MP Materials Corp DE

Previous wording

We produce rare earth concentrate products as well as refined rare earth oxides and related products. The rare earth concentrate is principally sold pursuant to the Offtake Agreements to Shenghe (as such terms are defined in Note 19, “Related-Party Transactions,” in the notes to the unaudited Condensed Consolidated Financial Statements), that, in turn, typically sells that product to refiners in China. Following the commissioning of our Stage II optimization project (“Stage II”) in the second half of 2023, we began producing and selling separated rare earth products, including neodymium-praseodymium (“NdPr”) oxide. Additionally, we have a long-term agreement with General Motors Company (NYSE: GM) (“GM”) to supply U.S.-sourced and manufactured rare earth materials and finished magnets for the electric motors in more than a dozen models based on GM’s Ultium Platform. These developments are part of our Stage III downstream expansion strategy (“Stage III”).

Current wording

We produce rare earth concentrate products as well as refined rare earth oxides and related products. The rare earth concentrate is principally sold pursuant to the Offtake Agreements to Shenghe (as such terms are defined in Note 19, “Related-Party Transactions,” in the notes to the unaudited Condensed Consolidated Financial Statements), that, in turn, typically sells that product to refiners in China. Following the commissioning of our Stage II optimization project (“Stage II”) in the second half of 2023, we began producing and selling separated rare earth products, including neodymium-praseodymium (“NdPr”) oxide. Additionally, we have a long-term agreement with General Motors Company (NYSE: GM) (“GM”) to supply U.S.-sourced and manufactured rare earth materials and finished magnets for the electric motors in more than a dozen models based on GM’s Ultium Platform. In April 2024, pursuant to the long-term supply agreement with GM, we received a $50.0 million initial prepayment for magnetic precursor materials. See Note 14, “Revenue Recognition” in the notes to the unaudited Condensed Consolidated Financial Statements for additional details. These developments are part of our Stage III downstream expansion strategy (“Stage III”).

Previous wording

In March 2024, we were awarded a $58.5 million Section 48C Qualifying Advanced Energy Project Tax Credit (the “48C Credit”) to advance the construction of our Fort Worth Facility. The 48C Credit is an investment tax credit equal to 30% of qualified investments for certified projects that meet prevailing wage and apprenticeship requirements and are placed in service after the date of the award. The allocation of the awards under the 48C Credit was issued by the Internal Revenue Service and Treasury following a competitive, oversubscribed process administered by the Department of Energy that evaluated the technical and commercial viability and environmental and community impact of approximately 250 projects.

Current wording

In March 2024, we were awarded a $58.5 million Section 48C Qualifying Advanced Energy Project Tax Credit (the “48C Credit”) to advance the construction of our Fort Worth Facility. The 48C Credit is an investment tax credit equal to 30% of qualified investments for certified projects that meet prevailing wage and apprenticeship requirements and are placed in service after the date of the award. The allocation of the awards under the 48C Credit was issued by the Internal Revenue Service and Treasury following a competitive, oversubscribed process administered by the Department of Energy that evaluated the technical and commercial viability and environmental and community impact of approximately 250 projects. See Note 12, “Income Taxes,” in the notes to the unaudited Condensed Consolidated Financial Statements for additional information.

Previous wording

Our REO Sales Volume for a given period is calculated in MTs. A unit, or MT, is considered sold once we recognize revenue on its sale as determined in accordance with generally accepted accounting principles in the United States (“GAAP”). Our REO Sales Volume is a key measure of our ability to convert our concentrate production into revenue. Our REO Sales Volume for the three months ended March 31, 2024, included both traditional concentrate as well as roasted concentrate.

Current wording

Our REO Sales Volume for a given period is calculated in MTs. A unit, or MT, is considered sold once we recognize revenue on its sale as determined in accordance with generally accepted accounting principles in the United States (“GAAP”). Our REO Sales Volume is a key measure of our ability to convert our concentrate production into revenue. Our REO Sales Volume includes both traditional concentrate as well as roasted concentrate.

Previous wording

We expect to have a mix of contracts with customers where we will sell NdPr as (i) oxide, (ii) metal, where the amount of oxide required to produce such metal is variable, and (iii) metal, where we have a guarantee of the amount produced and sold based on the amount of oxide consumed. Among other factors, differences between quarterly NdPr Production Volume and NdPr Sales Volume may be caused by the time required for the conversion of NdPr oxide to NdPr metal, including time in-transit.

Current wording

We have a mix of contracts with customers where we sell NdPr as (i) oxide, (ii) metal, where the amount of oxide required to produce such metal is variable, and (iii) metal, where we have a guarantee of the amount produced and sold based on the amount of oxide consumed. Among other factors, differences between quarterly NdPr Production Volume and NdPr Sales Volume may be caused by the time required for the conversion of NdPr oxide to NdPr metal, including time in-transit.

