Q4 2024 Canadian Solar Inc Earnings Call
That's all I got there Sean.
Yeah, Yeah yeah.
Speaker Change: At the end of Canadian Solar subsidiary C. S. I feel that it's not likely that all corporate EVP and president of Canadian solar subsidiaries of current energy and see what you see.
Speaker Change: Senior VP and CFO.
Speaker Change: All company executives will participate in the Q&A session after management's remarks.
Speaker Change: On this call Shawn will go over some key messages for the quarter, Yeah, and it's notable that the new business highlights, let's see if that's still left in the current energy, but secondly, it's involved will go through the financial results Shawn will conclude the prepared remarks that the business outlook after which we'll have time for questions.
Speaker Change: Before we begin I would like to remind listeners that management's prepared remarks today I suppose the answer to your question will contain forward looking statements that are subject to risks and uncertainties. The company claims protection under the Safe Harbor for forward looking statements that is contained in the private Securities Litigation Reform Act of nine.
Speaker Change: 95.
Speaker Change: Actual results may differ from management's current expectations and projections of the company's future performance represent managements estimates as of today.
Speaker Change: Canadian Solar assumes no obligation to update these projections in the future unless otherwise required by applicable law.
Speaker Change: A more detailed discussion of risks and uncertainties can be found in the company's annual report on form 20-F.
Speaker Change: With the Securities and Exchange Commission.
Speaker Change: Management's prepared remarks will be presented within the requirements of SEC regulation G. A priority regarding generally accepted accounting principles or GAAP.
Speaker Change: Information presented during the call will be provided on both a GAAP and non-GAAP basis.
Speaker Change: 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: It actually uses non-GAAP measures to better assess operating performance and to establish operational goals.
Speaker Change: non-GAAP information should not be viewed by investors as a substitute for data prepared in accordance with GAAP and now I would like to turn the call over to Canadian Solar Chairman and CEO, Dr. Shawn Qu Shawn. Please go ahead.
Shawn: Thanks Neal.
Shawn: And thank you all for joining our fourth quarter earnings call.
Speaker Change: Hi, I'm speaking to you today from Louisville, Kentucky.
Shawn: They pay you or fire me in I'll say this year.
Shawn: With construction progressing all power new Andrew just storage, if they're still at nearby and also all of our new solar cell that's alive.
Shawn: In Jeffersonville.
Shawn: Indiana.
Shawn: Across the Ohio River.
Shawn: We work on.
Shawn: Partners so visit.
Shawn: Now, let's review the quarter and full year performance, Please turn to slide three.
Shawn: In the fourth quarter, we shipped 8.2 gigawatts of solar modules.
Shawn: Our total volume for the year or 31.1 gigawatt.
Shawn: With the rapid decline.
Shawn: Mobile molecule pricing and light or project sales from recurrent energy our total revenue in China trying to fall plus fixed 1 billion U S dollar.
Shawn: Inventory write downs.
Shawn: They did do you days and Paris and project asset impairment.
Shawn: All gross margin well elevated freight costs and impairments.
Shawn: Solar power and battery storage systems cost operating expenses will go up.
Shawn: As a result of a difficult operating environment, we generated net income for Canadian solar shareholders of $34 million or eight cents per diluted share.
Shawn: This result included the positive impact of our pulse batch of coal liquidation at book value.
Shawn: H L. B V a content of tax equity treatment for U S project.
Shawn: $132 million and.
Shawn: Allah $1.95 per diluted share respectively.
Shawn: And then kind of fall was a challenging year.
Shawn: Solar industry competition intensified waste major manufacturers reported.
Shawn: Is that kind of losses.
Shawn: Overcapacity across their supply chain as well.
Shawn: Lord market downturn.
Shawn: And we expect I extended Peoria of consolidation I had.
Shawn: At the same time T market.
Shawn: This uncertainty well.
Shawn: Well, China, you're seeing a surge in installation in the first off the China Chinese by due to to policy change effective April 30, and May go there first respectively.
Shawn: The U S continues to grapple with policy and trade related challenges together. These factors a curated both operational and financial lines or the industry.
Shawn: Despite these challenges and indias solar highest damage.
Shawn: Demonstrated resilience.
Shawn: Demand for storage and school, Ian and diversifying globally, Please turn to slide four.
Shawn: Yeah.
Shawn: Now great parity solar plus storage can provide reliable Ireland o'clock clean energy to meet the growing data centers electric vehicles and other energy intensive applications.
Shawn: As a tier one solar.
Shawn: Just started provider we are uniquely positioned.
Shawn: Volatile our tech knowledge and services to address diverse use cases from co located solar and storage talk I agreed systems.
Speaker Change: Hello, Paul a worse the shift toward longer duration battery.
Shawn: Dollar just systems.
Speaker Change: Our out of violence.
Speaker Change: Territory system solution. The sole by this 3.0 is designed to meet the customized and increasingly demanding needs of each market.
Speaker Change: So back so appalling zero is alrighty industry median solution.
Speaker Change: Borrowings to a prayer.
Speaker Change: Performance and state to state.
Speaker Change: We are also making a rapid.
Speaker Change: Gross Rob.
Speaker Change: <unk>.
Speaker Change: Progress on our next generation systems, which well include extended battery cycle performance low degradation.
Speaker Change: Molecule does lie.
Speaker Change: Installation configurations and increased power density cool.
Speaker Change: Megawatt hours per container you on it.
Speaker Change: Well, it's the industry already what's the industry also trending toward more distributed storage and smaller point of use assistance Canadian solar yes uniquely positioned.
Speaker Change: Cocteau lies all this opportunity.
Speaker Change: As a technology leader with not only drive.
Speaker Change: <unk> product innovation, but also offer a comprehensive portfolio of <unk>.
Speaker Change: Storage solutions.
Speaker Change: From a Frac fleet still bank book top tier solutions for residential commercial and industrial applications, we provide a complete product suite.
Speaker Change: That address space.
Speaker Change: Oh spectrum.
Speaker Change: Just storage needs.
Speaker Change: Finally, let me provide an update on our three U S manufacturing facilities.
Speaker Change: Please turn to slide five.
Speaker Change: On the left U S. The our module factory, which is on track to fully ramp up in China in China five in Mesquite, Texas.
