Q1 2024 Canadian Solar Inc Earnings Call
Yeah.
Okay.
Ladies and gentlemen, thank you for standing by welcome to Canadian Solar first quarter 2024 earnings call. My name is me 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, I would now like to turn the call over to Lino well.
Head of Investor Relations of Canadian Solar Oops go ahead.
Yeah.
Thank you operator, and welcome everyone to Canadian Solar first quarter 'twenty 'twenty four conference call. Please note that today's conference call is accompanied with slides, which are available on Canadian solar its investor relations website within the events and presentations section.
Joining us today are Dr. Shawn Qu, chairman and CEO, Dan strong, especially that of Canadian solar subsidiary CSI solar at Malibu Arrow, corporate VP and president of Canadian solar subsidiaries.
Dr Xudong, Chen senior VP, and CFO and some go to.
We'll be taking over the CFO position on May 15th 2024.
Company executives will participate in the Q&A session after management's formal remarks.
On this call Shawn will go over some key messages for the quarter, Yeah, and then the smiles will review business highlights for CSI solar and recurrent energy, respectively, and with all of those through the financial results. Shawn will conclude the prepared remarks with the business outlook after which we will have time for questions.
Before we begin I would like to remind listeners that management's prepared remarks today as long as their answers to questions will contain forward looking statements that are subject to risks and uncertainties. The company glass protection under the Safe Harbor for forward looking statements that is contained in the private Securities Litigation Reform Act of 1995.
Actual results may differ from management's current expectations and projections of the company's future performance represent managements estimates as of today.
Indian solar expense no obligation to update these projections in the future unless otherwise required by applicable law.
A more detailed discussion of risks and uncertainties can be found in the company's annual report on form 20-F filed with the Securities and Exchange Commission.
Management's prepared remarks will be presented within the requirements of SEC regulation G regarding generally accepted accounting principles or GAAP.
Some financial information presented joined the call will be provided on both a GAAP and non-GAAP basis by disclosing certain non-GAAP information management intends to provide investors with additional information to enable further analysis of the company's performance and underlying trends.
Management uses non-GAAP measures to better assess operating performance and to establish operational goals.
non-GAAP information should not be viewed by investors as a substitute for data prepared in accordance with GAAP.
And now I would like to turn the call over to Canadians Daus, Chairman and CEO, Dr. Shawn Qu.
John Please go ahead.
Thank you for whoever it was for John you add to a job for Johnny first quarter call today.
Please turn to slide.
<unk> three <unk>.
Our strong results in line with our guidance.
The first quarter of China in China before we delivered six three gigawatts.
Total module shipments.
Revenue of 1.3 bidding and improved gross margin.
19%.
As we have mentioned in the past our priority is to drive high quality profitable growth.
At times.
Low price the deals.
In a challenging environment.
Significant recovery.
Your margin.
From that of last year's first of last year's final quarter underscores our resilience.
Indeed with respect to our module business.
At a very difficult point.
<unk> cycle.
Fierce competition is creating.
In mens.
Turn headwinds for the industry.
However, I hope or see improvement in the second half as the market.
Rationalized saves.
Demand continues to be strong and we are seeing signs of improvement.
Distributed generation market search and regions.
Oil prices have stabilized.
We remain at historically low levels.
Yeah in April Julian My presentation at Harvard University.
Discussed fall advances in January.
Official intelligence.
Expected to boost electricity demand and how solar coupled a waste energy storage.
Oil you're equipped to support.
Development.
For example in the U S. A one kilowatt solar system could generate approximately four kilowatt hours of electricity daily average.
Paris with up two kilowatt hour lithium battery energy storage system. This system can shift.
A shift pop off the electricity generated yet for <unk>.
Use creating a reliable.
Controllable, Andrew just supply around the clock.
The resulting globalized cost of electricity can be slow.
Seven cents.
Per kilowatt hour comparative with fossil fuels, even without a collagen carbon credits.
AI development accelerates it is crucial that we do not compromise our climate change objectives.
Sure.
Serge electricity demand.
Sourced from clean energy.
The world is quickly evolving.
We are instrumental.
Driving this change.
Yeah.
I missed that.
<unk> industry landscape, whereas the praluent tailored strategies.
Across our increasingly diverse business.
Our module business, we are focused on achieving profitable growth.
Increasing our market share in key strategic markets.
Recurrent energy.
In the process of finalizing the Blackrock investment.
