MP Materials Corp. / DE

We present Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Diluted EPS, and Free Cash Flow, which are non-GAAP financial measures that we use to supplement our results presented in accordance with GAAP. These measures may be similar to measures reported by other companies in our industry and are regularly used by securities analysts and investors to measure companies’ financial performance. Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Diluted EPS, and Free Cash Flow are not intended to be substitutes for any GAAP financial measures and, as calculated, may not be comparable to other similarly titled measures of performance or liquidity of other companies within our industry or in other industries.

Adjusted EBITDA

We define Adjusted EBITDA as our GAAP net income or loss before interest expense, net; income tax expense or benefit; and depreciation, depletion and amortization; further adjusted to eliminate the impact of stock-based compensation expense; initial start-up costs; transaction-related and other costs; accretion of asset retirement and environmental obligations; loss on environmental obligations; gain or loss on disposals of long-lived assets; gain or loss on early extinguishment of debt; other income or loss; and other items that we do not consider representative of our underlying operations. We present Adjusted EBITDA because it is used by management to evaluate our underlying operating and financial performance and trends. Adjusted EBITDA excludes certain expenses that are required in accordance with GAAP because they are non-recurring, non-cash or are not related to our underlying business performance. This non-GAAP financial measure is intended to supplement our GAAP results and should not be used as a substitute for financial measures presented in accordance with GAAP.

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

(1)Principally included in “Selling, general and administrative” within our Consolidated Statements of Operations.

(2)Included in “Start-up costs” within our Consolidated Statements of Operations and excludes any applicable stock-based compensation, which is included in the “Stock-based compensation expense” line above. Relates to certain costs incurred in connection with the commissioning and starting up of our initial separations capability at Mountain Pass and our initial magnet-making capabilities at the Independence Facility prior to the achievement of commercial production. These costs include labor of incremental employees hired in advance to work directly on such commissioning activities, training costs, costs of testing and commissioning the new circuits and processes, and other related costs. Given the nature and scale of the related costs and activities, management does not view these as normal, recurring operating expenses, but rather as non-recurring investments to initially develop our separations and magnet-making capabilities. Therefore, we believe it is useful and necessary for investors to understand our core operating performance in current and future periods by excluding the impact of these start-up costs. To the extent additional start-up costs are incurred in the future to expand our separations and magnet-making capabilities after initial achievement of commercial production (e.g., significantly expanding production capacity at an existing facility or building a new separations or magnet manufacturing facility), such costs would not be considered an adjustment for this non-GAAP financial measure.

(3)Pertains to legal, consulting, and advisory services, and other costs associated with specific matters or transactions. The year ended December 31, 2025, included $12.7 million of costs incurred in association with the DoW transactions, $11.9 million of costs associated with a construction-related litigation matter and $7.4 million of costs incurred to secure financing. For the years ended December 31, 2025 and 2023, amounts are principally included in “Advanced projects and development” within our Consolidated Statements of Operations. For the year ended December 31, 2024, amount is principally included in “Selling, general and administrative” within our Consolidated Statements of Operations.

(4)Included in “Other operating costs and expenses” within our Consolidated Statements of Operations.

Adjusted Net Income (Loss) and Adjusted Diluted EPS

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; loss on environmental obligations; 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 common share, excluding the per-share impact of each adjusting item described in the previous sentence (the numerator) divided by the adjusted diluted weighted-average shares outstanding (the denominator). 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 common share and Adjusted Diluted EPS.

Adjusted Net Income (Loss) and Adjusted Diluted EPS exclude certain expenses that are required in accordance with GAAP because they are non-recurring, non-cash, or not related to our underlying business performance. To calculate the income tax impact of such adjustments on a year-to-date basis, we utilize an effective tax rate equal to our income tax expense or benefit excluding material discrete costs and benefits, with any impacts of changes in effective tax rate being recognized in the current period. We present Adjusted Net Income (Loss) and Adjusted Diluted EPS because it is used by management to evaluate our underlying operating and financial performance and trends. These non-GAAP financial measures are intended to supplement our GAAP results and should not be used as a substitute for financial measures presented in accordance with GAAP.

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

(1)Principally included in “Selling, general and administrative” within our Consolidated Statements of Operations.

(2)Included in “Start-up costs” within our Consolidated Statements of Operations and excludes any applicable stock-based compensation, which is included in the “Stock-based compensation expense” line above. Relates to certain costs incurred in connection with the commissioning and starting up of our initial separations capability at Mountain Pass and our initial magnet-making capabilities at the Independence Facility prior to the achievement of commercial production. These costs include labor of incremental employees hired in advance to work directly on such commissioning activities, training costs, costs of testing and commissioning the new circuits and processes, and other related costs. Given the nature and scale of the related costs and activities, management does not view these as normal, recurring operating expenses, but rather as non-recurring investments to initially develop our separations and magnet-making capabilities. Therefore, we believe it is useful and necessary for investors to understand our core operating performance in current and future periods by excluding the impact of these start-up costs. To the extent additional start-up costs are incurred in the future to expand our separations and magnet-making capabilities after initial achievement of commercial production (e.g., significantly expanding production capacity at an existing facility or building a new separations or magnet manufacturing facility), such costs would not be considered an adjustment for this non-GAAP financial measure.