Previous wording

Since the implementation of our Stage I optimization plan and the achievement of commercial production of concentrate on July 1, 2019, we have achieved at least 40,000 MTs of annual REO Production Volume since 2021. These results were achieved by optimizing the reagent scheme, reducing process temperatures, improving tailings facility management, and committing to operational excellence, which has allowed us to achieve approximately 92% uptime in 2023. Our Stage I optimization plan enabled us to achieve what we believe to be world-class production cost levels for rare earth concentrate.

Current wording

Subsequent to the implementation of our Stage I optimization plan, and starting in 2021, we have achieved at least 40,000 MTs of annual REO Production Volume. These results were achieved by optimizing the reagent scheme, reducing process temperatures, improving tailings facility management, and committing to operational excellence, which has allowed us to achieve approximately 92% uptime in 2023. Our Stage I optimization plan enabled us to achieve what we believe to be world-class production cost levels for rare earth concentrate.

Previous wording

During the second half of 2023, we began producing separated rare earth products. However, we expect that it may take several quarters to achieve our designed throughput of separated products. As we increase production of separated products over time, we expect to improve our per-unit production costs of NdPr oxide, which represents a majority of the value contained in our concentrate.

Current wording

During the second half of 2023, we began producing separated rare earth products. However, we expect that it may take many quarters to achieve our designed throughput of separated products. As we increase production of separated products over time, we expect to improve our per-unit production costs of NdPr oxide, which represents a majority of the value contained in our concentrate. Until such time, we may experience unstable operations and elevated costs of our initial production of separated products.

Previous wording

Comparison of the Three Months Ended March 31, 2024 and 2023

Current wording

Comparison of the Three and Six Months Ended June 30, 2024 and 2023

Previous wording

The decrease in rare earth concentrate revenue for the three months ended March 31, 2024, as compared to the prior year period, was driven by lower Realized Price per REO MT, which decreased by 54% when compared to the prior year period, as well as lower REO Sales Volume, which decreased by 9% when compared to prior year period.

Current wording

Rare earth concentrater evenue consists primarily of sales of traditional and roasted rare earth concentrate. The decreases in rare earth concentrate revenue for the three and six months ended June 30, 2024, as compared to the respective prior year periods, were driven by lower Realized Price per REO MT, which decreased by 33% and 45%, respectively, as well as lower REO Sales Volume, which decreased by 43% and 26%, respectively.

Previous wording

Realized Price per REO MT for the three months ended March 31, 2024, reflects the continued softness in the pricing environment for rare earth products. As noted above in the“Factors Affecting our Performance” section, market prices for rare earth products may be volatile due to actual or perceived changes in supply or demand. The decline in the market prices for rare earth products was largely attributable to lower than anticipated growth in demand for magnetic products, which negatively impacted the price of REE. The decrease in REO Sales Volume for the three months ended March 31, 2024, was due to the ramp-up of Stage II operations where a significant portion of the REO produced, which could otherwise have been sold as rare earth concentrate, was used to produce packaged and finished separated rare earth products.

Current wording

Realized Price per REO MT for the three and six months ended June 30, 2024, reflects the continued softness in the pricing environment for rare earth products. As noted above in the“Factors Affecting our Performance” section, market prices for rare earth products may be volatile due to actual or perceived changes in supply or demand. The decline in the market prices for rare earth products was largely attributable to lower than anticipated growth in demand for magnetic products, which negatively impacted the price of REE. The decreases in REO Sales Volume for the three and six months ended June 30, 2024, were due to the ramp-up of Stage II operations where a significant portion of the REO produced, which could otherwise have been sold as rare earth concentrate, was used to produce packaged and finished separated rare earth products. In addition, the decreases in REO Sales Volume were also impacted by higher unplanned downtime as a result of equipment damage to one of our thickeners, which impacted production for approximately three weeks and contributed to decreases in REO Production Volume for the three and six months ended June 30, 2024.

Previous wording

NdPr oxide and metal revenue consists of sales of NdPr oxide and metal, which commenced in the fourth quarter of 2023, primarily pursuant to our distribution agreement with Sumitomo Corporation of Americas. As we ramp up production of separated rare earth products, we expect our NdPr oxide and metal revenue to become a larger portion of our total revenue. Accordingly, to the extent we are able to sell a greater portion of NdPr oxide and NdPr metal, we expect that rare earth concentrate revenue will decline in future periods.

Current wording

NdPr oxide and metal revenue consists of sales of NdPr oxide and metal, which commenced in the fourth quarter of 2023, primarily pursuant to our distribution agreement with Sumitomo Corporation of Americas. As we ramp up production of separated rare earth products, we expect our NdPr oxide and metal revenue to become a larger proportion of our total revenue. Accordingly, to the extent we sell a greater volume of NdPr oxide and NdPr metal, we expect that rare earth concentrate revenue will decline in future periods.

