Q1 2022 Highlights
(unless otherwise noted, all financial amounts
in this news release are expressed in U.S. dollars)
- Neo sets new records for quarterly sales, net income, and
Adjusted EBITDA(1) since re-emerging as a public company
in 2017.
- Q1 2022 revenue of $166.3
million, higher by 27.1% YoY.
- Operating income of $28.7 million
in the quarter, higher by 74.8% YoY.
- Adjusted Net Income(1) of $23.5 million, or $0.57 per share.
- Adjusted EBITDA(1) of $33.1
million, higher by 47.6% YoY.
- Cash balance of $61.1 million
after distributing $3.2 million in
dividends to shareholders.
- A quarterly dividend of Cdn$0.10
per common share was declared on May 12,
2022 for shareholders of record at June 20, 2022, with a payment date of
June 28, 2022.
TORONTO, May 13, 2022
/CNW/ - Neo Performance Materials Inc. ("Neo", the
"Company") (TSX: NEO) released its first quarter 2022
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/ and on
SEDAR at www.sedar.com.
HIGHLIGHTS OF Q1 2022 AND YEAR-END CONSOLIDATED
PERFORMANCE
Neo reported strong year-over-year ("YoY") gains in
revenue, operating income, and Adjusted EBITDA1 in
the first quarter of 2022. The Company set new records in the
quarter for sales, net income, and Adjusted
EBITDA1 since re-emerging as a public company in
2017.
For the three months ended March 31,
2022, consolidated revenue was $166.3
million compared to $130.9
million for the same period in the prior year; an increase
of $35.4 million or 27.1%. Neo
reported a net income of $22.7
million, or $0.55 per share,
compared to $7.6 million, or
$0.20 per share, in the same period
of 2021. Adjusted Net Income(1) totaled
$23.5 million, or $0.57 per share, compared to $15.1 million, or $0.40 per share, in the corresponding period of
the prior year. Adjusted EBITDA1 was
$33.1 million, a 47.6% jump over
Adjusted EBITDA of $22.4 million in
the first quarter of 2021.
As of March 31, 2022, Neo had cash
and cash equivalents of $61.1 million
plus restricted cash of $1.3 million,
compared to $89.0 million plus
$1.3 million as at December 31, 2021. In the three months
ended March 31, 2022, Neo distributed
$3.2 million in dividends to its
shareholders. As of March 31,
2022, Neo had approximately $41.3
million available under its credit facilities with
$18.9 million drawn, compared to
$6.5 million drawn at December 31, 2021.
"While the world has been impacted by many macroeconomic
headwinds, causing volatility across all sectors, all of our plants
continued to service the needs of our global customers with
relentless focus, resulting in strong financial performance," said
Constantine Karayannopoulos, CEO of
Neo. "Our European downstream expansion plans are on track and we
remain excited and encouraged with the progress made to date
concerning our discussions with government officials in
Estonia and with the relevant EU
Institutions in Brussels -- as
well as with prospective OEM and Tier 1 and 2 customers in
Europe - who are providing strong
early indications of interest leading us to believe the first phase
of our plans could be sold out by its start of production."
SELECTED FINANCIAL RESULTS
TABLE 1: Selected
Consolidated Results
|
|
Year-over-Year
Comparison
|
|
Q1
2022
|
Q1
2021
|
Volume
(tonnes)
|
3,510
|
4,206
|
($000s)
|
|
|
Revenue
|
166,282
|
130,855
|
Operating
income
|
28,685
|
16,408
|
EBITDA(1)
|
33,384
|
14,800
|
Adjusted
EBITDA(1)
|
33,118
|
22,436
|
Adjusted EBITDA
%(1)
|
19.9%
|
17.1%
|
|
_________________________
|
|
(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 months ended March 31,
2022, revenues of $166.3
million were 27.1% higher, than the three months ended
March 31, 2021.
Neo reported operating income of $28.7
million and net income of $22.7
million for the three months ended March 31, 2022. Operating income in the three
months ended March 31, 2022, was
higher in C&O and Rare Metals but lower in Magnequench.
Adjusted EBITDA(I) for the three months ended
March 31, 2022, was $33.1 million, an increase of $10.7 million or 47.6% compared to the same
period of the prior year. Similar to operating income, in the
three months ended March 31, 2022,
Adjusted EBITDA(I) was higher in C&O and Rare Metals
but lower in Magnequench.
