TOYO Co., Ltd. (TOYO) Q2 2025 Earnings Call Transcript

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Overview

The earnings call reveals several concerns: a decline in gross profit margin, increased operating expenses, and a significant drop in net income and EPS. Tariff challenges and raw material costs further strain financial health. The market strategy faces risks from global supply chain dynamics and integration challenges. Despite some growth in solar cell deliveries, the financial outlook is weak, with no positive shareholder return plan. The Q&A section did not alleviate these concerns, indicating a likely negative stock price movement.

Key Financial Performance

Solar Cell Deliveries 1.6 gigawatts in the first half of 2025, up from 985 megawatts in the same period last year. This increase reflects a significant growth in production capacity.

Revenue $139 million in the first half of 2025, a 0.7% increase from $138.1 million in the same period last year. The increase was due to the positive contribution of the new solar sales line in Ethiopia, which began in April 2025, offering more attractive pricing and margin opportunities.

Cost of Revenue $160 million for the first half of 2025, compared to $111.4 million for the same period last year. The increase was attributed to higher raw material costs.

Gross Profit Margin 16.6% for the first half of 2025, down from 19.3% in the same period last year. The decrease was due to the increasing unit cost of raw materials.

Total Operating Expenses $30 million for the first half of 2025, a 219.9% increase from $4.2 million in the same period last year. This was driven by higher sales commissions from new customers and increased expenses related to managing new facilities in Houston and Ethiopia, as well as public company costs.

Selling Expenses $3 million for the first half of 2025, compared to $40,000 in the same period last year. The increase was due to higher sales commissions from new customers.

General and Administrative Expenses $11 million for the first half of 2025, compared to $3.8 million in the same period last year. The increase was primarily due to expenses related to managing new facilities in Houston and Ethiopia, and public company costs.

Non-GAAP Adjusted EBITDA $23 million for the first half of 2025, compared to $33 million in the same period last year. The decrease reflects increased operating expenses, reduced sales volume to the U.S. market, and changes in fair value of contingent consideration payable related to earn-out shares.

Net Income $4 million for the first half of 2025, compared to $19.6 million in the same period last year. The decline was due to increased operating expenses and reduced sales volume to the U.S. market.

Earnings Per Share (EPS) $0.10 (basic and diluted) for the first half of 2025, compared to $0.48 (basic and diluted) in the same period last year. The decrease was due to the same factors affecting net income.

Cash and Current Restricted Cash $30 million as of June end 2025, compared to $15.1 million as of December end 2024. The increase reflects improved cash flow management and operational performance.

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Operating Highlights

Acquisition of VSUN brand: TOYO acquired the VSUN brand from Vietnam Sun Energy Joint Stock Company, streamlining operations and enhancing market credibility.

New solar cell manufacturing facility in Ethiopia: The facility is operating at full 2 GW capacity, with plans to double to 4 GW by October 2025, offering cost advantages and green power.

Trial production in Houston, USA: TOYO commenced trial production at a new module facility, aligning with its 'Made in USA' strategy.

Expansion in U.S. market: Leveraging the VSUN brand to strengthen relationships with North American utility-scale developers.

Strategic redirection of Vietnam operations: Output redirected to high-growth markets not impacted by U.S. tariffs.

Revenue growth: Revenue increased to $139 million in H1 2025, up 0.7% from the same period last year, driven by Ethiopian operations.

Cost and margin changes: Gross profit margin decreased to 16.6% due to higher raw material costs, while operating expenses rose significantly.

Integration of VSUN brand: Consolidating VSUN brand, sales channels, and customer base into TOYO for a unified organization.

Production and revenue guidance: Projected solar cell shipments of 4.2-4.4 GW and revenue of $375-$400 million for 2025.

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Risk or Challenges

Shifting Tariff Structures: The company faces challenges due to shifting tariff structures, which could impact cost structures and market competitiveness.

Global Supply Chain Dynamics: Evolving global supply chain dynamics pose risks to sourcing and production strategies, potentially affecting operational efficiency.

Raw Material Costs: Increasing unit costs of raw materials have led to a decrease in gross profit margin, impacting financial performance.

Operating Expenses: A significant increase in operating expenses, including selling and administrative costs, has reduced profitability.

U.S. Tariffs: Elevated U.S. tariffs have led to a strategic redirection of output from Vietnam to other markets, potentially limiting U.S. market growth.

Production Expansion Risks: The company is expanding production in Ethiopia and the U.S., which involves risks related to execution, cost management, and market demand alignment.

Integration of VSUN Brand: The integration of the VSUN brand into TOYO's operations presents challenges in streamlining operations and maintaining customer confidence during the transition.

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Guidance & Outlook

Solar Cell Production Expansion: TOYO is expanding solar cell production at its Ethiopian facility to achieve a 4-gigawatt run rate by October 2025. The company is also redirecting output from Vietnam operations to high-growth markets not impacted by elevated U.S. tariffs.

U.S. Module Production: TOYO is taking a measured approach to expanding its module capacity in the U.S., aligning growth with sourcing strategy refinement and disciplined investment allocation.

Revenue and Shipment Projections for 2025: TOYO expects to exceed its previous guidance of 3.5 gigawatts in solar cell shipments, projecting approximately 4.2 to 4.4 gigawatts for the full year 2025. Revenue is anticipated to range between $375 million and $400 million, with projected net income between $39 million and $45 million.

VSUN Brand Integration: The launch of U.S. production marks the beginning of a strategic consolidation of the VSUN brand, sales channels, and customer base into TOYO, creating a unified organization to deliver high-performance solar solutions.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:As the Ethiopia facility reaches scale and Houston production comes online, do you see any way where gross margins start trending back higher up to where they were in the first half of '24? Or are some of these tariff-related costs putting a cap on that?

A:The gross margin decreased slightly for the first half of the year due to two main reasons: (1) A change in the product destination blend, with shipments to the U.S. dropping from over 80% last year to 44% in the first half of this year, which affected margins. (2) The ramping up of production in Ethiopia, which led to higher overall costs as the cost structure was still being refined. The company hopes to see gross margins return to last year's levels through efforts to refine cost structure and sourcing strategy.

Q:Review of Unclear Management Responses

A:No questions were avoided or lacked clarity in the responses provided.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

TOYO Transcript

TOYO Co., Ltd. (TOYO) Q2 2025 Earnings Call Transcript

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TOYO Report

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