Speaker Change: Yeah, we'll provide it well culturally with around three gigawatts of volume delivery. This year, increasing the share of domestic coli made products.
Speaker Change: Our hotel.
Speaker Change: Shipment.
Speaker Change: Oh, a solar cell facility in.
Speaker Change: In the middle.
Speaker Change: Yes fully contracted two of our molecule factory and progressing smoothly.
Speaker Change: Civil works are underway as you can see and win and we expect to install manufacturing equipment later this year with production.
Speaker Change: To begin by year end.
Andy: Yeah, Andy just storage facility, well produce batteries, South mall juice and complete systems.
Andy: It is expected to start delivering U S made so banks by the beginning of next year.
Andy: These facilities highlight our differentiation with our with over 20 years of global manufacturing experience across both solar and storage, we Havent got pellet co manufacturer.
Andy: Those submarkets.
Andy: For example by leveraging our existing battery cell manufacturing.
Andy: Expertise, we can quickly adapt to the U S market, where local production is a game changer.
Andy: Sure.
Andy: Well, we can export expertise gained from all of the market, we have operated in and execute with local familiarity.
Andy: Post advantages that our competitors send poly doing all that.
Andy: With that our our call over to yen or provide more details on our <unk>.
Speaker Change: <unk> solar bathing, yes, yes. Please go ahead.
Sean: Thank you Sean please turn to slide six.
Speaker Change: Despite a challenging solar market in 2024.
Speaker Change: We maintained relatively strong profitability by adhering to a disciplined order taking strategy and achieving record energy storage.
Speaker Change: These two drivers that to full year revenue of $6 $5 billion with a gross margin of 18, 4%.
Speaker Change: Notably our module and the energy storage segments were both profitable on a standalone basis.
Speaker Change: Now, let's examine the drivers for solar and energy storage separately. Please.
Speaker Change: Please turn to slide seven.
Speaker Change: A S piece first significant fleet throughout 2024, however, we maintained relatively higher blended prices by strategically controlling volumes to less profitable markets, while increasing shipments to the U S. We accounted for.
Speaker Change: Approximately 25% of our global shipments.
Speaker Change: Polysilicon prices crossed over 40% during the year, triggering a cascade of price reductions along the supply chain.
Speaker Change: However, in most markets module pricing declined at around the same rate or faster than upstream cost savings.
Speaker Change: In addition to supply chain driven cost reductions, we continued to enhance efficiency across our vertically integrated.
Speaker Change: Capabilities and capacities.
Speaker Change: Yeah.
Speaker Change: For example through innovations like half Moon savings and seen their wafers, we expect to increase capacity across our ingot and wafer manufacturing.
Speaker Change: In cell manufacturing the industry's rapid transition to top coat technology resulted in impairments of PERC manufacturing assets during the fourth quarter, while some equipment will become extra deep we have the flexibility the flexibility too.
Speaker Change: Curt for existing facilities for new initiatives, such as new materials manufacturing, which will further strengthen our integrated supply chain.
Speaker Change: Importantly, our exposure to legacy technology is significantly lower compared to our peers.
Speaker Change: Next onto battery energy storage, please turn to slide eight the fourth quarter and full year 2024 or record breaking for energy storage in terms of shipments revenue and profitability.
Speaker Change: Deliberate to two gigawatt hours in Q4, bringing our total to six six gigawatt hours.
Speaker Change: More than 500% year over year increase.
Speaker Change: We expect this growth to continue in 2025, while Q1 will be seasonally softer.
Speaker Change: Volumes will ramp up quarter over quarter.
Speaker Change: Each subsequent quarter exceeding the same period last year.
Speaker Change: However, as upstream prices have stabilized.
Speaker Change: We anticipate margins will normalize.
Speaker Change: To address this we will continue scaling our volumes differentiating our manufacturing strategy and navigating market uncertainties.
Speaker Change: In the U S. Recent trade policy changes have created turbulence in the market.
Speaker Change: However, we are effectively managing tariff exposure and to our onshore capacity ramps up.
Speaker Change: Our $3 2 billion dollar backlog.
Speaker Change: Backlog provides strong visibility while our pipeline now at a record 79 gigawatt hours reflects increasingly diversified global demand.
Speaker Change: E storage is extending coverage into new markets, such as mainland Europe and Japan.
Speaker Change: Where we are well positioned to capture growth.
Speaker Change: Additionally, we are exploring new opportunities in markets like Latin America and Australia.
Speaker Change: There we have already.
Speaker Change: Yes, we.
Speaker Change: We continue to grow our energy storage manufacturing capabilities.
Speaker Change: Capabilities, we strategically located geographic expansions in the U S and Asia.
Speaker Change: These facilities will produce battery cells molecules and complete module.
Speaker Change: Battery systems.
Speaker Change: The U S. We are also on track with our supply chain strategy to take advantage of domestic content requirements.
Speaker Change: Overall, we are winning on value.
Speaker Change: While new entrants may offer cost effective products.
Speaker Change: We deliver our system integration.
Speaker Change: The difference between the simply supply in D C block.
And ensuring its safety.
Speaker Change: In stocks and tested our predate and supported with long term service is massive.
Speaker Change: Now, let me hand, the call over to US now who will provide an overview of recurrent energy Canadians soulless global product development business.
Neil Please go ahead.
Speaker Change: Thank you Dan.
Speaker Change: Let's turn to slide nine.
Mark: But I think when they for Mark the largest execution gear in the history of recurrent energy.
We successfully brought one three gigawatts of solar projects to commercial operation across the U S, Italy, Brazil, Japan and Taiwan.
Mark: We also started construction on the one four gigawatts of solar on the 1.8 gigawatt hours of best projects.
Mark: Specifically in the U S and Europe, I would IPP markets.
Mark: But 18 portfolio reached 490 megawatts peak of PV and <unk>.
Mark: 310 megawatts hours I'll finish off I know you started as of December 2024.
Mark: Last week I attended the ribbon cutting event.
Mark: We're one two gigawatt hour papago throw his thoughts project in Arizona.
Mark: If menthol is thought of as a project that will officially reached commercial operation in a few days.
Mark: Overall, we have fully funded a total of 20 projects equivalent to 1.8 gigawatt speak of solar PV on 1.7 gigawatt hours of best projects.
Mark: All of these projects.
Mark: EBIT reached commercial operation or are in construction.
Mark: In addition, we have partially funded 15 projects that are set to start construction this year.
Mark: And the 1.1 gigawatt speak of silver and 840 megawatts hours of best.
Mark: We are making significant progress in our thoughts formation as an independent power producer.
Mark: As discussed in the bust respected our financials to take a short term hit when we execute projects all the way from our celebration.
Mark: Some of them upfront.
Mark: Which is what we saw in 2024.
Mark: But that's with scale.
Mark: Portfolio the shed off of stable recurrent income will grow.
Mark: Thus, it's wanted 24, it was not a strong financial year <unk>.
Mark: So impacted by certain project delays that push into Q4 and 2025.
Mark: Please turn to slide 10.
Mark: In the fourth quarter, we sold 540 megawatts of PV projects in the U K, Italy, Japan and stay one.
Mark: Making total full year 'twenty 'twenty four sales one two gigawatts.
Mark: 418 megawatts peak of silver and 480 megawatt hour surface thought, let's say in the APAC region, where does it lead to 2025.
Mark: Combined with our recurrent revenues generated from operating projects electricity sales on our O&M business, we reported $188 million in revenue.
Mark: Gross margin of seven on the health person and an operating loss of $40 million.
Mark: We also advanced our growth by signing Ppas, both bilateral auction based.
Mark: One five gigawatts of solar and 1.3 gigawatt hours of Bes.
Mark: Yeah.
Mark: Our global operations and maintenance or O&M business expanded significantly.
Mark: We are now the seventh largest O&M provider globally.
Mark: Up from 15 in 2021.
Mark: We currently manage or two gigawatts of solar five seven gigawatts of co located solar plus storage and 3.2 gigawatt that were sofa standalone off the standalone storage worldwide.
Mark: While the financial contribution from Oh, and then maybe modest today.
Mark: It's the authentic values significant the.
Mark: Operational insights we gain from this business enabled us to enhance every stage of project development and operations.
Mark: Driving greater efficiency, and ultimately improving project economics and returns.
Mark: Please turn to slide 11 for an update on our pipeline.
Mark: As of December 20th 24.
Mark: Security Interconnections, four nine gigawatts of solar and 17 gigawatt hours of storage globally.
Mark: Excluding projects already in operation.
Mark: Our total project pipeline now stands at 25, Gigawatts of solar and 75 gigawatt hours of energy storage.
Johns: Echoing Johns comments on I, just thought I'd check growth, we see this momentum reflected in our best pipeline.
Johns: We send out as these thoughts to expanding Europe, we can leverage our experience from the U S has stood us projects.
Johns: The more than 35 gigawatt hour soft pipeline me in EMEA underscores our strong market position.
Shimbun: Now, let me hand, the call over to Shimbun, who will go through our financial results in more detail.
Speaker Change: Please go ahead.
Speaker Change: And can you smell.
Speaker Change: Please turn to slide 12.
Speaker Change: In the fourth quarter, we shipped 822 P. Cal was within our guidance.
Speaker Change: Robin you almost one $5 billion sitting at the lower end of our range.
Speaker Change: As some projects south work delayed into 2025.
Speaker Change: Gross margin was impacted by several factors.
Speaker Change: Clothing duty and tariff and facts.
Speaker Change: Inventory write down due to declining market prices.
And project asset impairments.
Speaker Change: Together these factors reduced gross margin by more than 950 basis points and were slightly offset by advanced manufacturing credits.
Speaker Change: Selling and distribution expenses decreased by 3% sequentially, primarily due to lower shipping costs.
Speaker Change: General and administrative expenses increased 120% sequentially.
Speaker Change: Driven by.
Speaker Change: $65 million impairments of certain assets.
Speaker Change: Assets.
Speaker Change: The $21 million of impairments to solar power systems.
Speaker Change: Following ongoing curtailments in the Latin American region.
Speaker Change: Yeah assessments off project for values.
Speaker Change: We incurred $54 million off impairments project access and solar power systems.
Speaker Change: Collectively these impairments impacted Q4 operating margin by approximately three.
Speaker Change: 350 basis points.
Speaker Change: Research and development expenses remained stable quarter over quarter.
Speaker Change: Net interest expense in the fourth quarter was $9 million.
Speaker Change: From $20 million in the prior quarter.
Speaker Change: This was mainly driven by higher interest income.
Speaker Change: Net foreign exchange loss in the fourth quarter was $10 million.
Speaker Change: And by a strong dollar following the U S presidential election.
Speaker Change: Total net loss before non controlling interest was $135 million well net income attributable to Canadian solar shareholders was $34 million.
Speaker Change: Diluted earnings per share of 48 cents.
Speaker Change: These results included a significant $132 million positive impact.
Speaker Change: At Shelby the accounting related to the tax equity arrangements of certain U S operating projects.
Speaker Change: Now, let's turn to cash flow.
Speaker Change: Balance sheet, please turn to us twice that.
Speaker Change: For the full year of 'twenty 'twenty four.
Speaker Change: Net increase in cash was $682 million.
Speaker Change: All flows in our people and our investing cash were driven by funding.
Speaker Change: Country in life.
Speaker Change: Yeah.
Speaker Change: And so hungry and $58 million.
Speaker Change: So on two projects assets and operating projects respectively.
Speaker Change: Capital expenditures for the year totaled $1 $1 billion slide.
Speaker Change: Slightly below forecast.
Speaker Change: Four planes aren't flying.
Speaker Change: We expect capex to be approximately 1.2 daughters.
Speaker Change: We focus on our strategic manufacturing investments in the U S.
Shop: Now, let me turn the call back to shop, who will conclude with our guidance and business outlook.
Shop: Please go ahead.
Shop: Yeah.
Thank you Lance you more.
Shop: Please turn to slide 14.
Shop: For the first quarter I'll turn the 25, we expect see.
Shop: Yes, as solar module shipment to be in the range of <unk>.
Shop: Six four to six seven gigawatts, including approximately.
Shop: I'm good.
Shop: Megawatts to our own project.
Shop: We also anticipate delivering around 800 megawatt hours.
Shop: And you just storage.
Shop: 150 megawatt hours allocated to our home projects.
