Earnings call transcript: REC Silicon Q2 2025 reports positive EBITDA

REC Silicon ASA (NASDAQ:RECSL) reported its Q2 2025 earnings, highlighting a positive EBITDA of $4.9 million and ending the quarter with $8.3 million in cash. This quarterly result contrasts with the trailing twelve-month EBITDA of -$21.4 million, according to InvestingPro data. Despite facing market uncertainties, the company maintained stable silicon gas shipments and continued its cost reduction efforts. The stock price showed a slight increase of 0.09%, reflecting a neutral market reaction. InvestingPro analysis indicates the company is currently undervalued based on its Fair Value calculations.

Key Takeaways

• Positive EBITDA of $4.9 million for Q2 2025.
• Stable silicon gas shipments over the last three quarters.
• Ongoing cost reduction and operational optimization efforts.
• Market uncertainties due to trade actions and global trade impacts.
• Slight stock price increase of 0.09%.

Company Performance

REC Silicon’s Q2 2025 performance was marked by a positive EBITDA of $4.9 million, indicating operational profitability despite challenging market conditions. The company ended the quarter with $8.3 million in cash, supported by $10 million from borrowing activities and an additional $13 million in short-term loans from Hanwha International post-quarter. InvestingPro data reveals a concerning total debt burden of $315.6 million, with short-term obligations exceeding liquid assets. The stable silicon gas shipments and cost reduction initiatives at Moses Lake and Butte operations are central to REC Silicon’s strategy to navigate market uncertainties.

Financial Highlights

• Positive EBITDA: $4.9 million
• Cash on hand: $8.3 million
• Interest payments: $7.2 million
• Borrowing activities: $10 million
• Additional short-term loans: $13 million from Hanwha International

Market Reaction

REC Silicon’s stock price experienced a modest increase of 0.09%, closing at $2.19. According to InvestingPro data, the stock has shown significant volatility, with a 76.76% gain over the past six months despite a 68.08% decline over the past year. This movement is minor compared to its 52-week range of $1.041 to $11.3, indicating a neutral market sentiment towards the earnings report. The limited stock price change suggests that investors are cautiously optimistic but remain attentive to ongoing market uncertainties and operational challenges. For deeper insights into REC Silicon’s valuation and financial health, including 10+ additional ProTips and comprehensive metrics, explore the full InvestingPro Research Report.

Outlook & Guidance

Looking forward, REC Silicon anticipates continued cost reductions through the end of the year, with Q3 silicon gas shipments expected to remain stable. The company is exploring financing options and remains focused on disposing of non-core assets by year-end. Despite the suspension of polysilicon production at Moses Lake, REC Silicon is engaged in discussions with potential silicon anode customers, which could offer future growth opportunities.

Executive Commentary

CEO Kurt Levens emphasized the importance of focusing on revenue growth and cost control in a challenging environment. "The most important thing for the company is to focus on the basics of being able to increase our revenues in a challenging environment and control our costs," he stated. Levens also reassured stakeholders of the company’s compliance with ongoing legal investigations and commitment to transparent communication with the market.

Risks and Challenges

• Trade tariffs and global trade uncertainties may impact expansion opportunities.
• Soft demand in the semi memory market could affect revenue streams.
• The suspension of polysilicon production at Moses Lake presents operational challenges.
• The need for ongoing financing and cost control amidst market volatility.
• Legal and corporate governance concerns require careful management.

Q&A

During the earnings call, analysts inquired about corporate governance and the ongoing legal investigation. Management clarified that there are no immediate plans to sell core assets such as Butte or Moses Lake, and lease renegotiations have resulted in other income. Discussions with potential silicon anode customers were also addressed, highlighting future growth prospects.

Full transcript - REC Silicon ASA (RECSI) Q2 2025:

Kurt Levens, CEO, REC Silicon: Good morning. My name is Kurt Levens. I’m the CEO of REC Silicon. And with me is Jack Yoon, the CFO of REC Silicon. Welcome to the second quarter twenty twenty five interim results presentation.

