Canadian Solar (CSIQ) 22 Aug 232023 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to Canadian Solar Second Quarter 2023 Earnings Conference Call. My name is Melissa, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session.

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

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

quarter everyone have the we slides Events website, on to call, section. Canadian welcome Canadian note conference provided and today's and are operator, call. Please Presentations you, Solar Thank within second which XXXX accompany Solar's conference that Relations to available Investor

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

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

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

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

presented Principles within GAAP. of will the Accepted Accounting SEC remarks or regarding G Management’s Generally requirements prepared be Regulation

to be will underlying to GAAP further during basis. additional the certain a Some non-GAAP disclosing information provided investors and call By analysis company's and intends a information on financial performance trends. presented provide management with both the information, of permit non-GAAP

non-GAAP be information investors assess substitute in better by and as goals. not for to should uses operating accordance to establish viewed Non-GAAP data a operational GAAP. Management measures with prepared performance

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

turn of record Thank with We Isabel. Please operating Welcome and gross you module at us delivered you, XX.X%. in achieved financial thank results revenue everyone. XXXX. of to We for shipments X.X X. margin quarter and second Hi, the joining strong billion and gigawatt Slide today. in $X.X

for diluted net per delivered we income share. or $XXX million Canadian record Importantly, $X.XX shareholders of total (ph) Solar

more X. Let our Huifeng in Slide me share few QX and performance Isabel, Please messages to review turn Yan, a before key detail.

First, efforts this Shanghai Exchange of we Board. Solar for goal. team major completed to their Power entire the would successfully our thank Stock This IPO CSI subsidiary achievement, our like in on a I and reaching the was

more This and in knowledge integration long-term drive shareholders. cost of to our (ph) raised Investor and value million support funds we (ph) latest vertical building be investments to in energy target. including will demand solar across businesses, for approximately further our plans used are improvements. and example XX% growth company proceeds, our than was $XXX we storage both strategic strong original tech and gross These the how is our the

Slide Please X. turn to

in X,XXX end gigawatt annual over expected $XXX skilled with U.S., position module the begin of million. production in our Reduction once the Second, a Production we near one strengthen jobs In under an announced we Act, This output PV the establishment approximately to created the while ramped our Texas. of backdrop of of to June, core competitive up. represents markets. is facility Inflation this investment of have the and X plant an continue solar fully year of

on are efficiency of we gigawatts embarking modules. module to We a proud N-type such supply as initiatives Renewables, signed high EDF X these be multi-year TOPCon of growth with agreement partners solar with whom long-term

We expect the many important be this to first partnerships. of

in also continue position to the in our We market solidify project U.S. business. development downstream

Recurrent Papago. over and on the services its for focus is how storage standalone will Papago Arizona. be developing battery of example the each same long-term some more the supplying lifetime. team valuable project solar energy great time, another This in including the gigawatt equipment we integration Energy is our of project At hour and services most capturing of value the storage e-STORAGE projects, X.X

build X.X projects with gigawatts storage in We market, over Likewise, of we'll of energy in the on [Technical PV U.S. XX% which competitive the in pipeline the also the particularly gigawatt of pipelines significant advanced potential in energy our U.S. of cited to IRA have interconnection and development in are our communities. communities. X see XX% Difficulty] passing solar sited we Of of continue our are agreements, U.S., after

Hello, am Hello? still I online?

on. you're Shawn, still

We the IRA. Okay. And continue to we'll see U.S. of in market, build on passing in this market. I'm the and significant potentially, competitive record the All right. potential online, track our still right? position particularly after

we transparent systems Sustainability Solar's a every ethics in of would aspect made a ESG Slide Canadian few our year, to X, to as improvements to weeks integrate will Lastly, I the account and and report ago. latest of This sustainability which We into business. like efforts serve Report, our our significant published Annual turning disclosures. we highlight hope

and certifications. example, our ESG significantly expanded For we international participation in initiatives

of UN Nations' United Committee Sustainable I to and adhere Nations and We the Principle Development, are on now UNGC and Global labor, and United Goals to the the support joined rights, XXth recently of anti-corruption. Compact recently the Sustainable Development human joined supporters environment

