Neo Performance Materials Reports Record Second Quarter 2022 Results

Q2 2022 Highlights
(unless otherwise noted, all financial amounts in this news release are expressed in U.S. dollars)

 

  • Neo sets new records for revenue, net income, and Adjusted EBITDA(1) for the six months ended June 30, 2022, since re-emerging as a public company in 2017.
  • Q2 2022 revenue of $168.2 million, higher by 24.5% YoY.
  • Operating income of $21.0 million in the quarter, higher by 15.2% YoY.
  • Adjusted Net Income(1) of $15.9 million in the quarter, or $0.39 per share.
  • Adjusted EBITDA(1) of $26.5 million in the quarter, higher by 19.3% YoY.
  • Cash balance of $66.2 million after distributing $6.3 million for the six months ended June 30, 2022 in dividends to shareholders.
  • A quarterly dividend of Cdn$0.10 per common share was declared on August 11, 2022 for shareholders of record at September 20, 2022, with a payment date of September 29, 2022.
  • Neo’s Board of Directors have appointed Mr. Yadin Rozov and Ms. Zhe Zhao as directors of the Company to fill the vacancies resulting from the resignation of Mr. Brook Hinchman and Mr. Gregory Share.

 

TORONTO, Canada, August 12, 2022 – Neo Performance Materials Inc. (“Neo“, the “Company“) (TSX:NEO) released its second quarter 2022 financial results. The financial statements and management’s discussion and analysis (“MD&A“) of these results can be viewed on Neo’s web site at www.neomaterials.com/investors/ and on SEDAR at www.sedar.com.

“The Neo team achieved another strong quarter, and I am very pleased with our ability to continue to outperform in the face of macroeconomic uncertainty, continuing supply chain challenges, and deteriorating economic sentiment or outlook in some economies,” said Constantine Karayannopoulos, CEO of Neo.  “Our manufacturing operations around the world are running efficiently and our strategic growth initiatives remain on track, particularly with regard to our plans to expand into sintered Neo magnet manufacturing in Europe.  Our Magnequench teams are progressing rapidly on engineering, permitting, and construction planning for a greenfield magnet plant in Estonia to serve European automotive OEM customers, who clearly want us to make these products as they ramp up electric vehicle production.  Estonian government leaders also continue to express their support for assembling the financial assistance necessary for us to make a final commitment to proceed.  We very much appreciate the support from prospective customers and government leaders in this effort.”

In the second quarter, Neo published its first annual Sustainability Report, which provides details on Neo’s environmental, social, and governance performance in 2021.  The Sustainability Report also launched a formal reporting process that helps to explain and document Neo’s ongoing efforts to help fast-forward the world’s transition to a more sustainable and less carbon-centric future.

 

HIGHLIGHTS OF Q2 2022 CONSOLIDATED PERFORMANCE

 

Neo reported strong year-over-year (“YoY“) gains in revenue, operating income, and Adjusted EBITDA(1) in the second quarter of 2022.

All three of Neo’s business segments experienced higher revenues, driven primarily by higher rare earth prices and strong demand for Neo’s magnetic rare earth products used in the electrification of automobiles and in other environmentally sustaining technologies.  Selling prices for rare earth products, including Magnequench powders, rose significantly starting in the fourth quarter of 2020 and through the first quarter of 2022, before leveling off.  Neo benefited from these generally higher prices from both a lead-lag perspective (lower cost inventory on hand) and more dollar value margin available with higher prices.

For the three months ended June 30, 2022, consolidated revenue was $168.2 million compared to $135.1 million for the same period in the prior year; an increase of $33.1 million or 24.5%.  Neo reported net income of $14.7 million, or $0.36 per share, compared to $13.0 million, or $0.34 per share, in the same period of 2021.  Adjusted Net Income(1) totaled $15.9 million, or $0.39 per share, compared to $14.1 million, or $0.37 per share, in the corresponding period of the prior year.  Adjusted EBITDA(1) was $26.5 million, a 19.3% jump over Adjusted EBITDA(1) of $22.2 million in the second quarter of 2021.

As of June 30, 2022, Neo had cash and cash equivalents of $66.2 million plus restricted cash of $1.3 million, compared to $89.0 million plus $1.3 million as at December 31, 2021.  For the six months ended June 30, 2022, Neo distributed $6.3 million in dividends to its shareholders.  Neo has approximately $40.7 million available under its credit facilities, of which $16.5 million was drawn as at June 30, 2022, compared to $6.5 million drawn as at December 31, 2021.