Shop: We forecast total revenue for Q1 to be between one and $1.2 billion with gross margin expected to range from 9% to 11%.
Shop: Yeah.
Shop: First quarter market refract lower than usual performance.
Shop: Ross, both CSI solar and recurrent energy.
Speaker Change: Well see outside of solar the primary job on margins well be seasonally lower and it just storage shipments, but it's all good.
Speaker Change: We reduced the margin contribution from that segment.
Speaker Change: Well slightly higher ASP.
And Amanda cried ads.
Speaker Change: Well, partially offset total duties tariffs.
Speaker Change: The accelerated depreciation of mine in fact downsides.
Speaker Change: These factors will still wait.
Speaker Change: Spartan.
Speaker Change: For recurrent margins will be impacted by protests cells with minimal margin contribution.
Speaker Change: However, what isn't correct mark.
Speaker Change: To improve in subsequent quarters.
Speaker Change: Alright shipments increase significantly starting in Q2.
Speaker Change: Terrorists and beauty impacts Uh huh per watt basis decline over the year.
Speaker Change: For the full year.
Speaker Change: It's only 25.
Speaker Change: We reiterate our volume guidance of 30 to 35 Gigawatts of module shipment, including approximately one gigawatt hour.
Speaker Change: Yes.
Speaker Change: We also agree.
Speaker Change: It kind of it.
Speaker Change: Yeah.
Speaker Change: Guidance.
Speaker Change: So I need to start shipments to be between 11 to 13 gigawatt hours, including approximately one gigawatt hour Hello, Hello can you do to our own project.
Speaker Change: We expect full year revenue.
Speaker Change: Right right.
Speaker Change: 7.3.
Speaker Change: Julien.
Speaker Change: An $8.3 billion.
Speaker Change: Throughout the year, we anticipate continued consolidation in the solar market.
Speaker Change: Geopolitical uncertainties, well impact all of our lines, but we remain confident in our ability to navigate these trying to guess.
Speaker Change: With that I would like to open.
Speaker Change: Open the floor for questions.
Speaker Change: Operator.
Speaker Change: Thank you.
Speaker Change: At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line isn't the question Kim you.
Speaker Change: You May press star two if you'd like to remove your question from Nikhil for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Our first question comes from the line of Colin Rusch with Oppenheimer. Please proceed with your question.
Colin Rusch: Sometimes you guys have given the that the changes that we're seeing in terms of chemistries on the battery side as well as price dynamics can you talk a little bit about how you see margins trending for your energy storage systems and how you are passing on some of the benefits of improving chemistry and cycle wise.
Colin Rusch: I'm, calling this a show or also boots quest here, although there are some kind of a code change but are the main kind of a cola structural for the battery.
Colin Rusch: The same store the L. A.
Colin Rusch: But L L L P.
Colin Rusch: <unk> pulps solar cell chemical structure, but we are working.
Speaker Change: Uh huh.
Speaker Change: In fact implement.
Speaker Change: Some newer technology crop for example, the pre lithium Asian economic suggest well resolved in which were resolved in <unk>.
Speaker Change: Cycle times, and also less degradation and especially less degradation in the first five years now we think.
Speaker Change: Most of those savings.
Speaker Change: The pilot phase we will.
Speaker Change: Whoa are passed to our customers and for Canadian Solar Oh, <unk>, we're still seeing those new technologies.
Speaker Change: I think we'll be able to maintain.
Speaker Change: Reasonable margin for ourselves.
Speaker Change: Yeah.
Speaker Change: Alright. Thanks, so much guys and then I guess the second one is very small you know given some of the geopolitical shifts that we're seeing here and potential for increased.
Speaker Change: Activity in Europe can you talk a little bit about early indications are around where some of the infrastructure support might end up filtering out you know, whether it's Germany or other countries or what you're seeing in terms of the value of the pipeline of products that you have on the continent.
Speaker Change: That's another question cross sale.
Speaker Change: Yeah. Thanks for the question look at despite all the noise that is happening we we have not.
Speaker Change: Been suffering anything in particular, you know Neil how are you.
Speaker Change: U S projects debt and small permit that we were missing on.
Speaker Change: That all government was granted very quickly actually.
Speaker Change: And in Europe, what we're seeing is a very strong movement into installing storage.
Speaker Change: And remain.
Speaker Change: We can felicia, so PV, but PV penetration, it's just going to be pretty high.
Speaker Change: So.
Speaker Change: So that's just a bit.
Speaker Change: Ah there's almost nothing in Europe. So that's what we have seen them, but we have not seen at least so far any slowdown in the U S market.
Speaker Change: Excellent thanks, guys.
Speaker Change: Yeah.
Speaker Change: Thank you. Our next question comes from the line of <unk> with Wells Fargo. Please proceed with your question.
Speaker Change: Thanks, maybe turning to the guidance, so Q1 guidance for module shipments of $6 four to six seven gigawatts.
Speaker Change: Versus the full year of 30% to 35, Gigawatts, So basically implies.
Speaker Change: Meaningful kind of acceleration in the back half of the year.
Speaker Change: Maybe if you could provide any more clarity on the ramp over the course of the year and the main factors that's driving it given the continued pricing pressure in.
Speaker Change: Geopolitical tensions that were seeing.
Speaker Change: Yes, do you want to answer that question.
Speaker Change: Yeah. So actually you asked a pretty big question, Chris of the price trend.
Speaker Change: It's just kind of a complicated across different markets.
Speaker Change: And also first half and second half might be different so.
Speaker Change: Overall, we're seeing price being stabilized most of the world except in China, we see the price going up because of this surge of demand are triggered by the policy shift and as Sean mentioned and also the U S.
Speaker Change: We're observing price starts to go down a little bit and are moving into the second half.
Speaker Change: We anticipate we see somehow assertion sheets for China market, given the policy shift and it could be a period of.
Speaker Change: Slowing down that's possible.
Speaker Change: However on the other hand.
Speaker Change: We are actually.
Speaker Change: Ramping off our own U S manufacturing volume, so that it's going to help us help our margin.
Speaker Change: And.
Speaker Change: We also have the rolling storage shipment or QQ.
Speaker Change: That also helps our margin in the house channel sell side.
Speaker Change: Some markets, we have no strategy I'll focus a lot of high priced channel and also high priced a business such as bundled sales. So we're focusing more and more on our solution.
