Q2 2024 Canadian Solar Inc Earnings Call
Operator: Ladies and gentlemen, thank you for standing by.
Speaker Change: i
Operator: Welcome to Canadian Solar's second quarter 2024 earnings conference call.
Speaker Change: ladies and gentlemen thank you for standing by welcome to canadian solar second quarter two thousand and twentyfour earnings soference call
Operator: My name is Rob, and I'll be your operator for today.
Operator: At this time, all participants are in listen-only mode.
Speaker Change: my nameis rob and i'll be your operator or today
Operator: Later we will conduct a question-and-answer session.
Speaker Change: at the time of difference are listen ally mode later we will conduct to question and answer session as a reminder this conference is being recorded for replay purposes
Operator: As a reminder, this conference is being recorded for replay purposes.
Operator: I would now like to turn the call over to Wina Huang, Head of Investor Relations at
Speaker Change: i would now like to turn the call over to lena hong ahead of investor relations at canadian solllar please go ahead
Operator: Canadian Solar.
Speaker Change: thank you oer your and welcome everyone to comitteans so word second quarter twenty four call ton call theyase note that today's conference call companyies s which are available on canadian the lower investoral relation website within the events and presentation section
Operator: Please go ahead.
Wina Huang: Thank you, Operator, and welcome, everyone, to Canadian Solar's second quarter 2024 conference, call.
Wina Huang: Please note that today's conference call is accompanied by slides, which are available, on Canadian Solar's Investor Relations website within the events and presentation section.
Wina Huang: Joining us today are Dr. Shawn Chu, Chairman and CEO, Yan Zhuang, President of Canadian
Sean: puting up today are do sean to chairman and eo
Wina Huang: Solar's subsidiary, CSI Solar, Ismael Guerrero, Corporate VP and President of Canadian Solar's
Speaker Change: n strong president of canadian soar periar cight forward
Wina Huang: subsidiary, Recurrent Energy, and Xinbo Zhu, Senior VP and CFO. All company executives will participate in the Q&A session after management's formal, remarks.
Speaker Change: is not clar for bryp and president of canadian solar subsidiary recurrent energy and simimportant to with junior repe and cpo
Speaker Change: all company executves will participate in a human session after managements formal remarks on this call shaable where comte messages for the quarter yet and is nowl will review thisiness highlights con that arer and occurren and issue respectively and to will go through the financial results
Wina Huang: On this call, Shawn will go over some key messages for the quarter.
Wina Huang: Yan and Ismael will review business highlights for CSI Solar and Recurrent Energy, respectively,
Wina Huang: and Xinbo will go through the financial results.
Wina Huang: Shawn will conclude his remarks with a business outlook, after which we will have time for
Sean: sean' looking for this preparared remarks to the busendiness outlook after which we will have time for questions
Wina Huang: questions.
Wina Huang: Before we begin, I would like to remind listeners that management's prepared remarks today, as well as their answers to questions, will contain certain forward-looking statements that are subject to risks and uncertainties.
Speaker Change: before we begin i'd like to remind listener thatent management's prepared remarks today as well as their answwer to questions will contain certain forward-looking statements thatare aduject to risks and uncertainties
Wina Huang: The company claims protection under the safe harbor for forward-looking statements that, is contained in the Private Security Litigation Reform Act of 1995. Actual results may vary depending on your current expectations. Any projections of the company's future performance represent management's estimates, as of today.
Speaker Change: the company cleint protection under the basfe harbor for forward-looking statements that has contained in the private securityities litigation reform act of nine and fives
Speaker Change: excell resulting current expectation any proteions of the company's future performance represent management estimate as of today making fillers since no obligation to update these projections in the deure on that otherwise required by of a law
Wina Huang: Canadian Solar has no obligation to update these projections in the future unless otherwise, required by applicable law.
Wina Huang: 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.
Speaker Change: in more because customerof risks and uncertainties can be found in the company's annual quort perform twenty-th valers of the securities and exchange commission
Wina Huang: 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 during 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.
Speaker Change: managements prepared marks will be presented within the requirements in se's regulation incompete regarding generally accepted accounting inprinciples workout
Speaker Change: some financial information presented during the call will be provided on both a ap and non-gaap basis
Speaker Change: by exposing to our non-gaap information management intend to provide investors with additional information to enable further analysis of company's performance and underlying trends management used non-gaap measures to better assthat operating performance and to establish operational regolts
Wina Huang: Management uses non-GAAP measures to better assess operating performance and to establish, operational goals.
Wina Huang: Non-GAAP information should not be viewed by investors as a substitute for data provided, for parity in accordance with GAAP.
Speaker Change: non-gaap information should not be vieused by about due that the substitute for the ado vid it prepted in aaccordance with gap and now i dont like to try to cred were to canadian of chairman at the yield dr chan to sean leet
Wina Huang: And now, I would like to turn the call over to Canadian Solar's Chairman and CEO, Dr.
Wina Huang: Sean Suits.
Sean Suits: Sean, please go ahead.
Sean Suits: Thank you, Weena.
Sean Suits: And thank you all for joining our second quarter call today.
Sean Leet: thank you winena and thank you all for john at our second quarter call today please turn to slide three
Sean Suits: Please turn to Slide 3.
Sean Suits: In the second quarter, we delivered strong results. We shipped 8.2 GW of solar modules, surpassing our previous guidance of 7.5 to 8 GW. While increasing volume, we maintained competitive average selling prices, resulting in revenue, of $1.6 billion and a gross margin of 17.2%, both in line with our previous – both in line with our – over the past few months, we have observed signs of market growth.
Speaker Change: in a second the quarter we delired a stronger results we shipped eight point two takeigleb of solar modules surpassing our previous guidance of seven point five to eight gig
Speaker Change: while increas in volume we maintained competitive average standning prices
Speaker Change: resulting en revenue of five point six billion dollars
Speaker Change: and a gross margin of seventeen point two percent both in line with our previous both in line with time
Speaker Change: over the past few message we have observed signs of market rationalization
Sean Suits: Market rationalization. Record low prices are driving out uncompetitive players.
Speaker Change: record go prices driving out andcompetitive players meanwhile or industry pe we anallowced the significant first half losses
Sean Suits: Meanwhile, our industry peers preannounced significant first-half losses. In comparison, we have performed well, striking a delicate balance between volume and profitability. I'm proud of what we have accomplished in one of the most challenging industry cycles I have, experienced in my career.
Speaker Change: in comparison we have performed the well striking a delocate banance fure volume and profitability
Speaker Change: i'm proud of what we have accomplished in one of the most challenging industriations i have experienced in my career
Sean Suits: The underlying fundamentals of solar remain robust.
Speaker Change: the underlying fundamentals of solar remain robust
Sean Suits: As I have mentioned before, AI-driven data center expansion, electric vehicles, cryptocurrency, and other emerging technologies will generate substantial demand for clean energy.
Speaker Change: as i have mentioned before ai driven data center expansion electric vehicles crypical currency and other emerging technologers will generate substantial demand for kaning manag
Sean Suits: Solar and energy storages will also contribute – will also continue to be a major trend.
Speaker Change: solar and anyerous scolreages will also contribute
Speaker Change: we also continued to be a major trend we must now forget that the distance to meeting our global cli may goals remain large
Sean Suits: We must not forget that the distance to meeting our global climate goals remains large.
Sean Suits: However, the challenges ahead should not be underestimated. It will take time to rebalance, supply and demand in solar, given that today's industry competitors are more – have more scale and resilience than ever before.
Speaker Change: however the challenges are had should not be underunrestimated
Speaker Change: it will take time to rebalance supply and demand in solar given that today's industry in a competitors more have more scale and revebuilding than ever before
Sean Suits: How will we navigate a potentially extended downturn?
Speaker Change: how will we navigate our potentially extendive downter please turn to slide four
Sean Suits: Please turn to slide four.
Canadian Solar: canadian solar is our diversified busises with complementary divisigence that enable us to not only weather but also succeed in this challenges industry landscape
Sean Suits: Canadian solar is a diversified business with complementary divisions that enable us to not only weather but also succeed in this challenging industry landscape.
Sean Suits: Today, our modular business has reached an optimal scale, large enough to maintain a highly, competitive cost structure, yet lean enough to adapt swiftly to change in industry dynamics.
Canadian Solar: date our module business
Canadian Solar: has reached an optimal scale 's wor enough to maintain a highly comptitive cost of structural yet l enough to adopt swiftically to change in industry dynamics
Sean Suits: Our approach to capacity investment has always been to carefully balance vertical integration, the right technology mix, and magnitude.
Canadian Solar: our approach to capacity investment has allship
Canadian Solar: air volbality vertical integration the right techacnoledlogy and mix and magnitude
Sean Suits: At the same time, we are positioning ourselves for sustainable growth through our rapidly, expanding energy storage segment, a business for which we began laying the foundation 10 years ago.
Canadian Solar: at the same time where our position in ourselves for sustainable growth through our rapidly expanding anderous storage segment a business for which we began lay in the foundation ten years ago
Sean Suits: We are on track to grow by more than 500% this year, and we are doing so at industry-leading, margins.
Canadian Solar: we on track to grow by more than five hundred percent this year and we are doing so at industry-leading margins
Sean Suits: What McKinsey has forecasted a cumulative energy storage base of one terawatt hour by, 2027.
Speaker Change: what mackenz has forecasted accumulium andagjust storage pase of one cara hour by twenty-d chinese summer
Sean Suits: We have the expertise to grow alongside this market.
Speaker Change: we have the expertise to grow alify this market
Sean Suits: Complementing our global manufacturing expertise in both solar and energy storage are our outstanding, business teams.
Speaker Change: componenting our global manufacturing expertise in both solar and energy storage our outstanding business teams
Sean Suits: These local experts have enabled us to develop both global operations and a truly global, brand.
Speaker Change: these local experts have enabled us to develop both global operations and a truly global brand
Sean Suits: Finally, our project development platform, Recurrent Energy, is poised to deliver additional, long-term value as it transitions to be a global developer, owner, and operator of solar and storage assets.
Speaker Change: finally our project development platform with current energy
Speaker Change: is poised to deliver additional long-term value asit transitions to be a global developer owner and operator of solar and a storage assets
Sean Suits: A key element of our growth strategy is to do so sustainably and ethically.
Speaker Change: a key element of our growth strategy is to do so sub sustainably and adequically please turn to slide five
Sean Suits: Please turn to slide five.
Sean Suits: In May, we proudly published our latest corporate sustainability report, which features expanded, disclosures and enhanced transparency.
Speaker Change: in may we prodly published our latest corporate sustainability report which features expanding its cloures and enhanced transparency
Sean Suits: Highlighting a few achievements in 2023, Canadian solar achieved reductions in greenhouse gas, emissions by 37%, energy consumption also by 37%, water usage by 72%, and waste in storage intensity by 54% compared to the level in 2017.
Speaker Change: highlighting a few achievements in chey chinese three canadian solar achieved the reductions in gre house gas emission by thirtyy -seven percent energy consumption
Speaker Change: also by thirty seven percent water using by seventy two percent and waste the intensity by fifty four percent compared for the level in twenty seventeen
Sean Suits: Additionally, we remain on track to meet our target of powering all global operations with, 100% renewable energy by 2030.
Speaker Change: additionally we remain on track to meet our target of powering o global operations with one hundred percent renewable enaggy by twoa thirty
Sean Suits: As we have consistently emphasized, ethical labor practices are of utmost importance to, us, both within our operations and throughout our supply chain.
Speaker Change: we have consistently emphasized
Speaker Change: ethical labor practices of utmost importance to us
Speaker Change: o within our operations and throughout our supply chain
Sean Suits: As a participant in the United Nations Global Compact, which we adhere to the UNGC's 10, principles of human rights, labor practices, and human rights.
Speaker Change: as a participant in the united nation global compact which we are here to the u ungc's ten principles of human rights labor practicice
Sean Suits: Environmental Protection and Business Ethics.
Speaker Change: environment al protection and business aticsx
Sean Suits: To ensure the integrity of our operations and supply chain, we also engage with responsible, business alliance to conduct validated assessment programs out there at our facilities and those of our suppliers. The RBAVAP audit is an industry-leading standard for onsite manufacturing evaluations, assessing labor practices, health and safety, environmental impact, ethics, and management systems.
Speaker Change: to ensure the integrity of our operations and supply chain we also engage with responsible business ignines to conduct validated assessment programs our debt
Speaker Change: at our facilities and those of our suppliers
Speaker Change: the rpaav ap audit is an industry leading standard for onside and ufacturing evaluations assessing labor practices
Speaker Change: health and safety environmental impact addics and management systems
Sean Suits: Finally, we remain committed to promoting diversity, equity, and inclusion.
Speaker Change: finally we remain committed to promote it diversity
Sean Suits: At Canadian Solar, we foster a productive workforce that benefits from diverse perspectives in decision-making processes. Our newly included gender pay analysis revealed that women at Canadian Solar earned 95% of what men earned in 2023, with the remaining 5% gap being equitable.
Speaker Change: acquity and inclusion act canadian solar with foster productive workforce not benefit from diverse perspectives in decision making processes
Speaker Change: our newly includion gender pay analysis reviewed that women at canadian solder earned ninety five percent of what may men earned in cha twenty three
Sean Suits: In conclusion, I'm pleased with our achievement in the second quarter and the first half of this year.
Speaker Change: with the remain five percent gap deemed equitable
Speaker Change: in conclusion i'am pleased with our achievements in a second quarter and the first half of this year
Speaker Change: we have demonstrated the resilience of our business in challenging circumstances and remain vigilant in our work in our work moving forward
Sean Suits: We have demonstrated the resilience of our business in challenging circumstances and remain vigilant in our work moving forward.
Sean Suits: I will now turn the call over to Yan, who will provide more details of our CSI business,
Speaker Change: our now turn a call over to a yen oil provide more details our cs business visit css sold a prisoners yes please goon
Yan Zhuang: CSI Solar business.
Yan Zhuang: Yan, please go ahead.
Yen: thank you shan please turn cho like six
Yen Oil: in the second quarter of two thousand and twenty four we shipped eight point two gig adts of modules marking thirty percent quarter overquarter growth we generated revenue of one point seven billion dollars and achieved low margin of sixteen point seven percent
Yan Zhuang: Thank you, Sean.
Yan Zhuang: Please turn to slide six.
Speaker Change: despite the industry feasing record losses sissola delivered an operating income of ninety- three meeting dollars
Speaker Change: our revenue and profitability or boasted by strong performance in north america which accounted for approximately thirty percent of our shipments
Speaker Change: in most other regions average setting prices remain challenging we managed our orders stringently
Speaker Change: this coupled with a reduction cost supported our financial performance
Yan Zhuang: In the second quarter of 2024, we shipped 8.2 gigawatts of modules, marking a 30% quarter-over-quarter growth. We generated revenue of $1.7 billion and achieved a gross margin of 16.7%.
Speaker Change: walk through key drivers of our module business please turn to slide seven
Yan Zhuang: Despite the industry facing record losses, CSI Solar delivered an operating income of $93 million.
Speaker Change: alongside the rapid decline in poiciticcom prices the entire supply chain is under pressure leading to continued cost reductions
Speaker Change: while this trend may initially seem concerning it highlights the advantages of our partial vertical integration we can flexb flagxs
Operator: Ladies and gentlemen, thank you for standing by.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to Canadian Solar's second quarter of 2024 earnings conference call. My name is Rob, and I'll be your operator for today. At this time, all participants are in listen only mode. Later we will conduct a question and answer session. As a reminder, this conference is re-recorded for replay purposes.
Operator: Welcome to Canadian Solar's second quarter of 2024 earnings conference call.
Speaker Change: flagxiicallyally source upstream materials at prices that enhance our competitive of structure
Operator: My name is Rob, and I'll be your operator for today.
Operator: At this time, all participants are in listen only mode.
Operator: Later we will conduct a question and answer session.
Speaker Change: in along with our flexible strategic manufacturing approach we moderaching our capacity expansion plans to capitalize our current market conditions
Operator: As a reminder, this conference is re-recorded for replay purposes.
Wina Huang: I would now like to turn the call over to Wina Huang's Head of Investor Relations at Canadian Solar.