Previous wording

Cost of sales (excluding depreciation, depletion and amortization) (“COS”)consists of production- and processing-related labor costs (including wages and salaries, benefits, bonuses, and stock-based compensation), mining and processing supplies (such as reagents), parts and labor for the maintenance of our mining fleet and processing facilities, other facilities-related costs (such as property taxes and utilities), packaging materials, and shipping and freight costs.

Current wording

Cost of sales (excluding depreciation, depletion and amortization) (“COS”)consists of production- and processing-related labor costs (including wages and salaries, benefits, bonuses, and stock-based compensation), mining and processing supplies and reagents, parts and labor for the maintenance of our mining fleet and processing facilities, other facilities-related costs (such as property taxes and utilities), packaging materials, and shipping and freight costs.

Previous wording

COS for the three months ended March 31, 2024, increased year over year, partially driven by higher payroll costs, which increased as a result of salaries and wages of certain employees no longer being considered start-up costs given the commencement of initial production of separated products in late 2023. In addition, for the three months ended March 31, 2024, COS reflected higher materials and supplies costs, which were the result of producing and selling separated products in the current year period, as well as higher property and other taxes. Lastly, COS for the three months ended March 31, 2024, included a $6.0 million reserve on certain of our work in process and finished goods inventories. We may incur additional similar reserves of inventories prior to achieving normalized production levels on our Stage II facilities.

Current wording

COS for the three and six months ended June 30, 2024, increased year over year primarily due to the current year periods’ inclusion of $11.8 million and $17.8 million, respectively, in reserves on certain of our work in process and finished goods inventories. We may incur additional similar reserves of inventories prior to achieving normalized production levels on our Stage II facilities. The increases in COS were also driven by: (i) $1.9 million in higher repairs and maintenance expenses associated with the thickener equipment damage in the second quarter of 2024; (ii) higher payroll costs, which increased as a result of salaries and wages of certain employees no longer being considered start-up costs given the commencement of initial production of separated products in late 2023; and (iii) higher professional services, as well as higher property and other taxes.

Previous wording

SG&A expenses increased by $1.9 million, or 10% for the three months ended March 31, 2024, as compared to the prior year period. The increase in SG&A expenses was primarily due to higher personnel costs (other than stock-based compensation expense), in part to support of our downstream expansion, as well as higher legal costs.

Current wording

SG&A expenses increased by $2.6 million, or 14% for the three months ended June 30, 2024, and by $4.4 million, or 12% for the six months ended June 30, 2024, as compared to the respective prior year periods. The increases in SG&A expenses were primarily due to higher legal costs and additional professional services costs related to our enterprise resource planning system implementation. In addition, SG&A expenses for the six months ended June 30, 2024, were also impacted by higher personnel costs (other than stock-based compensation expense), in part to support our downstream expansion.

Previous wording

Depreciation, depletion and amortization primarily consists of depreciation of property, plant and equipment and depletion of mineral rights. The year-over-year increase in depreciation, depletion and amortization for the three months ended March 31, 2024, primarily reflects an increase in depreciation of $9.7 million. Depreciation increased as a result of the timing of placing new circuits and facilities associated with our Stage II optimization project into service, which occurred progressively throughout 2023, and the placement of certain of our Fort Worth Facility assets into service in the fourth quarter of 2023.

Current wording

Depreciation, depletion and amortization primarily consists of depreciation of property, plant and equipment and depletion of mineral rights. The year-over-year increase in depreciation, depletion and amortization for the three and six months ended June 30, 2024, primarily reflects an increase in depreciation of $5.9 million and $15.6 million, respectively. Depreciation increased as a result of the timing of placing new circuits and facilities associated with our Stage II optimization project into service, which occurred progressively throughout 2023, and the placement of certain of our Fort Worth Facility assets into service in the fourth quarter of 2023.

Previous wording

Start-up costs for the three months ended March 31, 2024, decreased by $3.4 million, as compared to the prior year period, attributable to our Stage II optimization project. As mentioned above, start-up costs associated with Stage II decreased, specifically as a result of salaries and wages of certain employees no longer being considered start-up given the commencement of initial production of separated products in late 2023. Start-up costs attributable to our Stage III initiatives increased modestly year over year, in-line with our advancement in starting up and developing our magnetics capability.

Current wording

Start-up costs for the three and six months ended June 30, 2024, decreased by $2.7 million and $6.1 million, respectively, as compared to the prior year comparable periods, attributable to the commencement of our operations related to our Stage II optimization project. As mentioned above, start-up costs associated with Stage II decreased, specifically as a result of salaries and wages of certain employees no longer being considered start-up given the commencement of initial production of separated products in late 2023. Start-up costs attributable to our Stage III initiatives increased modestly year over year, in-line with the development of our magnetics capability and team headcount.

