Canadian Solar (CSIQ) 18 May 232023 Q1 Earnings call transcript

Welcome to Canadian Solar’s first quarter 2023 earnings conference call. My name is Melissa and I will be your Operator for today.

At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session.

As a reminder, this conference is being recorded for replay purposes.

to at call Canadian like Zhang, to now Director IR Solar. would turn over the Isabel I Please go ahead.

Thank you XXXX quarter Canadian Solar’s Operator and welcome conference everyone call. to first

call, slides Please Relations Investor the section. accompany note have Presentations within available provided and that today’s Canadian we website conference which Events Solar’s are on to

Guerrero, Solar’s President Shawn VP Solar; CSI Dr. in Canadian Chang, Senior are management’s Joining and after owned Energy, Yan subsidiary, us Dr. subsidiary, today formal and Zhuang, Q&A the All formerly majority-owned CEO; CFO; Corporate and Solar’s wholly Global Ismael and remarks. session Chairman participate of company Qu, President VP of Canadian Recurrent will executives Huifeng Energy.

respectively Shawn some go the go outlook, over of will after which call, Energy the CSI questions. with key Solar this have prepared and quarter, for financial business followed the will conclude will the Ismael who review the by Huifeng, remarks time Recurrent highlights for On Shawn will results. businesses, through messages Yan we’ll and a

company the Before remind forward-looking in subject well may will the that listeners as prepared Actual today, from to remarks answers Private uncertainties. their the of for Litigation is as results forward-looking differ I begin, and The risks of Securities current statements protection XXXX. that contain may to Safe that are Act Harbor management’s we contained claims expectations. statements questions Reform management’s

the with detailed XX-F report the Securities estimates unless discussion represent more annual and future update company’s management’s Form Any today. Commission. applicable in performance the the obligation on filed found can of be risks by the law. and otherwise assumes future projections to Exchange in uncertainties Canadian of as company’s these of projections required A Solar no

G accepted regarding prepared Management’s Regulation principles, within GAAP. of will requirements accounting generally or be presented SEC the remarks

investors with will performance management data and financial By should additional basis. viewed company’s with a prepared non-GAAP provide underlying on trends. for uses and analyze information further non-GAAP operational performance intends by disclosing establish Management a be and information, to certain the better operating to presented investors substitute during as in accordance both goals. provided the Some assess GAAP. a Non-GAAP measures to to information not be call GAAP non-GAAP information

Now the I would like Dr. over to CEO, please Canadian Chairman Qu. and go call to Shawn, turn Solar’s Shawn ahead.

you Isabel, us for thanks everyone. hi and Welcome today. Thank and joining

to turn please Slide Now X.

seasonally in a We very had start shipments soft We a solid what also to X.X of year in delivered revenue margin a and is gross at the billion $X.X strong worth in gigawatts module XX.X%. typically quarter. QX

one was this Importantly, of in profit. the terms Canadian Solar’s underlying net in quarters strongest history of

done in team on excellent strategy. our Our executing job has term long an

customer my continue quality, outstanding to work. I driving and build growth. on This position is We for our focus profitable to relationships. leadership high our team global and brand strengthening thankful very am their further technology, and

make is to Canadian world Solar efforts to a Canadian turn world motivation. proudly generations. across We more manufacturing X. base global in in customers our in support Asia. Slide the company we as U.S. future Please a listed the for core decarbonization with their predominantly sustainable is This work a

renewable and and have competitive solutions We competitive we premium record. energy about sourcing where as most clean product advantages, care leverage and doing some the fairly. a we and materials business track our in open advanced We our thrive commands developed technologically brand and competitive responsibly ethically, our strong of markets long treating our employees

been where market committed we example, long we partnerships. For U.S. to the have our term strongly building are

gigawatt project We as U.S. have in hours storage the some such delivered the California. X.X most iconic market, of projects in the Crimson

now we leaders solar about a industry consortium further in signed recently fields, investing we also communities. U.S. Texas in excited also We are of are XXX and power in agreement local five virtual megawatt contributing with the their manufacturing, purchase to respective

content. we recent IRA U.S. week, reviewing past domestic guidance on most have the the Over been

it As of both the demand an provides think initial chain we clean investment incentives in that energy supply supply clean the is assessment, and energy. and encouraging the to promotes capacity across guidance

continue Our position support and is deliver our to to to value customers.