Advising our extensive pipeline of solar and battery storage projects.
At the same time, our E storage platform, yes experiencing rapid growth.
With secure a contract in new markets and enhance our proprietary technology for both utility scale and residential applications.
Next I would like to discuss our progress and achievements.
Barbara until social and governance practices.
Barbara: Please turn to slide four.
Good day differentiation our industry takes many forms.
Our customers and partners ranging from financial institutions to surface vacated project developers and utility companies.
Increasingly forecast.
E S G.
Operating trust parent entity and Tanner Barney yields substantial commercial impact and cheer leader Shannon yes.
Evidence.
And just two of our recent achievements.
Well awarded silver Radian.
Equal that is one of the worlds largest and most trusted providers of business sustainability ratings.
Canadian solar scored especially high in the environmental and.
Tenable procurement categories, placing in a pulp fives of companies right.
Barbara: Vehicle bodies in our industry.
We are also pleased to win for the second time.
Environmental Finance Green project bond of the year.
Awarded four hour.
120 million U S dollar Green samurai private placement.
The award recognizes <unk>.
Later financing strategies.
Global development business.
Look forward to sharing more details in our upcoming annual sustainability report, which we expect to release.
Barbara: Sweet.
Barbara: Okay.
Barbara: Okay.
Lastly, I would like to address the concerns regarding the recently filed antidumping and countervailing duty petitions.
Barbara: Well, we will not speculate about ongoing cases, I want to convey our confidence in the.
Phase of any political.
Any potential challenges that may arise, we have been navigating similar cases, well over a decade and time and time again, managing the risk effectively.
Half of both of our company and our customer and partners.
Furthermore.
Thailand is both.
With P. A W T O member and a market economy.
Likely faces lower ADR CVD risks.
Barbara: Our local leadership professional cross functional teams among our key competitive edges.
As a Canadian company with a plan to invest over $1 billion in new manufacturing.
The new manufacturing.
Yes.
We hope to continue playing our part.
Sure.
Long term.
Barbara: Our resilient.
Domestic.
Solar supply chain.
With that let me turn the call over to Yan.
We will provide more details our CSS solar business. Yes. Please go ahead.
Thank you Sean.
Please turn to slide five in the first quarter of 2024, we shipped six three gigawatts of modules.
Yan: North America accounting for over 20% of the total share.
Revenue reached $1 $3 billion, and our gross margin increased 630 basis points quarter over quarter to 18, 4%.
Despite a significant decrease in module prices compared to the same period last year.
And contraction in the overall profit margin of the industry.
Hi, solar still posted an operating income of $82 million.
As Shaun highlighted.
These gains in profitability are due to our deliberate management of volume and the boost from our expanding energy storage business.
While the first quarter is.
Seasonally softer our results were primarily driven by our team's disciplined execution.
Let us walk through some key drivers.
Please turn to slide six.
Yan: Our costs in our solar module business continuing to decline.
We expand our N type top count capacity.
A trend.
Fostered by the recent reduction in polysilicon prices.
Our processing costs are decreasing although moderated by plant expansions in the second half.
These include our upstream investments in lingers and wafers as well as U S manufacturing.
With increased vertical integration with <unk>.
Aim to further reduce costs and enhanced control of our supply chain.
Following the rationalization of our capacity expansion plans, starting last year, our utilization levels have remained healthy.
In terms of the market, we see demand is robust but price sensitive.
We remain hopeful of a recovery in asp's in the second half.
Yan: Although this improvement may be moderated by the availability of low cost products.
Against this challenging backdrop.
We are combining strategic order management with cost savings to navigate the market effectively.
In the rules of both solar and energy storage.
Our intensifying our investment in research and development.
Our R&D team.
Has grown to nearly 1300 members.
Yan: Our mass production top comm cell efficiency has reached 26, 5%.
In energy storage, we are dedicating R&D efforts to both upstream and downstream initiatives.
Thereby enhancing our graphs.
<unk> technology for both commercial and strategic purposes.
As Shaun highlighted we are committed to ESG principles.
And have been continuously advancing our technology and operations to reduce carbon emissions throughout the entire product life cycles.
We have received not only the French carbon footprint certification or ECS, but also the tiling environmental product declaration or <unk> certification.
Additionally, our Thailand module factory is the first facility outside of Korea to earn their Korean carbon footprint certification.
Turning to storage.
Please refer to page seven.
In the first quarter, we recognized revenue from over one one gigawatt hours of ship shipped product.
The revenue and volume of this quarter topped the total for all of 2023 weeks.
We currently have a significant backlog valued at $2 $5 billion.
Our contracted backlog reflects.
Both newly contracted opportunities.
<unk> reductions from revenue recognition.
Given energy storage as a project by project business its growth may be uneven.
Regarding manufacturing capacity of any storage.
We have not only achieved our target of 20 gigawatt hours for the year.
But also plan to expand further next year to 30 gigawatt hours in response to a robust demand.
Additionally, with our impeccable track record E storage is proud to have earned a place on the prestigious Bloomberg.
As Andy just storage tier one list for the second quarter of 2024.
This award recognizes these storage as a leader in delivering bankable and reliable energy storage solutions globally.
Finally, I am pleased to provide encouraging updates regarding <unk> detentions.
Since our first dependent in the second half of last year.
Fully cooperated with CVP to provide detailed information demonstrating our strict traceability procedures.
We're happy to share that at this point.
Majority of our bonds have been approved for release.
And now have been excluded.
In terms of the impact to our customers. We believe we have addressed associated risks homeless team their entirety.
Now, let me hand over to east meal to provide an overview of recurrent energy Canadian soldiers Global project development business.
Ismael. Please go ahead.
Thank you Jim.
Please turn to slide eight.
Since the announcement of blackhawk's $500 million.
Generally we have made swift progress.
Having secured.
Yan: Requisite regulatory approvals, we anticipate closing within the next few months.
Yan: As part of this transaction and in our commitment to enhancing.
Balancing.
Got it and R&D effectively developing.
And independent ESG strategy to guide our future growth.
In early 2024.
We joined forces with a repeatable sustainable Sharon to conduct a comprehensive double Natalia.
Our system.
Aligning with the guidelines of the European Union's corporate sustainability reporting.
This assessment.
Aims to pinpoint ESG issues that whole significance.
But our business.
Including both risks and opportunities.
As well as solid operational impact on these matters.
We remain laser focused.
Our goal of operating four gigawatts of solar and two gigawatt hours of best buy 2026.
We are focused on advancing our substantial.
Thanks.
Including approximately one and they help gigawatts of solar projects that are currently under construction.
Ashamed.
<unk> represents a significant opportunity.
And we are waiting to see this demand firsthand in our business.
We have already secured nearly 700 megawatts of Ppas with top cloud service providers that are in the process of negotiating a 100 more megawatts of Ppas.
Yan: More broadly we continue to target, 70% to 80% of our debt.
To be secured under long term contracts exceeding 10 years with top tier companies from a financial rating perspective.
Now moving on to quarterly performance, please turn to page nine.
Okay.
The first quarter was relatively modest with no major project sales.
We achieved fit in I mean since revenue with a gross margin of 33, 1%.
During this period.
We also strengthen our footprint in the Spain through a strategic acquisition.
Yan: Which other.
Over 420 megawatts of our project pipeline.
Currently.
We have projects at different stages of development in Spain, and we anticipate getting.
Our more than one gigawatt of solar projects in the country in 2024.
Turning to page 10.
Yes.
To have one of the world's largest and most mature solar and energy storage project development pipelines.
I would like to particular highlight our recent progress in the Japanese market.
Where as of March 31, 2024 hour solar on Best project development pipelines has reached.
Yan: 240 megawatts.
One seven gigawatt hours respectively.
Yan: The unveiling of the long term.
Option, our MTA results on April 26.
Yan: Represents a significant milestone for Japan energy landscape.
This is Kevin.
Our spirit new investment assumptions.
Switching technologies probes.
<unk> provides long term income predictability for projects, including most importantly battery energy storage.
We are honored to have secured three of the best projects in this auction.
93 megawatts, which accounts for 13, 3% of the total awarded energy storage projects.
Now, let me hand over to his son, who will go through our financial results in more detail.
Speaker Change: Please go ahead.
His Son: Thank you smell please.
Please turn to slide 11.
In Q1.
We delivered a $1 3 billion.
And our gross margin of 19% in.
In line with guidance respectively.
His Son: The sequential decrease in graphics.
Oh, It was Fox had a decline in solar module shipment volume and a decline in module average selling price.
Which were partially offset by higher battery storage solutions sales.
Gross margin improved 650 basis points quarter over quarter.
Due to strategic management of our module volumes, coupled with uplift from E storage.
Operating expenses declined in Q1, mainly driven by lower G&A costs go to cost cutting measures.
She can cause temporary increased due to the red Sea crisis, perhaps since the quake.
Net interest expense improved sequentially by $17 million.
Mainly driven by $19 million of interest received on Rehabs of the <unk>.
A b C D. The deposits from the solar one proceeding.
Total net income was $12 million.
<unk> 19 cents.
Diluted share.
Now onto cash flow and the balance sheet. Please turn to slide 12.
His Son: Net cash flow used in operating activities in the first quarter of 2024.
$291 million.
The sequential decrease in operating cash flow pomery, resulting from increased the inventories and the project assets.
Our total assets are passed.
Billion.
By significant growth in project assets solar policy systems.
His Son: Setting the stage for future profit generation.
In the first quarter.
His Son: We spent around $266 million in capex programs in our U S supply chain and popcorn manufacturing capabilities.
Our full year 'twenty 'twenty four capex expectation remains unchanged.
His Son: Approximately $1 $8 billion.
We ended the period with a healthy cash balance of $2 9 billion and total debt of $4 3 billion.
His Son: Should attract incremental borrowings for working capital.
Additional vertical integration for CSI solar as a wireless new product development.
Energy.
Lastly, I would like to say a few words about the CFO transition. Please turn to slide 13.
I want to thank Shah the board of directors and our shareholders with the opportunity to have extended to me over the past eight years.
Canadian Solar has now evolved into a globally, leading provider of solar and energy storage solutions spanning both manufacturing and project development.
His Son: As both our company under the World, having a ball I see my role transforming as well.
His Son: Excited to continue making impact the company.
His Son: Notably in our U S business operations through my new position as Chief strategy Officer.
I confidently hand over the reins to symbol <unk>.
His Son: I have worked closely with throughout my journey at Canadian Solar.
Confident that he will contribute to the company achieving even greater feat.
I hand, the call over to Shao, that's pause for a moment to hear from simple simple. Please go ahead.
Thank you.
I'm grateful to Sean and the company's board of directors for Entrusting me with this new road.
I'd also like to thank <unk> for his invaluable guidance and support throughout this transition period.
I look forward to working with the port and the Canadian Solar Senior management and finance teams.
Continued executing on our vision and the strategy.
During long term value for our shareholders now.
His Son: Now, let me turn the call back to Sean who will conclude with our guidance and business outlook. Shawn. Please go ahead.
Thanks, Paul and thanks, Gimbal, let's turn to slide 14.
Yes.
But the second quarter of China, and therefore, we expect solar module shipment by sea.
Sean: <unk> solar to be in the range of seven five to eight gigawatts, including approximately 100 megawatt of solar module shipment to our own project.
Total battery energy storage shipment.
Expected to be between one four to one six gigawatt hours, including about 800 megawatt hours cube.
Sean: The company's full project.
Total revenues are expected to be in a range of one five to one 7 billion U S dollar.
Sean: Gross margin expected to be between 16% to 18%.
Regarding our outlook for the later half of the year I always like to highlight four key trends.
We remain hopeful of.
The improvement in both supply demand dynamics.
<unk> levels within the industry Julian the second half.
Sean: These storage, yes expected to significantly contribute to our revenue and profitability even more so in the second half than in the first.
Our advanced.
Top car capacity will continue to ramp up in enhancing efficiency yield.
Cost to meet market demand.
Rapid.
<unk>.
Kirk.
We expect continued improvement in distribution generation market.
Sean: We have traditionally excelled.
With that in mind for the full year of China trended for we.
Adjusting CSI <unk> total solar module shipment guidance to be in the range of 35 to 40 Gigawatts.
We expect full year revenue to be in the range of <unk>.
Sean: Seven three to $8 3 billion U S dollar.
Sean: Our revised shipment and revenue forecast underscore our dedication to profitable growth.
Sean: We navigated a challenging macro environment.
Speaker Change: With that I would now like to open up for <unk>.
Speaker Change: Open the floor for questions operator.
Speaker Change: Okay.
Speaker Change: Okay. Thank.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by one on your Touchtone phone you will hear it problems that your head has been raised should you wish to decline from the polling process. Please press star followed by Q. If you are using a speaker phone. Please.
Speaker Change: Lift the handset before pressing any key one moment. Please for your first question.