We’re going to go through some highlights and updates as well as the financial review, discussion of the strategic direction, activities that we’ve been undertaking, and then finally, a summary of where we’re at. We made significant progress in cost reduction activities in the quarter relative to the prior quarter. We had some benefits of one off effects on our EBITDA that we will discuss, subsequent that led to a positive EBITDA of 4,900,000,000.0. Subsequent to quarter end, Anchor AS completed voluntary offer for shares and launched a mandatory share offer. Additional financing was received and is still needed.

Additionally, trade actions and concern around the market effects of this have created forecast and demand uncertainty for our silicon gases. Silicon gas shipments are in a range that we have settled in for the last three quarters. As I stated, we’re still having trade related effects due to tariffs and trade actions on our products, however, also on the goods which require our products. Expected opportunities for volume and spa expansion increases are still being delayed or suspended. Semi memory market demand is still soft compared to prior periods and affecting underlying demand, particularly for silane.

On the other hand, our other silicon gas shipments continue to regain volume and grow in terms of sequential, quarters on quarters. Note the other income effect due to the modification of a lease agreement. This is what was giving us a positive EBITDA for the quarter and for the first half. Find this in the Moses Lake segment. This is part of

Unidentified Questioner: our

Kurt Levens, CEO, REC Silicon: ongoing cost reduction program. Our Siemens polysilicon inventory clearance is as planned, and we’re still expecting that we will continue to move the product through the end of this year. Silicon gas sales volume did increase. But, again, as I’d stated, they are it’s within the range that we have been settled into the past few quarters. Slightly lower lower ASPs due to mix effect and planned maintenance in the quarter contributed to a lower EBITDA from our Butte operation.

We finished the quarter with 8,300,000.0, and I wanna note that our interest payment items are at 7,200,000.0 within the quarter. We also have noted that we as we stated, we did receive 10,000,000 in proceeds from our borrowing activities. Subsequent to the quarter end, we have received an additional $13,000,000 in short term loans from Hanwha International. We have continued to monitor slower than expected project development, execution, and startup of reshoring activities. Trade action uncertainty, policy uncertainty, and market uncertainty all are affecting our expected volume growth opportunities.

While we see fewer actualization of PV cell fabs, we have noted more semiconductor fab announcements. Our cost reduction efforts in Moses Lake continue, and material progress was made over q one. We expect to continue incremental reductions through the remainder of the year as we finish and negotiate prior commitments. Our Butte operation has also continued to optimize for cost reduction and has achieved cost reduction targets over our internal targets, particularly on manufacturing overhead. We need to redouble our efforts in improving our silicon gas sales in spite of the challenging market.

This is especially important given our current distressed situation. As a result of passing the 33.3% threshold, Hinker AS launched a mandatory offer. Mandatory offer expires on twenty nine August. As stated, we will need additional financing. This includes the possibility of further short term loans.

We are focused now on the disposal of noncore assets targeting completion before the end of this year. We are complying with the request for investigation submitted to the Norwegian District Court, and we are complying with the process requirements and associated requests for information on all legal processes. We expect for the sequential quarter on quarter cost reduction to continue through the end of this year. For q three, we expect to be in the same range with silicon gas shipments, slight possibility for small increment improvements. Global trade and market uncertainty still continue to impact timing on expansions and our sales growth.

And our short and long term financing options are still in progress. Right now, the most important thing for the company is to focus on the basics of being able to increase our revenues in a challenging environment and control our costs in spite of having higher commitment levels prior to us making the decision to shut down polysilicon at Moses Lake. This is what we will continue to do through the end of the year to ensure that our best chances for setting ourselves up to be in a sustainable situation is by having a strong revenue base and having strong cost reduction. Thank you, and we will be back for the next quarter in November 6. We can take some questions.