customer believe that decisions in more we policy help overhang from this removes a executing Importantly, guidance move we will them plans. as make faster growth think a result, their the informed standpoint; this and

next turn slide. the to Please

me let CSI IPO. Solar comment Finally, carve-out on the

on completed numbers. and being The full financial I final the audits are have

expect CSI the next the can published the completed Shanghai the Solar IPO We few of Stock the website over weeks be before quarter. updated the on prospectus be end hope We Exchange to soon. second

me let on Yan, over please Yan, business. go our now CSI provide that, who details Solar to will turn ahead. With more

X. Thanks to Slide turn Shawn. Please

In is points improvement At QX, to level, the division solar profit significant. Solar delivered the in year-over-year. operating X.X quarter-over-quarter points module which expanded in XXX shipments our basis improvement of even $X.X billion margin represents basis revenue. and almost and CSI XXX improvement gigawatts more XX.X%, Gross profitability

profit grew operating times touching over QX. the soft XX% margin operating Our almost year-over-year five seasonally with during

proud for say not I having I’m this, and teams that quite of easy. have our was achieved to it

key me turn market dynamics. Please Let some drivers to and over Slide go X.

driver gradually. On come as we are input prices the polysilicon costs module down to of coming particularly business, the the decline, costs. solar Polysilicon expected, down, continue main is although

our coming control vertical our down, manufacturing of are in the expansion also happen processing chain. in as manufacturing costs although and year. the optimize supply of upstream the second we slower to expect half the cost mostly On is cells costs greater to With integration, gain our going ingots, side, further our over greater wafers and

Customers margin the back, due we’re the polysilicon our that to customers even although to are stronger down, steady over couple past demand all given are prices nearly gradually to there demand these moving contributing starting side, though module pricing. the see regions. across and from This and trajectory project to means positively see of many economics. also were and channels strong projects On come are in inflation years All up given up parts. starting held the market price significant we come

that to leverage in the what the trend middle. of follows rest in unit Note line, continued see a further expansion margin Europe, the U.S. between on shipping us, similar divergent for remain drive helping as and to operating chart operating shown we the costs Below the prices which the and decline gross world, profitability. in

that to we By the now, forward, pretty cost bottom while much I declines. cost terms relatively going reached shipping think will unit unit have We grow volumes, stable logistics remain relatively expect with so of it unchanged. now the means in remain should costs

Slide to turn X. Please

XXXX to be storage to manufactured previously expected product. utility a battery we utility a we scale as half small scale to third contributor communicated, own proprietary from relatively Moving onto label our business, party of our deliveries our product white storage as the project first is transition

fact From our standpoint, by execution The SolBank also led last development peak product. prices year by deliveries QX is driver. a leading a the have team preparing our demand in for and the since is fallen over year of of carbonite busy a half that of second XX%

commercial the new teams signing On our side, have actively contracts. been

$X at relationships. led market end to the and to of at expanded number Our March, the customer end by term our CSI billion grow the energy storage contracted revenues continues this billion of and long $X.X of deep January from our team understanding approximately

portfolio For follow-on example, a Blackstone announced yesterday company. Power, transaction we with Aypa a

to energy industry. from of our We with we come turnkey XXX megawatt in Since Aypa of business, as projects storage expanding and the initial more are hours, are XXX to back a has This we project collaboration. hours Power from an execution started in successful in is our megawatt relationship are Texas. typical our repeat initial expanding California been one best clients customers that after to us our the most