SBTi, to science-based This We initiatives. -- intention the also submitted our commitment our -- climate near-term Science-Based net to or letter indicates our track Targets zero target.

have those having unnoticed, well Prime Achilles. received or Services, of excellent an operations, Shareholder our that I'm suppliers, also ethical that as these to from gone as our a ensure from follow practices. Institutional ESG ESG labor We and continue rating not efforts rating ISS own grateful

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

sharp XX.X%, $XX costs. raw included $X by Thanks, in Slide $X billion division In margin down X.X Without and Shawn. Please This solar we're in write-down, was material Solar been This the decline driven would is a first write-down, million of revenue. crossing margin billion QX, the mark. Gross module points percentage quarter, CSI it's quarter-over-quarter. shipments X.X delivered X. a time the the XX.X%. around turn to the gigawatt record as gross inventory have

key numbers. turn Please X. Slide these go over the drivers to me behind Let

while This polysilicon. to optimal of quarter, see cell last nearly declined prices that a wafer First, XX have significantly XX much the as that capacity you with prices year was can gigawatt fallen shipments. XX ended cost cell we gigawatt our as Note polysilicon integrated of non-vertically standpoint. gigawatt module means capacity during from expecting not the most that despite and not

up. We're our procurement in order this ramp second order half and up meaningfully to margins we our before as cell meantime, cells to capacity In third-party are improve working cell restricting ramped in protest of we the of -- to is wafer XXXX. fully protect capacity in the

the generation higher module factor, market is and usual, mainly are the segment led just Second, most specifically sector. has was and which inventory This residential regions, in the the perhaps across driven levels that to decline is Overall larger distributed destocking. than prices. by

to as is the once see complete. in segment the expect destocking through improvements DG half We the second move we of XXXX

destocking, even over to prices demand the paused delayed we second has delay damages customers the long We to given or through for based before to some we the few they be remain previous Despite eclipsed we weeks. pricing of only we And declines. strong already polysilicon improve the starting orders, are just volatility utility term, nearly past we also and rebounding scale the Near incur pricing across half market start saw confident the on mentioned, sharp 'XX. see every the can the see Projects market. levels. move very I've given near-term pipeline in market as so development factors and expect liquidated the

our once in in been logistic from Third, costs to ourselves protect to lower continued also costs by contracts lower We've locking in logistics are QX, driven mostly they any shipping decline China. market already see we our nearly higher profit with year-over-year operating leverage, into improving. increase margins the moving Combined doubled as our gross QX, operating Actually that are rebounds. to the $XXX million.

further So moving expect we improvement. into QX, a

Slide e-STORAGE new brand, quarter X. rebrand under bookings. scale of believe made to million more we In our our approximately $XXX clearly which to second XXXX, decision business. turnkey new Turning we articulates storage We and signed in utility the our the business strategic

billion, of long-term a As contracted had service agreements. including backlog end $X.X the under QX, of of contracts we

into a the second in planned We ramp products. as own our expect complete manufactured from of will significantly product our transition we up shipments half XXXX white-label

given and pipeline, just the to become three growth XXXX. believe achieving impressive our e-STORAGE in I'm Importantly, business a team very such bookings in billion our firmly we years. total gigawatt of of proud XX is e-STORAGE on hour for $X track

overview pass me go to development Recurrent global let Ismael ahead. Now, Energy, the call of Solar's project an business. for please Canadian Ismael,

revenue In Thank project $XXX Japan. our delivered million flagship sale by driven Kofuji QX, XX.X% Slide gross to we XXX Please with in you, the turn mainly megawatts in margin, Azuma XX. Yan. of a

in profit. terms As was and previously largest QX our guided, quarters one of of revenue

can several term, long our opposed executing the specifically the going as projects of U.S., we monetizing be as believe in next the by We of short capture them are projects efforts asset where now owner and to Europe over we value the to particular, more and term. higher hold building operator. in remaining them gigawatts concentrating immediately long-term to quarters, we are few In on