Wina Huang: I would now like to turn the call over to Wina Huang's Head of Investor Relations at Canadian Solar. Please go ahead. Thank you operator and welcome everyone to Canadian Solar's second quarter of 2024 calls and calls. Please note that today's conference call is coming despite which are available on Canadian Solar's Investor Relations website within the events and presentation section. Joining us today are Dr. Sean Chu, Chairman and CEO, Yan Zhuang, President of Canadian Solar's Investor Series CSI Solar, Ismael Guerrero, corporate VP, and President of Canadian Solar's Investor Series Recurrent Energy, and Xinbo Zhu, Senior VP and CFL.
Speaker Change: specifically we intend to delay upstream investments and two are more up to window reducing our plned capital expenditures this year
Wina Huang: Please go ahead.
Wina Huang: Thank you operator and welcome everyone to Canadian Solar's second quarter of 2024 calls and calls.
Speaker Change: thanks to our ongoing technological advancements
Speaker Change: ni top pound costs are now nearly aligned with those of perk
Speaker Change: today top count technologies and industry standard offering lower levelized cause of energy compared to mass produce noncrystalline technologies
Speaker Change: this means our customers benefit from using less land installing fewer trackers reducing end of life disposal costs and more
Wina Huang: All company executives will participate in a Q&A session after management formal remarks. On this call, Sean will go over some key messages for the court. Yan and Ismael will review the business highlights to share that solar from the current energy respectively, and Xinbo will go through the financial results. Sean will go through this third remarks through the business outlook after which we will have time for questions.
Yan Zhuang: Our revenue and profitability were boasted by strong performance in North America, which accounted for approximately 30% of our shipments.
Yan Zhuang: In most other regions, average selling prices remain challenging.
Yan Zhuang: We managed our orders stringently. This coupled with a reduction in cost supported our financial performance.
Speaker Change: as i mentioned our u s business remains strong with higher volumes delivebered at competitive prices in the second quarter compared to the first
Yan Zhuang: To walk through key drivers of our module business,
Yan Zhuang: Please turn to slide 7. Alongside the rapid decline in polysilicon prices, the entire supply chain is under pressure, leading to continued cost reductions. While this trend may initially seem concerning, it highlights the advantages of our partial, vertical integration. We can flexibly source upstream materials at prices that enhance our competitive cost, structure.
Yan Zhuang: In line with our flexible strategic manufacturing approach, we're moderating our capacity expansion, plans to capitalize on current market conditions. Specifically, we intend to delay upstream investments until a more uptune window, reducing, our planned capital expenditures this year.
Yan Zhuang: Thanks to our ongoing technological advancements, n-type top-down costs are now nearly aligned, with those of PERC.
Yan Zhuang: Today, top-down technology is an industry standard, offering lower levelized cost of, energy compared to mass-produced non-crystalline technologies.
Yan Zhuang: This means our customers benefit from using less land, installing fewer trackers, reducing, end-of-life disposal costs, and more.
Speaker Change: we currently have contract signed and under active negotiations through two two thousand and twent thirty
Wina Huang: Please note that today's conference call is coming despite which are available on Canadian Solar's Investor Relations website within the events and presentation section.
Wina Huang: Before we begin, I would like to remind listeners that management prepared the remarks today as well as their answers to questions will contain certain forward-looking statements that are subject to risks and uncertainties. The company claims protection under the state harbor before-looking statements that have contained in a target security litigation reform act of 1995. Actual result in the presentation. Any projections of the company's future performance represent management estimates as of today. Canadian Solar sends no obligation to update these projections in the future on the otherwise required bias of the law.
Speaker Change: in the u s than cability is even more critical than than in other markets and customers prefer to buy phara select group of tier one suppliers where trust and proven trck record are paralamount
Yan Zhuang: As I mentioned, our U.S. business remains strong, with higher volumes delivered at competitive, prices in the second quarter compared to the first.
Speaker Change: as in the past
Speaker Change: during pes of uncertainty we continue to actively servveice to the u s market
Yan Zhuang: We currently have contracts signed and under active negotiations through to 2030.
Yan Zhuang: In the U.S., bankability is even more critical than in other markets, and customers prefer, to buy from a select group of Tier 1 suppliers, where trust and a proven track record are paramount.
Speaker Change: in addition we are investing over one bing dollars in the u s to rp up two state of the art and highly competitive manufacturing facilities
Yan Zhuang: As in the past, during periods of uncertainty, we continue to actively service the U.S. market. In addition, we are investing over $1 billion in the U.S. to ramp up two state-of-the-art, and highly competitive manufacturing facilities. One facility is already producing solar modules in Mesquite, Texas, while the other will manufacture, solar cells in Jeffersonville, Indiana. Together, those – these facilities will create more than 2,500 American manufacturing, jobs.
Wina Huang: A more detailed discussion of risks and uncertainties can be found in the company's annual report on form 20F filed with the Securities and Exchange Commission. Management prepared remarks will be presented within the requirements of STP's regulation sheets, regarding generally accepted accounting principles or gaps. Some financial information presented during the call will be provided on both the gaps and non-gap basis. By disposing to earn non-gap information, management intends to provide investors with additional information to enable further analysis of the company's performance and underlying trust. Management uses non-gap measures to better assess operating performance and to establish operational goals. Non-gap information should not be viewed by investors at the substitute, but be it else provided, it's prepared in accordance with gaps.
Speaker Change: one fac sociiety producing solar moges in mustcreet tatexas while the other will manufacture solo sales in jefferson will ind theenda
Speaker Change: together those these facilagities will create more than two thousand and five hundred american manufacturing jobs
Yan Zhuang: As a domestic manufacturer, we believe that regulatory certainty and clarity are essential, for maintaining a long-term resilient solar industry in the United States.
Speaker Change: as a domestic manufacturer we believe that regulatory certainty and clarity are essential for intending a long-term resilient solar industry in the united states
Yan Zhuang: Now turning to our e-storage business, please go to slide eight.
Speaker Change: now turning to our ease storage business
Yan Zhuang: In the second quarter, we continued to achieve record shipments, delivering approximately, 1.5 gigawatt hours globally. Our backlog continues to grow and now stands at $2.6 billion.
Speaker Change: these go through slide eight in the second quarter we continued to achieve record shipments
Wina Huang: Joining us today are Dr. Sean Chu, Chairman and CEO, Yan Zhuang, President of Canadian Solar's Investor Series CSI Solar, Ismael Guerrero, corporate VP, and President of Canadian Solar's Investor Series Recurrent Energy, and Xinbo Zhu, Senior VP and CFL.
Dr. Sean Chu: And now I would like to turn the call over to Canadian Solar, Chairman and CEO, Dr. Sean Feito. Thank you, Wiener, and thank you all for joining our second quarter call today. Please turn to slide three. In our second quarter, we deliver strong results. We ship 8.2 gigawatts of solar modules, surpassing our previous guidance of 7.5 to 8 gigawatts. We are increasing volume. We maintain competitive average setting prices, resulting in revenue of $1.6 billion and a growth margin of 17.2% both in line with our previous, both in line with our company.
Speaker Change: delivering approximately one point five dead hours globally
Speaker Change: our backlog continues to grow and now stands at two point six beding dollars our key markets include the united states where we have a longstanding track record across all our businesses
Wina Huang: All company executives will participate in a Q&A session after management formal remarks.
Yan Zhuang: Our key markets include the United States, where we have a longstanding track record, across all our businesses, as well as the United Kingdom, Australia, Canada, and other countries we're entering as we expand the business.
Sean Chu: On this call, Sean will go over some key messages for the court.
Sean Chu: Yan and Ismael will review the business highlights to share that solar from the current energy respectively, and Xinbo will go through the financial results.
Speaker Change: as well as the united kingdom
Sean Chu: Sean will go through this third remarks through the business outlook after which we will have time for questions.
Speaker Change: australia canada and other countries we're entering as we expand the business
Yan Zhuang: One deal in our backlog that I would like to highlight is our contract with Nova Scotia, Power to develop flagship energy storage projects across three locations in Nova Scotia, Bridgewater, Waverly, and White Rock. These projects, totaling more than 700 megawatt hours, will play a crucial role in enhancing, grid reliability and stability.
Speaker Change: one deal in our backlogck that i would like to highlight it's our contract wewith've nov scos sha power to develop flagship energy storage projects across these across relocations in novascotia
Wina Huang: Before we begin, I would like to remind listeners that management prepared the remarks today as well as their answers to questions will contain certain forward-looking statements that are subject to risks and uncertainties.
Wina Huang: The company claims protection under the state harbor before-looking statements that have contained in a target security litigation reform act of 1995.
Speaker Change: great water
Speaker Change: liabberty and white rock
Speaker Change: these projects totally more than seven hundred meod hours will play a crucial role in enhancing great reliability and stability
Wina Huang: Actual result in the presentation.
Dr. Sean Chu: Over the past few months, we have observed signs of market, rationalization, recordal prices are driving out uncompetitive players. Meanwhile, our industry peers, we announced the significant first half losses. In comparison, we have performed well, striking and delicate balance between volume and profitability. I am proud of what we have accomplished in one of the most challenging industries I have experienced in my career. The underlying fundamentals of solar remain robust. As I have mentioned before, AI-driven data center expansion, electric vehicles, cryptocurrency, and other emerging technologies will generate substantial demand for clean energy.
Yan Zhuang: As Canadians, we take pride in making a significant environmental impact at home, contributing, to both provincial and federal targets of achieving 80% renewable energy by 2030.
Speaker Change: as canadi we take pride in making a significant environmental impact at home contributing to both provincial and federal harargetiess of achieving eighty percent renewable energy by two thousand and thirty
Wina Huang: Any projections of the company's future performance represent management estimates as of today.
Yan Zhuang: The growth potential for e-storage is immense.
Speaker Change: the growth potential for e storage is imn
Yan Zhuang: As of June 30, 2024, our total project turnkey pipeline for e-storage stands at approximately, 66 gigawatt hours. This pipeline includes both contracted and in-construction projects, as well as projects, in various stages of negotiation.
Wina Huang: Canadian Solar sends no obligation to update these projections in the future on the otherwise required bias of the law.
Speaker Change: as of jwewe thirty's
Speaker Change: two thousand and twenty-four our total project turnkey pipeline for eaststorage stands at approximately sixty-six skkeedweb hours
Wina Huang: A more detailed discussion of risks and uncertainties can be found in the company's annual report on form 20F filed with the Securities and Exchange Commission.
Speaker Change: this pipeline includes both contracted and inconstruction projects as well as projects in various stages of negotiation
Wina Huang: Management prepared remarks will be presented within the requirements of STP's regulation sheets, regarding generally accepted accounting principles or gaps. Some financial information presented during the call will be provided on both the gaps and non-gap basis. By disposing to earn non-gap information, management intends to provide investors with additional information to enable further analysis of the company's performance and underlying trust. Management uses non-gap measures to better assess operating performance and to establish operational goals.
Yan Zhuang: Moving forward, we expect to continue growing volume at healthy margins.
Speaker Change: moving forward we expect to continue growing volume at healthy margins
Yan Zhuang: With the support of our energy storage segment and the continued strategic management of our module business, we anticipate the second half of the year to be stronger than the first.
Speaker Change: we the support of our energy storage segment and the continued strategic management of oural mo business who anticipate the second half of the year to these longer than the first
Yan Zhuang: Now I will hand it over to Ismail to provide an overview of Recurrent Energy, Canadian
email: now i will hand it over to email
Dr. Sean Chu: Solar and energy storages will also contribute will also continue to be a major trend. We must not forget that the distance to meeting our global climate goals remain large. However, the challenges I had should not be underestimated. It will take time to rebalance supply and demand in solar, given that today's industry competitors have more scale and resilient than ever before.
Ismael Guerrero: Solar's global project development business.
Speaker Change: right an overview of recurrent energy canadian solar global project development business
Ismael Guerrero: Ismail, please go ahead.
Ismael Guerrero: Thank you, Ian.
Ismail: ismail case go ahead
Ismael Guerrero: Please turn to slide nine.
Ismail: in interyoung
Ismail: please turn to slide nine
Ismael Guerrero: Second quarter results were relatively modest, with no major project sales. We generated $50 million in revenue, with a gross margin of 47.4%. During our transition to a model focused on accumulating operating assets, project sales, will be lighter.
Ismail: second quarter results were relatively modest with no major projects sa
Speaker Change: we generated fifty million dollars in revenue with advan margin of forty seven point four percent
Speaker Change: during our transition to a model focused on acculating operating assets project sales will be lier
Ismael Guerrero: In the second half, due to policy changes in Europe, our projects will experience delays, between one to two quarters in Spain and longer in Italy, depending on the region, while in the UK we obtain approval on several projects.
Speaker Change: in the second halfalth due to policy changes in europe our projects will experience delays between one to two quarters in spain a longer in italy depending on the region
Dr. Sean Chu: How will we navigate a potentially only extended counter? Please turn to slide 4. Canadian solar is a diversified business with complementary divisions that enable us to not only weather but also succeed in the challenges in the industry landscape. Today, our module business has reached an optimal scale, largely enough to maintain a highly competitive cost of structure, yet linked enough to adapt swiftly to change in industry dynamics. Our approach to capacity investments has always been, carefully balancing vertical integration, the right technology mix, and magnitude.
Speaker Change: within the uk we obtain approval on several projects
Ismael Guerrero: We also anticipate potential interconnection delays in certain parts of the US.
Speaker Change: we also anticipate potential interconnection relis in certain parts of the u s
Ismael Guerrero: These risks we will continue to manage through our hybrid developer-owner and operator business, model with global presence.
Speaker Change: these risks we will continue to manage through our hybrid developer owner and o perator business model with global presence
Ismael Guerrero: Since the announcement of BlackRock's $500 million investment in January, we have made, significant progress, securing the requisite regulatory approvals and making internal operating milestones. We are pleased to have announced the initial closing representing $300 million of the planned, capital infusion.
Speaker Change: since the announcement of blackrocks five hundred million dollar investment in january we have made significant progress secing the requisite regulatory approvals and maetking internal operating milestones
Speaker Change: we are pleased to have announced the initial closing grow presentcenting in three hundred million llars of the plan capital efficient
Ismael Guerrero: A key aspect of the growth expected from this transaction is our ability to secure the financing, needed to support the construction and monetization of our high-value pipeline projects. Over the past few months, we continue to obtain competitive financing at both the operational, and construction levels. In May, we secured a landmark multi-currency revolving credit facility valued at up to, 1.3 billion Euro, involving 10 banks to support the construction of renewable energy projects across several European countries.
Speaker Change: a key aspect of the growth expected from this transaction is our will ability to secure the chrenance modeed to support the construction and monetization of our high- value pipeline projects
Speaker Change: over the past few months we continue to obtain competitive financing as o the operational and construction levels
Dr. Sean Chu: After the same time, we are positioning ourselves for sustainable growth through our rapidly expanding energy storage segment, a business for which we began laying the foundation 10 years ago. We are on track to grow by more than 500% this year, and we are doing so at industry leading margins. What McKinsey has forecasted a cumulative energy storage phase of one kilowatt hour by 2027. We have the expertise to grow alongside this market.
Speaker Change: in may we secured a landmark multicurrency revolving credit facility valu at at two one point three begin zuro
Speaker Change: involving ten banks to support the construction of renoable energy projects across several eupean countries
Ismael Guerrero: In June, we obtained $513 million in project financing for our 1.2 gigawatt-hour storage, project in Maricopa County, Arizona. Papago Storage is the largest energy storage project in Arizona and holds a 20-year tolling, agreement with Arizona Public Service Company. The battery energy storage system used for this historic project is sourced from Canadian, Solar's e-storage division.
Speaker Change: in june we obtained five hundred and thirteen million dollars in project financing for our one point to give what i would a storage project in medicop accounting arizona
Speaker Change: thepar torage is the largest energy distorage project in alarizona and hold set only year toin agreement with alison a public service company the battery energy toric system used for this historic project is resourced from canadian source we torage division
Dr. Sean Chu: Complimenting our global manufacturing expertise in both solar and energy storage are our outstanding business teams. These local experts have enabled us to develop both global operations and a truly global brand. Finally, our project development platform, Recurrent Energy, is promised to deliver additional long-term value as it transitions to be a global developer, owner and operator of solar and storage assets.
Ismael Guerrero: Also in June, we closed a $103 million tax credit facilitation agreement with Bank of, America for our 160-megawatt North Fork solar project, which is already in operation.