(3)Pertains to legal, consulting, and advisory services, and other costs associated with specific matters or transactions. The year ended December 31, 2025, included $12.7 million of costs incurred in association with the DoW transactions, $11.9 million of costs associated with a construction-related litigation matter and $7.4 million of costs incurred to secure financing. For the years ended December 31, 2025 and 2023, amounts are principally included in “Advanced projects and development” within our Consolidated Statements of Operations. For the year ended December 31, 2024, amount is principally included in “Selling, general and administrative” within our Consolidated Statements of Operations.

(4)Included in “Other operating costs and expenses” within our Consolidated Statements of Operations.

(5)Included in “Other income, net” within our Consolidated Statements of Operations. Amount for the year ended December 31, 2025, pertains to the change in fair value of the redemption feature included in the portion of our 2030 Notes that were issued in December 2024.

(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 26.5%, 31.3% and 25.9% for the years ended December 31, 2025, 2024 and 2023, respectively. See Note 12, “Income Taxes,” in the notes to the Consolidated Financial Statements for more information on the effective tax rate.

The following table presents a reconciliation of our Adjusted Diluted EPS, which is a non-GAAP financial measure, to our diluted earnings or loss per common share, which is determined in accordance with GAAP:

(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 26.5%, 31.3% and 25.9% for the years ended December 31, 2025, 2024 and 2023, respectively. See Note 12, “Income Taxes,” in the notes to the Consolidated Financial Statements for more information on the effective tax rate.

(2)For the year ended December 31, 2024, since the 2026 Notes were dilutive for purposes of computing GAAP diluted loss per common share but antidilutive for purposes of computing Adjusted Diluted EPS, within this reconciliation, we have included this adjustment to reverse the impact of applying the if-converted method to the 2026 Notes in the computation of GAAP diluted loss per common share.

(3)For the year ended December 31, 2024, since the 2026 Notes were dilutive for purposes of computing GAAP diluted loss per common share but antidilutive for purposes of computing Adjusted Diluted EPS, the adjusted diluted weighted-average shares outstanding exclude the potentially dilutive securities associated with the 2026 Notes.

(4)For the year ended December 31, 2023, the 2026 Notes were antidilutive for GAAP purposes. For purposes of calculating Adjusted Diluted EPS, we have added back the assumed conversion of the 2026 Notes since they would not be antidilutive when using Adjusted Net Income (Loss) as the numerator in the calculation of Adjusted Diluted EPS.

Free Cash Flow

We calculate Free Cash Flow as net cash provided by or used in operating activities less additions to property, plant and equipment, net of proceeds from government awards used for construction. We believe Free Cash Flow is useful for comparing our ability to generate cash with that of our peers. The presentation of Free Cash Flow is not meant to be considered in isolation or as an alternative to cash flows from operating activities and does not necessarily indicate whether cash flows will be sufficient to fund cash needs.

The following table presents a reconciliation of our Free Cash Flow, which is a non-GAAP financial measure, to our net cash provided by (used in) operating activities, which is determined in accordance with GAAP:

(1)Amounts for the years ended December 31, 2025, 2024 and 2023, are net of $24.2 million, $0.1 million and $2.8 million, respectively, in proceeds from government awards used for construction.

Critical Accounting Estimates

Preparation of the Consolidated Financial Statements in accordance with GAAP requires our management to make judgments, estimates and assumptions that impact the reported amount of revenue and operating expenses, assets and liabilities and the disclosure of contingent assets and liabilities. We consider an accounting judgment, estimate or assumption to be critical when (i) the estimate or assumption is complex in nature or requires a high degree of judgment and (ii) the use of different judgments, estimates and assumptions could have a material impact on our Consolidated Financial Statements. Our significant accounting policies are described in Note 2, “Significant Accounting Policies,” in the notes to the Consolidated Financial Statements. Our critical accounting estimates are described below.

Financial Instruments Associated with the DoW Transactions

As described in Note 3, “Public-Private Partnership with U.S. Department of War,” in the notes to the Consolidated Financial Statements, on July 9, 2025, the Company entered into the DoW Transaction Agreements, which resulted in the issuance and recognition of the Series A Preferred Stock, Warrant and the Samarium Project Loan. The Company engaged independent valuation specialists to assist with the determination of the fair value of the Series A Preferred Stock, Warrant and the Samarium Project Loan. These instruments were recorded at their allocated relative fair value of the cash and PPA Upfront Asset received. The initial measurement of the transaction and allocation of proceeds to the various components required significant judgments and estimates, primarily related to fair value measurement.

The estimates related to the initial fair value of the Series A Preferred Stock, Warrant and the Samarium Project Loan and therefore, the allocation of proceeds, were based on observable inputs such as our stock price and implied volatility and other inputs traditionally associated with equity and debt valuations. Changes in certain assumptions underlying the fair value determinations of the instruments issued to the DoW could have resulted in a different relative fair value allocation among the Series A Preferred Stock, Warrant and the Samarium Project Loan. The PPA Upfront Asset was initially measured as the excess of the relative fair value of the Series A Preferred Stock, Warrant and the Samarium Project Loan over the cash consideration received from the DoW. As a result, changes in certain assumptions utilized in the valuation of the instruments issued could have resulted in a different initial value of the PPA Upfront Asset.

To validate that all instruments exchanged with the DoW were properly identified, the Company’s valuation specialists assisted with an assessment of the fair value of the PPA Upfront Asset. The valuation utilized estimates and assumptions regarding NdPr commodity prices, forecasted production over the PPA’s 10-year term, and was discounted based on our estimated cost of capital. The valuation results indicated that the Company properly identified all of the exchanged instruments at fair value. The PPA Upfront Asset is amortized over the Company’s expected pattern of economic benefit, which was derived from the PPA Upfront Asset’s valuation. Prospective changes in the expected pattern of economic benefit as a result of revised estimates and assumptions could result in adjustments to the periodic amortization expense recognized for the PPA Upfront Asset over the remaining term.

Inventories

Raw materials, mined ore stockpiles, work in process, and finished goods inventories, including non-current inventories, are carried at weighted average cost. Supplies are carried at moving average cost. All inventories are carried at the lower of cost or net realizable value, which represents the estimated selling price of the product during the ordinary course of business based on current market conditions less reasonably predictable costs of completion, disposal, and transportation. Costs of completion include labor, utilities, reagents, maintenance, and allocated production overhead costs, including depreciation and depletion.

We evaluate the carrying amount of inventory each reporting period, considering recent and expected market prices, income to be recognized under the PPA, slow-moving items, obsolescence, excess inventory levels, as well as other factors, and recognize related write-downs if it is determined that the inventory is impaired. In addition, our estimate of costs of completion may be impacted by forecasted production levels, which are particularly sensitive before we achieve our anticipated production levels for our midstream operations. Although considerable effort is made to ensure the accuracy of our forecasts of future product demand, market conditions, or other cost assumptions, any significant unfavorable changes in demand, market price or expected usage could have a significant negative impact on the value of our inventory and our results of operations. At least until such time that we achieve our anticipated throughput, we may continue to incur write-downs of certain of our separated product inventories. See Note 5, “Inventories,” in the notes to the Consolidated Financial Statements for more information.

Asset Retirement Obligations (“ARO”)

We recognize ARO for estimated costs of legally and contractually required closure, dismantlement, and reclamation activities associated with Mountain Pass. ARO are initially recognized at their estimated fair value in the period in which the obligation is incurred. In determining fair value, management makes estimates based on the expected timing of reclamation activities; cash flows to perform activities, which involves utilizing an assumption for future inflation; amount and uncertainty associated with the cash flows, including adjustments for a market risk premium; and discounts such amounts using a credit-adjusted risk-free rate. Although we base our estimates on historical experience and reevaluate our estimated timing and cash flows regularly, since the majority of the cash flows to settle our ARO occur decades in the future, it is inherently difficult to accurately predict the ultimate cash flows used to settle such obligations. As a result, these estimates and assumptions are subjective and can vary over time. See Note 9, “Asset Retirement and Environmental Obligations,” in the notes to the Consolidated Financial Statements for more information.

Environmental Obligations (“ENV”)

Our operating activities are subject to various laws and regulations governing protection of the environment. We conduct our operations to protect public health and the environment and believe our operations are in compliance with applicable laws and regulations in all material respects. We recognize certain environmental monitoring and remediation obligations related to the groundwater contamination in and around Mountain Pass. We engage environmental consultants to develop remediation plans and the related cost projections, which are used to develop an estimate of future cash payments needed to satisfy the Company’s environmental obligations. If the cost can only be estimated as a range of possible amounts with no point in the range being more likely, the minimum of the range is accrued. It is possible that additional environmental obligations could be incurred, the extent of which cannot be assessed. As assessments and remediation progress occur, the Company periodically reviews its estimates and records any necessary adjustments in the period in which new information becomes available.

We estimate the cash outflows related to these environmental activities will be incurred annually over the next 30 years but could be longer. The Company’s environmental obligations are measured at the expected value of future cash outflows, adjusted for future inflation and discounted to their present value using a risk-free rate, which we derive from U.S. Treasury yields. See Note 9, “Asset Retirement and Environmental Obligations,” in the notes to the Consolidated Financial Statements for more information.

Recently Adopted and Issued Accounting Pronouncements

Recently adopted and issued accounting pronouncements are described in Note 2, “Significant Accounting Policies,” in the notes to the Consolidated Financial Statements.