Slide to turn X. Please

to the we On our product. storage progress residential Cube on good EP energy continue side, make

with efficiency inverters. delivering AC capacity and continue EP to kilowatts has with kilowatt storage A of coupled under XX%. DC continuous XX deliver The energy to kilowatt power hours solo with an opportunities. of an a contract XX integrated system We solution from AC all-in-one PV growth high significant LFP-based and single X.X product hours. are both [indiscernible] is can up new storage capture just and is residential Cube The grade

designed add can see we most hours As that six nearly the is Lego-like stacks, XXX such to means up you this storage. the on households. in power kilowatts in can kilowatt effortlessly Cube for reach in This the slide, XX largest system enough This we EP product parallel. manner in more and in high can energy a than load picture output more

of cubes than each pounds, transportation and weigh the Importantly, of easier. work physical much installation the which makes XX less

installations. The commissioning within app do faster phone with in seamless is XX the could instructions. time of designed using be first it much a subsequent to installer step-by-step mobile A and EP minutes Cube

capacity XX% strongest addition, offer in the of In years, with least to cycles. or warranties market we the at XX one X,XXX up

in and embraced installer distributor we around megawatt expect to in solution and have achieve Our shipments XXX XXXX. network new our hours

again be showcasing month, in the the Munich next for Conference will and encourage yourself. it to you We see I Cube EP Intersolar at

Now let please onto pass me Ismael, it go Ismael. ahead.

Please Slide XX. to Yan. you Thank turn

Recurrent previously a April, network business. business Energy. was rebranding words to In Energy our project the global me from few say energy business. Energy Recurrent on storage our First, American development let and of utility-scale Global North solar our we development rebranded

brand. platforms the services was energy of will entire world’s our and brand and to it rebranding our goal encompass strengthen forward, The under clean of a this one unify development Going development strong global businesses. as largest

with quarterly QX a was of expected us, $XX around due timing We megawatts quarter and Japan X our performance, delivered in as revenue monetized of small gross onto to in [indiscernible]. project Moving margin. for the million XX% a projects

we the about in term inherently we developing higher such operator, we call, capture talked so the where are in a can to believe from we as on transition projects we As is and projects, certain lumpy. and which Europe continue now holding long term selling the prior as markets value proactively and U.S., donor longer

a recently, few in the a of major sale. had we’ve project While process smaller closing we quarters are

quarter we guidance. As the Shawn a largest will of the for QX on color expect Energy. more be Recurrent year the provide result, to

Next slide, please.

development storage stood solar is not XX, rather of pipeline three months. near develop region months for unchanged increases of gigawatt XX our at but last EMEA of the ago total XX from and because America reduces our weight This a gigawatts the for originate that we’ve we half number solar added As and two of and hours ceased the weight because gigawatt March in pipeline region, to the we in where battery Latin have projects. redundancy pipeline pipeline the our

gigawatts and given is pipeline of mature, energy storage interconnections. Our XX hours solar large the gigawatt [indiscernible] and especially battery of

[indiscernible] We are portfolio selective how on add the how most and being value. our we increasingly we

projects and our from pipeline advanced towards construction. also are backlog moving and projects these We focusing executing resources to

previous and America projects term, revenues Europe, seeing larger to gives management XX. short the however, Europe will one-off Energy greater This our This higher to in of is period. series the we’ve are as shifting is as towards fully Slide and America monetize start operating XXXX contracted, out such instead of the sales, markets, start sale model. Longer the cash will partially and see flows as positive to Recurrent these ownership discussed, that asset assets income. strategy of and by as be retain income XX% asset XX% flows resources recurring turn It than development we on energy also power the North aggregate in over the the lower reflected of as select we these pure the value through these to a opposed model. including under should storage visibility We increase operations in of and cash impact maintenance, projects. Please may generated monetizing XX retained such in This are as XXXX. to on XX-year and projects built North means the more that a transactions, in or projects and and execution sustainable term, means revenues; us

Now detail. in onto the Huifeng, me it results let will pass Huifeng, financial go through please greater who ahead. go

Thanks turn to Please Slide XX. Ismael.

manufacturing Gross selling Selling delivered costs previous points that average and decline XX% expenses a margin in price. offset increase year-over-year. in were quarter-over-quarter up basis was the partially by of we lower by margin revenue, XXX quarter. lower by XX.X%, distribution driven In QX after XX% sequential declined billion XX% $X.X QX, sequential

but shipping opex further room remain mentioned, further. costs. the impairment stable. declined relatively this administrative much unit expenses declines General point, and quarter-over-quarter to to the and Yan by absence don’t XX% expect due think declined is At As costs for cost there we we of efficiencies