 

 

SELECTED FINANCIAL RESULTS

 

TABLE 1: Selected Consolidated Results
Quarter-over-Quarter Comparison Year-over-Year Comparison
($000s) Q2 2022 Q2 2021 YTD Q2 2022 YTD Q2 2021
Revenue          168,221          135,141          334,503          265,996
Operating income            20,963            18,195            49,648            34,603
EBITDA(1)            27,225            21,810            60,608            36,610
Adjusted EBITDA(1)            26,456            22,177            59,573            44,613
Adjusted EBITDA %(1) 15.7 % 16.4 % 17.8 % 16.8 %

_________________________

(1)Neo reports non-IFRS measures such as “Adjusted Net Income”, “Adjusted Earnings per Share”, “Adjusted EBITDA”, “Adjusted EBITDA Margin” and “EBITDA”. Please see information on this and other non-IFRS measures in the “Non-IFRS Measures” section of this news release and in the MD&A.

 

 

 

MAGNEQUENCH SEGMENT RESULTS

 

TABLE 2: Selected Magnequench Results
Quarter-over-Quarter Comparison Year-over-Year Comparison
Q2 2022 Q2 2021 YTD Q2 2022 YTD Q2 2021
Volume (tonnes)               1,218               1,509               2,523               3,234
($000s)
Revenue 78,412 67,888 152,426 132,793
Operating income 12,862 12,585 23,098 23,675
EBITDA(1) 15,923 15,502 29,469 29,467
Adjusted EBITDA(1) 15,325 14,937 28,102 28,369

_________________________

(1)Neo reports non-IFRS measures such as “Adjusted Net Income”, “Adjusted Earnings per Share”, “Adjusted EBITDA”, “Adjusted EBITDA Margin” and “EBITDA”. Please see information on this and other non-IFRS measures in the “Non-IFRS Measures” section of this news release and in the MD&A.

 

For the three and six months ended June 30, 2022, volumes in the Magnequench segment saw a decline with respect to the prior-year period as well as sequentially, driven largely by the recent spike in COVID-19 cases and resulting shutdowns in Asia, several natural disasters impacted production facilities and customers, and the on-going semi-conductor chip shortage.

Margins in the Magnequench segment were particularly strong in the quarter due to increasing rare earth magnetic prices.  Magnequench has pass-through agreements on the vast majority of its contracts, and with rising rare earth magnetic prices, Magnequench has been passing through these higher replacement costs while utilizing some of its lower cost inventory on hand.  Pass-through is a key strategic focus of Magnequench and ensures that Magnequench focuses on generating long term sustainable and value-added margins.

 

 

CHEMICALS & OXIDES (“C&O”) SEGMENT RESULTS

 

TABLE 3: Selected C&O Results
Quarter-over-Quarter Comparison Year-over-Year Comparison
($000s) Q2 2022 Q2 2021 YTD Q2 2022 YTD Q2 2021
Revenue             69,350             52,255           137,013           106,645
Operating income               8,146               7,920             26,622             20,042
EBITDA(1)             10,755               8,105             29,721             13,992
Adjusted EBITDA(1)               9,663               8,735             29,573             21,653

_________________________

(1)Neo reports non-IFRS measures such as “Adjusted Net Income”, “Adjusted Earnings per Share”, “Adjusted EBITDA”, “Adjusted EBITDA Margin” and “EBITDA”. Please see information on this and other non-IFRS measures in the “Non-IFRS Measures” section of this news release and in the MD&A.

 

The C&O segment continues to see strong demand for various rare earth products, particularly its magnetic-based products. The demand and price for these magnetic elements continues to increase, given their use in the electrification of automobiles and other environmentally sustainable technologies, although pricing stabilized in the second quarter of 2022.  The combination of higher prices and higher demand for magnetic rare earth products resulted in strong financial performance for the C&O segment compared to the prior periods, particularly in the first quarter of 2022, driven by premium sales to key customers when rare earth prices peaked. Higher prices support higher-dollar value margins in C&O’s rare earth separation business in addition to the impact of having lower-cost inventory on hand, particularly in the first quarter of 2022.  C&O is experiencing higher cost of sales than in previous periods as current cost of sales more closely resemble replacement costs.