Speaker Change: Your first question.
Speaker Change: Comes from Colin Rusch of Oppenheimer. Please go ahead.
Colin William Rusch: Thanks, so much guys.
Colin William Rusch: Could you talk about the pricing dynamics for utility scale batteries and what you are seeing in terms of trajectory and how that translates into margin for the company, obviously with the rationalization of the supply chain on the cell production side. There is some potential for margin expansion, but curious how you guys are thinking about that.
Colin William Rusch: Those two trajectories matching up.
Colin William Rusch: Closer to the guidance.
Speaker Change: Yes call it our <unk>.
Speaker Change: Oscar yet to provide a comment on this question alright, So hey, Collin. This is again so.
Speaker Change: Actually.
Collin: As you know that contract signing on negotiation for utilities utility storage contracts has always been like a one at least one or even two years ahead of shipping.
Collin: So.
Collin: We have been signing contracts and.
Collin: Most of our contracts are indexed over the lithium carbonate.
Collin: Pricing. So we're protected in terms of margin and this margin is healthy even for the pipeline that we're negotiating today for 2025 2026, sometimes.
Collin: Sometimes even 2027, we're still seeing a healthy margin.
Collin: So we're actually.
Collin: Safe there.
Speaker Change: Thanks, So much and then just shifting gears to the recurrent and construction Timeframes and can you talk a little bit about what youre seeing in terms of not just grid access permits and interconnection permits, but really just the construction time frames what are you seeing at the civil level.
Speaker Change: Both in the U S and Europe right now.
Collin: In terms of the cadence of that and then he can put slimness or ability to quicken the pace on those construction timeframes.
Collin: Yes.
Speaker Change: I think this question is too.
Speaker Change: <unk> do you want to comment.
Speaker Change: Sure.
Speaker Change: For the question.
Speaker Change: Yes.
Speaker Change: We are not experiencing.
Speaker Change: In the civil works.
Speaker Change: Michigan delays or anything of this week.
Speaker Change: See many of the EPC component.
Speaker Change: So what we are doing is engaging with them before.
Speaker Change: Construction has started like a year before and yet on a health before when we started doing engineering detail.
Speaker Change: So we can make sure that their teams are already by the time the ABC Pixar.
Speaker Change: It's taking nine months to be too.
Speaker Change: Site of reasonable size to 150 megawatts or so.
Speaker Change: Roughly.
Speaker Change: In Europe, it's more.
Speaker Change: Difficult.
Speaker Change: That's why.
Speaker Change: We took an action.
Speaker Change: Sure.
Speaker Change: Great I think it's a component of why wouldn't we be seeing Europe.
Speaker Change: Duane.
Speaker Change: Way more saturated.
Speaker Change: Yeah.
Speaker Change: So we acquired a company that has that own their own machines and a Christian.
Speaker Change: Thanks to that we are being able to to get reasonable timelines on execution.
Speaker Change: Something like that.
Speaker Change: Okay.
Speaker Change: Hope it helps skol.
Speaker Change: Thanks, I'll follow up afterwards, thanks, guys.
Speaker Change: Yeah.
Speaker Change: Your next question comes from the line of <unk> Satish.
Satish: Wells Fargo. Your line is open.
Satish: Good morning.
Satish: So I guess on the on the revised guidance for module shipments in 2024 still assumes kind of a sharp recovery in the back half of the year.
Satish: Maybe if you can just kind of.
Satish: Unpack the drivers the confidence level that you have in that recovery and then as a follow up.
Satish: <unk> been kind of prioritizing margin here with shipments in the first half so as you see a recovery in the second half.
Satish: You think you can kind of maintain gross margins at the 17% to 19% type of range.
Speaker Change: How should we think about that.
Speaker Change: Okay.
Speaker Change: Yes, we're still ask you into.
Speaker Change: To comment on this question yet.
Speaker Change: Alright, okay.
Speaker Change: No.
Speaker Change: We'll realize the oversupply situation, but we still believe that the demand in the second half is going to be stronger than the first half.
Speaker Change: And.
Speaker Change: Also.
Speaker Change: We're continuously.
Speaker Change: By reducing our cost on both.
Speaker Change: <unk> <unk> and the Opex and our.
Speaker Change: Top count capacity will continue to ramp up and improve.
Speaker Change: So also.
Speaker Change: We believe that the distribution.
Speaker Change: Panel, which is the DG market.