Unidentified Questioner: Yeah. Moving into questions. So recently, the minority shareholders replaced the board of REC Silicon and partly due to the perceived weak corporate governance and the principle of equal treatment of all shareholders. What does management of REC Silicon plan to do differently going forward?

Kurt Levens, CEO, REC Silicon: We will continue to communicate to the market as needed. We will continue to take actions which are in the interest of all of the shareholders regardless of majority, minority, or otherwise as we have done prior and we will continue to do.

Unidentified Questioner: Can you get into more details on what’s, specifically happening happening with both CEVA and also group fourteen as far as what agreements are in place and when and what demand of silane volume is expected by these two in 2026 and going forward?

Kurt Levens, CEO, REC Silicon: As far as we know, CELA has announced that they will be moving forward with their, opening of their facilities. We are aware that they will be taking a delivery their first delivery from us coming up. As far as the volumes go for Sila, that is not something that we’re disclosing at this time due to our contractual agreements as well as respect of our customers’ guidance over their recipes and how much product is used for in their product. The same goes with same goes with g fourteen with regards to how much they will use. That’s gonna be highly dependent upon the level at which they ramp.

As of right now, per their last communications, they do not expect to begin ramping until the end of this year or the ’1 at such time that we have visibility of into when that may be And if those volumes are something we can discuss specifically to those customers, then we will certainly, be willing to discuss them.

Unidentified Questioner: At the general meeting that took place in June, REC decided to initiate an investigation. A petition has been submitted to the district court in Norway, and REC has filed its response. How does management view this?

Kurt Levens, CEO, REC Silicon: K. That that was voted on at the AGM, and that is, per the rules, that is the right of any shareholder holding a certain amount of shares has the right to petition the court for that. As I stated in this slide, we, as REC Silicon, are fully complying with what will be required in the process and will continue to do so.

Unidentified Questioner: Are you able to disclose which REC employees have been issued a subpoena as part of the investigation?

Kurt Levens, CEO, REC Silicon: No. We’re not disclosing right now, what employees might have been issued subpoenas for request for information.

Unidentified Questioner: K. Changing subjects a little bit. What is REC’s board and management doing specifically to address debt? Can you get into more detail on the sale of noncore assets, or are you looking to sell Butte or Moses Lake either fully or partially?

Kurt Levens, CEO, REC Silicon: So at this time, there is no plan to sell core assets, meaning either Moses Lake or Butte. In order to maintain optionality through this period, it for Moses Lake, obviously, for the opportunities to restart the silane plant and then in in Butte for us to continue to take advantage of the growth opportunities that are presented through the reshoring investments that I’ve made. So the as far as addressing the debt, we are currently, investigating how we’re going to be able to do that and what the options are. And that’s all we can really say about that right now. Obviously, there’s only gonna be a certain level of debt that’s gonna be manageable for the company, going forward.

Unidentified Questioner: Okay. Are you able to, more fully explain the other income of amount of 13,100,000.0 reported for Moses Lake?

Kurt Levens, CEO, REC Silicon: Yeah. It’s again, that’s a renegotiation renegotiation of a lease that we had. So in essence, we reached an agreement to lower that amount. And then on a technical basis, that resulted in that becoming noted as other income for us within that quarter.

Unidentified Questioner: I see you’ve already gone into more detail on both Ciel and g fourteen, but, specifically related to g g fourteen or group fourteen’s announcement of over $400,000,000 in funding. Is this new and exciting opportunities for REC?

Kurt Levens, CEO, REC Silicon: As of now, it hasn’t changed anything for REC, and that’s because that Moses Lake plant across the street from us is still, in a suspended state, and they have indicated that they will not be getting back to that till sometime towards the end of this year or q one. Should we hear that that changes, then, obviously, that potentially could be more favorable for us. But as I’ve stated before in other presentations or in other questions, we continue discussion and welcome the opportunity to be able to supply g 14.

Unidentified Questioner: K. Moving back to the investigation and the legal process. Can you disclose what are the key milestones coming up in both Norway and The United States?

