Q4 2025 Neo Performance Materials Inc Earnings Call

March 19, 2026

Operator: Good morning, and welcome to the Neo Performance Materials Q4 2025 Earnings Conference Call. For opening remarks and introductions, let me turn the call over to Karen Murray, General Counsel for Neo. Karen, please proceed.

Speaker #2: Karen, please proceed. 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.

Karen Murray: 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. Our call will be accompanied by a live webcast presentation, and if you are joining us online, the slides will advance automatically as we progress through the discussion. You can also download a copy of the presentation from our website to follow along or for reference afterwards. On today's call are Rahim Suleman, Neo's President and Chief Executive Officer, and Jonathan Baksh, Neo's Executive Vice President and Chief Financial Officer.

Speaker #2: Our call will be accompanied by a live webcast presentation, and if you are joining us online, the slides will advance automatically as we progress through the discussion.

Speaker #2: You can also download a copy of the presentation from our website to follow along or for reference afterwards. On today's call, our Rahim Suleman, Neo's president and chief executive officer, and Jonathan Baksh, Neo's executive vice president and chief financial officer.

Speaker #2: Please note that some of the information you will hear during today's call and discussion will consist of forward-looking statements within the meaning of applicable securities law, including statements regarding revenue, EBITDA, adjusted EBITDA, product volumes, product pricing, capital expenditures, operational plans, customer agreements, the ramp-up for our European permanent magnet facility, heavy rare earth separation, and 2026 guidance.

Karen Murray: Please note that some of the information you will hear during today's call and discussion will consist of forward-looking statements within the meaning of applicable securities law, including statements regarding revenue, EBITDA, adjusted EBITDA, product volumes, product pricing, capital expenditures, operational plans, customer agreements, the ramp-up for our European permanent magnet facility, heavy rare earth separation, and 2026 guidance. Actual results or trends could differ materially from these discussed today. For more information, please refer to the risk factors discussed in Neo's recent filings, including the AIF, annual audited financial statements, and MD&A for the year ended 31 December 2025, all of which are available on SEDAR+ and on our website. Financial amounts presented today will be in US dollars unless otherwise noted. Non-IFRS financial measures will be used during this conference call, and reconciliations to the nearest IFRS measure are included in our MD&A.

Speaker #2: Actual results or trends could differ material from these discussed today. For more information, please refer to the risk factors discussed in Neo's recent filings, including the AI.

Karen Murray: For more information, please refer to the risk factors discussed in Neo's recent filings, including the AIF, annual audited financial statements, and MD&A for the year ended 31 December 2025, all of which are available on SEDAR+ and on our website. Financial amounts presented today will be in US dollars unless otherwise noted. Non-IFRS financial measures will be used during this conference call, and reconciliations to the nearest IFRS measure are included in our MD&A. Neo assumes no obligation to update any forward-looking statements except as required by applicable law. I will now turn the call over to Rahim Suleman, President and CEO.

Speaker #2: Annual audited financial statements and MDNA for the year ended December 31st, 2025. All of which are available on Cedar Plus and on our website.

Speaker #2: Financial amounts presented today will be in US dollars unless otherwise noted. Non-IFRS financial measures will be used during this conference call, and reconciliations to the nearest IFRS measure are included in our MD&A.

Karen Murray: Neo assumes no obligation to update any forward-looking statements except as required by applicable law. I will now turn the call over to Rahim Suleman, President and CEO.

Speaker #2: Neo assumes no obligation to update any forward-looking statements except as required by applicable law. I will now turn the call over to Rahim Suleman, president and CEO.

Rahim Suleman: Good morning, everyone, and thank you for joining us today. The Q4 capped off a very exciting year for Neo and indeed the industry. We haven't seen so much change in the global rare earth industry since 2010, and we can attest to that because Neo was around in 2010. We adapted, we changed, and we flourished. The changes this year are quite different than those changes. Neo has seen numerous cycles, numerous commodity price swings, numerous sets of geopolitical uncertainty, and we adapt, we change, and we flourish. This is part of the benefits of having a 30-year history in this industry, a history like no other in the rare earth space. We ended the year with $76 million in adjusted EBITDA, up from the $64 million in 2024, and increased our guidance range consistently throughout the year.

Speaker #2: Good morning, everyone, and thank you for joining us today. The fourth quarter capped off a very exciting year for Neo, and indeed, the industry.

Speaker #2: We haven't seen so much change in the global rare earth industry since 2010, and we can attest to that because Neo was around in 2010.

Speaker #2: We adapted, we changed, and we flourished. The changes this year are quite different than those changes Neo has seen numerous cycles, numerous commodity price swings, numerous sets of geopolitical uncertainty, and we adapt, we change, and we flourish.

Speaker #2: This is part of the benefits of having a 30-year history in this industry—a history like no other in the rare earth space. We ended the year with $76 million in adjusted EBITDA, up from $64 million in 2024, and increased our guidance range consistently throughout the year.

Rahim Suleman: This, in a year of new tariffs, new export controls, and a substantial decrease in hafnium prices, and with 3 fewer manufacturing facilities, two of which were sold at the end of Q1 2025. Prices had a bit of a ride in 2025. Rare earth prices moved up in the second half of the year. Gallium prices were up through most of the year, and hafnium prices were stable for most of the year before increasing in Q4. We focus our business on value-add margins, and we continue to strategically include rare earth pass-through provisions, particularly for our Magnequench contracts. While commodity prices were generally very supportive, they are not the main driver of our increased results. We saw very strong volumes from our customers across our key product lines. Magnequench bonded powder volumes were up. Magnequench bonded magnet volumes were up.

Speaker #2: This in a year of new tariffs, new export controls, and a substantial decrease in Hafnium prices and with three fewer manufacturing facilities, two of which were sold at the end of Q1 2025.

Speaker #2: Prices had a bit of a ride in 2025. Rare earth prices moved up in the second half of the year, gallium prices were up through most of the year, and hafnium prices were stable for most of the year before increasing in the fourth quarter.

Speaker #2: But we focus our business on value-added margins, and we continue to strategically include rare earth pass-through provisions, particularly for our magnet quench contracts. So while commodity prices were generally very supportive, they are not the main driver of our increased results.

Speaker #2: We saw very strong volumes from our customers across our key product lines. Magnet quench bonded powder volumes were up. Magnet quench bonded magnet volumes were up.

Rahim Suleman: Chemicals & Oxides emission catalyst volumes were up. Chemicals & Oxides water treatment volumes were up, and Rare Metals hafnium volumes were up. The increase in our emission catalyst volumes and results more than exceeded the 10% target for growth we laid out for the business a year ago. Across our businesses, Neo continues to benefit from the structural mega trends in robotics, AI infrastructure, electrification, aerospace, and clean energy. At the same time, governments and customers are increasingly focused on secure and localized supply chains for critical materials. Moving to Slide 5. Our operational discipline and conversion cost improvements played a major role in our improved results. Over the last 2 to 3 years, we have seen reductions in our conversion costs in the 20% to 30% range across several of our key products.

Speaker #2: CNO emission catalyst volumes were up. CNO water treatment volumes were up, and rare metals Hafnium volumes were up. The increase in our emission catalyst volumes and results more than exceeded the 10% target for growth we laid out for the business a year ago.

Speaker #2: Across our businesses, Neo continues to benefit from the structural megatrends in robotics, AI infrastructure, electrification, aerospace, and clean energy. At the same time, governments and customers are increasingly focused on secure and localized supply chains for critical materials.

Speaker #2: Moving to slide five, our operational discipline and conversion cost improvements played a major role in our improved results. Over the last two to three years, we have seen

Speaker #1: Reductions in our conversion costs from the 20 to 30% range across several of our key products in 2025. I think the most notable change was realizing the benefits of the new, highly automated emission catalyst facility that we launched in late 2024.

Rahim Suleman: In 2025, I think the most notable change was realizing the benefits of the new, highly automated emission catalyst facility that we launched in late 2024. This improved data-centric cost improvement process was not limited to emission catalysts. We executed incredibly forward-thinking data-centric projects in Magnequench and Rare Metals, linking the capabilities of our knowledge with data and AI tools to drive even further improvements for the future. I'm confident that you will hear more about these types of data and AI-based projects in the future. Speaking of AI tools, as an aside, in a world of many milestones at Neo in 2025, we sold over 10 million rare earth bonded magnets to AI data centers.

Speaker #1: And this improved data centric cost improvement process was not limited to emission catalysts . We executed incredibly forward thinking , data centric projects in magnet quench and rare metals linking the capabilities of our knowledge with data and AI tools to drive even further improvements for the future .

Speaker #1: I'm confident that you will hear more about these types of data and AI based projects in the future Speaking of AI tools , as an aside , and in a world of many milestones at NIO in 2025 , we sold over 10 million rare earth bonded magnets to AI data centers .