Previous wording

Advanced projects and development consists principally of costs incurred in connection with research and development of new processes or to significantly enhance our existing processes; and certain government contracts, as well as costs incurred to support growth initiatives or pursue other opportunities. Advanced projects and development for the three months ended March 31, 2024, increased year over year primarily due to costs incurred for legal, consulting, and advisory services to support growth initiatives, such as potential acquisitions, mergers, or other investments, which increased by $0.2 million, and continued investment in research and development activities, which increased by $0.5 million and related primarily to Stage III magnetics.

Current wording

Advanced projects and development consists principally of costs incurred in connection with research and development of new processes or to significantly enhance our existing processes; and certain government contracts, as well as costs incurred to support growth initiatives or pursue other opportunities. Advanced projects and development for the three and six months ended June 30, 2024, decreased year over year, primarily due to lower costs incurred for legal, consulting, and advisory services to support growth initiatives, such as potential acquisitions, mergers, or other investments, which decreased by $1.5 million and $1.3 million, respectively, when compared to the respective prior year periods. This was partially offset by continued investment in research and development activities associated with Stage III magnetics, which increased by $0.5 million and $1.0 million, respectively, when compared to the respective prior year periods.

Previous wording

Other operating costs and expenses consists primarily of accretion of asset retirement and environmental obligations and gains or losses on disposals of long-lived assets, including demolition costs. Other operating costs and expenses for the three months ended March 31, 2024, decreased year over year as a result of demolition costs incurred in the prior year period, associated with demolishing and removing certain out-of-use older facilities and infrastructure from the Mountain Pass site to accommodate future expansion in rare earth processing.

Current wording

Other operating costs and expenses consists primarily of accretion of asset retirement and environmental obligations and gains or losses on disposals of long-lived assets, including demolition costs. Other operating costs and expenses for the three and six months ended June 30, 2024, decreased year over year as a result of demolition costs incurred in the prior year period, associated with demolishing and removing certain out-of-use older facilities and infrastructure from the Mountain Pass site to accommodate future expansion in rare earth processing.

Previous wording

Interest expense, net principally consists of expense associated with the 0.25% and 3.00% per annum interest rates and amortization of the debt issuance costs on our 2026 Notes and 2030 Notes, respectively, offset by capitalized interest. Interest expense, net for the three months ended March 31, 2024, increased year over year due to the issuance of the 2030 Notes, offset by repurchases of the 2026 Notes.

Current wording

Interest expense, net principally consists of expense associated with the 0.25% and 3.00% per annum interest rates and amortization of the debt issuance costs on our 2026 Notes and 2030 Notes, respectively, offset by capitalized interest. Interest expense, net for the three and six months ended June 30, 2024, increased year over year due to the issuance of the 2030 Notes, partially offset by repurchases of the 2026 Notes.

Previous wording

Gain on early extinguishment of debt during the three months ended March 31, 2024, is the result of the repurchase of a portion of our 2026 Notes at prices lower than the associated carrying amounts. See the“Liquidity and Capital Resources” section below for additional information.

Current wording

Gain on early extinguishment of debt during the six months ended June 30, 2024, is the result of the repurchase of a portion of our 2026 Notes at prices lower than the associated carrying amounts. See the“Liquidity and Capital Resources” section below for additional information.

Previous wording

Other income, net consists of interest and investment income and non-operating gains or losses. Other income, net for the three months ended March 31, 2024, increased year over year as a result of interest and investment income earned on our short-term investments. Interest and investment income is principally generated from accretion of the discount on such investments.

Current wording

Other income, net consists of interest and investment income and non-operating gains or losses. Other income, net for the three and six months ended June 30, 2024, decreased year over year as a result of interest and investment income earned on our short-term investments. Interest and investment income is principally generated from accretion of the discount on such investments.

Previous wording

Income tax expense consists of an estimate of U.S. federal and state income taxes in the jurisdictions in which we conduct business, adjusted for federal, state and local allowable income tax benefits, the effect of permanent differences and any valuation allowance against deferred tax assets. The effective tax rate (income tax expense as a percentage of income before income taxes) was 30.2% and 17.3% for the three months ended March 31, 2024 and 2023, respectively. The effective tax rate for the three months ended March 31, 2024, differed from the statutory tax rate of 21% primarily due to state income tax expense and a deduction limitation on officers’ compensation, offset by the Section 45X Advanced Manufacturing Production Credit and the California Competes Tax Credit. The effective tax rate for the three months ended March 31, 2023, differed from the statutory tax rate of 21% primarily due to excess tax benefits associated with stock-based compensation.