Speaker Change: In.
Speaker Change: Mature markets our recovery so.
Speaker Change: So we are confident that we can actually.
Speaker Change: Get more volume at a reasonable margin moving in the second half of the year.
Speaker Change: Got it. Thank you and then maybe just switching gears. So on the on the AI data center side, obviously, a lot of power consumption coming.
Speaker Change: I guess in the U S on the CSI solar business on the module business are you seeing any data centers or.
Speaker Change: Datacenter to developers come to you directly to start preparing for load generation later this decade.
Speaker Change: How large of a pipeline do you think this is and then do you think there's an opportunity here to maybe enter into some multi year supply contracts just given the visibility of this growth.
Speaker Change: Okay.
Speaker Change: Hi.
Speaker Change: Our solar typically deal with developers and EPC companies.
Speaker Change: And the EPC developers Lithia was the data center, so I would ask.
Speaker Change: Yes, Neal to provide some color on the data center.
Neal: Activities via Smith.
Neal: Phil.
Neal: Thank you Sean.
Phil: We are seeing.
Speaker Change: First of all.
Smith: We saw a big shift on.
Phil: We signed the Ppas.
Phil: <unk> bought the number one PPA signing company in the World right now with some awesome.
Phil: Yeah.
Phil: Very keen on keep on sign in as much as we can the top four PPA signing companies are.
Phil: I used to companies and they are engaging with us on several years.
Phil: Hi agreements to move development basically for them.
Speaker Change: Just on that expectation, so long way out.
Speaker Change: They are going to be having all this data.
Speaker Change: We had even discussing to grow funded rejoining our services to these companies because they are truly striping.
Speaker Change: To have the power they need on time.
Speaker Change: The projections that you have.
Speaker Change: For the short term.
Speaker Change: Much higher than what we see on any ultimate.
Speaker Change: <unk> you.
Speaker Change: Usually distribute it on the market.
Speaker Change: <unk> helps but.
Speaker Change: Okay.
Speaker Change: Got it interesting thank you.
Speaker Change: Okay.
Speaker Change: Your next question comes from the line of Philip Shen.
Philip Shen: Roth Capital your line is open.
Philip Shen: Hi, everyone. Thanks for taking my questions.
Philip Shen: First one is around the U S.
Philip Shen: I was wondering if you could share the percentage of revenue and shipments.
Philip Shen: From the U S in Q1, and what's your expectation for Q2 and three.
Philip Shen: Well Philip this is Shawn I'll, one hour side, so I think that the second page of therapy Thompson will show the shipment.
Shawn: America is sort of noise, 23% of in terms of a gig.
Shawn: <unk> shipments and not North America.
Speaker Change: Yes, more or less or more or less.
Speaker Change: Canada is a small market.
Philip Shen: Got it thank you Sean and so as.
Shawn: As you think about the.
Shawn: The anti circle, sorry, the 80 CVD case on Southeast Asia.
Shawn: Is it fair to assume that the mix should be the same for Q2, roughly maybe 25% and then for Q3 and four where do you expect that to go down would you expect it to increase or stay the same.
Shawn: I would expect that to be more or less trying to understand.
Shawn: Our new <unk>.
Shawn: Our new module shipment guidance is 35 to 40 gigawatt.
Shawn: In previous.
Shawn: Earning calls you asking me.
Speaker Change: What is our expectation.
Shawn: U S remains for the year.
Shawn: I believe Palma Si alternatives question was that around the 10 gigawatt hour.
Shawn: In the India.
Shawn: Last earnings call.
Shawn: Ron.
Shawn: Around 20%.
Speaker Change: Okay, great. Thank you Shawn and then from the 45 X standpoint.
Speaker Change: Sorry, if I missed this but did you guys sure.
Speaker Change: Fit in Q1 can you share.
Speaker Change: Well, what it was and then what you expect in Q2 and three.
Shawn: Well the photo acts.
Shawn: And here is for U S.
Shawn: <unk> production.
Shawn: We're still ramping up the U S factory, so the Q1.
Shawn: Shipment.
Shawn: The musky factory, yes.
Shawn: Still a small insignificant compare with all.
Shawn: The total.
Shawn: <unk>.
Shawn: 613 gigawatt now from Q2 onward or see hopefully.
Speaker Change: From Q2, our overseas took a different numbers, so I would be more than happy to share.
Speaker Change: To address this question again.