XX% Overall, down total to in expenses QX operating Total after revenue. total QX. opex were XX% XX.X% sequentially of decline a fell in

and scale starting are to guided, economies normalizing a with we leverage previously see had we operating logistics As of cost.

to income of Net Solar foreign U.S. dollar. was net loss weaker million quarter income attributable shareholders was the the in with mainly first derivative net $XXX $XX $X.XX. Total million by million, exchange or EPS and $XX of driven diluted Canadian

sheet, cash capex. Now generated operating In flow please. million in and to cash turning approximately and $XX we QX, million next $XXX the spent balance in slide around

year billion. XXXX $X.X debt with of full approximately We capex Our unchanged ended and a healthy balance total billion. period billion $X $X.X expectation the remains at cash of

measured at excluding X.X cash Our to net stable EBITDA by debt leverage as times. restricted was

Lastly, let me the a on IPO. couple comments Solar make CSI housekeeping

successful Solar to this CSI interests. delta account investors We ownership share. and one-time increase of will for net greater or between that expect month. expect be to interests million, Solar shareholders is CSI a allocation note the total to the IPO, impact attributable we IPO-related expense the your completion non-controlling The to models be given will income that which Please greater IPO. the consider full attributable $XX income approximately Canadian the Solar incur in minority year approximately after income completion occur will the million $XX to contingent with of as June, non-controlling net in in net expected a incentive stock after Also IPO successful upon next to

me ahead. with guidance let back Now Shawn, conclude the go and pass please who outlook. business it Shawn, will to our

Huifeng. Thanks

turn XX. Let’s to Slide

Recurrent XXXX, XX%, costs, For $X.X be X.X CSI projects. billion be of of low megawatts the a billion. to expected expect Solar second X.X to to module solar module revenue to quarter further XX% range improvement including Total Gross lower is of from shipments offset range approximately Recurrent slightly ASPs. is Energy, by XX in in contribution to expected to by gigawatts, be margin to $X.X reflecting higher between margin the we solar a from Energy partially

are white shipment to label we as CSI year’s Solar’s by storage range this in be module battery For be XX reflecting Solar’s guidance the year gigawatt of full reiterate X earlier. the shipments XXXX, from of CSI explained hours, own to to between to X.X gigawatts. Yan products, to total solar manufactured XX transition expected

to our year towards of previous $X.X full expect the XXXX range. to upper between billion be billion, We revenue guidance end $X

profitable challenging to As we market business growth. market focus deliver as sustainable come strong a period, outlook continue our we out our of to position and term on are long and

Operator? the I questions. With to call would your like that, open to

Thank you. [Operator instructions]

of Our with Colin first proceed your question Oppenheimer. question. comes from Please the line Rusch with

guys. much, to two-part so related and It’s Thanks pricing polysilicon a question availability.

of pretty You’ve got a wide year. range shipment guidance for the

to how you know, is wanted margin understand would and think much how demand. understand have of poly around to supply Just to incremental actually is go as leverage - that continue the how trajectory margin of prices side. considerations related lower you the on much Then, that you love much

the question. to Yan thanks will question. this for Colin, Hi I get Yan? answer

Yan. is this Colin, Hey

the shipment have You two is the the parts One volume, volume of question. range.

year, guidance, it so For more for the that about would available capacity high a our have with is we rate I utilization capacity. actually effective question, pretty say volume

silicon gradual side, as but price with the continue continue in and down, to that same believe than the manner, price supply going module expected, will go we silicon will our improve. the are the over will cost, to year, go down down the also we price that course down and slower margin believe still but go On way margin at module that we so confident price will chain of pace we a the a

margin this on year’s on performance confident We’re whole the side.

this how fixed how sales about sales how think expense much. and that much variable basis? point, so much at should about is on expense of go-forward is sales a we and and think how side that thanks on just the to that Okay, Then expense, fixed

our about you sales the Are talking of [indiscernible]?

opex line. on Yes, the

Shawn?

