REC Silicon ASA

Welcome to the REC Silicon fourth quarter 2021 earnings release presentation. I'm James May. I'm the current CEO of REC Silicon. And today I have with me Douglas Moore, our new CFO, who will review the company's financial performance during the fourth quarter. Kurt Levins, the vice president and general manager of our semiconductor materials business, who will review the performance and the prospects for the semiconductor materials segment, and Chuck Sutton, the vice president of sales for FBR PolySilicon, who will review the prospects for our solar materials business. I will then cover the remaining topics on this morning's agenda. There's really no possible way that I can place the fourth quarter highlights on a slide and give each one of them adequate coverage. First, I'd like to recognize our long-term CEO, Tor Torben. He was the CEO of REC Silicon for some 15 years. He joined the company at a time when we were completing the construction of the FBR facility in Moats Lake. He helped us bring this plant up and prove the benefits of the FBR technology, then guided the company through some pretty rough times as we lost access to markets and were forced to shut down our operations in Moats Lake. Now he has played no small part setting up the circumstances which we believe will allow us to restart this facility he leaves a very large void and will be greatly missed now in terms of the fourth quarter results we generated 43.2 million dollars in revenue increased compared to 36.2 million during the prior quarter largely a result of higher sales volume evita for the quarter was a loss of compared to a loss of 3.7 million in the prior quarter. This increase was due primarily to the impact of planned maintenance activities in the prior quarter. Doug will provide additional information regarding our financial results in a few minutes. Our semiconductor materials segment, we shipped 750 metric tons of silicon gases and 481 metric tons of polysilicon. Kurt Levin's We'll provide additional details regarding the markets for our semiconductor materials products in a few moments as well. As we announced during our last earnings release, we reached a settlement regarding the indemnification loans in October. We expect to make a payment of $10.8 million prior to the end of February to resolve all remaining claims under these loans. Doug will talk about this payment specifically and the company's liquidity position in a few minutes. Finally, we completed a private placement of equity that resulted in the issuance of approximately 48.2 million shares and proceeds to the company of approximately 964 million kroner on January 19, 2022. This will be reflected in our cash balances for first quarter 2022 results. This transaction improves the company's liquidity position and is expected to give us the capital necessary to restart the FBAR facility in Moses Lake and to make targeted investments to improve our product portfolio in the semiconductor materials segment. With that, I will turn the presentation over to Doug Moore to review our financial results.

James, good morning. As James mentioned, my name is Douglas Moore, and I'll be reviewing the company's financial performance for the fourth quarter. As James mentioned, total revenues for the fourth quarter were $43.2 million, which represents an approximate 19% increase compared to the $35.6 million reported for the third quarter. This increase is primarily the result of increased sales volume of polysilicon. We're reporting an EBITDA loss for the fourth quarter of 0.4 million compared to a loss of 3.7 million for the third quarter. This is an EBITDA increase of 3.3 million when comparing to the prior quarter. This increase can be attributed to higher EBITDA contribution from the semiconductor material segment, which I will talk about next. All revenues reported by the company for the fourth quarter in the semiconductor material segment. Total polysilicon sales volumes were 481 metric ton, or 84 metric ton higher than the prior quarter. Total average polysilicon prices realized during the fourth quarter increased by 15% from the third quarter, primarily due to an increase in sales mix of higher value products. Prices for each individual grade of semiconductor polysilicon increased slightly. Silicon gas sales volume increased 3% to 750 metric tons in the fourth quarter, up from 728 metric tons in the third quarter. Feedback contributed by the semiconductor material segment was $9.3 million for the fourth quarter, compared to $1.8 million for the third quarter. As James mentioned, we must recall that during the third quarter, the company completed planned maintenance outage, which contributed to the lower EBITDA. Later in the presentation, Kurt will provide additional information with respect to our semiconductor segment. Cash balance has decreased by $15.9 million during the fourth quarter. ending at 110.5 million cash outflow from operations were negative 11 million and the result of a 1.1 decrease in working capital which consisted of a 5.2 million dollar decrease in inventory 5.5 million dollar decrease in trade receivables offset by a 1.4 million dollar increase in accounts payable The decrease in working capital was offset by cash outflows, which included even a loss of 0.4 million. Interest payments totaling 9.4 million, which was associated with payments on a long-term debt and the interest on leases. Previously received customer payments of 1.9 million that were recognized as revenue during the fourth quarter. and also contributions to the pension plan of 0.6 million. The remaining cash outflows can be attributed to changes in other assets and liabilities. Cash outflows from investing activities were 3.4 million and consisted of capital expenditures. Cash outflows from financing activities were 1.4 million and were the result of the repayment of long-term lease liabilities and the annual payment for the grant county property tax note again cash balance is decreased by 15.9 million during the quarter down to 110.5 million on december 31st 2021. Nominal debt decreased by $1 million during Q4 to $197.5 million. Nominal net debt increased by $14.9 million to $87.1 million due to the decrease in cash of the $15.9 million and the decrease of nominal net debt. I will now turn the presentation over to Curt Levins to discuss our semiconductor segment business.

Thank you. Hi, this is Curt Levins, and I'm going to cover some items relating to the market going forward, as well as our performance in the last quarter. Semiconductor wafer production is forecasted to continue its relatively strong growth rate This is a key driver for our business from both the silicon gases standpoint and that wafer fabs have a demand and therefore throughput which drives gas consumption as well as polysilicon where in wafer production drives the consumption of our polysilicon. Key demand drivers are similar to what they've been and in fact in some cases We're seeing stronger trends towards an even heavier emphasis on that application. Data, 5G, automotive, Internet of Things, as well as general electrification and electricity consumption trends. the estimated demand growth for waivers is 6.4 percent compounded annual growth rate from 21 through 26. there is something that that i would like to note though and that is that there's not in general a lot of new capacity that is slated to come on regarding wafers there have been recently some announcements However, third parties, as well as semiconductor industry analysts, have raised the specter that perhaps wafer tightness could cause at some point a further bottleneck down the line. Semiconductor-grade polysilicon for us in Q4 was a relatively strong quarter. This was aided in some senses by a pull forward from customer at their request. And this was a clear sign in terms of how strong demand is from our perspective. Price decrease, however, that is mainly due to mix effect. And not necessarily because underlying. Prices are going down, in fact. prices are increasing across the board and that will be a general trend for the remainder of this year. Demand is expected to remain strong. When we look at right now our visibility on commitments, we have a very high level of backlog and assured commitments from our customers. Approximately 90% of our production is sold out at this point, and we are working on various methods to increase our production where applicable on an incremental basis. In addition to that, we are executing on projects to increase our highest value product in the polysilicon portfolio and that's floats on we had discussed this at last quarter and work continues on that project and we hope to have more production out of that in due time silicon gases again was a strong quarter unfortunately not as strong as it could have been and this was related to the primary drag related to the logistics. Right now, global logistics bottlenecks are, in fact, affecting our ability to put product into our customers hands. And we find that the demand flow is much stronger than our ability at this point to service it. So that means that in reality, the bottleneck ends up being booking and availability of our packages. What we see right now, we see that demand is going to continue to be strong based upon our customer forecasts as well as customer commitments. In addition to that, we have very good visibility in terms of new wafer fab investments and when they're coming online and our involvement in that. We are also continuing our program that we had discussed in the last quarter about increasing our production capacity of key molecules, as well as our distribution capacity of key molecules, including our silane molecule. And this will help us to mitigate some of the effects of the logistics bottleneck. Now hand this over to Chuck Sutton.