Kurt Levens, CEO, REC Silicon: Well, in Norway, we need to submit our response, and that’s the first key milestone. And in The United States, we’ve already begun the, providing of information as requested as the information request was, made of us. So we have already been doing that, and we will continue to do that as as required by the courts.

Unidentified Questioner: Okay. Being that we’re just over halfway through the third quarter, can you get into how the third quarter is looking so far? And, specifically, will there be improvement from the second quarter?

Kurt Levens, CEO, REC Silicon: Yeah. I think, as I as I stated in there, when if you look at the level to which we’re guiding, one thing that we’re saying is that we we believe that we should see sequential cost reduction in our Moses Lake continuing through the end of the year. And as far as our shipments go and potential revenues, when you look at what we, stated in the summary, we expect to be somewhere in the range of where we were this past quarter.

Unidentified Questioner: K. And to date, REC Silicon has relied exclusively on Hanwha as a lender to secure financing. Have you approached other financial institution or strategic investors for loan financing? And if not, why not?

Kurt Levens, CEO, REC Silicon: We went through a process of entertaining other sources of financing and would still entertain other sources of financing. At the end of the day, it came down to the cost and the willingness of the other party to to engage. So when it’s come down to, and as noted from our last round, with Hanwha in the public statements that were made, we had a few choices when it came to being able to access short term loans that we were looking for.

Unidentified Questioner: K. You had previous previously mentioned that you’re in discussions with up to six other potential silicon nano customers. And can you give an update on the current status of these negotiations and whether you expect any, offtake agreements from these? Yeah. Of of those, we do expect some offtake agreements.

It’s a function of when.

Kurt Levens, CEO, REC Silicon: If there are no longer six, one has dropped off, so there are five. And they are all in different states as far as their evolution or their qualification or their production operations versus their pilot operations. So it’s really all over the place right now. I would say that, from our perspective, if you look at those that we would consider to be most advanced, and this is only on the basis of what we see going in the ground, that would be CELA and that would be g 14. And that’s only because of where they’re at in their life cycle.

I I make no representations around the technology and, you know, who’s going to be successful. We hope they’re all successful as far as I’m concerned.

Unidentified Questioner: Has the management of REC conducted an analysis of potentially restarting polysilicon in Butte? And I guess to go along that with that, will there ever be polysilicon produced again in Moses Lake?

Kurt Levens, CEO, REC Silicon: As of right now, we have not currently evaluated restarting Butte, and that is based upon the fact that the equipment there is still going to require tremendous amount of investment for us to make the product that’s gonna be required for the larger diameter float zone. And the economics are not there or not justified for that given what the end product will be able to absorb in terms of price. In addition to that, while the power situation has improved, some of that is because, of course, we took a relatively large load off of the off of the market there. So that is not something that’s, at this point, can be verified to be sustainable. And until we can see a situation where we have a partner who who, for some reason, it makes sense for them to wanna work with us on that polysilicon and absorb the cost or the the price that’s needed, and we have stability in our electricity input.

It’s it doesn’t make sense there. Regarding Moses Lake, again, we have we have entered into this under the premise that we are not going to be restarting production in Moses Lake. If there was ever something that came up, well, that would be something that would need to be addressed at the time. But that’s not in the plans, and that’s not what we’re operating under. And that’s not how the plant is set up to operate at this time.

Unidentified Questioner: Are you able to give an update, Sonata?

Kurt Levens, CEO, REC Silicon: No. Other than than, as indicated, we have been having discussions with a number of a number of different silicon anode producers, and we have also supplied a number of different silicon anode producers to their pilot production. Sonata hasn’t made any public statements, to our knowledge regarding their status and where they’re at. Therefore, it’s not appropriate for us to

Unidentified Questioner: Going through the questions, I think you’ve touched on, the questions that have come up.

Kurt Levens, CEO, REC Silicon: Okay. K. Well, thank you for your questions and your time, and we’ll see you next

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