Current wording

Income tax benefit (expense) consists of an estimate of U.S. federal and state income taxes in the jurisdictions in which we conduct business, adjusted for federal, state and local allowable income tax benefits, the effect of permanent differences and any valuation allowance against deferred tax assets. The effective tax rate (income tax expense as a percentage of income before income taxes) was 29.3% and 28.4% for the three and six months ended June 30, 2024, respectively, as compared to 42.7% and 23.0% for the three and six months ended June 30, 2023, respectively. The effective tax rate for the three and six months ended June 30, 2024 and 2023, differed from the statutory tax rate of 21% primarily due to the Section 45X Advanced Manufacturing Production Credit and the California Competes Tax Credit, offset by state income tax expense and a deduction limitation on officers’ compensation.

Previous wording

While our business is not highly seasonal in nature, we sometimes experience a timing lag between production and sales, which may result in volatility in our results of operations between periods. The timing lag may be the result of, or influenced by, factors such as the timing and duration of shipments or the time required to convert materials. In addition, quarterly production of concentrate is impacted by the timing of scheduled outages of our production facilities for maintenance, which typically occur in the second and fourth quarters. Finally, starting in the third quarter of 2023, as we ramp up production of separated rare earth materials, we expect that significant volumes of REO produced will be retained for separation and not sold as concentrate.

Current wording

While our business is not highly seasonal in nature, we sometimes experience a timing lag between production and sales, which may result in volatility in our results of operations between periods. The timing lag may be the result of, or influenced by, factors such as the timing and duration of shipments or the time required to convert materials. In addition, quarterly production of concentrate is impacted by the timing of scheduled outages of our production facilities for maintenance, which typically occur in the second and fourth quarters. Finally, since we began production of separated rare earth materials in the third quarter of 2023, certain volumes of REO produced are further processed rather than sold as concentrate.

Previous wording

Liquidity refers to our ability to generate sufficient cash flows to meet the cash requirements of our business operations, including working capital and capital expenditure needs, contractual obligations, debt service and other commitments. In recent years, our principal sources of liquidity have been financing through the consummation of the business combination with Fortress Value Acquisition Corp. in November 2020, the issuance of the 2026 Notes in March 2021, and net cash from operating activities. In addition, we issued the 2030 Notes in March 2024, resulting in net proceeds of $732.4 million prior to the use of a portion of these funds to purchase Capped Call Options, repurchase 2026 Notes and repurchase shares of our common stock, as discussed below. As of March 31, 2024, we had $946.8 million of cash, cash equivalents and short-term investments and $957.5 million principal amount of long-term debt.

Current wording

Liquidity refers to our ability to generate sufficient cash flows to meet the cash requirements of our business operations, including working capital and capital expenditure needs, contractual obligations, debt service and other commitments. Our principal sources of liquidity have been financing through the consummation of the business combination with Fortress Value Acquisition Corp. in November 2020, the issuance of the 2026 Notes in March 2021, and net cash from operating activities. In addition, we issued the 2030 Notes in March 2024, resulting in net proceeds of $731.4 million prior to the use of a portion of these funds to repurchase the 2026 Notes, repurchase shares of our common stock, and purchase Capped Call Options, as discussed below. As of June 30, 2024, we had $937.0 million of cash, cash equivalents and short-term investments and $957.5 million principal amount of long-term debt.

Previous wording

Our results of operations and cash flows depend in large part upon the market prices of REO and particularly the price of rare earth concentrate. Rare earth concentrate is not quoted on any major commodities market or exchange and demand is currently constrained to a relatively limited number of refiners, a significant majority of which are based in China. Although we believe that our cash flows from operations and cash on hand are adequate to meet our liquidity requirements for the foreseeable future, uncertainty continues to exist as to the market price of REO, as evidenced by the volatility experienced in 2022 and the significant decrease seen in 2023, primarily due to concerns over the global economic conditions and actual or perceived concerns over increases in the supply of and/or decreases in demand for rare earth products. The significant decrease in the market price of rare earth products in 2023 negatively impacted our cash flows from operations and liquidity.

Current wording

Our results of operations and cash flows depend in large part upon the market prices of REO and particularly the price of rare earth concentrate. Rare earth concentrate is not quoted on any major commodities market or exchange and demand is currently constrained to a relatively limited number of refiners, a significant majority of which are based in China. Although we believe that our cash flows from operations and cash on hand are adequate to meet our liquidity requirements for the foreseeable future, uncertainty continues to exist as to the market price of REO, as evidenced by the volatility experienced in 2022 and the significant decrease in the market price of REO subsequently experienced, primarily due to concerns over the global economic conditions and actual or perceived concerns over increases in the supply of and/or decreases in demand for rare earth products. The significant decrease in the market price of rare earth products negatively impacted our cash flows from operations and liquidity.

Previous wording

The completion of our mission to become a fully integrated domestic magnetics producer is expected to be capital intensive. With the construction portion of our Stage II optimization project complete, our principal capital expenditure requirements relate mainly to further investment in Mountain Pass, including the development of the HREE Facility, Upstream 60K, and other growth and investment projects, completing the buildout of the Fort Worth Facility, as well as periodic repairs and maintenance of mining and rare earth processing equipment. We expect to spend between $200 million and $250 million of capital costs in 2024, with further costs for all of these identified projects in 2025. Our future capital requirements will also depend on several other factors, including future acquisitions and potential additional investments in further downstream production.

Current wording

The completion of our mission to become a fully integrated domestic magnetics producer is expected to be capital intensive. With the construction portion of our Stage II optimization project complete, our principal capital expenditure requirements relate mainly to further investment in Mountain Pass, including the development of the HREE Facility, Upstream 60K, and other growth and investment projects, completing the buildout of the Fort Worth Facility, as well as periodic repairs and maintenance of mining and rare earth processing equipment. We expect to spend between $200 million and $250 million of capital costs in 2024, with further costs for all of these identified projects in 2025. Our future capital requirements will also depend on several other factors, including market conditions, decisions regarding downstream production capability, and future acquisitions.

Previous wording

Contemporaneous with the pricing of the 2030 Notes, we entered into privately negotiated transactions with certain holders of the 2026 Notes to repurchase $400.0 million in aggregate principal amount of the 2026 Notes, using $358.0 million of the net proceeds from the offering of the 2030 Notes. The price we paid to repurchase the 2026 Notes, 89.5% of par value, was the same for each lender and approximated the trading price of the 2026 Notes at the time of the repurchases. Subsequent to the issuance of the 2030 Notes, we repurchased an additional $80.0 million in aggregate principal amount of the 2026 Notes in open market transactions for $70.6 million. As a result of the repurchases of 2026 Notes, during the three months ended March 31, 2024, we recorded a $46.3 million gain on early extinguishment of debt.

Current wording

Contemporaneous with the pricing of the 2030 Notes, we entered into privately negotiated transactions with certain holders of the 2026 Notes to repurchase $400.0 million in aggregate principal amount of the 2026 Notes, using $358.0 million of the net proceeds from the offering of the 2030 Notes. The price we paid to repurchase the 2026 Notes, 89.5% of par value, was the same for each lender and approximated the trading price of the 2026 Notes at the time of the repurchases. Subsequent to the issuance of the 2030 Notes, we repurchased an additional $80.0 million in aggregate principal amount of the 2026 Notes in open market transactions for $70.6 million. As a result of the repurchases of 2026 Notes, during the six months ended June 30, 2024, we recorded a $46.3 million gain on early extinguishment of debt.

Previous wording

The remaining 2026 Notes outstanding mature, unless earlier converted, redeemed or repurchased, on April 1, 2026. The initial conversion price of the remaining 2026 Notes is approximately $44.28 per share, or 22.5861 shares per $1,000 principal amount of notes, subject to adjustment upon the occurrence of certain events. As of March 31, 2024, the maximum number of shares that could be issued to satisfy the conversion feature of the 2026 Notes was 5,999,994.

Current wording

The remaining 2026 Notes outstanding mature, unless earlier converted, redeemed or repurchased, on April 1, 2026. The initial conversion price of the remaining 2026 Notes is approximately $44.28 per share, or 22.5861 shares per $1,000 principal amount of notes, subject to adjustment upon the occurrence of certain events. As of June 30, 2024, the maximum number of shares that could be issued to satisfy the conversion feature of the 2026 Notes was 5,999,994 shares.

Previous wording

2030 Notes: In March 2024, we issued $747.5 million in aggregate principal amount of 3.00% unsecured convertible senior notes that mature, unless earlier converted, redeemed or repurchased, on March 1, 2030, at a price of par. Interest on the 2030 Notes is payable on March 1 st and September 1 st of each year, beginning on September 1, 2024. In connection with the issuance, we recorded debt issuance costs of $19.9 million, of which, $15.1 million was paid in cash as of March 31, 2024, and $3.7 million was settled through the issuance of shares of our common stock.

Current wording

2030 Notes: In March 2024, we issued $747.5 million in aggregate principal amount of 3.00% unsecured convertible senior notes that mature, unless earlier converted, redeemed or repurchased, on March 1, 2030, at a price of par. Interest on the 2030 Notes is payable on March 1 st and September 1 st of each year, beginning on September 1, 2024. In connection with the issuance, we recorded debt issuance costs of $19.9 million, of which $3.7 million was settled through the issuance of shares of our common stock.

Previous wording

The 2030 Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, at an initial conversion price of approximately $21.74 per share, or 45.9939 shares per $1,000 principal amount of 2030 Notes, subject to adjustment upon the occurrence of certain events. As of March 31, 2024, the maximum number of shares that could be issued to satisfy the conversion feature of the 2030 Notes was 48,132,646.