Speaker Change: And in services that can give us a higher margin. So long. So overall our margin situation I think Q2 Q over the year, it's going to.
Speaker Change: Uh huh.
Speaker Change: On the uptrend a note so we're going to improve Q to Q.
Speaker Change: Got it that's helpful and just quickly just two questions here on the slide showing the manufacturing capacity looking out to 2025 so.
Speaker Change: Just on the outlook for cell capacity.
Speaker Change: Does that 36 Gigawatts does that include the five gigawatts from the Indiana facility that you're constructing and then at this point what percentage of that 36 Gigawatts of cell capacity is is top con versus park.
Speaker Change: Let me answer this question Hugh.
Speaker Change: You probably have noticed that the cell capacity declined from.
Speaker Change: And turning to China or to the end opportunity China five so we are taken.
Speaker Change: The Earth capacities electrically.
Speaker Change: Hum capacities off Brian.
Speaker Change: Through all its trying to trying to five so that's why the number changed so the 30th.
Speaker Change: Turning to six gigawatt.
Speaker Change: Well.
Speaker Change: Yes Martin.
Speaker Change: It's mainly the remaining top column capacities.
Speaker Change: Not much PERC I assumed in this numbers.
Speaker Change: And the Indiana facility, where.
Speaker Change: It will start to move equipment this year.
Speaker Change: But the facilities well only start to contribute.
Speaker Change: In China, China six.
Speaker Change: At this moment, we expect.
Speaker Change: You'll start commercial shipments from Indiana in Q2.
Speaker Change: China, China effects.
Speaker Change: That's helpful. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from the line.
Speaker Change: Mentally with Mizuho Securities. Please proceed with your question.
Speaker Change: Okay.
Speaker Change: Thanks for taking the question.
Speaker Change: Maybe on the previous question on the gross margin improvement you kind of talked about a quarter over quarter margin improvement is that just for Q2 is that like for the full year a.
Speaker Change: First question on that and second on this.
Speaker Change: Do you kind of mentioned.
Speaker Change: A few reasons, which kind of impacted the gross margin so again in Q1.
Speaker Change: If you could give us some insights into the the.
Speaker Change: The gross margin trajectory.
Speaker Change: Production due to low what are you sort of shipments or trade duties or tariffs.
Speaker Change: Thanks.
Speaker Change: Yeah can you answer this question.
Speaker Change: Yes so.
Speaker Change: Uh huh.
Speaker Change: Okay.
Speaker Change: I'm talking about this throughout the year, we're on the upward trend in terms of the margin it.
Speaker Change: It doesn't mean every quarter, we're gonna have a you know a.
Speaker Change: Significant jump like all wore off throughout the year, although I'm trying to get some margin improvement. So that comes from as I said that improved the increase up for a strong shipment and also our.
Speaker Change: Our improved our channel structure and.
Speaker Change: Our solution as a service offering water sources.
Speaker Change: Upscale trend.
Speaker Change: Yeah.
Speaker Change: So the second question is about the Q1 margin disruption that was your question.
Speaker Change: The factors in Q1, yeah, Yeah, just the factor that you highlighted.
Speaker Change: <unk> I was just curious.
Speaker Change: Or how do you think about the impact of those three things in Q1.
Speaker Change: So in Q1, I think Sean has mentioned we had a different factors.
Speaker Change: Such as the impairment in Brazil in South America right now.
Speaker Change: Current site and also we have the impairment on the approach for Citi.
Speaker Change: And of course, some impact on their duty right.
So that's that was the factors that are not.
Mexico affected our Q1 margin.
Speaker Change: Yes.
Speaker Change: This is a symbol is thinking.
Speaker Change: In Q1, the lower margin is I think it's more about mix.
This solar products will continue to maintain a stable margin Sydney.
Speaker Change: Similar to.
Speaker Change: The last quarters and the lower margin is mainly because of the lower shipment volume from east to RH.
Speaker Change: Who oh, that's been contributing decent margin to the call.
Speaker Change: On Q4, yes.
Speaker Change: Do you want me to say, it's the lower excuse me for not just before he starts but also for solar as well yeah. If you calculate our guidance.
Speaker Change: The battery system shipment volumes until one only accounts for about 7% alcohol and new volume.
Speaker Change: Yeah, it's much lower than average it's the main reason.
Speaker Change: Got it I appreciate that.
Speaker Change: And just one last one quickly just on the steel and aluminum that is on U S imports.
Speaker Change: Presume that's already baked into your Q1 guide for the rest of the year, how should we kind of think about that Oh is that pops or do your customers or is that something that had been negotiating with the customers.
Speaker Change: Okay.
Speaker Change: Uh huh.
Speaker Change: Sorry.
Speaker Change: Thank you.
Speaker Change: Steel tariffs.
Speaker Change: Steel and aluminum die that's like for.
Speaker Change: Which goes into your module frames and peninsula into the buffering of data. So it's all right.
Speaker Change: So just curious if any of those are impacting you or not.
Speaker Change: Those Uh huh.
Speaker Change: Tariffs are already taken into account and see them on our cost structure. So.
Speaker Change: I don't.
Speaker Change: There's no I don't.
Speaker Change: Sorry go ahead.
Speaker Change: No sorry, sorry.
Speaker Change: Yeah, well, it's all observe a significant in time likely if theres certain car it is absorbed by our suppliers.
Speaker Change: Got it all figured out all right. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Alan Lowe with Jefferies. Please proceed with your question.
Alan Lowe: Hi, Thanks for taking my question I guess I don't know from Jefferies.
Speaker Change: First question is about yes. It does.
Speaker Change: The first quarter.
Speaker Change: Okay.
Speaker Change: Guidance for the back of what so it's 7% of annual volume, we'd like to know how.
Speaker Change: How much of the remaining volume Ah.
Speaker Change: Fact that.
Speaker Change: S M a.
Speaker Change: Other fact price spikes that.
Speaker Change: Is confident to deliver our 11th.
Speaker Change: At the 30 gigawatt hour of yes, that's funny.
Speaker Change: Right.
Speaker Change: The car.
Speaker Change: Right.
Speaker Change: Right.
Speaker Change: Yeah.
Speaker Change: Oh, so you're talking about storage on module <unk>.