Speaker Change: also in june we closed a one hundred and three million dollar tax credit facilitation agreement with bank of america for our one hundred and sixty megawatt north four solar project which is already in ogation
Ismael Guerrero: This transaction marks our first production tax credit deal and exemplifies our ability, to execute globally to optimize our funding access.
Speaker Change: this transaction marks our our first revection tax credit deal and exemimplifies our will ability to execute globally to optimize our funding access
Ismael Guerrero: Please turn to slide 10.
Speaker Change: please turn to sllight then
Ismael Guerrero: We continue to lay the groundwork for long-term shareholder value.
Speaker Change: we continue to lay the groundwork for long-term shareholder value
Ismael Guerrero: We have expanded our total development pipeline to 27 gigawatts of solar and 63 gigawatt-hours, of battery energy storage. Our pipeline is valuable not only for its scale and geographical diversity, but also, because of interconnections we can secure and the competitive PPAs we negotiate with top-tier counterparts. For example, we recently signed a 10-year PPA with GKM Automotive, a global leader in, drive systems. This agreement will facilitate the annual production of approximately 200 gigawatt-hours, of renewable electricity and marks GKM Automotive's first renewable energy PPA in Europe.
Speaker Change: we have expanded our total development pipeline to twenty -sevenventy ats of solar and sixty-three big what hours of battery energy torledge
Dr. Sean Chu: A key element of our growth strategy is to do so substantially and adequately.
Speaker Change: our pipeline is valuable not only for its scale and geographical diversity but also because of the interconnections we can secure and the competitive pa will negotiate with top the count hars
Dr. Sean Chu: Please turn to slide five.
Wina Huang: Non-gap information should not be viewed by investors at the substitute, but be it else provided, it's prepared in accordance with gaps.
Dr. Sean Chu: In May, we proudly published our latest corporate sustainability report, which features expanded disclosures and enhanced transparency. Highlighting of fuel achievements in 2023, Canadian solar achieved reduction in greenhouse gas emissions by 37%, energy consumption also by 37%, water usage by 72%, and waste intensity by 54% compared to the level in 2017. Additionally, we remain on track to meet our target of powering our global operations with 100% renewable energy by 2030. As we have consistently emphasized ethical labor practices of utmost importance to us, also within our operations and throughout our supply chain.
Speaker Change: for example
Speaker Change: we recentally sign a ten yearppaa with gkand automotive a global leader in drive system
Speaker Change: this agreement will facilitate the annual production of approximately two hundred dig what hours
Speaker Change: of renewnorable electricity and marks daym automotiveves first renewal n dpppaa europe
Ismael Guerrero: Across the world in Japan, we entered into a 20-year PPA with Toyota Susho Corporation, to secure 100 percent of the solar power along with the non-fossil certificates generated by three of our solar projects. This accomplishment marked our first private PPA with Toyota Susho, a key member of the, Toyota Group.
Speaker Change: across the world independent moenter it to a twenty d ppl with dlta social cooperation to secure one hundred percent of the solar power along with a nonfossil certificates
Speaker Change: generated by three of our solar drinks
Speaker Change: this accomplishment marked our first private ppaa with tolitaassal a key member of the digital group
Ismael Guerrero: Pre-current energy currently owns 1.6 gigawatts of projects in operation and 1.7 gigawatts, under construction, along with one gigawatt hour of BESS projects in operation and 3.8 gigawatt hours under construction.
Speaker Change: curard er currently owns one point six gigouts of proakes in operation and one point seven bigigwhat centle construction
Speaker Change: along with one givingyou a power of best products in operation and three point eight gw att hours under construction
Ismael Guerrero: The vast majority of these projects are fully funded and secured with PTA contracts, positioning us to begin generating substantial revenues from 2025 onwards. Additionally, we have around 10 gigawatts of PV and 16 gigawatt hours of BESS with granted interconnections, which are expected to be ready in the near term, driving significant growth.
Speaker Change: the vast majority of these projects are fully funded and secured with pa contracts
Speaker Change: position in us to begin generating substantial revenues from two thousand and twenty-five onwardss
Dr. Sean Chu: As a participant in the United Nations Global Compact, which we adhere to the UNGC's 10 principles of human rights, labor practices. This environmental protection and business ethics to ensure the integrity of our operations and supply chain, we also engage with responsible business aligns to conduct validated assessment programs out there at our facilities and those of our suppliers. The RPA, the AP audit is an industry leading standard for on-site manufacturing evaluations, assessing labor practices, health and safety, environmental impact, ethics and management systems.
Speaker Change: additionally we have around tking whats of pv and sixteen give what ours of best with granted interconnections which have expected to be ready in the near term driving significant growth
Ismael Guerrero: Our O&M business continues to grow steadily with 11 gigawatts of contracted projects, making it one of the largest operational flits globally. This steady growth is supported by our own project portfolio, which provides clear visibility into future expansion.
Speaker Change: our ownanning business continues to grow students with eleven y wordss of contracted projects making it one of the larggetest operational fli globally
Speaker Change: this is steady growth is supported by our own project portfolio which provides clear visibility into future expansion
Xinbo Zhu: Now, let me hand it over to Xinbo, who will go through our financial results in more detail.
shmb: now let me hand it over to shmb who will go through our financial results in more deil symbo clisco happens
Dr. Sean Chu: Finally, we remain committed to promoting diversity. Equity and Inclusion. At Canadian Solar, we foster a productive workforce that benefits from diverse perspectives in decision-making processes. Our newly included gender pay analysis revealed that women at Canadian Solar earn 95% of what men earn in 2023. With the remaining 5% gap deemed equitable. Inclusion.
Xinbo Zhu: Xinbo, please go ahead.
Xinbo Zhu: Thank you, Ismael.
shmb: thank you sme pleaseed until slide leb
shmb: in the second quarter we achieved revenue of one point six billion dollars and the cloross margin of seventeen point two percent
Xinbo Zhu: Please turn to slide 11.
shmb: both of which were in line with our guidance
Speaker Change: the sequenential increase in revenue was primarily due to a higher volume of solar modul shipments
Speaker Change: partially offset by a decline in mole isp
Xinbo Zhu: In the second quarter, we achieved revenue of $1.6 billion and a gross margin of 17.2%, both of which were in line with our guidance. The sequential increase in revenue was primarily due to a higher volume of solar module shipments, partially offset by a decline in module ASP. Gross margin decreased 180 basis points quarter over quarter, mainly due to lower module prices.
Speaker Change: gross margin decreased one hundred eighty basis points for the over quarter mainly built to lower marduile prices
Xinbo Zhu: Total operating expenses in the second quarter increased to $234 million, primarily driven by higher shipping and handling expenses.
Speaker Change: total operating expenses in the second quarter increased to four hundred thirty- four million dollars
Speaker Change: primarily driven by higher shaipping and handling expenses
Xinbo Zhu: Free costs are likely to remain elevated in the second half of the year, given the ongoing Red Sea issue and the industry's efforts to clear shipment backlogs from Asia to the United States and Europe.
Speaker Change: free costs are likely to remain anlevated in the second half of the year
Speaker Change: even the ongoing racy issue and the industry's efforts to clearer shipment backloss from asia to the united states and europe now inches returned to normalized level in the second quarter
Sean Chu: And now I would like to turn the call over to Canadian Solar, Chairman and CEO, Dr. Sean Feito.
Dr. Sean Chu: I'm pleased with our achievements in a second quarter and the first half of this year. We have demonstrated the resilience of our business in challenging circumstances and remain vigilant in our work moving forward.
Xinbo Zhu: Net interest returned to a normalized level in the second quarter, following the absence of an interest benefit derived from the interest income generated by anti-dumping and the countervailing duty deposit refunds in the first quarter of 2024.
Sean Chu: Thank you, Wiener, and thank you all for joining our second quarter call today.
Speaker Change: following the absence of an inchinterestase benefit beived from the inchinterest income generated by antidty and the number biling duty departit refs in the first quarter of two thousand and twenty-four
Sean Chu: Please turn to slide three.
Yan Zhuang: I will now turn a call over to Yan, who will provide more details of our CSI business, CSI solar business. Yan, please go ahead. Thank you, Sean. Please turn to slide 6. In the second quarter of 2024, we shipped 8.2 gigawatts of modules, marking a 30% quarter over quarter growth. We generated revenue of 1.7 billion dollars and a low margin of 16.7%. Despite the industry facing record losses, CSI solar delivered an operating income of 93 million dollars.
Xinbo Zhu: Net foreign exchange and derivative gains in the second quarter of 2026 amounted to $13 billion, mainly driven by the weakening of the Chinese yuan and the Japanese yen against the U.S. dollar.
Speaker Change: that growing big change and derivative gains in the second quarter of two thousand and twenty six amounted to thirteen
Sean Chu: In our second quarter, we deliver strong results. We ship 8.2 gigawatts of solar modules, surpassing our previous guidance of 7.5 to 8 gigawatts. We are increasing volume. We maintain competitive average setting prices, resulting in revenue of $1.6 billion and a growth margin of 17.2% both in line with our previous, both in line with our company. Over the past few months, we have observed signs of market, rationalization, recordal prices are driving out uncompetitive players.
Xinbo Zhu: Total net income was $27 million, while net income attributable to Canadian solar was $4 million, or $0.02 per diluted share.
Sean Chu: Meanwhile, our industry peers, we announced the significant first half losses.
Speaker Change: cal net income was twenty seven million dollars
Sean Chu: In comparison, we have performed well, striking and delicate balance between volume and profitability.
Speaker Change: while net income at she attributable to canadian solar was four million dollars
Xinbo Zhu: Basic and diluted earnings per share included the recurrent energy redeemable preferred share, dividends payable in kind. That is associated with BlackRock's investment, resulting in an EPS effect of $0.03 deducted on the dilutive basis.
Speaker Change: or two cents per diloature
Sean Chu: I am proud of what we have accomplished in one of the most challenging industries I have experienced in my career.
Yan Zhuang: Our revenue and profitability were boosted by strong performance in North America, which accounted for approximately 30% of our shipments. In most other regions, average setting prices remain challenging. We managed our orders stringently. This coupled with a reduction cost supported our financial performance.
Speaker Change: basic and diluted earning per year included the recurrent energy redeemable preferred share dividends payable in kind
Speaker Change: that is associated with blackrocks investment resulting in an epsthe fact of threecent deductappeared on the dilutive basis
Xinbo Zhu: Here I want to address the impact of recurrent energy's business model transformation on, Canadian solar's P&L in the near to mid-term.
Speaker Change: here i want to address the impact of recurrent manenagies business model transformation on canadian solar pnl in the near to meet ter
Xinbo Zhu: As recurrent transitions to a partial IPP model and accumulates more assets, two key effects will emerge. First, recurrent will sell fewer projects, leading to a lower contribution to Canadian solar's P&L. Second, as more projects are retained on balance sheet, a greater portion of revenue and gross profit created by CSI Solar will be eliminated at the consolidated growth level. The unrealized CSI Solar revenue, and gross profit on payment sales to recurrent for those projects will be recognized gradually over the life of the project assets.
Sean Chu: The underlying fundamentals of solar remain robust.
Yan Zhuang: To walk through key drivers of our module business.
Yan Zhuang: Please turn to Slide 7. Alongside the rapid decline in policy-conprices, the entire supply chain is under pressure, leading to continued cost reductions. While this trend may initially seem concerning, it highlights the advantages of our partial vertical integration. We can flexibly source upstream materials at prices that enhance our competitive structure. Along with our flexible strategic manufacturing approach, we're moderating our capacity expansion plans to capitalize on current market conditions. Specifically, we intend to delay upstream investments into a more obtune window, reducing our planned capture expenditures this year.
Speaker Change: as recurring transitions to a partial occupy model and the accumulates more assets two ke effects will emerge
Speaker Change: first recorvering will sell fewer projects
Speaker Change: leading to a lower contribution to canadian solarars p now
Speaker Change: second as more projects are retained on balance sheet a greater portion of revenue and gross profit created by sciance solar will be limain elimin ated and the consolidated pro level
Speaker Change: the unrealized i solldar revenue and gross profit on premment sales to recurrent for those projects will be recognized gradually over the life of the project assets
Xinbo Zhu: Due to these effects, during the transition period, Canadian solar's P&L will be systematically and consistently lower than that of CSI Solar, while recurrent assets will deliver value longer term.
Speaker Change: due to this effects
Speaker Change: during the transition period cleillion solars pl well be systematically and consistently lower than that of the sso
Yan Zhuang: Thanks to our ongoing technological advancements, N-type top-com costs are now nearly aligned with those of PERC. Today, top-com technology is an industry standard offering lower-levelized cost of energy compared to mass-produced non-crystalline technologies. This means our customers benefit from using less land, installing fewer trackers, reducing end-of-life disposal costs and more. As I mentioned, our U.S, business remains strong. We've higher volumes delivered at competitive prices in the second quarter compared to the first.
Speaker Change: well recurrent assets will deliver value longer term
Xinbo Zhu: Now let's discuss cash flow and the balance sheet.
Speaker Change: now let's up discurs cash flow and sp the balance sheet
Speaker Change: please turn to slides twelf
Xinbo Zhu: Please turn to slide 12.
Speaker Change: ne hasash flow used in arperating activities in the second quarter of two thousand four was
Xinbo Zhu: Net cash flow used in operating activities in the second quarter of 2024 was $429 million. The operating cash outflow was primarily driven by increased project assets due for sale and, increased accounts receivables, mainly associated with higher module sales during the second quarter.
Speaker Change: four hundred twenty nine million dollars
Speaker Change: the operating cash outflow was primarily driven by increased project assets you procept
Sean Chu: As I have mentioned before, AI-driven data center expansion, electric vehicles, cryptocurrency, and other emerging technologies will generate substantial demand for clean energy.
Speaker Change: and increased on accountplate counterresuvables mainly associated with higher margin sales dueuring the second quarter
Xinbo Zhu: Regarding that, going forward, CSI Solar and recurrent energy's leverage profiles will align, with their respective strategic goals.
Yan Zhuang: We currently have contract signed and under active negotiations through 2020-30. In the U.S., thankability is even more critical than in other markets, and customers prefer to buy from a select group of Tier 1 suppliers where trust and proven track record are paramount. As in the past, during periods of uncertainty, we continue to actively service the U.S, market. In addition, we are investing over $1 billion dollars in the U.S, to ramp up two state-of-the-art and highly competitive manufacturing facilities. One facility is already producing solar modules in Muskete, Texas, while the other will manufacture solar cells in Jeffersonville, Indiana.
Speaker Change: regarding b going forward since a solar and recurrent energies to average profiles will align what their is active strategic cost
Xinbo Zhu: This quarter, CSI Solar reduced its debt, optimizing its financial leverage to better navigate the industry cycle.
Speaker Change: this quarter s and soar reduced is that
Speaker Change: optimizing is financial leverage to better navigate the industry cycle
Xinbo Zhu: Meanwhile, recurrent energy will continue to increase leverage in the near term to support its transition to a partial IPP model. In summary, total financing at the half-year mark stood at $4.2 billion, with a decrease at CSI Solar and a net increase at recurrent energy.
Speaker Change: meanwhile
Speaker Change: thecurrent energy will continuuallyly increase aabverage in the new term to support its transition to a partial ipp model
Speaker Change: in summary total financing and the half-year marks
Speaker Change: still at fourl point two billion dollars
Speaker Change: with a decrease ascsi shouldldar and a net increase at recurren engy
Xinbo Zhu: In the second quarter, we spent approximately $390 million in manufacturing capital expenditures.
Speaker Change: in the second quarter we spent approximately three hundred and ninety million doars manufacturing capital expenditures
Xinbo Zhu: As Yan mentioned earlier, in light of market conditions, we are dialing back our upstream, capacity plans.
Yan Zhuang: Together, those these facilities will create more than 2,500 American manufacturing jobs. As a domestic manufacturer, we believe that regulatory certainty and clarity are essential for maintaining a long-term resilient solar industry in the United States.
Speaker Change: as c i mentioned earlier in light of market conditions
Speaker Change: we are dialing back our upstream capacity plat
Xinbo Zhu: We have revised our full year 2024 capital expenditure expectations downward to approximately, $1.2 billion.
Speaker Change: we have revised our full year thousand and twent four a capital expenditure expact patients downward
Speaker Change: to approximately one point two billion dollars
Sean Chu: Solar and energy storages will also contribute will also continue to be a major trend.
