
112,889
|
Operating income (loss)
|
12,558
|
|
1,137
|
|
47,161
|
|
(58,849)
|
Other income
(expense)
|
462
|
|
(92)
|
|
(5,399)
|
|
(65)
|
Finance cost,
net
|
(747)
|
|
(99)
|
|
(2,420)
|
|
(3,362)
|
Foreign exchange
loss
|
(755)
|
|
(128)
|
|
(1,844)
|
|
(440)
|
Income (loss) from operations before income taxes
and equity income of associates
|
11,518
|
|
818
|
|
37,498
|
|
(62,716)
|
Income tax
expense
|
(3,670)
|
|
(1,198)
|
|
(10,282)
|
|
(811)
|
Income (loss) from operations before equity
income
of associates
|
7,848
|
|
(380)
|
|
27,216
|
|
(63,527)
|
Equity income of
associates (net of income tax)
|
288
|
|
781
|
|
1,564
|
|
1,082
|
Net income (loss)
|
$
|
8,136
|
|
$
|
401
|
|
$
|
28,780
|
|
$
|
(62,445)
|
Attributable to:
|
|
|
|
|
|
|
|
Equity holders of
Neo
|
$
|
8,036
|
|
$
|
423
|
|
$
|
28,442
|
|
$
|
(60,150)
|
Non-controlling
interest
|
100
|
|
(22)
|
|
338
|
|
(2,295)
|
|
$
|
8,136
|
|
$
|
401
|
|
$
|
28,780
|
|
$
|
(62,445)
|
Earnings (Loss) per share attributable to equity
holders of Neo:
|
|
|
|
|
|
|
|
Basic
|
$
|
0.21
|
|
$
|
0.01
|
|
$
|
0.75
|
|
$
|
(1.60)
|
Diluted
|
$
|
0.21
|
|
$
|
0.01
|
|
$
|
0.75
|
|
$
|
(1.60)
|
____________________________
|
See Management's Discussion and Analysis for the
Three and Nine Months Ended September 30, 2021, available on Neo's
website at www.neomaterials.com and on SEDAR at www.sedar.com.
|
TABLE 7: RECONCILIATION OF NET INCOME (LOSS) TO EBITDA,
ADJUSTED EBITDA AND FREE CASH FLOW
($000s)
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Net income (loss)
|
$
|
8,136
|
|
$
|
401
|
|
$
|
28,780
|
|
$
|
(62,445)
|
Add back
(deduct):
|
|
|
|
|
|
|
|
Finance cost,
net
|
747
|
|
99
|
|
2,420
|
|
3,362
|
Income tax
expense
|
3,670
|
|
1,198
|
|
10,282
|
|
811
|
Depreciation and
amortization included in costs of sales
|
1,980
|
|
1,996
|
|
5,771
|
|
7,431
|
Depreciation and
amortization included in operating expenses
|
1,908
|
|
1,797
|
|
5,798
|
|
5,851
|
EBITDA
|
16,441
|
|
5,491
|
|
53,051
|
|
(44,990)
|
Adjustments to EBITDA:
|
|
|
|
|
|
|
|
Other (income) expense
(1)
|
(462)
|
|
92
|
|
5,399
|
|
65
|
Foreign exchange loss
(2)
|
755
|
|
128
|
|
1,844
|
|
440
|
Equity income of
associates
|
(288)
|
|
(781)
|
|
(1,564)
|
|
(1,082)
|
Share and value-based
compensation (3)
|
1,198
|
|
931
|
|
2,761
|
|
660
|
Impairment of assets
(4)
|
—
|
|
—
|
|
—
|
|
59,084
|
Other costs
(5)
|
6
|
|
(131)
|
|
772
|
|
2,389
|
Adjusted EBITDA
|
$
|
17,650
|
|
$
|
5,730
|
|
$
|
62,263
|
|
$
|
16,566
|
Adjusted EBITDA Margins
|
14.7
%
|
|
7.4
%
|
|
16.1
%
|
|
7.0
%
|
Less:
|
|
|
|
|
|
|
|
Capital
expenditures
|
$
|
2,374
|
|
$
|
3,407
|
|
$
|
6,631
|
|
$
|
6,436
|
Free Cash Flow
|
$
|
15,276
|
|
$
|
2,323
|
|
$
|
55,632
|
|
$
|
10,130
|
Free Cash Flow Conversion
(6)
|
86.5 %
|
|
40.5 %
|
|
89.4 %
|
|
61.1 %
|
|
Notes:
|
(1)
|
Represents other
expenses resulting from non-operational related activities,
including provisions for estimated damages for outstanding legal
claims related to historic volumes, costs for disposal of
historically generated naturally occurring radioactive materials
("NORM") and fair value remeasurement of equity
securities. These costs and recoveries are not indicative of
Neo's ongoing activities.