Speaker Change: He started okay. So for the whole year.
Speaker Change: We have we guided 11% to 13 gigawatt hour actually most of the contract has been signed already.
Speaker Change: So it has a price fixed already or like another price is actually decided.
Speaker Change: And so that's preset price of.
Speaker Change: Of course, we have some.
Speaker Change: Like a change of law.
Speaker Change: Protection as well and so so pretty.
Speaker Change: Our all margin lateral it's pretty high confident.
Speaker Change: I missed it so so for change cross protection I assume that includes thought put to protection from tariffs as well right.
Speaker Change: Yes material off the ball.
Speaker Change: Thank you and then my next question is about the Max on a U S module shipment I think last year around 25% off the board you'll stop ship to U S market, we like to do as Danny.
Speaker Change: Our idea on the amount of our module shipment to the U S. A first quarter and throughout the whole year.
Speaker Change: Five.
Speaker Change: So I yeah.
Speaker Change: No. It was this year the.
Speaker Change: U S.
Speaker Change: Well the total in the total global.
Speaker Change: Module shipment news Costar, all quantify per se. So maintain roughly the same level you may notice that all our volume guidance, but trying to trying to five.
Speaker Change: So okay. So 35 gigawatt will be curious more or less in line with China and Singapore and also your line was trying to trying to three.
Speaker Change: III almost at the same level so in the current situation.
Speaker Change: The global oversupply of solar module.
Speaker Change: As I said in my comments, we expect this situation to continue this year therefore under this circumstances.
Speaker Change: We.
Speaker Change: Now forecasting volume increased we rather want to focus on protecting the margin.
Speaker Change: And.
Speaker Change: Then the percentage of U S or around the same number no.
Speaker Change: Around the same percentage, which also means more or less around the same number.
Speaker Change: Turning to try and pay for now for Q.
Speaker Change: For Q1.
Speaker Change: I think the overall percentage is almost also almost around the same level like you're trying to do a 30% halt.
Speaker Change: Global shipment.
Speaker Change: Thanks, a lot. That's that's all actually I think last final question on that.
Speaker Change: I can't say expenses, because Ah yeah P. S T.
Speaker Change: The general and admin expenses for Q seems to be higher than the previous quarter would like to know if it is it one off or a wife that and is there any room for improvement next quarter.
Speaker Change: Yeah, It's one I'll walk in Cummins.
Speaker Change: This one off.
Speaker Change: Included.
Speaker Change: In G&A.
Speaker Change: On some of the inherent.
Speaker Change: For operating.
Speaker Change: Uh huh.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question comes from the line I think from partnering with Citi. Please proceed with your question.
Speaker Change: Good morning to everyone. A few quick questions apologize for asking one more question on first quarter margins at the gross margin in first quarter it appears likely lower than.
Speaker Change: You had been expecting even accounting for the lower storage shipments can you confirm if storage margins I didnt back in the 17% to 20% range that you've historically talked about and if so perhaps mortgage margins have dropped into low single digits or even lower and then I have a follow up.
Speaker Change: Yeah.
Speaker Change: Our motto.
Speaker Change: Yeah.
Speaker Change: Yeah most of the margin.
Speaker Change: Maintained at similar level.
Speaker Change: We're looking to sell some of the solar projects also in Q1.
Speaker Change: Yeah.
Speaker Change: Some of the projects might be sold at a lower margin. So he can also contribute to the mix and.
Speaker Change: Our overall lower average gross margin in Q1.
Speaker Change: Got it but the storage margins are still intact in the 17th century Jay.
Speaker Change:
Speaker Change: Batteries storage systems are still sold at decent margin.
Speaker Change: Got it and then secondly, looking at the full year guidance. It appears there's some price rebound expected didn't.
Speaker Change: Back half of this year.
Speaker Change: Am I right in assuming so and if so can you talk about the drivers that would help pricing in backhaul healthier based on do you have any outlook you have.
Speaker Change: Here with PDL question.
Speaker Change: Oh absolutely.
Speaker Change: Second half of the the guidance appears to pricing from some improvement in module pricing is that correct or are you expecting a rebound in module pricing in back half of this year and so what would be the drivers that you see on the horizon that will help pricing.
Speaker Change: As a matter of fact.
Speaker Change: The solar molecule pricing.
Speaker Change: Auto.
Speaker Change: States.
Speaker Change: Yes rebounded in right now.
Speaker Change: This rebound.
Speaker Change: Yes.
Speaker Change: It was helped by the.
Speaker Change: Oh by the installation increase.
In this first half of this year in China.
Speaker Change: Mentioned that in my prepared speech.
Speaker Change: Work to policy change.
Speaker Change: In fact too.
Speaker Change: Oh April 30 and May 31st.
Speaker Change: So basically after at least two days.
Speaker Change: To date.
Speaker Change: The solar installation in China, well not be subject to fixed price rather.
Speaker Change: Pretty much all the solar project well have to participate in the electricity market accretive so because of that.
Speaker Change: There has been a installations search.
Speaker Change: Right now, we expect to see installations search well go.
Speaker Change: Well go out and to May 31st which is the the effective date of the new policy.
Speaker Change: Or do you solely installed Asia, therefore, the solar module price.
Speaker Change: Has it rebounded.
Speaker Change:
Speaker Change: Alrighty and well.
Speaker Change: Kept at all.
Speaker Change: A rescue, but a high high level.
Speaker Change: The first half of this year now the second half of this year.
Speaker Change: As a matter of fact, we I mean, we think this therapy in China, well stop and then the market went back to the.
In normal situations and.
Speaker Change: We actually we expect this deconsolidation, which means the.
Speaker Change: Molecule price pressure will continue.
Speaker Change: In the second half of this year, so we're not forecasting.
Speaker Change: I know you have solar molecule price increase for.
Speaker Change: For the second half this year.
Speaker Change: Instead, well experiencing a solar molecule.
Speaker Change: Inquiries are.
Speaker Change: As we speak right.
Speaker Change: Right now.
Speaker Change: Thank you very much.
Speaker Change: Thank you. Our next question comes from the line of Philip Shen with Roth Capital Partners. Please proceed with your question.
Philip Shen: Hi, everyone. Thanks for taking my questions.
Speaker Change: Back to the margins.