In C&O’s environmental catalysts business, volumes were reasonably strong in the first half of 2022, although they were lower than the comparable periods in the prior year, which benefited from customers refilling their supply chains.  Volumes, particularly in the second quarter of 2022, were negatively impacted by the slowdown of automotive production related primarily to the on-going semi-conductor chip shortage.  C&O’s environmentally protective water treatment solutions business continues to perform well with higher volume and new customer adoption, although sales volume growth expectations were partially impacted by the challenges in global shipping and logistics availability.

 

 

RARE METALS SEGMENT RESULTS

 

TABLE 4: Selected Rare Metals Results
Quarter-over-Quarter Comparison Year-over-Year Comparison
($000s) Q2 2022 Q2 2021 YTD Q2 2022 YTD Q2 2021
Revenue 25,892 20,083 54,954 36,799
Operating income 4,264 1,836 7,987 2,094
EBITDA(1) 5,358 2,127 9,870 4,281
Adjusted EBITDA(1) 5,174 2,462 9,515 3,365

_________________________

(1)Neo reports non-IFRS measures such as “Adjusted Net Income”, “Adjusted Earnings per Share”, “Adjusted EBITDA”, “Adjusted EBITDA Margin” and “EBITDA”. Please see information on this and other non-IFRS measures in the “Non-IFRS Measures” section of this news release and in the MD&A.

 

Rare Metals achieved a strong first half of 2022, continuing the improvement that started in the fourth quarter of 2021.  Rare Metals showed strength in pricing for key products such as hafnium and tantalum while also benefiting from lower-cost inventory on hand.  Hafnium prices, in particular, have increased rapidly starting in the fourth quarter of 2021 and the segment benefited by having approximately six months of lower-cost inventory on hand. The recycling purchases and activities of Rare Metals was particularly impactful to lowering its overall material costs.

The Rare Metals business continues to make progress in several key strategic initiatives, including selling more products outside of the aerospace industry, expanding its customer base, and diversifying its total end-market exposure.  Sales prices in a number of end markets have recovered and gallium-based products are exhibiting improved market demand.

 

CHANGE OF DIRECTORS

 

Neo’s Board of Directors have appointed Mr. Yadin Rozov and Ms. Zhe Zhao as directors of the Company to fill the vacancies resulting from the resignation of Mr. Brook Hinchman and Mr. Gregory Share.

Yadin Rozov is an investment professional with over 20 years of experience in capital markets, corporate finance, investment banking, and investment management with substantial experience in corporate strategy and governance.  He is the founder and Managing Partner of Terrace Edge Ventures LLC, a financial advisory firm. Previously, Mr. Rozov was a Partner of GoldenTree Asset Management LLC, a leading global credit asset management firm, where he also served as the Chief Executive Officer and President of Syncora Guarantee Inc. and Chief Executive Officer of Financial Guaranty UK Ltd, each of which are stand-alone specialty insurance companies owned by GoldenTree. Additionally, he was a Partner and Managing Director at Moelis & Company where he headed the Financial Institution Advisory group.  While at Moelis, Mr. Rozov helped co-found College Avenue Student Loans LLC and served on its board and co-founded Chamonix Partners Capital Management LLC. Before Moelis, Mr. Rozov was a Managing Director at UBS AG, where he was the Head of the Americas for the Repositioning Group. He also serves on the Board of Directors of Oramed Pharmaceuticals Inc. Mr. Rozov earned an M.Sc. in data science from Columbia University and a bachelor’s degree with highest honors in physics and materials engineering from Rutgers University.

Zhe Zhao is a Vice President in the Global Opportunities group at Oaktree Capital Management, L.P. Ms. Zhao joined Oaktree in 2021 from Marathon Asset Management, where she served as a vice president of distressed investments. There, Ms. Zhao was responsible for sourcing and analyzing long and short investment opportunities across a variety of security classes, including stressed and distressed public and private credit. Prior thereto, Ms. Zhao was an analyst at Davidson Kempner Capital Management focusing on distressed real estate assets. Ms. Zhao began her career as an investment banking analyst with Deutsche Bank Securities before moving to Brookfield Asset Management as a private equity analyst. Ms. Zhao earned a B.S. degree in economics from Duke University and is fluent in Mandarin.

Mr. Brook Hinchman, Managing Director and Co-Head of North America for Oaktree’s Global Opportunities strategy at Oaktree Capital Management, L.P., joined Neo as a director in October 2017 at the time of its initial public offering. Mr. Gregory Share, Managing Director for the Opportunities Fund within Oaktree Capital Management, L.P., joined Neo as a director in July 2020. Neo would like to thank Mr. Hinchman and Mr. Share for their contributions as directors during their tenure.