|
(2)
|
Represents unrealized
and realized foreign exchange losses (gains) that include non-cash
adjustments in translating foreign denominated monetary assets and
liabilities.
|
(3)
|
Represents share and
value-based compensation expense in respect of the Plan, the Legacy
Plan, the LTIP and the long-term value bonus plan. The long-term
value bonus plan is included in selling, general, and
administration expenses and has similar vesting criteria to the
share-based plan and is settled in cash for non-executives and
non-North Americans where implementation of a share settlement plan
would have been prohibitively expensive in terms of administration
and compliance. For the three and nine months ended September
30, 2021, value-based compensation expense was nil, as the
financial statement impact of the liquidity event was recorded in
the year ended December 31, 2020. For the three and nine
months ended September 30, 2020, value-based compensation recovery
was $(42) and $(256), respectively. Neo has removed both the
share and value-based compensation expense from EBITDA to provide
comparability with historic periods and to treat it consistently
with the share-based awards that they are intended to
replace.
|
(4)
|
The negative economic
impacts of COVID-19 were determined to be an impairment indicator
as of June 30, 2020 for all Neo's Cash Generating Units
("CGUs"). In accordance with IAS 36 Impairment of
Assets, the recoverable amount of Neo's CGUs was determined based
on fair value less cost of disposal for the Magnequench segment and
value in use for the C&O and the Rare Metals segments. As a
result of the impairment test, Neo recognized an impairment charge
of $59.1 million as of June 30, 2020, with $35.1 million
attributable to the C&O segment and $24.0 million attributable
to the Rare Metals segment. No impairment was recorded against the
Magnequench segment.
|
(5)
|
These represent
primarily legal, professional advisory fees and other transaction
costs incurred with respect to non-operating capital structure
related transactions and restructuring costs related to management
team changes. Neo has removed these charges to provide
comparability with historic periods.
|
(6)
|
Calculated as Free
Cash Flow divided by Adjusted EBITDA.
|
TABLE 8: RECONCILIATION OF NET INCOME (LOSS) TO
ADJUSTED NET INCOME (LOSS)
($000s)
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Net income (loss)
|
$
|
8,136
|
|
$
|
401
|
|
$
|
28,780
|
|
$
|
(62,445)
|
Adjustments to net income
(loss):
|
|
|
|
|
|
|
|
Foreign exchange loss
(1)
|
755
|
|
128
|
|
1,844
|
|
440
|
Impairment of assets
(2)
|
—
|
|
—
|
|
—
|
|
59,084
|
Share and value-based
compensation (3)
|
1,198
|
|
931
|
|
2,761
|
|
660
|
Other costs (income)
(4)
|
6
|
|
(131)
|
|
772
|
|
2,389
|
Other items included in
other (income) expense (5)
|
(260)
|
|
—
|
|
6,162
|
|
—
|
Tax impact of the above
items
|
(43)
|
|
(38)
|
|
(1,341)
|
|
(3,546)
|
Adjusted net income (loss)
|
$
|
9,792
|
|
$
|
1,291
|
|
$
|
38,978
|
|
$
|
(3,418)
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
Equity holders of
Neo
|
$
|
9,692
|
|
$
|
1,313
|
|
$
|
38,640
|
|
$
|
(3,390)
|
Non-controlling
interest
|
$
|
100
|
|
$
|
(22)
|
|
$
|
338
|
|
$
|
(28)
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
37,913,275
|
|
37,610,846
|
|
37,738,354
|
|
37,671,721
|
Diluted
|
38,228,888
|
|
37,653,807
|
|
38,084,902
|
|
37,671,721
|
Adjusted earnings (loss) per share (6)
attributable to equity holders of Neo:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.26
|
|
$
|
0.03
|
|
$
|
1.02
|
|
$
|
(0.09)
|
Diluted
|
$
|
0.25
|
|
$
|
0.03
|
|
$
|
1.01
|
|
$
|
(0.09)
|
|
Notes:
|
(1)
|
Represents unrealized
and realized foreign exchange losses (gains) that include non-cash
adjustments in translating foreign denominated monetary assets and
liabilities.
|
|
|
(2)
|
The negative economic
impacts of COVID-19 were determined to be an impairment indicator
as of June 30, 2020 for all Neo's CGUs. In accordance with
IAS 36 Impairment of Assets, the recoverable amount of Neo's CGUs
was determined based on fair value less cost of disposal for the
Magnequench segment and value in use for the C&O and the Rare
Metals segments. As a result of the impairment test, Neo recognized
an impairment charge of $59.1 million as of June 30, 2020, with
$35.1 million attributable to the C&O segment and $24.0 million
attributable to the Rare Metals segment. No impairment was recorded
against the Magnequench segment.