Philip Shen: You guys talked about margin improvement through the.
Philip Shen: The year every quarter I was wondering if you could share.
Philip Shen: How much higher margins can be and do you expect the margins to peak.
Philip Shen: In Q3 or do you think we rise through the year.
Philip Shen: In Q4 is the highest margin level.
Philip Shen:
Philip Shen: By quarter. So just wondering how high we can get back to in which quarter is nice.
Philip Shen: Yeah, do you want to yeah.
Philip Shen: Yeah.
Philip Shen: Yeah, we do not guide Q to Q.
Philip Shen: You know qualify the increase that we do not guide that but.
Philip Shen: What I said is a we have a low Q1.
Philip Shen: But the rest of the year, we see the margin improve so I can't tell you exactly you know what is the margin every quarter.
Philip Shen: Now we cannot.
Speaker Change: I got that.
Philip Shen: The reason behind this is that is there.
Philip Shen: That could.
Philip Shen: From a storage shipment and also that are ramping up the last module.
Philip Shen: And as well as our overall innovation on our channel and our services that will be.
Philip Shen: We've been a work out very hard to improve margin.
Philip Shen: Okay.
Philip Shen: Uh huh.
Philip Shen: Or at a few comments.
Philip Shen: Okay.
Philip Shen: That you.
Philip Shen: In my prepared speech this quarter Q1 hour delivery.
Philip Shen: Delivery.
Philip Shen: And you just start with system is 800 megawatt when he says seasonally low.
Philip Shen: We will see Q2.
Philip Shen: Start a shipment to inquiries significantly although I'm not guiding to two but according to look at the shipping schedule, we expect the Q2 shipment.
Philip Shen: Can you just storage to go back to the two for last year's level.
Philip Shen: Our Ohio property, you have a higher than the level, we reported for Q4 of last year and I need to start shipment have a reason.
Philip Shen: Decent.
Philip Shen: Gross margin. This is one reason, we see or we expect to see a.
Philip Shen: Margin improvement in Q2, Q3, Q4, and also on the solar module side.
Philip Shen: This quarter again, the solar molecule delivery.
Philip Shen: I had a season, though in a lull, but we see this pattern every year. If you look at last year and I'll kind of turn this around its three.
Philip Shen: Q1 shipment is always slow and then.
Philip Shen: The shipment increase quarter by quarter.
Philip Shen: After Q1.
Philip Shen: And.
Philip Shen: Another reason is that the.
Philip Shen: The new <unk>.
Philip Shen: A preliminary ruling out.
Philip Shen: A D CBD.
Philip Shen: Oh, the solar module shipment to U S from some of the South Eastern Asian countries now are we well we do see them.
Speaker Change: Hi, <unk>.
Philip Shen: Terrorists in.
In Q4, and also in Q1, but throughout the year.
Philip Shen: The shipment from our muskie.
Philip Shen: Excess.
Solar module factory, that's going up and for the shipment from.
Philip Shen: From mesquite.
Philip Shen: The beauty the import tariff only apply on the solar cell.
Philip Shen: On the back molecule Park.
Philip Shen: That's another reason for us to see the <unk>.
Philip Shen: Solar margin.
Philip Shen: The operating margin body solar molecule business also going up again those are the forecast for Q2 Q3 Q4.
Now, but it's not all official guidance yet.
Philip Shen: Okay, great. Thanks for the additional color Sean.
Speaker Change: You mentioned the tariff impact for Q4 and Q1.
Philip Shen: I have missed it but can you.
Philip Shen: Help us understand specifically what tariffs there where it was at the Southeast Asia 80, CVD and then.
Philip Shen: Do you expect that to abate.
Philip Shen: And not be as heavily impactful for Q2, three and four.
Philip Shen: Because it sounds like Oh.
Philip Shen: It sounds like the impacts might be not as strong.
Philip Shen: There are two set of tariffs.
Speaker Change: Like Oh.
Speaker Change: Men tariffs applied to the South East Asian countries Shipman, why yes, the CBD.
Speaker Change: New relic.
Speaker Change: Our ADC BD ruling.
Speaker Change: For Southeast Asian countries.
Speaker Change: Thailand.
Speaker Change: Yeah.
Speaker Change: Hum.
Speaker Change: Thailand in D C.
Speaker Change: And DNN and.
Speaker Change: What's the first country.
Speaker Change: Yes until the army.
Speaker Change: Oh right right, yes, Cambodia, so those four countries now our solar module.
Speaker Change: Yes, located in Thailand. So this the new shipment from this factor.
Speaker Change: Factors to see.
Speaker Change: And.
Speaker Change: The entire fee enquiries from this <unk> CBD and is another duty. We're just call. It does three Oh no coding tool what you talk 201.
Speaker Change: Judy.
Judy: Judy also a factor.
Speaker Change: Solar module shipment.
Speaker Change: Originated from Thailand. So those are the two.
Speaker Change: <unk> kicked off the after.
Speaker Change: Off the.
Speaker Change: Import tariffs.
Speaker Change: And so it would be.
Tariff impacts for Q2, three and four this year.
Speaker Change: Go lower because you ship more from the U S is that right.
Speaker Change: Yeah. That's one reason we are using we have a combination of all.
Speaker Change: Different manufacturing strategist and a one off increase for example, the domestic production of solar modules using solar cell from South East Asia. This will allow us to reduce the effect effective percentage off.
Speaker Change: No.
Speaker Change: The effective length.
Speaker Change: Absolutely to do with the impact on the solar modules.
Speaker Change: Okay, great. Thanks for taking the question I'll pass it on.
Speaker Change: Thank you.
Speaker Change: Thank you. Our final question. This morning comes from the line of Brian Lee with Goldman Sachs. Please proceed with your question.
Brian Lee: Hey, guys. Good morning, Thanks for taking the questions here.
Brian Lee: Maybe just a couple of follow ups the sales margin questions.
Brian Lee: It seems like a pretty big drivers. So can you I mean, you said 900 basis points of different margin headwinds in Q4, including the tariffs how much did it impact the Q4 gross margins.
Brian Lee: How much are the 80 CVD tariffs are impacting the Q1 margin guidance and then what what's sort of the.
Brian Lee: The level at which you'll see impact going through the year. If its you know X basis points in Q4 down to X basis points in Q1, what is it gonna be by the end of the year because it seems like again.