Rahim Suleman: The breadth of what Neo does and our accomplishments in rare earth magnetics with over 10,000 metric tons of capacity for rare earth magnetics is often overlooked, but shouldn't be underestimated. Moving to slide 6. Strategically, it was a very exciting year indeed. I won't review all of the strategic accomplishments achieved throughout the year. Instead, I will just lay out a hit list of some of the key strategic accomplishments. We launched our emission catalyst facility in late 2024, so the facility ran for a full year in 2025, having qualified all of our products and moved them all to mass production stages with improved costs and improved ESG footprint. We sold two of our Chinese separation facilities in Q1 2025 and used that cash to drive further global growth projects. We simplified our portfolio and improved our overall return on capital metrics.

Speaker #1: The breadth of what NIO does and our accomplishments in rare earth magnetics, with over 10,000 metric tons of capacity for rare earth magnetics, is often overlooked.

Speaker #1: But shouldn't be underestimated . Moving to slide six . Strategically , it was a very exciting year indeed . I won't review all of the strategic accomplishments achieved throughout the year .

Speaker #1: Instead , I will just lay out a hit list of some of the key strategic accomplishments . We launched our Mission Catalyst facility in late 2024 .

Speaker #1: So the facility ran for a full year in 2025 , having qualified all of our products and moved them all to mass production stages with improved costs and improved ESG footprint .

Speaker #1: We sold two of our Chinese separation facilities in Q1 2025 and used that cash to drive further global growth projects . We simplified our portfolio and improved our overall return on capital metrics .

Rahim Suleman: We navigated through two important shockwaves to the whole critical materials landscape, the new tariffs introduced by the United States, and increasing export control restrictions introduced in China. We continue to serve our customers globally, well, and responsibly. We settled all of our outstanding IP litigation against the company from the past decade related to the emission catalyst business. We announced and made significant progress toward beginning heavy rare separation in Europe. Neo, of course, has been a heavy rare separator for 30 years. We have the technology and experience, and we are now working to bring capacity online for the Western world. Moving to slide 7. The most important development, though, is the progress we have made to bring rare earth permanent magnets to Europe with our plant in Estonia. For this, the milestones are numerous and impressive.

Speaker #1: We navigated through two important shock waves to the whole critical materials landscape: the new tariffs introduced by the United States, and increasing export control restrictions introduced in China.

Speaker #1: We continue to serve our customers globally well and responsibly . We settled all of our outstanding IP litigation against the company from the past decade related to the emission catalyst business .

Speaker #1: We announced and made significant progress toward beginning heavy , rare separation in Europe NIO , of course , has been a heavy , rare separator for 30 years .

Speaker #1: We have the technology and experience , and we are now working to bring capacity online for the Western world . Moving to slide seven , the most important development , though , is the progress we have made to bring rare earth , permanent magnets to Europe with our plant in Estonia And for this , the milestones are numerous and impressive .

Rahim Suleman: We completed core construction in January 2025 and had the main sets of the magnet-making equipment installed. In April 2025, we produced in-house our first set of EV traction motor magnets for an awarded customer program in Europe. In summer of 2025, we announced another award for an EV traction magnet from another Tier One customer and European OEM. In September 2025, we had our grand opening of this European magnets plant. The grand opening was attended by major OEMs and government officials from around the world. At the same time, we entered into a strategic multi-year framework agreement with Bosch, one of the largest Tier One motor makers in the world, to continue to work closely together and to reserve capacity for future program opportunities and launches with Bosch and their customers.

Speaker #1: We completed core construction in January 2025 and had the main sets of the magnet-making equipment installed.

Speaker #2: In

Speaker #1: In April 2025, we produced in-house our first set of EV traction motor magnets for an awarded customer program in Europe in the summer of 2025.

Speaker #1: We announced another award for an EV traction magnet from another tier one customer and European OEM . In September of 2025 . We had our grand opening of this European magnets plant , the grand opening was attended by major OEMs and government officials from around the world .

Speaker #1: And at the same time , we entered into a strategic multi-year framework agreement with Bosch , one of the largest tier one motor makers in the world , to continue to work closely together and to reserve capacity for future program opportunities .

Speaker #1: And launches with Bosch and their customers. And we recently shipped our one millionth magnet, produced from our European permanent magnet facility. As we continue to develop new programs and prepare for programme launches here in 2026, moving to slide eight.

Rahim Suleman: We recently shipped our 1 millionth magnet produced from our European permanent magnet facility as we continue to develop new programs and prepare for program launches here in 2026. Moving to slide 8. Our efforts are being noticed and recognized globally. Our permanent magnets were presented and prominently referenced during the G7 meeting in Canada as a model for global cooperation on critical materials. RESourceEU, one of the European strategic initiatives around rare earths, was announced at our facility in Europe. In the grand scheme of things, this is just the beginning. Before we get into the growth plans and opportunities for 2026, I'll turn it over to Jonathan to review the financials.

Speaker #1: In our efforts are being noticed and recognized globally . Our permanent magnets were presented and prominently referenced during the G7 meeting in Canada as a model for global cooperation on critical materials in resource .

Speaker #1: Q one of the European strategic initiatives around rare earths was announced at our facility in Europe . And in the grand scheme of things , this is just the beginning .

Speaker #1: But before we get into the growth plans and opportunities for 2026 , I'll turn it over to Jonathan to review the financials

Jonathan Baksh: Thank you, Rahim, and good morning, everyone. As you can see on slide 10, for the Q4, Neo generated $120.3 million in revenue and $20.4 million in adjusted EBITDA, reflecting solid execution across the business. For the full year 2025, adjusted EBITDA reached $75.6 million, exceeding our previously issued guidance range. This outperformance was driven by strong end market demand, a supportive pricing environment, improved product mix, and disciplined cost management across our global operations. Quarter-over-quarter performance reflected higher Magnequench volumes and improved rare earth pricing, partially offset by the absence of revenue from the divested Chinese separation facilities and lower hafnium prices in rare metals. Our margin profile remained resilient with adjusted EBITDA margin expanding year-over-year.

Speaker #3: Thank you , Rahim , and good morning , everyone . As you can see on slide ten for the fourth quarter , NIO generated 120.3 million in revenue and 20.4 million in adjusted EBITDA , reflecting solid execution across the business .

Speaker #3: For the full year 2025 , adjusted EBITDA reached 75.6 million , exceeding our previously issued guidance range . This outperformance was driven by strong end market demand , a supportive pricing environment , improved product mix and disciplined cost management across our global operations .

Speaker #3: Quarter over quarter performance reflected higher volumes and improved rare earth pricing , partially offset by the absence of revenue from the divested Chinese separation facilities and lower hafnium prices in rare metals .

Speaker #3: Our margin profile remained resilient , with adjusted EBITDA margin expanding year over year . This reflects the benefits of operational efficiencies , improved mix portfolio simplification , and continued use of pass through pricing mechanisms in our customer contracts .

Jonathan Baksh: This reflects the benefits of operational efficiencies, improved mix, portfolio simplification, and continued use of pass-through pricing mechanisms in our customer contracts. While rare earth price movements can create short-term variability, our global platform and disciplined cost controls help manage volatility and support predictable performance. Moving to slide 11. I'll review performance by segment. Magnequench delivered solid volume and revenue growth in Q4, reflecting continued demand across automotive and industrial applications, as well as improving rare earth pricing during the quarter. For the full year, Magnequench generated $204.6 million in revenue, up 16%, with volumes increasing approximately 20% year-over-year. Full year adjusted EBITDA was $28.4 million, up 11% compared to the prior year, supported by higher volumes, improved pricing, and continued operational discipline.

Speaker #3: While rare price movements can create short term variability . Our global platform and disciplined cost controls helped manage volatility and support predictable performance Moving to slide 11 , review performance by segment .

Speaker #3: Magnet . Quench . Delivered solid volume and revenue growth in the fourth quarter , reflecting continued demand across automotive and industrial applications as well as improving rare earth pricing .

Speaker #3: During the quarter . For the full year , magnet , quench generated 204.6 million in revenue , up 16% , with volumes increasing approximately 20% year over year .

Speaker #3: Full year adjusted EBITDA was 28.4 million , up 11% compared to the prior year , supported by higher volumes , improved pricing , and continued operational discipline .

Jonathan Baksh: While operating margin in the quarter reflected the impact of pre-operational expenses associated with the European permanent magnet facility, underlying demand trends remained constructive. The segment continues to benefit from exposure to structural growth drivers, including electrification, automation, AI infrastructure, and energy-efficient applications. As you can see on slide 12, the Chemicals & Oxides segment delivered improved profitability in Q4, reflecting the benefits of portfolio simplification and operational execution. For Q4, the segment generated revenue of $29.3 million and operating income of $5.3 million, compared to the near breakeven operating results in the prior year period. The year-over-year improvement primarily reflects strong volume growth and cost reductions in the new emission catalyst facility, the divestiture of the lower margin Chinese separation assets earlier in the year, and a more favorable rare earth pricing environment.

Speaker #3: While operating margin in the quarter reflected the impact of operational expenses associated with the European Permanent Magnet Facility Underlying demand trends remained constructive .