MAGNEQUENCH SEGMENT RESULTS
TABLE 2: Selected
Magnequench Results
|
|
Year-over-Year
Comparison
|
|
Q1
2022
|
Q1
2021
|
Volume
(tonnes)
|
1,305
|
1,725
|
($000s)
|
|
|
Revenue
|
74,015
|
64,905
|
Operating
income
|
10,236
|
11,090
|
EBITDA(1)
|
13,547
|
13,965
|
Adjusted
EBITDA(1)
|
12,778
|
13,432
|
|
_________________________
|
|
(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 months ended March 31,
2022, volumes in the Magnequench segment saw a decline with
respect to the prior-year period as well as sequentially, driven
largely by the recent spike in COVID-19 in Asia, several natural disasters impacted
production facilities and customers, and the ongoing semiconductor
chip shortage.
Margins in the Magnequench segment were particularly strong in
the quarter due to increasing rare earth magnetic prices which
began in the fourth quarter of 2020 and continued to mid-March
2022. Magnequench has pass-through agreements on the vast
majority of its contracts and with rising rare earth magnetic
prices, Magnequench has been passing through the higher replacement
costs while utilizing some of the lower cost inventory on
hand. Pass-through is a key strategic focus of Magnequench
and ensures that Magnequench focuses on generating long term
sustainable and value-added margins.
CHEMICALS & OXIDES ("C&O") SEGMENT RESULTS
TABLE 3: Selected
C&O Results
|
|
Year-over-Year
Comparison
|
|
Q1
2022
|
Q1
2021
|
Volume
(tonnes)
|
2,099
|
2,423
|
($000s)
|
|
|
Revenue
|
67,662
|
54,390
|
Operating
income
|
18,477
|
12,122
|
EBITDA(1)
|
18,968
|
5,887
|
Adjusted
EBITDA(1)
|
19,910
|
12,918
|
|
_________________________
|
|
(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 used
in electrification of automobiles and other environmentally
sustainable technologies. The combination of higher prices
and higher demand resulted in strong financial performance for the
C&O segment compared to the prior periods, particularly driven
by premium sales to key customers in March, where rare earth prices
peaked in the quarter. In C&O's environmental catalysts
business, volumes were reasonably strong in the three months ended
March 31, 2022, although they were
slower than the comparable quarter in the prior year, which
benefited from customers refilling their supply chains.
Volumes were negatively impacted by the slowdown of automotive
production but rebounded a little after lower volumes in the third
and fourth quarters of 2021. C&O's environmentally
protective water treatment solutions business continues to perform
well with higher volume and new customer adoption, although sales
volume growth expectations were partially impacted by the
challenges in global shipping and logistics availability.
RARE METALS SEGMENT RESULTS
TABLE 4: Selected
Rare Metals Results
|
|
Year-over-Year
Comparison
|
|
Q1
2022
|
Q1
2021
|
Volume
(tonnes)
|
137
|
118
|
($000s)
|
|
|
Revenue
|
29,062
|
16,716
|
Operating
income
|
3,723
|
258
|
EBITDA(1)
|
4,512
|
2,154
|
Adjusted
EBITDA(1)
|
4,341
|
903
|
|
_________________________
|
|
(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.
|
Rare Metals continued its trend of a strong fourth quarter of
2021 with a strong first quarter of 2022. Rare Metals showed
strength in pricing for key products such as hafnium and tantalum
while able to benefit from lower-cost inventory on hand. The
recycling purchases and activities of Rare Metals were particularly
impactful to lowering its overall material costs.
The Rare Metals business continues to make progress in several
key strategic initiatives, including selling more products outside
of the aerospace industry, expanding its customer base, and
diversifying its total end-market exposure. Sales prices in a
number of end markets have recovered and gallium-based products are
exhibiting improved market demand.
CONFERENCE CALL ON FRIDAY MAY 13, 2022 AT 10
AM EASTERN
Management will host a teleconference call on Friday May 13, 2022 at 10:00 a.m. (Eastern Time) to discuss the first
quarter 2022 results. Interested parties may access the
teleconference by calling (647) 794-4605 (local) or (866)
575-6539 (toll-free long distance) or by visiting
http://cnw.en.mediaroom.com/events. A recording of the
teleconference may be accessed by calling (416) 436-0148 (local) or
(888) 203-1112 (toll-free long distance), and entering pass code
3171025# until June 30, 2022 or by
visiting http://cnw.en.mediaroom.com/events.