Yan Zhuang: Now, turning to our East-Storage business, phase go to slide 8. In the second quarter, we continued to achieve record shipments, delivering approximately 1.5 gigawatt hours globally. Our backlog continues to grow and now stands at $2.6 billion. Our key markets include the United States where we have a long-standing track record across our businesses, as well as the United Kingdom, Australia, Canada and other countries were entering as we expand the business. One deal in our backlog that I would like to highlight is our contract with Nova Scotia Power to develop flagship energy storage projects across three locations in Nova Scotia.
Xinbo Zhu: We ended the period with a cash position of $2.2 billion reflecting CSI Solar's debt repayments, recurrent solar and storage asset growth, and change in working capital.
Speaker Change: we ended the period with a cash position of two point two billion dollars
Speaker Change: reflecting the asi solar that repayments
Speaker Change: recurrent solar and storage asset growth and chance in working capital
Xinbo Zhu: Lastly, I would like to speak to the private convertible bond announced on Monday.
Speaker Change: lastly i would like to speak to the privving converbal bondb nced a monday
Xinbo Zhu: Please turn to slide 15.
Speaker Change: please turn to sllight the teen
Xinbo Zhu: The rationale for this transaction is both financial and strategic. From a financial perspective, the notes provide us a versatile financing solution offering, a flexible drawdown schedule and a reasonable funding cost.
Speaker Change: well
Speaker Change: the rushationalnow for this transaction is both financial and syiatric
Speaker Change: from a financial perspective the notse provide us worthile financing solution offering a flexible jjoawdown schedule
Xinbo Zhu: From a strategic standpoint, we are pleased to welcome PAG as a new potential equity partner.
Speaker Change: and the reasonable funding costs
Speaker Change: from its strategic standpointints
Speaker Change: we are pleased to welcome pateight and some new potential actiquity part
Yan Zhuang: Great water, wagerty and white rock. These projects totaling more than 700 megawatt hours will play a crucial role in enhancing great reliability and stability. As Canadians, we take pride in making a significant environmental impact at home, contributing to both provincial and federal targets of achieving 80% renewable energy by 2030.
Xinbo Zhu: Please turn to slide 14 for additional title.
Xinbo Zhu: With more than $55 billion in assets under management, PAG is among a select group of, global investment managers with specialized capital pools across multiple asset classes dedicated to investing in renewable energy. PAG is an experienced investor in the solar sector. After acquiring the first solar Japan platform in 2022, it expanded its portfolio to over, 600 megawatt across Japan.
Speaker Change: with more than fifty five billion dollars in assets under management
Sean Chu: We must not forget that the distance to meeting our global climate goals remain large.
Speaker Change: aging is among a sillect growth of global investment managers with specialized the capital pos across multiple as a classics dedicated to investing in renewable energy
Speaker Change: pg is an experienced investor in the solar sector
Sean Chu: However, the challenges I had should not be underestimated.
Yan Zhuang: The growth potential for e-storage is immense. As of June 30, 2024, our total project-turned-t pipeline for e-storage stands at approximately 66 gigawatt hours. This pipeline includes both contracted and in construction projects, as well as projects in various stages of negotiation. Moving forward, we expect to continue growing water at healthy margins. We support our energy storage segment and the continued strategic management of our module business will anticipate the second half of the year to be stronger than the first.
Sean Chu: It will take time to rebalance supply and demand in solar, given that today's industry competitors have more scale and resilient than ever before.
Speaker Change: after firiring the first solar japan platform in two thousand and twenty-two it exptandended is portfolio to over six hundred metalw across jap
Xinbo Zhu: PAG is also the largest owner of distributed solar projects in Hong Kong.
Sean Chu: How will we navigate a potentially only extended counter?
Speaker Change: phg is also the largest owner of distributed solar projects in hong kong
Xinbo Zhu: PAG is well positioned to partner with CSIQ to strengthen the company's market leading, position across the solar value chain.
Speaker Change: community is well positioned to partonner what saysi q to strengthen the company's market leading position across the solar value chaan
Sean Chu: Please turn to slide 4.
Xinbo Zhu: In key operating markets, we anticipate that PAG will collaborate with Canadian Solar to, explore and realize strategic synergies.
Sean Chu: Canadian solar is a diversified business with complementary divisions that enable us to not only weather but also succeed in the challenges in the industry landscape.
Speaker Change: in key operating markets we anticipate that p will collaborate with canadian solar to explore and realized suit synergies
Sean Suits: Now let me turn the call back to Sean, who will conclude with our guidance and business outlook.
Shaar: now let me turn the call back to shaar who will conclude with our guidance and business outlook chm please go her thank you in bo please turn to a slide fifteen
Sean Chu: Today, our module business has reached an optimal scale, largely enough to maintain a highly competitive cost of structure, yet linked enough to adapt swiftly to change in industry dynamics.
Ismael Guerrero: Now, I will hand it over to Israel to provide an overview of recurrent energy, Canadian solar, global project development business. Israel, please go ahead. Thank you again.
Sean Suits: Sean, please go ahead.
Sean Suits: Thank you, Xinbo.
Sean Suits: Please turn to slide 15.
Sean Suits: For the third quarter of 2024, we expect solar module shipments by CSI Solar to be in a range, of 9 to 9.5 gigawatts, including approximately 100 megawatts of solar module shipments to our own project. Total battery energy storage shipments are expected to be between 1.4 to 1.7 gigawatt, hours, including about 1.2 gigawatt hours for our own project. This significant volume to our own project is primarily for Papago Storage, a landmark, project in Arizona developed by Recurrent Energy.
Shaar: for the third quarter out twent thousand and twenty four we expect total moduular shipment by csi solar to be in a r j nine to nine point five gqu
Ismael Guerrero: Please turn to slide 9. Second quarter results were relatively modest, with no major project sales. We generated $50 million in revenue with a growth margin of 47.4%. During our transition to a model focus on accumulating operating assets, project sales will be lighter. In the second half, due to policy changes in Europe, our projects will experience delays between one to two quarters in Spain and longer in Italy, depending on the region. Within the UK, we obtain approval on several projects. We also anticipate potential interconnection delays in certain parts of the US. This risk will continue to manage through our hybrid developer owner and operator business model with global presence.
Shaar: including approximately one hundred marat of solar mergular shipments to our own project
Speaker Change: photobattery enerious knowledge
Speaker Change: unexpected to be between one point four to one point seven to one hours including about one point two take one hours for our phone poter
Speaker Change: execive imint volue to our ownfo year there's
Speaker Change: prered for capical storage and landmark project greenparizona develop by a recurrent energy
Sean Suits: Total revenue is expected to be in the range of $1.6 to $1.8 billion.
Speaker Change: fther revenue are expected to be in a r jo one point six to one point eight million dollars all margins is expected to be puring fourteenth to sixteen percent
Sean Suits: Growth margin is expected to be between 14% to 16%.
Ismael Guerrero: Since the announcement of BlackRock's $500 million investment in January, we have made significant progress, securing the requisite regulatory approvals and making internal operating matters. We are pleased to have announced the initial closing representing 300 million words of the planned capital infusion. A key aspect of the growth expected from this transaction is our ability to secure the finance in needed to support the construction and monetization of our high-value pipeline projects. Over the past few months, we continue to obtain competitive financing as both the operational and construction levels.
Sean Suits: At this midpoint of the year, we observe a second half characterized by certain uncertainties, by some uncertainties.
Speaker Change: at this midpoint of the year we observe a second half character ris by
Speaker Change: search and a certain base by some uncertainties
Sean Suits: During the potential extended period required for the supply-demand balance to normalize, module margins will continue to face pressure.
Speaker Change: given the potential extended period required for the supply imman balance to norommalize module margins or continue to for ase pressure
Sean Suits: However, this is counterbalanced by the strength of our e-storage business. E-storage is expected to deliver record revenue and profitability in the fourth quarter, even, after accounting for elimination of shipment to our own project.
Speaker Change: however this is comfortbalan by the strength of our storage business
Ismael Guerrero: In May, we secured a landmark multi-currency-revolving credit facility valued at up to 1.3 billion euro, involving 10 banks to support the construction of renewable energy projects across several European countries. In June, we obtained 513 million dollars in project financing for our 1.2 billion-dollar power storage project in Maricopa County, Arizona. Papago Storage is the largest energy storage project in Arizona and holds a 20-year-to-line agreement with Arizona Public Service Company. The battery energy storage system used for this historic project is sourced from Canadian source is storage division.
Speaker Change: this storage is expected to deliver record revenue and profitability in the fourth quarter even after accounted for eliminations of shipment to our home project
Sean Suits: As such, we are revising our total solar module shipment guidance to be in a range of 32 to, 36 gigawatts, including one gigawatt to our own project. CSI Solar's factory storage shipment is expected to be between 6.5 to 7 gigawatt hours, including, approximately 2.5 gigawatt hours to our own project.
Speaker Change: such we are revising our total soal mole shipment guidance to be in a range of thirty two to thirty six didwas including one g one to our own program
Speaker Change: ci thoughtto's facattory toll achshipment expected to be betweenuring six point five to sevenate giveig one hours including approximately two point five give one hours to our own projects
Ismael Guerrero: Also in June, we closed a 103 million-dollar tax credit facilitation agreement with Bank of America for our 160 megawatt north-forth solar project, which is already in operation. Distance action marks our first production tax credit deal and exemplifies our ability to execute globally to optimize our funding access.
Sean Suits: We expect full-year revenue to be in the range of 6.5 to 7.5 billion U.S. dollars. These revised forecasts reflect our continued commitment to our strategy of prioritizing, profitability and driving sustainable growth.
Speaker Change: we expect a full year revenue to be in a ranger six point five to sevenn point clire billing sr
Speaker Change: these revised the forecast refract our continued commitment to our strate of prioritizing profitability and
Ismael Guerrero: Please turn to slide 10. We continue to lay the groundwork for long-term shareholder value. We have expanded our total development pipeline to 27 gigawatts of solar and 63 gigawatts of battery energy storage. Our pipeline is available not only for its scale and geographical diversity, but also because of interconnections we can secure and the competitive PPAs we negotiate with top-tier counterparts.
Speaker Change: driving sustainable gross
Sean Suits: With that, I would like to open the floor for questions.
Sean Chu: Our approach to capacity investments has always been, carefully balancing vertical integration, the right technology mix, and magnitude.
Speaker Change: with that i would like to open the fu for questions operator
Operator: Operator?
Sean Chu: After the same time, we are positioning ourselves for sustainable growth through our rapidly expanding energy storage segment, a business for which we began laying the foundation 10 years ago.
Operator: Thank you.
Operator: At this time, we'll be conducting a question-and-answer session.
Speaker Change: thank you at this time will be conducting a question and- answer session
Operator: If you'd like to ask a question today, please press star 1 from your telephone keypad, and, a confirmation tone will indicate your line is in the question queue.
Speaker Change: if youd like to ask a question today please press star one from your telephone keypad and a confirmation tone will indicate your line is in the question q let me firstress start to to withdraw your question from the que
Sean Chu: We are on track to grow by more than 500% this year, and we are doing so at industry leading margins.
Operator: You may press star 2 if you'd like to withdraw your question from the queue.
Operator: For assistance, if you're using speaker equipment, it may be necessary to pick up your handset, before pressing the star keys.
Speaker Change: per sistence or young speaker equipment maybe necessary ick up pre handset before pressing the starkeys
Operator: One moment, please, while we poll for questions.
Sean Chu: What McKinsey has forecasted a cumulative energy storage phase of one kilowatt hour by 2027.
Ismael Guerrero: For example, we recently signed a 10-year PPA with GTAN Automotive, a global leader in drive systems. This agreement will facilitate the annual production of approximately 200 gigawatts of renewable electricity and marks a decade and automotive first renewable energy PPA in Europe. Across the world in Japan, we entered it through a 20-year PPA with Toyota Sucio Corporation to secure 100% of the solar power along with the non-phosilial certificates generated by three of our solar projects.
Operator: Thank you.
Speaker Change: one moment please will we pull for questions thank you
Operator: And our first question comes from the line of Colin Rush with Oppenheimer.
Colin Rush: thank you in our first question comes in a line of colin rush was oban imer please receive your quest
Colin Rush: Please proceed with your question.
Colin Rush: Thanks so much, guys.
Colin Rush: You know, with, you know, the new ADCVD charters, can you talk a little bit about how you're, expecting the sales and distribution cost to trend to the balance of the year, you know, just on the percentage of revenue that would be supreme?
Colin Rush: thanks so much you know with the new atcvd charges can you talk a little bit about how you're expecting the sales and distribution cost to trendto the balance of the year you know and you know just on a percentage of revenue would be sochroninical
Sean Chu: We have the expertise to grow alongside this market.
Unknown Executive: Yeah, Colin, I don't know which ADCVD you refer to.
Speaker Change: are calling i don't know which a d c v d you refer to if you refer to the new a cv d petition
Unknown Executive: If you refer to the new ADCVD petition for the four Southeastern Asian countries, then, we have to wait. We have to wait for at least for the preliminary ruling expected in October and November.
Sean Chu: Complimenting our global manufacturing expertise in both solar and energy storage are our outstanding business teams.
Ismael Guerrero: This accomplishment marked our first private PPA with Toyota Sucio, a key member of the Toyota Group. Pre-carbon energy currently owns 1.6 gigawatts of projects in operation and 1.7 gigawatts Along with one gigawatt hour of best projects in operation and 3.8 gigawatt hours under construction. The vast majority of these projects are fully funded and secured with PTA contracts, positioning us to begin generating substantial revenues from 2020-25 onwards. Additionally, we have around 10 gigawatts of PD and 16 gigawatts hours of best with granted interconnections, which have expected to be ready in the near term, driving significant growth.
Speaker Change: for the
Speaker Change: for south eastern asian country
Sean Chu: These local experts have enabled us to develop both global operations and a truly global brand.
Speaker Change: then we have to wa we have to wait for the at least for the preliminary ruling expect a october and the november so itiss difficult for me the speculate the impact
Unknown Executive: So it's difficult for me to speculate the impact of that ADCVD case at this moment.
Speaker Change: of that adddeccv case at this moment
Colin Rush: Maybe I can take it offline, but the question is really around how are you accruing for, that in the meantime as you bring products into the country?
Speaker Change: maybe youcan take offline but the questionsis really around howare you you ocaccurring for that in a mei it's bring products into the into the end of the country
Unknown Executive: All right, let me let me take that one offline.
Colin Rush: So the second question then is really around...
Speaker Change: let me let me take down one offl so the second question then is earreally a run this
Colin Rush: This is Colin.
Yan Zhuang: This is Yan.
Yan Zhuang: Go ahead.
Yan Zhuang: So let me answer your question.
Yan Zhuang: So in the meantime, we actually work with our customers on the conditioning price mechanism.
Speaker Change: the contro has end so let me answer your crest
Ismael Guerrero: Our own aim business continues to grow steadily, with 11 gigawatts of contracted projects making it one of the largest operational fleets globally. This steady growth is supported by our own project portfolio, which provides clear visibility into future expansion.
Speaker Change: so the meantime we actually work with our customers on the conditioning price mechanism so both sides are protected
Yan Zhuang: So both sides are protected with the assumption of different tariff level.
Speaker Change: with with assumption of different tariff level
Yan Zhuang: So we are actually doing business as usual at the moment.
Speaker Change: so so we are actually doing this as usual at the moment so that's what we do right now
Yan Zhuang: So that's what we do right now.
Xinbo Zhu: Now, let me hand it over to Xinbo, who will go through our financial results in more detail. Xinbo, please go ahead. Thank you Ismael.
Colin Rush: Okay, thanks guys.
Colin Rush: And then, you know, you guys have had a history of being flexible with the market in terms, of building out capacity and managing margins around, you know, where best returns are.
Speaker Change: okay thank guys and then you know you ve got have had a history of being flexible with the market in terms of building out capacity and
Xinbo Zhu: Please turn to slide level. In the second quarter, we achieved revenue of 1.6 billion dollars and the growth margin of 17.2%. Both of which were in line with our kindness. The sequential increase in revenue was primarily due to a higher volume of solar model shipments, partially offset by a decline in module ASP. The growth margin decreased 180 basis points, quarter over quarter, mainly due to lower module prices. Total operating expenses in the second quarter increased to 234 million dollars, primarily driven by higher shipping and handling expenses.