Speaker #3: The segment continues to benefit from exposure to structural growth drivers , including electrification , automation , AI infrastructure , and energy efficient applications As you can see on slide 12 , the chemicals and oxide segment delivered improved profitability in the fourth quarter , reflecting the benefits of portfolio simplification and operational execution for Q4 .

Speaker #3: The segment generated revenue of 29.3 million and operating income of 5.3 million , compared to the near breakeven operating results in the prior year period .

Speaker #3: The year over year improvement , primarily reflects strong volume growth and cost reductions in the new emission catalyst facility . The divestiture of the lower margin Chinese separation assets earlier in the year , and a more favorable rare earth pricing environment for the full year 2025 .

Jonathan Baksh: For the full year 2025, adjusted EBITDA reached $23.4 million, up significantly compared to the prior year. The business is now more focused on higher value specialty materials, including emission catalysts and water treatment products, with a more stable cost structure and reduced earnings volatility. Overall, the segment enters 2026 with a strong earnings base, improved cost profile, and greater strategic alignment with Neo's integrated platform. Moving to slide 13, Rare Metals continues to deliver solid performance with the segment generating Q4 revenue of $39.7 million and full year revenue of $147.7 million. This performance reflects lower average hafnium pricing in 2025 compared to the elevated levels seen in 2024. Full year adjusted EBITDA was $43.2 million, down year-over-year as anticipated due to the normalization of hafnium pricing conditions.

Speaker #3: Adjusted EBITDA reached 23.4 million , up significantly compared to the prior year . The business is now more focused on higher value specialty materials , including emission catalysts and water treatment products with a more stable cost structure and reduced earnings volatility Overall , the segment enters 2026 with a strong earnings base , improved cost profile , and greater strategic alignment with Neo's integrated platform Moving to slide 13 .

Speaker #3: Rare Metals continues to deliver solid performance, with the segment generating fourth quarter revenue of $39.7 million and full year revenue of $147.7 million.

Speaker #3: This performance reflects lower average hafnium pricing in 2025 compared to the elevated levels seen in 2020. For the full year, adjusted EBITDA was $43.2 million, down year over year as anticipated due to the normalization of hafnium pricing conditions.

Jonathan Baksh: While hafnium prices moderated through Q1, Q2, and Q3 of 2025, it's worth noting that during Q4, hafnium prices broke out to new record highs, positioning the business favorably entering 2026. In addition, underlying demand remains constructive across aerospace, semiconductor, and industrial applications, supported by continued global investment in advanced manufacturing and high-performance materials. Across all three businesses, our teams have demonstrated disciplined execution, maintaining operational stability in a dynamic market environment. Turning to the balance sheet on slide 14, Neo maintains a strong, well-structured financial position. We ended the year with $38.4 million in cash and total debt of $101.8 million, resulting in a net debt position of approximately $63 million. The total available liquidity was approximately $76 million, including available credit facilities and government grants.

Speaker #3: While hafnium prices moderated through the first three quarters of 2025, it's worth noting that during the fourth quarter, hafnium prices broke out to new record highs, positioning the business favorably entering 2026.

Speaker #3: In addition , underlying demand remains constructive across aerospace , semiconductor and industrial applications , supported by continued global investment in advanced manufacturing and high performance materials across all three businesses .

Speaker #3: Our teams have demonstrated disciplined execution , maintaining operational stability in a dynamic market environment Turning to the balance sheet on slide 14 . Neo maintains a , well financial position .

Speaker #3: We ended the year with 38.4 million in cash and total debt of 101.8 million , resulting in a net debt position of approximately 63 million .

Speaker #3: The total available liquidity was approximately 76 million , including available credit facilities and government grants . Our working capital levels were strategically managed during the quarter , including a deliberate increase in inventory to support customer commitments and navigate pricing dynamics .

Jonathan Baksh: Our working capital levels were strategically managed during the quarter, including a deliberate increase in inventory to support customer commitments and navigate pricing dynamics. Despite these investments, leverage remains prudent and consistent with our long-term capital framework. We continue to balance investments in growth with shareholder returns. During 2025, we maintained our regular dividend while funding strategic capital expenditures, including the European permanent magnet facility. With 2025 adjusted EBITDA of $75.6 million exceeding prior year guidance and 2026 guidance established at $75 to 80 million, we are entering the new year with a strong operating base and a continued focus on efficiency, capital discipline, and financial flexibility. With that, I'll turn the call back to Rahim for closing remarks.

Speaker #3: Despite these investments , leverage remains prudent and consistent with our long term capital framework . We continue to balance investments in growth with shareholder returns during 2025 .

Speaker #3: We maintained our regular dividend while funding strategic capital expenditures, including the European Permanent Magnet Facility. With 2025 adjusted EBITDA of $75.6 million exceeding prior year guidance, and 2026 guidance established at $75 to $80 million.

Speaker #3: We are entering the new year with a strong operating base and a continued focus on efficiency , capital discipline and financial flexibility . With that , I'll turn the call back to Rahim for closing remarks

Rahim Suleman: Thank you, Jonathan, and turning to slide 16. As we close out 2025, Neo enters the new year from a position of strength, strategically, operationally, and financially. Over the past year, we advanced key strategic initiatives, strengthened our platform, and delivered results that exceeded our commitments. Looking forward to 2026, we see another great year of exciting accomplishments. We intend to commission the heavy rare earth separation line in Europe with production-ready material as precursor materials for magnet making. We intend to launch 2 to 3 customer programs for magnets in Europe, from PPAP to SOP to growing volumes later in the year. We expect to announce additional wins for more magnets in Europe and continue to fill out the launch curves for the years ahead.

Speaker #1: Thank you , Jonathan . And turning to slide 16 . As we close out 2025 , neo enters the new year from a position of strength strategically , operationally , and financially .

Speaker #1: Over the past year , we advanced key strategic initiatives , strengthened our platform , and delivered results that exceeded our commitments . Looking forward to 2026 , we see another great year of exciting accomplishments .

Speaker #1: We intend to commission the heavy rare earth separation line in Europe with production ready material as precursor materials for magnet making . We intend to launch 2 to 3 customer programs for magnets in Europe from PAP to SOP to growing volumes .

Speaker #1: Later in the year, we expect to announce additional wins for more magnets in Europe and continue to fill out the launch curves for the years ahead.

Rahim Suleman: We will begin engaging in the planning activities related to phase one B in the expansion of our European magnet facility from 2,000 tons to 5,000 tons. We expect additional strategic projects to be announced, building upon and delivering robust, parallel, and global diverse supply chains in critical materials. We expect to launch our first magnet assembly project, continuing down the value add chain from bonded powders to magnets and soon to be assemblies. We expect continued growth in other areas of the business like emission catalysts and water treatment. Together, these developments reflect the practical execution of Neo's integrated model, combining separation, advanced material processing, and magnet manufacturing to support localized critical materials and supply chains. As slide 17 highlights, Neo remains directly aligned with the structural shifts underway in the global critical material supply chains.

Speaker #1: We will begin engaging in the planning activities related to phase one B and the expansion of our European magnet facility from 2000 tons to 5000 tons .

Speaker #1: We expect additional strategic projects to be announced , building upon and delivering robust , parallel and global diverse supply chains in critical materials We expect to launch our first magnet assembly project , continuing down the value chain from bonded powders to magnets and soon to be assemblies And we expect continued growth in other areas of the business , like emission catalyst and water treatment Together , these developments reflect the practical execution of Neo's integrated model , combining separation , advanced material processing and magnet manufacturing to support localized critical materials and supply chains And as slide 17 highlights , Neo remains directly aligned with the structural shifts underway in the global critical materials supply chains .

Rahim Suleman: We are operating at the intersection of three durable drivers: sustained demand growth from electrification, automation, AI, robotics, space, and clean energy applications, government policy and customer initiatives, accelerating supply chain diversification and localization, and Neo's established asset base, technical depth, and decades of operational execution in rare earth magnetics and specialty materials. Together, these forces create a long-term opportunity set that aligns directly with our capabilities. Our integrated platform enables us to serve customers across regions and technologies, from advanced permanent magnets to emission catalysts and specialty rare metals. These markets are supported by structural demand trends rather than short-term cycles, contributing to a more resilient growth profile. Our teams continue executing complex initiatives across multiple jurisdictions with a strong focus on safety, operational discipline, and long-term value creation. I want to recognize them for their continued dedication.

Speaker #1: We are operating at the intersection of three durable drivers , sustained demand growth from electrification , automation , AI , robotics space , and clean energy applications Government policy and customer initiatives accelerating supply chain diversification and localization , and Neo's established asset base .

Speaker #1: Technical depth and decades of operational execution in rare earth magnetics and specialty materials . Together , these forces create a long term opportunity set that aligns directly with our capabilities , our integrated platform enables us to serve customers across regions and technologies from advanced , permanent magnets to emission catalysts and specialty rare metals These markets are supported by structural demand trends rather than short term cycles , contributing to a more resilient growth profile and our team's continue executing complex initiatives across multiple jurisdictions with a strong focus on safety , operational discipline and long term value creation .