NON-IFRS MEASURES
This news release refers to certain non-IFRS financial measures
and ratios such as "Adjusted Net Income", "EBITDA", "Adjusted
EBITDA", and "Adjusted EBITDA Margin". These measures and
ratios 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 and ratios 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 and ratios 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 and ratios 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 and ratios 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 and
ratios, please see the "Non-IFRS Financial Measures" section of
Neo's management's discussion and analysis filing for the three
months ended March 31, 2022,
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)
|
|
March 31,
2022
|
|
December 31,
2021
|
ASSETS
|
|
|
|
|
Current
|
|
|
|
|
Cash and cash
equivalents
|
|
$
61,143
|
|
$
89,037
|
Restricted
cash
|
|
1,312
|
|
1,283
|
Accounts
receivable
|
|
85,310
|
|
65,209
|
Inventories
|
|
217,417
|
|
200,954
|
Income taxes
receivable
|
|
1,176
|
|
1,667
|
Other current
assets
|
|
24,112
|
|
19,211
|
Total current
assets
|
|
390,470
|
|
377,361
|
Property, plant and
equipment
|
|
77,140
|
|
73,378
|
Intangible
assets
|
|
48,875
|
|
49,961
|
Goodwill
|
|
70,253
|
|
70,082
|
Investments
|
|
15,000
|
|
13,759
|
Deferred tax
assets
|
|
6,874
|
|
6,638
|
Other non-current
assets
|
|
2,962
|
|
2,903
|
Total non-current
assets
|
|
221,104
|
|
216,721
|
Total
assets
|
|
$
611,574
|
|
$
594,082
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
Current
|
|
|
|
|
Bank advances and other
short-term debt
|
|
$
18,935
|
|
$
6,502
|
Accounts payable and
other accrued charges
|
|
67,062
|
|
94,201
|
Income taxes
payable
|
|
10,673
|
|
7,059
|
Provisions
|
|
3,640
|
|
5,560
|
Lease
obligations
|
|
1,279
|
|
1,589
|
Derivative
liability
|
|
14,733
|
|
14,704
|
Other current
liabilities
|
|
3,084
|
|
1,455
|
Total current
liabilities
|
|
119,406
|
|
131,070
|
Employee
benefits
|
|
1,177
|
|
1,210
|
Provisions
|
|
22,913
|
|
15,127
|
Deferred tax
liabilities
|
|
14,210
|
|
13,366
|
Lease
obligations
|
|
1,175
|
|
1,388
|
Other non-current
liabilities
|
|
1,447
|
|
1,405
|
Total non-current
liabilities
|
|
40,922
|
|
32,496
|
Total
liabilities
|
|
160,328
|
|
163,566
|
Non-controlling
interest
|
|
3,248
|
|
2,891
|
Equity attributable to
equity holders of Neo Performance Materials Inc.
|
|
447,998
|
|
427,625
|
Total
equity
|
|
451,246
|
|
430,516
|
Total liabilities
and equity
|
|
$
611,574
|
|
$
594,082
|
|
____________________________
|
|
See accompanying notes
to this table in Neo's Consolidated Financial Statements for the
Three Months Ended March 31, 2022, 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 months ended March 31, 2022 to the three months ended
March 31, 2021:
($000s)
|
|
Three Months Ended
March 31,
|
|
|
2022
|
|
2021
|
Revenue
|
|
$
166,282
|
|
$
130,855
|
Costs of
sales
|
|
|
|
|
Costs
excluding depreciation and amortization
|
|
114,316
|
|
90,920
|
Depreciation and amortization
|
|
2,378
|
|
1,879
|
Gross
profit
|
|
49,588
|
|
38,056
|
Expenses
|
|
|
|
|
Selling,
general and administrative
|
|
14,252
|
|
14,060
|
Share-based compensation
|
|
181
|
|
1,592
|
Depreciation and amortization
|
|
1,896
|
|
1,955
|
Research
and development
|
|
4,574
|
|
4,041
|
|
|
20,903
|
|
21,648
|
Operating
income
|
|
28,685
|
|
16,408
|
Other
expense
|
|
(433)
|
|
(6,074)
|
Finance
cost, net
|
|
(414)
|
|
(216)
|
Foreign
exchange loss
|
|
(411)
|
|
(301)
|
Income from
operations before income taxes and equity income of
associates
|
|
27,427
|
|
9,817
|
Income
tax expense
|
|
(5,995)
|
|
(3,133)
|
Income from
operations before equity income of associates
|
|
21,432
|
|
6,684
|
Equity
income of associates (net of income tax)
|
|
1,269
|
|
933
|
Net
income
|
|
$
22,701
|
|
$
7,617
|
Attributable
to:
|
|
|
|
|
Equity
holders of Neo
|
|
$
22,350
|
|
$
7,446
|
Non-controlling interest
|
|
351
|
|
171
|
|
|
$
22,701
|
|
$
7,617
|
|
|
|
|
|
Earnings per share
attributable to equity holders of Neo:
|
|
|
|
|
Basic
|
|
$
0.55
|
|
$
0.20
|
Diluted
|
|
$
0.54
|
|
$
0.20
|
|
____________________________
|
|
See Management's
Discussion and Analysis for the Three Months Ended March 31, 2022,
available on Neo's website at www.neomaterials.com and on SEDAR at
www.sedar.com.