to turn Slide XX. Please

solar at hours As gigawatt pipeline storage total projects. XX, and of our gigawatts XX for stood XX for battery June

more pipeline strong for mature next a execution as us the selective more few originating growth years. visibility our being are in and current PV is over pipeline give and We significantly

solar we positioning. ahead remain of the the originate projects, terms where reliability side, On focusing We continue to high. relatively understanding on penetration industry risks regions high is and market record, also in far grid of track are project and

we confident pipeline very company increased execute are on the build that shareholders. to this value for and We can

turn XX. to Slide Please

to players competitive years, in driven PPA capital, and the clean secure sources. prices and Demand new have been as due who electricity the large in of which reliable strong well very influx few attracted past inflation of we've Over economics combined to seen needs cost CapEx interest by increases were as significant has the through higher. costs

XXXX, SBTi Yet projects at the in of than end has companies lineup the growth a greenhouse three number gas this more emissions. XX. companies, of grown than to years, According market to X,XXX quality have data, remain to good publicly over pledged the XXX their of Less reduce scarce.

projects. Over the Recurrent over X years, signed Energy of reconstruction PPAs three in stage gigawatts past late

X.X advanced approximately have we of gigawatts projects addition, are in term. expected that to PPA U.S. for the in longer and In Europe held contracts negotiations be

clean U.S., ability market the an XX%. among the long-term Shawn of approximately X high-quality allowed positioning solar successfully which example, PV the mentioned Taking to agreements, we of U.S. to and energy are to raise U.S. X.X us has PPA assets with in prices energy have development interconnection of over earlier, communities. as XX% XX% sited pipeline gigawatts as our projects in And by develop gigawatts

will monetize In storage significant gigawatt Papago communities. projects. storage the in the electricity surge Arizona Thanks expect pipeline signed includes standalone the This in which a also to IRA, our X.X energy of addition, demand. part project of to our meet the of hours, in XX% the cited state is advanced U.S. in recently help we in ITC

IRA more serve to them continue support like to flagship execute relentlessly we and needs. these deliver will and to projects expect our to We customer on the work

to who on detail. financial the through go Now, it please let Huifeng, me more Huifeng, results will ahead. in pass go

was Slide Ismael. year-over-year. XX. small basis in XX% Please X% sequential an by by due been the margin ASPs quarter-over-quarter a high up and we margin Gross material points. turn $X.X XX.X%. sharp offset the Without decrease write-down project margin QX, margin and delivered XX.X%, Thanks, write-down, was to revenue, up sales. raw billion of have gross X to In driven costs, lower inventory would inventory in decline Gross

and quarter-over-quarter, expense were to significant increased, shipment General expenses a million decline leverage the flat expenses share-based our reflecting CSI IPO. to in the administrative Solar further despite in $XX distribution costs. compensation due volume, unit operating and related mainly and a Selling increase logistical

of We the quarters. million $XX coming expect IPO remaining the expense to roughly over amortize

$XXX million, as derivative the at to of diluted driven OpEx, the EPS scale the Total of net Overall, second income growth our we $XX Canadian relative net The income in dollar by shareholders revenue million, outpaced stronger to XX% with the increase $X.XX. U.S. million, Solar Chinese far quarter and business. leverage mainly the was in RMB. or greater gains $XXX foreign in achieve XX% attributable was exchange net operating and

flow Now cash turning sheet. to balance the and

we in generated in $XXX Next a slide, million QX, CapEx. $XXX and million approximately around please. In operating spend cash

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

as measured cash, lowest was times, has excluding restricted net X.X many to been leverage, the EBITDA years. Our it in debt in at

imagine, we increase can cash the IPO expect slightly more you normal towards Solar to As deployed projects the a and raised towards CSI have growth level. the from future therefore, leverage

