MP Materials Results Presentation Deck
3
Use of Non-GAAP Financial Measures
This presentation references certain non-GAAP financial measures, including Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Diluted EPS, Production Costs, and Free Cash
Flow, which have not been prepared in accordance with generally accepted accounting principles in the United States ("GAAP").
MP Materials defines Adjusted EBITDA as 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; start-up costs; transaction-related and other non-recurring costs; accretion of asset retirement and environmental obligations; gain or loss
on disposals of long-lived assets; and other income or loss. We define Adjusted EBITDA Margin as our Adjusted EBITDA divided by our total revenue. MP Materials defines Adjusted Net Income as
GAAP net income or loss excluding the impact of stock-based compensation expense; start-up costs; transaction-related and other non-recurring costs; gain or loss on disposals of long-lived assets;
and other items that management does not consider representative of our underlying operations; adjusted to give effect to the income tax impact of such adjustments; and the release of valuation
allowance. MP Materials defines Adjusted Diluted EPS as 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; start-up costs; transaction-related and other non-recurring costs; gain or loss on disposals of long-lived assets; and other items that management does not
consider representative of our underlying operations; adjusted to give effect to the income tax impact of such adjustments; and the release of valuation allowance. Production Costs, which we use to
calculate our key performance indicator, Production Cost per REO MT, is defined as GAAP cost of sales (excluding depreciation, depletion and amortization), less stock-based compensation expense
included in cost of sales, shipping and freight costs, and costs not attributable to concentrate sales, for a given period. Production Cost per REO MT is calculated as the quotient of: (i) our Production
Costs for a given period and (ii) our REO Sales Volume for the same period. We define Free Cash Flow as net cash provided by operating activities less additions to property, plant and equipment, net
of proceeds from government awards used for construction. You can find the reconciliation of these measures to the most directly comparable GAAP measures in the Appendix.
MP Materials' management uses Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Adjusted Diluted EPS to compare MP Materials' performance to that of prior periods for trend
analyses and for budgeting and planning purposes. MP Materials believes Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Adjusted Diluted EPS provide useful information to
management and investors regarding certain financial and business trends relating to MP Materials' financial condition and results of operations. MP Materials' management believes that the use of
Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Adjusted Diluted EPS provide an additional tool for investors to use in evaluating projected operating results and trends.
Furthermore, MP Materials believes Production Cost per REO MT sold, which utilizes the non-GAAP financial measure, Production Costs, is a key indicator of the Company's concentrate production
efficiency. As MP Materials continues to evolve as a business and transitions from a producer of rare earth concentrate to a producer of separated rare earth products upon completing the
commissioning of the Company's Stage Il project, the metrics that management anticipates using to evaluate the business may change or be revised. For example, in completing the transition to
separated rare earth products, management may determine that Production Cost per REO MT, which is a metric focused solely on Stage I concentrate operations, and consequently, Production Costs,
are no longer meaningful in evaluating and understanding the Company's business or operating results. We believe Free Cash Flow is useful for comparing our ability to generate cash with that of our
peers. 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.
MP Materials' method of determining these non-GAAP measures may be different from other companies' methods and, therefore, may not be comparable to those used by other companies and MP
Materials does not recommend the sole use of these non-GAAP measures to assess its financial performance. Management does not consider non-GAAP measures in isolation or as an alternative or to
be superior to financial measures determined in accordance with GAAP. The principal limitation of non-GAAP financial measures is that they exclude significant expenses and income that are required
by GAAP to be recorded in MP Materials' financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expense and
income are excluded or included in determining these non-GAAP financial measures. In order to compensate for these limitations, management presents reconciliations of such non-GAAP financial
measures to the most directly comparable GAAP financial measures.
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