Speaker #1: I want to recognize them for their continued dedication Thank you for joining us today , and we will now open the call for questions

Rahim Suleman: Thank you for joining us today, and we will now open the call for questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. The first question comes from Daniel Harriman with Sidoti. Please go ahead.

Speaker #4: Thank you . Ladies and gentlemen . We will now begin the question and answer session . Should you have a question , please press the star followed by the one on your touchtone phone .

Speaker #4: You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by the two.

Speaker #4: And if you are using a speakerphone , please lift the handset before pressing any keys The first question comes from Daniel Harriman with Sidoti .

Speaker #4: Please go ahead

Daniel Harriman: Hey, guys. Good morning. Congratulations on the great quarter, the great year, and the progress ahead. I have two questions that I'll start with. First, as we think about Magnequench 16%, you know, annual growth in 2025 and above 20% year-over-year growth in the last two quarters. Based on current demand trends, how sustainable do you think that growth is heading into 2026? Could you just update us and remind us of what still needs to happen at Narva before we start to see a real meaningful production ramp there in 2026? Thanks so much.

Speaker #5: Hey , guys . Good morning . Congratulations on the Great Quarter and the great year and the progress ahead I have two questions that I'll start with .

Speaker #5: First , as we think about magnet quench 16% annual growth in 2025 . And above 20% year over year growth in the last two quarters .

Speaker #5: Based on current demand trends , how sustainable do you think that growth is heading into 2026 ? And then could you just update us and remind us of what still needs to happen at Nava before we start to see a real , meaningful production ramp there in 26 ?

Speaker #5: Thanks so much

Rahim Suleman: Sure thing. Thanks, Daniel, for your questions on both accounts. In terms of Magnequench growth rates, I assume I don't know if you're referring to volume or profitability per se, but I think that look, these end markets are growing. These end markets are growing by, you know, high single digits, low double-digit type opportunities here. We do continue to see strength in those areas. In particular, when we talk about, you know, Magnequench's bonded business, which is the largest portion of its business today prior to launching sintered magnets, you know, we see the same trends of customers needing diversification, and we are the only player outside of China who can provide bonded powders at this point in time.

Speaker #1: Sure thing . Thanks , Daniel , for your for your questions on both accounts . So in terms of magnet , quench growth rates , I assume I don't know if you're referring to volume or profitability per se , but I think that look , these end markets are growing , these end markets roaring by , you know , high single digits , low double digit type , type opportunities here .

Speaker #1: So we do continue to see strength in those areas . And in particular , when we talk about , you know , magnetic is bonded business , which is the largest portion of its business today .

Speaker #1: Prior to launching sintered magnets , you know , we see the same trends of customers needing diversification . And we are the only player outside of China who can provide bonded powders at this point in time .

Rahim Suleman: I think that those trends of both end markets growing will remain strong, and I think that the need for diversification will remain strong. We do continue to see good things for the Magnequench business in general in terms of its core existing business. In terms of the second part of your question about our launch of sintered magnets in Europe, the launch is going extremely well. You know, the facility is getting more and more ready. The equipment's coming in, you know, and is already in. We've commissioned several programs, so we're in great shape. As we said, we will launch 2 to 3 programs in 2026, and you'll start seeing growing volumes throughout the year. We'll launch, you know, a number of other programs in 2027, and we'll continue to be launching programs into 2028.

Speaker #1: So I think that those trends of both end markets growing will remain strong . And I think that the need for diversification will remain strong .

Speaker #1: So we do continue to see good things for the magnet quench business in general in terms of its core existing business , in terms of the second part of your question about our launch of sintered magnets in Europe , the launch is going extremely well .

Speaker #1: The , you know , the facility is getting more and more ready . The equipment's coming in , you know , is already in .

Speaker #1: Sorry . We've commissioned several programs . So we're in great shape . As we said , we will launch 2 to 3 programs in 2026 .

Speaker #1: And you'll start seeing growing volumes throughout the year. We'll launch, you know, a number of other programs in '27 and will continue to be launching programs into '28.

Rahim Suleman: Every magnet is individually designed and engineered to match the motor that it's going into. These it takes time to engineer and launch every one of them. This is not a question of if, it's just a question of when in terms of, you know, the customer demand is there, the technology is there, but you just need to launch these responsibly. These are our customers. They've been our customers for 20, 25 years. They have demanding requirements, and we intend to meet them all. We are an automotive supplier. We understand the issues around safe launch and how to do things the right way and to build all the contingencies into every single launch path. That's why we approach our launches, you know, very, very cautiously, but very rigorously in our process.

Speaker #1: Every magnet is individually designed and engineered to match the motor that it's going into. So, it takes time to engineer and launch every one of them.

Speaker #1: This is not a question of if . It's just a question of when . In terms of , you know , the customer demand is there , the technology is there , but you just need to launch these responsibly .

Speaker #1: These are our customers. They've been our customers for 20, 25 years. They have demanding requirements, and we intend to meet them all.

Speaker #1: We are an automotive supplier. We understand the issues around safe launch and how to do things the right way, and to build all the contingencies into every single launch path.

Speaker #1: So that's what we approach our launches , you know , very , very cautiously . But very rigorously in our process . So I think we'll see more and more volumes .

Rahim Suleman: I think we'll see more and more volumes. I mean, volumes will just start coming really at the end of 2026, and then we'll see more growth in 2027, 2028, and 2029. I think only good things will continue to happen on Magnequench on both sides.

Speaker #1: I mean , volumes will just start coming really at the end of , of 2026 . And then we'll see more growth in 27 , 28 and 29 .

Speaker #1: So I think only good things will continue to happen on magnet quench on both sides.

Daniel Harriman: Really appreciate it, Rahim. Thank you.

Speaker #5: Really appreciate it . Rahim . Thank you

Operator: Thank you. The next question comes from Nicholas Boychuk with ATB Capital Markets. Please go ahead.

Speaker #4: Thank you . The next question comes from Nicolas Boychuk with ATB Cormark Capital Markets . Please go ahead .

Nicholas Boychuk: Thanks. Good morning, guys. First, around the commentary in the MD&A about Phase 1B plans advancing. Can you just kind of comment a little bit around any changes that you're seeing that are giving you confidence in that? Just remind us what ultimately the plans are in terms of timing, and what you would need to move ahead with that.

Speaker #6: Thanks . Good morning guys . First , around the commentary on the m d a about phase one B plans advancing . Can you just kind of comment a little bit around any changes that you're seeing that are giving you confidence in that ?

Speaker #6: And just remind us what ultimately the plans are in terms of timing and what you would need to move ahead with that

Rahim Suleman: Yeah. I, you know, I mean, I think we've been talking about, you know, we'd always designed this facility to be a 5,000-ton facility. That was always our intent from the beginning, and we just wanted to lay out shareholders' capital in a responsible way that would match, you know, the launch curves and the demand curves that we're seeing. I think it's still gonna be in the planning phase. We'll do some things with certain portions of the business, and certain portions of the equipment to plan around that.

Speaker #1: Yeah . So I , you know , I mean , I think we've been talking about , you know , we'd always designed this facility to be a 5000 ton facility that was always our intent from the beginning .

Speaker #1: And we just wanted to lay out shareholders capital in a , in a responsible way that would match , you know , the launch curves and the demand curves that we're seeing .

Speaker #1: So I think it's still in going to be in the , the , the planning phase . We'll do some things with certain portions of the business certain portions of the equipment to plan around that , but I don't , I think it is kind of again , it falls into the category of when and not if .

Rahim Suleman: I think it is kind of again, it falls into the category of when and not if, and we just wanna make sure that we spend the majority of our capital aligned with where we see new programs launching. The benefits of Phase 1B should be obvious in terms of the ramp curve and timing, 'cause I talked a lot about that, you know, in Phase 1A, that look, ramps are slower, and you got to manage these correctly. When we're launching Phase 1B, frankly, we're launching and ramping based on the equipment that already exists in Phase 1A. The ramp curves and timelines for Phase 1B are much faster. You know, in terms of the planning activities, I don't think that we see.

Speaker #1: And we just want to make sure that we spend the majority of our capital aligned with where we see new programs launching and the benefits of phase one B should be obvious in terms of , of the ramp curve and timing , because I talked a lot about that , you know , in phase one A , that look , ramps are slower and you got to manage these correctly .

Speaker #1: But when we're launching phase one B , frankly , we're launching and ramping based on the equipment that already exists in phase one A .

Speaker #1: So the ramp curves and timelines for phase one B are much faster . But you know , in terms of the planning activities , I don't think that we see , you know , we're not concerned about from a technology perspective , we're not concerned about it from a customer perspective .

Rahim Suleman: You know, we're not concerned about from a technology perspective, we're not concerned about it from a customer perspective, we're not concerned about it from a commercial perspective. It's just about how do we lay this out to be most efficient, and most thoughtful to kind of have the right kind of transition between the two, the two facilities coming together. They are in fact, you know, one facility, but nonetheless the two portions of that facility coming together the right way. Again, I think we'll give more information later in the year, but for now I'd say it's a really coordinated process.

