Neo Performance Materials Q3 Earnings Call Highlights

Key Points

• Neo raised its 2026 adjusted EBITDA outlook to $180 million–$185 million, from $140 million–$150 million, after third-quarter revenue increased nearly 60% to $194 million and adjusted EBITDA rose nearly 150% to $47 million.
• Rare Metals led growth, with revenue up almost 125% and adjusted EBITDA up more than 200%, supported by strong volumes, tight supply and higher prices. Magnequench also benefited from demand for AI data center cooling fans and traction-motor magnets.
• Neo began commercial production at its European magnet facility in September and is targeting two to three customer programs by year-end. Its proposed expansion is part of a larger European project eligible for up to €126 million in EU grant funding.

Neo Performance Materials TSE: NEO raised its full-year 2026 earnings outlook after reporting a sharp increase in third-quarter revenue and adjusted earnings, as demand and pricing strengthened across its rare earth magnetics and critical materials businesses.

The company now expects adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, of $180 million to $185 million for 2026, up from its previous forecast of $140 million to $150 million. Neo reported $76 million in adjusted EBITDA for 2025. All figures are in U.S. dollars unless otherwise noted.

Third-quarter revenue rose nearly 60% from a year earlier to $194 million, while adjusted EBITDA climbed nearly 150% to $47 million from $19 million. Adjusted earnings per share increased to $0.40 from $0.14. For the first nine months of 2026, adjusted EBITDA reached $140 million, compared with $55 million a year earlier.

Chief Financial Officer Jonathan Baksh attributed the higher forecast to year-to-date results, healthy demand, firm pricing and higher contracted hafnium volumes for the fourth quarter.

Rare Metals leads quarterly growth

Neo’s Rare Metals segment reported revenue of $88 million, up almost 125% year over year, and adjusted EBITDA of $35 million, an increase of more than 200%. Baksh said robust volumes, tight global supply and elevated prices supported the results.

Gallium delivered record gross profit as prices rose amid export restrictions and tightening supply, while rhenium posted record quarterly results on favorable pricing and demand from superalloy applications. Hafnium continued to benefit from favorable pricing, Baksh said.

In Magnequench, revenue increased 42% to $79 million and adjusted EBITDA rose nearly 25% to $10.1 million. Bonded magnet volumes grew 17%, led by server cooling fan applications in artificial intelligence data centers. Bonded powder volumes for traction motors also reached a quarterly record as a new vehicle model year ramped up.

Chemicals & Oxides generated $6.8 million in adjusted EBITDA, up almost 70%, supported by emission catalysts and favorable rare earth pricing. Neo said parts of its Silmet facility in Estonia will be temporarily idled as existing lines are reconfigured for new feed sources.

European magnet production begins

President and Chief Executive Officer Rahim Suleman said Neo began commercial production at its European magnet facility in September and is shipping rare earth sintered magnets to a European tier-one traction motor customer serving the electric vehicle market.

Neo remains on track to launch two to three customer programs into commercial production by year-end, including the program already in production, Suleman said. The company is also in discussions with customers in industrial, robotics, wind, data center and clean energy applications.

The facility has approximately 2,000 tons of annual capacity. A proposed expansion, known as phase I-B, would take capacity to approximately 5,000 tons of neodymium-iron-boron block per year. Under criteria for an EU grant, at least one-third of the additional 3,000 tons would be allocated to offshore wind farms in the European Union.

Suleman said Neo has previously estimated that phase I-A could generate $15 million to $20 million of EBITDA when filled. He said the earnings opportunity from phase I-B would be substantially greater but did not provide a specific forecast.

Grant-backed project and feedstock plans

Neo’s European Integrated Magnet Project was selected for an EU Innovation Fund grant of up to €126 million, or approximately $140 million. The company estimates total project capital expenditure at approximately $450 million and expects completion to take about three years.

The project includes the magnet expansion, metallization capacity and Silmet 2.0, which is expected to triple the existing facility’s total light and heavy rare earth separation capacity. It also includes digital infrastructure intended to help optimize production. Neo said it will update cost estimates as planning and engineering progress.

Suleman said Neo could phase the projects, with timing driven primarily by customer demand and business requirements. The company expects to provide future updates on a combination of grant, debt and equity funding.

Asked about feedstock availability, Suleman said the principal open question was securing supply for the separation business. Neo has signed a binding term sheet with France’s Carester covering supply and recycling, and a memorandum of understanding with Rainbow Rare Earths concerning offtake from its South African project.

Inventory and spending outlook

Neo ended the quarter with $78 million in cash and $143 million in total debt. Baksh said inventory increased primarily because of purchases of low-cost hafnium scrap, strategic Magnequench inventory and the ramp-up of European magnet production. He expects inventory to increase further in the fourth quarter, followed by some normalization.

Suleman said costs associated with ramping the European magnet facility are likely to rise in the fourth quarter and into 2027 as Neo builds engineering, quality and other support capacity. Baksh added that some one-time ramp items in the third quarter should normalize in the fourth quarter.

For 2027, Baksh said sustaining capital expenditure generally ranges from $6 million to $10 million. Neo has begun expedited equipment purchases for phase I-B and expects to provide more clarity on the expansion’s timing in the coming months.

About Neo Performance Materials (TSE:NEO)

Neo manufactures the building blocks of many modern technologies that enhance efficiency and sustainability. Neo's advanced industrial materials - magnetic powders, rare earth magnets, magnetic assemblies, specialty chemicals, metals, and alloys - are critical to the performance of many everyday products and emerging technologies. Neo's products fast-forward technologies for the net-zero transition. The business of Neo is organized along three segments: Magnequench, Chemicals & Oxides and Rare Metals.

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