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

Huifeng. Thanks,

Slide turn XX. to Let's

X.X to be in $X.X Recurrent to the gigawatts, approximately third Energy projects. quarter $X.X of we range the a revenues of to are megawatts of gigawatts expected shipment expect to Total to including Solar For solar XX CSI be billion X.X in range module billion. by XXXX,

expected margin Energy in margin XX.X%. reflects Gross to CSI from QX. XX.X% improvement comparing to contribution between is This to offset Recurrent lower be a a by Solar,

For solar product. shipment X this total label in Solar's gigawatt module to shipment Solar's full year gigawatt XX XX X.X and reiterate between year's gigawatt a storage gigawatt to transition CSI XXXX, be of to range white battery manufactured be from representing hours, CSI to to own the we of guidance

decline is module year to expected mainly solar between Full the to due $X be XXXX billion, revenue billion $X.X to prices. rapid in

IPO CSI lasting our to subsidiary, help our create successful growth Solar remain highly achieve Canadian and sheet will While and Solar's we for competitive, global will brand balance strong of position industry the expect profitable shareholders. value

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

first Thank with you. comes proceed [Operator line your from the Brian question. question Sachs. Our of Goldman Please Lee Instructions] with

questions. the margins you I guess, Appreciate which for the the on numbers, question time. for was Solar? one, are you're if Solar expected presume gross I guidance first specific CSI the it XQ? of the to adjustment? guidance if have for Solar How think gross you're guidance And additional normalized not, then but, any guys. said ex you QX the that in in adjusted margin would margin Hey, CSI XX% adjustments I would trend inventory how I the Thank sort not wasn't relative the you taking you look just here. know the not, relative giving in is margin to margins printed in QX gross two, XQ, assuming adjustment. you're CSI to number

any QX. Yeah, We answer expect I'll adjustment inventory Brian. your question. for don't first significant

let Now, Yan? your I would to comment on Yan second question.

Hi.

I the most going CSI is Solar. revenue in So QX, come to of think from

margin improvement for So CSI margin really for provided Solar. that it gross indicates gross we the QX, that of

Okay.

adjustment. is I I mean, did So, the midpoint, Okay. [Multiple the midpoint you Speakers] the after guess, XX.X XX the XX.X and

here? So you're maybe it's inferring flat what bit to down is a little

Yeah.

visibility of this out given year, to ASPs multiple and lot guys Fair Okay. where in for maybe then there. kind CSI I And XQ, QX looking environment sense also you see enough. how advance, for trending you've you of quarters pricing just a know because activity maybe already declining have into beyond then in if started early and you in margins Solar next quoting -- book

It's a Yan. for big question

to You first? comment want

residential and demand, all, DG so Yeah. in has down come since Well, will market especially almost agree I first that market, everybody really that QX overall demand the much the both of QX stronger, would globally. think, been includes the

mentioned that as So destocking, the about. after we

to QX it scale into to And well. as happen going is QX, utility in back. rush Moving going is come

very strong So we're a going demand. to see

upstream that cost. rebound so of And certain cause may

capacity, the ramping up high are in because rapid at price staying TOPCon cell of until cell been observing a and QX time, has now. we same However,

we're to QX, industry. in into see significant moving sales -- supply So more going supply more the TOPCon on

have storage in in going QX. volume second it's So of we Canadian -- going also rebalancing going we're to start be we see Solar but be specific, are QX, to time, it's in be projects. improvement. we think pipeline for utility going a chance -- to uncertain although, scale going That's And see to is ship a half. we a Most to of that to but for

So, I worst have passed. may the think

on. and capacity ship if December? but from what's enough. I on 'XX, to XQ plan it and linear the TOPCon what on missed Okay. And maybe speak ones pass think you am update Fair I And late, see I also, to from -- one-third that? I'll did March of maybe we to reading XQ press delayed you. expected I is if how or then maybe cell should going provide module the any two it, last expansion that Thank Is and to the 'XX so XXXX as release volume to jumped Could ramp driving technology? the be the model correctly. I it you you

