TOYO Co., Ltd Ordinary Shares 2026 H1 Earnings Call

Thank you, Carly. Hello, everyone. Thank you so much for joining us to review Toyo's second quarter and first half 2026 results. This morning, Toyo posted both the earnings release and a related investor presentation covering those results to our website, which you can find at investors.toyo-solar.com. I am pleased to say that with us on the call today, we have Mr. Takahiko Onozuka, Toyo's Chairman and Chief Executive Officer. We have Rhone Resch, the company's Chief Strategy Officer, and we also have Mr. Yasunari Harada, Toyo's Chief Financial Officer. After the prepared remarks are concluded, we are going to open up the floor for any questions that you have today.

But before we begin, I would like to point out the financial results discussed on this call for the second quarter 2026 and first half of 2026 and the corresponding periods in 2025 are unaudited, and some of the statements in this teleconference are forward-looking within the meanings of federal securities laws. Although we believe these statements are reasonable, we can provide no assurance that they will prove to be accurate because they are prospective in nature. During this call, we are also going to discuss certain non-GAAP financial measures such as EBITDA, adjusted EBITDA, and adjusted net income. We believe these measures provide meaningful supplemental information regarding our operational performance by excluding non-cash items and one-time charges that may not be indicative of our core business performance. Actual results could differ materially from those we discussed today.

We therefore encourage you to review our most recent annual report on Form 20-F, 6-K, and other SEC filings for risk factors that could materially impact our results. With those formalities now out of the way, it is my great pleasure to turn this call over to Onozuka-san, Toyo's Chairman and CEO. Onozuka-san, please take it away.

Thank you, Crocker. We are very pleased with our first half 2026 results, which reflects the continued strength in our global manufacturing platform and the growing demand we are seeing across our markets. Let me walk you through the headline numbers at high level. Revenue for the first half of 2026 was approximately $261.0 million, an increase of 87.6% year-over-year from $139.1 million in the first half of 2025. The increase was primarily driven by higher solar cell and high solar module sales together with the commencement OEM services. Revenue from end customer in the U.S. increased 153.9% to approximately $210.5 million and it represented 80.7% of first half revenue. Growth margin for the first half of 2026 expanded to 32.5%, up from 16.6% in the prior year period, reflecting expanded production capacity, improved production consistency, and greater mix of higher average selling price U.S. sales.

Net income for the first half of 2026 was approximately $45.8 million compared to $2.5 billion in the first half of 2025. Earning per share basic and diluted of $1.21 and $1.20 respectively, compared to $0.08 in the first half of 2025. For the second quarter of 2026, revenue was approximately $118.2 million, up 35% year-over-year with net income for the second quarter of 2026 of approximately $17.4 million compared to $6.2 million in the second quarter of last year. The recent Section 232 determination by the Trump administration on polysilicon and its derivatives is on balance a positive risk development for Toyo and therefore U.S. solar manufacturing in the U.S. market. We expected it to support strong module pricing and we anticipate that solar cells produced at our Ethiopia facility will be eligible for the relief under the framework now taking shape.

We are engaged with the Department of Commerce as those terms are finalized. While we are optimistic about the net effect on our second half and year-end 2026 results, we are not yet in a position to quantify it. We will provide further updates as more clarity emerges. As you see in our results, trade policy uncertainty also affected the pace of some shipments from our Ethiopia facility during the quarter. Ron will speak to that in a moment, but I want to be clear front that this reflects a timing issue tied to an active regulatory process and the review, not the change in its underlying customer demand. At the same time, we are excited to move forward with the expansion of Heterojunction, or HJT solar cell capacity in Humble, Texas.

A project we believe will be crucial not just for Toyo, but for the broader push to build a skilled, competitive U.S. solar manufacturing base. I will now turn the call over to our CSO, Rhone Resch, to walk through that project in more detail, along with the broader strategy and the policy environment.