|
TABLE 7: RECONCILIATION OF NET INCOME TO EBITDA, ADJUSTED
EBITDA AND FREE CASH FLOW
($000s)
|
|
Three Months Ended
March 31,
|
|
|
2022
|
|
2021
|
Net
income
|
|
$
22,701
|
|
$
7,617
|
Add back
(deduct):
|
|
|
|
|
Finance
cost, net
|
|
414
|
|
216
|
Income
tax expense
|
|
5,995
|
|
3,133
|
Depreciation and amortization included in costs of sales
|
|
2,378
|
|
1,879
|
Depreciation and amortization included in operating
expenses
|
|
1,896
|
|
1,955
|
EBITDA
|
|
33,384
|
|
14,800
|
Adjustments to
EBITDA:
|
|
|
|
|
Other
expense (1)
|
|
433
|
|
6,074
|
Foreign
exchange loss (2)
|
|
411
|
|
301
|
Equity
income of associates
|
|
(1,269)
|
|
(933)
|
Share-based compensation (3)
|
|
181
|
|
1,592
|
Other
(recoveries) costs (4)
|
|
(22)
|
|
602
|
Adjusted
EBITDA(5)
|
|
$
33,118
|
|
$
22,436
|
Adjusted EBITDA
Margins(5)
|
|
19.9%
|
|
17.1%
|
Less:
|
|
|
|
|
Capital
expenditures
|
|
$
6,782
|
|
$
1,736
|
Free Cash Flow
(5)
|
|
$
26,336
|
|
$
20,700
|
Free Cash Flow
Conversion (5)
|
|
79.5%
|
|
92.3%
|
|
Notes:
|
(1)
|
Represents other
expenses resulting from non-operational related activities,
including provisions for damages for outstanding legal claims
related to historic volumes. 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-based
compensation expense in respect of the Plan and the
LTIP.
|
|
|
(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)
|
Neo reports non-IFRS
measures such as "Adjusted Net Income", "Adjusted Earnings per
Share", "Adjusted EBITDA", "Adjusted EBITDA Margin", "Free Cash
Flow" and "Free Cash Flow Conversion". 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.com and on SEDAR at www.sedar.com.
|
TABLE 8: RECONCILIATION OF NET INCOME TO ADJUSTED NET
INCOME
($000s)
|
|
Three Months Ended
March 31,
|
|
|
2022
|
|
2021
|
Net
income
|
|
$
22,701
|
|
$
7,617
|
Adjustments to net
income:
|
|
|
|
|
Foreign
exchange loss (1)
|
|
411
|
|
301
|
Share-based compensation (2)
|
|
181
|
|
1,592
|
Other
(recoveries) costs (3)
|
|
(22)
|
|
602
|
Other
items included in other expense (4)
|
|
547
|
|
6,179
|
Tax
impact of the above items
|
|
(353)
|
|
(1,197)
|
Adjusted net income
(5)
|
|
$
23,465
|
|
$
15,094
|
|
|
|
|
|
Attributable
to:
|
|
|
|
|
Equity
holders of Neo
|
|
$
23,114
|
|
$
14,923
|
Non-controlling interest
|
|
$
351
|
|
$
171
|
|
|
|
|
|
Weighted average
number of common shares outstanding:
|
Basic
|
|
40,681,191
|
|
37,481,638
|
Diluted
|
|
41,149,323
|
|
37,814,133
|
Adjusted earnings
(loss) per share (5) attributable to equity holders of
Neo:
|
Basic
|
|
$
0.57
|
|
$
0.40
|
Diluted
|
|
$
0.56
|
|
$
0.39
|
|
Notes:
|
(1)
|
Represents unrealized
and realized foreign exchange losses (gains) that include non-cash
adjustments in translating foreign denominated monetary assets and
liabilities.
|
|
|
(2)
|
Represents share-based
compensation expense in respect of the Plan and the
LTIP.
|
|
|
(3)
|
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.
|
|
|
(4)
|
Represents other
expenses resulting from non-operational related activities,
including provisions for damages for outstanding legal claims
related to historic volumes. These costs and recoveries are
not indicative of Neo's ongoing activities.
|
|
|
(5)
|
Neo reports non-IFRS
measures such as "Adjusted Net Income", "Adjusted Earnings per
Share", "Adjusted EBITDA", "Adjusted EBITDA Margin", "Free Cash
Flow" and "Free Cash Flow Conversion". 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.com and 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.