Yeah, delay project. cell solar Brian. This any is didn't Shawn. We of our

Also now, only quite right tubes equivalent but quartz of the example, not supply the tubes, crucible However, crucial tight. is parts, quartz the quartz for the is supply some tight. also

are switching So I There on moving But target -- our people are balance, say. PERC same. some to from release is still would TOPCon. the

We to we speak. TOPCon up XX XX gigawatt are about ramping of gigawatt as

right (ph) now. We close PERC to XX of have gigawatt capacity

And up XX gigawatt I gigawatt speak. said, XX as TOPCon we we Yes. as around to ramping are

capacity project, TOPCon that, we -- finish project. gigawatt plan So we will TOPCon. our XX also after will that And we project, once two-thirds ramp-up, be of another

see linear, altogether -- TOPCon. -- gigawatt facility, those of a it's complete of machines. to you why XX not so It's not because XX once that's you install gigawatt by end around by start year, we And next to ramp-up, the

bump of a a see so And the then leap once tuned cell capacity. up, are the of machines you will the --

shipment higher. QX. to higher QX, in much QX is TOPCon also going than therefore, the is be significantly And, And TOPCon our in Yeah. capacity

is it jump a mentioned, it's linear, not Shawn as in a So QX.

for Thanks the I'll color, all it pass Okay. guys. on.

with comes Thank with next proceed your the Instructions] from Roth Our MKM. you. question. line Philip Shen Please [Operator question of

guys. the is on This questions. Matt Hi, Thank for taking for you Phil.

First, the CBP expect topic then have that in wafers decision? modules 'XX? I U.S. where U.S. year, just facility? make to wafer your And facility secondly, eventually for what shipping you take any wanted there ask the are to of have module on plans market that you cells this source by and it cell announced, to and have that And to the for U.S. been detained guys different then when to a do would and

is I'll In detained by to of this and Shawn. we any States. Thailand use United the This And haven't in to Matt. facility question. Yeah, we the we our facility County of Dallas, answer solar looking Mesquite, factory of factory the solar modules -- will are XXXX, second, had the our CBP. in cell cell supply into

Thank there. color Okay. it along. pass for the I'll you

Thank you.

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

guys. year the forward? much trend a you to us you give shipping balance go going of of through so as how are think operating and SG&A, Could about if full Thanks sense the leverage impact we on the the expenses the the

comment Yan, this question, you shipping impact want on do the Yeah. on to its SG&A? expansion and full

Yes.

the we shipping So came space contracts we're -- stabilizing. to may is low as long-term cost. lines And some up, I mentioned QX most and signing some secure in at the -- and QX, shipping in down we're actually, of lines stabilizing before, as costs mentioned go kind are

will that at our cost believe level. remain lower we a So shipping

SG&A. So we're help to continue on helping our --

look then with rest that of or design your Can development right evolution how of cadence are are pipeline that perspective, the battery really of to happening incremental talk is the in point be at ongoing on offline. focus from kind future design of implemented pack as design this about and your you chemistry pipeline R&D, evolution being perspective. locked and there's what effort. going awful and and now the an take at much products changes on you you well product side, and chemistry as And or battery I'll Okay, as a R&D lot

Yeah.

mainly batteries As storage -- to the batteries system. the our energy LFP you know, (ph) we strengthen battery use use LFP

product and products. our -- we the main are killer is new hour SolBank, product, the developing X now right Our megawatt

not will new releasing yet, safety. much power higher higher are new much the we the but but Now, spec product have density, also

the battery of in we so, chemistry. in believe lithium And the terms chemistry,

are So products. we're developing -- on for major change but not design new the yet, we chemistry looking develop and any

Thanks guys. so much,

Thank you, Colin.

I'm any floor to Thank Solar's the Shawn Instructions] Qu. CEO, questions. will Canadian turn not other Please showing you. go [Operator time, At this back Dr. ahead. I

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

you summer If have Investor set would or please of like great a and up and questions take other you. a call, good rest our Relations Thank contact have care. the team to any

Thank you. concludes This today's call. conference

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