Speaker Change: managing margins around where best returns are
Colin Rush: And you've still got a very strong distribution business in a number of countries.
Colin Rush: Can you talk a little bit about the dynamics for that distribution business as you've seen, some of the kind of disruption that's happened in that distribution channel here in the last couple of years and how you see that opportunity evolving for your distribution businesses?
Speaker Change: and you've still got a very strong distribution business in a number of countries key talk a little bit about
Speaker Change: the dynamics for that distribution business as you've seen some of the kind of destruction that's happened in that distribution channel
Speaker Change: here in in the last couple of years and then how you see an opportunity evolving for your distribution businesses that times you can grow into or are you still mentioning a lot of relationships kind of working somewhere some your
Yan Zhuang: Is that something you can, you know, grow into or are you still managing a lot of relationships, and kind of working similar to some of your peers?
Yan Zhuang: Yeah, so distribution business has always been our strong channel and it continues to, be strong. Actually, we anticipate this year more than half of the volume goes to the DG market.
Speaker Change: yeah so distribution busis has always been our strong channel and to continue to do soong actually we anticipate this year more than the half of the the volume goes to the dg market
Yan Zhuang: That includes the residential rooftop and the CNI rooftop market.
Speaker Change: that include a residential toughten us in sandni with top market
Yan Zhuang: And in particular, I would say, you know, even under the current situation with a very, low market price on module, we're doing well in the U.S., for example, on the distribution channel and we're doing well in Japan.
Xinbo Zhu: Free costs are likely to remain elevated in the second half of the year, given the ongoing racy issue and the industry's efforts to clear shipment backlash from Asia to the United States and Europe. Now, interest returned to a normalized level in the second quarter, following the absence of an interest benefit derived from the interest income generated by anti-dumpting and the comfort value and duty deposit refunds in the first quarter of 2024.
Speaker Change: and in particular i will say even i'mgoing this the current
Speaker Change: a situation with with a very low price in the market price module
Speaker Change: we're doing well in the u as for example on the distribution channel and we're doing well in japan and we even started our boundary pis boundary module
Yan Zhuang: And we even started our bundle business, bundle module and residential storage and inverters, in the channel to enhance our margin. So long term wise, we will expand that business, that bundling business in different markets, and has proven to be a very profitable way of conducting sales by providing solutions.
Speaker Change: and residential storage and the orders in the channel to enhance our margin so long-term life so we will expand that bus is that bumbleoing thisiness
Speaker Change: in different markets and it has proven to the very profitable way for conducting sales produ by prviding solutions
Xinbo Zhu: Networking exchange and derivative gains in the second quarter of 2026 amounted to 13, mainly driven by the weakening Chinese yen and the Japanese yen against the US dollar. Total net income was 27 million dollars. Well, net income achieved both to Canadian solar was 4 million dollars or 2 cents per diluted share. Basic and diluted earning for share included the recurrent energy redeemable preferred shared dividends payable in kind. That is associated with blood rocks investment, resulting in an EPSD plan of three cents deducted on the diluted basis.
Operator: Our next question is from the line of Philip Shen with Roth Capital.
Speaker Change: good thank gu
philipption: our next questions from the line of philipption with worth capital please just use your questions
Philip Shen: Please use your questions.
Speaker Change: i thanks for taking my questions first one is on the twenty four guide
Speaker Change: can you share some additional color on what drove the latest two thousand and twenty-four shipment reduction
Speaker Change: was the main impact driven by the southeast asia eightcd tariff process i know the tariffs have not come out yet but
Speaker Change: there is uncertainty and so just what the petition filed to that slow business and the willingness of customers
Speaker Change: to receive modules and if it wasn't that then was the driver more driven or more the just the global slowdown that we're seeing
Sean Chu: Finally, our project development platform, Recurrent Energy, is promised to deliver additional long-term value as it transitions to be a global developer, owner and operator of solar and storage assets.
Xinbo Zhu: Here, I want to address the impact of recurrent energies business model transformation on Canadian Solar's PML in the near-to-meet term. As recurrent transitions to a partial IPP model and accumulate more assets, two key effects will emerge. First, recurrent will sell fewer projects leading to a lower contribution to Canadian Solar's PML. Second, as more projects are retained on balance sheet, a greater portion of revenue and growth profit created by CSS Solar will be eliminated at the consolidated growth level.
Philip Shen: Hey guys, thanks for taking my questions.
Speaker Change: our filip potthis is shok
Yk Guida: the yk guida
Sean Chu: A key element of our growth strategy is to do so substantially and adequately.
Speaker Change #100: is not because of
Speaker Change #101: the new cbd case
Speaker Change #102: in for oursouth tern countries is rather for other market for u us vient shipments we are more less on target
Sean Chu: Please turn to slide five.
Sean Chu: In May, we proudly published our latest corporate sustainability report, which features expanded disclosures and enhanced transparency.
Speaker Change #102: was always all previous target n not much impact and asyouknow the
Speaker Change #102: preliminate
Speaker Change #102: decision for the new acvd is only expected thein october in november so yet' rather ate so you 't have much impact to the to onnyour shipment
Sean Chu: Highlighting of fuel achievements in 2023, Canadian solar achieved reduction in greenhouse gas emissions by 37%, energy consumption also by 37%, water usage by 72%, and waste intensity by 54% compared to the level in 2017. Additionally, we remain on track to meet our target of powering our global operations with 100% renewable energy by 2030.
Xinbo Zhu: The unrealized CSS Solar revenue and growth profit on premium sales to recurrent for those projects will be recognized gradually over the life of the project assets due to this in fact, during the transition period, Canadian Solar's PML will be systematically and consistently lower than that of CSS Solar. Well recurrent assets will deliver value longer term.
Speaker Change #102: so the carire is really for from other market now as we mentioned everytime in earning call we want to strike our balance
Philip Shen: First one is on the 24 guide.
Speaker Change #103: petun sheppand audio and
Sean Chu: As we have consistently emphasized ethical labor practices of utmost importance to us, also within our operations and throughout our supply chain. As a participant in the United Nations Global Compact, which we adhere to the UNGC's 10 principles of human rights, labor practices.
Speaker Change #102: profit the other words we would got want to lose money just to sust
Sean Chu: This environmental protection and business ethics to ensure the integrity of our operations and supply chain, we also engage with responsible business aligns to conduct validated assessment programs out there at our facilities and those of our suppliers.
Xinbo Zhu: Now, let's discuss cash flow and the balance sheet.
Speaker Change #102: or to achieve a shipment numbers though we look at the current situation but as you know ourisherman tr being
Sean Chu: The RPA, the AP audit is an industry leading standard for on-site manufacturing evaluations, assessing labor practices, health and safety, environmental impact, ethics and management systems.
Sean Chu: Finally, we remain committed to promoting diversity.
Xinbo Zhu: Please turn to slides top. Net cash flow used in operating activities in the second quarter of 2024 was $429 million. The operating cash outflow was primarily driven by increased project assets due for sale. And increased accounts receivables mainly associated with higher module sales during the second quarter.
Philip Shen: Can you share, some additional color on what drove the latest 2024 shipment reduction?
Philip Shen: Was the main impact driven by the Southeast Asia ADCBD tariff process?
Philip Shen: I know the tariffs have not come out yet, but there is uncertainty.
Speaker Change #102: going up every quarter quarter back quarter
Sean Chu: Equity and Inclusion.
Speaker Change #102: the first quarter we delivered
Speaker Change #104: i think six point three kig and second quarter eight point two bigig the third quarter we are were just guided it nine to a nine point five people
Sean Chu: At Canadian Solar, we foster a productive workforce that benefits from diverse perspectives in decision-making processes. Our newly included gender pay analysis revealed that women at Canadian Solar earn 95% of what men earn in 2023.
Speaker Change #104: so actually we have stadabized to our sales
Philip Shen: And so just with the petition filed, did that slow business and the willingness of customers to receive modules?
Philip Shen: And if it wasn't that, then was the driver more driven or more just the global slowdown that we're seeing?
Sean Suits: Thanks.
Sean Chu: With the remaining 5% gap deemed equitable.
Xinbo Zhu: Regarding that, going forward, CSS Solar and recurrent energies' leverage profiles will align with their respective strategic goals. This quarter CSS Solar reduced its debt. Optimizing is financial leverage to better navigate the industry cycle. Meanwhile, recurrent energy will continue to increase leverage in the near term to support its transition to a partial IPP model.
Speaker Change #104: channels and we are getting back with more orders will still be able to protect our profitability but still you know we are already at the second half of august
Sean Suits: Now, Philip, this is Sheng.
Sean Chu: Inclusion.
Speaker Change #104: in the order to strike about and picturing in the volme and profitability know we have taken actctions
Speaker Change #104: so we look at how much we can reason ably ship
Speaker Change #104: while still maintain
Sean Suits: The new guidance is not because of the new ADCBD case, in for Southeastern countries.
Xinbo Zhu: In summary, total financing at the year marked still at $4.2 billion, with a decrease at CSS Solar and a net increase at recurrent energy. In the second quarter, we spent approximately $390 million in manufacturing capital expenditures. As you mentioned earlier, in light of market conditions, we are dialing back our upstream capacity plants. We have revised our four-year 2020 for capital expenditure expectations downward to approximately $1.2 billion.
Speaker Change #104: the profitability then we decide the new guidance
Speaker Change #105: the usshouldman rangech
Speaker Change #105: yes as a reasonable estimate is a reasonable by update
Sean Suits: It's rather for other markets.
Sean Chu: I'm pleased with our achievements in a second quarter and the first half of this year.
Speaker Change #105: f of
Speaker Change #105: great okay and i thank you sean
Speaker Change #106: can you share any color on a potential recurrence
Sean Suits: For U.S. founded shipments, we are more or less on target with our previous target.
Sean Chu: We have demonstrated the resilience of our business in challenging circumstances and remain vigilant in our work moving forward.
Speaker Change #107: ipo timeline additionally are you thinking about spinninging off the east storage business as well and then finally related these stores do you plan on building a battery cell pack line of the u us and how much solar cell
Speaker Change #108: capacity well you ys talked about how much you have inthe u uss now how much more could it be how much could you more could you grow it sorry for the so many questions in a row but on thank you
Xinbo Zhu: We ended the period with a cash position of $2.2 billion. Reflecting the SI Solar's debt repayments, recurrence solar and storage assets growth, and change in working capital.
Speaker Change #108: i
philipper: our philipper thanks for highlighting so much of
Speaker Change #110: the gram of canadians older you see our strength in recurren we also see our strength
Xinbo Zhu: Lastly, I would like to speak to the private convertible bond on Monday. Please turn to slot 15. The rationale for this transaction is both financial and strategic. From a financial perspective, the notes provide us a worthwhile financing solution offering a flexible drawdown schedule and the reasonable funding cost. From strategic standpoints, we are pleased to welcome TAG as a new potential equity partner. Please turn to slot 14 for additional pilot. With more than $55 billion in assets under management, TAG is among a select group of global investment managers with specialized capital pools across multiple asset classes dedicated to investing in renewable energy.
Sean Suits: There's not much impact.
Sean Suits: As you know, the preliminary decision for the new ADCBD is only expected in, October and November.
Sean Suits: It's rather late, so it won't have much impact to the total annual shipment.
Sean Suits: So, the impact is really from the other markets.
Ismail: also speaculate that however we are moving to our partial p model as i am myitself ismail and symbo ation and going into this model
Sean Suits: Now, as we mentioned every time in earnings call that we want to strike a balance between, shipment volume and profit. In other words, we don't want to lose money just to sustain or to achieve shipment numbers.
Sean Suits: So, we look at the current situation.
Speaker Change #111: ah you can
Speaker Change #111: reasonably specully that at some point we will look at while way to capitalize out what we what do we accumulate and won't review however we just started this process
Sean Suits: But as you know, our shipment has been going up every quarter, quarter by quarter. The first quarter we delivered I think 6.3 gigawatts. The second quarter, 8.2 gigawatts. And the third quarter, we just guided 9 to 9.5 gigawatts. So, actually, we have stabilized our sales channels and we are getting back with more and more orders.
Sean Suits: We'll still be able to protect our profitability.
Speaker Change #111: so i would say to build a good ipp it takes a couple of years so i guess this is the indication of any
Speaker Change #111: capitaliz station
Speaker Change #112: plan for a current now you storage we don't have a plan to sping off storage is a
Xinbo Zhu: TAG is an experienced investor in the solar sector. After acquiring the first solar Japan platform in 2022, it expanded its portfolio to over 600 megawatt across Japan. TAG is also the largest owner of distributed solar projects in Hong Kong. TAG is well positioned to partner with CSIQ to strengthen the company's market-leading position across the solar value chain. In key operating markets, we anticipate that PAT will collaborate with Canadian solar to explore and realize strategic synergies.
Speaker Change #112: important
Speaker Change #113: and dynamic component of csi solar so and is it well in the cs solar family so we don't have our plan there now what's your next
Speaker Change #114: numbers to react yourful question yes so the next one is do you plan on building battery cell and pack in the u s
Speaker Change #115: and then um as it relates to
Speaker Change #116: u s solar sell and module capacity i'll just remind everybody kind of what the capacity is today and what your plans are for expansion and i think that's it s
Dr. Sean Chu: Now, let me turn the call back to Sean who will conclude with our guidance and business outlook. Sean, please go ahead. Thank you, Shinbo.
Dr. Sean Chu: Please turn to slide 15. For the third quarter of 2024, we expect solar module shipments by CSI solar to be in a range of 9 to 9.5 gigawatts, including approximately 100 megawatts of solar module shipments to our own project. Photo battery energy storage shipments are expected to be between 1.4 to 1.7 gigawatts hours, including about 1.2 gigawatts hours for our own project. This is an important volume to our own project. There's primarily for Papagol storage and landmark project in Arizona, developed by Recurrent Energy.
Speaker Change #117: well we're pray
Speaker Change #118: in other words we have been study the battery cell pack and the best production u s no question about that however haven't made announcement
Yan Zhuang: I will now turn a call over to Yan, who will provide more details of our CSI business, CSI solar business.
Speaker Change #118: of any factories there so would not make announcement today
Speaker Change #118: now for solar celle
Yan Zhuang: Yan, please go ahead.
Speaker Change #119: and so of module you know the module capacity you mustski yes five ggoat the cell capacity in jefficeon well in the enda is also so five gatelock
Yan Zhuang: Thank you, Sean.
Speaker Change #120: okay thanks i'll passit on
Yan Zhuang: Please turn to slide 6.
Speaker Change #121: thank you
Speaker Change #122: theningnext questions from the line of e the tach was wells fargo please su to your questions
Yan Zhuang: In the second quarter of 2024, we shipped 8.2 gigawatts of modules, marking a 30% quarter over quarter growth. We generated revenue of 1.7 billion dollars and a low margin of 16.7%.
Dr. Sean Chu: Total revenue is expected to be in a range of $1.6 to $1.8 billion. Gross margin is expected to be between 14 to 16%. At this midpoint of the year, we observe a second half characterised by certain dates, by some uncertain dates. Given the potential extended period required for the supply demand balance to normalise, marginal margins will continue to freeze pressure. However, this is counterbalanced by the strength of our storage business. This storage is expected to deliver record revenue and profitability in the fourth quarter, even after accounting for elimination of shipment to our own project.
Speaker Change #123: thanks for taking my questions so the guidance for the second half it sounds like you expect margins to be under pressure because of the
Yan Zhuang: Despite the industry facing record losses, CSI solar delivered an operating income of 93 million dollars. Our revenue and profitability were boosted by strong performance in North America, which accounted for approximately 30% of our shipments.
Speaker Change #124: challenging market conditions and supply oversupply across the solar value chain i gu when do you think things get back into balance you have kind of an internal view thereand then at a high level do youexpect
Yan Zhuang: In most other regions, average setting prices remain challenging.
Speaker Change #124: this challenging market conditions and margin weakness to extend into two thousand and twenty-five
Yan Zhuang: We managed our orders stringently. This coupled with a reduction cost supported our financial performance.
Speaker Change #125: yeah u to clarify that we see the margin for solar modu business under pressure fire we see sustainable and healthy margin for our and just doarage is
Yan Zhuang: To walk through key drivers of our module business.
Sean Suits: But still, we are already at the second half of August.
Yan Zhuang: Please turn to Slide 7.