Pretty meaningful driver here.
Speaker Change: Gosh and Bob do you want to share some color yeah I can take the question.
Brian Lee: Uh huh.
Speaker Change: The tourists.
Speaker Change: It was possibly offset by the higher price in the U S. So when you go on observed a significant change with the gross raunchy I think.
Speaker Change: You are talking about the module products right and.
Speaker Change: Ourselves in the U S accounts for about one quarter of total volume pretty stable.
Speaker Change: And the selling price in the U S has been about three times the rest of the world So any chance of into yeah about half.
Speaker Change: Hum are Robin you generated in the U S also pretty stable. So we don't know.
Speaker Change: We don't observe don't forecast.
Speaker Change: Hmm.
Speaker Change: Differences are moving to acquaint them time, and likely the solar module products Wilmington cylinder margin for the year.
Speaker Change: Okay.
Speaker Change: Take my question offline, maybe a separate question on margins.
Speaker Change: I think you guys have historically been talking about E storage margins in the 20% range I know a previous caller.
Speaker Change: I ask you about 17 to 21, and you said that that's the right range, but I think on a slide deck recently in December you put out mid teens as sort of your target now so it's.
Speaker Change: It's a subtle shift, but what what might be driving the 20%.
Speaker Change: Historical view now to mid teens in storage I know one of your peers.
Speaker Change: At a margin issue this past quarter and it seems like there's a lot more competition in the storage space. So can you kind of speak to some of the dynamics as to what's driving not just seasonality and volumes, but it seems like there's been a bit of a structural downtick.
Speaker Change: Downtick, a little bit in your margin outlook for storage can you speak to that.
Speaker Change: Yes.
Speaker Change: Yeah, I will I want to take this question now the.
Speaker Change: Molecule no.
Speaker Change: The gross margin percentage for your storage.
Speaker Change: No.
Speaker Change: Wasatch.
Speaker Change: You got that or iron level now.
Speaker Change: At the beginning of this year, we forecast.
Speaker Change: The <unk> story.
Speaker Change: Product gross margin.
Speaker Change: China percent or higher and although they are totally.
Speaker Change: The.
Speaker Change: The price the absolute price indeed.
Speaker Change: It's trending down because I'll be right.
Speaker Change: Those technologies become mature and also be called increase the market.
Speaker Change: Market competition.
Speaker Change: However, the new U S administration.
Speaker Change: Monster.
Speaker Change: New terrorists news import tariff.
Speaker Change: In particular.
Speaker Change: <unk>, that's a new tariff.
Speaker Change: Product.
Speaker Change: Imported from.
Speaker Change: Well, we do have some storage shipment coming from China into new S. So dollar impact to us and therefore, we know we've got impact almost think the margin well trend down although we have the churn calcium all protection.
Speaker Change: Some customers, but those change outlaw classes allow us to re negotiate whereas to your customer.
Speaker Change: Rather than.
Speaker Change: To put the China percent burden.
Speaker Change: Mac directly and two on the on the customers.
Speaker Change: Customers, so typical in a or negotiate.
Speaker Change: Im kind of sharing often you trying to 5%.
Speaker Change: You would say or to we saw customers. So it will impact our margin. However, we are working.
Speaker Change: And our strategy as it plays out Paul.
Speaker Change: Building, a new and you just start checks factory.
Speaker Change: Shopping meal, Kentucky.
Speaker Change: And the way I also take in the <unk>.
Speaker Change: Solar cell.
Speaker Change: Our supply from.
Speaker Change: From other countries outside of China.
Speaker Change: China, So so rather all of the year, we do see.
Speaker Change: No.
Speaker Change: Be able to small solve some months ago.
Speaker Change: The impact assuming there is no new deals new duty impact so well.
Speaker Change: Well closely watching what will happen April 2nd by U S started to implement the reciprocal global attacks.
Speaker Change: I still don't know how much impact would that.
Speaker Change: B.
Speaker Change: But what it does.
Speaker Change: Expect.
Speaker Change: Uncertainties in terms of product flow and terrorists.
Speaker Change: Sure.
Speaker Change: So this year.
Speaker Change: Okay understood I appreciate the detailed response, maybe last one for me and I'll pass it on.
Speaker Change: I know you don't want to break out I guess to the basis points the margin impact from a D. C V D and they're still preliminary but I believe they're retroactive for the Thailand portion. So have you outlined or can you give us a sense a range of what the cash deposits are.
Speaker Change: Have you already accrued those on the balance sheet or is that something that we'll see next quarter just trying to understand what maybe the cash implications of retroactivity may may be for you guys. Thank you.
Speaker Change: At this moment in time.
Speaker Change: Oh, the pulse of it.
Speaker Change: For the important could pose a renewed at Ids CBD, we do book it as cost.
Speaker Change: P&L and now.
Speaker Change: Those two days when it goes through.
Speaker Change: The typical it goes through the final reveal.
Speaker Change: A couple of years after the year for example.
Speaker Change: The China Chinese five ADC.
Speaker Change: CBD due date.
Speaker Change: Final determination will be a couple of years down the road and depend on the results of that final ruling by no determination either.
Speaker Change: Oh I see.
Speaker Change: Some of those pitfalls that funnel back to us or maybe worst scenario weekends.
Speaker Change: Additional duty.
Speaker Change: But so far.
Speaker Change: As of today, we only see the office.
Speaker Change: Deposit money part of the deposit flow back.
Speaker Change: To us.
Speaker Change: I don't see why I'm, making where do we end and then provision for.
Speaker Change: For the.
Speaker Change: <unk>.
Speaker Change: The retroactive application of annuities without waiting for the final.
Speaker Change: Julien.
Speaker Change: From.
Speaker Change: The USDA Oc and also from <unk>.
Speaker Change: From U S ITC.
Speaker Change: Okay. Thank you guys.
Speaker Change: Thank you.
Speaker Change: Thank you, ladies and gentlemen that concludes our time allowed for questions I'll turn the floor back to management for any final comments.
Speaker Change: Thank you. Thank you for joining us today and for your continued support if you have any question or like to set up a call. Please contact all or in.
Speaker Change: In Moscow relationship.
Speaker Change: Take care and have a great day.
Speaker Change: Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.