Yes, Yan. so ahead,

actually--we the expenses, some expect reached the upside we Sorry. the part the on on believe believe has Q-to-Q, because downside any sales Yes, trend, and the going expense so of volume level, and low with sales also and us don’t dilute is a expenses. help is to we the cost overhead distribution actually increase will to shipping

Okay, offline. that a I’ll Thanks try to guys. lot, clarify

you. Thank

Shen line Roth MKM. Philip the question. question proceed Please with with of your next comes Our from

Hi everyone, for questions. taking thanks my

has Do the you and U.S. module manufacturing domestic about to other talk and that? outer been the can you up capacity, your around to total guidance you capacity, that cell Now what’s us talk plans? to expect released, can us content ramp timing, any and about detail

content also base? guidance of them impact adder in you Then think far utility not relates customer the as you domestic expect do pursue U.S., with the it complexities, the your to what Thanks. has of your customers or many scale module the been the ITC thus to do

Hi Philip, this is Shawn.

question. answer me this Let

Our we goes then solar what past, the in of the plan order explained the module for through upstream order cell U.S. wafer. manufacturing, as and first

think Now, with are then the is solar same on cells the guidance still going wafers. content, either solar release I to modules, which the new the domestic of follow we or solar pattern, first

We advanced our are manufacturing already. in solar plans module U.S.-based pretty

next make stay we in announcement to a please the think going while, that, while, clear little so are I about tuned.

to question they domestic content. their haven’t CSI but are intentions solar the still going to going customer. on asked new this U.S.-made truth, back to--how the far our customer yet, modules domestic waiting our for for handle feedback. we any their we off content, what haven’t That’s give to customer for purchase waiting come from question about Now To heard are still the us second we they you are but tell after we so them customer back guidance with are reaction a the to is our

that Shawn. for thanks Okay, color,

delayed more guys fund you if risk could be Then is IPO in China June, expecting U.S. that going, there process give Was it beyond to us that can you expansion like the how China with and on IPO, you’re Thanks. sounds shifting capacity that little that a wondering proceeds? color is June. to finished could be

This June, is June. China we after Shawn particular don’t delaying risk any see behind again. At the moment, this IPO of

know, always as events, even some are for market so uncertainty, always--there’s of sure. say IPOs you unexpected that we However, can’t some possibility

the manufacturing second going Now, are fund U.S. question, China through proceeds not IPO. we the the the to from

of are any in we specified For and specify projects the for with In specified we to the U.S.--no, project, going which are use The already IPO, of it fundraising market and we to IPO U.S. in your project. other have fund have words, to how going will or already proceeds plants have requirements. China, from you the stock use other some sources China manufacturing the the operating China for also cash be our funding. public

been thanks the your U.S. you through percentage back Thanks. and on module ramp overall go non-U.S., clarity to up you per the U.S. cost structure, versus Then to guys of content question, determine is for have estimated then your able Great, manufacturing that, After domestic manufacturing, adder one Shawn. as what cell? be could using Asia Southeast general. in watt and cost your content what cost U.S. you final coming expected structure guys U.S.

to want this you do Huifeng, handle question?

Hi Phil.

factory components. U.S. the the our in for all, all U.S. of will First sourcing maximize the module

to we numbers module. still working It’s are talking put the part, also moving a Second, and on we the are components the cost our within customers. to and all different of still details

for other the manufacturers few components reach out we look to U.S. goal manufacturing modules. very partially next and with strong working towards forward payment We coming new of so but and have forward module, weeks, solar very, of also our facility, customers, fund eventually they developments, to our our to the all pay are many the received the forward to willing U.S.-made interest also orders and

you. Thank

I’ll on. thank thank you pass Huifeng, you it Great, Shawn.

Thank you.

on join like As queue, one telephone a question you’d to press reminder, your keypad. please the if star,

proceed Brian your comes of Sachs. Lee question Please the with next Our question. line from with Goldman

on on Hi is My for just Brian. everyone, first guidance. Miguel the question this was

it range the - it is there, color guidance you You guidance giving just to raised business? but the thank is the the this expected hoping kept pricing, better better some you to the revenue tighten low you. What’s and get for end year battery the shipment projects timing year the of confidence on Just module unchanged.