Speaker #1: We're not concerned about it from a commercial perspective. So it's just about how do we lay this out to be most efficient and most thoughtful, to kind of have the right kind of transition between the two, the two facilities coming together.

Speaker #1: They are in fact , you know , one facility , but nonetheless , the two portions of that facility coming together the right way .

Speaker #1: So again , I think we'll give more information later in the year . But but for now , I'd say it's a really coordinated process .

Nicholas Boychuk: I appreciate that. I guess sorry, the question was more so if you're seeing anything in the industry, be it from customers or anything else that is pushing you to do that. Like, are you now having more confidence in making that decision?

Speaker #6: I appreciate that , but I guess the the question was more so if you're seeing anything in the industry , be it from customers or anything else that is pushing you to do that , like are you now having more confidence in making that decision ?

Rahim Suleman: Oh, absolutely. I think that, you know, if I were to back that out in terms of kind of like, you know, when we designed this facility three years ago, I think that that's, you know, we've seen an absolute change in terms of those dynamics. When we designed the facility, we talked primarily about wind farms and traction motors as being kind of customer-driven events and customer-driven technology that needed that diversification. I think over the last six months, we've seen customers from every industry and every end market application looking for urgent solutions. I think we were confident in our business planning model then. I think we're extremely confident in customers.

Speaker #1: Oh , absolutely . But I think that , you know , if I , if I were to back that out in terms of kind of like , you know , when we design this facility three years ago , I think that that's , you know , we've seen an absolute change in terms of those dynamics when we design the facility , we talked primarily about wind farms and traction motors as being kind of customer driven events and customer driven technology that needed that diversification .

Speaker #1: I think over the last six months , we've seen customers from every industry and every end market application looking for urgent solutions . So I think we're I think we are confident in our business planning model .

Speaker #1: Then I think we're extremely confident in customers . They are absolutely asking us , you know , in terms of things like the Bosch MoU that we talked about , you know , it does contemplate volumes that are going far enough out that they would be using the volumes in phase one B , so there's absolutely a trend that customers are looking for the capacity .

Rahim Suleman: They are absolutely asking us, you know, in terms of things like the Bosch MOU that we talked about, you know, it does contemplate volumes that are going far enough out that they would be using the volumes in Phase 1B. There's absolutely a trend that customers are looking for the capacity, they're looking for the assurance, and they're looking for the reliability of Neo to deliver.

Speaker #1: They're looking for the assurance , and they're looking for the reliability of Neo to deliver .

Nicholas Boychuk: Okay. Moving to the bonded side, can you just kind of run us through a little bit, especially given the color around the number of magnets that you're selling to the AI data centers, the capacity that you have to continue to produce bonded magnets, as well as the powders?

Speaker #6: Okay , moving to the bonded side , just kind of run us through a little bit , especially given the color around the number of magnets that you're selling is the data centers , the capacity that you have to continue to , to produce bonded magnets as well as the powders

Rahim Suleman: On the powder side, I would say we have plenty of capacity. You know, we have 8,000 tons of capacity on the bonded side between the couple of facilities that we have. In terms of magnet capacity, you'll remember when we kind of started this business, we purchased a very small business, what was it? 5, 6, maybe 6 years ago now. They were doing, you know, 30 to 50 tons a year when we bought them, and we're doing over 1,000 tons of magnets today.

Speaker #1: So on the powder side , I would say we have , we have plenty of capacity , you know , if we have 8000 tons of capacity on the bonded slide , bonded side between the couple of facilities that we have in terms of magnet capacity , you'll remember when we kind of started this business , we purchased a very small business .

Speaker #1: What was it , five , maybe six years ago now , and they were doing , you know , 30 to 50 tons a year when when we bought them .

Speaker #1: And we're doing over a thousand tons of magnets today . So that gives you a sense of when we put an accelerator onto this , how we were , how we were growing with it and how we would kind of anticipate continuing to see us being able to capture more margin , more value , add in our end goals .

Rahim Suleman: That gives you a sense of when we put an accelerator onto this, how we were growing with it and how we would kind of anticipate continuing to see us being able to capture more margin, more value add, in our end goals. Capacity, you know, we add capacity incrementally kind of every month or, you know, every quarter as needed. A lot of the bricks and mortar are there for a good portion of our continued build, but we do need to add more equipment as we go. We can do that quite easily. Again, we just time it with where we see demand. Frankly, it's been a regular thing.

Speaker #1: So capacity , you know , we add capacity incrementally kind of every month or , every quarter as , as needed . The , a lot of the bricks and mortar are there for a , for a good portion of our continued build , but we do need to add more equipment as we go , but we can do that quite easily .

Speaker #1: And again , we just time it with where we see demand . And frankly , it's been a regular thing . This this type of equipment that we're adding for bonded magnets is not hugely expensive .

Rahim Suleman: This type of equipment that we're adding for bonded magnets is not hugely expensive, so it actually will just blend into our CapEx normally. I think when we've talked about our CapEx normally, you know, we've said it's kind of $4 to 6 million in kind of the sustaining capital and another $4 to 5 million in what we would call kind of normal growth CapEx. I think it falls into that normal growth CapEx category.

Speaker #1: So it actually will just blend into our CapEx . Normally . I think when we've talked about our CapEx , normally , you know , we've said it's kind of 4 to 6 million in kind of the sustaining capital and another 4 to 5 million in what we would call kind of normal , gross CapEx .

Speaker #1: I think it falls into that normal gross CapEx category .

Nicholas Boychuk: Okay. Understood. Last for me on C&O, seems like Namco is now really starting to ramp. Can you just remind us again on the capacity that you have there? How much incremental material could you be producing from Namco? What are you seeing from your automotive customers there? Are they, given demand for ICE engines, now willing to contract with you a little bit more, pay a higher price? What are the metrics like coming out of that facility?

Speaker #6: Okay. Understood. And then, last for me on C, and it seems like Namco is now really starting to ramp. Can you just remind us again of the capacity that you have there?

Speaker #6: How much incremental material could you be producing from Namco and what are you seeing from your automotive customers there? Are they, given demand for ICE engines, now willing to contract with you a little bit more, pay a higher price?

Speaker #6: What are the metrics like coming out of that facility

Rahim Suleman: Well, I'd always love to ask customers to pay a higher price. I think that the market remains competitive. I think what's happened here over the last two years is, for Neo, two to three things, right? One is, customers were concerned about launching business with us while we were relocating a facility. That issue is now behind us, and we will be launching a couple of more programs this year with our customers. Two, more and more customers have come to visit the facility and see the facility, and they see the state-of-the-art quality metrics and analytics that are built into the line.

Speaker #1: Well , I'd always love to to ask customers to pay higher price , but I think that the , the market remains competitive .

Speaker #1: So I think what's happened here over the last two years is for NIO is is 2 to 3 things , right ? One is customers were concerned about launching business with us while we were relocating a facility .

Speaker #1: So that issue is now behind us and we will be launching a couple of more programs . This year with our customers . Two more and more customers have come to visit the facility and see the facility , and they see the state of the art quality metrics and analytics that are built into the line .

Rahim Suleman: I think that they're frankly very impressed in terms of how all of those lines work together, how we control the data, and how we can make changes to our process instantly. That's been a huge plus in terms of customers' perception. Then of course, our conversion costs are down. We talked about that, right? The combination of those three things, and the fact that we didn't lose any customers, we didn't let any customers down, and we didn't miss any shipments during the relocation, I think are all three really important factors, or four important factors that are gonna see us have continued confidence with our customers to grow forward.

Speaker #1: So I think that there , frankly , very impressed on on terms of how all of those lines all work together , how we control the data and how we can make changes to our process instantly .

Speaker #1: So that's been a huge plus in terms of customers perception . And then of course , our conversion costs are down . And we talked about that , right ?

Speaker #1: So the combination of those three things, and the fact that we didn't lose any customers, we didn't let any customers down, we didn't miss any shipments during the relocation.

Speaker #1: I think are all three really important factors or four important factors . They're going to see us have continued confidence in our customer with our customers , to grow forward

Nicholas Boychuk: Excellent. Thanks, Rahim. Appreciate it.

Rahim Suleman: Thank you.

Speaker #6: Excellent . Thanks , Rahim . Appreciate it .

Operator: Thank you. The next question comes from Ian Gillies with Stifel. Please go ahead.

Speaker #1: Thank you .

Speaker #4: Thank you . The next question comes from Ian Gillis with stifle . Please go ahead .

Ian Gillies: Morning, everyone.

Rahim Suleman: Morning, Ian.

Speaker #7: Morning , everyone .

David Brown: I wanted to start on the guidance for 2026. It's obviously you've got to do a pretty strong year, but given where commodity prices are, should we be thinking about the way you said it is you expect Q1 and likely Q2 are gonna be pretty robust, but given the volatility in commodity prices, maybe a bit more normalized back half of the year?

