MP Materials Corp DE

Segment Results

Materials Segment

The Materials segment operates Mountain Pass, which produces refined rare earth oxides and related products as well as rare earth concentrate products.

KPIs

Revenue and Segment Adjusted EBITDA

The year-over-year decreases in rare earth concentrate revenue were driven by lower Realized Price per REO MT, as well as lower REO Sales Volume. Realized Price per REO MT for the years ended December 31, 2024 and 2023, reflects a significantly softer pricing environment for rare earth products following the cyclical peak in pricing in February 2022. 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 in 2024 and 2023 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 year ended December 31, 2024, as compared to the prior year, was due to the ramp-up in midstream operations, where a significantly higher portion of REO produced was refined and sold as NdPr oxide and metal during 2024. The decrease in REO Sales Volume for the year ended December 31, 2023, as compared to the prior year, was due to the start-up of midstream operations, where a significant portion of the REO produced, which could otherwise have been sold as rare earth concentrate, was used to charge the Stage II circuits, establish separations work-in-process inventory, or produce packaged and finished separated rare earth products, the majority of which had not yet been sold.

Until we commenced our midstream operations, our REO Sales Volume generally tracked our REO Production Volume over time with slight period-to-period differences caused by the timing of shipments. However, as we continue to ramp up production of separated rare earth materials, we expect that significant volumes of REO produced from upstream operations will continue to be consumed for separation and not sold as concentrate. In addition, a significant portion of the contained cerium in the REO produced will be intentionally rejected and may not result in finished product. Accordingly, we continue to expect that REO Sales Volume will be significantly lower than REO Production Volume in the future as we produce and sell more separated products.

The increase in NdPr oxide and metal revenue for the year ended December 31, 2024, as compared to the year ended December 31, 2023, was primarily driven by higher NdPr Production Volume as a result of ramping production of separated products throughout 2024, partially offset by lower NdPr Realized Price per KG. There was no NdPr oxide and metal revenue for the year ended December 31, 2022, since we had not yet commenced midstream operations. We currently expect to begin intersegment sales of NdPr oxide to the Magnetics segment starting in 2025.

Other revenue for the year ended December 31, 2024, increased as compared to the prior year, primarily due to current year sales of other refined products, including lanthanum and cerium. Other revenue for the year ended December 31, 2022, consisted primarily of $8.5 million of revenue related to certain stockpiles of rare earth fluoride.

The decrease in Materials Segment Adjusted EBITDA for the year ended December 31, 2024, when compared to the prior year, was primarily due to lower revenues and higher cost of sales (excluding depreciation, depletion and amortization and stock-based compensation expense) (“Segment COS”), partially offset by lower selling, general and administrative (excluding stock-based compensation expense) (“Segment SG&A”). The lower revenue was driven by lower realized prices and lower REO Sales Volume, partially offset by higher NdPr Sales Volume, as discussed above.

The increase in Segment COS for the year ended December 31, 2024, was driven by production costs associated with separated rare earth products sold in the current year, which are currently elevated as we continue to ramp and optimize production of separated products toward normalized capacity. The increase in Segment COS was also attributable to (i) $21.5 million in write-downs of certain of our separated product inventories due to the elevated production costs, (ii) higher labor costs, professional services and property taxes, and (iii) $1.9 million in higher repairs and maintenance expenses associated with the thickener equipment damage in the second quarter of 2024. Lastly, Segment COS for the year ended December 31, 2024, benefited from the 45X Credit in the amount of $12.2 million.

Segment SG&A for the Materials segment decreased year over year by $4.5 million, which was primarily due to the 45X Credit in 2024 for costs that qualify as “production costs incurred” but are presented in SG&A expenses within the financial statements, as well as lower environmental, outside services, and legal costs, as compared to the prior year.

The decrease in Materials Segment Adjusted EBITDA for the year ended December 31, 2023, when compared to the prior year, was similarly driven by lower revenues and to a lesser extent, higher Segment SG&A. Segment SG&A for the Materials segment increased year over year by $3.1 million, which was primarily due to higher environmental, outside services, and legal costs, as compared to the prior year, which were largely incurred in connection with completing the Stage II optimization project and commencing midstream operations, as well as higher corporate allocations.

Magnetics Segment

The Magnetics segment operates the Independence Facility, where we began production of magnetic precursor products in December 2024 and anticipate the manufacturing of NdFeB permanent magnets by the end of 2025. Pursuant to the long-term agreement with GM, we received prepayments of $50.0 million in April 2024 and $50.0 million in December 2024 for magnetic precursor products, with an additional and final $50.0 million prepayment expected to be received in the first half of 2025, subject to achieving a certain milestone. As of December 31, 2024, the Magnetics segment had not yet generated revenue; however, we expect that it will begin recording sales of magnetic precursor products, specifically NdPr metal, to a single customer in the U.S. in the first quarter of 2025.

Segment Adjusted EBITDA

The year-over-year decreases in Magnetics Segment Adjusted EBITDA, when compared to the respective prior years, were primarily due to $4.5 million and $2.3 million of higher Segment SG&A expenses, respectively. These increases were driven by the development of the Independence Facility and downstream magnetics capabilities, primarily from higher personnel costs associated with increased headcount to support the engineering, technical, and administrative functions, as well as increases in other costs, such as property taxes. Additionally, continued investment in research and development activities related to magnetics contributed to higher expenses of $1.9 million in 2024 compared to 2023, and an additional $1.3 million of expenses in 2023 compared to 2022. The commencement of recognizing revenue and Segment COS from magnetic precursor products, which is expected to occur in the first quarter of 2025, will significantly impact the historical trend of Magnetics Segment Adjusted EBITDA.

Corporate Expenses and Other

Corporate expenses and other is primarily comprised of the operating results of other business activities that excludes our Materials and Magnetics segments and includes costs incurred at the corporate level that are not allocated to the operating segments, specifically relating to executive compensation, investor relations, other corporate costs, and unallocated shared service functions such as legal, information technology, human resources, finance and accounting and supply chain. Corporate expenses and other excludes stock-based compensation expense.

The increase in corporate expenses and other for the year ended December 31, 2024, as compared to the prior year, was primarily due to higher personnel costs (other than stock-based compensation expense) related to executives and administrative personnel as well as higher legal costs. The increase in corporate expenses and other for the year ended December 31, 2023, as compared to the prior year, was due to higher personnel costs (other than stock-based compensation expense) from an increase in employee headcount to further build out our corporate infrastructure to support the growth in our business and initiatives, as well as higher building rent expense following the commencement of the lease for corporate office space in April 2023.

Quarterly Performance Trend

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 and separated products 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 second half of 2023, certain volumes of REO produced are further processed or rejected rather than sold as concentrate.

The following table presents our KPIs, which pertain to the Materials segment, for the quarterly periods indicated: