MP Materials Corp. (MP) Earnings

Management highlights

- Overall Business Execution * Q2 2026 was a strong quarter of execution, with continued scaling of both materials and magnetics businesses, expansion of production, and advancement of commercial magnet manufacturing. * Consolidated revenue plus PPA income totaled $126.1 million, more than doubling year-over-year, driven by the 127% increase in NDPR sales volumes. Consolidated adjusted EBITDA was $28.5 million, a $41 million year-over-year improvement. Adjusted diluted EPS improved 12 cents to a loss of 1 cent per share. * Year-to-date CapEx as of June 30 was $308 million, and the company ended the quarter with $1.45 billion in cash and short-term investments, maintaining a fortress balance sheet that fully funds its long-term capital plan. - Materials Segment Operations * A planned extended April 2026 plant shutdown for biannual maintenance was further extended by unrelated projects, but the company still met all Q2 production objectives. Q3 NDPR production is expected to exceed 1,000 metric tons. * Mechanical completion of the first heavy rare earth (DYTB) separation circuit was achieved in May 2026, with commissioning activities underway and first production of terbium and dysprosium on track for late 2026. * A long-term nine-figure supply agreement for gadolinium oxide to a leading U.S. aerospace and defense manufacturer was signed in July 2026. Engineering and procurement for gadolinium separation is moving forward, with samarium production targeted for 2028. * Land clearing for the new on-site recycling facility and additional heavy rare earth separation capacity is complete, with groundbreaking scheduled for August 2026. The chloralkali facility recommissioning project hit key milestones in Q2, with early positive operational results. * A full-plant non-China sourced reagent trial delivered encouraging results, expected to improve water quality and supply chain resiliency when implemented in late 2026, at a modestly higher direct cost. Pilot testing for a new pre-float process continues, with full-scale implementation targeted for 2028 to improve product quality and lower operating costs. - Magnetics Segment Operations * Startup and customer qualification activities at the Independence facility continue to progress, with prototype magnets delivered to GM for in-vehicle qualification testing. Commercial shipments remain on track to begin in Q4 2026, followed by a steady production ramp. * The company continues to reduce heavy rare earth content in its magnet products via grain boundary diffusion technology and other process innovations, while expanding the range of high-performance magnet grades it can produce. * The 10X magnet manufacturing facility's foundation work is underway, long-lead equipment has been ordered, and vertical construction has commenced. The project remains on schedule, with learnings from Independence incorporated into its design. * Project Swarm, an industrial coordination initiative to aggregate and standardize magnet demand for U.S. and allied drone manufacturers, has been launched, with multiple participants already signing subscription agreements to secure future capacity. - Strategic Direction * Management views growing demand for physical AI applications (such as autonomous systems and robotics) as a long-term structural driver of magnet demand, with domestic, resilient supply chains for critical materials increasingly viewed as a strategic national priority.

Guidance

- Full-year 2026 capital expenditure is expected to remain in the $500 million to $600 million range, unchanged from prior guidance. - Q3 2026 NDPR realized pricing is expected to be in the high $90s per kilogram, with PPA income of roughly $10 per kilogram, leading to a slight sequential decline in overall PPA income. Materials segment sales volumes are expected to be flattish sequentially. - Initial commercial magnet shipments from the Independence facility are confirmed to begin in Q4 2026, with modest volumes starting and capacity ramping over subsequent quarters. This guidance is maintained from the prior quarter. - The gadolinium separation project, samarium first production, 10X facility construction, and heavy rare earth circuit commissioning all remain on their previously communicated timelines.

Segment performance

1. Materials Segment: Generated $113.2 million of revenue plus PPA income, with $32.5 million of adjusted EBITDA, representing a $45 million year-over-year improvement. This segment contributed 89.8% of the company's total revenue plus PPA income. NDPR production hit 840 metric tons, up 41% year-over-year, while NDPR sales exceeded 1,000 metric tons for the second consecutive quarter, up 127% year-over-year. 2. Magnetics Segment: Revenue declined slightly sequentially, with adjusted EBITDA also declining modestly quarter-over-quarter. Precursor production delivered adjusted EBITDA margins exceeding 40%, highlighting the segment's long-term earnings potential as commercial production ramps. There is approximately $46 million of prepaid revenue for magnetic precursor products remaining to be recognized over the next 3-4 quarters.

Risks & headwinds

- Talent shortages across construction trades and specialized rare earth/magnet engineering create scaling challenges, though management notes the company has historically navigated these constraints and has built momentum as an attractive employer for the sector. - Global rare earth supply is currently in a state of controlled scarcity driven by Chinese export restrictions, creating ongoing supply chain disruption across aerospace, defense, and industrial end markets that could impact customer planning and demand patterns. - Startup of new production facilities (including the DYTB separation circuit and 10X plant) carries typical technical and execution risks, with ramp timelines dependent on successful commissioning and quality achievement. - Demand growth for emerging applications such as humanoid robotics and autonomous drones is uncertain in terms of timing and ultimate scale, even as management sees strong long-term potential.

Analyst Q&A

• Q: The analyst asks if the new gadolinium defense contract is the first of many, what the pricing structure is, and why gadolinium was the first heavy rare earth secured for this type of contract. /

  A: Management confirms the deal is a nine-figure long-term agreement with locked-in, attractive standalone economics, and expects it to be the first of many incremental heavy rare earth offtake deals. Gadolinium was first because output of this element is a natural co-product of separating dysprosium and terbium, and the deal lets MP capture incremental value from the existing ore body with limited additional capital. Management notes this strategy will be applied to other heavy rare earths contained in Mountain Pass ore going forward.

• Q: How has the U.S. ban on magnet scrap exports changed MP's approach to recycling capacity, and have you seen higher customer inquiry for recycling services? /

  A: Management notes recycling has been core to MP's vertically integrated strategy long before the export ban, and the ban just further highlights the importance of domestic recycling capability. MP's primary near-term focus is processing process waste from its own Independence and 10X facilities to support the Apple partnership, but the company is prepared to scale recycling capacity in line with growing market demand.

• Q: GM magnet qualification is progressing, and commercial shipments are planned for Q4. What feedback has MP received from GM during early qualification testing? /

  A: Management notes the qualification process is extensive, covering not just magnet performance but also batch traceability, quality system integration, and full vehicle system testing with part swaps. MP says progress to date has been extremely encouraging, and the company remains on track to begin regular commercial production deliveries in Q4 2026 as previously guided.

• Q: Why haven't more new magnetics contracts been announced for 10X capacity, given strong demand signals? What has to happen for demand to turn into firm contracts? /

  A: Management explains Independence is already fully sold out to GM and Apple, and 10X is currently fully contracted via the Department of War (DoW). MP is in no rush to sign new contracts prematurely, as the DoW support gives the company flexibility to wait for high-value deals that maximize long-term shareholder value. Customer engagement levels are extremely high, and MP will only announce significant new contracts when they are finalized on attractive terms, consistent with the company's past approach to dealmaking.

• Q: How is MP positioned for innovation to address ongoing rare earth scarcity? What R&D is underway? /

  A: Management notes MP has a large engineering team focused on innovation to reduce costs and minimize use of scarce heavy rare earth inputs via process improvements like grain boundary diffusion. While substitution is always attempted when materials are scarce, management notes size and torque density requirements for emerging physical AI/robotics applications make heavy rare earth substitution much harder than for larger applications like EV motors. MP has also built flexibility into its magnet manufacturing platform to adapt to changing supply conditions over time.