 

CONFERENCE CALL ON FRIDAY AUGUST 12, 2022 AT 10 AM EASTERN

 

Management will host a teleconference call on Friday August 12, 2022 at 10:00 a.m. (Eastern Time) to discuss the second quarter 2022 results.  Interested parties may access the teleconference by calling (647) 484-0475 (local) or  (888) 220-8451 (toll free long distance) or by visiting http://cnw.en.mediaroom.com/events.  A recording of the teleconference may be accessed by calling (647) 436-0148 (local) or (888) 203-1112  (toll free long distance), and entering pass code 7089160# until September 12, 2022, or by visiting http://cnw.en.mediaroom.com/events.

 

NON-IFRS MEASURES

 

This news release refers to certain non-IFRS financial measures and ratios such as “Adjusted Net Income”, “EBITDA”, “Adjusted EBITDA”, and “Adjusted EBITDA Margin”.  These measures and ratios are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS, and may not be comparable to similar measures presented by other companies. Rather, these measures and ratios are provided as additional information to complement IFRS financial measures by providing further understanding of Neo’s results of operations from management’s perspective. Neo’s definitions of non-IFRS measures used in this news release may not be the same as the definitions for such measures used by other companies in their reporting.  Non-IFRS measures and ratios have limitations as analytical tools and should not be considered in isolation nor as a substitute for analysis of Neo’s financial information reported under IFRS.  Neo uses non-IFRS financial measures and ratios to provide investors with supplemental measures of its base-line operating performance and to eliminate items that have less bearing on operating performance or operating conditions and thus highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS financial measures.  Neo believes that securities analysts, investors and other interested parties frequently use non-IFRS financial measures and ratios in the evaluation of issuers.  Neo’s management also uses non-IFRS financial measures in order to facilitate operating performance comparisons from period to period. For definitions of how Neo defines such financial measures and ratios, please see the “Non-IFRS Financial Measures” section of Neo’s management’s discussion and analysis filing for the three and six months ended June 30, 2022, available on Neo’s web site at www.neomaterials.com and on SEDAR at www.sedar.com.

 

 

TABLE 5: CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

($000s) June 30, 2022 December 31, 2021
ASSETS
Current
Cash and cash equivalents $66,158 $89,037
Restricted cash 1,276 1,283
Accounts receivable 85,785 65,209
Inventories 214,182 200,954
Income taxes receivable 477 1,667
Other current assets 21,896 19,211
Total current assets 389,774 377,361
Property, plant and equipment 74,877 73,378
Intangible assets 46,226 49,961
Goodwill 67,750 70,082
Investments 16,746 13,759
Deferred tax assets 7,677 6,638
Other non-current assets 1,925 2,903
Total non-current assets 215,201 216,721
Total assets $604,975 $594,082
LIABILITIES AND EQUITY
Current
Bank advances and other short-term debt $11,940 $6,502
Accounts payable and other accrued charges 62,756 94,201
Income taxes payable 11,711 7,059
Provisions 651 5,560
Lease obligations 1,189 1,589
Derivative liability 15,961 14,704
Current portion of long-term debt 733
Other current liabilities 1,199 1,455
Total current liabilities 106,140 131,070
Long term debt 3,796
Employee benefits 1,167 1,210
Provisions 22,813 15,127
Deferred tax liabilities 15,392 13,366
Lease obligations 1,278 1,388
Other non-current liabilities 1,407 1,405
Total non-current liabilities 45,853 32,496
Total liabilities 151,993 163,566
Non-controlling interest 3,233 2,891
Equity attributable to equity holders of Neo Performance Materials Inc. 449,749 427,625
Total equity 452,982 430,516
Total liabilities and equity $604,975 $594,082

See accompanying notes to this table in Neo’s Consolidated Financial Statements for the Three and Six Months Ended June 30, 2022, available on Neo’s website at www.neomaterials.com and on SEDAR at www.sedar.com.