Yen Oil: confidence for the second half after the year now i will let yen to america further comment is especially for
Sean Suits: In order to strike a balance between the volume and profitability, we have taken actions. So, we look at how much we can reasonably ship.
Sean Suits: We'll still maintain the profitability.
Speaker Change #126: the question iwill'll callall out the pressure on the module reason ers may continue
Yan Zhuang: Alongside the rapid decline in policy-conprices, the entire supply chain is under pressure, leading to continued cost reductions. While this trend may initially seem concerning, it highlights the advantages of our partial vertical integration. We can flexibly source upstream materials at prices that enhance our competitive structure.
Dr. Sean Chu: As such, we are revising our total solar module shipment guidance to be in a range of 32 to 36 gigawatts, including one gigawatts to our own project. We expect 4-year revenue to be in a range of $6.5 to $7.5 billion.
Sean Suits: Then we decide that the new guidance, the new shipment range is a reasonable estimate.
Yen Oil: so first of all at sha has already mentioned
Yen Oil: that going to have a strong que four very strongcture for us storage ps
Philip Shen: Great.
Speaker Change #127: so we believe the pressure will continue throughout this year for sureort next year
Speaker Change #128: so i'm not a magic i cannow tell you one that's going toberecovever but we're already seeing it's actually reaching the bottom
Yan Zhuang: Along with our flexible strategic manufacturing approach, we're moderating our capacity expansion plans to capitalize on current market conditions.
Speaker Change #128: so people are very careful the inventory control and we're seeing capacity are actually start to flash out
Yan Zhuang: Specifically, we intend to delay upstream investments into a more obtune window, reducing our planned capture expenditures this year.
Dr. Sean Chu: These revised forecasts reflect our continued commitment to our strategy of prioritising profitability and driving sustainable growth.
Speaker Change #129: slowly not known but the school accelerate who bebelieve when we moving to a next year
Speaker Change #129: and for us
Speaker Change #129: we're going to have continuue to have a very healthy this is on our storage moving to next year signly higher volume with
Yan Zhuang: Thanks to our ongoing technological advancements, N-type top-com costs are now nearly aligned with those of PERC.
Operator: With that, I would like to open the floor for questions, operator. Thank you.
Speaker Change #129: healthy margin so and we believe next year's module situations a little further be stabilized i don't think it's going to wards them this year so saw we're speaking with confident about our thisinessis next year
Yan Zhuang: Today, top-com technology is an industry standard offering lower-levelized cost of energy compared to mass-produced non-crystalline technologies.
Yan Zhuang: This means our customers benefit from using less land, installing fewer trackers, reducing end-of-life disposal costs and more.
Operator: At this time, we'll be conducting a question and answer session. If you'd like to ask a question today, please press star 1 from your telephone keypad, and a confirmation telephone will indicate your line in the question queue. You may press star 2 if you'd like to withdraw your question from the queue. For assistance or even speaker equipment, maybe necessary to pick up your handset before pressing the star keys. One moment please, so we poll for questions.
Yan Zhuang: As I mentioned, our U.S, business remains strong.
Operator: Thank you.
Speaker Change #130: let me okayat additional col the the weaker cross margin in q three is kind of fluctuation
Speaker Change #131: both margin recognition in q three you know eaststorage is kind of system sell and the revenue and profit reaccogvenition may flect to a because of cutoffs
Yan Zhuang: We've higher volumes delivered at competitive prices in the second quarter compared to the first.
Colin Rush: Thank you, and our first question comes from the line of Colin Rush with Oppenheimer. Please receive your questions. Thanks so much, guys.
Yan Zhuang: We currently have contract signed and under active negotiations through 2020-30.
Yan Zhuang: In the U.S., thankability is even more critical than in other markets, and customers prefer to buy from a select group of Tier 1 suppliers where trust and proven track record are paramount.
Yan Zhuang: As in the past, during periods of uncertainty, we continue to actively service the U.S, market.
Dr. Sean Chu: You know, with the new ADCVD charges, can you talk a little bit about how you're expecting the sales and distribution cost to trend to the balance of the year? They are calling. I don't know which ADCVD you refer to. Now if you refer to the new ADCVD petition for the South Eastern Asian country, then we have to wait for the at least for the preliminary ruling expected in October and then November.
Speaker Change #132: so we expect lower cross margin to be recognizing in q three and as both yen and shaan mention we confirm that evenven after elimination
Yan Zhuang: In addition, we are investing over $1 billion dollars in the U.S, to ramp up two state-of-the-art and highly competitive manufacturing facilities. One facility is already producing solar modules in Muskete, Texas, while the other will manufacture solar cells in Jeffersonville, Indiana. Together, those these facilities will create more than 2,500 American manufacturing jobs.
Yan Zhuang: As a domestic manufacturer, we believe that regulatory certainty and clarity are essential for maintaining a long-term resilient solar industry in the United States.
Speaker Change #133: we are going to deliver a stronger second half of the year for these torage so it implies a very robust cube four for etars
Yan Zhuang: Now, turning to our East-Storage business, phase go to slide 8.
Speaker Change #134: okay got it so maybe just
Speaker Change #134: just just to be clear on that point for as i know you haven't provided guidance or gross margin in q four but given the commentary around you know east storage being strong in q four the margin there is higher should be assumed then that the gross margin increases potentially from q three the midpoint of fifteen percent from q three to q four
Yan Zhuang: In the second quarter, we continued to achieve record shipments, delivering approximately 1.5 gigawatt hours globally.
Dr. Sean Chu: So it's difficult for me to speculate the impact of that ADCVD case at this moment. Maybe we can take it offline, but the question is really around how are you occurring for that in the meantime as you bring products into the end of the country. All right, let me take that one offline. So the main time we actually work with our customers on the condition in price mechanism. So both sides are protected with a with assumption of different tariff level. So we are actually doing this as usual at the moment. So that's what we do right now.
Speaker Change #136: there reason noble
Speaker Change #137: while out providing qill four gross marartging yes as you all
Speaker Change #138: just mentioned so you take a quiteet you computation to determine the course margin range well usually we reserve it before the lectiron and call
Speaker Change #139: so we already stated to that we're going to happena stronger second half
Speaker Change #139: then first half
Speaker Change #140: okay no that mekes that makes sense okay thank you guys
Speaker Change #141: our next questions from the line of vicrome virate with city please re see your questions
Dr. Sean Chu: Okay, thanks guys. And then you know, you guys have had a history of being flexible with the market in terms of building the not capacity and managing margins around where best returns are. And you've still got a very strong distribution business in a number of countries. Can you talk a little bit about the dynamics for that distribution business? As you've seen, some of the kind of destruction that's happened in that distribution channel here in the last couple of years and then how you see that opportunity evolving for your distribution businesses, that's something you can grow into.
vicrome virate: hi thanks for taking the question could you give some ight into u s smallal pricing more recently we know that it's far higher than mulinpricing globally but we've also seen an increase in module imports this year quite a sharp increase so could you talk about how that impacts your to mic
Yan Zhuang: Our backlog continues to grow and now stands at $2.6 billion. Our key markets include the United States where we have a long-standing track record across our businesses, as well as the United Kingdom, Australia, Canada and other countries were entering as we expand the business.
Yan Zhuang: One deal in our backlog that I would like to highlight is our contract with Nova Scotia Power to develop flagship energy storage projects across three locations in Nova Scotia.
Speaker Change #143: u s module pricing compared to your imported volumes have you seen a big change where ' differential in the producting of those two markets that would be helpful
Yan Zhuang: Great water, wagerty and white rock.
Speaker Change #143: yeah
Speaker Change #143: wellso
Yan Zhuang: These projects totaling more than 700 megawatt hours will play a crucial role in enhancing great reliability and stability.
Dr. Sean Chu: Or are you still managing a lot of relationships and kind of working somewhere? Yeah, so distribution business has always been our strong channel. And they continue to be strong. Actually, we anticipate this year more than half of the volume goes to the DG market. That include the residential roof top and the same same nine with top market. And in particular, I will say we're, you know, even under the current situation with a very low price in the market price on module.
Speaker Change #144: we have a very healthy margin in the u s on mooside and we're actually growing our volume in the u s shipiing into the u s
Yan Zhuang: As Canadians, we take pride in making a significant environmental impact at home, contributing to both provincial and federal targets of achieving 80% renewable energy by 2030.
Speaker Change #144: and so i think we see some price fluctuation and however the addcvd the petition actually
Yan Zhuang: The growth potential for e-storage is immense. As of June 30, 2024, our total project-turned-t pipeline for e-storage stands at approximately 66 gigawatt hours. This pipeline includes both contracted and in construction projects, as well as projects in various stages of negotiation.
Yan Zhuang: Moving forward, we expect to continue growing water at healthy margins.
Yan Zhuang: We support our energy storage segment and the continued strategic management of our module business will anticipate the second half of the year to be stronger than the first.
Ismael Guerrero: Now, I will hand it over to Israel to provide an overview of recurrent energy, Canadian solar, global project development business.
Speaker Change #144: making the price ed more compleact in in general we're seeing price trenaining up so so the impact of the elvity
Ismael Guerrero: Israel, please go ahead.
Dr. Sean Chu: We're doing while in the US, for example, on the distribution channel. And we're doing while in Japan. And we even started our bundle business bundle module and residential storage and the murders in the channel to enhance our margin. So long term life, so we will expand that business that bundle in business in different markets and has proven to be very profitable way of conducting sales, providing solutions.
Speaker Change #144: so i'll do we we confident from the deals we're signing up work're actually quite confident that our margin the u s will continue to be healthy in q three and even in q four we have strong high confidence
Ismael Guerrero: Thank you again.
Dr. Sean Chu: Okay, thank you guys.
Ismael Guerrero: Please turn to slide 9.
Ismael Guerrero: Second quarter results were relatively modest, with no major project sales. We generated $50 million in revenue with a growth margin of 47.4%. During our transition to a model focus on accumulating operating assets, project sales will be lighter.
Speaker Change #145: it that's that thoughtful ide and just a question on the third quarter gardens could you give some color on what's driving that stuff up sequentially
Speaker Change #146: the moultiple shipment to that mind to not and a half take a wt range are there any specific regions that you're shipping to that are driving that just trying to understand and understand that that step up especially in might of managing volumes against pricing
Philip Shen: Our next question is from the line of Philipsion with West Capital. Please use your questions. Hey guys, thanks for taking my questions. First one is on the 24th guide. Can you share some additional color on what drove the latest 2024 shipment reduction? Was the main impact driven by the Southeast Asia ADCBD tariff process? I know the tariffs have not come out yet, but there is uncertainty. And so, just with the petition filed, did that slow business and the willingness of customers to receive modules? And if it wasn't that, then was the driver more driven or more the just like global slowdown that we're seeing? Thanks.
Ismael Guerrero: In the second half, due to policy changes in Europe, our projects will experience delays between one to two quarters in Spain and longer in Italy, depending on the region.
Speaker Change #147: but we have a volume increase in the u us
Speaker Change #147: in q three and also in europe slightly and
Speaker Change #148: other than that it's actually small changes small increases so it's actually in the end it's from eight point two up to we give a range of m to one point five so you's like about a lunkey ada
Speaker Change #149: want to thank you
Speaker Change #150: thank you at this time we've reached under question answer sion i'll hand the floorback to management for closing remarks
Ismael Guerrero: Within the UK, we obtain approval on several projects.
Dr. Sean Chu: Now, Philip, this is Sean. The new guidance is not because of the new ADCBD case in for Southeast Asian countries. It's rather for other market. For US-bounded shipments, we are more or less on target with our previous target. That's not much impact. And as you know, the preliminary decision for the new ADCBD is only expected in October and November. So, it's rather late. So, you don't have much impact to the total annual shipment.
Philip Shen: Okay.
Philip Shen: Thank you, Sean.
Philip Shen: Can you share any color on a potential recurrent IPO timeline?
Philip Shen: Additionally, are you thinking about spinning off the e-storage business as well?
Speaker Change #151: thank you for joining us today and for your continuous support if you have any question or will act to set up call please contact our investor relations te take care and have a great today
Philip Shen: And then, finally, related to e-storage, do you plan on building a battery cell pack line in the U.S.?
Sean Suits: So I guess this is the indication of any capitalization plan for recurrence.
Philip Shen: And how much solar cell capacity – well, you guys talked about how much you have in the U.S. now.
Sean Suits: Now, e-storage, we don't have a plan to spin off. E-storage is an important and dynamic component, of CSI solar. And it sits well in the CSI solar family, so we don't have a plan there.
Philip Shen: How much more could it be, and how much more could you grow it?
Sean Suits: Now, what's your next number three and number four question?
Philip Shen: Sorry for so many questions in a row, but thank you.
Philip Shen: Yeah, so the next one is, do you plan on building battery cell and pack in the U.S.?
Philip Shen: Well, Philip, thanks for highlighting so much of the strengths of Canadian solar.
Philip Shen: And then as it relates to U.S. solar cell and module capacity, just remind everybody kind of what the capacity is, today and what your plans are for expansion.
Sean Suits: You see our strengths in recurrence.
Philip Shen: And I think that's it.
Sean Suits: You also see our strengths and differentiation in the storage.
Philip Shen: Thanks.
Sean Suits: Let me add additional comment.
Sean Suits: So thank you very much for seeing our strengths and seeing our differentiators.
Sean Suits: Well, we plan.
Sean Suits: The weaker gross margin in Q3 is a kind of fluctuation, mostly because of the gross margin recognition in Q3.
Sean Suits: Now, we haven't talked about how to speculate this.
Sean Suits: In other words, we have been studying the battery cell pack and the best, production in U.S., no question about that.
Sean Suits: You know, e-storage is a kind of a system cell, and the revenue and profit recognition may fluctuate because of cut-off.
Sean Suits: However, we are moving to a partial IPP, model, as I, myself, Ismael, and Xinbo mentioned.
Sean Suits: However, we haven't made an announcement of any factories there, so I would not make an announcement today.
Sean Suits: So, we expect lower gross margin to be recognized in Q3, and as both Yan and Xiaohua mentioned, we confirm that even after elimination, we are going to deliver a stronger second half of the year for eStorage, so it implies a very robust Q4 for eStorage.
Sean Suits: And going through this model, you can reasonably speculate that at some point we will look for a way to capitalize on what we accumulate and what we build.
Ismael Guerrero: We also anticipate potential interconnection delays in certain parts of the US.
Sean Suits: Now, for solar cell and solar module, the module capacity in Mesquite is five gigawatt.
Praneeth Satish: Okay.
Sean Suits: However, we just started this process, so I would say to build a good IPP, it takes a couple of years.
Sean Suits: The cell, capacity in Jefferson Well, Indiana, is also five gigawatt.
Praneeth Satish: Got it.
Sean Suits: Great.
Praneeth Satish: So, maybe just to be clear on that point for – I know you haven't provided, guidance for gross margin in Q4, but given the commentary around eStorage being strong in Q4, the margin there is higher.
Philip Shen: Okay.
Praneeth Satish: Should we assume, then, that the gross margin increases from Q3?
Sean Suits: Thank you for joining us today and for your continuous support.
Philip Shen: Thanks.
Praneeth Satish: The midpoint is 15% from Q3 to Q4?
Sean Suits: If you have any questions or would like to set up a call, please contact our investor, relations team.
Operator: You may now disconnect your lines at this time.
Philip Shen: I'll pass it on.
Praneeth Satish: We are not providing Q4 gross margin yet, as you just mentioned.
Speaker Change #152: this will conclude today's conference thank you for your participation you may now disconnect your lines at this time
Sean Suits: Take care and have a great day.
Operator: Thank you.
Praneeth Satish: It will take quite some computation to determine the gross margin range.
Operator: This will conclude today's conference.
Praneeth Satish: The next question is from the line of Praneeth
Praneeth Satish: So, usually, we reserve it before the next ironing call.
Operator: Thank you for your participation.
Praneeth Satish: Satish with Wells Fargo.
Praneeth Satish: So, we already stated that we are going to have a stronger second half than first half.
Praneeth Satish: Please proceed with your question.
Praneeth Satish: Okay.
Praneeth Satish: Thanks for taking my questions.
Praneeth Satish: No, that makes sense.
Ismael Guerrero: This risk will continue to manage through our hybrid developer owner and operator business model with global presence.
Praneeth Satish: So, the guidance for the second half, it sounds like you expect margins to be under pressure, because of the challenging market conditions and supply, oversupply across the solar value chain.