Current wording

The 2030 Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, at an initial conversion price of approximately $21.74 per share, or 45.9939 shares per $1,000 principal amount of 2030 Notes, subject to adjustment upon the occurrence of certain events. As of June 30, 2024, the maximum number of shares that could be issued to satisfy the conversion feature of the 2030 Notes was 48,132,646 shares.

Previous wording

Equipment Notes: We have financing agreements for the purchase of certain equipment, including trucks, tractors, loaders, graders, and various other machinery. As of March 31, 2024, we had $4.0 million in principal (and accrued interest) outstanding under the equipment notes. See Note 10, “Debt Obligations,” in the notes to the unaudited Condensed Consolidated Financial Statements for further information.

Current wording

Equipment Notes: We have financing agreements for the purchase of certain equipment, including trucks, tractors, loaders, graders, and various other machinery. As of June 30, 2024, we had $3.7 million in principal (and accrued interest) outstanding under the equipment notes. See Note 10, “Debt Obligations,” in the notes to the unaudited Condensed Consolidated Financial Statements for further information.

Previous wording

Leases: We have lease arrangements for certain equipment and facilities, including office space, vehicles and equipment used in our operations. As of March 31, 2024, we had future expected lease payment obligations totaling $10.0 million, with $1.7 million due within the next 12 months. See Note 11, “Leases,” in the notes to the unaudited Condensed Consolidated Financial Statements for further information.

Current wording

Leases: We have lease arrangements for certain equipment and facilities, including office space, vehicles and equipment used in our operations. As of June 30, 2024, we had future expected lease payment obligations totaling $9.5 million, with $1.7 million due within the next 12 months. See Note 11, “Leases,” in the notes to the unaudited Condensed Consolidated Financial Statements for further information.

Previous wording

During the three months ended March 31, 2024, we repurchased 13.0 million shares of our common stock under the program at an aggregate cost of $200.8 million. See Item 2. Unregistered Sales of Equity Securities and Use of Proceeds for additional information.

Current wording

During the six months ended June 30, 2024, we repurchased 13.0 million shares of our common stock under the program at an aggregate cost of $200.8 million. See Note 16, “Stockholders’ Equity and Stock-based Compensation,” in the notes to the unaudited Condensed Consolidated Financial Statements for additional information.

Previous wording

Net Cash Provided by (Used in) Operating Activities: Net cash used in operating activities was $41.1 million for the three months ended March 31, 2024, as compared to net cash provided by operating activities of $55.5 million in the prior year period. The change in cash flows from operating activities was primarily driven by a decrease in revenue and an increase in inventories to support commissioning of our Stage II separations facilities and the related change in working capital as we increase production of separated products.

Current wording

Net Cash Provided by (Used in) Operating Activities: Net cash used in operating activities was $10.3 million for the six months ended June 30, 2024, as compared to net cash provided by operating activities of $65.5 million in the prior year period. The change in cash flows from operating activities was primarily driven by a decrease in revenue and an increase in inventories to support commissioning of our Stage II separations facilities and the related change in working capital as we increase production of separated products. These decreases were partially offset by the receipt of a $50.0 million initial prepayment pursuant to the long-term supply agreement with GM for magnetic precursor materials.

Previous wording

Net Cash Provided by Investing Activities: Net cash provided by investing activities decreased by $421.5 million for the three months ended March 31, 2024, as compared to the prior year period. The change in cash flows from investing activities was primarily driven by the net cash flow impact, which was $444.2 million, of a year-over-year decrease in proceeds from short-term investments, offset by year-over-year increases in purchases and maturities of short-term investments. Also, additions to property, plant and equipment for the three months ended March 31, 2024, decreased by $22.7 million when compared to the prior year period, and related primarily to a decrease in construction spend on our Stage II optimization project given the timing of completion.

Current wording

Net Cash Provided by Investing Activities: Net cash provided by investing activities decreased by $717.1 million for the six months ended June 30, 2024, as compared to the prior year period. The change in cash flows from investing activities was primarily driven by the net cash flow impact, which was $749.2 million, of a year-over-year decrease in proceeds from short-term investments, offset by year-over-year increases in purchases and maturities of short-term investments. Also, additions to property, plant and equipment for the six months ended June 30, 2024, decreased by $32.0 million when compared to the prior year period, and related primarily to a decrease in construction spend on our Stage II optimization project given the timing of completion.

Previous wording

Net Cash Provided by (Used in) Financing Activities: Net cash provided by financing activities was $32.9 million for the three months ended March 31, 2024, as compared to net cash used in financing activities of $6.8 million in the prior year period. The change in cash flows from financing activities was driven by the net cash flow impact, which was $37.7 million, of the issuance of the 2030 Notes, the payments of debt issuance costs associated with the 2030 Notes, the payments made to retire a significant portion of the 2026 Notes, the purchase of the Capped Call Options, and the payments made to repurchase our common stock, all of which occurred during the three months ended March 31, 2024.