Thank you very much, Onozuka-san, and good morning, everyone. This morning I'd like to address the Section 232 Proclamation, which as you know, is less than two weeks old, and specifically mention how it reinforces our U.S. strategy. I want to talk a little bit about our HJT expansion and our broader U.S. manufacturing platform, and then provide an update on CBP and the Ethiopia anti-circumvention inquiry. On August 6, the president issued Proclamation 11052 addressing imports of polysilicon and its derivatives. The proclamation establishes Minimum Import Prices for polysilicon, ingots and wafers, solar cells, and modules, together with an additional tariff on specified downstream products. These measures take effect on December 4, 2026. We believe the proclamation validates the strategy Toyo has been pursuing, that is, increasing our use of U.S.-produced inputs, developing a transparent allied nation supply chain, and investing directly in U.S. advanced manufacturing.

Importantly, the proclamation creates an investment-linked onshoring program that can effectively offset the new Section 232 duties for qualified companies. Under an approved company-specific plan, Commerce may authorize duty-free imports of necessary production equipment and covered products in volumes it determines are commensurate with the company's U.S. investment. The proclamation also recognizes the importance of U.S.-produced polysilicon. Commerce may vary the benefits available under an approved onshoring plan based in part on the use of U.S.-produced polysilicon. That is particularly relevant to Toyo because approximately 70% of our polysilicon currently used for our Ethiopian production is supplied by a U.S. producer. The remaining 30% is produced by OCI in Malaysia, and we are working towards 100% U.S. polysilicon at the Ethiopian facility by the fourth quarter of this year. We intend to pursue an onshoring plan initially centered on our announced $357 million HJT cell facility in Humble, Texas.

Our strategy is to use the economic value created by approved duty offsets, including lower import costs and preserved working capital, to help fund the construction and expansion of our U.S. manufacturing facilities. In the near term, eligible imports would support our operating U.S. business model, and over time, the resulting economic benefit would help accelerate domestic cell production and potential upstream manufacturing. This structure creates a reinforced investment cycle. First, Toyo imports compliant cells made with U.S.-produced polysilicon to supply our American module operations. Second, if Commerce approves our onshoring plan, the resulting duty offsets would preserve capital that can help fund our U.S. factory expansions. Finally, as those factories come online, Toyo will progressively move more cell and upstream manufacturing into the United States.

The Minimum Import Prices established by the proclamation are above recent market benchmarks for cells and modules, and we believe this framework could support a stronger and more rational U.S. pricing environment. Toyo may be particularly well-positioned because an approved onshoring plan could offset Section 232 duties on eligible imports, and Commerce may provide greater benefits for products incorporating U.S.-produced polysilicon. If approved and implemented as intended, this combination would allow Toyo to benefit from stronger market pricing while mitigating a significant portion of the associated import costs. That could improve our unit economics and support gross margins while preserving additional capital to help fund the construction and expansion of our U.S. facilities.

The ultimate financial effect will depend on Commerce's approval, the volume and duration of any offsets, market conditions, customer contracts, and our cost structure. We believe our significant U.S. investment, substantial use of U.S.-produced polysilicon, and commitment to additional domestic manufacturing positions Toyo well under the onshoring framework. Approval, eligible products, import volumes, timings, and conditions will ultimately be determined by Commerce, but the structure of the program is closely aligned with a strategy Toyo is already executing. I now want to turn to our HJT project. As I mentioned, Toyo plans to invest approximately $357 million in an advanced heterojunction solar cell facility in Humble, Texas, which is just outside of Houston. The initial phase is designed for approximately 1.5 GW of annual production capacity. We selected HJT technology because customers increasingly value its higher efficiency, strong energy yield, and performance across a range of operating conditions.

HJT also provides Toyo with an advanced manufacturing platform that can support the future development and production of perovskite silicon tandem cells, positioning us to serve evolving customer needs and participate in the next generation of high-performance solar technology. We are targeting pilot production in the last quarter of 2027 or the first quarter of 2028 and expect the facility to support approximately 400 direct jobs at full operation. We have secured the principal equipment and are advancing permitting, contractor selection, engineering, and other development work. This facility is intended to bring next-generation cell manufacturing and R&D to the same U.S. campus as our module operations. Our Houston module facility remains on track to reach approximately 2 GW of annual capacity in September of this year, building on the capacity already operating today. Together, these investments are building an increasingly integrated U.S. platform.