Ian Gillies: I wanted to start on the guidance for 2026. It's obviously you've got to do a pretty strong year, but given where commodity prices are, should we be thinking about the way you said it is you expect Q1 and likely Q2 are gonna be pretty robust, but given the volatility in commodity prices, maybe a bit more normalized back half of the year?

Speaker #1: Morning , Ian .

Speaker #7: I just wanted to start on the guidance for 2026 . It's obviously you've got to do a pretty strong year . But given where commodity prices are , should we be thinking about the way you said it is , you expect the first quarter and likely the second quarter are going to be pretty robust .

Speaker #7: But given the volatility in prices , maybe a bit more normalized back half of the year

Rahim Suleman: Yes and no. I don't know that we see so much as first half and back half being massive changes in that environment. I mean, I think you're right that, you know, it takes time to work through the inventory, and when prices have moved dramatically, you have the opportunity to see more margins as, because, you know, as we're moving inventory through, that's more likely a first half impact. I think when you take a step back, you know, we sold the two Chinese separators, you know, in Q1 2025. Our goal to sell the two Chinese separators was to get rid of the vast majority of our commodity price risk in the rare separation business.

Speaker #1: Yes and no. I don't know that we see so much as first half and back half being massive changes in that environment.

Speaker #1: I mean I think you're right that , you know , it takes time to work through the inventory . And when prices have moved dramatically , you have the opportunity to to see more margins as because , you know , as we're moving inventory through , that's more likely a , a first half impact .

Speaker #1: But I think when you take a step back , you know , we sold the two Chinese separators , you know , in Q1 2025 .

Speaker #1: And our goal to sell the two Chinese separators was to get rid of the vast majority of our commodity price risk in the rare separation business.

Rahim Suleman: The fact that NDPR prices have kind of doubled, let's say, in the last, I don't know, 8 months or so, is not as impactful as it was, you know, in 2021 and 2022 when we were getting a lot more commodity type profitability, right? That led to the, you know, the high profits in kind of 2021, 2022, and the very low profits in 2023. You'll remember 2023, I guess it was about $37 million of EBITDA. Now we're at $75 million, right? We've doubled effectively from the 37, but as we've said, the 37 was never the right benchmark because of the impact of commodity prices. We have strategically always wanted to move more value add, and Magnequench is all value add. Everything is on passthroughs. When prices change, yes, there's an inventory impact, but it's relatively small.

Speaker #1: So the fact that prices have doubled , let's say in the last , I don't know , eight months or so , is not as impactful as it was , you know , in 21 and 2022 when we were getting a lot more commodity type , type profitability , right ?

Speaker #1: So , and that led to the , you know , the high profits in kind of 21 , 22 and the very low profits in 23 .

Speaker #1: You will remember . 23 I guess it was about $37 million of EBITDA . And now we're at 75 , right ? So we've doubled effectively from the 37 .

Speaker #1: But as we've said , the 37 was never the right benchmark because of the impact of commodity prices . So we have strategically always wanted to move more value , add and magnet quench is all value add .

Speaker #1: Everything is on pass through . So when prices change , yes , there's an inventory impact , but it's relatively small . The largest portion of the commodity price movement was always in the separation business .

Rahim Suleman: The largest portion of the commodity price movement was always in the separation business. We sold the two separation business to improve return on capital, to simplify the business, and move away from that commodity price and get more of the value add. Our European separation business absolutely will still have some benefits of the commodity price impact in 2026, but not to the same degree that we have seen commodity price impacts going forward. I think on the other side, which is on the Rare Metals side, you know, you've heard us talk about how hafnium prices have moved. Normally, when we would do a forecast, we generally take the position of we don't forecast commodity prices, and therefore we assume kind of like hafnium prices where they are.

Speaker #1: We sold the two separation business to improve return on capital . To the business and move away from that commodity price and get more of the value added .

Speaker #1: So our European separation business absolutely will still have some benefits of the commodity price impact in in 2026 . Here . But not to the same degree that we have seen commodity price impacts going forward .

Speaker #1: I think on the on the other side , which is on the rare metals side , you know , you've heard us talk about how hafnium prices have moved and if normally when we would do a forecast , we generally take the position of we don't forecast commodity prices and therefore we assume kind of like hafnium prices , where they are .

Rahim Suleman: Frankly, in this environment, we've been a little bit more conservative. You're absolutely right in that assessment because, you know, the hafnium prices are at record levels and have been record levels in the, you know, here over the last 4 or 5 months. We just need to see customers buying at the same volume levels that they have been at in the past. I think we have been a little bit conservative with respect to thinking that element of it through, just because at these high prices, we're just watching to see how our customers behave in terms of securing more long-term contracts or securing more spot business as everyone's kind of seeing these hafnium prices as really quite high.

Speaker #1: But frankly , in this environment , we've been a little bit more conservative . You're absolutely right in that assessment because we need we just , you know , the hafnium prices are at record levels and have been record levels in the , you know , here over the last 4 or 5 months .

Speaker #1: We just need to see customers buying at the same volume levels that they have been at in , in the past . So I think we have been a little bit conservative with respect to thinking that element of it through , just because at these high prices , we're just watching to see how our customers behave in terms of securing more long term contracts or securing more spot businesses .

Speaker #1: Everyone's kind of seen these hafnium prices as , as really as really quite high . So if they remain quite high , then then we'll actually have the benefit of that because we have most of , you know , we have probably all of the inventory already to satisfy our 2026 demand .

Rahim Suleman: If they remain quite high, then we'll absolutely have the benefit of that because we have probably all of the inventory already to satisfy our 2026 demand. No matter what, we're gonna do extremely well in that business. It'll just modulate on how many customers are issuing POs at what price point.

Speaker #1: So no matter what, we're going to do extremely well in that business. It'll just modulate on how many customers are issuing POS, at what price point.

Ian Gillies: Okay. That's helpful. You actually lead into my next question nicely. Can you talk a little bit about the inventory build in Q4, and is it planned? Does that have to do with Estonia? I'm just a bit curious there because the cash conversion was a little weaker than we would have thought.

Speaker #7: Okay, that's helpful. And you actually lead into my next question nicely. Can you talk a little bit about the inventory build in the fourth quarter, and is it planned?

Speaker #7: Does that have to do with Estonia ? I'm just a bit curious there because the cash conversion was a little weaker than we would have thought .

Rahim Suleman: Yeah, you're absolutely right, Ian, and you know, I always encourage people to go look at the promises that we've made publicly on all of our various calls. The one promise of the whatever, 12, 15 promises we've made over the last 2 years, the one promise that we're gonna miss here is our inventory levels. We did say that we would reduce our inventory levels in 2025, and in fact, they've increased dramatically and you know, further increased in Q4. It's a combination of things. One is customers are requiring more inventory to be available throughout the system just given the geopolitical dynamics. Two is the costing. You know, rare earth prices are, as I said, double where they were 6 to 9 months ago.

Speaker #1: Yeah , you're absolutely right . Ian . And , and you know , I always encourage people to go look at the promises that we've made publicly on all of our various calls .

Speaker #1: And the one promise of the whatever . 12 , 15 promises we've made over the last two years , the one promise that we're going to miss here is our inventory levels .

Speaker #1: We did say that we would reduce our inventory levels in 2025 . And in fact , they've increased dramatically . And , you know , further increased in Q4 .

Speaker #1: So it's a combination of things . One is customers are requiring more inventory to be available throughout the system , just given the geopolitical dynamics .

Speaker #1: Two is the costing , you know , rare earth prices are , as I said , double where they were 6 to 9 months ago .

Rahim Suleman: Third of it is we are holding more hafnium, in the system generally with kind of seeing where prices are. I think that puts us in actually really good stead generally. Lastly, we're holding a lot of inventory at MQPM at our European-centered facility, as we're kind of preparing for launch, and running more and more products and more and more trials. There is a lot of inventory in the system right now, both in terms of volume and in terms of price. You know, I think over time, at least some of those prices will normalize, but even if they don't, I think volume will actually, we'll get volume levels back to more reasonable levels.

Speaker #1: And third of it is, we are holding more hafnium in the system generally, with kind of seeing where prices are. I think that puts us in actually really good stead, generally.

Speaker #1: And then lastly , we're holding a lot of inventory at MXM as we are at our European centered facility , as we're kind of preparing for launch and running more and more products and more and more trials .

Speaker #1: So there's , there is a lot of inventory in the system right now , both in terms of volume and in terms of price .

Speaker #1: You know , I think over time , at least some of those prices will , will normalize . But even if they don't , I think volume will actually will , will get volume levels back to more reasonable levels .

Rahim Suleman: Right now, geopolitical uncertainty, launch, and other elements to it just have us holding more inventory than normal.

Speaker #1: But right now , geopolitical uncertainty , launch and other elements to it just have us holding more inventory than normal . Okay . As it turns out , we're going to benefit from that because we're the prices have been rising , but that would not be our goal in life .

Ian Gillies: Okay.