want you’re answer to Isabel, question? master. our you this guidance Do

we guidance Isabel. for certain left upper why higher, billion number before. therefore to given of Hi higher uncertainties were point, module confidence At revenue had this to increased previously pricing unchanged, Sure. is shipment reach of we pretty range overall side. the We $X wide the Miguel, this end our and much but volume $X.X where is guidance ability we’ve of in considering the think reason that end range that billion guidance the overall the is our on the a our and narrowed previous both the and we to

that. appreciate I thanks. Okay,

a Then your touch just question on I that guidance. interpretation domestic just more to a follow-up on bit on content. the today wanted

minimum subcomponents, helping it details, the threshold. Regarding talks about and meet you if various will, customers a

things you to U.S.? if you footprint do frames, all how change would assembly, up you’re set and how new terms supply sheets, glass, U.S., manufacturing thinking module aluminum the in does the have the of in domestic Thanks. it that to like For at about were much setting up for in back

Hi, Shawn this speaking. is

I of make to a comment. First all, want

are We open minded. very

We into looking possibilities. all are

We looking the all subcomponents materials. module, but which the raw of solar other also includes includes solar are at cell

components assessing U.S. are We which be produced in can the actively

more Now want share to Huifeng, you color?

the cell the period [indiscernible], easier etc, factory, . set glass such it’s to of and all probably Yes. to the to materials as receive solar also frame materials aluminum frame all are relative especially and the aluminum time for a much while glass, solar longer permits, Actually, [indiscernible] [indiscernible] requires up,

in lot moving much manufacturers, clear. be get we’ll will answers so plenty in factories, few all these but you. also glass they aluminum not we also earlier, factories a U.S., and in next more have We of--the are to much the after so talking map be are clearer of partnerships, U.S., into IRA a them solar seeing a only published of it think regarding related I supply them will guidance the the road chain, lot Thank are so weeks, we the that

I’ll Thanks, great. on. pass Okay, it

Thank you.

you’d if star, to the one queue. press question please like reminder, another As join

Satish question line comes Praneeth Please your Fargo. from the Wells question. with with of proceed next Our

on now modules. considering the first give cell building follow-up in domestic That’s more U.S., one just long it to overseas? my build ballpark maybe question. you’re Maybe the economics a just compare capacity in plant content guidelines. the of It the sounds it how you how a maybe cell Can Thanks. to like us might U.S. takes after

very a good That’s question.

think that facility, year we facility solar the or machine selection is and half [indiscernible], before can six ground tubes I probably a XX line cell it convert in in arranged become those two machines can very facility. diffusion XX wafers, very a an modern but the for the years then tube into manufacturing machines, solar one TECBD be floor site find now cell we the example, the just it usually will vertically, then semiconductor has and permitting machine all or probably bring the above the and and and each becomes so In special; facilities for all year, and a cell to Cube take machine plus the good special. the another old could old so contains below days ago XXX and the high, years the XX-millmeter fab is will sometimes it ago, back [indiscernible] that take years building then solar

to will to years say facility supply have probably for so three from are time. line, facility convert so modern I Altogether, solar be don’t manufacturers going any I minimum cell maybe takes today’s supply, bring built it and a think to any solar buildings the everything would the online, zero. power state-of-the-art cell solar old cell of building,

got Okay, helpful. That’s it. very

versus recent capex in How be that spent can help roughly of Then guidance capex $X.X your in Is be capex expansions. understand XXXX, that XXXX us included would for that maybe that’s if ’XX? to portion you will March the spent ’XX much in of the the tied billion ’XX?

US says an maybe are billion a our is Yes, billion total. to wafer ingot in solar new It’s which wafer billion, to XX gigawatt take believe just XX it $X.X we over going I will facility. build facility. altogether, $X.X about RMB basically capex plan new

typical money in that be that spread in expect ’XX. two out machine Now, the the XXXX to would be so capex delivery, payment XXXX, ’XX because for and some and will after are machines ’XX, terms also years in spent I XXXX,

you. thank Okay,

I’ll our Thank CEO and final time gentlemen, concludes for Qu for any you. Ladies the Shawn turn back that questions. allowed to floor comments.

continued Thanks support. everyone for you. today and your thank us joining for Okay, also

you any set Relations questions a please have would our up call, or team. contact to like If Investor

and a have care Take day. nice

you. This Thank today’s conference concludes call.

You time. may you your participation. disconnect for at your lines this Thank