Praneeth Satish: Okay.
Praneeth Satish: I guess, when do you think things get back into balance?
Praneeth Satish: Thank you, guys.
Praneeth Satish: Do you have kind of an internal view, there?
Vikram Bagri: Our next question is from the line of Vikram Bagri with Citi.
Ismael Guerrero: Since the announcement of BlackRock's $500 million investment in January, we have made significant progress, securing the requisite regulatory approvals and making internal operating matters. We are pleased to have announced the initial closing representing 300 million words of the planned capital infusion.
Praneeth Satish: And then at a high level, do you expect this challenging market conditions and margin weakness to extend into 2025? Yeah, I'd like to clarify that we see the margin for solar module business under pressure.
Vikram Bagri: Please proceed with your question.
Sean Suits: However, we see a sustainable and healthy margin for our energy storage business.
Vikram Bagri: Thanks for taking the question.
Sean Suits: So, overall, we still have confidence for the second half of the year.
Vikram Bagri: Could you give some insight into U.S. module pricing more, recently?
Sean Suits: Now, I will let Yan to make further comment, especially for the question of how long the, pressure on the module business may continue.
Vikram Bagri: We know that it's far higher than module pricing globally, but we've also seen an increase in module imports this year, quite a sharp increase.
Yan Zhuang: So, first of all, as Sean has already mentioned, that we're going to have a strong Q4, a very strong Q4 on storage side.
Vikram Bagri: So, could you talk about how that impacts your domestic U.S. module pricing compared to your imported volumes?
Yan Zhuang: So, we believe the pressure will continue throughout this year, for sure, and it may, carry into next year.
Vikram Bagri: Have you seen a big change or differential in the pricing of those two markets?
Yan Zhuang: So, I'm not a magician.
Vikram Bagri: That would be helpful.
Yan Zhuang: I cannot tell you when it's going to be recovered, but we're already seeing it's actually reaching the bottom.
Yan Zhuang: Well, so, we have a very healthy margin in the U.S. on the module side, and we're actually, growing our volume in the U.S., shipping to the U.S.
Yan Zhuang: So, people are very careful on inventory control, and we're seeing capacity actually start to flash out slowly, but it's going to accelerate, we believe, when we move into next year.
Yan Zhuang: So, I think we see some price fluctuation.
Yan Zhuang: And for us, we're going to continue to have a very healthy business on our storage moving into next year, significantly higher volume with a healthy margin.
Yan Zhuang: And, however, the ADCVD, the petition actually, you know, making the price addition more complex.
Yan Zhuang: So, we believe next year's module situation will further be stabilized.
Yan Zhuang: In general, we're seeing price trending up.
Yan Zhuang: I don't think it's going to worsen this year.
Yan Zhuang: So, with the impact of the ADCVD.
Yan Zhuang: So, overall speaking, we're still confident about our business next year.
Yan Zhuang: But still, we're confident from the deals we're signing up, we're actually quite confident that our margin in the U.S. will continue to be healthy in Q3.
Yan Zhuang: And even in Q4, we have strong, high confidence.
Ismael Guerrero: A key aspect of the growth expected from this transaction is our ability to secure the finance in needed to support the construction and monetization of our high-value pipeline projects.
Vikram Bagri: Got it.
Ismael Guerrero: Over the past few months, we continue to obtain competitive financing as both the operational and construction levels. In May, we secured a landmark multi-currency-revolving credit facility valued at up to 1.3 billion euro, involving 10 banks to support the construction of renewable energy projects across several European countries. In June, we obtained 513 million dollars in project financing for our 1.2 billion-dollar power storage project in Maricopa County, Arizona.
Vikram Bagri: That's helpful.
Vikram Bagri: Thank you.
Ismael Guerrero: Papago Storage is the largest energy storage project in Arizona and holds a 20-year-to-line agreement with Arizona Public Service Company.
Vikram Bagri: And just a question, on the third quarter guidance,
Vikram Bagri: could you give some color on what's driving that stuff up sequentially in the module shipment to that nine to nine and a half gigawatt range?
Vikram Bagri: Are there any specific regions that you're shipping to that are driving that?
Vikram Bagri: I'm just trying to understand that stuff up, especially in light of managing volumes against pricing.
Vikram Bagri: Well, we have a volume increase in the U.S. in Q3 and also in Europe slightly.
Dr. Sean Chu: So, the impact is really from the other market. Now, as we mentioned, every time in Ernie call that we want to strike a balance between shipment volume and profit. In other words, we don't want to lose money just to suspend or to achieve shipment numbers. So, we look at the current situation. But as you know, our shipment has been going up every quarter, quarter by quarter. The first quarter we delivered, I think, 6.3 giga and second quarter, 8.2 giga.
Yan Zhuang: And other than that, it's actually small changes, small increases.
Yan Zhuang: So it's actually, in the end, it's from 8.2 up to, we give a range of 9 to 9.5.
Yan Zhuang: So it's like about one gigawatt hour.
Operator: Thank you.
Operator: At this time, we've reached the end of our question and answer session.
Sean Suits: I'll hand the floor back to management for closing remarks.
Dr. Sean Chu: In third quarter, we just guided 9.2 and 9.5 giga. So, actually, we have stabilized our sales channels. And we are getting back with more and more orders. We'll still be able to protect our profitability. But still, we are already at the second half of August. And in order to strike a balance between the volume and profitability, we have taken actions. So, we look at how much we can reasonably ship, will still maintain the profitability, then we decide the new guidance, the new shipment range as a reasonable estimate. Is there a reasonable update for that?
Dr. Sean Chu: Great. Thank you, Sean. Can you share any color on a potential recurrent IPO timeline? Additionally, are you thinking about spinning off the eStorage business as well? And then finally, related to the eStorage du plan on building a battery cell, pack line in the US, and how much solar solar cell capacity? Well, you guys talked about how much you have in the US now. How much more could it be? How much could you grow it?
Dr. Sean Chu: Sorry for so many questions in a row, but thank you. Well, Philip, thanks for highlighting so much of the strength of Canadians over. The thank you very much for seeing our strengths and seeing our differentiators. Now, we haven't talked about how to speculate this. However, we are moving to a partial IPP model as I am myself, Ismael, and Xinbo mission. And going through this model, you can reasonably speculate that at some point, we will look for a way to capitalize on what we accumulate and what we build.
Ismael Guerrero: The battery energy storage system used for this historic project is sourced from Canadian source is storage division.
Ismael Guerrero: Also in June, we closed a 103 million-dollar tax credit facilitation agreement with Bank of America for our 160 megawatt north-forth solar project, which is already in operation.
Ismael Guerrero: Distance action marks our first production tax credit deal and exemplifies our ability to execute globally to optimize our funding access.
Ismael Guerrero: Please turn to slide 10.
Dr. Sean Chu: However, we just started this process, so I would say to build a good IPP, it takes a couple of years. So I guess this is the indication of any capitalization plan for recurrence. Now, eStorage, we don't have a plan to spin off, eStorage is an important dynamic component of CSI solar. And it's sit well in the CSI solar family, so we don't have a plan there.
Ismael Guerrero: We continue to lay the groundwork for long-term shareholder value.
Ismael Guerrero: We have expanded our total development pipeline to 27 gigawatts of solar and 63 gigawatts of battery energy storage. Our pipeline is available not only for its scale and geographical diversity, but also because of interconnections we can secure and the competitive PPAs we negotiate with top-tier counterparts.
Ismael Guerrero: For example, we recently signed a 10-year PPA with GTAN Automotive, a global leader in drive systems. This agreement will facilitate the annual production of approximately 200 gigawatts of renewable electricity and marks a decade and automotive first renewable energy PPA in Europe.
Ismael Guerrero: Across the world in Japan, we entered it through a 20-year PPA with Toyota Sucio Corporation to secure 100% of the solar power along with the non-phosilial certificates generated by three of our solar projects. This accomplishment marked our first private PPA with Toyota Sucio, a key member of the Toyota Group.
Ismael Guerrero: Pre-carbon energy currently owns 1.6 gigawatts of projects in operation and 1.7 gigawatts Along with one gigawatt hour of best projects in operation and 3.8 gigawatt hours under construction.
Dr. Sean Chu: Now, what's your next number three additional question? Yeah, so the next one is, do you plan on building battery cell and pack in the U.S.? And then, as it relates to U.S, solar cell and module capacity, just remind everybody what the capacity is today and what your plans are for expansion. And I think that's it. Thanks. Well, we plan. In other words, we have been studying the battery cell pack and the best production in U.S. No question about that.
Ismael Guerrero: The vast majority of these projects are fully funded and secured with PTA contracts, positioning us to begin generating substantial revenues from 2020-25 onwards.
Ismael Guerrero: Additionally, we have around 10 gigawatts of PD and 16 gigawatts hours of best with granted interconnections, which have expected to be ready in the near term, driving significant growth.
Dr. Sean Chu: However, we haven't made announcement of any factories there, so I would not make announcement today. Now, for solar cell and solar module, you know, the module capacity in Mesquite is 5GW, the cell capacity in Jefferson, well, in the end, is so-so 5GW.
Ismael Guerrero: Our own aim business continues to grow steadily, with 11 gigawatts of contracted projects making it one of the largest operational fleets globally. This steady growth is supported by our own project portfolio, which provides clear visibility into future expansion.
Dr. Sean Chu: Okay, thanks, I'll pass it on.
Xinbo Zhu: Now, let me hand it over to Xinbo, who will go through our financial results in more detail.
Xinbo Zhu: Xinbo, please go ahead.
Xinbo Zhu: Thank you Ismael.
Praneeth Satish: Thank you. The next questions from the line of Praneeth Satish with Wells Fargo, please to see your questions. Thanks for taking my questions.
Xinbo Zhu: Please turn to slide level.
Xinbo Zhu: In the second quarter, we achieved revenue of 1.6 billion dollars and the growth margin of 17.2%.
Dr. Sean Chu: So the guidance for the second half, it sounds like you expect margins to be under pressure because of the challenging market conditions and supply, oversupply across the solar value chain. I guess when do you think things get back into balance? You have kind of an internal view there. And then at a high level, do you expect, you know, this challenging market conditions and margin weakness to extend into 2025? Yeah, we're not so clarified. We see the margin for solar module business under pressure. However, we see sustainable and healthy margin for our energy storage business. So overall, we still have confidence for the second half of the year.
Xinbo Zhu: Both of which were in line with our kindness.
Xinbo Zhu: The sequential increase in revenue was primarily due to a higher volume of solar model shipments, partially offset by a decline in module ASP. The growth margin decreased 180 basis points, quarter over quarter, mainly due to lower module prices.
Xinbo Zhu: Total operating expenses in the second quarter increased to 234 million dollars, primarily driven by higher shipping and handling expenses.
Dr. Sean Chu: Now, I would like to end to make further comment. It's especially for like the question of how long the pressure on the module business may continue. So first of all, as Shaoh has already mentioned that we're going to have a strong Q4, very strong Q4 on storage. You know, so we believe the pressure will continue throughout this year, for sure. So I'm not a magician. I cannot tell you one is going to be recovered, but we're already seeing is actually reaching the bottom.
Xinbo Zhu: Free costs are likely to remain elevated in the second half of the year, given the ongoing racy issue and the industry's efforts to clear shipment backlash from Asia to the United States and Europe.
Xinbo Zhu: Now, interest returned to a normalized level in the second quarter, following the absence of an interest benefit derived from the interest income generated by anti-dumpting and the comfort value and duty deposit refunds in the first quarter of 2024.
Xinbo Zhu: Networking exchange and derivative gains in the second quarter of 2026 amounted to 13, mainly driven by the weakening Chinese yen and the Japanese yen against the US dollar.
Xinbo Zhu: Total net income was 27 million dollars.
Dr. Sean Chu: So people are very careful on inventory control. And we're seeing capacity are actually start to flash out slowly, not now, but it's going to accelerate. We believe one, we, you know, moving to next year. And for us, we're going to have continued to have a very healthy business on our storage, moving to next year, significantly higher volume with a healthy margin. So, and we believe next year's module, situations, we'll continue further the stabilize. I don't think it's going to worsen this year. So, overall speaking, we're still confident about our business next year.
Xinbo Zhu: Well, net income achieved both to Canadian solar was 4 million dollars or 2 cents per diluted share. Basic and diluted earning for share included the recurrent energy redeemable preferred shared dividends payable in kind.
Xinbo Zhu: Let me add a additional number. The weaker growth margin in Q3 is kind of fluctuation, growth margin recognition in Q3. You know, Easter is kind of system cell. And the revenue and profit recognition may fluctuate because of cutoff. We expect a lower growth margin to be recognized in Q3, and as both Yan and Xiaohang mentioned, we confirm that even after elimination, we are going to deliver a stronger second half of the year for Easterage, so it implies a very robust Q4 for Easterage.
Xinbo Zhu: That is associated with blood rocks investment, resulting in an EPSD plan of three cents deducted on the diluted basis.
Xinbo Zhu: Here, I want to address the impact of recurrent energies business model transformation on Canadian Solar's PML in the near-to-meet term.
Xinbo Zhu: As recurrent transitions to a partial IPP model and accumulate more assets, two key effects will emerge.
Xinbo Zhu: First, recurrent will sell fewer projects leading to a lower contribution to Canadian Solar's PML.
Xinbo Zhu: Okay, got it, so maybe just to be clear on that point, I know you haven't provided guidance for a growth margin in Q4, but given the commentary around Easterage being strong in Q4, the margin there is higher, should be assumed then that the growth margin increases potentially from Q3, the midpoint is 15% from Q3 to Q4. There is no point. Wow, we're not providing Q4 growth margin yet, as you know, just mentioned.
Xinbo Zhu: Second, as more projects are retained on balance sheet, a greater portion of revenue and growth profit created by CSS Solar will be eliminated at the consolidated growth level. The unrealized CSS Solar revenue and growth profit on premium sales to recurrent for those projects will be recognized gradually over the life of the project assets due to this in fact, during the transition period, Canadian Solar's PML will be systematically and consistently lower than that of CSS Solar.
Xinbo Zhu: Well recurrent assets will deliver value longer term.
Xinbo Zhu: Now, let's discuss cash flow and the balance sheet.
Xinbo Zhu: Please turn to slides top.
Xinbo Zhu: So it would take quite some computation to determine the growth margin range, but usually we reserve it before the next ironing call. So we already stated that we're going to have a stronger second half than first half. Okay, no, that makes sense.
Xinbo Zhu: Net cash flow used in operating activities in the second quarter of 2024 was $429 million. The operating cash outflow was primarily driven by increased project assets due for sale. And increased accounts receivables mainly associated with higher module sales during the second quarter.
Dr. Sean Chu: Okay, thank you guys.
Xinbo Zhu: Regarding that, going forward, CSS Solar and recurrent energies' leverage profiles will align with their respective strategic goals. This quarter CSS Solar reduced its debt.
Vikram Bagri: Our next question is from the line of Vikram Bagri with City. Please just use your question. All right, thanks for taking the question. Could you give some insight into U.S, multiple pricing more recently? We know that it's far higher than multiple pricing globally, but we've also seen an increase in module imports this year, quite a sharp increase. So could you talk about how that impacts your domestic U.S, module pricing compared to your imported volumes?
Xinbo Zhu: Optimizing is financial leverage to better navigate the industry cycle.
Xinbo Zhu: Meanwhile, recurrent energy will continue to increase leverage in the near term to support its transition to a partial IPP model.
Xinbo Zhu: In summary, total financing at the year marked still at $4.2 billion, with a decrease at CSS Solar and a net increase at recurrent energy.
Xinbo Zhu: In the second quarter, we spent approximately $390 million in manufacturing capital expenditures.
Xinbo Zhu: As you mentioned earlier, in light of market conditions, we are dialing back our upstream capacity plants.
Xinbo Zhu: We have revised our four-year 2020 for capital expenditure expectations downward to approximately $1.2 billion. We ended the period with a cash position of $2.2 billion. Reflecting the SI Solar's debt repayments, recurrence solar and storage assets growth, and change in working capital.
Xinbo Zhu: Lastly, I would like to speak to the private convertible bond on Monday.
Xinbo Zhu: Please turn to slot 15.