|
|
|
(3)
|
Represents share and
value-based compensation expense in respect of the Plan, the Legacy
Plan, the LTIP and the long-term value bonus plan. The long-term
value bonus plan is included in selling, general, and
administration expenses and has similar vesting criteria to the
share-based plan and is settled in cash for non-executives and
non-North Americans where implementation of a share settlement plan
would have been prohibitively expensive in terms of administration
and compliance. For the three and nine months ended September
30, 2021, value-based compensation expense was nil, as the
financial statement impact of the liquidity event was recorded in
the year ended December 31, 2020. For the three and nine
months ended September 30, 2020, value-based compensation recovery
was $(42) and $(256), respectively. Neo has removed both the
share and value-based compensation expense from net income to
provide comparability with historic periods and to treat it
consistently with the share-based awards that they are intended to
replace.
|
|
|
(4)
|
These represent
primarily legal, professional advisory fees and other transaction
costs incurred with respect to non-operating capital structure
related transactions and restructuring costs related to management
team changes. Neo has removed these charges to provide
comparability with historic periods.
|
|
|
(5)
|
Represents other
expenses resulting from non-operational related activities,
including provisions for estimated damages for outstanding legal
claims related to historic volumes, costs for disposal of
historically generated NORM and fair value remeasurement of equity
securities. These costs and recoveries are not indicative of
Neo's ongoing activities.
|
|
|
(6)
|
Neo reports non-IFRS
measures such as "Adjusted Net Income", "Adjusted Earnings per
Share", "Adjusted EBITDA", "Adjusted EBITDA Margin" and "EBITDA".
Please see information on this and other non-IFRS measures in the
"Non-IFRS Measures" section of this new release and in the
MD&A, available on Neo's website www.neomaterials.comand on SEDAR at
www.sedar.com.
|
About Neo Performance Materials
Neo manufactures the building blocks of many modern
technologies that enhance efficiency and sustainability.
Neo's advanced industrial materials - magnetic powders and magnets,
specialty chemicals, metals, and alloys - are critical to the
performance of many everyday products and emerging technologies.
Neo's products help to deliver the technologies of tomorrow to
consumers today. The business of Neo is organized along three
segments: Magnequench, Chemicals & Oxides and Rare Metals. Neo
is headquartered in Toronto, Ontario,
Canada; with corporate offices in Greenwood Village, Colorado, US; Singapore; and Beijing, China. Neo operates globally with
sales and production across 10 countries, being Japan, China,
Thailand, Estonia, Singapore, Germany, United
Kingdom, Canada,
United States, and South Korea. For more information, please
visit www.neomaterials.com.
Cautionary Statements Regarding Forward Looking
Statements
This news release contains "forward-looking information"
within the meaning of applicable securities laws in Canada. Forward-looking information may relate
to future events or future performance of Neo. All statements in
this release, other than statements of historical facts, with
respect to Neo's objectives and goals, as well as statements with
respect to its beliefs, plans, objectives, expectations,
anticipations, estimates, and intentions, are forward-looking
information. Specific forward-looking statements in this discussion
include, but are not limited to, the following: expectations
regarding certain of Neo's future results and information,
including, among other things, revenue, expenses, sales growth,
capital expenditures, and operations; statements with respect to
current and future market trends that may directly or indirectly
impact sales and revenue of Neo; expected use of cash balances;
continuation of prudent management of working capital; source of
funds for ongoing business requirements and capital investments;
expectations regarding sufficiency of the allowance for
uncollectible accounts and inventory provisions; analysis regarding
sensitivity of the business to changes in exchange rates; impact of
recently adopted accounting pronouncements; risk factors relating
to intellectual property protection and intellectual property
litigation; risk factors relating to national or international
economies (including the impact of COVID-19), and other risks
present in the jurisdictions in which Neo, its customers, its
suppliers, and/or its logistics partners operate, and; expectations
concerning any remediation efforts to Neo's design of its internal
controls over financial reporting and disclosure controls and
procedures. Often, but not always, forward-looking information can
be identified by the use of words such as "plans", "expects", "is
expected", "budget", "scheduled", "estimates", "continues",
"forecasts", "projects", "predicts", "intends", "anticipates" or
"believes", or variations of, or the negatives of, such words and
phrases, or state that certain actions, events or results "may",
"could", "would", "should", "might" or "will" be taken, occur or be
achieved. This information involves known and unknown risks,
uncertainties and other factors that may cause actual results or
events to differ materially from those anticipated in such
forward-looking information. Neo believes the expectations
reflected in such forward-looking information are reasonable, but
no assurance can be given that these expectations will prove to be
correct and such forward-looking information included in this
discussion and analysis should not be unduly relied upon. For more
information on Neo, investors should review Neo's continuous
disclosure filings that are available under Neo's profile at
www.sedar.com.
SOURCE Neo Performance Materials, Inc.