Current wording

Net Cash Provided by (Used in) Financing Activities: Net cash provided by financing activities was $31.4 million for the six months ended June 30, 2024, as compared to net cash used in financing activities of $7.6 million in the prior year period. The change in cash flows from financing activities was driven by the net cash flow impact, which was $36.7 million, of the issuance of the 2030 Notes, the payments of debt issuance costs associated with the 2030 Notes, the payments made to retire a significant portion of the 2026 Notes, the purchase of the Capped Call Options, and the payments made to repurchase our common stock, all of which occurred during the six months ended June 30, 2024.

Previous wording

The following table presents a reconciliation of our Adjusted EBITDA, which is a non-GAAP financial measure, to our net income, which is determined in accordance with GAAP:

Current wording

The following table presents a reconciliation of our Adjusted EBITDA, which is a non-GAAP financial measure, to our Net income (loss), which is determined in accordance with GAAP:

Previous wording

We calculate Adjusted Net Income (Loss) as our GAAP net income or loss excluding the impact of stock-based compensation expense; initial start-up costs; transaction-related and other costs; gain or loss on disposals of long-lived assets; gain or loss on early extinguishment of debt; and other items that we do not consider representative of our underlying operations; adjusted to give effect to the income tax impact of such adjustments. We calculate Adjusted Diluted EPS as our GAAP diluted earnings or loss per share (“EPS”) excluding the per share impact, using adjusted diluted weighted-average shares outstanding, of stock-based compensation expense; initial start-up costs; transaction-related and other costs; gain or loss on disposals of long-lived assets; gain or loss on early extinguishment of debt; and other items that we do not consider representative of our underlying operations; adjusted to give effect to the income tax impact of such adjustments. In addition, when appropriate, we include an adjustment to reverse the impact of applying the if-converted method to our 2026 Notes if necessary to reconcile between GAAP diluted earnings or loss per share and Adjusted Diluted EPS. When applicable, adjusted diluted weighted-average shares outstanding reflect the anti-dilutive impact of our Capped Call Options entered into in connection with the issuance of our 2030 Notes.

Current wording

We calculate Adjusted Net Income (Loss) as our GAAP net income or loss excluding the impact of stock-based compensation expense; initial start-up costs; transaction-related and other costs; gain or loss on disposals of long-lived assets; gain or loss on early extinguishment of debt; and other items that we do not consider representative of our underlying operations; adjusted to give effect to the income tax impact of such adjustments. We calculate Adjusted Diluted EPS as our GAAP diluted earnings or loss per share excluding the per share impact, using adjusted diluted weighted-average shares outstanding, of stock-based compensation expense; initial start-up costs; transaction-related and other costs; gain or loss on disposals of long-lived assets; gain or loss on early extinguishment of debt; and other items that we do not consider representative of our underlying operations; adjusted to give effect to the income tax impact of such adjustments. In addition, when appropriate, we include an adjustment to reverse the impact of applying the if-converted method to our 2026 Notes if necessary to reconcile between GAAP diluted earnings or loss per share and Adjusted Diluted EPS. When applicable, adjusted diluted weighted-average shares outstanding reflect the anti-dilutive impact of our Capped Call Options entered into in connection with the issuance of our 2030 Notes.

Previous wording

The following table presents a reconciliation of our Adjusted Net Income (Loss), which is a non-GAAP financial measure, to our net income, which is determined in accordance with GAAP:

Current wording

The following table presents a reconciliation of our Adjusted Net Income (Loss), which is a non-GAAP financial measure, to our Net income (loss), which is determined in accordance with GAAP:

Previous wording

(6)Tax impact of adjustments is calculated using an adjusted effective tax rate, which excludes the impact of discrete tax costs and benefits, to each adjustment. The adjusted effective tax rates were 28.8% and 20.1% for the three months ended March 31, 2024 and 2023, respectively.

Current wording

(6)Tax impact of adjustments is calculated using an adjusted effective tax rate, which excludes the impact of discrete tax costs and benefits, to each adjustment. The adjusted effective tax rates were 24.7%, 30.1%, 31.3% and 25.1% for the three and six months ended June 30, 2024 and 2023, respectively.

Previous wording

(1)Tax impact of adjustments is calculated using an adjusted effective tax rate, which excludes the impact of discrete tax costs and benefits, to each adjustment. The adjusted effective tax rates were 28.8% and 20.1% for the three months ended March 31, 2024 and 2023, respectively.

Current wording

(1)Tax impact of adjustments is calculated using an adjusted effective tax rate, which excludes the impact of discrete tax costs and benefits, to each adjustment. The adjusted effective tax rates were 24.7%, 30.1%, 31.3% and 25.1% for the three and six months ended June 30, 2024 and 2023, respectively.