Ian Gillies: As it turns out, we're gonna benefit from that because rare earth prices have been rising, but that would not be our goal in life.

Rahim Suleman: As it turns out, we're gonna benefit from that because rare earth prices have been rising, but that would not be our goal in life.

Ian Gillies: Understood. The last one I wanted to touch on was the startup costs at Estonia. I mean, you were, I think, roughly $10.5 million this year, $16 million the year before. I'm just curious how much longer you think you're incurring those startup costs for. Then as you move into phase two, should we expect a lower quantum of startup costs just given you already have a large facility in place?

Speaker #7: Understood . The last one I wanted to touch on was the startup costs at Estonia . I mean , you're I think roughly $10.5 million this year , $16 million a year before .

Speaker #7: I'm just curious how much longer you think you're incurring those startup costs for . And then as you move into phase two , should we expect a lower quantum of startup costs just given you already have such a large you already have a large facility in place

Rahim Suleman: Absolutely. You know, I think the startup costs will continue for a couple of years still, until we get the facility at kind of a reasonable volume level. Even in that universe of what you'll see when we scale the facility to be a reasonable volume level, it will ostensibly be staffed from an engineering, quality, back office, leadership level. It'll be staffed for the 5,000 tons already. Like, that is the plan in terms of staffing. That is how we are building the facility. That's how we are building the engineering group, and the development group, and the quality group, particularly because, you know, when you're launching, it's, you know, 4 times the amount of workload on some of those groups, including the quality group.

Speaker #1: Absolutely . So , you know , I think the startup costs will continue for a couple of years still until we get the facility .

Speaker #1: At kind of a reasonable volume level . But even in that universe of what you'll see when we call the facility to be a reasonable volume level , it will ostensibly be staffed from an engineering quality back office leadership level .

Speaker #1: It'll be staffed for the 5000 tons already . Like that is that is the plan in terms of staffing . So that is how we are building the facility .

Speaker #1: That's how we are building the engineering group and the development group and the quality group , particularly because , you know , we're just when you're launching , it's , you know , four times the amount of workload On some of those groups , including the quality group .

Rahim Suleman: We are continuing to hire, we're continuing to staff up. You know, what you'll see in the first two or three years here is staffing that's equivalent to 5,000 tons, ostensibly outside of direct labor. Now, you know, our efficiencies and our yield rates have a journey to go on, but we have, you know, we're filling out the team for what we would perceive to be kind of the longer term growth in the facility for the next one, two, three years so that we're prepared for that. As I said, ramps, ramp curves will be faster once you're beyond the first kind of two years, and the addition of kind of overall costs will be much lower because those costs are already being burdened today.

Speaker #1: So we are continuing to hire , we're continuing to staff up and , you know , so what you'll see in the first 2 or 3 years here is staffing .

Speaker #1: That's equivalent to 5000 tons , ostensibly outside of outside of direct labor . Now , you know , our our efficiencies and our yield rates have a journey to go on .

Speaker #1: But we have , you know , we're filling out the team for what we would perceive to be kind of the longer term growth in the in the facility for the next one , two , three years so that we're prepared for that .

Speaker #1: So as I said , ramps , ramp curves will be faster once you're beyond the first kind of two years and the addition of kind of overall costs will be much lower because those costs are already being burdened today .

Ian Gillies: That's helpful, and I'll sneak in one last one. With respect to these minimum price floor contracts you're seeing, we've obviously now seen two happen in the US. There's been one in Japan, and have you had any initial inquiries or any initial discussions that would lead you to believe that you know, may be in position to obtain one of these contracts or at least be in discussions to get them at this juncture?

Speaker #2: Okay .

Speaker #7: That's helpful . And I'll sneak in one last one . I , with respect to these minimum price for contracts , we've seen , we've obviously now seen to happen in the US , which has been one in Japan .

Speaker #7: And have you had any initial inquiries or any initial discussions that would lead you to believe that you, that Neo may be in position to obtain one of these contracts, or at least be in discussions to get them at this—at this juncture?

Rahim Suleman: A couple of dynamics attached to that. One is the majority of the floor price contracts and the like are going to mining companies, to encourage them to make mining economically efficient. For Neo, the NDPR and the rare earths themselves are all on passthrough with the customers, so they don't directly affect us in that way. What they do do is they provide confidence and certainty to customers in terms of feedstock, in terms of planning, and a number of different elements, in that universe. It challenges competitiveness in terms of customer dynamics and their alternatives to continue to buy from China. I think the customers are over that, and they will have a certain amount of their portfolio, outside of China.

Speaker #1: So a couple of dynamics attached to that . So one is the majority of the floor price contracts and the like are going to mining companies to encourage them to make mining economically efficient .

Speaker #1: For Neo , the NDP are and , and the rare earths themselves are all on pass through with the customers . So they don't directly affect us in that way .

Speaker #1: What they do do is they provide confidence and certainty to customers in terms of feedstock and in terms of planning and a number of different elements in that universe .

Speaker #1: It challenges competitiveness in terms of customer dynamics and their alternatives to continue to buy from China . But I think the customers are over that , and they will have a certain amount of their portfolio outside of China .

Rahim Suleman: I think that in those senses, it's a good thing to ensure that we get the feedstock into the system and available, and it raises customers' confidence. As I said, it'll challenge overall demand, but we're such a small portion of overall demand that any amount of diversification will be supported. We don't worry about that too much from that perspective. From our separation business perspective, you know, given it is part of the value chain of a mining company to be able to get oxides to market, it is absolutely supportive to our separation business. I don't know that that means that we see it in the form of a floor price contract. What we see it in is economics for separation get better over time.

Speaker #1: So I think that in those senses , it's it's a good thing to to ensure that we get the feedstock into the system and available in erase customers confidence , as I said , it'll challenge overall demand , but we're such a small portion of overall demand that any amount of diversification will be , will be supported .

Speaker #1: So we don't worry about that too much from that perspective , from our separation business perspective , you know , given it is part of the value chain of a mining company to be able to get oxides to market , it is absolutely supportive to our separation business .

Speaker #1: But I don't know that that means that we see it in the form of a of a floor price contract . What we see it in is economics or separation .

Ian Gillies: Understood. Thanks very much. I'll turn the call back over.

Speaker #1: Get better over time .

Speaker #7: Understood . Thanks very much . I'll turn the call back over .

Rahim Suleman: Thanks, Ian.

Operator: Thank you. The next question comes from Max Yerrill at BMO Capital Markets. Please go ahead.

Speaker #1: Thanks , Ian .

Speaker #4: Thank you . The next question comes from Max at BMO Capital Markets . Please go ahead .

Max Yerrill: Hey, Rahim. Hey, Jonathan. Thanks for taking my question. When we look at the 2026 guidance, that implied growth versus the 2025 EBITDA, could you provide a little bit more color on where that's coming from? Is that from the start of the sintered business, the growth at Narva, and then maybe how much is driven by price increase versus volume growth?

Speaker #8: Hey , Rahim . Hey , Jonathan , thanks for taking my question . When we look at the 2026 guidance that implied growth versus the 2025 EBITDA , could you provide a little bit more color on where that's coming from ?

Speaker #8: Is that from the start of the centered business , the growth at Namco and then maybe how much is driven by price increase versus volume growth ?

Rahim Suleman: Yeah, great questions, Max, on all the different elements there. It's not coming from the sintered business in that the sintered business will still be ramping up, and we'll still have kind of large start-up losses from that sintered business in 2026. Where it's coming from is, you know, continued growth and continued cost improvements in all of the other businesses, you know, including the hafnium business, including the catalyst business and the like. I think it'll be reasonably well distributed. We're seeing, you know, as I said, more volumes across the board, and we're seeing better cost conversions across the board.

Speaker #1: Yeah , great questions . Max . On on all the different elements there . So it's it's not coming from the centered business and that the centered business will still be ramping up have kind still business in , in 26 .

Speaker #1: startup So where it's coming from is , you know , continued growth and continued cost improvements in all of the other businesses , you know , including , you know , centered losses the hafnium business , including the catalyst from that and the like .

Speaker #1: So I think it'll be reasonably well distributed . We're seeing , you know , as I said , more volumes across the board and we're seeing better cost conversions across the board .

Rahim Suleman: The growth rate from 2025 to 2026 is probably not maybe what people would have hoped for, but we did get some commodity price increase in 2025 results that we're not counting on in 2026 results. As I said, if commodity prices, particularly hafnium, hold even reasonably close to where they are, I think we're gonna see more growth than that. I would say it's across the board in terms of strength of all areas of the business. The real kicker is when the sintered business comes online, and when it does, that'll actually hypercharge a number of different growth dimensions. We need to give it a little bit of time here to get it seasoned and spiced and ready to go.

Speaker #1: So the growth rate from '25 to '26 is probably not, maybe, what people would have hoped for. But we did get some commodity price increase in '25 results that we're not counting on in 2026 results.

Speaker #1: But as I said , if commodity prices , particularly have to hold even reasonably close to where they are , I business think we're going to see more growth than that .