 

TABLE 6: CONSOLIDATED RESULTS OF OPERATIONS

 

Comparison of the three and six months ended June 30, 2022 to the three and six months ended June 30, 2021:

($000s) Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Revenue $168,221 $135,141 $334,503 $265,996
Costs of sales
Costs excluding depreciation and amortization 121,796 94,580 236,112 185,500
Depreciation and amortization 2,388 1,912 4,766 3,791
Gross profit 44,037 38,649 93,625 76,705
Expenses
Selling, general and administrative 14,262 13,617 28,515 27,677
Share-based compensation 957 (29) 1,138 1,563
Depreciation and amortization 1,853 1,935 3,748 3,890
Research and development 5,707 4,931 10,281 8,972
Impairment of assets 295 295
23,074 20,454 43,977 42,102
Operating income 20,963 18,195 49,648 34,603
Other (expense) income (855) 213 (1,288) (5,861)
Finance cost, net (2,292) (1,457) (2,706) (1,673)
Foreign exchange gain (loss) 959 (788) 548 (1,089)
Income from operations before income taxes and equity income of associates 18,775 16,163 46,202 25,980
Income tax expense (6,001) (3,479) (11,996) (6,612)
Income from operations before equity income of associates 12,774 12,684 34,206 19,368
Equity income of associates (net of income tax) 1,917 343 3,186 1,276
Net income $14,691 $13,027 $37,392 $20,644
Attributable to:
Equity holders of Neo $14,607 $12,960 $36,957 $20,406
Non-controlling interest 84 67 435 238
$14,691 $13,027 $37,392 $20,644
Earnings per share attributable to equity holders of Neo:
Basic $0.36 $           0.34 $         0.91 $         0.54
Diluted $0.36 $           0.34 $         0.90 $         0.54

See Management’s Discussion and Analysis for the Three and Six Months Ended June 30, 2022, available on Neo’s website at www.neomaterials.com and on SEDAR at www.sedar.com.

 

 

TABLE 7: RECONCILIATION OF NET INCOME TO EBITDA, ADJUSTED EBITDA AND FREE CASH FLOW

 

($000s) Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Net income $14,691     $13,027     $37,392     $20,644    
Add back (deduct):
Finance cost, net 2,292 1,457 2,706 1,673
Income tax expense 6,001 3,479 11,996 6,612
Depreciation and amortization included in costs of sales 2,388 1,912 4,766 3,791
Depreciation and amortization included in operating expenses 1,853 1,935 3,748 3,890
EBITDA 27,225     21,810 60,608     36,610
Adjustments to EBITDA:
Other expense (income)  (1) 855 (213) 1,288 5,861
Foreign exchange (gain) loss (2) (959) 788 (548) 1,089
Equity income of associates (1,917) (343) (3,186) (1,276)
Share-based compensation (3) 957 (29) 1,138 1,563
Impairment of assets 295 295
Other costs (recoveries) (4) 164 (22) 766
Adjusted EBITDA (5) $26,456     $22,177     $59,573     $44,613    
Adjusted EBITDA Margins (5) 15.7%  16.4%  17.8%  16.8% 
Less:
Capital expenditures $2,582 $2,521 $9,364 $4,257
Free Cash Flow (5) $23,874 $19,656     $50,209     $40,356    
Free Cash Flow Conversion (5) 90.2% 88.6% 84.3% 90.5%

Notes:

  • Represents other expenses resulting from non-operational related activities, including provisions for damages for outstanding legal claims related to historic volumes. These costs and recoveries are not indicative of Neo’s ongoing activities.
  • Represents unrealized and realized foreign exchange losses (gains) that include non-cash adjustments in translating foreign denominated monetary assets and liabilities.
  • Represents share-based compensation expense in respect of the Plan and the LTIP.
  • These represent primarily legal, professional advisory fees and other transaction costs incurred with respect to non-operating capital structure related transactions and restructuring costs related to management team changes. Neo has removed these charges to provide comparability with historic periods.
  • Neo reports non-IFRS measures such as “Adjusted Net Income”, “Adjusted Earnings per Share”, “Adjusted EBITDA”, “Adjusted EBITDA Margin”, “Free Cash Flow” and “Free Cash Flow Conversion”. Please see information on this and other non-IFRS measures in the “Non-IFRS Measures” section of this new release and in the MD&A, available on Neo’s website neomaterials.com and on SEDAR at www.sedar.com.