Speaker Change: No.
Speaker Change: Three months.
Speaker Change: We report Q2.
Speaker Change: Okay, great. Thank you Shawn.
Speaker Change: Okay.
Speaker Change: Your next question comes from the line of Brian Lee with Goldman Sachs. Your line is open.
Brian K. Lee: Hey, guys. Good morning, Thanks for taking the questions.
Brian K. Lee: I might have missed this but.
Brian K. Lee: Could you.
Brian K. Lee: Give us a little bit of color behind the gross margin guidance for two Q I mean, you had a really solid.
Brian K. Lee: This margin result.
Brian K. Lee: Q1and it sounded like battery storage as part of that so why are gross margins being guided down into Q. Despite the higher mix of battery and then you even mentioned some lower costs on the modular side and you have higher revenues. So just wondering what's driving the lower gross margin view and looked at <unk>.
Brian K. Lee: I believe our Q1 actual gross margin.
Brian K. Lee: Exceeding it.
Brian K. Lee: Guiding ranch.
Brian K. Lee: On the top of the guidance range. So.
Brian K. Lee: Hope in Q2, we can also do better than we guided.
Brian K. Lee: Provide a guidance.
Brian K. Lee: Do it according to the current numbers and.
Speaker Change: It's difficult.
Speaker Change: To be so accurate so I would say.
Speaker Change: I'm not going to say, the 16% to 18% guidance yes.
Speaker Change: How much lower than our 19%.
Speaker Change: Actually realize alright, I will say that's the same range.
Speaker Change: And talking about the cost indeed.
Speaker Change: Cost of solar modules.
Speaker Change: Materials, especially the silica related materials pointed out again in the past.
Speaker Change: A few weeks.
Speaker Change: However.
Speaker Change: Maybe in some other markets.
Speaker Change: Good.
Speaker Change: Some of the low end market.
Speaker Change: Right.
Speaker Change: Moved out as well so that's why we are.
Speaker Change: Our cautious in modeled in our gross margin for Q2, but as I said I hope we can report.
Speaker Change: <unk> number than what we guided.
Speaker Change: Okay. That's helpful. Sean So maybe some conservatism baked into that.
Sean: If we drill drill drill down into that a bit more than.
Speaker Change: Can you give us a sense for.
Sean: Gross margin expectation, you're embedding for the <unk> guidance for solar modules versus the gross margin.
Sean: Are you embedding for battery storage just in the <unk> guidance and then.
Sean: What.
Speaker Change: What do you expect for gross margin cadence for both our various product sets within CSI. So the second half.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: And to.
Speaker Change: Provide.
Speaker Change: Colors.
Speaker Change: <unk>.
Speaker Change: On this details.
Speaker Change: Alright so.
Speaker Change: On the gross margin, we don't separate them.
Speaker Change: We don't disclose the separation of the margin, but I can tell you in the previous debt costs, we mentioned about 20% around 20% for utility scale storage.
Speaker Change: So on the module side as Sean has mentioned.
Speaker Change: We try to be.
Speaker Change: Conservative because we try also to sell more in the in Q2 so.
Speaker Change: So we try to.
Speaker Change: Scrap more volume while achieving.
Speaker Change: Healthy margin.
Speaker Change: Let's see.
Speaker Change: If we can do better.
Speaker Change: So moving into second half.
Speaker Change: Uncertainties for second half I have to say, but we all know that is not going to be worse than first half. This is our back our belief and we're confident that we actually continue to improve on both cost and quality of our capacity and especially.
Speaker Change: We have strong confidence in our storage business, which is getting.
Speaker Change: Significantly stronger in the second half so.
Speaker Change: Also we're seeing aside from the distribution channel in U S Europe and Japan are.
Speaker Change: A bouncing back on both pricing and demand. We're also seeing new markets are actually growing faster.
Speaker Change: So.
Speaker Change: So that is the OXXO also somewhere that we can grow.
Speaker Change: So.
Speaker Change: I think I hope that answer your question.
Speaker Change: Okay Super helpful. I'll take the rest offline. Thank you.
Speaker Change: There are no further questions at this time I will turn the call over to the management. Please continue.
Speaker Change: Yes.
Speaker Change: Alright, Thank you for joining us today and also thank you for your continued support.
Speaker Change: Any questions.
Speaker Change: I would like to set up a call.
Speaker Change: Please contact our Investor relations team take care and have a nice day.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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