Speaker #1: So I would say it's across the board in terms of strength of all areas of the business. And the real kicker is when the centered business comes online, and when it does, that'll really hypercharge a number of different growth dimensions.

Speaker #1: But we just , we need to give it the , the , a little bit of time here to get it seasoned and spiced and ready to go .

Max Yerrill: Got it. That makes sense. One more from me. On the Magnequench volumes, the bonded volumes, I was curious if you had a sense of how much of that growth is from growing end market demand versus potentially, your consumers and customers stockpiling material.

Speaker #8: Got it . That makes sense . And then more from me on the magnet quench volumes . The bonded volumes . I was curious if you had a sense of how much of that growth is from growing end market demand versus potentially your consumers and customers stockpiling material ?

Rahim Suleman: Yeah, that's an excellent observation. I gotta say it's a bit of both. I don't know if I can give you, like, an exact metric of what that means. I think that the growth outstripped our expectations. So I do think that some of that is customers being thoughtful about what their supply chains look like and how they are managing that. Having said that, I'm not sure that the entire supply chain through the end customer has even yet realized the, you know, what is to come and where their purchasing patterns exist. I think on the sintered side of the business and on traction motors and those types of things, I think customers are infinitely aware of where their purchasing is and have absolutely executed strategies on how to get more geographically diverse purchasing.

Speaker #1: Yeah , that's a that's an excellent observation . I gotta say , it's a bit of both . I don't know if I can give you like an exact metric of , of what that means .

Speaker #1: I think that the growth outstripped our expectations. So I do think that some of that is customers being thoughtful about what their supply chains look like and how they are managing that.

Speaker #1: Having said that , I'm not sure that the entire supply chain through the end customer has even yet realized the , you know , what is to come and where they're purchasing patterns exist .

Speaker #1: I think on the , the centered side of the business and our traction motors and those types of things , I think customers are infinitely aware of where their purchasing is and have absolutely executed strategies on how to get more geographically diverse purchasing on the bonded side of the business .

Rahim Suleman: On the bonded side of the business, we have seen customers, you know, increase their orders and the like, whether it's end market demand, whether it is building inventory, it's probably both. The next stage of diversification of supply chain, I think is just more opportunity.

Speaker #1: I'm not sure that we have seen we have seen customers , you know , increase their orders and the like , whether it's end market demand , whether it is building inventory , it's probably both .

Speaker #1: But the next stage of diversification of supply chain , I think is just more opportunity .

Max Yerrill: Got it. That's helpful. I'll just squeak in one more. When you start to look at that magnet assembly and moving a little bit more downstream, any color you can provide on how that might improve the margins from the Magnequench segment?

Speaker #8: Got it . That's helpful . And I'll just squeeze in one more . When you start to look at that magnet assembly and moving a little bit more downstream , any color you can provide on how that might improve the margins from the magnet , quench segment ?

Rahim Suleman: Yeah, I think it's early days. You know, we have what we call a couple of lighthouse projects, which essentially say, you know, 2, 3, 4 projects that we're working on today, to be able to do that. They improve margins 'cause frankly, when you're making the magnet itself, it's a very high material cost component to it, and we don't really mark up material costs since it's on passthrough. The only markup on material costs is really yield management. When you get into more value add of the assemblies and those types of things, there's more conversion costs and there's more margins available.

Speaker #1: Yeah , I think it's early days . You know , we've , we have what , what we call a couple of lighthouse projects , which essentially say , you know , two , three , four projects that we're working on today to be able to do that .

Speaker #1: And they improve margins because frankly , when you're when you're making the magnet itself , it's a very high material cost component to it .

Speaker #1: And we don't really markup material costs since it's on pass through . So the only markup on , on material costs is really yield management .

Speaker #1: So when you get into more value add of the assemblies and those types of things , there's more conversion costs and there's more margins available .

Rahim Suleman: To give you specifics on, you know, how those margins will compare and how impactful they'll be to Magnequench, we're probably a little ways away from that yet. If we look at the magnet business, I think it's a good example of how they've been very accretive to Magnequench volumes and Magnequench margins overall.

Speaker #1: But to give you a specifics on , you how those margins will compare and how impactful they'll be to magnet quench , we're probably a away from that .

Speaker #1: Yet . But if we look at the the magnet business , I think it's a good example of how they've been very accretive to magnet quench volumes .

Speaker #1: And magnet quench margins overall .

Max Yerrill: Great. Thanks, Rahim. I'll turn it back to the queue.

Speaker #8: Great . Thanks , Rahim . I'll turn it back to the to the Q

Rahim Suleman: Super. Thanks, Max.

Operator: Thank you. The next question comes from Marvin Wolff with Paradigm Capital. Please go ahead.

Speaker #1: Super . Thanks , Max .

Speaker #4: Thank you. The next question comes from Marvin Wolf with Paradigm Capital. Please go ahead.

Marvin Wolff: Yeah, good morning, guys, and congratulations on a very good quarter and a very good year and a great outlook for 2026. I had a quick question just on labor. How are you finding the labor situation in Estonia for ramping up the Narva facility? Is it one where the labor's pretty tight, or is it hard to find qualified people? How much training do they take, et cetera?

Speaker #9: Yeah . Good morning guys . And congratulations on a very good quarter and a very good year . And a great outlook for 26 .

Speaker #9: I had a quick question just on labor . How are you finding the labor situation in Estonia for ramping up the Narva facility ?

Speaker #9: Is it one where the labor is pretty tight , or is it hard to find a qualified people ? How much training do they take , etc.

Rahim Suleman: Yes to all of that. In terms of skilled labor, in Estonia, I think we're in great shape. I think Estonia is underrated in terms of the quality of education, the quality of talent and where we are with other changes in, let's say, the energy industry generally, in the region of Estonia means that there's lots of qualified and high quality people available as Estonia is going through its own energy transition to clean energy. Some of that means changes to some of their existing energy profile, closer to where we are, in Estonia. There's been lots of talent that we've been able to get in touch with. We have very close connections with the universities in Estonia.

Speaker #1: So yes , to all of that . So in terms of skilled labor in Estonia , I think we're in great shape . I think Estonia is underrated in terms of the quality of education .

Speaker #1: The quality of talent , and where we are with other changes in , let's say , the energy industry generally in the region of Estonia means that there's lots of qualified and high quality people available .

Speaker #1: As Estonia is going through its own energy transition to clean energy, some of that means changes to some of their existing energy profile, closer to where we are in Estonia.

Speaker #1: So there's there's been lots of talent that that we've been able to , to get in touch with . We have very close connections with the universities in Estonia .

Rahim Suleman: Given the size of Estonia, you know, I mean, everybody says they have close connections to universities, but given the size of Estonia, close connections mean something different. Like, you know, our involvement of designing programs, getting involved with telling folks that, "Here, look, here's the future of jobs available," and how quickly they're reacting to changing programs to match those types of dynamics. You know, I think we have an office that actually sits in the university, in TalTech there as well. In those dynamics, it's really strong. But we also are bringing in people from kind of around the world. You know, Estonia is Europe, and people are happy to come to Europe. There's been transfers from people from various different regions of the world.

Speaker #1: And given the size of Estonia , it you know , I mean , everybody says they have close connections to universities , but given the size of Estonia , close connections mean something different , like , you know , the our involvement of designing programs , getting involved of telling folks that here , look , here's the future of jobs available and how quickly they're reacting to changing programs to match those types of dynamics .

Speaker #1: You know , I think we have an office that actually sits in , in , in the university , in Taltech University . There as well .

Speaker #1: So in those dynamics , it's really strong , but we also are bringing in people from around the world . So , you know , Estonia is Europe and people are happy to , to come to Europe .

Speaker #1: So there's been transfers from people from various different regions of the world . So it is a , a really multinational , multinational group over there .

Rahim Suleman: It is a really multinational group over there. That's a very tight-knit group and doing quite well.

Speaker #1: That's a very tight knit group . And doing quite well

Marvin Wolff: Okay. That sounds great. Thanks for covering that up.

Speaker #9: Okay , that sounds great . Thanks for covering that up

Rahim Suleman: Wonderful. Thanks, Marv.

Operator: Thank you. We have no further questions. I will turn the call back over for closing comments.

Speaker #1: Wonderful. Thanks, Murph.

Speaker #4: Thank you . We have no further questions . I will turn the call back over for Chloe . Comments

Rahim Suleman: Well, you know, again, I wanna thank everyone for their time today and the great questions from everyone. I think we had a tremendous year in 2025, and I think we're gonna see more and more exciting things to come for 2026. Thank you all, and have a wonderful day. Thanks, Joanna.

Speaker #1: Well , you know , again , I want to thank everyone for their time today in the great from everyone . I think we had a tremendous year in 2025 , and I think we're going to see more and more exciting things to come for 2026 .

Speaker #1: So, thank you all, and have a wonderful day. Thanks, Joanna.

Operator: Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.

Q4 2025 Neo Performance Materials Inc Earnings Call

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