Vikram Bagri: Have you seen a big change? We're differential in the pricing of those two markets. That would be helpful. Well, so we have a very healthy margin in the U.S, on module side, and we're actually thinking we see some price fluctuation, and however, the ADCVD, the petition actually making the price iteration more complex in general, we're seeing price trending up. So the impact of the ADCVD. So both do. We're confident from the deals we're signing up. We're actually quite confident that our margin in the U.S, will continue to be healthy in two-three, and even in two-four, we have a strong high confidence.
Xinbo Zhu: The rationale for this transaction is both financial and strategic. From a financial perspective, the notes provide us a worthwhile financing solution offering a flexible drawdown schedule and the reasonable funding cost.
Vikram Bagri: That's helpful, thank you.
Xinbo Zhu: From strategic standpoints, we are pleased to welcome TAG as a new potential equity partner.
Xinbo Zhu: Please turn to slot 14 for additional pilot.
Xinbo Zhu: With more than $55 billion in assets under management, TAG is among a select group of global investment managers with specialized capital pools across multiple asset classes dedicated to investing in renewable energy. TAG is an experienced investor in the solar sector. After acquiring the first solar Japan platform in 2022, it expanded its portfolio to over 600 megawatt across Japan.
Xinbo Zhu: TAG is also the largest owner of distributed solar projects in Hong Kong.
Xinbo Zhu: TAG is well positioned to partner with CSIQ to strengthen the company's market-leading position across the solar value chain.
Xinbo Zhu: In key operating markets, we anticipate that PAT will collaborate with Canadian solar to explore and realize strategic synergies.
Dr. Sean Chu: And just a question on the third quarter of guidance. Could you give some color on what's driving that stuff up sequentially in the module shipment to that mine to not-and-a-half gigawatt range? Are there any specific regions that you're shipping to that are driving that? Just trying to understand that stuff up, especially in managing volumes against price. Well, we have a volume increase in the U.S, in Q3 and also in Europe slightly.
Dr. Sean Chu: And other than that it's actually small changes, small increases. So it's actually in the end, it's from 8.2 up to, we give a range of 9 to 9.5. So it's like about one giga dot. Thank you.
Sean Chu: Now, let me turn the call back to Sean who will conclude with our guidance and business outlook.
Operator: At this time we've reached the end of our question and answer session. I'll hand the floor back to management for closing remarks. Thank you for joining us today and for your continuous support. If you have any questions or will act or set up a call, please contact our investor relations team. Take care and have a great day.
Sean Chu: Sean, please go ahead.
Sean Chu: Thank you, Shinbo.
Sean Chu: Please turn to slide 15.
Sean Chu: For the third quarter of 2024, we expect solar module shipments by CSI solar to be in a range of 9 to 9.5 gigawatts, including approximately 100 megawatts of solar module shipments to our own project.
Sean Chu: Photo battery energy storage shipments are expected to be between 1.4 to 1.7 gigawatts hours, including about 1.2 gigawatts hours for our own project.
Sean Chu: This is an important volume to our own project.
Operator: This will conclude today's conference. Thank you for your participation. You may not disconnect your lines this time.
Sean Chu: There's primarily for Papagol storage and landmark project in Arizona, developed by Recurrent Energy.
Sean Chu: Total revenue is expected to be in a range of $1.6 to $1.8 billion.
Sean Chu: Gross margin is expected to be between 14 to 16%.
Sean Chu: At this midpoint of the year, we observe a second half characterised by certain dates, by some uncertain dates.
Sean Chu: Given the potential extended period required for the supply demand balance to normalise, marginal margins will continue to freeze pressure.
Sean Chu: However, this is counterbalanced by the strength of our storage business. This storage is expected to deliver record revenue and profitability in the fourth quarter, even after accounting for elimination of shipment to our own project.
Sean Chu: As such, we are revising our total solar module shipment guidance to be in a range of 32 to 36 gigawatts, including one gigawatts to our own project.
Sean Chu: We expect 4-year revenue to be in a range of $6.5 to $7.5 billion.
Sean Chu: These revised forecasts reflect our continued commitment to our strategy of prioritising profitability and driving sustainable growth.
Operator: With that, I would like to open the floor for questions, operator.
Operator: Thank you.
Operator: At this time, we'll be conducting a question and answer session.
Operator: If you'd like to ask a question today, please press star 1 from your telephone keypad, and a confirmation telephone will indicate your line in the question queue.
Operator: You may press star 2 if you'd like to withdraw your question from the queue.
Operator: For assistance or even speaker equipment, maybe necessary to pick up your handset before pressing the star keys.
Operator: One moment please, so we poll for questions.
Operator: Thank you.
Colin Rush: Thank you, and our first question comes from the line of Colin Rush with Oppenheimer.
Colin Rush: Please receive your questions.
Colin Rush: Thanks so much, guys.
Colin Rush: You know, with the new ADCVD charges, can you talk a little bit about how you're expecting the sales and distribution cost to trend to the balance of the year?
Sean Chu: They are calling.
Sean Chu: I don't know which ADCVD you refer to.
Sean Chu: Now if you refer to the new ADCVD petition for the South Eastern Asian country, then we have to wait for the at least for the preliminary ruling expected in October and then November.
Sean Chu: So it's difficult for me to speculate the impact of that ADCVD case at this moment.
Sean Chu: Maybe we can take it offline, but the question is really around how are you occurring for that in the meantime as you bring products into the end of the country.
Sean Chu: All right, let me take that one offline.
Sean Chu: So the main time we actually work with our customers on the condition in price mechanism.
Sean Chu: So both sides are protected with a with assumption of different tariff level.
Sean Chu: So we are actually doing this as usual at the moment.
Sean Chu: So that's what we do right now.
Colin Rush: Okay, thanks guys.
Colin Rush: And then you know, you guys have had a history of being flexible with the market in terms of building the not capacity and managing margins around where best returns are.
Colin Rush: And you've still got a very strong distribution business in a number of countries.
Colin Rush: Can you talk a little bit about the dynamics for that distribution business?
Colin Rush: As you've seen, some of the kind of destruction that's happened in that distribution channel here in the last couple of years and then how you see that opportunity evolving for your distribution businesses, that's something you can grow into.
Colin Rush: Or are you still managing a lot of relationships and kind of working somewhere?
Yan Zhuang: Yeah, so distribution business has always been our strong channel. And they continue to be strong.
Yan Zhuang: Actually, we anticipate this year more than half of the volume goes to the DG market.
Yan Zhuang: That include the residential roof top and the same same nine with top market.
Yan Zhuang: And in particular, I will say we're, you know, even under the current situation with a very low price in the market price on module.
Yan Zhuang: We're doing while in the US, for example, on the distribution channel.
Yan Zhuang: And we're doing while in Japan.
Yan Zhuang: And we even started our bundle business bundle module and residential storage and the murders in the channel to enhance our margin.
Yan Zhuang: So long term life, so we will expand that business that bundle in business in different markets and has proven to be very profitable way of conducting sales, providing solutions.
Colin Rush: Okay, thank you guys.
Philip Shen: Our next question is from the line of Philipsion with West Capital.
Philip Shen: Please use your questions.
Philip Shen: Hey guys, thanks for taking my questions.
Philip Shen: First one is on the 24th guide.
Philip Shen: Can you share some additional color on what drove the latest 2024 shipment reduction?
Philip Shen: Was the main impact driven by the Southeast Asia ADCBD tariff process?
Philip Shen: I know the tariffs have not come out yet, but there is uncertainty.
Philip Shen: And so, just with the petition filed, did that slow business and the willingness of customers to receive modules?
Philip Shen: And if it wasn't that, then was the driver more driven or more the just like global slowdown that we're seeing?
Philip Shen: Thanks.
Sean Chu: Now, Philip, this is Sean.
Sean Chu: The new guidance is not because of the new ADCBD case in for Southeast Asian countries.
Sean Chu: It's rather for other market.
Sean Chu: For US-bounded shipments, we are more or less on target with our previous target.
Sean Chu: That's not much impact.
Sean Chu: And as you know, the preliminary decision for the new ADCBD is only expected in October and November.
Sean Chu: So, it's rather late.
Sean Chu: So, you don't have much impact to the total annual shipment.
Sean Chu: So, the impact is really from the other market.
Sean Chu: Now, as we mentioned, every time in Ernie call that we want to strike a balance between shipment volume and profit. In other words, we don't want to lose money just to suspend or to achieve shipment numbers.
Sean Chu: So, we look at the current situation.
Sean Chu: But as you know, our shipment has been going up every quarter, quarter by quarter. The first quarter we delivered, I think, 6.3 giga and second quarter, 8.2 giga. In third quarter, we just guided 9.2 and 9.5 giga.
Sean Chu: So, actually, we have stabilized our sales channels.
Sean Chu: And we are getting back with more and more orders.
Sean Chu: We'll still be able to protect our profitability.
Sean Chu: But still, we are already at the second half of August.
Sean Chu: And in order to strike a balance between the volume and profitability, we have taken actions. So, we look at how much we can reasonably ship, will still maintain the profitability, then we decide the new guidance, the new shipment range as a reasonable estimate.
Sean Chu: Is there a reasonable update for that?
Philip Shen: Great.
Philip Shen: Thank you, Sean.
Philip Shen: Can you share any color on a potential recurrent IPO timeline?
Philip Shen: Additionally, are you thinking about spinning off the eStorage business as well?
Philip Shen: And then finally, related to the eStorage du plan on building a battery cell, pack line in the US, and how much solar solar cell capacity?
Philip Shen: Well, you guys talked about how much you have in the US now.
Philip Shen: How much more could it be?
Philip Shen: How much could you grow it?
Philip Shen: Sorry for so many questions in a row, but thank you.
Sean Chu: Well, Philip, thanks for highlighting so much of the strength of Canadians over.
Sean Chu: The thank you very much for seeing our strengths and seeing our differentiators.
Sean Chu: Now, we haven't talked about how to speculate this.
Sean Chu: However, we are moving to a partial IPP model as I am myself, Ismael, and Xinbo mission.
Sean Chu: And going through this model, you can reasonably speculate that at some point, we will look for a way to capitalize on what we accumulate and what we build.
Sean Chu: However, we just started this process, so I would say to build a good IPP, it takes a couple of years.
Sean Chu: So I guess this is the indication of any capitalization plan for recurrence.
Sean Chu: Now, eStorage, we don't have a plan to spin off, eStorage is an important dynamic component of CSI solar.
Sean Chu: And it's sit well in the CSI solar family, so we don't have a plan there.
Sean Chu: Now, what's your next number three additional question?
Philip Shen: Yeah, so the next one is, do you plan on building battery cell and pack in the U.S.?
Philip Shen: And then, as it relates to U.S, solar cell and module capacity, just remind everybody what the capacity is today and what your plans are for expansion.
Philip Shen: And I think that's it.
Philip Shen: Thanks.
Sean Chu: Well, we plan.
Sean Chu: In other words, we have been studying the battery cell pack and the best production in U.S.
Sean Chu: No question about that.
Sean Chu: However, we haven't made announcement of any factories there, so I would not make announcement today.
Sean Chu: Now, for solar cell and solar module, you know, the module capacity in Mesquite is 5GW, the cell capacity in Jefferson, well, in the end, is so-so 5GW.
Philip Shen: Okay, thanks, I'll pass it on.
Operator: Thank you.
Praneeth Satish: The next questions from the line of Praneeth Satish with Wells Fargo, please to see your questions.
Praneeth Satish: Thanks for taking my questions.
Praneeth Satish: So the guidance for the second half, it sounds like you expect margins to be under pressure because of the challenging market conditions and supply, oversupply across the solar value chain.
Praneeth Satish: I guess when do you think things get back into balance?
Sean Chu: You have kind of an internal view there.
Sean Chu: And then at a high level, do you expect, you know, this challenging market conditions and margin weakness to extend into 2025?
Sean Chu: Yeah, we're not so clarified.
Sean Chu: We see the margin for solar module business under pressure.
Sean Chu: However, we see sustainable and healthy margin for our energy storage business.
Sean Chu: So overall, we still have confidence for the second half of the year.
Sean Chu: Now, I would like to end to make further comment.
Sean Chu: It's especially for like the question of how long the pressure on the module business may continue.
Sean Chu: So first of all, as Shaoh has already mentioned that we're going to have a strong Q4, very strong Q4 on storage.
Sean Chu: You know, so we believe the pressure will continue throughout this year, for sure.
Sean Chu: So I'm not a magician.
Sean Chu: I cannot tell you one is going to be recovered, but we're already seeing is actually reaching the bottom.
Sean Chu: So people are very careful on inventory control.
Sean Chu: And we're seeing capacity are actually start to flash out slowly, not now, but it's going to accelerate.
Sean Chu: We believe one, we, you know, moving to next year.
Sean Chu: And for us, we're going to have continued to have a very healthy business on our storage, moving to next year, significantly higher volume with a healthy margin.
Sean Chu: So, and we believe next year's module, situations, we'll continue further the stabilize.
Sean Chu: I don't think it's going to worsen this year.
Sean Chu: So, overall speaking, we're still confident about our business next year.
Sean Chu: Let me add a additional number.
Sean Chu: The weaker growth margin in Q3 is kind of fluctuation, growth margin recognition in Q3.
Sean Chu: You know, Easter is kind of system cell.
Sean Chu: And the revenue and profit recognition may fluctuate because of cutoff.
Sean Chu: We expect a lower growth margin to be recognized in Q3, and as both Yan and Xiaohang mentioned, we confirm that even after elimination, we are going to deliver a stronger second half of the year for Easterage, so it implies a very robust Q4 for Easterage.
Sean Chu: Okay, got it, so maybe just to be clear on that point, I know you haven't provided guidance for a growth margin in Q4, but given the commentary around Easterage being strong in Q4, the margin there is higher, should be assumed then that the growth margin increases potentially from Q3, the midpoint is 15% from Q3 to Q4.
Sean Chu: There is no point.
Sean Chu: Wow, we're not providing Q4 growth margin yet, as you know, just mentioned.
Sean Chu: So it would take quite some computation to determine the growth margin range, but usually we reserve it before the next ironing call.
Sean Chu: So we already stated that we're going to have a stronger second half than first half.
Sean Chu: Okay, no, that makes sense.
Sean Chu: Okay, thank you guys.
Vikram Bagri: Our next question is from the line of Vikram Bagri with City.
Vikram Bagri: Please just use your question.
Vikram Bagri: All right, thanks for taking the question.
Vikram Bagri: Could you give some insight into U.S, multiple pricing more recently?
Vikram Bagri: We know that it's far higher than multiple pricing globally, but we've also seen an increase in module imports this year, quite a sharp increase.
Vikram Bagri: So could you talk about how that impacts your domestic U.S, module pricing compared to your imported volumes?
Vikram Bagri: Have you seen a big change?
Vikram Bagri: We're differential in the pricing of those two markets.
Vikram Bagri: That would be helpful.
Sean Chu: Well, so we have a very healthy margin in the U.S, on module side, and we're actually thinking we see some price fluctuation, and however, the ADCVD, the petition actually making the price iteration more complex in general, we're seeing price trending up. So the impact of the ADCVD.
Sean Chu: So both do.
Sean Chu: We're confident from the deals we're signing up. We're actually quite confident that our margin in the U.S, will continue to be healthy in two-three, and even in two-four, we have a strong high confidence.
Vikram Bagri: That's helpful, thank you.
Vikram Bagri: And just a question on the third quarter of guidance.
Vikram Bagri: Could you give some color on what's driving that stuff up sequentially in the module shipment to that mine to not-and-a-half gigawatt range?
Vikram Bagri: Are there any specific regions that you're shipping to that are driving that?
Vikram Bagri: Just trying to understand that stuff up, especially in managing volumes against price.
Sean Chu: Well, we have a volume increase in the U.S, in Q3 and also in Europe slightly.
Sean Chu: And other than that it's actually small changes, small increases.
Sean Chu: So it's actually in the end, it's from 8.2 up to, we give a range of 9 to 9.5.
Sean Chu: So it's like about one giga dot.
Vikram Bagri: Thank you.
Operator: At this time we've reached the end of our question and answer session.
Sean Chu: I'll hand the floor back to management for closing remarks.
Sean Chu: Thank you for joining us today and for your continuous support.
Sean Chu: If you have any questions or will act or set up a call, please contact our investor relations team.
Operator: Take care and have a great day.
Operator: This will conclude today's conference.
Operator: Thank you for your participation.
You may not disconnect your lines this time.