 

 

TABLE 8: RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME

 

($000s) Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Net income $14,691 $13,027 $37,392 $20,644
Adjustments to net income:
Foreign exchange (gain) loss (1) (959) 788 (548) 1,089
Impairment of assets 295 295
Share-based compensation (2) 957 (29) 1,138 1,563
Other costs (recoveries) (3) 164 (22) 766
Other items included in other expense (4) 947 243 1,494 6,422
Tax impact of the above items (44) (101) (397) (1,298)
Adjusted net income (5) $15,887 $14,092 $39,352 $29,186
Attributable to:
Equity holders of Neo $15,803 $14,025 $38,917 $28,948
Non-controlling interest $84 $67 $435 $238
Weighted average number of common shares outstanding:
Basic 40,681,902 37,815,403 40,681,548 37,649,443
Diluted 41,001,055 38,195,144 41,089,719 38,009,185
Adjusted earnings (loss) per share (5) attributable to equity holders of Neo:
Basic $0.39 $0.37 $0.96 $0.77
Diluted $0.39 $0.37 $0.95 $0.76

 

Notes:

  • Represents unrealized and realized foreign exchange losses (gains) that include non-cash adjustments in translating foreign denominated monetary assets and liabilities.
  • Represents share-based compensation expense in respect of the Plan and the LTIP.
  • These represent primarily legal, professional advisory fees and other transaction costs incurred with respect to non-operating capital structure related transactions and restructuring costs related to management team changes. Neo has removed these charges to provide comparability with historic periods.
  • Represents other expenses resulting from non-operational related activities, including provisions for damages for outstanding legal claims related to historic volumes. These costs and recoveries are not indicative of Neo’s ongoing activities.
  • Neo reports non-IFRS measures such as “Adjusted Net Income”, “Adjusted Earnings per Share”, “Adjusted EBITDA”, “Adjusted EBITDA Margin”, “Free Cash Flow” and “Free Cash Flow Conversion”. Please see information on this and other non-IFRS measures in the “Non-IFRS Measures” section of this new release and in the MD&A, available on Neo’s website neomaterials.com and on SEDAR at www.sedar.com. 

 

 

About Neo Performance Materials

Neo manufactures the building blocks of many modern technologies that enhance efficiency and sustainability.  Neo’s advanced industrial materials – magnetic powders and magnets, specialty chemicals, metals, and alloys – are critical to the performance of many everyday products and emerging technologies. Neo’s products help to deliver the technologies of tomorrow to consumers today.  The business of Neo is organized along three segments: Magnequench, Chemicals & Oxides and Rare Metals. Neo is headquartered in Toronto, Ontario, Canada; with corporate offices in Greenwood Village, Colorado, United States; Singapore; and Beijing, China. Neo has a global platform that includes 10 manufacturing facilities located in China, the United States, Germany, Canada, Estonia, Thailand and South Korea as well as one dedicated research and development centre in Singapore.  For more information, please visit www.neomaterials.com.

 

 

Information Contacts
Ali Mahdavi Jim Sims
SVP, Corporate Development & Capital Markets Director of Corporate Communications
(416) 962-3300 (303) 503-6203
Email: a.mahdavi@neomaterials.com Email: j.sims@neomaterials.com
Website: www.neomaterials.com
Email: info@neomaterials.com

 

 

Cautionary Statements Regarding Forward-Looking Statements

This news release contains “forward-looking information” within the meaning of applicable securities laws in Canada. Forward-looking information may relate to future events or future performance of Neo. All statements in this release, other than statements of historical facts, with respect to Neo’s objectives and goals, as well as statements with respect to its beliefs, plans, objectives, expectations, anticipations, estimates, and intentions, are forward-looking information. Specific forward-looking statements in this discussion include, but are not limited to, the following: expectations regarding certain of Neo’s future results and information, including, among other things, revenue, expenses, sales growth, capital expenditures, and operations; statements with respect to current and future market trends that may directly or indirectly impact sales and revenue of Neo; expected use of cash balances; continuation of prudent management of working capital; source of funds for ongoing business requirements and capital investments; expectations regarding sufficiency of the allowance for uncollectible accounts and inventory provisions; analysis regarding sensitivity of the business to changes in exchange rates; impact of recently adopted accounting pronouncements; risk factors relating to intellectual property protection and intellectual property litigation; risk factors relating to national or international economies (including the impact of COVID-19), geopolitical risk and other risks present in the jurisdictions in which Neo, its customers, its suppliers, and/or its logistics partners operate, and; expectations concerning any remediation efforts to Neo’s design of its internal controls over financial reporting and disclosure controls and procedures. Often, but not always, forward-looking information can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “continues”, “forecasts”, “projects”, “predicts”, “intends”, “anticipates” or “believes”, or variations of, or the negatives of, such words and phrases, or state that certain actions, events or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved. This information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information. Neo believes the expectations reflected in such forward-looking information are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking information included in this discussion and analysis should not be unduly relied upon. For more information on Neo, investors should review Neo’s continuous disclosure filings that are available under Neo’s profile at www.sedar.com.